<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended May 31, 1996
------------
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to __________________
Commission File Number: 0-5531
----------------------------------
FLORAFAX INTERNATIONAL, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 41-0719035
------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
8075 20th Street, Vero Beach, Florida 32966
-----------------------------------------------------------------------
(Address of principal executive offices)
407-563-0263
------------
(Issuer's telephone number)
---------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO___
The registrant had 6,022,973 shares of common stock, $0.01 par value,
outstanding at May 31, 1996.
Transitional Small Business Disclosure Format (Check one): Yes ; No X
----- -----
<PAGE> 2
<TABLE>
<CAPTION>
INDEX
PART I FINANCIAL INFORMATION Page No.
<S> <C> <C> <C>
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets
May 31, 1996 and August 31, 1995 1 - 2
Consolidated Statements of Income and
Accumulated Deficit
Three Months and Nine Months Ended
May 31, 1996 and May 31, 1995 3 - 4
Consolidated Statements of Cash Flows
Nine Months Ended May 31, 1996
and May 31, 1995 5 - 6
Notes to Consolidated Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13 - 15
Signatures 16
</TABLE>
<PAGE> 3
FLORAFAX INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In Thousands)
ASSETS May 31 August 31
1996 1995
------------ ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $3,824 $1,972
Restricted cash and investments 71 566
Accounts receivable:
Members, less allowances of $547
at May 31, 1996 and $706 at
August 31, 1995 1,609 1,289
Charge card issuers 1,226 225
Other 58 34
----------- ----------
2,893 1,548
Prepaid and other assets 52 31
----------- ----------
TOTAL CURRENT ASSETS 6,840 4,117
Property and equipment, at cost:
Fixtures and equipment 613 1,347
Computer systems 587 1,114
Communication systems 1,268 1,516
Leasehold improvements 26 311
----------- ----------
2,494 4,288
Accumulated depreciation
and amortization 2,238 3,919
----------- ----------
256 369
Other assets:
Excess of cost over net assets
of acquired business 1,995 1,995
Other 284 371
----------- ----------
2,279 2,366
----------- ----------
TOTAL ASSETs $9,375 $6,852
=========== ==========
</TABLE>
See accompanying notes.
1
<PAGE> 4
FLORAFAX INTERNATIONAL, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In Thousands)
LIABILITIES AND STOCKHOLDERS' NET CAPITAL DEFICIENCY May 31 August 31
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt 2,508 466
Accounts payable 5,242 3,919
Accrued liabilities:
Member benefits 168 150
Other 1,402 980
---------- ----------
TOTAL CURRENT LIABILITIES 9,320 5,515
Long-term debt, less current maturities:
9 1/2% convertible subordinated notes 2,567
Other 348 467
---------- ----------
348 3,034
Membership security deposits 52 59
Unearned directory income 65
---------- ----------
TOTAL LIABILITIES 9,785 8,608
STOCKHOLDERS' NET CAPITAL DEFICIENCY:
Preferred stock ($10 par value, 600,000
shares authorized, none issued)
Common stock - (par value $.01,
18,000,000 shares authorized, 6,045,973 and 5,793,874
issued at May 31, 1996 and August 31, 1995, respectively,
6,022,973 and 5,770,874 outstanding at May 31, 1996
and August 31, 1995, respectively 61 58
Additional paid-in capital 7,505 7,381
Accumulated deficit (7,976) (9,195)
---------- ----------
TOTAL STOCKHOLDERS' NET CAPITAL
DEFICIENCY (410) (1,756)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' NET
CAPITAL DEFICIENCY $9,375 $6,852
========== ==========
</TABLE>
See accompanying notes.
2
<PAGE> 5
FLORAFAX INTERNATIONAL, INC.
Consolidated Statements of Income and Accumulated Deficit
(In Thousands Except per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- ----------------------------
May 31 May 31 May 31 May 31
1996 1995 1996 1995
------------- ---------- ---------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
NET REVENUES:
Member dues and fees $ 538 $ 508 $1,514 $1,483
Floral and other order
processing 1,267 740 3,037 1,831
Directory and advertising fees 362 371 954 965
Charge card processing 409 343 1,067 1,176
Other revenue 2 9 39 26
------ ------ ------ ------
2,678 1,969 8,611 5,481
EXPENSES:
General and administrative 1,602 1,290 4,145 3,739
Selling, advertising and promotion 190 142 562 409
Directory publishing 146 140 303 293
Depreciation, amortization
and retirements 104 82 310 301
------ ------ ------ ------
2,042 1,654 5,320 4,742
------ ------ ------ ------
OPERATING INCOME 536 316 1,291 739
OTHER INCOME (EXPENSE):
Interest expense (77) (81) (235) (233)
Other (3) 1
31 33 77 34
Interest income ------ ------ ------ ------
(46) (61) (157) (199)
------ ------ ------ ------
INCOME BEFORE TAXES AND EXTRAORDINARY ITEM $ 490 $ 264 $1,134 $ 540
Income taxes 14 40
------ ------ ------ ------
INCOME BEFORE EXTRAORDINARY ITEM 476 264 1,094 540
Extraordinary item (Gain on forgiveness of 125
debt) less applicable income taxes ------ ------ ------ ------
NET INCOME $ 476 $ 264 $1,219 $ 540
</TABLE>
(Continued)
3
<PAGE> 6
FLORAFAX INTERNATIONAL, INC.
Consolidated Statements of Income and Accumulated Deficit
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------------
May 31 May 31 May 31 May 31
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
NET INCOME $ 476 $ 264 $ 1,219 $ 540
Accumulated deficit at beginning of period (8,452) (9,626) (9,195) (9,902)
------- ------- -------- -------
ACCUMULATED DEFICIT AT END OF PERIOD (7,976) (9,362) (7,976) (8,362)
======= ======= ======== =======
Primary earnings per common share:
Income before extraordinary item $ 0.07 $ 0.05 $ 0.16 $ 0.09
Extraordinary item 0.00 0.00 0.02 0.00
------- ------- -------- -------
NET INCOME $ 0.07 $ 0.05 $ 0.20 $ 0.09
======= ======= ======== =======
Fully diluted earnings per common share:
Income before extraordinary item $ 0.07 $ 0.05 $ 0.17 $ 0.09
Extraordinary item 0.00 0.00 0.02 0.00
------- ------- -------- -------
$ 0.07 $ 0.05 $ 0.19 $ 0.09
NET INCOME ======= ======= ======== =======
</TABLE>
See accompanying notes.
4
<PAGE> 7
FLORAFAX INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Nine months ended
May 31 May 31
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $1,219 $540
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation, amortization, and retirements 225 291
Provision for doubtful accounts 193 191
Amortization of discount on debt 24
Non cash compensation expense 37
Increase (decrease) in cash
flows due to changes in:
Accounts receivable (1,538) (1,029)
Prepaid and other assets (21) (14)
Other assets 87 80
Accounts payable 1,323 1,776
Accrued liabilities 505 583
Unearned directory income 70
Membership security deposits (7)
------ ------
Net cash provided by
operating activities 2,010 2,525
INVESTING ACTIVITIES
Capital expenditures (112) (156)
Release of restricted cash 495
------ ------
Net cash (used in) provided by
investing activities $383 ($156)
</TABLE>
(Continued)
5
<PAGE> 8
FLORAFAX INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Nine months ended
May 31 May 31
1996 1995
-------- -------
(Unaudited)
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuing debt 2,500
Proceeds from issuing stock 127
Reduction in bank overdraft (1,065)
Payments of debt (3,168) (100)
--------- --------
Net cash used in
financing activities (541) (1,165)
--------- --------
NET INCREASE IN
CASH AND CASH EQUIVALENTS 1,852 1,204
Cash and cash equivalents
at beginning of year 1,972 558
CASH AND CASH EQUIVALENTS --------- --------
AT END OF PERIOD $3,824 $1,762
========= ========
Supplemental disclosures of
cash flow information:
Cash paid during the period for interest $245 $149
Cash paid during the period for income tax $8
========= ========
</TABLE>
See accompanying notes.
6
<PAGE> 9
FLORAFAX INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Nine Months Ended May 31, 1996
Note (1) Management's Opinion and Accounting Policies
The accompanying interim financial statements should be read in conjunction
with the Florafax International, Inc. (the Company's) Form 10-KSB for the year
ended August 31, 1995.
In the opinion of Management the unaudited consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position as
of May 31, 1996 and the consolidated results of operations and cash flows for
the three and nine months ended May 31, 1996.
Included in the computation of earnings per share is the dilutive effect of
outstanding warrants and options for the Company's common stock. The
convertible promissory note discussed in Note 3 to the consolidated financial
statements did not meet the test necessary to be considered a common stock
equivalent. Consequently, the shares issuable upon conversion of the note have
not been included in the calculation of earnings per share.
Historically, the Company's flowers-by-wire operation is seasonal in that its
member florists send a much larger volume of orders during Thanksgiving, the
Christmas season, Valentine's Day, Easter and Mother's Day. Therefore, the
results of operations of an interim period may not necessarily be indicative
of the results expected for a full year. In an effort to increase orders to
member florists the Company continues to engage in non traditional campaigns
through it's wholly owned subsidiary, The Flower Club (800 800 SEND). The
Flower Club, Inc. was formed to generate additional orders by pursuing
relationships with nationally recognized corporations. The Company engages in
joint marketing campaigns with these corporations not only during holidays,
but also during non seasonal periods in an effort to provide member florists
with orders during slow periods of the year. Floral orders and handling fees
generated through The Flower Club have become significant, representing 62%
of gross floral order revenue for the nine months ended May 31, 1996 compared
to 51% for the nine months ended May 31, 1995. Management expects orders
generated by The Flower Club to continue to represent a significant portion of
floral order revenue.
Note (2) Contingencies
Florafax International, Inc. vs. Bellerose Floral Inc. and GTE Market
Resources Inc., et al.
During 1990 the Company filed a lawsuit against GTE Market Resources, Inc.
(GTE/MR) for failure on the part of GTE/MR to fulfill certain contractual
telecommunication services on behalf of Florafax. On November 23, 1993 a jury
awarded Florafax $1,481,000 in net damages against GTE/MR.
7
<PAGE> 10
FLORAFAX INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Nine Months Ended May 31, 1996
GTE/MR appealed this case and posted bond with the Court in order to do so. On
December 22, 1994 this case was assigned to the Oklahoma Court of Appeals
by the Oklahoma Supreme Court. On April 4, 1995 the Court of Appeals of the
State of Oklahoma released for publication its decision on the appeal filed by
GTE/MR. The award to the Company of $743,117 for consequential damages was
affirmed. To the extent that the Company was awarded lost profits for two
years in the amount of $750,000, the judgment was reversed and remanded for a
determination of lost profits as limited by Oklahoma law. The award to GTE/MR
of a set-off amount of $88,750 for unpaid invoices was affirmed, a contractual
rate of 18% per annum applied for prejudgment interest was applied and the
case remanded for a determination of an award of GTE's reasonable attorney's
fees, expenses and other collection costs incurred in recovering the unpaid
invoice amounts, but not their fees or expenses in defending against the
claims of the Company or in pursuing other unsuccessful aspects of GTE/MR's
counterclaim. The denial of the Company's request for attorney's fees was
affirmed. The Company and GTE/MR have each petitioned the Oklahoma Supreme
Court for writ of certiorari to review the portions of the Oklahoma Court of
Appeals decision adverse to their respective interests, and both of the
parties appeals have been granted. There are no assurances that the Company
will obtain a favorable ruling from the Oklahoma Supreme Court.
The Company's legal counsel has tried this case on a contingency fee basis
and, accordingly, the Company has incurred minimal expenses related to this
litigation. However, the agreement between the Company and its legal counsel
stipulates that the Company's attorneys are to receive 40% of the net proceeds
now that the case has reached the appellate court. Consequently, the Company
is to receive 60% of the ultimate proceeds. Recognition of any of these
amounts will not be reflected in the financial statements until ultimate
resolution.
Other
The Company is involved in various disputes involving routine business
matters, the resolution of all of which in management's opinion will not have
a material adverse effect upon the Company.
Note (3) Current Maturities of Debt
On February 28, 1996 the Company issued to St. James Capital Partners, Ltd.
(St. James) a secured Convertible Promissory Note ("Note") in the amount of
$2,500,000 bearing interest at seven percent per annum with a maturity date of
February 28, 1997. The Note is convertible into common stock of the Company at
a rate of $1.25 per share on certain terms and conditions contained in the Note.
The funds from the Note were used primarily to retire outstanding debt of the
Company in the amount of $2,419,000 due to mature September 15, 1996. Prior to
the funding of the Note the Company negotiated a discount on its debt in the
amount of $125,000. This discount has been
8
<PAGE> 11
FLORAFAX INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
Nine Months Ended May 31, 1996
reported as an extraordinary gain in the Company's income statement for the
nine months ended May 31, 1996.
In conjunction with the issuance of the Promissory Note the Company issued to
St. James a total of 650,000 warrants to purchase Common Stock of the Company
with an exercise price of $1.00 per share, on the terms and conditions
contained in the warrants. St. James has also been granted certain
registration rights for resale of the shares of common stock issuable upon
exercise of the warrants. All of the warrants expire January 1, 2001. Proceeds
attributable to the warrants, using an estimated fair value of $96,000, have
been recorded as a discount to the Promissory Note with the credit to paid in
capital. The discount is being amortized over the life of the note and is
being accounted for using the effective method.
During the quarter ended May 31, 1996 $500,000 of the original Note and
130,000 warrants were transferred from St. James and were reissued in the name
of SV Capital Partners, LP. The new $500,000 note and the 130,000 warrants
were issued with the same terms and conditions contained in the original Note
and warrants.
9
<PAGE> 12
FLORAFAX INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Liquidity and Capital Resources
Sources of cash to meet future requirements are existing cash balances and
internally generated funds. For the past several years management had been
pursuing various options that would give the Company access to additional
working capital. During the second quarter of fiscal 1996 the Company was
successful in refinancing the majority of its debt that was due to mature on
September 15, 1996, as discussed in the following two paragraphs.
On February 28, 1996 the Company issued to St. James Capital Partners, Ltd. a
secured Convertible Promissory Note ("Note") in the amount of $2,500,000
bearing interest at seven percent per annum with a maturity date of February
28, 1997. The Note is convertible into common stock of the Company at a rate
of $1.25 per share on certain terms and conditions contained in the Note.
The funds from the Note were used primarily to retire outstanding debt of the
Company in the amount of $2,419,000 due to mature September 15, 1996. Prior to
the funding of the Note the Company negotiated a discount on its debt in the
amount of $125,000. This discount has been reported as an extraordinary gain
in the Company's income statement for the nine months ended May 31, 1996.
In addition, as discussed in Note 2, the Company is hopeful that they will
reach a settlement with GTE/MR during the current year, which could provide an
additional source of working capital. However, there is no guaranty that the
Company will receive any funds as a result of the GTE/MR judgment.
For the nine months ended May 31, 1996 the Company reported a total increase
in cash of $1,852,000 compared to an overall cash increase of $1,204,000 for
the nine months ended May 31, 1995, leaving the Company with cash and cash
equivalents of $3,824,000 at May 31, 1996 compared to cash of $1,762,000 at
May 31, 1995.
Operating cash flows historically have been generated primarily from
processing floral orders and charge card transactions for the Company's member
florists, as well as collecting dues, fees and directory advertising from the
members. Floral order processing may require settlement with the fulfilling
florist before collection of funds from the sending florist. Charge card
processing, however, generally allows the Company to collect funds from the
charge card issuer prior to settlement with the merchant. Since in both types
of transactions the Company is both collecting and settling funds, the timing
of these cash flows has a significant impact on the Company's liquidity.
10
<PAGE> 13
FLORAFAX INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
As discussed in Note 1 to the consolidated financial statements the Company
continues to engage in non traditional campaigns through it's wholly owned
subsidiary, The Flower Club (800 800 SEND). This has helped to improve the
Company's cash flow as the majority of orders generated through The Flower
Club are paid for by credit cards. This allows the Company to receive a
significant amount of its funds within days after processing the transaction.
For the quarter ended May 31, 1996 floral orders and handling fees generated
through The Flower Club amounted to approximately $5,092,000 compared to
$3,667,000 for the quarter ended May 31, 1995, an increase of 39%. For the
nine months ended May 31, 1996 floral orders and handling fees generated
through The Flower Club amounted to approximately $12,784,000 compared to
$8,066,000 for the nine months ended May 31, 1995, an increase of 58%.
RESULTS OF OPERATIONS
General Comments
For the nine months ended May 31, 1996 the company is reporting net income
(excluding extraordinary gain) of $1,094,000 compared to $540,000 for the nine
months ended May 31, 1995. Net income (excluding extraordinary gain) for the
nine months ended May 31, 1996 has already surpassed net income for the entire
1995 fiscal year by 55%. In addition, net income for the quarter ended
May 31, 1996 exceeded net income for the same period in the prior year by 80%.
Total revenues increased by 31% during the quarter ended May 31, 1996 when
compared to the same period in the prior year while operating expenses
increased by only 23%. For the nine months ended May 31, 1996 total revenues
increased by 21% when compared to the same period in the prior year while
operating expenses increased by only 12%.
Net Revenues
Revenues from member dues and fees increased by six percent and two percent
respectively for the quarter end nine month period ended May 31, 1996 when
compared to the prior year. The main components of the increase in revenues
were sign up fees for new accounts and fees charged to members who receive a
disproportionate number of orders.
Floral order revenue increased by 71% and 66% for the quarter and nine months
ended May 31, 1996, respectively, when compared to the same periods in the
previous year. This increase is primarily a result of orders generated by The
Flower Club. Orders and handling fees generated by The Flower Club increased
by 39% and 58% for the quarter and nine months ended May 31, 1996, respectively,
when compared to the same periods in the previous year. In addition, gross
traditional orders were slightly greater, approximately 5% and 3%,
respectively, for the quarter and nine months ended May 31, 1996 when compared
to the same periods in the prior year.
11
<PAGE> 14
FLORAFAX INTERNATIONAL, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operation
Over the past several quarters the Company has experienced several factors
that have caused net revenue from charge card processing to decline, as
follows. First, the Company lowered it's discount rate to be more competitive
in certain markets. Second, the Company experienced an increase in the cost to
clear credit card transactions as well as an increase in data capture and
authorization fees. Third, certain credit card companies began settling credit
card transactions directly with a segment of the Company's merchants, which
eliminated the Companies ability to charge a discount rate on these
transactions. Fourth, the Company no longer processes the credit card
transactions for the Oklahoma State Treasurers office. Even though the company
experienced an increase in the volume of charge card transactions for the nine
months ended May 31, 1996, these factors more than offset the volume increase,
causing a decline in revenue when compared to the prior year. However, for the
quarter ended May 31, 1996 the Company is reporting an increase in net credit
card processing revenues. The company is now generating higher gross revenues
than in prior periods and is aggressively seeking out new credit card
business. In addition, the Company has entered into a fee arrangement with its
credit card sponsoring bank whereby the discount rate charged to the Company
by the bank can only be increased to pass through fee increases by Visa and
MasterCard. Management is cautiously optimistic that the amount of business
currently being generated, the fixed fee structure with its sponsoring bank,
and the current marketing efforts will more than offset the aforementioned
factors which caused a decline in net revenues over the past several periods.
Expenses
Member support, general and administrative expenses increased by 24% and 11%
for the quarter and nine months ended May 31, 1996, respectively, when
compared to the same periods in the previous year. The main component of the
increase was payroll and related benefits. The increase in payroll resulted
primarily from two factors. First, there was an increase in labor necessary to
handle to increased volume of orders generated by The Flower Club. Second,
there were normal pay increases given to employees throughout the Company. In
addition to payroll there were also increases in contract labor and equipment
lease costs, which were also related to increased volumes in Flower Club
orders. Other costs that were greater in 1996 include legal fees (related to
refinancing the Company's debt and the filing of certain registration
statements) and postage (related to the mailing of member materials resulting
from an increase in membership sales).
Selling and advertising expenses increased for both the quarter and nine
months ended May 31, 1996 when compared to the same period in the prior year.
The main component of this increase was an increase in advertising costs. Now
that the Company is operating at a profit management has begun to focus on
increasing membership, which requires expenditures for advertising. It is
anticipated that the Company will continue to incur advertising costs in an
effort to increase membership.
12
<PAGE> 15
Part II Other Information
Item 1. Legal Proceedings
For a summary of legal proceedings, reference is made to Item 3, Legal
Proceedings, included in the Company's annual report on Form 10-KSB for the
year ended August 31, 1995 and to Note 2 of the Notes to Consolidated Financial
Statements included in this filing.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. The Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
Exhibit Reference
(10) Material Contracts
First Amendment to Agreement of Purchase and Sale of Agreement
between the Company and St. James Capital Partners, L.P.
The following items have been included as exhibits in filings by the Company
in a previous period and, accordingly, are incorporated here by reference.
Exhibit Reference
(3) Articles of incorporation and Bylaws of the Registrant, as amended.
13
<PAGE> 16
Exhibit Reference
(10) Material Contracts
(a) Convertible subordinated notes due to Clark Estates, now
paid in full.
(b) Subordinated debentures maturing in 1998.
(c) Agreement dated December 3 1993, Addendum, Second Addendum,
Third Addendum, Fourth Addendum and Fifth
Addendum thereto by and between the Registrant
and Citizens Fidelity Bank and Trust Company
(now PNC Bank, Kentucky, Inc.), now expired.
(d) Purchase Agreement for certain assets formerly owned by
Savannah Floral Services, Inc. dated March 10,
1994.
(e) Note Payable to Andrew Williams dated March 10, 1994, now
paid n full.
(f) Promissory Note to Citrus Bank dated November 9, 1993.
(g) Promissory Note to Citrus Bank dated November 17, 1993.
(h) Promissory Note to Citrus Bank dated January 25, 1994.
(i) Loan to James H. West, Director, President and Chief
Financial Officer, dated August 28, 1994.
(j) Consulting agreement with David Harper of Ventura County
California dated December 10, 1993.
(k) Promissory Note to Citrus Bank dated August 31, 1995.
(l) Operating lease agreement between Registrant and Alvin
Wunderlich dated April 1995.
(m) Agreement of Purchase and Sale made and entered into to be
effective December 29, 1995 by and between
Registrant and St. James Partners, LTD.
14
<PAGE> 17
Exhibit Reference
(n) Convertible Promissory Note in the amount of $2,500,000
dated February 28, 1996 due February 28, 1997.
(o) Security agreement dated February 28, 1996 executed in
connection with the $2,500,000 Convertible Promissory
Note.
(p) Common Stock Purchase Warrant for 250,000 shares of the
registrants common stock expiring January 1, 2001.
(q) Common Stock Purchase Warrant for 400,000 shares of the
registrants common stock expiring January 1, 2001.
(22) Subsidiaries of the Registrant
Filed herewith
(27) Financial Data Schedule (For SEC use only).
During the three months ended May 31, 1996, the Company has not filed
any reports on Form 8-K.
15
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Florafax International, Inc.
Date: July l1, 1996 /S/ James H. West
------------- --------------------
James H. West
President and Chief
Financial Officer
16
<PAGE> 1
EXHIBIT 10
FIRST AMENDMENT
TO
AGREEMENT OF PURCHASE AND SALE
This First Amendment to Agreement of Purchase and Sale (the "First
Amendment"), is made and entered into effective as of February 29, 1996, by and
between Florafax International, Inc., a Delaware corporation (the "Seller"),
St. James Capital Partners, L.P., a Delaware limited partnership ("St. James")
and SV Capital Partners, L.P., a Texas limited partnership (SV Capital"). For
purposes of this Agreement, the term "Seller" is defined to mean Florafax
International, Inc. and each of its subsidiaries, and the term "Purchaser" is
defined as St. James and SV Capital, collectively.
WHEREAS, St. James and Seller entered into an Agreement of Purchase
and Sale (the "Agreement") dated to be effective December 29, 1995 pursuant to
which (i) St. James purchased a $2,500,000 7% Convertible Promissory Note from
Seller, and (ii) St. James purchased 650,000 warrants to purchase shares of
Seller's common stock, par value $.01 per share (the "Common Stock");
WHEREAS, on February 29, 1996 St. James purchased (i) the $2,500,000
7% Convertible Promissory Note and (ii) the 650,000 warrants to purchase Common
Stock, all as contemplated by the Agreement;
WHEREAS, $500,000 of the $2,500,000 purchase price of the $2,500,000
7% Convertible Promissory Note was provided by SV Capital Partners, L.P., a
Texas limited partnership ("SV Capital");
WHEREAS, the purchase price for 130,000 of the 650,000 warrants issued
to St. James pursuant to the Agreement was provided by SV Capital;
WHEREAS, SV Capital has requested that it be made a named party to the
Agreement, and that it be issued a $500,000 7% Convertible Promissory Note and
130,000 warrants to reflect its direct ownership of said note and warrants;
WHEREAS, St. James, SV Capital and Florafax have agreed to enter into
this First Amendment to set forth the terms and conditions of the reissuance
of: (i) a $2,000,000 7% Convertible Promissory Note to St. James, substantially
in the form attached hereto as Exhibit "A" (the "$2,000,000 Note"); (ii) a
$500,000 7% Convertible Promissory Note to SV Capital, substantially in the
form attached hereto as Exhibit "B" (the "$500,000 Note"); (iii) 520,000
warrants to St. James to purchase Common Stock, substantially in the form
attached hereto as Exhibit "C"; and (iv) 130,000 warrants to SV Capital to
purchase Common Stock, substantially in the form attached hereto as Exhibit
"D". For purposes of this Agreement, the $2,000,000 Note and the $500,000 Note
are referred to collectively as the "Note"; and the warrants issued to St.
James and SV Capital are referred to collectively as the "Warrants";
<PAGE> 2
WHEREAS, the Seller desires to issue to the Purchasers, a Security
Agreement securing the obligations of Seller under the Note, in the form
attached hereto as Exhibit "E" (the "Security Agreement");
WHEREAS, the Seller and the Purchaser desire to make certain
representations, warranties and agreements in connection with the purchase and
sale of the Note contemplated hereby;
WHEREAS, the Seller desires to grant to St. James and SV Capital
individually certain registration rights in respect to the shares of Seller's
Common Stock that may be acquired on the conversion of the Note or the exercise
of the Warrants, which registration rights shall have the terms and be subject
to the conditions set forth in the Registration Rights Agreements attached
hereto as Exhibits "D" and "E", respectively (the "Registration Rights
Agreement"). This First Amendment, the Note, the Security Agreement, the
Warrants and the Registration Rights Agreements are collectively referred to as
the "Transaction Documents".
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein, the parties agree as
follows:
ARTICLE 1.
Purchase and Sale
a. Purchase and Sale of the Note and the Warrants.
Subject to the terms of this Agreement, the Seller agrees to
and does hereby issue, sell and deliver: the Note and the
Warrants on the date hereof (the "Closing Date"), and
Purchaser agrees to and does hereby purchase and accept the
Note and the Warrants from the Seller on such date.
b. Consideration for Purchase of the Note. Subject to
the terms of this Agreement, the Purchaser paid to the Seller
on February 29, 1996, $2,500,000 as the consideration for the
purchase of the Notes (the "Note Consideration").
c. Consideration for Purchase of the Warrants. Subject
to the terms of this Agreement, Purchaser paid to the Seller
on February 29, 1996, $0.001 per Warrant, as the consideration
for the purchase of the Warrants (the "Warrants
Consideration"; the Note Consideration and the total Warrants
Consideration are collectively referred to as the
"Consideration").
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<PAGE> 3
ARTICLE 2.
Representations and Warranties of Seller
Seller represents and warrants to the Purchaser as follows:
a. Organization, Standing and Qualification. Seller is
a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and
has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it
is now being conducted. Seller is licensed and qualified to
do business as a foreign corporation in each jurisdiction in
which the character of Seller's properties, owned or leased,
or the nature of its activities makes such qualification or
license necessary, except where failure to be so licensed and
qualified would not have a material adverse effect on Seller's
business.
b. Authority; No Defaults. Seller has all requisite
corporate power and authority to enter into the Transaction
Documents and to carry out its obligations thereunder. The
execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the
part of Seller. The Transaction Documents have been executed
and delivered by Seller and constitute the valid and binding
obligation of Seller, enforceable in accordance with their
terms, subject to bankruptcy, insolvency, moratorium and other
similar laws affecting creditors' rights generally and general
principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law). The execution and delivery of the Transaction Documents
do not, and the consummation of the transactions contemplated
hereby and thereby will not, conflict with or result in a
breach of or the acceleration of any obligation under, or
constitute a default or event of default (or event which, with
notice or lapse of time or both, would constitute a default)
under, any provision of any charter, bylaw, indenture,
mortgage, lien, lease, agreement, contract, instrument, order,
judgment, decree, ordinance or regulation, or any restriction
to which any property of Seller is subject or by which Seller
is bound, the effect of which would be materially adverse to
Seller. Seller is not, nor is it alleged to be, in material
violation or default of any applicable law, statute, order,
rule or regulation promulgated or judgment entered by any
court, administrative agency or commission or other
governmental agency or instrumentality, domestic or foreign (a
"Governmental Entity"), relating to or affecting the
operation, conduct or ownership of the property or business of
Seller.
c. Approvals. Except for compliance with the provisions
of the Securities Exchange Act of 1934 (the "Exchange Act"),
the Securities Act of 1933 (the
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<PAGE> 4
"Securities Act") and the blue sky laws of various states,
there is no legal impediment to the execution and delivery of
the Transaction Documents by Seller or to the consummation of
the transactions contemplated thereby, and no filing or
registration with, or authorization, consent or approval of, a
Governmental Entity, shareholders or any other third party is
necessary for the consummation by Seller of the transactions
contemplated thereby.
d. SEC Documents. Seller has made all filings with the
Securities and Exchange Commission ("SEC") that it has been
required to make under the Securities Act and the Exchange Act
since August 31, 1991. Seller has provided to the Purchaser a
true, complete and correct copy of Seller's annual report on
Form 10-KSB for the fiscal year ended August 31, 1995,
together with all amendments thereto, and any and all filings
with the SEC made by Seller (including all requested exhibits
to such filings) since the filing of said Form 10-KSB (all
such documents that have been filed with the SEC, as amended,
are referred to as the "Seller SEC Documents"). As of their
respective dates, and except as amended, the Seller SEC
Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and none of the Seller SEC Documents contained
any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The financial
statements of Seller included in the Seller SEC Documents
comply as to form in all material respects with applicable
accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q) and fairly present (subject, in the
case of the unaudited statements, to normal recurring audit
adjustments) the consolidated financial position of Seller as
of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended. Except
as set forth in the Seller SEC Documents, since August 31,
1995, (i) there have been no material adverse changes in the
Seller's business, operations or financial condition and (ii)
Seller's operations have been conducted in the ordinary course
of business except as disclosed in writing to the Purchaser.
e. Litigation. Except as set forth in Seller SEC
Documents or set forth in Schedule 2.5, as of the date of this
Agreement, there is no suit, action, proceeding or
investigation pending or, to the best knowledge of Seller,
threatened against or affecting Seller (or any of its
respective officers or directors in connection with the
business of Seller), nor is there any outstanding judgment,
order, writ, injunction or decree against Seller, which
judgment would have a material adverse effect on Seller.
Seller is not subject to any court order, writ, injunction,
decree, settlement agreement or judgment that contains or
orders any on-going obligations, whether prohibitory or
4
<PAGE> 5
mandatory in nature, the performance of which would have a
material adverse effect on Seller.
f. Capitalization. Seller has authorized capital stock
of (a) 18,000,000 shares of Common Stock of which, as of
December 31, 1995, there are 6,022,973 shares issued and
outstanding, and (b) 600,000 shares of preferred stock, par
value $10 per share, ("Preferred Stock"), of which, as of
December 31, 1995, 0 are issued and outstanding. All of the
issued and outstanding shares of Common Stock were duly and
validly issued and are fully paid and non-assessable. None of
the outstanding shares of Common Stock have been issued in
violation of any preemptive rights of the current or past
stockholders of Seller. As of the date hereof, the Seller has
reserved for issuance an aggregate of 1,000,000 shares of
Common Stock issuable on issuance of stock options to
employees, officers, directors and other persons. Except as
set forth on Schedule 2.6, or described above in (i) and (ii),
and except for shares that may be issued in connection with
completed or pending acquisitions, there are no outstanding
options, warrants or rights to subscribe for, or commitments
of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the
capital stock of Seller or contracts, commitments,
understandings or arrangements by which Seller is or may be
obligated to issue additional shares of its capital stock or
options, warrants, or rights to purchase or acquire any
additional shares of its capital stock. All of the Common
Stock issued on the conversion of the Note or the exercise of
the Warrants will be fully paid, non-assessable and free and
clear of any preemptive rights and, subject to compliance with
the statutes and regulations referred to in Section 2.3,
Encumbrances. As used in this Agreement, the term
"Encumbrance" means and includes (i) any security interest,
mortgage, deed of trust, lien, charge, pledge, proxy, adverse
claim, equity, power of attorney, or restriction of any kind,
including but not limited to, any restriction or servitude on
the use, transfer, receipt of income, or other exercise of any
attributes of ownership, other than restrictions imposed by
the Securities Act or any state blue sky laws, and (ii) any
Uniform Commercial Code financing statement or other public
filing, notice or record that by its terms purports to
evidence or notify interested parties of any of the matters
referred to in clause (i) that has not been terminated or
released by another proper public filing, notice or record.
g. Subsidiaries. Schedule 2.7 sets forth a true,
complete and correct list of each subsidiary of Seller,
including state or country of organization and address of its
principal executive offices. Each subsidiary of Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its
organization, has all requisite corporate power and authority
to own, to lease or to operate its properties and to carry on
its business as it is now being conducted and is duly
qualified or licensed to do business in each jurisdiction in
which the character of its properties, owned or leased, or the
nature of its activities makes such qualification or license
necessary, unless the failure to be so licensed or qualified
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<PAGE> 6
would not have a material, adverse effect on Seller. Except
as set forth in Schedule 2.7, all outstanding shares of
capital stock of each subsidiary of Seller were duly and
validly issued and are fully paid, nonassessable and owned by
Seller or a subsidiary of Seller, free and clear of all
Encumbrances. There are no options, warrants or other rights,
agreements or commitments (including preemptive rights)
obligating Seller or any of its subsidiaries to issue, to sell
or to transfer any shares of capital stock or other securities
of any subsidiary of Seller.
h. Liabilities. Except as set forth in Schedule 2.8,
Seller has no liabilities or obligations, either accrued,
absolute, contingent, or otherwise that have a material
adverse effect on the value or business of Seller, and Seller
has no knowledge of any potential liability that it reasonably
believes would likely result in a material adverse effect on
the value or business of the Seller, other than those (a)
reflected or reserved against in the unaudited consolidated
balance sheet of Seller at November 30, 1995 or disclosed in
other Seller SEC Documents or (b) incurred in the ordinary
course of business since November 30, 1995.
i. Licenses, Permits, Authorizations, Etc. Seller holds
all approvals, authorizations, consents, licenses, orders,
franchises, rights, registrations and permits of any type
required to operate its business as presently conducted,
except where failure to be so authorized would not have a
material adverse effect on Seller's business. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any
revocation, cancellation, suspension or modification of any
such approval, authorization, consent, license, order,
franchise, right, registration or permit.
j. Title to Assets; Encumbrances. Except as set forth
in Schedule 2.10:
i. Seller has good and indefeasible title to its assets,
whether real, personal or intangible, free and clear
of all Encumbrances except (i) as reflected in the
Seller SEC Documents, (ii) liens for current taxes
and assessments not yet due or being contested in
good faith by appropriate proceedings, (iii)
mechanic's liens arising under the operation of law
for actions contested in good faith or for which
payment arrangements have been made, (iv) liens
granted or incurred by Seller in the ordinary course
of its business or financing of equipment, office
space, furniture and computers in the ordinary course
of its business, and (v) easements, rights of way,
encroachments or other reductions or matters
affecting title which do not prevent the assets from
being used for the purpose for which they are
currently being used;
ii. There are no parties in possession of any of the
assets of Seller other than personal property held by
third parties in the reasonable and ordinary course
of business. Seller enjoys full, free and exclusive
use and quiet enjoyment
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<PAGE> 7
of its assets and its rights pertaining thereto.
Seller enjoys peaceful and undisturbed possession
under all leases under which it is a lessee, and each
such lease is a legal, valid and binding obligation
of Seller, enforceable against Seller in accordance
with its terms.
k. Taxes and Returns. Seller has filed all required tax
returns and reports. Seller has paid all taxes, assessments
and governmental charges and penalties which it has incurred,
except such as are being or may be contested in good faith by
appropriate proceedings. Seller is not delinquent in the
payment of any tax, assessment or governmental charge. No
deficiencies for any taxes have been proposed, asserted, or
assessed against Seller, and no requests for waivers of the
time to assess any such tax are pending. For the purposes of
this Agreement, the term "tax" (including, with correlative
meaning, the terms "taxes" and "taxable") shall include all
federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes, duties or assessments of
any nature whatsoever, together with all interest, penalties
and additions imposed with respect to such amounts.
l. Insurance. Each policy of property, fire and
casualty, product liability, worker's compensation,
professional liability and title insurance and other forms of
insurance (except group, health and life policies) and each
bond issued or posted by any person with respect to any
operations or other activities of Seller is, to the knowledge
of Seller, the legal, valid and binding obligation of the
insurer or bond issuer, enforceable in accordance with its
terms, and is in an amount and provides for coverage as is
customary in the ordinary business practices of Seller's
industry.
m. Hazardous Wastes and Substances. Except as set forth
in Seller SEC Documents, to the reasonable knowledge of Seller
neither the operations of Seller nor the use of its assets
violates any applicable federal, state or local law, statute,
ordinance, rule, regulation, memorandum of understanding,
order or notice requirement pertaining to the collection,
transportation, storage, treatment, discharge, release or
disposal of hazardous or non-hazardous waste or substances,
including without limitation (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Section Section 9601 et seq.), as amended from time
to time on or before the Closing Date ("CERCLA") (including,
without limitation, as amended pursuant to the Superfund
Amendments and Reauthorization Act of 1986), and such
regulations promulgated under CERCLA on or before the Closing
Date, (ii) the Resources Conservation and Recovery Act of 1976
(42 U.S.C. Section Section 6901 et seq.), as amended from time
to time ("RCRA") on or before the Closing Date, and such
regulations promulgated under RCRA, (iii) any applicable
federal, state or local laws or regulations relating to the
environment in effect on the Closing Date (collectively, the
"Applicable Environmental Laws"). Except as set forth in the
Seller SEC Documents, none of the operations of Seller has
ever been conducted nor
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<PAGE> 8
have any of its assets been used in such a manner as to
constitute a violation of any of the Applicable Environmental
Laws. Except as set forth in Seller SEC Documents, no notice
has been served on Seller by any person or Governmental Entity
regarding any existing, pending or threatened investigation or
inquiry related to violations under any Applicable
Environmental Law, or regarding any claims for corrective
action, remedial obligations or contribution for removal costs
or damages under any Applicable Environmental Law or regarding
the designation of Seller or any of its affiliates as a
potentially responsible party for any facility under the
Applicable Environmental Laws, nor, to the reasonable
knowledge of Seller, does any fact or circumstance exist
which, if disclosed publicly, would be reasonably likely to
result in the service on Seller of any such notice. Except as
set forth on Seller SEC Documents, to the reasonable knowledge
of Seller, there has been no action taken, or omitted to be
taken by Seller which has caused, or would be reasonably
likely to cause, a "release" of any "hazardous substance" at
any "facility", without limitation, within the meaning of such
terms as defined in the Applicable Environmental Laws.
ARTICLE 3.
Representations and Warranties of Purchaser
Purchaser represents and warrants to the Seller as follows:
a. Organization, Standing and Qualification.
(a) SV Capital is a partnership
duly organized, validly existing and
in good standing under the laws of
the State of Texas.
(b) St. James is a partnership
duly organized, validly existing and
in good standing under the laws of
the State of Delaware.
b. Authority; No Defaults. Purchaser has all requisite
corporate power and authority to enter into the Transaction
Documents and to carry out its obligations thereby. The
execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby have
been duly authorized by all necessary partnership action on
the part of Purchaser.
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<PAGE> 9
ARTICLE 4.
The Closing
a. Time and Place. The closing of the reissuance of the
Note, the Warrants, and the other Transaction Documents (the
"Closing") will take place on March 25, 1996 (the "Closing
Date"), at the offices of Porter & Hedges, L.L.P., unless
another place is agreed to by the parties.
b. Conditions to the Obligations of Seller. The
obligation of Seller to effect the Closing of the transactions
contemplated by this Agreement is subject to St. James
delivering, or causing to be delivered, to Seller at the
Closing the following:
i. $2,500,000 7% Convertible Promissory Note
dated February 29, 1996;
ii. Warrants to purchase 250,000 shares of
Florafax common stock dated December 29, 1995;
iii. Warrants to purchase 400,000 shares of
Florafax common stock dated February 29,
1996; and
iv. Security Agreement by and between St. James
and Florafax dated February 29, 1996.
v. Registration Rights Agreement by and between
St. James and Florafax dated December 29,
1996.
c. Conditions to the Obligations of St. James. The
obligation of St. James to effect the Closing is subject to
Seller delivering, or causing to be delivered, to St. James at
the Closing the following:
i. $2,000,000 7% Convertible Promissory Note
dated February 29, 1996;
ii. Warrants to purchase 520,000 shares of
Florafax common stock dated February 29,
1996;
iii. Security Agreement by and between Florafax,
St. James and SV Capital dated February 29,
1996 (the "New Security Agreement"); and
iv. Registration Rights Agreement by and between
Florafax and St. James dated February 29,
1996.
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<PAGE> 10
d. Conditions to the Obligation of SV Capital. The
obligation of SV Capital to effect the Closing is subject to
Seller delivering, or causing to be delivered, to SV Capital
at the Closing the following:
i. $500,000 Convertible Promissory Note dated
February 29, 1996;
ii. New Security Agreement;
iii. Warrants to purchase 130,000 shares of
Florafax common stock dated February 29,
1996; and
iv. Registration Rights Agreement by and between
Florafax and SV Capital dated February 29,
1996.
ARTICLE 5.
General Provisions
a. Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements
contained in this Agreement shall survive the Closing until
such time as the Purchaser is no longer the owner of any of
the Shares.
b. Notices. All notices or other communications which
are required or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when
delivered in person, transmitted by telecopier (with receipt
confirmed) or mailed by registered or certified first class
mail, postage prepaid, return receipt requested to the parties
hereto at the address set forth below (as the same may be
changed from time to time by notice similarly given) or the
last known business or residence address of such other person
as may be designated by either party hereto in writing.
(a) If to Seller:
Florafax International, Inc.
8075 20th Street
Vero Beach, FL 32966
Attn: James H. West
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<PAGE> 11
(b) If to St. James:
5599 San Felipe, 3rd Floor
Houston, TX 77056
(c) If to SV Capital:
SV Capital Partners, L.P.
200 Concord Plaza, Suite 620
San Antonio, Texas 78216
Attn: William H. Wagner
c. Miscellaneous. This Agreement and the other
Transaction Documents (i) constitute the entire agreement and
supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with
respect to the subject matter hereof, (ii) shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns and is not intended to
confer upon any other person any rights or remedies hereunder,
(iii) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of
Delaware and (iv) may be executed in two or more counterparts
which when read together shall constitute a single agreement.
d. Publicity. Seller and Purchaser promptly shall
advise and cooperate with the other prior to issuing, or
permitting any of its directors, officers, employees or agents
to issue, any press release with respect to this Agreement or
the explicit transactions contemplated hereby.
Notwithstanding the foregoing, without the prior consent of
the Purchaser, neither Seller nor any of its directors,
officers, employees or agents shall issue any press release
which includes the name of the Purchaser or any of the
Purchaser' affiliates.
e. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned
by either of the parties hereto (whether by operation of law
or otherwise) without the prior written consent of the other
party.
f. Schedules. All statements contained in any exhibit,
schedule, appendix, certificate or other instrument delivered
by or on behalf of the parties hereto, or in connection with
the transactions contemplated hereby, are an integral part of
this Agreement and shall be deemed representations and
warranties hereunder.
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<PAGE> 12
g. Counterparts. This Agreement may be executed in one
or more counterparts, each of which constitutes an original
execution and, in the aggregate, constitute a single document.
h. Effect of First Amendment. The First Amendment and
the Note, Warrants and Registration Rights Agreements
contemplated hereby are delivered in replacement of the
Agreement and the documents contemplated thereby, and
supersede the terms of the Agreement and any such previously
issued documents.
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<PAGE> 13
SELLER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Seller has signed this Agreement as of the date
first written above.
FLORAFAX INTERNATIONAL, INC.
________________________________________
James H. West, President
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<PAGE> 14
PURCHASERS' SIGNATURE PAGE
IN WITNESS WHEREOF, Purchaser has signed this Agreement as of the date first
written above.
SV CAPITAL PARTNERS, L.P.
________________________________________
Willliam H. Wagner
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<PAGE> 15
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE
SECURITIES LAWS.
FLORAFAX INTERNATIONAL, INC.
7% Convertible Promissory Note
$2,000,000 Houston, Texas February 29, 1996
Florafax International, Inc., a Delaware corporation (hereinafter
called the "Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to St. James Capital Partners, L.P., a Delaware limited partnership
(hereinafter called "Holder"), or its registered assigns, the principal sum of
Two Million Dollars ($2,000,000) together with accrued interest on the amount
of such principal sum, payable in accordance with the terms set forth below.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO
THE TERMS OF A SECURITY AGREEMENT BETWEEN THE COMPANY, THE HOLDER AND SV
CAPITAL PARTNERS, L.P. DATED FEBRUARY 29, 1996 (THE "SECURITY AGREEMENT").
ARTICLE 1.
Definitions
For all purposes of this Note, except as otherwise expressly provided
or unless the context otherwise requires: (i) The terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and
not to any particular Article, Section or other subdivision.
a. "Board of Directors" means the board of
directors of the Company as elected from time to time
or any duly authorized committee of that board.
<PAGE> 16
b. "Business Day" means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on
which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to
be closed.
c. "Common Stock" means shares of common stock,
par value $.01 per share, of the Company.
d. "Company Financial Statements" shall mean
those audited financial statements of the Company
included in the Company's most recent annual report
as filed with the United States Securities and
Exchange Commission on Form 10-K, and any amendments
thereto.
e. "Conversion Price" means the price per share
determined in accordance with Articles IV and V (as
adjusted in accordance with the terms of this Note)
at which shares of Common Stock shall be delivered to
Holder upon conversion of this Note into Common
Stock.
f. "Default" means any event which is, or after
notice or passage of time would be, an Event of
Default.
g. "Event of Default" has the meaning specified
in Section 3.1.
h. "Indebtedness" of any Person means all
indebtedness of such Person, whether outstanding on
the date of this Note or hereafter created, incurred,
assumed or guaranteed, (i) for the principal of,
premium on and interest on all debts of the Person
whether outstanding on the date of this Note or
thereafter created for money borrowed by such Person
(including capitalized lease obligations), money
borrowed by others (including capitalized lease
obligations) and guaranteed, directly or indirectly,
by such Person, or purchase money indebtedness, or
indebtedness secured by property ("Purchase Money
Indebtedness") at the time of the acquisition of such
property by such Person, for the payment of which the
Person is directly or contingently liable; (ii) for
all accrued obligations of the Person in respect of
any contract, agreement or instrument imposing an
obligation upon the Person to pay over funds; (iii)
for all trade debt of the Person; and (iv) for all
deferrals, renewals, extensions and refundings of,
and amendments, modifications and supplements to, any
of the indebtedness referred to in (i), (ii) or (iii)
above.
i. "Market Price" for any day, when used with
reference to Common Stock, shall mean the price of
said Common Stock determined by reference to the last
reported sale price for the Common Stock on such day
on the principal securities exchange on which the
Common Stock is listed or admitted to trading or if
no such sale takes place on such date, the average of
the closing bid and asked prices thereof as
officially reported, or, if not so listed or admitted
to trading on any securities
2
<PAGE> 17
exchange, the last sale price for the Common Stock on
the National Association of Securities Dealers
national market system on such date, or, if there
shall have been no trading on such date or if the
Common Stock shall not be listed on such system, the
average of the closing bid and asked prices in the
over-the-counter market as furnished by any NASD
member firm selected from time to time by the Company
for such purpose.
j. "Maturity Date", when used with respect to
the Note means February 28, 1997 (or such earlier
date upon which the Note become due and payable).
k. "Note" means this 7% Convertible Promissory
Note.
l. "Outside Financing" shall be defined as (i)
any transaction where the Company sells or transfers
its equity or debt securities for cash whether in
public or private offerings and (ii) any financing
from a bank or other entity acting as a financial
institution made to the Company or any Subsidiary
other than (x) Purchase Money Indebtedness incurred
in the ordinary course of business, and (y) amounts
advanced under the terms of the Independent Sales
Organization and Merchant Servicing Agreement by and
between the Company and Universal Savings Bank, F.A.,
dated December 31, 1995.
m. "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or
government or any agency or political subdivision
thereof.
n. "SEC" means the United States Securities and
Exchange Commission or any other federal agency at
the time administering the Securities Act of 1933.
o. "Subsidiary" means a corporation or other
entity in which more than 50% of the outstanding
voting stock or equity interests is owned or
controlled, directly or indirectly, by the Company or
any combination of the Company and one or more other
Subsidiaries. For the purposes of this definition,
"voting stock" means stock or other interests which
ordinarily has voting power for the election of
directors, and equity interests means the right to
receive the profits of the entity, when disbursed, or
the assets of the entity upon liquidation or
dissolution.
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<PAGE> 18
ARTICLE 2.
Payments
a. Interest. From the date of this Note through
the Maturity Date, interest shall accrue hereunder on
the unpaid outstanding principal sum of this Note at
at a rate equal to 7% per annum calculated on the
basis of a 360-day year. All past due amounts of
principal and interest shall bear interest at 15% per
annum calculated on the basis of a 360-day year until
paid.
b. Payment of Principal and Interest. The
principal and unpaid interest of this Note shall be
due and payable in full on the Maturity Date.
c. Prepayments; Escrow of Funds.
i. At any time before the Maturity
Date, the Company may prepay all or any part
of this Note by making a voluntarily deposit
of funds into an escrow account for the
benefit of Holder and upon terms acceptable
to the Holder (the "Escrow Account") to be
applied towards payment of the amount of the
principal and accrued interest due under this
Note (the "Outstanding Balance"). The
Company shall provide notice of such deposit
to the Holder (the "Escrow Notice").
ii. Immediately upon the closing of an
Outside Financing, the Company will deposit
an amount into the Escrow Account equal to
the lesser of (i) the net proceeds received
by the Company or any Subsidiary from such
Outside Financing; or (ii) the amount
required to make the total funds in the
Escrow Account (the "Escrow Balance") equal
the Outstanding Balance. The Company shall
transmit notice of such Outside Financing
(the "Financing Notice") within one business
day of the closing of the Outside Financing.
Upon the closing of each subsequent Outside
Financing, additional deposits into the
Escrow Account shall be made in accordance
with this section.
iii. Upon the deposit of any funds into
the Escrow Account, such funds shall be
allocated toward the payment of accrued
interest on the date of such deposit and any
balance shall be allocated to prepayment of
the outstanding principal of the Note on the
date of such deposit. Principal to which
funds have been allocated in the Escrow
Account shall cease accruing interest under
the Note on the date of such deposit and
shall be prepaid 10 Business Days after
receipt of notice of such deposit by the
Holder. The Company will transmit notice to
the Holder within one business day of such
deposit. Ten (10) Business Days after
receipt of such notice by the Holder, any
amount of funds in the Escrow Account
attributable to a portion of the Note which
was
4
<PAGE> 19
converted into Common Stock, as contemplated
by Section 4.1 hereof, will be disbursed to
the Company and the remainder will be
disbursed to the Holder.
d. Manner of Payment upon Maturity. At
maturity, payment of principal and interest on this
Note will be made by delivery of checks to Holder at
its address as set forth in this Note or wire
transfers pursuant to instructions from Holder. If
the date upon which the payment of principal and
interest is required to be made pursuant to this Note
occurs other than on a Business Day, then such
payment of principal and interest shall be made on
the next occurring Business Day following said
payment date and shall include interest through said
next occurring Business Day.
ARTICLE 3.
Remedies
a. Events of Default. An "Event of Default"
occurs if:
i. the Company defaults in the payment
or a mandatory prepayment by deposit of funds
into escrow of the principal or interest of
the Note when such principal or interest
becomes due and payable; or
ii. the Company defaults in the
performance of any covenant made by the
Company, and such default remains uncured for
a period of 30 days in (i) the First
Amendment to Agreement of Purchase and Sale
by and between the Company and the Holder
dated as of February 29, 1996 (the "Purchase
Agreement"), (ii) the Common Stock Purchase
Warrants issued by the Company to the Holder
(the "Warrants"); (iii) the Registration
Rights Agreement dated as of February 29,
1996 by and between the Company and the
Holder (the "Registration Rights Agreement");
(iv) the Security Agreement; or (v) this
Note, provided that a default in the
performance of any covenant in Sections 8(a),
8(c), 8(d), 8(e), 8(f), 8(h), 8(i), 8(j),
8(k), 8(l), 8(m) or 8(n) of the Security
Agreement; or Section 6.1 of this Note shall
be an event of Default immediately upon
occurrence; or
iii. any representation or warranty made
by the Company in the Purchase Agreement, the
Warrants, the Registration Rights Agreement,
this Note or in any certificate furnished by
the Company in connection with the
consummation of the transaction contemplated
thereby, is untrue in any material respect as
of the date of making thereof; or
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<PAGE> 20
iv. the Company defaults in the payment
when due (whether by lapse of time, by
declaration, by call for redemption or
otherwise) of the principal of or interest on
any Indebtedness of the Company (other than
the Indebtedness evidenced by the Note or
good-faith disputes with trade creditors)
having an aggregate principal amount in
excess of $100,000 and such default remains
uncured for a period of 15 days; or
v. a court of competent jurisdiction
enters a final and non-appealable judgment or
judgments against the Company or any property
or assets of the Company for the payment of
money aggregating $100,000 or more in excess
of applicable insurance coverage; or
vi. a court of competent jurisdiction
enters (i) a decree or order for relief in
respect of the Company in an involuntary case
or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization
or other similar law or (ii) a decree or
order adjudging the Company a bankrupt or
insolvent, or approving as properly filed a
petition seeking reorganization, arrangement,
adjustment or composition of or in respect of
the Company under any applicable federal or
state law, or appointing a custodian,
receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the
Company or of any substantial part of the
property of the Company or ordering the
winding up or liquidation of the affairs of
the Company; or
vii. the Company: (i) commences a
voluntary case or proceeding under any
applicable federal or state bankruptcy,
insolvency, reorganization or other similar
law or any other case or proceeding to be
adjudicated a bankrupt or insolvent; (ii)
files a petition, answer or consent seeking
reorganization or similar relief under any
applicable federal or state law; (iii) makes
an assignment for the benefit of creditors;
or (iv) admits in writing its inability to
pay its debts generally as they become due;
or
viii. any person or group (within the
meaning of Section 13(d) of the Securities
Exchange Act of 1934) becomes the beneficial
owner of 25% or more of the total voting
power of the Company and was not the
beneficial owner of 25% or more of the total
voting power of the Company as of the date of
this Note;
ix. the Company: (i) merges or
consolidates with or into any other Person,
unless the Company is the surviving or
acquiring party; (ii) the Company dissolves
or liquidates; or (iii) the Company sells all
or any substantial portion of its assets.
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<PAGE> 21
b. Acceleration of Maturity. This Note and all
accrued interest shall (i) automatically become
immediately due and payable if an Event of Default
described in Sections 3.1.6, 3.1.7, 3.1.8 or 3.1.9
occurs, and (ii) become immediately due and payable
at the option of the Holder in its sole discretion if
any other Event of Default occurs.
ARTICLE 4.
Conversion of Note
a. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of
this Article, at the option of Holder, all or any
part of this Note may be converted at any time, at
the amount of principal and accrued interest hereof,
into fully paid and nonassessable shares of Common
Stock (the "Shares"), calculated as to each
conversion to the nearest 1/100 of a share at the
Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. The Conversion
Price shall be initially $1.25 per share of Common
Stock. The principal amount of this Note shall be
reduced by the amount so converted as if payment or
prepayment in such amount has occurred.
b. Mandatory Conversion. If, at any time: (i)
the Market Price of the Company's common stock for
each of the previous 20 consecutive trading days
shall be $3.00 or more and (ii) the average daily
trading volume for such 20-day period shall be at
least 25,000 shares, then, upon ten days notice from
the Company to the Holder, the Note shall be
converted into Common Stock in accordance with the
procedure described in Section 4.1 at the Conversion
Price in effect on the date of said conversion.
ARTICLE 5.
Adjustment of Conversion Price
a. Anti-Dilution Provisions. The Conversion
Price shall be subject to adjustment from time to
time as provided herein. Upon each adjustment of the
Conversion Price, the holder of this Note shall
thereafter be entitled to purchase, at the Conversion
Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the
Conversion Price in effect immediately prior to such
adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment
and dividing the product thereof by the Conversion
Price resulting from such adjustment.
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<PAGE> 22
b. Adjustment of Conversion Price Upon Issuance
of Common Stock.
i. If and whenever after the date
hereof the Company shall issue or sell any
Common Stock for no consideration or for a
consideration per share less than the
Conversion Price, the Conversion Price shall
be reduced (but not increased, except as
otherwise specifically provided herein), to
the price (calculated to the nearest one-
tenth of a cent) determined by dividing (x)
an amount equal to the sum of (1) the
aggregate number of shares of Common Stock
outstanding immediately prior to such issue
or sale multiplied by the then existing
Conversion Price plus (2) the consideration
received by the Company upon such issue or
sale by (y) the aggregate number of shares of
Common Stock outstanding immediately after
such issue or sale.
ii. No adjustment shall be made in the
Conversion Price in the event that the
Company issues, in one or more transactions,
(i) Common Stock upon exercise of any options
issued to officers, directors or employees of
the Company pursuant to a stock option plan
or an employment, severance or consulting
agreement as now or hereafter in effect, the
1996 Nonemployee Directors' Stock Option
Plan, or the Management Incentive Stock Plan,
in each case approved by the Board of
Directors, provided that the aggregate number
of shares of Common Stock which may be
issuable, including options issued prior to
the date hereof, under all such employee
plans and agreements shall at no time exceed
the number of such shares of Common Stock
that are issuable under currently effective
employee plans and agreements, the 1996
Nonemployee Directors' Stock Option Plan, or
the Management Incentive Stock Plan; (ii)
Common Stock upon conversion of this Note or
exercise of the Warrants; (iii) Common Stock
upon exercise of any stock purchase warrant
or option (other than the options referred to
in clause (i) above) or other convertible
security outstanding on the date hereof; or
(iv) Common Stock issued as consideration in
acquisitions. In addition, for purposes of
calculating any adjustment of the Conversion
Price, all of the shares of Common Stock
issuable pursuant to any of the foregoing
shall be assumed to be outstanding prior to
the event causing such adjustment to be made.
iii. In case at any time after the date
hereof the Company shall in any manner grant
(whether directly or by assumption in a
merger or otherwise) any rights to subscribe
for or to purchase Common Stock or any
options, except for options issued to
officers, directors or employees of the
Company pursuant to a stock option plan in
effect as of the date hereof, the 1996
Nonemployee Directors' Stock Option Plan, or
the Management Incentive Stock Plan, for the
purchase of Common Stock or any stock or
securities convertible into or exchangeable
for Common Stock (such convertible or
8
<PAGE> 23
exchangeable stock or securities being herein
called "Convertible Securities"), whether or
not such rights or options or the right to
convert or exchange any such Convertible
Securities are immediately exercisable, and
the price per share for which shares of
Common Stock are issuable upon the exercise
of such rights or options or upon conversion
or exchange of such Convertible Securities
(determined by dividing (i) the total amount,
if any, received or receivable by the Company
as consideration for the granting of such
rights or options, plus the minimum aggregate
amount of additional consideration, if any,
payable to the Company upon the exercise of
such rights or options, or plus, in the case
of such rights or options that relate to
Convertible Securities, the minimum aggregate
amount of additional consideration, if any,
payable upon the issue or sale of such
Convertible Securities and upon the
conversion or exchange thereof, by (ii) the
total maximum number of shares of Common
Stock issuable upon the exercise of such
rights or options or upon the conversion or
exchange of all such Convertible Securities
issuable upon the exercise of such rights or
options) shall be less than the Conversion
Price in effect as of the date of granting
such rights or options, then the total
maximum number of shares of Common Stock
issuable upon the exercise of such rights or
options or upon conversion or exchange of all
such Convertible Securities issuable upon the
exercise of such rights or options shall be
deemed to be outstanding as of the date of
the granting of such rights or options and to
have been issued for such price per share,
with the effect on the Conversion Price
specified herein. Except as provided herein,
no further adjustment of the Conversion Price
shall be made upon the actual issuance of
such Common Stock or of such Convertible
Securities upon exercise of such rights or
options or upon the actual issuance of such
Common Stock upon conversion or exchange of
such Convertible Securities.
iv. If: (i) the purchase price provided
for in any right or option, (ii) the
additional consideration, if any, payable
upon the conversion or exchange of any
Convertible Securities, or (iii) the rate at
which any Convertible Securities are
convertible into or exchangeable for Common
Stock shall be decreased (other than by
reason of provisions designed to protect
against dilution), the Conversion Price then
in effect shall be decreased to the
Conversion Price that would have been in
effect had such rights, options or
Convertible Securities provided for such
changed purchase price, additional
consideration or conversion rate at the time
initially issued.
v. In case at any time Common Stock or
Convertible Securities or any rights or
options to purchase Common Stock or
Convertible Securities shall be issued or
sold for cash, the total amount of cash
consideration shall be deemed to be the
amount received by the Company. If at any
time any
9
<PAGE> 24
Common Stock, Convertible Securities or any
rights or options to purchase any such Common
Stock or Convertible Securities shall be
issued or sold for consideration other than
cash, the amount of the consideration other
than cash received by the Company shall be
deemed to be the fair value of such
consideration, as determined reasonably and
in good faith by the Board of Directors of
the Company. If at any time any Common
Stock, Convertible Securities or any rights
or options to purchase any Common Stock or
Convertible Securities shall be issued in
connection with any merger or consolidation
in which the Company is the surviving
corporation, the amount of consideration
received therefor shall be deemed to be the
fair value, as determined reasonably and in
good faith by the Board of Directors of the
Company, of such portion of the assets and
business of the nonsurviving corporation as
such Board of Directors may determine to be
attributable to such Common Stock,
Convertible Securities, rights or options as
the case may be. In case at any time any
rights or options to purchase any shares of
Common Stock or Convertible Securities shall
be issued in connection with the issuance and
sale of other securities of the Company,
together consisting of one integral
transaction in which no consideration is
allocated to such rights or options by the
parties, such rights or options shall be
deemed to have been issued without
consideration.
vi. In the case the Company shall take a
record of the holders of its Common Stock for
the purpose of entitling them (i) to receive
a dividend or other distribution payable in
Common Stock or Convertible Securities, or
(ii) to subscribe for or purchase Common
Stock or Convertible Securities, then such
record date shall be deemed to be the date of
the issuance or sale of the Common Stock or
Convertible Securities deemed to have been
issued or sold as a result of the declaration
of such dividend or the making of such other
distribution or the date of the granting of
such right of subscription or purchase, as
the case may be.
vii. The number of shares of Common Stock
outstanding at any given time shall not
include shares owned directly by the Company
in treasury, and the disposition of any such
shares shall be considered an issuance or
sale of Common Stock.
c. Stock Dividends. In case the Company shall
declare a dividend or make any other distribution
upon any shares of the Company, payable in Common
Stock or Convertible Securities, any Common Stock or
Convertible Securities, as the case may be, issuable
in payment of such dividend or distribution shall be
deemed to have been issued or sold without
consideration.
10
<PAGE> 25
d. Stock Splits and Reverse Splits. In the
event that the Company shall at any time subdivide
its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect
immediately prior to such subdivision shall be
proportionately reduced and the number of Shares into
which this Note may be converted immediately prior to
such subdivision shall be proportionately increased,
and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined
into a smaller number of shares, the Conversion Price
in effect immediately prior to such combination shall
be proportionately increased and the number of Shares
into which this Note may be converted immediately
prior to such combination shall be proportionately
reduced.
e. Reorganizations and Asset Sales. If any
capital reorganization or reclassification of the
capital stock of the Company, or any consolidation,
merger or share exchange of the Company with another
Person, or the sale, transfer or other disposition of
all or substantially all of its assets to another
Person shall be effected in such a way that holders
of Common Stock shall be entitled to receive capital
stock, securities or assets with respect to or in
exchange for their shares, then the following
provisions shall apply:
i. As a condition of such
reorganization, reclassification,
consolidation, merger, share exchange, sale,
transfer or other disposition, lawful and
adequate provisions shall be made whereby the
Holder shall thereafter have the right to
purchase and receive upon the terms and
conditions specified in this Note, such
shares of capital stock, securities or assets
as may be issued or payable with respect to
or in exchange for a number of outstanding
shares of such Common Stock equal to the
number of Shares immediately theretofore so
receivable had such reorganization,
reclassification, consolidation, merger,
share exchange or sale not taken place, and
in any such case appropriate provision
reasonably satisfactory to such holder shall
be made with respect to the rights and
interests of such holder to the end that the
provisions hereof (including, without
limitation, provisions for adjustments of the
Conversion Price and of the number of Shares
receivable upon the exercise) shall
thereafter be applicable, as nearly as
possible, in relation to any shares of
capital stock, securities or assets
thereafter deliverable upon the exercise of
Note.
ii. In the event of a merger, share
exchange or consolidation of the Company with
or into another Person as a result of which a
number of shares of common stock or its
equivalent of the successor Person greater or
lesser than the number of shares of Common
Stock outstanding immediately prior to such
merger, share exchange or consolidation are
issuable to holders of Common Stock, then the
Conversion Price in effect immediately prior
to such merger, share exchange or
consolidation shall be adjusted in the same
11
<PAGE> 26
manner as though there were a subdivision or
combination of the outstanding shares of
Common Stock.
iii. The Company shall not effect any
such consolidation, merger, share exchange,
sale, transfer or other disposition unless
prior to or simultaneously with the
consummation thereof the successor Person (if
other than the Company) resulting from such
consolidation, share exchange or merger or
the Person purchasing or otherwise acquiring
such assets shall have assumed by written
instrument executed and mailed or delivered
to the Holder hereof at the last address of
such Holder appearing on the books of the
Company the obligation to deliver to such
Holder such shares of capital stock,
securities or assets as, in accordance with
the foregoing provisions, such Holder may be
entitled to receive, and all other
liabilities and obligations of the Company
hereunder. Upon written request by the
Holder hereof, such Successor Person will
issue a new Note revised to reflect the
modifications in this Note effected pursuant
to this Section 5.5.
iv. If a purchase, tender or exchange
offer is made to and accepted by the holders
of 50% or more of the outstanding shares of
Common Stock, the Company shall not effect
any consolidation, merger, share exchange or
sale, transfer or other disposition of all or
substantially all of the Company's assets
with the Person having made such offer or
with any affiliate of such Person, unless
prior to the consummation of such
consolidation, merger, share exchange, sale,
transfer or other disposition the holder
hereof shall have been given a reasonable
opportunity to then elect to receive upon the
conversion of the Note either the capital
stock, securities or assets then issuable
with respect to the Common Stock or the
capital stock, securities or assets, or the
equivalent, issued to previous holders of the
Common Stock in accordance with such offer.
f. Adjustment for Asset Distribution. If the
Company declares a dividend or other distribution
payable to all holders of shares of Common Stock in
evidences of indebtedness of the Company or other
assets of the Company (including, cash (other than
regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock,
Convertible Securities or options or rights thereto)
or other property), the Conversion Price in effect
immediately prior to such declaration of such
dividend or other distribution shall be reduced by an
amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in
the case of a cash dividend or distribution, or by
the fair value of such dividend or distribution per
share of Common Stock (as reasonably determined in
good faith by the Board of Directors of the Company),
in the case of any other dividend or distribution.
Such reduction shall be made whenever any such
dividend or distribution is made and shall be
effective as of the date as of which a record is
taken
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<PAGE> 27
for purpose of such dividend or distribution or, if a
record is not taken, the date as of which holders of
record of Common Stock entitled to such dividend or
distribution are determined.
g. De Minimis Adjustments. No adjustment in the
number of shares of Common Stock purchasable
hereunder shall be required unless such adjustment
would require an increase or decrease of at least one
share of Common Stock purchasable upon conversion of
the Note and no adjustment in the Conversion Price
shall be required unless such adjustment would
require an increase or decrease of at least $.01 in
the Conversion Price; provided, however, that any
adjustments which are not required to be made shall
be carried forward and taken into account in any
subsequent adjustment. All calculations shall be
made to the nearest full share or nearest one
hundredth of a dollar, as applicable.
h. Notice of Adjustment. Whenever the
Conversion Price or the number of Shares issuable
upon the conversion of the Note shall be adjusted as
herein provided, or the rights of the holder hereof
shall change by reason of other events specified
herein, the Company shall compute the adjusted
Conversion Price and the adjusted number of Shares in
accordance with the provisions hereof and shall
prepare an Officer's Certificate setting forth the
adjusted Conversion Price and the adjusted number of
Shares issuable upon the conversion of the Note or
specifying the other shares of stock, securities or
assets receivable as a result of such change in
rights, and showing in reasonable detail the facts
and calculations upon which such adjustments or other
changes are based. The Company shall cause to be
mailed to the Holder hereof copies of such Officer's
Certificate together with a notice stating that the
Conversion Price and the number of Shares purchasable
upon conversion of the Note have been adjusted and
setting forth the adjusted Conversion Price and the
adjusted number of Shares purchasable upon conversion
of the Note.
i. Notifications to Holders. In case at any
time the Company proposes:
(i) to declare any dividend upon its
Common Stock payable in capital stock or make any
special dividend or other distribution (other than
cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata
to all of the holders of its Common Stock any
additional shares of capital stock of any class or
other rights;
(iii) to effect any capital
reorganization, or reclassification of the capital
stock of the Company, or consolidation, merger or
share exchange of the Company with another Person, or
sale, transfer or other disposition of all or
substantially all of its assets; or
13
<PAGE> 28
(iv) to effect a voluntary or involuntary
dissolution, liquidation or winding up of the
Company,
then, in any one or more of such cases, the Company shall give the holder
hereof (a) at least 10 days (but not more than 90 days) prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such issuance, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of any
such issuance, reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
at least 10 days (but not more than 90 days) prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution
or subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock, as the case may be, for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition,
dissolution, liquidation or winding up, as the case may be.
j. Company to Prevent Dilution. If any event or
condition occurs as to which other provisions of this
Article are not strictly applicable or if strictly
applicable would not fairly protect the exercise or
purchase rights of the Note evidenced hereby in
accordance with the essential intent and principles
of such provisions, or that might materially and
adversely affect the exercise or purchase rights of
the holder hereof under any provisions of this Note,
then the Company shall make such adjustments in the
application of such provisions, in accordance with
such essential intent and principles, so as to
protect such exercise and purchase rights as
aforesaid, and any adjustments necessary with respect
to the Conversion Price and the number of Shares
purchasable hereunder so as to preserve the rights of
the holder hereunder. In no event shall any such
adjustment have the effect of increasing the
Conversion Price as otherwise determined pursuant to
this Article except in the event of a combination of
shares.
ARTICLE 6.
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
a. Payment of Principal and Accrued Interest.
The Company will duly and punctually pay or cause to
be paid the principal sum of this Note, together with
interest accrued thereon from the date hereof to the
date of payment, in accordance with the terms hereof.
14
<PAGE> 29
b. Corporate Existence. The Company will do or
cause to be done all things necessary to preserve and
keep in full force and effect its corporate
existence, rights (charter and statutory) and
franchises; provided, however, that the Company shall
not be required to preserve any such right or
franchise if it shall reasonably determine that the
preservation thereof is no longer desirable in the
conduct of its business.
c. Taxes; Claims; etc. The Company will
promptly pay and discharge all lawful taxes,
assessments, and governmental charges or levies
imposed upon it or upon its income or profits, or
upon any of its properties, real, personal, or mixed,
before the same shall become in default, as well as
all lawful claims for labor, materials, and supplies
or otherwise which, if unpaid, might become a lien or
charge upon such properties or any part thereof, and
which lien or charges will have a material adverse
effect on the business of the Company; provided,
however, that the Company shall not be required to
pay or cause to be paid any such tax, assessment,
charge, levy, or claim prior to institution of
foreclosure proceedings if the validity thereof shall
concurrently be contested in good faith by
appropriate proceedings and if the Company shall have
established reserves deemed by the Company adequate
with respect to such tax, assessment, charge, levy,
or claim.
d. Maintenance of Existence and Properties. The
Company will, and will cause each Subsidiary to, keep
its material properties in good repair, working
order, and condition, ordinary wear and tear
excepted, so that the business carried on may be
properly conducted at all times in accordance with
prudent business management.
e. SEC Reports. The Company will deliver to the
Holder within 20 days after it files them with the
SEC, copies of its annual and quarterly reports and
of the information, documents, and other reports (or
copies of such portions of any of the foregoing as
the SEC may by rules and regulations prescribe) which
the Company is required to file with the SEC pursuant
to Section 13 or 15(d) of the Securities Exchange Act
of 1934. The Company will timely comply with its
reporting and filing obligations under the applicable
federal securities laws.
f. Notice of Defaults. The Company will
promptly notify the Holder in writing of the
occurrence of (i) any Event of Default under this
Note, and (ii) any event of default (or if any event
of default would result upon any payment with respect
to this Note) with respect to any Indebtedness as
such event of default is defined therein or in the
instrument under which it is outstanding, permitting
holders to accelerate the maturity of such
Indebtedness.
g. Mergers and Acquisitions. Without the
consent of the Holder the Company or any Subsidiary
will not dissolve, liquidate, consolidate or merge
with or sell or transfer all or a substantial portion
of its assets to any Person.
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h. Compliance with Laws. The Company will
promptly comply with all laws, ordinances and
governmental rules and regulations to which it is
subject.
ARTICLE 7.
Miscellaneous
a. Collection Fees. If this Note is placed in
the hands of an attorney for collection, and if it is
collected through any legal proceedings at law or in
equity or in bankruptcy, receivership or other court
proceedings, the Company hereby undertakes to pay all
costs and expenses of collection including, but not
limited to, court costs and the reasonable attorney's
fees of Holder.
b. Consent to Amendments. This Note may be
amended, and the Company may take any action herein
prohibited, or omit to perform any act herein
required to be performed by it, if and only if the
Company shall obtain the written consent to such
amendment, action or omission to act from the holders
of a majority of the aggregate principal amount of
the Note.
c. Benefits of Note. Nothing in this Note,
express or implied, shall give to any Person, other
than the Company, Holder, and their successors any
benefit or any legal or equitable right, remedy or
claim under or in respect of this Note.
d. Successors and Assigns. All covenants and
agreements in this Note contained by or on behalf of
the Company and the Holder shall bind and inure to
the benefit of the respective successors and assigns
of the Company and the Holder.
e. Restrictions on Transfer. Subject to the
provisions of this Section, this Note is transferable
in the same manner and with the same effect as in the
case of a negotiable instrument payable to a
specified person.
f. Notice; Address of Parties. Except as
otherwise provided, all communications to the Company
or Holder provided for herein or with reference to
this Note shall be deemed to have been sufficiently
given or served for all purposes on the third
business day after being sent as certified or
registered mail, postage and charges prepaid, to the
following addresses: if to the Company: Florafax
International, Inc., 8075 20th Street, Vero Beach, FL
32966, Attn: James H. West, or at any other address
designated by the Company in writing to Holder; if to
Holder: St. James Capital Partners, L.P., 5599 San
Felipe, Suite 301, Houston, Texas 77056, Attn: John
L. Thompson, or at any other address designated by
Holder to the Company in writing.
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<PAGE> 31
g. Separability Clause. In case any provision
in this Note shall be invalid, illegal or
unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining
provisions in such jurisdiction shall not in any way
be affected or impaired thereby; provided, however,
such construction does not destroy the essence of the
bargain provided for hereunder.
h. Governing Law. This Note shall be governed
by, and construed in accordance with, the internal
laws of the State of Delaware (without regard to
principles of choice of law).
i. Usury. It is the intention of the parties
hereto to conform strictly to the applicable laws of
the State of Delaware and the United States of
America, and judicial or administrative
interpretations or determinations thereof regarding
the contracting for, charging and receiving of
interest for the use, forbearance, and detention of
money (referred to as "Applicable Law"). The Holder
shall have no right to claim, to charge or to receive
any interest in excess of the maximum rate of
interest, if any, permitted to be charged on that
portion of the amount representing principal which is
outstanding and unpaid from time to time by
Applicable Law. Determination of the rate of
interest for the purpose of determining whether this
Note is usurious under Applicable Law shall be made
by amortizing, prorating, allocating and spreading in
equal parts during the period of the actual time of
this Note, all interest or other sums deemed to be
interest (referred to in this Section as "Interest")
at any time contracted for, charged or received from
the Company in connection with this Note. Any
Interest contracted for, charged or received in
excess of the maximum rate allowed by Applicable Law
shall be deemed a result of a mathematical error and
a mistake. If this Note is paid in part prior to the
end of the full stated term of this Note and the
Interest received for the actual period of existence
of this Note exceeds the maximum rate allowed by
Applicable Law, Holder shall credit the amount of the
excess against any amount owing under this Note or,
if this Note has been paid in full, or in the event
that it has been accelerated prior to maturity,
Holder shall refund to the Company the amount of such
excess, and shall not be subject to any of the
penalties provided by Applicable Law for contracting
for, charging or receiving Interest in excess of the
maximum rate allowed by Applicable Law. Any such
excess which is unpaid shall be canceled.
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<PAGE> 32
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
FLORAFAX INTERNATIONAL, INC.
-----------------------------------
James H. West, President
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<PAGE> 33
THE SECURITIES REPRESENTED BY THIS NOTE AND THE COMMON STOCK ISSUABLE THEREBY
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER APPLICABLE
SECURITIES LAWS.
FLORAFAX INTERNATIONAL, INC.
7% Convertible Promissory Note
$500,000 Houston, Texas February 29, 1996
Florafax International, Inc., a Delaware corporation (hereinafter
called the "Company," which term includes any directly or indirectly controlled
subsidiaries or successor entities), for value received, hereby promises to pay
to SV Capital Partners, L.P., a Texas limited partnership (hereinafter called
"Holder"), or its registered assigns, the principal sum of Five Hundred
Thousand Dollars ($500,000) together with accrued interest on the amount of
such principal sum, payable in accordance with the terms set forth below.
THE OBLIGATIONS OF THE COMPANY CONTAINED IN THIS NOTE ARE SUBJECT TO
THE TERMS OF A SECURITY AGREEMENT BETWEEN THE COMPANY, ST. JAMES CAPITAL
PARTNERS, L.P. AND THE HOLDER DATED FEBRUARY 29, 1996 (THE "SECURITY
AGREEMENT").
ARTICLE I
Definitions
For all purposes of this Note, except as otherwise expressly provided
or unless the context otherwise requires: (i) The terms defined in this Article
have the meanings assigned to them in this Article and include the plural as
well as the singular; (ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally accepted
accounting principles as promulgated from time to time by the Association of
Independent Certified Public Accountants; and (iii) the words "herein" and
"hereof" and other words of similar import refer to this Note as a whole and
not to any particular Article, Section or other subdivision.
1.1 "Board of Directors" means the board of directors of the
Company as elected from time to time or any duly authorized committee of that
board.
1.2 "Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday
<PAGE> 34
which is not a day on which banking institutions in Houston, Texas are
authorized or obligated by law or executive order to be closed.
1.3 "Common Stock" means shares of common stock, par value $.01
per share, of the Company.
1.4 "Company Financial Statements" shall mean those audited
financial statements of the Company included in the Company's most recent
annual report as filed with the United States Securities and Exchange
Commission on Form 10-K, and any amendments thereto.
1.5 "Conversion Price" means the price per share determined in
accordance with Articles IV and V (as adjusted in accordance with the terms of
this Note) at which shares of Common Stock shall be delivered to Holder upon
conversion of this Note into Common Stock.
1.6 "Default" means any event which is, or after notice or
passage of time would be, an Event of Default.
1.7 "Event of Default" has the meaning specified in Section 3.1.
1.8 "Indebtedness" of any Person means all indebtedness of such
Person, whether outstanding on the date of this Note or hereafter created,
incurred, assumed or guaranteed, (i) for the principal of, premium on and
interest on all debts of the Person whether outstanding on the date of this
Note or thereafter created for money borrowed by such Person (including
capitalized lease obligations), money borrowed by others (including capitalized
lease obligations) and guaranteed, directly or indirectly, by such Person, or
purchase money indebtedness, or indebtedness secured by property ("Purchase
Money Indebtedness") at the time of the acquisition of such property by such
Person, for the payment of which the Person is directly or contingently liable;
(ii) for all accrued obligations of the Person in respect of any contract,
agreement or instrument imposing an obligation upon the Person to pay over
funds; (iii) for all trade debt of the Person; and (iv) for all deferrals,
renewals, extensions and refundings of, and amendments, modifications and
supplements to, any of the indebtedness referred to in (i), (ii) or (iii)
above.
1.9 "Market Price" for any day, when used with reference to Common
Stock, shall mean the price of said Common Stock determined by reference to the
last reported sale price for the Common Stock on such day on the principal
securities exchange on which the Common Stock is listed or admitted to trading
or if no such sale takes place on such date, the average of the closing bid and
asked prices thereof as officially reported, or, if not so listed or admitted
to trading on any securities exchange, the last sale price for the Common Stock
on the National Association of Securities Dealers national market system on
such date, or, if there shall have been no trading on such date or if the
Common Stock shall not be listed on such system, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any NASD member
firm selected from time to time by the Company for such purpose.
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<PAGE> 35
1.10 "Maturity Date", when used with respect to the Note means
February 28, 1997 (or such earlier date upon which the Note become due and
payable).
1.11 "Note" means this 7% Convertible Promissory Note.
1.12 "Outside Financing" shall be defined as (i) any transaction
where the Company sells or transfers its equity or debt securities for cash
whether in public or private offerings and (ii) any financing from a bank or
other entity acting as a financial institution made to the Company or any
Subsidiary other than (x) Purchase Money Indebtedness incurred in the ordinary
course of business, and (y) amounts advanced under the terms of the Independent
Sales Organization and Merchant Servicing Agreement by and between the Company
and Universal Savings Bank, F.A., dated December 31, 1995.
1.13 "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
1.14 "SEC" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act of 1933.
1.15 "Subsidiary" means a corporation or other entity in which more
than 50% of the outstanding voting stock or equity interests is owned or
controlled, directly or indirectly, by the Company or any combination of the
Company and one or more other Subsidiaries. For the purposes of this
definition, "voting stock" means stock or other interests which ordinarily has
voting power for the election of directors, and equity interests means the
right to receive the profits of the entity, when disbursed, or the assets of
the entity upon liquidation or dissolution.
ARTICLE II
Payments
2.1 Interest. From the date of this Note through the Maturity
Date, interest shall accrue hereunder on the unpaid outstanding principal sum
of this Note at at a rate equal to 7% per annum calculated on the basis of a
360-day year. All past due amounts of principal and interest shall bear
interest at 15% per annum calculated on the basis of a 360-day year until paid.
2.2 Payment of Principal and Interest. The principal and unpaid
interest of this Note shall be due and payable in full on the Maturity Date.
2.3 Prepayments; Escrow of Funds.
2.3.1. At any time before the Maturity Date, the Company may
prepay all or any part
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<PAGE> 36
of this Note by making a voluntarily deposit of funds into an escrow account
for the benefit of Holder and upon terms acceptable to the Holder (the "Escrow
Account") to be applied towards payment of the amount of the principal and
accrued interest due under this Note (the "Outstanding Balance"). The Company
shall provide notice of such deposit to the Holder (the "Escrow Notice").
2.3.2. Immediately upon the closing of an Outside Financing,
the Company will deposit an amount into the Escrow Account equal to the lesser
of (i) the net proceeds received by the Company or any Subsidiary from such
Outside Financing; or (ii) the amount required to make the total funds in the
Escrow Account (the "Escrow Balance") equal the Outstanding Balance. The
Company shall transmit notice of such Outside Financing (the "Financing
Notice") within one business day of the closing of the Outside Financing. Upon
the closing of each subsequent Outside Financing, additional deposits into the
Escrow Account shall be made in accordance with this section.
2.3.3. Upon the deposit of any funds into the Escrow
Account, such funds shall be allocated toward the payment of accrued interest
on the date of such deposit and any balance shall be allocated to prepayment of
the outstanding principal of the Note on the date of such deposit. Principal
to which funds have been allocated in the Escrow Account shall cease accruing
interest under the Note on the date of such deposit and shall be prepaid 10
Business Days after receipt of notice of such deposit by the Holder. The
Company will transmit notice to the Holder within one business day of such
deposit. Ten (10) Business Days after receipt of such notice by the Holder,
any amount of funds in the Escrow Account attributable to a portion of the Note
which was converted into Common Stock, as contemplated by Section 4.1 hereof,
will be disbursed to the Company and the remainder will be disbursed to the
Holder.
2.4 Manner of Payment upon Maturity. At maturity, payment of
principal and interest on this Note will be made by delivery of checks to
Holder at its address as set forth in this Note or wire transfers pursuant to
instructions from Holder. If the date upon which the payment of principal and
interest is required to be made pursuant to this Note occurs other than on a
Business Day, then such payment of principal and interest shall be made on the
next occurring Business Day following said payment date and shall include
interest through said next occurring Business Day.
ARTICLE III
Remedies
3.1 Events of Default. An "Event of Default" occurs if:
3.1.1. the Company defaults in the payment or a mandatory
prepayment by deposit of funds into escrow of the principal or interest of the
Note when such principal or interest becomes due and payable; or
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<PAGE> 37
3.1.2. the Company defaults in the performance of any
covenant made by the Company, and such default remains uncured for a period of
30 days in (i) the First Amendment to Agreement of Purchase and Sale by and
between the Company and the Holder dated as of February 29, 1996 (the "Purchase
Agreement"), (ii) the Common Stock Purchase Warrants issued by the Company to
the Holder (the "Warrants"); (iii) the Registration Rights Agreement dated as
of February 29, 1996 by and between the Company and the Holder (the
"Registration Rights Agreement"); (iv) the Security Agreement; or (v) this
Note, provided that a default in the performance of any covenant in Sections
8(a), 8(c), 8(d), 8(e), 8(f), 8(h), 8(i), 8(j), 8(k), 8(l), 8(m) or 8(n) of the
Security Agreement; or Section 6.1 of this Note shall be an event of Default
immediately upon occurrence; or
3.1.3. any representation or warranty made by the Company in
the Purchase Agreement, the Warrants, the Registration Rights Agreement, this
Note or in any certificate furnished by the Company in connection with the
consummation of the transaction contemplated thereby, is untrue in any material
respect as of the date of making thereof; or
3.1.4. the Company defaults in the payment when due (whether
by lapse of time, by declaration, by call for redemption or otherwise) of the
principal of or interest on any Indebtedness of the Company (other than the
Indebtedness evidenced by the Note or good-faith disputes with trade creditors)
having an aggregate principal amount in excess of $100,000 and such default
remains uncured for a period of 15 days; or
3.1.5. a court of competent jurisdiction enters a final and
non-appealable judgment or judgments against the Company or any property or
assets of the Company for the payment of money aggregating $100,000 or more in
excess of applicable insurance coverage; or
3.1.6. a court of competent jurisdiction enters (i) a decree
or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (ii) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in respect
of the Company under any applicable federal or state law, or appointing a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or of any substantial part of the property of
the Company or ordering the winding up or liquidation of the affairs of the
Company; or
3.1.7. the Company: (i) commences a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or any other case or proceeding to be
adjudicated a bankrupt or insolvent; (ii) files a petition, answer or consent
seeking reorganization or similar relief under any applicable federal or state
law; (iii) makes an assignment for the benefit of creditors; or (iv) admits in
writing its inability to pay its debts generally as they become due; or
3.1.8. any person or group (within the meaning of Section
13(d) of the Securities
5
<PAGE> 38
Exchange Act of 1934) becomes the beneficial owner of 25% or more of the total
voting power of the Company and was not the beneficial owner of 25% or more of
the total voting power of the Company as of the date of this Note;
3.1.9. the Company: (i) merges or consolidates with or into
any other Person, unless the Company is the surviving or acquiring party; (ii)
the Company dissolves or liquidates; or (iii) the Company sells all or any
substantial portion of its assets.
3.2 Acceleration of Maturity. This Note and all accrued interest
shall (i) automatically become immediately due and payable if an Event of
Default described in Sections 3.1.6, 3.1.7, 3.1.8 or 3.1.9 occurs, and (ii)
become immediately due and payable at the option of the Holder in its sole
discretion if any other Event of Default occurs.
ARTICLE IV
Conversion of Note
4.1 Conversion Privilege and Conversion Price. Subject to and
upon compliance with the provisions of this Article, at the option of Holder,
all or any part of this Note may be converted at any time, at the amount of
principal and accrued interest hereof, into fully paid and nonassessable shares
of Common Stock (the "Shares"), calculated as to each conversion to the nearest
1/100 of a share at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. The Conversion Price shall be initially
$1.25 per share of Common Stock. The principal amount of this Note shall be
reduced by the amount so converted as if payment or prepayment in such amount
has occurred.
4.2 Mandatory Conversion. If, at any time: (i) the Market Price
of the Company's common stock for each of the previous 20 consecutive trading
days shall be $3.00 or more and (ii) the average daily trading volume for such
20-day period shall be at least 25,000 shares, then, upon ten days notice from
the Company to the Holder, the Note shall be converted into Common Stock in
accordance with the procedure described in Section 4.1 at the Conversion Price
in effect on the date of said conversion.
ARTICLE V
Adjustment of Conversion Price
5.1 Anti-Dilution Provisions. The Conversion Price shall be
subject to adjustment from time to time as provided herein. Upon each
adjustment of the Conversion Price, the holder of this Note shall thereafter be
entitled to purchase, at the Conversion Price resulting from such adjustment,
the number of shares of Common Stock obtained by multiplying the Conversion
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Conversion Price
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<PAGE> 39
resulting from such adjustment.
5.2 Adjustment of Conversion Price Upon Issuance of Common Stock.
5.2.1. If and whenever after the date hereof the Company
shall issue or sell any Common Stock for no consideration or for a
consideration per share less than the Conversion Price, the Conversion Price
shall be reduced (but not increased, except as otherwise specifically provided
herein), to the price (calculated to the nearest one-tenth of a cent)
determined by dividing (x) an amount equal to the sum of (1) the aggregate
number of shares of Common Stock outstanding immediately prior to such issue or
sale multiplied by the then existing Conversion Price plus (2) the
consideration received by the Company upon such issue or sale by (y) the
aggregate number of shares of Common Stock outstanding immediately after such
issue or sale.
5.2.2. No adjustment shall be made in the Conversion Price
in the event that the Company issues, in one or more transactions, (i) Common
Stock upon exercise of any options issued to officers, directors or employees
of the Company pursuant to a stock option plan or an employment, severance or
consulting agreement as now or hereafter in effect, the 1996 Nonemployee
Directors' Stock Option Plan, or the Management Incentive Stock Plan, in each
case approved by the Board of Directors, provided that the aggregate number of
shares of Common Stock which may be issuable, including options issued prior to
the date hereof, under all such employee plans and agreements shall at no time
exceed the number of such shares of Common Stock that are issuable under
currently effective employee plans and agreements, the 1996 Nonemployee
Directors' Stock Option Plan, or the Management Incentive Stock Plan; (ii)
Common Stock upon conversion of this Note or exercise of the Warrants; (iii)
Common Stock upon exercise of any stock purchase warrant or option (other than
the options referred to in clause (i) above) or other convertible security
outstanding on the date hereof; or (iv) Common Stock issued as consideration in
acquisitions. In addition, for purposes of calculating any adjustment of the
Conversion Price, all of the shares of Common Stock issuable pursuant to any of
the foregoing shall be assumed to be outstanding prior to the event causing
such adjustment to be made.
5.2.3. In case at any time after the date hereof the Company
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase Common Stock or any
options, except for options issued to officers, directors or employees of the
Company pursuant to a stock option plan in effect as of the date hereof, the
1996 Nonemployee Directors' Stock Option Plan, or the Management Incentive
Stock Plan, for the purchase of Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise of such
rights or options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable to
the Company
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<PAGE> 40
upon the exercise of such rights or options, or plus, in the case of such
rights or options that relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issue or sale of
such Convertible Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon the
exercise of such rights or options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Conversion Price in effect as of the date of
granting such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or upon
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Conversion Price specified herein.
Except as provided herein, no further adjustment of the Conversion Price shall
be made upon the actual issuance of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the actual issuance
of such Common Stock upon conversion or exchange of such Convertible
Securities.
5.2.4. If: (i) the purchase price provided for in any right
or option, (ii) the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities, or (iii) the rate at
which any Convertible Securities are convertible into or exchangeable for
Common Stock shall be decreased (other than by reason of provisions designed to
protect against dilution), the Conversion Price then in effect shall be
decreased to the Conversion Price that would have been in effect had such
rights, options or Convertible Securities provided for such changed purchase
price, additional consideration or conversion rate at the time initially
issued.
5.2.5. In case at any time Common Stock or Convertible
Securities or any rights or options to purchase Common Stock or Convertible
Securities shall be issued or sold for cash, the total amount of cash
consideration shall be deemed to be the amount received by the Company. If at
any time any Common Stock, Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be issued or
sold for consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value of such
consideration, as determined reasonably and in good faith by the Board of
Directors of the Company. If at any time any Common Stock, Convertible
Securities or any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection with any merger or consolidation in
which the Company is the surviving corporation, the amount of consideration
received therefor shall be deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such
Board of Directors may determine to be attributable to such Common Stock,
Convertible Securities, rights or options as the case may be. In case at any
time any rights or options to purchase any shares of Common Stock or
Convertible Securities shall be issued in connection with the issuance and sale
of other securities of the Company, together consisting of one integral
transaction in which no consideration is allocated to such rights or options by
the parties, such rights or options shall be deemed to have been issued without
consideration.
8
<PAGE> 41
5.2.6. In the case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or Convertible
Securities, or (ii) to subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be the date of the
issuance or sale of the Common Stock or Convertible Securities deemed to have
been issued or sold as a result of the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
5.2.7. The number of shares of Common Stock outstanding at
any given time shall not include shares owned directly by the Company in
treasury, and the disposition of any such shares shall be considered an
issuance or sale of Common Stock.
5.3 Stock Dividends. In case the Company shall declare a dividend
or make any other distribution upon any shares of the Company, payable in
Common Stock or Convertible Securities, any Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
5.4 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of Common Stock into
a greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Shares into
which this Note may be converted immediately prior to such subdivision shall be
proportionately increased, and conversely, in the event that the outstanding
shares of Common Stock shall at any time be combined into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
shall be proportionately increased and the number of Shares into which this
Note may be converted immediately prior to such combination shall be
proportionately reduced.
5.5 Reorganizations and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another Person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another Person shall be effected in such a way that holders of Common
Stock shall be entitled to receive capital stock, securities or assets with
respect to or in exchange for their shares, then the following provisions shall
apply:
5.5.1. As a condition of such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer or
other disposition, lawful and adequate provisions shall be made whereby the
Holder shall thereafter have the right to purchase and receive upon the terms
and conditions specified in this Note, such shares of capital stock, securities
or assets as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of Shares
immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger, share exchange or sale not taken
place, and in any such case appropriate provision reasonably satisfactory to
such holder shall be made with respect to the rights and interests of such
holder to the end that the provisions hereof (including, without limitation,
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<PAGE> 42
provisions for adjustments of the Conversion Price and of the number of Shares
receivable upon the exercise) shall thereafter be applicable, as nearly as
possible, in relation to any shares of capital stock, securities or assets
thereafter deliverable upon the exercise of Note.
5.5.2. In the event of a merger, share exchange or
consolidation of the Company with or into another Person as a result of which a
number of shares of common stock or its equivalent of the successor Person
greater or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are issuable
to holders of Common Stock, then the Conversion Price in effect immediately
prior to such merger, share exchange or consolidation shall be adjusted in the
same manner as though there were a subdivision or combination of the
outstanding shares of Common Stock.
5.5.3. The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other
than the Company) resulting from such consolidation, share exchange or merger
or the Person purchasing or otherwise acquiring such assets shall have assumed
by written instrument executed and mailed or delivered to the Holder hereof at
the last address of such Holder appearing on the books of the Company the
obligation to deliver to such Holder such shares of capital stock, securities
or assets as, in accordance with the foregoing provisions, such Holder may be
entitled to receive, and all other liabilities and obligations of the Company
hereunder. Upon written request by the Holder hereof, such Successor Person
will issue a new Note revised to reflect the modifications in this Note
effected pursuant to this Section 5.5.
5.5.4. If a purchase, tender or exchange offer is made to
and accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange
or sale, transfer or other disposition of all or substantially all of the
Company's assets with the Person having made such offer or with any affiliate
of such Person, unless prior to the consummation of such consolidation, merger,
share exchange, sale, transfer or other disposition the holder hereof shall
have been given a reasonable opportunity to then elect to receive upon the
conversion of the Note either the capital stock, securities or assets then
issuable with respect to the Common Stock or the capital stock, securities or
assets, or the equivalent, issued to previous holders of the Common Stock in
accordance with such offer.
5.6 Adjustment for Asset Distribution. If the Company declares a
dividend or other distribution payable to all holders of shares of Common Stock
in evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Conversion Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per
share of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such
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<PAGE> 43
dividend or distribution is made and shall be effective as of the date as of
which a record is taken for purpose of such dividend or distribution or, if a
record is not taken, the date as of which holders of record of Common Stock
entitled to such dividend or distribution are determined.
5.7 De Minimis Adjustments. No adjustment in the number of shares
of Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon conversion of the Note and no adjustment in the Conversion
Price shall be required unless such adjustment would require an increase or
decrease of at least $.01 in the Conversion Price; provided, however, that any
adjustments which are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall be
made to the nearest full share or nearest one hundredth of a dollar, as
applicable.
5.8 Notice of Adjustment. Whenever the Conversion Price or the
number of Shares issuable upon the conversion of the Note shall be adjusted as
herein provided, or the rights of the holder hereof shall change by reason of
other events specified herein, the Company shall compute the adjusted
Conversion Price and the adjusted number of Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Conversion Price and the adjusted number of Shares issuable upon the
conversion of the Note or specifying the other shares of stock, securities or
assets receivable as a result of such change in rights, and showing in
reasonable detail the facts and calculations upon which such adjustments or
other changes are based. The Company shall cause to be mailed to the Holder
hereof copies of such Officer's Certificate together with a notice stating that
the Conversion Price and the number of Shares purchasable upon conversion of
the Note have been adjusted and setting forth the adjusted Conversion Price and
the adjusted number of Shares purchasable upon conversion of the Note.
5.9 Notifications to Holders. In case at any time the Company
proposes:
(i) to declare any dividend upon its Common Stock
payable in capital stock or make any special dividend or other
distribution (other than cash dividends) to the holders of its
Common Stock;
(ii) to offer for subscription pro rata to all of
the holders of its Common Stock any additional shares of
capital stock of any class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with
another Person, or sale, transfer or other disposition of all
or substantially all of its assets; or
(iv) to effect a voluntary or involuntary
dissolution, liquidation or winding up of the Company,
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<PAGE> 44
then, in any one or more of such cases, the Company shall give the
holder hereof (a) at least 10 days (but not more than 90 days) prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such issuance, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of any
such issuance, reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
at least 10 days (but not more than 90 days) prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock, as the case may be, for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition, dissolution,
liquidation or winding up, as the case may be.
5.10 Company to Prevent Dilution. If any event or condition occurs
as to which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Note evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect
the exercise or purchase rights of the holder hereof under any provisions of
this Note, then the Company shall make such adjustments in the application of
such provisions, in accordance with such essential intent and principles, so as
to protect such exercise and purchase rights as aforesaid, and any adjustments
necessary with respect to the Conversion Price and the number of Shares
purchasable hereunder so as to preserve the rights of the holder hereunder. In
no event shall any such adjustment have the effect of increasing the Conversion
Price as otherwise determined pursuant to this Article except in the event of a
combination of shares.
ARTICLE VI
Covenants
The Company covenants and agrees that, so long as this Note is
outstanding:
6.1 Payment of Principal and Accrued Interest. The Company will
duly and punctually pay or cause to be paid the principal sum of this Note,
together with interest accrued thereon from the date hereof to the date of
payment, in accordance with the terms hereof.
6.2 Corporate Existence. The Company will do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such right or
franchise if it shall reasonably determine that the preservation thereof is no
longer desirable in the conduct of its business.
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<PAGE> 45
6.3 Taxes; Claims; etc. The Company will promptly pay and
discharge all lawful taxes, assessments, and governmental charges or levies
imposed upon it or upon its income or profits, or upon any of its properties,
real, personal, or mixed, before the same shall become in default, as well as
all lawful claims for labor, materials, and supplies or otherwise which, if
unpaid, might become a lien or charge upon such properties or any part thereof,
and which lien or charges will have a material adverse effect on the business
of the Company; provided, however, that the Company shall not be required to
pay or cause to be paid any such tax, assessment, charge, levy, or claim prior
to institution of foreclosure proceedings if the validity thereof shall
concurrently be contested in good faith by appropriate proceedings and if the
Company shall have established reserves deemed by the Company adequate with
respect to such tax, assessment, charge, levy, or claim.
6.4 Maintenance of Existence and Properties. The Company will,
and will cause each Subsidiary to, keep its material properties in good repair,
working order, and condition, ordinary wear and tear excepted, so that the
business carried on may be properly conducted at all times in accordance with
prudent business management.
6.5 SEC Reports. The Company will deliver to the Holder within 20
days after it files them with the SEC, copies of its annual and quarterly
reports and of the information, documents, and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. The Company will
timely comply with its reporting and filing obligations under the applicable
federal securities laws.
6.6 Notice of Defaults. The Company will promptly notify the
Holder in writing of the occurrence of (i) any Event of Default under this
Note, and (ii) any event of default (or if any event of default would result
upon any payment with respect to this Note) with respect to any Indebtedness as
such event of default is defined therein or in the instrument under which it is
outstanding, permitting holders to accelerate the maturity of such
Indebtedness.
6.7 Mergers and Acquisitions. Without the consent of the Holder
the Company or any Subsidiary will not dissolve, liquidate, consolidate or
merge with or sell or transfer all or a substantial portion of its assets to
any Person.
6.8 Compliance with Laws. The Company will promptly comply with
all laws, ordinances and governmental rules and regulations to which it is
subject.
ARTICLE VII
Miscellaneous
7.1 Collection Fees. If this Note is placed in the hands of an
attorney for collection, and if it is collected through any legal proceedings
at law or in equity or in bankruptcy, receivership or other court proceedings,
the Company hereby undertakes to pay all costs and expenses of collection
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<PAGE> 46
including, but not limited to, court costs and the reasonable attorney's fees
of Holder.
7.2 Consent to Amendments. This Note may be amended, and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if and only if the Company shall obtain
the written consent to such amendment, action or omission to act from the
holders of a majority of the aggregate principal amount of the Note.
7.3 Benefits of Note. Nothing in this Note, express or implied,
shall give to any Person, other than the Company, Holder, and their successors
any benefit or any legal or equitable right, remedy or claim under or in
respect of this Note.
7.4 Successors and Assigns. All covenants and agreements in this
Note contained by or on behalf of the Company and the Holder shall bind and
inure to the benefit of the respective successors and assigns of the Company
and the Holder.
7.5 Restrictions on Transfer. Subject to the provisions of this
Section, this Note is transferable in the same manner and with the same effect
as in the case of a negotiable instrument payable to a specified person.
7.6 Notice; Address of Parties. Except as otherwise provided, all
communications to the Company or Holder provided for herein or with reference
to this Note shall be deemed to have been sufficiently given or served for all
purposes on the third business day after being sent as certified or registered
mail, postage and charges prepaid, to the following addresses: if to the
Company: Florafax International, Inc., 8075 20th Street, Vero Beach, FL 32966,
Attn: James H. West, or at any other address designated by the Company in
writing to Holder; if to Holder: SV Capital Partners, L.P., 200 Concord Plaza,
Suite 620, San Antonio, Texas 78216, Attn: William H. Wagner, or at any other
address designated by Holder to the Company in writing.
7.7 Separability Clause. In case any provision in this Note shall
be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions in such jurisdiction
shall not in any way be affected or impaired thereby; provided, however, such
construction does not destroy the essence of the bargain provided for
hereunder.
7.8 Governing Law. This Note shall be governed by, and construed
in accordance with, the internal laws of the State of Delaware (without regard
to principles of choice of law).
7.9 Usury. It is the intention of the parties hereto to conform
strictly to the applicable laws of the State of Delaware and the United States
of America, and judicial or administrative interpretations or determinations
thereof regarding the contracting for, charging and receiving of interest for
the use, forbearance, and detention of money (referred to as "Applicable Law").
The Holder shall have no right to claim, to charge or to receive any interest
in excess of the maximum rate of interest, if any, permitted to be charged on
that portion of the amount representing principal which is outstanding and
unpaid from time to time by Applicable Law. Determination of the rate
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<PAGE> 47
of interest for the purpose of determining whether this Note is usurious under
Applicable Law shall be made by amortizing, prorating, allocating and spreading
in equal parts during the period of the actual time of this Note, all interest
or other sums deemed to be interest (referred to in this Section as "Interest")
at any time contracted for, charged or received from the Company in connection
with this Note. Any Interest contracted for, charged or received in excess of
the maximum rate allowed by Applicable Law shall be deemed a result of a
mathematical error and a mistake. If this Note is paid in part prior to the
end of the full stated term of this Note and the Interest received for the
actual period of existence of this Note exceeds the maximum rate allowed by
Applicable Law, Holder shall credit the amount of the excess against any amount
owing under this Note or, if this Note has been paid in full, or in the event
that it has been accelerated prior to maturity, Holder shall refund to the
Company the amount of such excess, and shall not be subject to any of the
penalties provided by Applicable Law for contracting for, charging or receiving
Interest in excess of the maximum rate allowed by Applicable Law. Any such
excess which is unpaid shall be canceled.
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IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed on the date first above written.
FLORAFAX INTERNATIONAL, INC.
--------------------------------------
James H. West, President
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THE SECURITIES REPRESENTED BY THESE WARRANTS AND THE COMMON STOCK ISSUABLE
THEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THESE WARRANTS MAY NOT BE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
FLORAFAX INTERNATIONAL, INC.
Expiring on January 1, 2001
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, St. James Capital Partners, L.P. (the "Holder") or its assigns,
is entitled to subscribe for and purchase from the Company (as hereinafter
defined), in whole or in part, 520,000 shares of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (as hereinafter
defined) at an initial Exercise Price (as hereinafter defined) per share of
$1.00, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. These Warrants
and all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on
January 1, 2001 (the "Expiration Date").
ARTICLE I
Definitions
As used herein, the following terms shall have the meanings set forth
below:
1.1 "Company" shall mean Florafax International, Inc., a Delaware
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
1.2 "Common Stock" shall mean and include the Company's Common
Stock, par value $.01 per share, authorized on the date of the original issue
of these Warrants and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets, the stock or other securities provided for herein,
and (ii) any
<PAGE> 50
other shares of common stock of the Company into which such shares of Common
Stock may be converted.
1.3 "Exercise Price" shall mean the initial purchase price of
$1.00 per share of Common Stock payable upon exercise of the Warrants, as
adjusted from time to time pursuant to the provisions hereof.
1.4 "Market Price" for any day, when used with reference to Common
Stock, shall mean the price of said Common Stock determined by reference to the
last reported sale price for the Common Stock on such day on the principal
securities exchange on which the Common Stock is listed or admitted to trading
or if no such sale takes place on such date, the average of the closing bid and
asked prices thereof as officially reported, or, if not so listed or admitted
to trading on any securities exchange, the last sale price for the Common Stock
on the National Association of Securities Dealers national market system on
such date, or, if there shall have been no trading on such date or if the
Common Stock shall not be listed on such system, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any NASD member
firm selected from time to time by the Company for such purpose.
1.5 "Note" shall mean the 7% Convertible Promissory Note of the
Company issued to St. James Capital Partners, L.P.
1.6 "Outstanding," when used with reference to Common Stock, shall
mean (except as otherwise expressly provided herein) at any date as of which
the number of shares thereof is to be determined, all issued shares of Common
Stock, except shares then owned or held by or for the account of the Company.
1.7 "Trading Days" shall mean any days during the course of which
the principal securities exchange on which the Common Stock is listed or
admitted to trading is open for the exchange of securities.
1.8 "Warrant" shall mean the right upon exercise to purchase one
Warrant Share.
1.9 "Warrant Shares" shall mean the shares of Common Stock
purchased or purchasable by the holder hereof upon the exercise of the
Warrants.
ARTICLE II
Exercise of Warrants
2.1 Method of Exercise. The Warrants represented hereby may be
exercised by the holder hereof, in whole or in part, at any time and from time
to time on or after the date hereof until 5:00 p.m., Houston, Texas time, on
the Expiration Date. To exercise the Warrants, the holder hereof shall deliver
to the Company, at the Warrant Office designated herein, (i) a written notice
in the form of
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<PAGE> 51
the Subscription Notice attached as an exhibit hereto, stating therein the
election of such holder to exercise the Warrants in the manner provided in the
Subscription Notice; (ii) payment in full of the Exercise Price (A) in cash or
by bank check for all Warrant Shares purchased hereunder, or (B) through a
"cashless" or "net-issue" exercise of each such Warrant ("Cashless Exercise");
the holder shall exchange each Warrant subject to a Cashless Exercise for that
number of Warrant Shares determined by multiplying the number of Warrant Shares
issuable hereunder by a fraction, the numerator of which shall be the
difference between (x) the Market Price and (y) the Exercise Price for each
such Warrant, and the denominator of which shall be the Market Price; the
Subscription Notice shall set forth the calculation upon which the Cashless
Exercise is based, or (C) a combination of (A) and (B) above; and (iii) these
Warrants. The Warrants shall be deemed to be exercised on the date of receipt
by the Company of the Subscription Notice, accompanied by payment for the
Warrant Shares and surrender of these Warrants, as aforesaid, and such date is
referred to herein as the "Exercise Date". Upon such exercise, the Company
shall, as promptly as practicable and in any event within five business days,
issue and deliver to such holder a certificate or certificates for the full
number of the Warrant Shares purchased by such holder hereunder, and shall,
unless the Warrants have expired, deliver to the holder hereof a new Warrant
representing the number of Warrants, if any, that shall not have been
exercised, in all other respects identical to these Warrants. As permitted by
applicable law, the Person in whose name the certificates for Common Stock are
to be issued shall be deemed to have become a holder of record of such Common
Stock on the Exercise Date and shall be entitled to all of the benefits of such
holder on the Exercise Date, including without limitation the right to receive
dividends and other distributions for which the record date falls on or after
the Exercise Date and to exercise voting rights.
2.2 Expenses and Taxes. The Company shall pay all expenses and
taxes (including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
2.3 Reservation of Shares. The Company shall reserve at all times
so long as the Warrants remain outstanding, free from preemptive rights, out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrants, a sufficient number of shares of Common
Stock to provide for the exercise of the Warrants.
2.4 Valid Issuance. All shares of Common Stock that may be issued
upon exercise of the Warrants will, upon issuance by the Company, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value,
if any, of the Common Stock).
2.5 Purchase Agreement. The Warrants represented hereby are part
of a duly authorized issue and sale of warrants to purchase Common Stock issued
and sold pursuant to that certain Agreement of Purchase and Sale, effective as
of February 29, 1996 (the "Agreement") between the
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<PAGE> 52
Company and the Holder. The Holder shall be entitled to the rights to
registration under the Securities Act and any applicable state securities or
blue sky laws to the extent set forth in the Registration Rights Agreement
between the Company and the Holder effective as of February 29, 1996 (the
"Registration Rights Agreement"). The terms of the Agreement and Registration
Rights Agreement are hereby incorporated herein for all purposes and shall be
considered a part of this Warrant as if they had been fully set forth herein.
Notwithstanding the previous sentence, in the event of any conflict between the
provisions of the Agreement and of this Warrant, the provisions of this Warrant
shall control.
2.6 Acknowledgment of Rights. At the time of the exercise of the
Warrants in accordance with the terms hereof and upon the written request of
the holder hereof, the Company will acknowledge in writing its continuing
obligation to afford to such holder any rights (including, without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions
of these Warrants; provided, however, that if the Holder hereof shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to such Holder any such rights.
2.7 No Fractional Shares. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of these Warrants. If
more than one Warrant shall be presented for exercise at the same time by the
same holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
whole shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section, be issuable on the exercise of this Warrant, the
Company shall pay an amount in cash calculated by it to be equal to the Market
Price of one share of Common Stock at the time of such exercise multiplied by
such fraction computed to the nearest whole cent.
ARTICLE III
Transfer
3.1 Warrant Office. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's offices at 8075 20th Street, Vero Beach, FL 32966
and may subsequently be such other office of the Company or of any transfer
agent of the Common Stock in the continental United States as to which written
notice has previously been given to the Holder. The Company shall maintain, at
the Warrant Office, a register for the Warrants in which the Company shall
record the name and address of the Person in whose name these Warrants has been
issued, as well as the name and address of each permitted assignee of the
rights of the registered owner hereof.
3.2 Ownership of Warrants. The Company may deem and treat the
Person in whose name the Warrants are registered as the holder and owner hereof
until provided with notice to the
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contrary. The Warrants may be exercised by an assignee for the purchase of
Warrant Shares without having new Warrants issued.
3.3 Restrictions on Transfer of Warrants. These Warrants may be
transferred, in whole or in part, by the Holder. The Company agrees to
maintain at the Warrant Office books for the registration and transfer of the
Warrants. The Company, from time to time, shall register the transfer of the
Warrants in such books upon surrender of this Warrant at the Warrant Office
properly endorsed or accompanied by appropriate instruments of transfer and
written instructions for transfer. Upon any such transfer and upon payment by
the holder or its transferee of any applicable transfer taxes, new Warrants
shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrants shall be cancelled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
or income taxes) and all other expenses and charges payable in connection with
the transfer of the Warrants pursuant to this Section.
3.4 Compliance with Securities Laws. Subject to the terms of the
Registration Rights Agreement and notwithstanding any other provisions
contained in these Warrants, the Holder understands and agrees that the
following restrictions and limitations shall be applicable to all Warrant
Shares and to all resales or other transfers thereof pursuant to the Securities
Act:
3.4.1 The holder hereof agrees that the Warrant Shares may
not be sold or otherwise transferred unless the Warrant Shares are registered
under the Securities Act and applicable state securities or blue sky laws or
are exempt therefrom.
3.4.2 A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY
OTHER APPLICABLE SECURITIES LAWS."
3.4.3 Stop transfer instructions will be imposed with
respect to the Warrant Shares so as to restrict resale or other transfer
thereof.
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ARTICLE IV
Anti-Dilution
4.1 Anti-Dilution Provisions. The Exercise Price shall be subject
to adjustment from time to time as provided herein. Upon each adjustment of
the Exercise Price, the holder of this Warrant shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
4.2 Adjustment of Exercise Price Upon Issuance of Common Stock.
4.2.1 If and whenever after the date hereof the Company
shall issue or sell any Common Stock for no consideration or for a
consideration per share less than the Exercise Price, the Exercise Price shall
be reduced (but not increased, except as otherwise specifically provided
herein) to the price (calculated to the nearest one-tenth of a cent) determined
by dividing (x) an amount equal to the sum of (1) the aggregate number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by then existing Exercise Price plus (2) the consideration received
by the Company upon such issue or sale by (y) the aggregate number of shares of
Common Stock outstanding immediately after such issue or sale.
4.2.2 No adjustment shall be made in the Exercise Price in
the event that the Company issues, in one or more transactions, (i) Common
Stock or convertible securities upon exercise of any options issued to
officers, directors or employees of the Company pursuant to a stock option plan
or an employment, severance or consulting agreement as now or hereafter in
effect, the 1996 Nonemployee Directors' Stock Option Plan, or the Management
Incentive Stock Plan, in each case approved by the Board of Directors, provided
that the aggregate number of shares of Common Stock which may be issuable,
including options issued prior to the date hereof, under all such employee
plans and agreements shall at no time exceed the number of such shares of
Common Stock that are issuable under currently effective employee plans and
agreements, the 1996 Nonemployee Directors' Stock Option Plan, or the
Management Incentive Stock Plan; (ii) Common Stock upon conversion of the Note
pursuant to the terms of the Notes or the Warrants; (iii) Common Stock upon
exercise of any stock purchase warrant or option (other than the options
referred to in clause (i) above) or other convertible security outstanding on
the date hereof; or (iv) Common Stock issued as consideration in acquisitions.
In addition, for purposes of calculating any adjustment of the Exercise Price,
all of the shares of Common Stock issuable pursuant to any of the foregoing
shall be assumed to be outstanding prior to the event causing such adjustment
to be made.
4.2.3 In case at any time after the date hereof the Company
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase Common Stock or any
options, except for options issued to officers, directors or employees
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<PAGE> 55
of the Company pursuant to a stock option plan in effect as of the date hereof,
the 1996 Nonemployee Directors' Stock Option Plan, or the Management Incentive
Stock Plan, for the purchase of Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise of such
rights or options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of such rights or options, or plus, in the case
of such rights or options that relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon the conversion or exchange
of all such Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect as of the date of
granting such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or upon
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Exercise Price specified herein.
Except as provided herein, no further adjustment of the Exercise Price shall be
made upon the actual issuance of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the actual issuance
of such Common Stock upon conversion or exchange of such Convertible
Securities.
4.2.4 If: (i) the purchase price provided for in any right
or option, (ii) the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities or (iii) the rate at which
any Convertible Securities are convertible into or exchangeable for Common
Stock shall be decreased (other than under or by reason of provisions designed
to protect against dilution), the Exercise Price then in effect shall be
decreased to the Exercise Price that would have been in effect had such rights,
options or Convertible Securities provided for such changed purchase price,
additional consideration or conversion rate at the time initially issued.
4.2.5 In case at any time Common Stock or Convertible
Securities or any rights or options to purchase Common Stock or Convertible
Securities shall be issued or sold for cash, the total amount of cash
consideration shall be deemed to be the amount received by the Company. If at
any time any Common Stock, Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be issued or
sold for consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value of such
consideration, as determined reasonably and in good faith by the Board of
Directors of the Company. If at any time any Common Stock, Convertible
Securities or any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection
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<PAGE> 56
with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration received therefor shall be deemed to
be the fair value, as determined reasonably and in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board of Directors may determine to be
attributable to such Common Stock, Convertible Securities, rights or options as
the case may be. In case at any time any rights or options to purchase any
shares of Common Stock or Convertible Securities shall be issued in connection
with the issuance and sale of other securities of the Company, together
consisting of one integral transaction in which no consideration is allocated
to such rights or options by the parties, such rights or options shall be
deemed to have been issued without consideration.
4.2.6 In the case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or Convertible
Securities, or (ii) to subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be the date of the
issuance or sale of the Common Stock or Convertible Securities deemed to have
been issued or sold as a result of the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
4.2.7 The number of shares of Common Stock outstanding at
any given time shall not include shares owned directly by the Company in
treasury, and the disposition of any such shares shall be considered an
issuance or sale of Common Stock.
4.3 Stock Dividends. In case the Company shall declare a dividend
or make any other distribution upon any shares of the Company, payable in
Common Stock or Convertible Securities, any Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
4.4 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the outstanding shares of Common Stock shall at any time be combined into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant
Shares purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced.
4.5 Reorganizations and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another Person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another Person shall be effected in such a way that holders of Common
Stock shall be entitled to receive capital stock, securities or assets with
respect to or in exchange for their shares, then the following provisions shall
apply:
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4.5.1 As a condition of such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer or
other disposition, lawful and adequate provisions shall be made whereby the
Holder shall thereafter have the right to purchase and receive upon the terms
and conditions specified in these Warrants and in lieu of the Warrant Shares
immediately theretofore receivable upon the exercise of the rights represented
hereby, such shares of capital stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of Warrant Shares immediately theretofore
so receivable had such reorganization, reclassification, consolidation, merger,
share exchange or sale not taken place, and in any such case appropriate
provision reasonably satisfactory to such holder shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Warrant Shares receivable upon the exercise) shall
thereafter be applicable, as nearly as possible, in relation to any shares of
capital stock, securities or assets thereafter deliverable upon the exercise of
Warrants.
4.5.2 In the event of a merger, share exchange or
consolidation of the Company with or into another Person as a result of which a
number of shares of common stock or its equivalent of the successor Person
greater or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are issuable
to holders of Common Stock, then the Exercise Price in effect immediately prior
to such merger, share exchange or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of Common Stock.
4.5.3 The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other
than the Company) resulting from such consolidation, share exchange or merger
or the Person purchasing or otherwise acquiring such assets shall have assumed
by written instrument executed and mailed or delivered to the holder hereof at
the last address of such holder appearing on the books of the Company the
obligation to deliver to such holder such shares of capital stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive, and all other liabilities and obligations of the Company
hereunder. Upon written request by the holder hereof, such successor Person
will issue a new Warrant revised to reflect the modifications in this Warrant
effected pursuant to this Section.
4.5.4 If a purchase, tender or exchange offer is made to
and accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange
or sale, transfer or other disposition of all or substantially all of the
Company's assets with the Person having made such offer or with any affiliate
of such Person, unless prior to the consummation of such consolidation, merger,
share exchange, sale, transfer or other disposition the holder hereof shall
have been given a reasonable opportunity to then elect to receive upon the
exercise of the Warrants either the capital stock, securities or assets then
issuable with respect to the Common Stock or the capital stock, securities or
assets, or the equivalent, issued to previous holders of the Common Stock in
accordance with such offer.
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4.6 Adjustment for Asset Distribution. If the Company declares a
dividend or other distribution payable to all holders of shares of Common Stock
in evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Exercise Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per
share of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
4.7 De Minimis Adjustments. No adjustment in the number of shares
of Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall be made to the
nearest full share or nearest one hundredth of a dollar, as applicable.
4.8 Notice of Adjustment. Whenever the Exercise Price or the
number of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted as herein provided, or the rights of the holder hereof shall change by
reason of other events specified herein, the Company shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock,
securities or assets receivable as a result of such change in rights, and
showing in reasonable detail the facts and calculations upon which such
adjustments or other changes are based. The Company shall cause to be mailed
to the holder hereof copies of such Officer's Certificate and an independent
accountants' opinion together with a notice stating that the Exercise Price and
the number of Warrant Shares purchasable upon exercise of the Warrants have
been adjusted and setting forth the adjusted Exercise Price and the adjusted
number of Warrant Shares purchasable upon the exercise of the Warrants.
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4.9 Notifications to Holders. In case at any time the Company
proposes:
(i) to declare any dividend upon its Common Stock payable
in capital stock or make any special dividend or other distribution
(other than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the
holders of its Common Stock any additional shares of capital stock of
any class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with another
Person, or sale, transfer or other disposition of all or substantially
all of its assets; or
(iv) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder
hereof (a) at least 10 days (but not more than 90 days) prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such issuance, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of any
such issuance, reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
at least 10 days (but not more than 90 days) prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution
or subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock, as the case may be, for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition,
dissolution, liquidation or winding up, as the case may be.
4.10 Company to Prevent Dilution. If any event or condition occurs
as to which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect
the exercise or purchase rights of the holder hereof under any provisions of
this Warrant, then the Company shall make such adjustments in the application
of such provisions, in accordance with such essential intent and principles, so
as to protect such exercise and purchase rights as aforesaid, and any
adjustments necessary with respect to the Exercise Price and the number of
Warrant Shares purchasable hereunder so as to preserve the rights of the holder
hereunder. In no event shall any such adjustment have the effect of increasing
the Exercise Price as otherwise determined pursuant to this Article except in
the event of a combination of shares.
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ARTICLE V
Miscellaneous
5.1 Entire Agreement. These Warrants, together with the
Agreement, contain the entire agreement between the holder hereof and the
Company with respect to the Warrant Shares purchasable upon exercise hereof and
the related transactions and supersedes all prior arrangements or
understandings with respect thereto.
5.2 Governing Law. This warrant shall be governed by and construed
in accordance with the laws of the State of Delaware.
5.3 Waiver and Amendment. Any term or provision of these Warrants
may be waived at any time by the party which is entitled to the benefits
thereof and any term or provision of these Warrants may be amended or
supplemented at any time by agreement of the holder hereof and the Company,
except that any waiver of any term or condition, or any amendment or
supplementation, of these Warrants shall be in writing. A waiver of any breach
or failure to enforce any of the terms or conditions of these Warrants shall
not in any way effect, limit or waive a party's rights hereunder at any time to
enforce strict compliance thereafter with every term or condition of these
Warrants.
5.4 Illegality. In the event that any one or more of the
provisions contained in this Warrant shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of these Warrants shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
5.5 Copy of Warrant. A copy of these Warrants shall be filed
among the records of the Company.
5.6 Notice. Any notice or other document required or permitted to
be given or delivered to the holder hereof shall be in writing and delivered
at, or sent by certified or registered mail to such holder at, the last address
shown on the books of the Company maintained at the Warrant Office for the
registration of these Warrants or at any more recent address of which the
holder hereof shall have notified the Company in writing. Any notice or other
document required or permitted to be given or delivered to the Company, other
than such notice or documents required to be delivered to the Warrant Office,
shall be delivered at, or sent by certified or registered mail to, the offices
of the Company at 8075 20th Street, Vero Beach, FL 32966 or such other address
within the continental United States of America as shall have been furnished by
the Company to the holder of this Warrant.
5.7 Limitation of Liability; Not Stockholders. No provision of
these Warrants shall be construed as conferring upon the holder hereof the
right to vote, consent, receive dividends or receive notices (other than as
herein expressly provided) in respect of meetings of stockholders for the
election of directors of the Company or any other matter whatsoever as a
stockholder of the
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Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the purchase price of any shares of Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
5.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of these Warrants, and in the case of any such loss, theft or
destruction upon delivery of an appropriate affidavit in such form as shall be
reasonably satisfactory to the Company and include reasonable indemnification
of the Company, or in the event of such mutilation upon surrender and
cancellation of these Warrants, the Company will make and deliver new Warrants
of like tenor, in lieu of such lost, stolen, destroyed or mutilated Warrants.
Any Warrants issued under the provisions of this Section in lieu of any
Warrants alleged to be lost, destroyed or stolen, or in lieu of any mutilated
Warrants, shall constitute an original contractual obligation on the part of
the Company. These Warrants shall be promptly canceled by the Company upon the
surrender hereof in connection with any exchange or replacement. The Company
shall pay all taxes (other than securities transfer taxes or income taxes) and
all other expenses and charges payable in connection with the preparation,
execution and delivery of Warrants pursuant to this Section.
5.9 Registration Rights. The Warrant Shares shall be entitled to
such registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
5.10 Headings. The Article and Section and other headings herein
are for convenience only and are not a part of this Warrant and shall not
affect the interpretation thereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its name.
Dated: February 29, 1996
FLORAFAX INTERNATIONAL, INC.
-----------------------------------
James H. West, President
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SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrants, hereby elects
to exercise purchase rights represented thereby for, and to purchase
thereunder, ____________ shares of the Common Stock covered by such Warrants,
and herewith makes payment in full for such shares, and requests (a) that
certificates for such shares (and any other securities or other property
issuable upon such exercise) be issued in the name of, and delivered to,
___________________ ______________________________________________________ and
(b), if such shares shall not include all of the shares issuable as provided in
such Warrants, that new Warrants of like tenor and date for the balance of the
shares issuable thereunder be delivered to the undersigned.
-------------------------------------
Date:
-----------------------------
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ASSIGNMENT
For value received, ____________________________, hereby sells,
assigns and transfers unto ____________________ _______ these Warrants,
together with all rights, title and interest therein, and does irrevocably
constitute and appoint __________________________________________attorney,
to transfer such Warrants on the books of the Company, with full power of
substitution.
-------------------------------------
Date:
------------------------------
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THE SECURITIES REPRESENTED BY THESE WARRANTS AND THE COMMON STOCK ISSUABLE
THEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW. THE SECURITIES
REPRESENTED BY THESE WARRANTS MAY NOT BE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY OTHER
APPLICABLE SECURITIES LAWS.
WARRANTS
to Purchase Common Stock of
FLORAFAX INTERNATIONAL, INC.
Expiring on January 1, 2001
This Common Stock Purchase Warrant (the "Warrant") certifies that for
value received, SV Capital Partners, L.P. (the "Holder") or its assigns, is
entitled to subscribe for and purchase from the Company (as hereinafter
defined), in whole or in part, 130,000 shares of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock (as hereinafter
defined) at an initial Exercise Price (as hereinafter defined) per share of
$1.00, subject, however, to the provisions and upon the terms and conditions
hereinafter set forth. The number of Warrants (as hereinafter defined), the
number of shares of Common Stock purchasable hereunder, and the Exercise Price
therefor are subject to adjustment as hereinafter set forth. These Warrants
and all rights hereunder shall expire at 5:00 p.m., Houston, Texas time, on
January 1, 2001 (the "Expiration Date").
ARTICLE I
Definitions
As used herein, the following terms shall have the meanings set forth
below:
1.1 "Company" shall mean Florafax International, Inc., a Delaware
corporation, and shall also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
1.2 "Common Stock" shall mean and include the Company's Common
Stock, par value $.01 per share, authorized on the date of the original issue
of these Warrants and shall also include (i) in case of any reorganization,
reclassification, consolidation, merger, share exchange or sale, transfer or
other disposition of assets, the stock or other securities provided for herein,
and (ii) any
<PAGE> 66
other shares of common stock of the Company into which such shares of Common
Stock may be converted.
1.3 "Exercise Price" shall mean the initial purchase price of
$1.00 per share of Common Stock payable upon exercise of the Warrants, as
adjusted from time to time pursuant to the provisions hereof.
1.4 "Market Price" for any day, when used with reference to Common
Stock, shall mean the price of said Common Stock determined by reference to the
last reported sale price for the Common Stock on such day on the principal
securities exchange on which the Common Stock is listed or admitted to trading
or if no such sale takes place on such date, the average of the closing bid and
asked prices thereof as officially reported, or, if not so listed or admitted
to trading on any securities exchange, the last sale price for the Common Stock
on the National Association of Securities Dealers national market system on
such date, or, if there shall have been no trading on such date or if the
Common Stock shall not be listed on such system, the average of the closing bid
and asked prices in the over-the-counter market as furnished by any NASD member
firm selected from time to time by the Company for such purpose.
1.5 "Note" shall mean the 7% Convertible Promissory Note of the
Company issued to SV Capital Partners, L.P.
1.6 "Outstanding," when used with reference to Common Stock, shall
mean (except as otherwise expressly provided herein) at any date as of which
the number of shares thereof is to be determined, all issued shares of Common
Stock, except shares then owned or held by or for the account of the Company.
1.7 "Trading Days" shall mean any days during the course of which
the principal securities exchange on which the Common Stock is listed or
admitted to trading is open for the exchange of securities.
1.8 "Warrant" shall mean the right upon exercise to purchase one
Warrant Share.
1.9 "Warrant Shares" shall mean the shares of Common Stock
purchased or purchasable by the holder hereof upon the exercise of the
Warrants.
ARTICLE II
Exercise of Warrants
2.1 Method of Exercise. The Warrants represented hereby may be
exercised by the holder hereof, in whole or in part, at any time and from time
to time on or after the date hereof until 5:00 p.m., Houston, Texas time, on
the Expiration Date. To exercise the Warrants, the holder hereof shall deliver
to the Company, at the Warrant Office designated herein, (i) a written notice
in the form of
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the Subscription Notice attached as an exhibit hereto, stating therein the
election of such holder to exercise the Warrants in the manner provided in the
Subscription Notice; (ii) payment in full of the Exercise Price (A) in cash or
by bank check for all Warrant Shares purchased hereunder, or (B) through a
"cashless" or "net-issue" exercise of each such Warrant ("Cashless Exercise");
the holder shall exchange each Warrant subject to a Cashless Exercise for that
number of Warrant Shares determined by multiplying the number of Warrant Shares
issuable hereunder by a fraction, the numerator of which shall be the
difference between (x) the Market Price and (y) the Exercise Price for each
such Warrant, and the denominator of which shall be the Market Price; the
Subscription Notice shall set forth the calculation upon which the Cashless
Exercise is based, or (C) a combination of (A) and (B) above; and (iii) these
Warrants. The Warrants shall be deemed to be exercised on the date of receipt
by the Company of the Subscription Notice, accompanied by payment for the
Warrant Shares and surrender of these Warrants, as aforesaid, and such date is
referred to herein as the "Exercise Date". Upon such exercise, the Company
shall, as promptly as practicable and in any event within five business days,
issue and deliver to such holder a certificate or certificates for the full
number of the Warrant Shares purchased by such holder hereunder, and shall,
unless the Warrants have expired, deliver to the holder hereof a new Warrant
representing the number of Warrants, if any, that shall not have been
exercised, in all other respects identical to these Warrants. As permitted by
applicable law, the Person in whose name the certificates for Common Stock are
to be issued shall be deemed to have become a holder of record of such Common
Stock on the Exercise Date and shall be entitled to all of the benefits of such
holder on the Exercise Date, including without limitation the right to receive
dividends and other distributions for which the record date falls on or after
the Exercise Date and to exercise voting rights.
2.2 Expenses and Taxes. The Company shall pay all expenses and
taxes (including, without limitation, all documentary, stamp, transfer or other
transactional taxes) other than income taxes attributable to the preparation,
issuance or delivery of the Warrants and of the shares of Common Stock issuable
upon exercise of the Warrants.
2.3 Reservation of Shares. The Company shall reserve at all times
so long as the Warrants remain outstanding, free from preemptive rights, out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the exercise of the Warrants, a sufficient number of shares of Common
Stock to provide for the exercise of the Warrants.
2.4 Valid Issuance. All shares of Common Stock that may be issued
upon exercise of the Warrants will, upon issuance by the Company, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof and, without limiting the
generality of the foregoing, the Company shall take no action or fail to take
any action which will cause a contrary result (including, without limitation,
any action that would cause the Exercise Price to be less than the par value,
if any, of the Common Stock).
2.5 Purchase Agreement. The Warrants represented hereby are part
of a duly authorized issue and sale of warrants to purchase Common Stock issued
and sold pursuant to that certain Agreement of Purchase and Sale, effective as
of February 29, 1996 (the "Agreement") between the
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Company and the Holder. The Holder shall be entitled to the rights to
registration under the Securities Act and any applicable state securities or
blue sky laws to the extent set forth in the Registration Rights Agreement
between the Company and the Holder effective as of February 29, 1996 (the
"Registration Rights Agreement"). The terms of the Agreement and Registration
Rights Agreement are hereby incorporated herein for all purposes and shall be
considered a part of this Warrant as if they had been fully set forth herein.
Notwithstanding the previous sentence, in the event of any conflict between the
provisions of the Agreement and of this Warrant, the provisions of this Warrant
shall control.
2.6 Acknowledgment of Rights. At the time of the exercise of the
Warrants in accordance with the terms hereof and upon the written request of
the holder hereof, the Company will acknowledge in writing its continuing
obligation to afford to such holder any rights (including, without limitation,
any right to registration of the Warrant Shares) to which such holder shall
continue to be entitled after such exercise in accordance with the provisions
of these Warrants; provided, however, that if the Holder hereof shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to such Holder any such rights.
2.7 No Fractional Shares. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of these Warrants. If
more than one Warrant shall be presented for exercise at the same time by the
same holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
whole shares of Common Stock purchasable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section, be issuable on the exercise of this Warrant, the
Company shall pay an amount in cash calculated by it to be equal to the Market
Price of one share of Common Stock at the time of such exercise multiplied by
such fraction computed to the nearest whole cent.
ARTICLE III
Transfer
3.1 Warrant Office. The Company shall maintain an office for
certain purposes specified herein (the "Warrant Office"), which office shall
initially be the Company's offices at 8075 20th Street, Vero Beach, FL 32966
and may subsequently be such other office of the Company or of any transfer
agent of the Common Stock in the continental United States as to which written
notice has previously been given to the Holder. The Company shall maintain, at
the Warrant Office, a register for the Warrants in which the Company shall
record the name and address of the Person in whose name these Warrants has been
issued, as well as the name and address of each permitted assignee of the
rights of the registered owner hereof.
3.2 Ownership of Warrants. The Company may deem and treat the
Person in whose name the Warrants are registered as the holder and owner hereof
until provided with notice to the
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contrary. The Warrants may be exercised by an assignee for the purchase of
Warrant Shares without having new Warrants issued.
3.3 Restrictions on Transfer of Warrants. These Warrants may be
transferred, in whole or in part, by the Holder. The Company agrees to
maintain at the Warrant Office books for the registration and transfer of the
Warrants. The Company, from time to time, shall register the transfer of the
Warrants in such books upon surrender of this Warrant at the Warrant Office
properly endorsed or accompanied by appropriate instruments of transfer and
written instructions for transfer. Upon any such transfer and upon payment by
the holder or its transferee of any applicable transfer taxes, new Warrants
shall be issued to the transferee and the transferor (as their respective
interests may appear) and the surrendered Warrants shall be cancelled by the
Company. The Company shall pay all taxes (other than securities transfer taxes
or income taxes) and all other expenses and charges payable in connection with
the transfer of the Warrants pursuant to this Section.
3.4 Compliance with Securities Laws. Subject to the terms of the
Registration Rights Agreement and notwithstanding any other provisions
contained in these Warrants, the Holder understands and agrees that the
following restrictions and limitations shall be applicable to all Warrant
Shares and to all resales or other transfers thereof pursuant to the Securities
Act:
3.4.1 The holder hereof agrees that the Warrant Shares may
not be sold or otherwise transferred unless the Warrant Shares are registered
under the Securities Act and applicable state securities or blue sky laws or
are exempt therefrom.
3.4.2 A legend in substantially the following form will be
placed on the certificate(s) evidencing the Warrant Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW AND,
ACCORDINGLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
RESOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER, OR IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER, THE SECURITIES ACT AND IN ACCORDANCE WITH ANY
OTHER APPLICABLE SECURITIES LAWS."
3.4.3 Stop transfer instructions will be imposed with
respect to the Warrant Shares so as to restrict resale or other transfer
thereof.
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ARTICLE IV
Anti-Dilution
4.1 Anti-Dilution Provisions. The Exercise Price shall be subject
to adjustment from time to time as provided herein. Upon each adjustment of
the Exercise Price, the holder of this Warrant shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
4.2 Adjustment of Exercise Price Upon Issuance of Common Stock.
4.2.1 If and whenever after the date hereof the Company
shall issue or sell any Common Stock for no consideration or for a
consideration per share less than the Exercise Price, the Exercise Price shall
be reduced (but not increased, except as otherwise specifically provided
herein) to the price (calculated to the nearest one-tenth of a cent) determined
by dividing (x) an amount equal to the sum of (1) the aggregate number of
shares of Common Stock outstanding immediately prior to such issue or sale
multiplied by then existing Exercise Price plus (2) the consideration received
by the Company upon such issue or sale by (y) the aggregate number of shares of
Common Stock outstanding immediately after such issue or sale.
4.2.2 No adjustment shall be made in the Exercise Price in
the event that the Company issues, in one or more transactions, (i) Common
Stock or convertible securities upon exercise of any options issued to
officers, directors or employees of the Company pursuant to a stock option plan
or an employment, severance or consulting agreement as now or hereafter in
effect, the 1996 Nonemployee Directors' Stock Option Plan, or the Management
Incentive Stock Plan, in each case approved by the Board of Directors, provided
that the aggregate number of shares of Common Stock which may be issuable,
including options issued prior to the date hereof, under all such employee
plans and agreements shall at no time exceed the number of such shares of
Common Stock that are issuable under currently effective employee plans and
agreements, the 1996 Nonemployee Directors' Stock Option Plan, or the
Management Incentive Stock Plan; (ii) Common Stock upon conversion of the Note
pursuant to the terms of the Notes or the Warrants; (iii) Common Stock upon
exercise of any stock purchase warrant or option (other than the options
referred to in clause (i) above) or other convertible security outstanding on
the date hereof; or (iv) Common Stock issued as consideration in acquisitions.
In addition, for purposes of calculating any adjustment of the Exercise Price,
all of the shares of Common Stock issuable pursuant to any of the foregoing
shall be assumed to be outstanding prior to the event causing such adjustment
to be made.
4.2.3 In case at any time after the date hereof the Company
shall in any manner grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase Common Stock or any
options, except for options issued to officers, directors or employees
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of the Company pursuant to a stock option plan in effect as of the date hereof,
the 1996 Nonemployee Directors' Stock Option Plan, or the Management Incentive
Stock Plan, for the purchase of Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per
share for which shares of Common Stock are issuable upon the exercise of such
rights or options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the granting of such rights or options, plus
the minimum aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of such rights or options, or plus, in the case
of such rights or options that relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange
thereof, by (ii) the total maximum number of shares of Common Stock issuable
upon the exercise of such rights or options or upon the conversion or exchange
of all such Convertible Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect as of the date of
granting such rights or options, then the total maximum number of shares of
Common Stock issuable upon the exercise of such rights or options or upon
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such rights or options shall be deemed to be outstanding as of the
date of the granting of such rights or options and to have been issued for such
price per share, with the effect on the Exercise Price specified herein.
Except as provided herein, no further adjustment of the Exercise Price shall be
made upon the actual issuance of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or upon the actual issuance
of such Common Stock upon conversion or exchange of such Convertible
Securities.
4.2.4 If: (i) the purchase price provided for in any right
or option, (ii) the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities or (iii) the rate at which
any Convertible Securities are convertible into or exchangeable for Common
Stock shall be decreased (other than under or by reason of provisions designed
to protect against dilution), the Exercise Price then in effect shall be
decreased to the Exercise Price that would have been in effect had such rights,
options or Convertible Securities provided for such changed purchase price,
additional consideration or conversion rate at the time initially issued.
4.2.5 In case at any time Common Stock or Convertible
Securities or any rights or options to purchase Common Stock or Convertible
Securities shall be issued or sold for cash, the total amount of cash
consideration shall be deemed to be the amount received by the Company. If at
any time any Common Stock, Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities shall be issued or
sold for consideration other than cash, the amount of the consideration other
than cash received by the Company shall be deemed to be the fair value of such
consideration, as determined reasonably and in good faith by the Board of
Directors of the Company. If at any time any Common Stock, Convertible
Securities or any rights or options to purchase any Common Stock or Convertible
Securities shall be issued in connection
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with any merger or consolidation in which the Company is the surviving
corporation, the amount of consideration received therefor shall be deemed to
be the fair value, as determined reasonably and in good faith by the Board of
Directors of the Company, of such portion of the assets and business of the
nonsurviving corporation as such Board of Directors may determine to be
attributable to such Common Stock, Convertible Securities, rights or options as
the case may be. In case at any time any rights or options to purchase any
shares of Common Stock or Convertible Securities shall be issued in connection
with the issuance and sale of other securities of the Company, together
consisting of one integral transaction in which no consideration is allocated
to such rights or options by the parties, such rights or options shall be
deemed to have been issued without consideration.
4.2.6 In the case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock or Convertible
Securities, or (ii) to subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be the date of the
issuance or sale of the Common Stock or Convertible Securities deemed to have
been issued or sold as a result of the declaration of such dividend or the
making of such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
4.2.7 The number of shares of Common Stock outstanding at
any given time shall not include shares owned directly by the Company in
treasury, and the disposition of any such shares shall be considered an
issuance or sale of Common Stock.
4.3 Stock Dividends. In case the Company shall declare a dividend
or make any other distribution upon any shares of the Company, payable in
Common Stock or Convertible Securities, any Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
4.4 Stock Splits and Reverse Splits. In the event that the
Company shall at any time subdivide its outstanding shares of Common Stock into
a greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced and the number of Warrant
Shares purchasable pursuant to this Warrant immediately prior to such
subdivision shall be proportionately increased, and conversely, in the event
that the outstanding shares of Common Stock shall at any time be combined into
a smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant
Shares purchasable upon the exercise of this Warrant immediately prior to such
combination shall be proportionately reduced.
4.5 Reorganizations and Asset Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or any
consolidation, merger or share exchange of the Company with another Person, or
the sale, transfer or other disposition of all or substantially all of its
assets to another Person shall be effected in such a way that holders of Common
Stock shall be entitled to receive capital stock, securities or assets with
respect to or in exchange for their shares, then the following provisions shall
apply:
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4.5.1 As a condition of such reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer or
other disposition, lawful and adequate provisions shall be made whereby the
Holder shall thereafter have the right to purchase and receive upon the terms
and conditions specified in these Warrants and in lieu of the Warrant Shares
immediately theretofore receivable upon the exercise of the rights represented
hereby, such shares of capital stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of Warrant Shares immediately theretofore
so receivable had such reorganization, reclassification, consolidation, merger,
share exchange or sale not taken place, and in any such case appropriate
provision reasonably satisfactory to such holder shall be made with respect to
the rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustments of the Exercise
Price and of the number of Warrant Shares receivable upon the exercise) shall
thereafter be applicable, as nearly as possible, in relation to any shares of
capital stock, securities or assets thereafter deliverable upon the exercise of
Warrants.
4.5.2 In the event of a merger, share exchange or
consolidation of the Company with or into another Person as a result of which a
number of shares of common stock or its equivalent of the successor Person
greater or lesser than the number of shares of Common Stock outstanding
immediately prior to such merger, share exchange or consolidation are issuable
to holders of Common Stock, then the Exercise Price in effect immediately prior
to such merger, share exchange or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of Common Stock.
4.5.3 The Company shall not effect any such consolidation,
merger, share exchange, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor Person (if other
than the Company) resulting from such consolidation, share exchange or merger
or the Person purchasing or otherwise acquiring such assets shall have assumed
by written instrument executed and mailed or delivered to the holder hereof at
the last address of such holder appearing on the books of the Company the
obligation to deliver to such holder such shares of capital stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive, and all other liabilities and obligations of the Company
hereunder. Upon written request by the holder hereof, such successor Person
will issue a new Warrant revised to reflect the modifications in this Warrant
effected pursuant to this Section.
4.5.4 If a purchase, tender or exchange offer is made to
and accepted by the holders of 50% or more of the outstanding shares of Common
Stock, the Company shall not effect any consolidation, merger, share exchange
or sale, transfer or other disposition of all or substantially all of the
Company's assets with the Person having made such offer or with any affiliate
of such Person, unless prior to the consummation of such consolidation, merger,
share exchange, sale, transfer or other disposition the holder hereof shall
have been given a reasonable opportunity to then elect to receive upon the
exercise of the Warrants either the capital stock, securities or assets then
issuable with respect to the Common Stock or the capital stock, securities or
assets, or the equivalent, issued to previous holders of the Common Stock in
accordance with such offer.
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4.6 Adjustment for Asset Distribution. If the Company declares a
dividend or other distribution payable to all holders of shares of Common Stock
in evidences of indebtedness of the Company or other assets of the Company
(including, cash (other than regular cash dividends declared by the Board of
Directors), capital stock (other than Common Stock, Convertible Securities or
options or rights thereto) or other property), the Exercise Price in effect
immediately prior to such declaration of such dividend or other distribution
shall be reduced by an amount equal to the amount of such dividend or
distribution payable per share of Common Stock, in the case of a cash dividend
or distribution, or by the fair value of such dividend or distribution per
share of Common Stock (as reasonably determined in good faith by the Board of
Directors of the Company), in the case of any other dividend or distribution.
Such reduction shall be made whenever any such dividend or distribution is made
and shall be effective as of the date as of which a record is taken for purpose
of such dividend or distribution or, if a record is not taken, the date as of
which holders of record of Common Stock entitled to such dividend or
distribution are determined.
4.7 De Minimis Adjustments. No adjustment in the number of shares
of Common Stock purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one share of Common Stock
purchasable upon an exercise of each Warrant and no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least $0.01 in the Exercise Price; provided, however, that any
adjustments are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations shall be made to the
nearest full share or nearest one hundredth of a dollar, as applicable.
4.8 Notice of Adjustment. Whenever the Exercise Price or the
number of Warrant Shares issuable upon the exercise of the Warrants shall be
adjusted as herein provided, or the rights of the holder hereof shall change by
reason of other events specified herein, the Company shall compute the adjusted
Exercise Price and the adjusted number of Warrant Shares in accordance with the
provisions hereof and shall prepare an Officer's Certificate setting forth the
adjusted Exercise Price and the adjusted number of Warrant Shares issuable upon
the exercise of the Warrants or specifying the other shares of stock,
securities or assets receivable as a result of such change in rights, and
showing in reasonable detail the facts and calculations upon which such
adjustments or other changes are based. The Company shall cause to be mailed
to the holder hereof copies of such Officer's Certificate and an independent
accountants' opinion together with a notice stating that the Exercise Price and
the number of Warrant Shares purchasable upon exercise of the Warrants have
been adjusted and setting forth the adjusted Exercise Price and the adjusted
number of Warrant Shares purchasable upon the exercise of the Warrants.
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4.9 Notifications to Holders. In case at any time the Company
proposes:
(i) to declare any dividend upon its Common Stock payable
in capital stock or make any special dividend or other distribution
(other than cash dividends) to the holders of its Common Stock;
(ii) to offer for subscription pro rata to all of the
holders of its Common Stock any additional shares of capital stock of
any class or other rights;
(iii) to effect any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation, merger or share exchange of the Company with another
Person, or sale, transfer or other disposition of all or substantially
all of its assets; or
(iv) to effect a voluntary or involuntary dissolution,
liquidation or winding up of the Company,
then, in any one or more of such cases, the Company shall give the holder
hereof (a) at least 10 days (but not more than 90 days) prior written notice of
the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such issuance, reorganization,
reclassification, consolidation, merger, share exchange, sale, transfer,
disposition, dissolution, liquidation or winding up, and (b) in the case of any
such issuance, reorganization, reclassification, consolidation, merger, share
exchange, sale, transfer, disposition, dissolution, liquidation or winding up,
at least 10 days (but not more than 90 days) prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause (a) shall also specify, in the case of any such dividend, distribution
or subscription rights, the date on which the holders of Common Stock shall be
entitled thereto, and such notice in accordance with the foregoing clause (b)
shall also specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock, as the case may be, for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, share exchange, sale, transfer, disposition,
dissolution, liquidation or winding up, as the case may be.
4.10 Company to Prevent Dilution. If any event or condition occurs
as to which other provisions of this Article are not strictly applicable or if
strictly applicable would not fairly protect the exercise or purchase rights of
the Warrants evidenced hereby in accordance with the essential intent and
principles of such provisions, or that might materially and adversely affect
the exercise or purchase rights of the holder hereof under any provisions of
this Warrant, then the Company shall make such adjustments in the application
of such provisions, in accordance with such essential intent and principles, so
as to protect such exercise and purchase rights as aforesaid, and any
adjustments necessary with respect to the Exercise Price and the number of
Warrant Shares purchasable hereunder so as to preserve the rights of the holder
hereunder. In no event shall any such adjustment have the effect of increasing
the Exercise Price as otherwise determined pursuant to this Article except in
the event of a combination of shares.
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ARTICLE V
Miscellaneous
5.1 Entire Agreement. These Warrants, together with the
Agreement, contain the entire agreement between the holder hereof and the
Company with respect to the Warrant Shares purchasable upon exercise hereof and
the related transactions and supersedes all prior arrangements or
understandings with respect thereto.
5.2 Governing Law. This warrant shall be governed by and construed
in accordance with the laws of the State of Delaware.
5.3 Waiver and Amendment. Any term or provision of these Warrants
may be waived at any time by the party which is entitled to the benefits
thereof and any term or provision of these Warrants may be amended or
supplemented at any time by agreement of the holder hereof and the Company,
except that any waiver of any term or condition, or any amendment or
supplementation, of these Warrants shall be in writing. A waiver of any breach
or failure to enforce any of the terms or conditions of these Warrants shall
not in any way effect, limit or waive a party's rights hereunder at any time to
enforce strict compliance thereafter with every term or condition of these
Warrants.
5.4 Illegality. In the event that any one or more of the
provisions contained in this Warrant shall be determined to be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in any other respect and the remaining
provisions of these Warrants shall not, at the election of the party for whom
the benefit of the provision exists, be in any way impaired.
5.5 Copy of Warrant. A copy of these Warrants shall be filed
among the records of the Company.
5.6 Notice. Any notice or other document required or permitted to
be given or delivered to the holder hereof shall be in writing and delivered
at, or sent by certified or registered mail to such holder at, the last address
shown on the books of the Company maintained at the Warrant Office for the
registration of these Warrants or at any more recent address of which the
holder hereof shall have notified the Company in writing. Any notice or other
document required or permitted to be given or delivered to the Company, other
than such notice or documents required to be delivered to the Warrant Office,
shall be delivered at, or sent by certified or registered mail to, the offices
of the Company at 8075 20th Street, Vero Beach, FL 32966 or such other address
within the continental United States of America as shall have been furnished by
the Company to the holder of this Warrant.
5.7 Limitation of Liability; Not Stockholders. No provision of
these Warrants shall be construed as conferring upon the holder hereof the
right to vote, consent, receive dividends or receive notices (other than as
herein expressly provided) in respect of meetings of stockholders for the
election of directors of the Company or any other matter whatsoever as a
stockholder of the
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Company. No provision hereof, in the absence of affirmative action by the
holder hereof to purchase shares of Common Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the purchase price of any shares of Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
5.8 Exchange, Loss, Destruction, etc. of Warrant. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, mutilation
or destruction of these Warrants, and in the case of any such loss, theft or
destruction upon delivery of an appropriate affidavit in such form as shall be
reasonably satisfactory to the Company and include reasonable indemnification
of the Company, or in the event of such mutilation upon surrender and
cancellation of these Warrants, the Company will make and deliver new Warrants
of like tenor, in lieu of such lost, stolen, destroyed or mutilated Warrants.
Any Warrants issued under the provisions of this Section in lieu of any
Warrants alleged to be lost, destroyed or stolen, or in lieu of any mutilated
Warrants, shall constitute an original contractual obligation on the part of
the Company. These Warrants shall be promptly canceled by the Company upon the
surrender hereof in connection with any exchange or replacement. The Company
shall pay all taxes (other than securities transfer taxes or income taxes) and
all other expenses and charges payable in connection with the preparation,
execution and delivery of Warrants pursuant to this Section.
5.9 Registration Rights. The Warrant Shares shall be entitled to
such registration rights under the Securities Act and under applicable state
securities laws as are specified in the Registration Rights Agreement.
5.10 Headings. The Article and Section and other headings herein
are for convenience only and are not a part of this Warrant and shall not
affect the interpretation thereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its name.
Dated: February 29, 1996
FLORAFAX INTERNATIONAL, INC.
-----------------------------------
James H. West, President
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SUBSCRIPTION NOTICE
The undersigned, the holder of the foregoing Warrants, hereby elects
to exercise purchase rights represented thereby for, and to purchase
thereunder, ____________ shares of the Common Stock covered by such Warrants,
and herewith makes payment in full for such shares, and requests (a) that
certificates for such shares (and any other securities or other property
issuable upon such exercise) be issued in the name of, and delivered to,
__________________________________________________________________________ and
(b), if such shares shall not include all of the shares issuable as provided in
such Warrants, that new Warrants of like tenor and date for the balance of the
shares issuable thereunder be delivered to the undersigned.
---------------------------------
Date:
------------------------------
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ASSIGNMENT
For value received, ____________________________, hereby sells,
assigns and transfers unto ____________________ _______ these Warrants,
together with all rights, title and interest therein, and does irrevocably
constitute and appoint ______________________________________________attorney,
to transfer such Warrants on the books of the Company, with full power of
substitution.
----------------------------------
Date:
------------------------------
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is executed
February 29, 1996, by FLORAFAX INTERNATIONAL, INC., a Delaware corporation
("Florafax" or "Debtor"; as used herein, "Debtor" shall mean Florafax
International, Inc. and each of its Subsidiaries), ST. JAMES CAPITAL PARTNERS,
L.P., a Delaware limited partnership, and SV CAPITAL PARTNERS, L.P., a Texas
limited partnership (collectively, the "Purchasers"), in connection with the
purchase of certain 7% Convertible Promissory Notes issued by Debtor.
WHEREAS concurrent with the execution of this Security Agreement,
Debtor will execute its 7% Convertible Promissory Note made payable to the
Purchasers (as amended, supplemented or restated, the "Note");
WHEREAS it is expressly understood between Debtor and the Purchasers
that the execution and delivery of this Security Agreement is an integral part
of the transactions contemplated by the Agreement for Purchase and Sale between
the Purchasers and the Debtor dated as of December 29, 1995 and is a condition
precedent to Purchasers' purchase of the Note.
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are acknowledged, Debtor
covenants and agrees with the Purchasers as follows:
1. Certain Definitions. Unless otherwise defined in this
Security Agreement, each capitalized term used but not defined in this Security
Agreement will have the meaning given that term in the UCC. If the definition
given in Chapter 9 of the UCC conflicts with the definition given that term in
any other chapter of the UCC, the Chapter 9 definition shall control. As used
in this Security Agreement, the following terms have the meanings indicated:
"Accounts" means all accounts, instruments, receivables, accounts
receivable, contract rights, chattel paper, documents, general intangibles,
book debts, any and all amounts due to Debtor from a factor, arising from
Debtor's sale of goods or rendition of services, and all the books and records
pertaining to the foregoing, and the cash or non-cash proceeds resulting
therefrom and all security and guaranties therefor.
"Affiliate" of a Person means any other individual or entity who
directly or indirectly controls, is controlled by, or is under common control
with, that Person.
"Debt" means, for any Person, (a) all obligations required by GAAP to
be classified upon a balance sheet as liabilities, (b) liabilities secured by
any Lien existing on property owned or acquired by that Person, (c) obligations
that have been (or under GAAP should be) capitalized for financial reporting
purposes, and (d) all guaranties, endorsements and other contingent obligations
with respect to Debt of others.
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"Default" means an "Event of Default" as defined in the Note.
"Distribution" means, with respect to any shares of any capital stock
or other equity securities or other interests issued by a Person, (a) the
retirement, redemption, purchase or other acquisition for value of those
securities by such Person, (b) the declaration or payment of any dividend on or
with respect to those securities by such Person, (c) any loan or advance by
that Person to, or other investment by that Person in, the holder of any of
those securities, and (d) any other payment by that Person with respect to
those securities.
"Equipment" means any and all of Debtor's furnishings, machinery,
furniture, fixtures and equipment, wherever located, whether now owned or
hereafter acquired including without limitation, all manufacturing,
distribution, selling, data processing and office equipment and all appliances
and trade fixtures (excluding equipment in which Debtor's interest is a
leasehold interest), together with all increases, parts, fittings, accessories,
equipment, and special tools now or hereafter affixed to any part thereof and
thereto, together with all substitutes and replacements thereof, all accessions
and attachments thereto, and all tools, parts and equipment now or hereafter
added to or used in connection with the foregoing.
"GAAP" means generally accepted accounting principles of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board.
"Inventory" means any and all of Debtor's inventory, including without
limitation any and all goods held for sale or lease or being processed for sale
or lease in Debtor's business as now or hereafter conducted and all returned,
reclaimed, refused or repossessed goods, whether now owned or hereinafter
acquired, 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 inventory, all
cash and non-cash proceeds from the sale of inventory including proceeds from
insurance and including such property the sale or other disposition of which
has given rise to accounts and which has not been returned to or repossessed or
stopped in transit by Debtor. "Inventory" includes each of the foregoing items
whether they are in the possession of Debtor or a bailee or other person for
sale, storage, transit, processing, use or otherwise.
"Lien" means any lien, mortgage, security interest, pledge,
assignment, charge, title retention agreement or encumbrance of any kind and
any other arrangement for a creditor's claim to be satisfied from assets or
proceeds prior to the claims of other creditors or the owners.
"Obligation" means (a) the amount due under the Note, (b) all
indebtedness, liabilities and obligations of Debtor arising under this Security
Agreement, (c) interest accruing on, and attorneys' fees, court costs, and
other costs of collection reasonably incurred in the collection or enforcement
of, any of the indebtedness, liabilities, or obligations described in clauses
(a) and (b) above, and (d) any and all renewals and extensions of, or
amendments to, any of the indebtedness, liabilities, and obligations described
in clauses (a) through (c) above.
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"Patents" means, individually and collectively, all of Debtor's rights
in and to all patents and patent applications and the inventions and
improvements described or claimed in those patents and patent applications, and
any patented improvements and/or enhancements thereof now or hereafter owned,
controlled or acquired by Debtor, and (a) any reissues, divisions,
continuations, renewals, reexaminations, related applications, extensions and
continuations-in-part thereof, (b) all income, royalties, damages and payments
now and hereafter due, received and/or payable under and with respect thereto,
including, without limitation, damages and payments for past, present or future
infringements thereof, (c) the right to sue for or bring injunctive proceedings
with respect to past, present and future infringements thereof, (d) all
licenses, agreements, and general intangibles relating thereto and (e) all
books, records, computer tapes or disks, instructions, flow diagrams,
specification sheets, source codes, object codes, and any other physical
manifestations of or documentation relating to any of the foregoing.
"Permitted Debt" means (a) the Obligation; (b) debt arising from
endorsing negotiable instruments for collection in the ordinary course of
business; (c) purchase money debt incurred to finance equipment in the ordinary
course of business; (d) trade payables that are for goods furnished or services
rendered in the ordinary course of business and that are payable in accordance
with customary trade terms; (e) amounts due and owing under the Independent
Sales Organization and Merchant Servicing Agreement by and between Debtor and
Universal Savings Bank, F.A., dated December 31, 1995 (the "Universal Savings
Agreement"); and (f) amounts due and owing to Citrus Bank of Florida, N.A. on
December 29, 1995 (the "Citrus Debt").
"Permitted Liens" means (a) Liens now or hereafter securing the
Obligation; (b) purchase money Liens incurred to finance equipment in the
ordinary course of business; (c) pledges or deposits made to secure payment of
workers' compensation, unemployment insurance, or other forms of governmental
insurance or benefits or to participate in any fund in connection with workers'
compensation, unemployment insurance, pensions, or other social security
programs; (d) good-faith pledges or deposits made to secure performance of
bids, tenders, contracts (other than for the repayment of borrowed money), or
leases, or to secure statutory obligations, surety or appeal bonds, or
indemnity, performance, or other similar bonds in the ordinary course of
business; (e) Liens for taxes and liens imposed by operation of law (including
Liens of mechanics, materialmen, warehousemen, carriers and landlords), if (i)
no amounts are due and payable and no Lien has been filed (or agreed to), or
(ii) the validity or amount secured thereof is being contested in good faith by
lawful proceedings diligently conducted, reserves required by GAAP have been
made, and levy and execution thereon have been (and continue to be) stayed or
payment thereof is covered in full (subject to the customary deductible) by
insurance; (f) liens pursuant to the Universal Savings Agreement and Liens
pursuant to the Citrus Debt.
"Pledged Shares" means all shares of capital stock or other evidences
of ownership now or hereafter issued to Debtor by any entity and the
Certificate(s) representing the Pledged Shares and all dividends, cash,
instruments and other property from time-to-time received, receivable or
otherwise distributed in respect of or in exchange of any Pledged Shares.
"Security Interest" means the security interest granted and the pledge
and assignment made
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under the terms of this Security Agreement.
"Subsidiary" means any entity of which more than 50% (in number of
votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by Debtor.
"Tribunal" means any (a) local, state, or federal judicial, executive,
or legislative instrumentality, or (b) private arbitration board or panel.
"Trademarks" means, individually and collectively, all trademarks,
trade names and service marks registrations, applications, rights to use and
common law rights therein now or hereafter owned, controlled or acquired by
Debtor and all of Debtor's rights in and to (a) all trade names, service marks
and trademarks in which it has rights, and (b) all renewals thereof, (c) all
income, payments, royalties, damages and payments now and hereafter due or
payable with respect thereto, including, without limitation, damages and
payments for past, present or future infringements thereof, (d) the right to
sue for or bring injunctive proceedings with respect to past, present and
future infringements thereof, (e) the goodwill of Debtor's business connected
with, symbolized by, or in any way related to any of the Trademarks, (f) all
licenses, agreements, and general intangibles relating to any of the foregoing
and (g) all books, records, computer tapes or disks, instructions, flow
diagrams, specification sheets, source codes, object codes, and any other
physical manifestations of or documentation relating to any of the foregoing.
"UCC" means the Uniform Commercial Code, as adopted in Texas,
provided, however, that to the extent the perfection or the effect of
perfection (or non-perfection) of the Security Interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than Texas, "UCC" means, with respect to the provisions of this Security
Agreement relating to perfection or the effect of perfection (or
non-perfection), the Uniform Commercial Code in effect in such jurisdiction.
2. Note. This Security Agreement is being executed and delivered
pursuant to the terms and conditions of the Note.
3. Security Interest. Subject to the terms and conditions of
this Security Agreement, and to secure the prompt, unconditional and complete
payment and performance of the Obligation when due, Debtor grants to the
Purchasers a security interest in all of Debtor's right, title and interest in
the Collateral and Debtor transfers, pledges, and assigns as security to the
Purchasers all of Debtor's right, title, and interest in the Collateral.
4. No Assumption or Modification. The Security Interest is given
to secure the prompt, unconditional, and complete payment and performance of
the Obligation when due, and is given as security only. The Purchasers do not
assume and shall not be liable for any of Debtor's liabilities, duties, or
obligations under or in connection with the Collateral. The Purchasers'
acceptance of this Security Agreement, or its taking any action in carrying out
this Security Agreement, does not constitute the Purchasers' approval of the
Collateral or the Purchasers' assumption of any obligation under or in
connection with the Collateral. This Security Agreement does not affect or
modify
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Debtor's obligations with respect to the Collateral.
5. Collateral. As used in this Agreement, the term "Collateral"
means the following items and types of property, wherever located, whether now
owned or hereafter acquired by Debtor:
(a) Accounts
(b) Inventory
(c) Equipment
(d) Pledged Shares
(e) Trademarks
(f) Patents
The description of Collateral contained in this Section includes after
acquired Collateral and proceeds of the Collateral.
6. Fraudulent Conveyance. Notwithstanding anything contained in
this Agreement to the contrary, Debtor agrees that if, but for the application
of this Section, the Obligation or any Security Interest would constitute a
preferential transfer under 11 U.S.C. Section 547, a fraudulent conveyance
under 11 U.S.C. Section 548 (or any successor section of that Code) or a
fraudulent conveyance or transfer under any state fraudulent conveyance or
fraudulent transfer law or similar Law in effect from time to time (each a
"Fraudulent Conveyance"), then the Obligation and each affected Security
Interest will be enforceable to the maximum extent possible without causing the
Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be
deemed to have been automatically amended to carry out the intent of this
Section.
7. Representations and Warranties. Debtor represents and
warrants to the Purchasers as follows:
(a) Binding Obligation. This Security Agreement creates
a legal, valid and binding lien in and to the Collateral in favor of the
Purchasers and enforceable against Debtor. Once perfected, the Security
Interest will constitute a first and prior lien on the Collateral subject only
to Permitted Liens. The creation of the Security Interest does not require the
consent of any third party.
(b) Pledged Shares. The Pledged Shares are duly
authorized, validly issued, fully paid and non-assessable and are not subject
to purchase or similar rights of any Person. Transfer of the Pledged Shares is
subject to no restrictions, other than restrictions imposed by applicable
securities and corporate laws, and Debtor is not a party to or otherwise bound
by any agreement which restricts the right of any present or future holder of
any of the Pledged Shares with respect to transfer of the Pledged Shares.
(c) Place of Business; Location of Records. Debtor's
place of business and chief executive office is located at 8075 20th Street,
Vero Beach, Florida 32966.
(d) No Lien. Debtor has not executed any prior transfer,
assignment, pledge,
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<PAGE> 86
security interest or hypothecation covering the Collateral or any interest in
the Collateral other than Permitted Liens. Further, there is no assignment,
pledge, security interest, hypothecation, lien or other encumbrance on any
assets of any issuer of Pledged Shares, other than Permitted Liens. No Pledged
Shares are in the possession of any Person asserting any claim to or security
interest in the Pledged Shares. Debtor owns all presently existing Collateral.
(e) No Defenses. The amounts due Debtor under the
Collateral are not subject to any material setoff, counterclaim, defense,
allowance or adjustment (other than discounts for prompt payment shown on the
invoice) or to any material dispute, objection or complaint by any Obligor.
(f) Existence and Ownership of Patents and Trademarks.
Debtor is the sole and exclusive owner of the right, title and interest in and
to the Patents and Trademarks free and clear of any Liens, registered user
agreements, covenants by Debtor not to sue third Persons or licenses. To the
reasonable knowledge of Debtor, Debtor has full right to use the Patents and
Trademarks. To the best of Debtor's knowledge, all Patents and Trademarks
owned, controlled or acquired by Debtor, or which Debtor has a right to use:
(i) are subsisting and have not been adjudged or claimed to be invalid or
unenforceable (either in whole or in part) and Debtor is not aware of any basis
for such a claim, (ii) are valid and enforceable, (iii) are in the name of
Debtor, (iv) are properly recorded and/or filed in the U.S. Patent and
Trademark Office and (v) Debtor has taken all necessary steps to properly
record or file ownership in the name of Debtor in the proper foreign filing
offices (the "Foreign Filing Offices") with respect to foreign Patents and
Trademarks, as appropriate.
(g) Third Parties Rights. Except as set forth in
Schedule 7(g) to Debtor's knowledge, no claim has been made that the ownership
or use of any of the Patents and Trademarks, or the manufacture, use or sale of
any product made in accordance therewith or service rendered thereunder, does
or may violate the rights of any third Person, and Debtor has no knowledge of
any third party rights which may be infringed or otherwise violated by the use
of any of the Patents and Trademarks.
(h) Registration. To the best of Debtor's knowledge,
Debtor has properly completed all required filings, payments, renewals and
obligations in the United States Patent and Trademark Offices or the
appropriate Foreign Filing Offices, as the case may be, to maintain Patents and
Trademarks as fully valid and enforceable.
8. Covenants. Debtor covenants and agrees with the Purchasers
as follows:
(a) Approval of Rights. After a Default occurs, Debtor
will take all actions the Purchasers request to obtain any Tribunal's consent
to or approval of the Purchasers' rights under this Security Agreement,
including, without limitation, the right to sell all or any part of the
Collateral upon a Default without the Tribunal's further consent or approval.
Debtor agrees that the Purchasers' remedies at law for Debtor's failure to
comply with this provision would be inadequate and that the harm to the
Purchasers would not be adequately compensable in damages. Debtor agrees that
this provision may be specifically enforced.
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(b) Perform Obligations. Debtor will: (i) perform all of
its obligations under or in connection with the Collateral in accordance with
customary business practices; (ii) promptly notify the Purchasers of any change
in any fact or circumstances represented by Debtor with respect to any of the
Collateral; and (iii) promptly notify the Purchasers of any claim, action or
proceeding affecting the Security Interest or title to all or any of the
Collateral and, at the request of the Purchasers, appear in and defend, at
Debtor's expense, any such action or proceeding.
(c) Assurances. Debtor shall not change its name or
address for notices hereunder or relocate Debtor's principal place of business
or chief executive office unless prior thereto Debtor (i) gives the Purchasers
ten (10) days prior written notice thereof (such notice to include, without
limitation, the name of the county or parish and state into which any such
relocation is to be made) and (ii) executes and delivers all such additional
documents and performs all additional acts as the Purchasers, in their sole
discretion, may reasonably request in order to continue or maintain the
existence and priority of the Security Interest in such Collateral.
(d) Further Assurances. From time to time, Debtor will
promptly execute and deliver to the Purchasers all other assignments,
certificates, supplemental documents, financing statements and do all other
acts the Purchasers reasonably request in order to create, evidence, perfect,
continue or maintain the existence and priority of the Security Interest and in
order to perfect the Security Interest in all future Collateral including,
without limitation, the execution and filing of such financing statements as
the the Purchasers may reasonably require.
(e) Taxes. Debtor will promptly pay when due any and all
taxes, other than those which are being contested in good faith by lawful
proceedings diligently conducted, against which reserves required by GAAP have
been made, and in respect of which levy and execution of any Lien have been and
continue to be stayed.
(f) Payment of Obligations. Debtor will promptly pay,
renew and extend all of its material obligations as they become due, unless the
obligations are being contested in good faith by appropriate proceedings.
(g) Maintenance of Existence, Assets, and Business.
Debtor will (i) maintain its corporate existence and good standing and its
authority to transact business in all states where necessary; (ii) maintain all
licenses, permits and franchises necessary for its business; and (iii) keep all
of its assets that are useful in and necessary to its business in good working
order and condition (ordinary wear and tear excepted) and make all necessary
repairs and replacements.
(h) Debt. Without the written consent of Purchasers,
Debtor may not create, incur or suffer to exist any Debt, other than Permitted
Debt.
(i) Liens. Without the written consent of Purchasers,
Debtor may not create, incur or suffer or permit to be created or incurred or
to exist any Lien upon the Collateral, other than Permitted Liens.
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(j) Transactions with Affiliates. Without the written
consent of Purchasers, Debtor may not enter into any transaction with any of
its Affiliates, other than transactions in the ordinary course of business and
upon fair and reasonable terms not materially less favorable than it could
obtain or could become entitled to in an arm's-length transaction with a
non-Affiliate.
(k) Loans, Advances and Investments. Without the written
consent of Purchasers, Debtor may not make any loan, advance, extension of
credit or capital contribution to, make any investment in, or purchase or
commit to purchase any stock or other securities or evidences of Debt of, or
interests in, any other Person, other than dividends between the Company and
its Subsidiaries.
(l) Dividends and Distributions. Without the written
consent of Purchasers, Debtor may not declare, make or pay any Distribution,
other than dividends between the Company and its Subsidiaries.
(m) Sale of Assets. Without the written consent of
Purchasers, Debtor may not sell, assign, lease, transfer or otherwise dispose
of any of its assets, other than the following types of dispositions of assets:
(i) sales of inventory in the ordinary course of business, (ii) the sale,
discount or transfer of delinquent accounts receivable in the ordinary course
of business for purposes of collection, (iii) occasional sales, leases or other
dispositions of immaterial assets for consideration not less than fair market
value, (iv) sales, leases or other dispositions of assets that are obsolete or
have negligible fair market value, and (v) sales of equipment for a fair and
adequate consideration (but if replacement equipment is necessary for the
proper operation of the business of the seller, the seller must promptly
replace the sold equipment).
(n) Mergers and Dissolutions. Without the written
consent of Purchasers, Debtor may not merge or consolidate with any other
Person or liquidate, wind up or dissolve (or suffer any liquidation or
dissolution).
9. Default; Remedies. Upon the occurrence of a Default, the
Purchasers have the following cumulative rights and remedies under this
Security Agreement:
(a) Rights. The Purchasers may exercise any and all
rights available to the Purchasers under the UCC as enacted in Texas or any
other applicable jurisdiction, as amended, in addition to any and all other
rights afforded by this Security Agreement, at law, in equity, or otherwise,
including, without limitation, applying by appropriate judicial proceedings for
appointment of a receiver for all or part of the Collateral (and Debtor hereby
consents to any such appointment).
(b) Pledged Shares. Debtor and the Purchasers
acknowledge that the Purchasers must, in exercising its rights to foreclose
upon and sell any of the Pledged Shares, conduct themselves in accordance with
the applicable requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and state securities laws
(collectively, and together with any rules and regulations promulgated pursuant
thereto, the "Securities Laws"). Accordingly, the Purchasers may have
difficulty, by reason of legal restrictions and limitations
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<PAGE> 89
imposed by the Securities Laws, in selling the Pledged Shares at a price which
approximates their fair market value, were it not for such restrictions.
Debtor acknowledges and agrees that (i) the Purchasers may seek to dispose of
the Pledged Shares without registration or qualification under the Securities
Laws, provided that in any such transaction the Purchasers require the
purchaser or purchasers of the Pledged Shares to represent and warrant their
intent not to distribute the Pledged Shares in violation of the Securities
Laws, and any disposition so effected shall not be deemed "commercially
unreasonable," and (ii) the Purchasers may disclose any information it has
obtained concerning any issuer of Pledged Shares, even if obtained in
confidence, if the Purchasers consider such disclosure to potential purchasers
of the Pledged Shares at a foreclosure sale to be in its sole discretion
necessary to comply with the Securities Laws.
(c) Debtor's Agent. The Purchasers shall be deemed to be
irrevocably appointed as Debtor's agent and attorney-in-fact with all right and
power to enforce all of Debtor's rights and remedies under or in connection
with the Collateral. All reasonable costs, expenses and liabilities incurred
and all payments made by the Purchasers as Debtor's agent and attorney-in-fact,
including, without limitation, reasonable attorney's fees and expenses, shall
be considered a loan by the Purchasers to Debtor which shall be repayable on
demand and shall accrue interest at the Default Rate and shall be part of the
Obligation.
(d) Notice. Reasonable notification of the time and
place of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Debtor and to any other Person
entitled to notice under the UCC; provided that, if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold on a
recognized market, the Purchasers may sell or otherwise dispose of the
Collateral without notification, advertisement or other notice of any kind. It
is agreed that notice sent or given not less than five calendar days prior to
the taking of the action to which the notice relates is reasonable notification
and notice for the purposes of this subparagraph. It shall not be necessary
that the Collateral be at the location of the sale.
(e) Application of Proceeds. The Purchasers shall apply
the proceeds of any sale or other disposition of the Collateral under this
Section as follows: First, to the payment of all its expenses incurred in
retaking, holding, and preparing any of the Collateral for sale(s) or other
disposition, in arranging for such sale(s) or other disposition, and in
actually selling or disposing of the same (all of which are part of the
Obligation); second, toward repayment of amounts reasonably expended by the
Purchasers under this Section; and third, toward payment of the balance of the
Obligation in the order and manner specified in the Note. Any surplus
remaining shall be delivered to Debtor or as a court of competent jurisdiction
may direct. If the proceeds are insufficient to pay the Obligation in full,
Debtor shall remain liable for any deficiency.
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10. Other Rights of the Purchasers.
(a) Collection. If a Default has occurred and is
continuing, then the Purchasers shall have the right in its own name or in the
name of Debtor to (A) demand, collect, receive, receipt for, and sue for any
amounts due or to become due with respect to Collateral; (B) take control of
cash and other proceeds of the Collateral; (C) endorse the name of Debtor on
any notes, acceptances, checks, drafts, money orders, or other evidences of
payment on Collateral that may come into the possession of the Purchasers; (D)
take such action (in its own name or in the name of Debtor) as the Purchasers
shall deem appropriate for the collection of any amounts owed with respect to
Collateral or upon which a delinquency exists, if any Debtor fails or refuses
to make payment on the Collateral when due; and (E) do all other acts and
things necessary to carry out the intent of this Security Agreement.
Notwithstanding any other provision of this Security Agreement to the contrary,
the Purchasers shall not be liable for its failure to collect, or for its
failure to exercise diligence in the collection of, any amounts owed with
respect to the Collateral, nor shall it be under any duty to anyone except
Debtor to account for funds that it shall actually receive under this Security
Agreement. Without limiting the generality of the foregoing, the Purchasers
shall have no responsibility for ascertaining any maturities, calls,
conversions, exchanges, offers, tenders or similar matters relating to any
Collateral, or for informing Debtor with respect to any of such matters
(regardless of whether the Purchasers actually have, or may be deemed to have,
knowledge of such matters). The receipt of the Purchasers to any Debtor shall
be a full and complete release, discharge, and acquittance to any such issuer,
to the extent of any amount so paid by such issuer to the Purchasers.
(b) Performance. In the event Debtor fails to preserve
the priority of the Security Interest in any of the Collateral, then the
Purchasers may (but are not required to) prosecute or defend any suits in
relation to the Collateral. Any sum which may be expended or paid by the
Purchasers under this subparagraph (including, without limitation, court costs
and reasonable attorneys' fees and expenses) shall bear interest from the date
of expenditure or payment at the Default Rate (as defined in the Note) until
paid and, together with such interest, shall be payable by Debtor to the
Purchasers upon demand and shall be part of the Obligation.
(c) Record Ownership of Securities. If a Default exists,
the Purchasers may have the Pledged Shares registered in its name, or in the
name of its nominee or nominees, as pledgee, and, as to any Pledged Shares so
registered, Debtor shall execute and deliver (or cause to be executed and
delivered) to the Purchasers all such proxies, powers of attorney, dividend
coupons or orders, and other documents as the Purchasers may reasonably request
to exercise the voting rights and powers to which it is entitled under this
Security Agreement or to receive the dividends and other payments with respect
to such Pledged Shares which it is authorized to receive and retain under this
Security Agreement.
(d) Voting of Securities. If no Default exists, Debtor
may exercise all voting rights pertaining to the Pledged Shares. If a Default
exists, the right to vote the Pledged Shares may, in the Purchasers' sole
discretion, be vested exclusively in the Purchasers. Debtor hereby irrevocably
constitutes and appoints the Purchasers the proxy and attorney-in-fact of
Debtor, with
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full power of substitution, to vote and to act with respect to any and all
Pledged Shares standing in the name of Debtor or with respect to which Debtor
is entitled to vote and act, but such proxy may not be exercised unless a
Default exists. This proxy is coupled with an interest, is irrevocable, and
shall continue until the Obligation has been paid and performed in full.
(e) Certain Proceeds. All stock dividends or other
non-cash distributions made on or with respect to the Pledged Shares, and any
proceeds of any Collateral (whether such dividends, distributions or proceeds
result from a subdivision, combination or reclassification of the outstanding
capital stock of any issuer or as a result of any merger, consolidation,
acquisition or other exchange of assets or otherwise) shall be part of the
Collateral under this Security Agreement, shall be held in trust for the
benefit of the Purchasers and shall be delivered promptly to the Purchasers
(accompanied by proper instruments of assignment and stock powers executed by
Debtor in accordance with the Purchasers' instructions) to be held subject to
the terms of this Security Agreement.
(f) Indemnification. Debtor hereby assumes all liability
for the Collateral, for the Security Interest, and for any use, possession,
maintenance, and management of, all or any of the Collateral, arising from
Debtor's actions prior to the date of any foreclosure or deemed foreclosure of
the Security Interest, including, without limitation, any taxes arising as a
result of, or in connection with, the transactions contemplated herein, and
agrees to assume liability for, and to indemnify and hold Purchasers harmless
from and against, any and all claims, causes of action, or liability, for
injuries to or deaths of Persons and damage to property, howsoever arising from
or incident to such use, possession, maintenance, management, whether such
Persons be agents or employees of Debtor or of third parties, or such damage to
property of Debtor or of others. Unless expressly prohibited by applicable
Law, Debtor agrees to indemnify, save, and hold Purchasers harmless from and
against, and covenants to defend Purchasers against, any and all losses,
damages, claims, costs, penalties, liabilities, and expenses, including,
without limitation, court costs and attorneys' fees, howsoever arising or
incurred because of, incident to, or with respect to Collateral or any use,
possession, maintenance, or management thereof.
11. Miscellaneous.
(a) Term. Upon full and final payment of the Obligation
this Security Agreement shall terminate upon receipt by the Purchasers of
Debtor's written notice of such termination; provided that no Debtor shall ever
be obligated to make inquiry as to the termination of this agreement, but shall
be fully protected in making payment directly to the Purchasers.
(b) Actions Not Releases. The Security Interest and
Debtor's obligation and the Purchasers' rights under this Security Agreement
shall not be released, diminished, impaired or adversely affected by the
occurrence of any one or more of the following events: (i) the taking or
accepting of any other security or assurance for any or all of the Obligation;
(ii) any release, surrender, exchange, subordination or loss of any security or
assurance at any time existing in connection with any or all of the Obligation;
(iii) the modification of, amendment to or waiver of compliance with any terms
of the Note; (iv) the insolvency, bankruptcy or lack of corporate or
11
<PAGE> 92
trust power of any party at any time liable for the payment of any or all of
the Obligation, whether now existing or occurring in the future; (v) any
renewal, extension or rearrangement of the payment of any or all of the
Obligation, either with or without notice to or consent of Debtor or any
adjustment, indulgence, forbearance or compromise that may be granted or given
by the Purchasers to Debtor; (vi) any neglect, delay, omission, failure or
refusal of the Purchasers to take or prosecute any action in connection with
the Note; (vii) any failure of the Purchasers to notify Debtor of any renewal,
extension or assignment of the Obligation or any part of the Obligation, or of
any other action taken or refrained from being taken by the Purchasers against
Debtor or any new agreement between the Purchasers and Debtor, it being
understood that, the Purchasers shall not be required to give Debtor any notice
of any kind under any circumstances whatsoever with respect to or in connection
with the Obligation, including, without limitation, notice of acceptance of
this Security Agreement or any Collateral ever delivered to or for the account
of the Purchasers under this Security Agreement; (viii) the illegality,
invalidity or unenforceability of all or any part of the Obligation against any
third party obligated with respect thereto by reason of the fact that the
Obligation, or the interest paid or payable with respect thereto, exceeds the
amount permitted by law, the act of creating the Obligation, or any part of the
Obligation, is ultra vires, or the officers, partners or trustees creating same
acted in excess of their authority, or for any other reason; or (ix) if any
payment by any party obligated with respect to such payment is held to
constitute a preference under applicable Laws or for any other reason the
Purchasers are required to refund such payment or pay the amount to someone
else.
(c) Waivers. Except to the extent expressly otherwise
provided in this Security Agreement, Debtor waives (i) any right to require the
Purchasers to proceed against any other Person, to exhaust its rights in
Collateral, or to pursue any other right which the Purchasers may have; (ii)
with respect to the Obligation, presentment and demand for payment, protest,
notice of protest and nonpayment, notice of acceleration, and notice of the
intention to accelerate; and (iii) all rights of marshaling in respect of any
and all of the Collateral.
(d) Financing Statement. The Purchasers shall be
entitled at any time to (i) file this Security Agreement or a carbon,
photographic or other reproduction of this Security Agreement, as a financing
statement, but the failure of the Purchasers to do so shall not impair the
validity or enforceability of this Security Agreement and (ii) sign a financing
statement covering the Collateral on behalf of Debtor.
(e) Amendments. This Security Agreement may only be
amended by a writing jointly executed by Debtor and the Purchasers, and
supplemented only by documents delivered or to be delivered in accordance with
the express terms hereof.
(f) Multiple Counterparts. This Security Agreement may
be executed in any number of identical counterparts with the same effect as if
all signatories had signed the same document. In making proof of this Security
Agreement, it shall not be necessary to produce or account for more than one
set of counterpart signatures.
(g) Parties Bound. This Security Agreement shall be
binding on Debtor and
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<PAGE> 93
its successors and assigns and shall inure to the benefit of the Purchasers and
their successors and assigns. The obligations and agreements of Debtor under
this Security Agreement shall be binding upon its successors and assigns, and
delivery or other accounting of Collateral to Debtor shall discharge the
Purchasers of all liability therefor.
(h) Assignment. Neither Debtor nor the Purchasers
may, without the other party's prior written consent, assign any rights,
duties, or obligations under this Security Agreement. In the event of an
assignment of all or part of the Obligation, the Security Interest and other
rights and benefits under this Security Agreement, to the extent applicable to
the part of the Obligation so assigned, may be transferred with the Obligation.
(i) Notice. Any required notice must be given to Debtor
or the Purchasers at the following addresses (or telecopier numbers):
DEBTOR PURCHASERS
------ ----------
Florafax International, Inc. St. James Capital Partners, L.P.
8075 20th Street c/o St. James Capital Corp.
Vero Beach, FL 32966 5599 San Felipe, 3rd Floor
Attn: James H. West Houston, Texas 77056
Attn: John L. Thompson
SV Capital Partners, L.P.
200 Concord Plaza, Suite 620
San Antonio, Texas 78216
Attn: William H. Wagner
Notice shall be deemed to have been given (a) if by mail, on the third
business day after it is enclosed in an envelope and properly addressed,
stamped, sealed, certified return receipt requested, and deposited in the
appropriate official postal service, or (b) if by any other means when actually
delivered. Either party may change the address or telecopy number at which it
receives notice by giving five (5) day's advance written notice to the other
party.
(i) Governing Law. This agreement will be construed and
its performance enforced in accordance with the laws of the state of Delaware
and the laws of the United States of America.
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<PAGE> 94
IN WITNESS WHEREOF, this Security Agreement is executed by the Company
as of the date first set forth above.
FLORAFAX INTERNATIONAL, INC. and each of
its Subsidiaries
---------------------------------------------
James H. West, President
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<PAGE> 95
IN WITNESS WHEREOF, this Security Agreement is executed by St. James
as of the date first set forth above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its general partner
-------------------------------------------------
Todd M. Binet, Executive Vice President
15
<PAGE> 96
IN WITNESS WHEREOF, this Security Agreement is executed by SV Capital
as of the date first set forth above.
SV CAPITAL PARTNERS, L.P.
------------------------------------
William H. Wagner
16
<PAGE> 97
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") is made effective as of February 29, 1996 by and between Florafax
International, Inc., a Delaware corporation (the "Company") and St. James
Capital Partners, L.P. (the "Purchaser").
WHEREAS, Purchaser holds a 7% Convertible Promissory Note (the "Note"),
payable by the Company, in the original principal amount of $2,000,000, which is
convertible into a number of shares as set forth in the Note (the "Note Shares")
of the Company's common stock, par value $0.01 per share ("Common Stock");
WHEREAS, the Purchaser holds Common Stock Purchase Warrants (the
"Warrants") which may be exercised to acquire a certain number of shares of the
Common Stock, subject to adjustment (the "Warrant Shares"; the Note Shares and
the Warrant Shares are collectively referred to as the "Shares");
WHEREAS, the Company wishes to grant the Purchaser certain registration
rights in respect of the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the meanings
set forth below:
1.1 "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
1.2 "Purchaser" shall mean St. James Capital Partners, L.P.
1.3 "Registrable Securities" shall mean (i) the Shares; and (ii)
any Common Stock issued or issuable at any time or from time to time in respect
of the Shares upon a stock split, stock dividend, recapitalization or other
similar event involving the Company until such Shares and Common Stock are sold
pursuant to a Registration Statement or an exemption from registration under the
Securities Act.
1.4 The terms "register", "registered", and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
<PAGE> 98
1.5 "Registration Expenses" shall mean all expenses, other than
Selling Expenses (as defined below), incurred by the Company in complying with
this Registration Rights Agreement, including, without limitation, all
registration, qualification and filing fees, exchange listing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company and for
the Purchaser, blue sky fees and expenses, the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
1.6 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.7 "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Purchaser.
1.8 "Underwritten Public Offering" shall mean a public offering in
which the Common Stock is offered and sold on a firm commitment basis through
one or more underwriters, all pursuant to an underwriting agreement between the
Company and such underwriters.
ARTICLE II
Registration Rights
2.1 Demand Registration.
2.1.1 Within 60 days of the issuance of the Note to the
Purchaser, the Company shall use its best efforts to file with the Securities
and Exchange Commission a shelf registration statement covering the resale of
the Shares on Form S-1, S-2, or S-3 (the "Registration Statement") which shall
remain effective until the earlier to occur of: (i) 3 years, or (ii) until such
time as the Holder does not beneficially own any Registrable Securities. The
Company shall use its reasonable best efforts to cause such Registration
Statement to become effective as soon as practicable and to cause the Shares to
be qualified in such state jurisdictions as the Purchaser may request.
2.1.2 Except as set forth herein and subject to the
limitations of Section 2.1.1, the Company shall take all reasonable steps
necessary to keep the Registration Statement current and effective until all
Shares have been distributed by the Purchaser including any necessary refiling
of additional registration statements.
2.1.3 The Company shall be entitled to require that the
parties refrain from effecting any public sales or distributions of the
Registrable Securities pursuant to a Registration Statement that has been
declared effective by the Commission or otherwise, if the board of directors of
the Company reasonably determines that such public sales or distributions
would interfere in any material respect with any transaction involving the
Company that the board of directors reasonably
<PAGE> 99
determines to be material to the Company. The board of directors shall, as
promptly as practicable, give the Purchasers written notice of any such
development. In the event of a request by the board of directors of the Company
that the Purchaser refrain from effecting any public sales or distributions of
the Registrable Securities, the Company shall be required to lift such
restrictions regarding effecting public sales or distributions of the
Registrable Securities as soon as reasonably practicable after the board of
directors shall reasonably determine public sales or distributions by the
Purchaser of the Registrable Securities shall not interfere with such
transaction, provided, that in no event shall any requirement that the
Purchasers refrain from effecting public sales or distributions in the
Registrable Securities extend for more than 90 days.
2.2 Piggyback Registration.
2.2.1 Subject to the terms hereof, if: (i) at any time or
from time to time the Company or any shareholder of the Company shall determine
to register any of its securities (except for registration statements relating
to employee benefit plans or exchange offers), either for its own account or the
account of a security holder; and (ii) the Purchaser is the beneficial owner of
any Registrable Securities; the Company will promptly give to the Purchaser
written notice thereof no less the 10 days prior to the filing of any
registration statement; and include in such registration (and any related
qualification under blue sky laws or other compliance), and in the underwriting
involved therein, if any, such Registrable Securities as Purchaser may request
in a writing delivered to the Company within 20 days after Purchaser's receipt
of Company's written notice.
2.2.2 The Purchaser may participate in any number of
registrations until all of the Shares held by such Purchaser have been
distributed pursuant to a registration.
2.2.3 If any registration statement is an Underwritten
Public Offering, the right of the Purchaser to registration pursuant to this
Section shall be conditioned upon such Purchaser's participation in such
reasonable underwriting arrangements as the Company shall make regarding the
offering, and the inclusion of Registrable Securities in the underwriting shall
be limited to the extent provided herein. The Purchaser and all other
shareholders proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section, if the
managing underwriter concludes in its reasonable judgment that the number of
shares to be registered for selling stockholders (including the Purchaser) would
materially adversely effect such offering, the number of Shares to be
registered, together with the number of shares of Common Stock or other
securities held by other stockholders proposed to be registered in such
offering, shall be reduced on a pro rata basis based on the number of Shares
proposed to be sold by the Purchaser as compared to the number of shares
proposed to be sold by all stockholders. If the Purchaser disapproves of the
terms of any such underwriting, it may elect to withdraw therefrom by written
notice to the Company and the managing underwriter, delivered not less than ten
days before the effective date. The Registrable Securities excluded by the
managing underwriter or withdrawn from such underwriting shall be
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<PAGE> 100
withdrawn from such registration, and shall not be transferred in a public
distribution prior to 120 days after the effective date of the registration
statement relating thereto, or such other shorter period of time as the
underwriters may require.
2.2.4 The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section prior to the
effectiveness of such registration whether or not the Purchaser has elected to
include securities in such registration.
2.3 Expenses of Registration. All Registration Expenses shall be
borne by the Company. Unless otherwise stated herein, all Selling Expenses
relating to securities registered on behalf of the Purchaser shall be borne by
the Purchaser.
2.4 Best Registration Rights. If, on or after the date of this
Registration Rights Agreement, the Company grants to any person with respect to
any security issued by the Company or any of its Subsidiaries registration
rights that provide for terms that are in any manner more favorable to the
holder of such registration rights than the terms granted to the Purchaser (or
if the Company amends or waives any provision of any Agreement providing
registration rights of others or takes any other action whatsoever to provide
for terms that are more favorable to other holders than the terms provided to
the Purchaser) then this Registration Rights Agreement shall immediately be
deemed amended to provide the Purchaser with any (or all) of such more favorable
terms as the Purchaser shall elect to include herein.
2.5 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the Purchaser advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense, the Company will:
2.5.1 Prepare and file with the Commission a registration
statement with respect to such securities and use its commercially reasonable
efforts to cause such registration statement to become and remain effective
until the distribution described in such registration statement has been
completed;
2.5.2 Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such underwriter
may reasonably request in order to facilitate the public sale of the shares by
such underwriter, and promptly furnish to each underwriter and the Purchaser
notice of any stop-order or similar notice issued by the Commission or any state
agency charged with the regulation of securities, and notice of any Nasdaq or
securities exchange listing.
2.5.3 Cause the Shares to be listed on the Nasdaq Stock
Market's OTC Bulletin Board and each Securities Exchange on which the Common
Stock is approved for listing.
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<PAGE> 101
2.6 Indemnification.
2.6.1 To the extent permitted by law, the Company will
indemnify the Purchaser, each of its officers and directors and partners, and
each person controlling the Purchaser within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, to the extent such
expenses, claims, losses, damages or liabilities arise out of or are based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any registration statement, prospectus, offering circular or other similar
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse Purchaser, each of
its officers and directors and partners, and each person controlling Purchaser,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action; provided, however, that the indemnity contained herein shall not apply
to amounts paid in settlement of any claim, loss, damage, liability or expense
if settlement is effected without the consent of the Company (which consent
shall not unreasonably be withheld); provided, further, that the Company will
not be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
Purchaser, such controlling person or such underwriter specifically for use
therein or the violation of the Securities Act or any rule or regulation
promulgated thereunder by any such person. Notwithstanding the foregoing,
insofar as the foregoing indemnity relates to any such untrue statement (or
alleged untrue statement) or omission (or alleged omission) made in the
preliminary prospectus but eliminated or remedied in the amended prospectus on
file with the Commission at the time the registration statement becomes
effective or in the final prospectus filed with the Commission pursuant to the
applicable rules of the Commission or in any supplement or addendum thereto, the
indemnity agreement herein shall not inure to the benefit of any underwriter if
a copy of the final prospectus filed pursuant to such rules, together with all
supplements and addenda thereto, was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act.
2.6.2 To the extent permitted by law, the Purchaser will, if
securities held by the Purchaser are included in the securities as to which
such registration, qualification or compliance is being effected pursuant to
terms hereof, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each
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<PAGE> 102
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, and each other person selling the Company's
securities covered by such registration statement, each of such person's
officers and directors and each person controlling such persons within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by Purchaser of any rule or regulation promulgated
under the Securities Act applicable to Purchaser and relating to action or
inaction required of Purchaser in connection with any such registration,
qualification or compliance, and will reimburse the Company, such other persons,
such directors, officers, persons, underwriters or control persons for any legal
or other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such
Purchaser specifically for use therein; provided, however, that the indemnity
contained herein shall not apply to amounts paid in settlement of any claim,
loss, damage, liability or expense if settlement is effected without the consent
of such Purchaser (which consent shall not be unreasonably withheld).
Notwithstanding the foregoing, the liability of such Purchaser under this
subsection (b) shall be limited in an amount equal to the net proceeds from the
sale of the shares sold by Purchaser, unless such liability arises out of or is
based on willful conduct by Purchaser. In addition, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus filed
pursuant to applicable rules of the Commission or in any supplement or addendum
thereto, the indemnity agreement herein shall not inure to the benefit of the
Company or any underwriter if a copy of the final prospectus filed pursuant to
such rules, together with all supplements and addenda thereto, was not furnished
to the person or entity asserting the loss, liability, claim or damage at or
prior to the time such furnishing is required by the Securities Act.
2.6.3 Notwithstanding the foregoing paragraphs (a) and (b)
of this Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such
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<PAGE> 103
action and provided further, that the Indemnifying Party shall not assume the
defense for matters as to which there is a conflict of interest or as to which
the Indemnifying Party is asserting separate or different defenses, which
defenses are inconsistent with the defenses of the Indemnified Party. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. No
Indemnified Party shall consent to entry of any judgment or enter into any
settlement without the consent of each Indemnifying Party.
2.6.4 If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and all shareholders offering
securities in the offering (the "Selling Security Holders") on the other from
the offering of the Company's securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Selling
Security Holders on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Selling Security Holders on the other shall be
the net proceeds from the offering (before deducting expenses) received by the
Company on the one hand and the Selling Security Holders on the other. The
relative fault of the Company on the one hand and the Selling Security Holders
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Selling Security Holders and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Selling Security Holders agree that
it would not be just and equitable if contribution pursuant to this Section were
based solely upon the number of entities from whom contribution was requested or
by any other method of allocation which does not take account of the equitable
considerations referred to above in this Section. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages and liabilities
referred to above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
hereof. Notwithstanding the provisions of this Section, no Selling Shareholder
shall be required to contribute any amount or make any other payments under this
Agreement which in the aggregate exceed the proceeds received by such Selling
Shareholder unless such losses, claims, damages or liabilities are based on
conduct which such Selling Shareholder actually knows to be in controversion of
the Securities Act. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
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<PAGE> 104
2.7 Certain Information.
2.7.1 The Purchaser agrees, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding Purchaser, the Registrable Securities and the distribution
proposed by the Purchaser as the Company may reasonably request in writing and
as shall be required in connection with any registration, qualification or
compliance referred to herein.
2.7.2 The failure of the Purchaser to furnish the
information requested pursuant to this Section shall not affect the obligation
of the Company to the other Selling Security Holders who furnish such
information unless, in the reasonable opinion of counsel to the Company or the
underwriters, such failure impairs or may impair the legality of the
Registration Statement or the underlying offering.
2.8 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of Restricted Securities (used herein as defined in Rule
144 under the Securities Act) to the public without registration, the Company
agrees to use its best lawful efforts to:
2.8.1 Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times during which the Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
2.8.2 File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act (at all times during which the Company is subject to such
reporting requirements); and
2.8.3 So long as the Purchaser owns any Restricted
Securities (as defined in Rule 144 promulgated under the Securities Act), to
furnish to Purchaser forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 and with
regard to the Securities Act and the Exchange Act (at all times during which the
Company is subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as the Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing the Purchaser to
sell any such securities without registration.
2.9 Transferability. The rights conferred by this Agreement shall
be freely transferable to a recipient of Registrable Securities who agree in
writing to assume the obligations of Purchaser hereunder, and to be bound by the
provisions hereof.
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2.10 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Texas.
2.11 Entire Agreement; Amendment. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject hereof. This Agreement, or any provision hereof, may be amended,
waived, discharged or terminated upon the written consent of the Company and the
Purchaser.
2.12 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Purchaser: St. James Capital Corp., 5599 San Felipe, Suite 301, Houston, Texas
77056, or at such other address as the Purchaser shall have furnished to the
Company in writing, or (b) if to the Company: to Florafax International, Inc.,
8075 20th Street, Vero Beach, FL 32966 or at such other address as the Company
shall have furnished to the Purchaser. Each such notice or other communication
shall for all purposes of this Agreement be treated as effective upon receipt.
2.13 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any party
to this Agreement shall impair any such right, power or remedy of such party nor
shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
2.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
2.15 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
2.16 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
-9-
<PAGE> 106
THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this agreement effective
upon the date first set forth above.
FLORAFAX INTERNATIONAL, INC.
------------------------------------
James H. West, President
-10-
<PAGE> 107
THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Purchaser has signed this Agreement as of the date
first written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its General Partner
------------------------------------------------
Todd M. Binet, Executive Vice President
-11-
<PAGE> 108
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights
Agreement") is made effective as of February 29, 1996 by and between Florafax
International, Inc., a Delaware corporation (the "Company") and St. James
Capital Partners, L.P. (the "Purchaser").
WHEREAS, Purchaser holds a 7% Convertible Promissory Note (the
"Note"), payable by the Company, in the original principal amount of
$2,000,000, which is convertible into a number of shares as set forth in the
Note (the "Note Shares") of the Company's common stock, par value $0.01 per
share ("Common Stock");
WHEREAS, the Purchaser holds Common Stock Purchase Warrants (the
"Warrants") which may be exercised to acquire a certain number of shares of the
Common Stock, subject to adjustment (the "Warrant Shares"; the Note Shares and
the Warrant Shares are collectively referred to as the "Shares");
WHEREAS, the Company wishes to grant the Purchaser certain
registration rights in respect of the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the meanings
set forth below:
1.1 "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
1.2 "Purchaser" shall mean St. James Capital Partners, L.P.
1.3 "Registrable Securities" shall mean (i) the Shares; and (ii)
any Common Stock issued or issuable at any time or from time to time in respect
of the Shares upon a stock split, stock dividend, recapitalization or other
similar event involving the Company until such Shares and Common Stock are sold
pursuant to a Registration Statement or an exemption from registration under
the Securities Act.
1.4 The terms "register", "registered", and "registration" refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
1.5 "Registration Expenses" shall mean all expenses, other than
Selling Expenses (as
<PAGE> 109
defined below), incurred by the Company in complying with this Registration
Rights Agreement, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company and for the Purchaser,
blue sky fees and expenses, the expense of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of the Company which shall be paid in any event by the Company).
1.6 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.7 "Selling Expenses" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Purchaser.
1.8 "Underwritten Public Offering" shall mean a public offering in
which the Common Stock is offered and sold on a firm commitment basis through
one or more underwriters, all pursuant to an underwriting agreement between the
Company and such underwriters.
ARTICLE II
Registration Rights
2.1 Demand Registration.
2.1.1 Within 60 days of the issuance of the Note to the
Purchaser, the Company shall use its best efforts to file with the Securities
and Exchange Commission a shelf registration statement covering the resale of
the Shares on Form S-1, S-2, or S-3 (the "Registration Statement") which shall
remain effective until the earlier to occur of: (i) 3 years, or (ii) until
such time as the Holder does not beneficially own any Registrable Securities.
The Company shall use its reasonable best efforts to cause such Registration
Statement to become effective as soon as practicable and to cause the Shares to
be qualified in such state jurisdictions as the Purchaser may request.
2.1.2 Except as set forth herein and subject to the
limitations of Section 2.1.1, the Company shall take all reasonable steps
necessary to keep the Registration Statement current and effective until all
Shares have been distributed by the Purchaser including any necessary refiling
of additional registration statements.
2.1.3 The Company shall be entitled to require that the
parties refrain from effecting any public sales or distributions of the
Registrable Securities pursuant to a Registration Statement that has been
declared effective by the Commission or otherwise, if the board of directors of
the Company reasonably determines that such public sales or distributions
would interfere in any material respect with any transaction involving the
Company that the board of directors reasonably determines to be material to the
Company. The board of directors shall, as promptly as practicable,
-2-
<PAGE> 110
give the Purchasers written notice of any such development. In the event of a
request by the board of directors of the Company that the Purchaser refrain
from effecting any public sales or distributions of the Registrable Securities,
the Company shall be required to lift such restrictions regarding effecting
public sales or distributions of the Registrable Securities as soon as
reasonably practicable after the board of directors shall reasonably determine
public sales or distributions by the Purchaser of the Registrable Securities
shall not interfere with such transaction, provided, that in no event shall any
requirement that the Purchasers refrain from effecting public sales or
distributions in the Registrable Securities extend for more than 90 days.
2.2 Piggyback Registration.
2.2.1 Subject to the terms hereof, if: (i) at any time or
from time to time the Company or any shareholder of the Company shall determine
to register any of its securities (except for registration statements relating
to employee benefit plans or exchange offers), either for its own account or
the account of a security holder; and (ii) the Purchaser is the beneficial
owner of any Registrable Securities; the Company will promptly give to the
Purchaser written notice thereof no less the 10 days prior to the filing of any
registration statement; and include in such registration (and any related
qualification under blue sky laws or other compliance), and in the underwriting
involved therein, if any, such Registrable Securities as Purchaser may request
in a writing delivered to the Company within 20 days after Purchaser's receipt
of Company's written notice.
2.2.2 The Purchaser may participate in any number of
registrations until all of the Shares held by such Purchaser have been
distributed pursuant to a registration.
2.2.3 If any registration statement is an Underwritten
Public Offering, the right of the Purchaser to registration pursuant to this
Section shall be conditioned upon such Purchaser's participation in such
reasonable underwriting arrangements as the Company shall make regarding the
offering, and the inclusion of Registrable Securities in the underwriting shall
be limited to the extent provided herein. The Purchaser and all other
shareholders proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section, if the
managing underwriter concludes in its reasonable judgment that the number of
shares to be registered for selling stockholders (including the Purchaser)
would materially adversely effect such offering, the number of Shares to be
registered, together with the number of shares of Common Stock or other
securities held by other stockholders proposed to be registered in such
offering, shall be reduced on a pro rata basis based on the number of Shares
proposed to be sold by the Purchaser as compared to the number of shares
proposed to be sold by all stockholders. If the Purchaser disapproves of the
terms of any such underwriting, it may elect to withdraw therefrom by written
notice to the Company and the managing underwriter, delivered not less than ten
days before the effective date. The Registrable Securities excluded by the
managing underwriter or withdrawn from such underwriting shall be withdrawn
from such registration, and shall not be transferred in a public distribution
prior to 120
-3-
<PAGE> 111
days after the effective date of the registration statement relating thereto,
or such other shorter period of time as the underwriters may require.
2.2.4 The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section prior to the
effectiveness of such registration whether or not the Purchaser has elected to
include securities in such registration.
2.3 Expenses of Registration. All Registration Expenses shall be
borne by the Company. Unless otherwise stated herein, all Selling Expenses
relating to securities registered on behalf of the Purchaser shall be borne by
the Purchaser.
2.4 Best Registration Rights. If, on or after the date of this
Registration Rights Agreement, the Company grants to any person with respect to
any security issued by the Company or any of its Subsidiaries registration
rights that provide for terms that are in any manner more favorable to the
holder of such registration rights than the terms granted to the Purchaser (or
if the Company amends or waives any provision of any Agreement providing
registration rights of others or takes any other action whatsoever to provide
for terms that are more favorable to other holders than the terms provided to
the Purchaser) then this Registration Rights Agreement shall immediately be
deemed amended to provide the Purchaser with any (or all) of such more
favorable terms as the Purchaser shall elect to include herein.
2.5 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the Purchaser advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense, the Company will:
2.5.1 Prepare and file with the Commission a registration
statement with respect to such securities and use its commercially reasonable
efforts to cause such registration statement to become and remain effective
until the distribution described in such registration statement has been
completed;
2.5.2 Furnish to each underwriter such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such
underwriter may reasonably request in order to facilitate the public sale of
the shares by such underwriter, and promptly furnish to each underwriter and
the Purchaser notice of any stop-order or similar notice issued by the
Commission or any state agency charged with the regulation of securities, and
notice of any Nasdaq or securities exchange listing.
2.5.3 Cause the Shares to be listed on the Nasdaq Stock
Market's OTC Bulletin Board and each Securities Exchange on which the Common
Stock is approved for listing.
-4-
<PAGE> 112
2.6 Indemnification.
2.6.1 To the extent permitted by law, the Company will
indemnify the Purchaser, each of its officers and directors and partners, and
each person controlling the Purchaser within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter, if any, and
each person who controls any underwriter within the meaning of Section 15 of
the Securities Act, against all expenses, claims, losses, damages or
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, to the
extent such expenses, claims, losses, damages or liabilities arise out of or
are based on any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus, offering circular or
other similar document, or any amendment or supplement thereto, incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of the Securities Act or any rule or regulation promulgated under the
Securities Act applicable to the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse
Purchaser, each of its officers and directors and partners, and each person
controlling Purchaser, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the indemnity contained
herein shall not apply to amounts paid in settlement of any claim, loss,
damage, liability or expense if settlement is effected without the consent of
the Company (which consent shall not unreasonably be withheld); provided,
further, that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of Purchaser, such controlling person
or such underwriter specifically for use therein or the violation of the
Securities Act or any rule or regulation promulgated thereunder by any such
person. Notwithstanding the foregoing, insofar as the foregoing indemnity
relates to any such untrue statement (or alleged untrue statement) or omission
(or alleged omission) made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the final prospectus filed with
the Commission pursuant to the applicable rules of the Commission or in any
supplement or addendum thereto, the indemnity agreement herein shall not inure
to the benefit of any underwriter if a copy of the final prospectus filed
pursuant to such rules, together with all supplements and addenda thereto, was
not furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities
Act.
2.6.2 To the extent permitted by law, the Purchaser will,
if securities held by the Purchaser are included in the securities as to which
such registration, qualification or compliance is being effected pursuant to
terms hereof, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each
-5-
<PAGE> 113
person who controls the Company or such underwriter within the meaning
of Section 15 of the Securities Act, and each other person selling the
Company's securities covered by such registration statement, each of such
person's officers and directors and each person controlling such persons within
the meaning of Section 15 of the Securities Act, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by Purchaser of any rule or
regulation promulgated under the Securities Act applicable to Purchaser and
relating to action or inaction required of Purchaser in connection with any
such registration, qualification or compliance, and will reimburse the Company,
such other persons, such directors, officers, persons, underwriters or control
persons for any legal or other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by such Purchaser specifically for use therein; provided, however, that
the indemnity contained herein shall not apply to amounts paid in settlement of
any claim, loss, damage, liability or expense if settlement is effected without
the consent of such Purchaser (which consent shall not be unreasonably
withheld). Notwithstanding the foregoing, the liability of such Purchaser under
this subsection (b) shall be limited in an amount equal to the net proceeds
from the sale of the shares sold by Purchaser, unless such liability arises out
of or is based on willful conduct by Purchaser. In addition, insofar as the
foregoing indemnity relates to any such untrue statement (or alleged untrue
statement) or omission (or alleged omission) made in the preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the
Commission at the time the registration statement becomes effective or in the
final prospectus filed pursuant to applicable rules of the Commission or in any
supplement or addendum thereto, the indemnity agreement herein shall not inure
to the benefit of the Company or any underwriter if a copy of the final
prospectus filed pursuant to such rules, together with all supplements and
addenda thereto, was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such furnishing is required
by the Securities Act.
2.6.3 Notwithstanding the foregoing paragraphs (a) and (b)
of this Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's
ability to defend such
-6-
<PAGE> 114
action and provided further, that the Indemnifying Party shall not assume the
defense for matters as to which there is a conflict of interest or as to which
the Indemnifying Party is asserting separate or different defenses, which
defenses are inconsistent with the defenses of the Indemnified Party. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. No Indemnified Party shall consent to entry of any judgment or
enter into any settlement without the consent of each Indemnifying Party.
2.6.4 If the indemnification provided for in this Section
is unavailable to an Indemnified Party in respect of any losses, claims,
damages or liabilities referred to therein, then each Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and all shareholders
offering securities in the offering (the "Selling Security Holders") on the
other from the offering of the Company's securities, or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company on the one
hand and the Selling Security Holders on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Selling
Security Holders on the other shall be the net proceeds from the offering
(before deducting expenses) received by the Company on the one hand and the
Selling Security Holders on the other. The relative fault of the Company on the
one hand and the Selling Security Holders on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Selling
Security Holders and the parties' relevant intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Selling Security Holders agree that it would not be just
and equitable if contribution pursuant to this Section were based solely upon
the number of entities from whom contribution was requested or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages and liabilities
referred to above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
hereof. Notwithstanding the provisions of this Section, no Selling Shareholder
shall be required to contribute any amount or make any other payments under
this Agreement which in the aggregate exceed the proceeds received by such
Selling Shareholder unless such losses, claims, damages or liabilities are
based on conduct which such Selling Shareholder actually knows to be in
controversion of the Securities Act. No person guilty of fraudulent
misrepresentation (within the meaning of the Securities Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
-7-
<PAGE> 115
2.7 Certain Information.
2.7.1 The Purchaser agrees, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding Purchaser, the Registrable Securities and the
distribution proposed by the Purchaser as the Company may reasonably request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
2.7.2 The failure of the Purchaser to furnish the
information requested pursuant to this Section shall not affect the obligation
of the Company to the other Selling Security Holders who furnish such
information unless, in the reasonable opinion of counsel to the Company or the
underwriters, such failure impairs or may impair the legality of the
Registration Statement or the underlying offering.
2.8 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of Restricted Securities (used herein as defined in Rule
144 under the Securities Act) to the public without registration, the Company
agrees to use its best lawful efforts to:
2.8.1 Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times during which the Company is subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
2.8.2 File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act
and the Exchange Act (at all times during which the Company is subject to such
reporting requirements); and
2.8.3 So long as the Purchaser owns any Restricted
Securities (as defined in Rule 144 promulgated under the Securities Act), to
furnish to Purchaser forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 and with
regard to the Securities Act and the Exchange Act (at all times during which
the Company is subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as the Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing the
Purchaser to sell any such securities without registration.
2.9 Transferability. The rights conferred by this Agreement shall
be freely transferable to a recipient of Registrable Securities who agree in
writing to assume the obligations of Purchaser hereunder, and to be bound by
the provisions hereof.
-8-
<PAGE> 116
2.10 Governing Law. This Agreement shall be governed in
all respects by the laws of the State of Texas.
2.11 Entire Agreement; Amendment. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject hereof. This Agreement, or any provision hereof, may be amended,
waived, discharged or terminated upon the written consent of the Company and
the Purchaser.
2.12 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Purchaser: St. James Capital Corp., 5599 San Felipe, Suite 301, Houston, Texas
77056, or at such other address as the Purchaser shall have furnished to the
Company in writing, or (b) if to the Company: to Florafax International, Inc.,
8075 20th Street, Vero Beach, FL 32966 or at such other address as the Company
shall have furnished to the Purchaser. Each such notice or other communication
shall for all purposes of this Agreement be treated as effective upon receipt.
2.13 Delays or Omissions. Except as expressly provided herein, no
delay or omission to exercise any right, power or remedy accruing to any party
to this Agreement shall impair any such right, power or remedy of such party
nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part
of any party of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to any party to this Agreement, shall be cumulative and not
alternative.
2.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
2.15 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
2.16 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
-9-
<PAGE> 117
THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this agreement effective
upon the date first set forth above.
FLORAFAX INTERNATIONAL, INC.
------------------------------------
James H. West, President
-10-
<PAGE> 118
THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Purchaser has signed this Agreement as of the
date first written above.
ST. JAMES CAPITAL PARTNERS, L.P.
By: St. James Capital Corp., its General Partner
------------------------------------------------
Todd M. Binet, Executive Vice President
-11-
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 3,895,000
<SECURITIES> 0
<RECEIVABLES> 3,440,000
<ALLOWANCES> 547,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,840,000
<PP&E> 2,494,000
<DEPRECIATION> 2,238,000
<TOTAL-ASSETS> 9,375,000
<CURRENT-LIABILITIES> 9,320,000
<BONDS> 2,848,000
0
0
<COMMON> 61,000
<OTHER-SE> (471,000)
<TOTAL-LIABILITY-AND-EQUITY> 9,375,000
<SALES> 0
<TOTAL-REVENUES> 6,611,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,320,000
<LOSS-PROVISION> 193,000
<INTEREST-EXPENSE> 235,000
<INCOME-PRETAX> 1,134,000
<INCOME-TAX> 40,000
<INCOME-CONTINUING> 1,094,000
<DISCONTINUED> 0
<EXTRAORDINARY> 125,000
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<NET-INCOME> 1,219,000
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