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United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [Fee Required]
For the fiscal year ended August 31, 1997
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or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]
For the transition period from ________________ to ________________
Commission File Number 0-5531
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FLORAFAX INTERNATIONAL, INC.
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(Name of small business issuer in its charter)
DELAWARE 41-0719035
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8075 20TH STREET, VERO BEACH, FLORIDA 32966
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(Address of principal executive offices) (Zip Code)
(561) 563-0263
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Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock par value of $.01
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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.
[X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB.
[ ]
State issuers' revenues for its most recent fiscal year $11,609,000.
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On November 7, 1997, the aggregate market value of the Common Stock based upon
the average bid and asked prices as reported by the NASD held by nonaffiliates
was approximately $14,367,000, based upon the assumption that only officers,
directors and 10% shareholders are affiliates.
As of November 7, 1997, 7,745,029 common shares were outstanding.
Documents Incorporated by Reference
Portions of the Company's definitive proxy statement relating to the 1998
annual meeting of shareholders are incorporated by reference into
Part III of this form 10-KSB.
Transitional Small Business Disclosure Format (Check One): Yes ; No X
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Florafax International, Inc.
Index
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PAGE
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REFERENCE
PART I
Item 1 Description of Business ................................................. 1
Item 2 Description of Property ................................................. 5
Item 3 Legal Proceedings ....................................................... 6
Item 4 Submission of Matters to a Vote of Security Holders ..................... 7
PART II
Item 5 Market for Common Equity and Related Stockholder Matters ................ 8
Item 6 Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Selected Financial Data ........................................ 9
Item 7 Financial Statements:
Report of Independent Certified Public Accountants ................. 18
Consolidated Balance Sheets ................................... 19
Consolidated Statements of Income ............................. 21
Consolidated Statements of Changes in
Stockholders' Equity ...................................... 23
Consolidated Statements of Cash Flows ......................... 24
Notes to Consolidated Financial Statements .................... 26
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ........................... 38
PART III
Items 9, 10, 11 and 12 are incorporated by reference to the
Company's definitive proxy statement, pursuant to Regulation
14A, which will involve the election of directors. However,
if such definitive proxy statement is not filed with the
Securities and Exchange Commission within 120 days following
August 31, 1997, such items will be filed as an amendment to
this Form 10-KSB not later than the end of the 120 day
period ............................................................. 39
Item 13 Exhibits and Reports on Form 8-K ....................................... 40
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Florafax International, Inc. is principally engaged in the flowers-by-wire
business of generating floral orders and providing floral order placement
services to retail florists throughout the United States. The Company is also
engaged in the business of credit and charge card processing for third parties.
As used herein, the terms "Florafax" and "Company" mean Florafax International,
Inc. (the Registrant), its divisions and subsidiaries, unless the context
requires otherwise. Insert forward looking statement.
All forecasts and projections in this document are "forward looking statements"
as defined in the Private Securities Litigation Reform Act of 1995, and are
based on management's current expectations of the Company's near term results,
based on current information available and pertaining to the Company. Actual
results may differ materially from those projected in the forward-looking
statements.
FLOWERS-BY-WIRE
The Company operates a flowers-by-wire business which enables Florafax member
florists (independent owners) to send and deliver floral orders throughout the
United States. Floral orders between florists are transacted primarily by
telephone or by the Company's order allocation system. Flowers-by-wire is the
Company's primary business segment, accounting for 90% of net revenues in 1997,
88% in 1996 and 85% in 1995.
The Company's order allocation system has the ability to distribute orders
ratably to Florafax member florists. Once an order is taken, the system analyzes
the area to ascertain which member florists will deliver to that location. The
system then determines which florist should receive that order based on certain
criteria. The most important of the distribution criteria is that all florists
are to receive an fair number of orders. Once the system determines which
florist is to receive the order it is sent via facsimile or telephone.
Management believes that the Company's order allocation system is presently the
only system in the industry that is capable of distributing orders fairly to
member florists.
Traditionally, floral orders originated with one florist and were then filled by
another florist. However, during the past three years the Company has been
generating a significant portion of floral orders through its wholly owned
subsidiary, The Flower Club. The Flower Club has arrangements with numerous
nationally recognized companies which allow The Flower Club to generate orders
by marketing directly to the customers of these companies. To order through the
Flower Club, the consumer dials a toll free number and places the order at the
Company's order entry department. These orders are then transmitted to member
florists via the order allocation system.
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Florists, and their advertisements, are listed in the "Florafax Directory,"
which is published and distributed several times a year. The Company produces
the "Florafax Directory," brochures, and sales and promotional materials for use
by the Company and its member florists.
The Company's flowers-by-wire business is dependent upon an adequate base of
member florists. The Company recruits member florists principally through
advertisement and direct solicitation. A florist applying to become a Florafax
member is evaluated to determine his or her ability to operate in accordance
with the Company's rules and regulations, to provide a quality product and to
comply with the credit policies established by the Company. Member florists are
eligible to receive orders from, and send orders to, any other member.
When a member florist places a floral order, he or she selects another florist
from the Florafax Directory near the desired point of delivery and contacts the
selected florist by use of the telephone or fax machine. In the event a florist
cannot find a fulfilling florist in the area they wish to send an order, they
can call the Company's order entry department and the Company will place the
order. The sending florist is paid by the customer for the purchase and the
receiving (or fulfilling) florist is responsible for designing and delivering
the flowers to the recipient, and will be paid by Florafax. The Company is
capable of placing floral orders virtually anywhere in the world.
Member florists are on a "reporting plan" under which the sending florist, who
collects the price of the flowers from the customer, normally pays the Company
80% of the sales price and the Company generally pays the receiving florist 71%
of the sales price, retaining 9% for its processing services. Under this
"reporting plan" the Company is normally not aware of the transaction until the
receiving florist reports the order. Accordingly, accounting recognition of the
revenue on floral shop to floral shop transactions does not occur until the
order is reported to the Company. Included in floral order processing are
revenues generated by The Flower Club. As more fully discussed in Management's
Discussion and Analysis, these revenues have a greater gross profit margin
(before marketing expenses) when compared to traditional processing services.
Consequently, net revenues from floral order processing have been much higher
than 9%, and increase in proportion to Flower Club generated orders. Revenues
and associated costs related to floral orders generated by The Flower Club are
recorded in the month that the order was filled, as the revenue process is
complete and the Company has the information needed to record the transaction.
The flowers-by-wire business is seasonal in that its member florists send a much
higher volume of orders during Thanksgiving, Christmas, Valentine's Day, Easter
and Mother's Day. In response to this seasonality and to generate additional
business for its member florists, the Company formed The Flower Club 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 nonseasonal periods in an
effort to provide member florists with orders during slow periods of the year.
Management expects the upward trend in orders generated by The Flower Club to
continue.
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Historically, the corporate relationships involving The Flower Club have been
established and serviced by an outside marketing firm, exclusively. However, the
Company believes that it can achieve greater growth by forming their own
marketing group, as well as continue the relationship with the outside marketing
firm. Accordingly, the upcoming year will include marketing efforts from the
Company's internal marketing division and the outside marketing firm.
During 1997, the Company developed and began marketing a new product call
Talking Bouquets. Talking Bouquets allow the sender of a flower arrangement to
record a personal voice greeting to be retrieved by the recipient of the flower
arrangement. In addition, the Company had formed a marketing alliance with a
firm in the gift basket industry. This alliance allows the Company to offer
products other than flowers to The Flower Club customers as well as member
florists.
CREDIT AND CHARGE CARD PROCESSING
Through its wholly owned subsidiary, Credit Card Management System, Inc. (CCMS),
the Company makes available to its members an electronic credit card and charge
card processing system, FloraCash. FloraCash automatically provides
authorization codes for each transaction and captures all the transaction data
electronically, which can allow florists and non floral merchants to receive
frequent, automatic deposits directly to their bank accounts. FloraCash
terminals and optional printers are sold or leased by the Company at competitive
rates.
HISTORY
Florafax was incorporated under the laws of Delaware in 1970 as the successor to
Spotts International, Inc., a company engaged in the premium promotion business.
In 1970, Florafax acquired a flowers-by-wire business, Florafax Delivery, Inc.,
which had been incorporated in Arkansas since 1961. In 1974, Florafax sold
Spotts International, Inc.
In April 1992, the Company incorporated Credit Card Management System, Inc., an
Oklahoma corporation formed to provide credit card processing services to both
floral and nonfloral businesses.
In March 1994, the Company incorporated The Flower Club, Inc. to generate
additional orders for its member florists.
EMPLOYEES
As of August 31, 1997, the Company had approximately 170 employees of which 90
are full time. Virtually all of the Company's employees support the
flowers-by-wire business to some extent.
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COMPETITION
The flowers-by-wire industry is principally comprised of five companies. Because
many florists subscribe to more than one flowers-by-wire service, competition is
intense. Usage can be affected by the quality and cost of services offered by
each company, promotional programs, industry reputation and traditional patterns
of usage employed by the sending florist. The Company believes that its
flowers-by-wire service is competitive in the industry.
In the credit card industry there are many banks and other companies which
process credit and charge card transactions on behalf of their business clients.
Most of these companies have greater revenues and process more transactions than
the Company. In addition, some of the Company's flowers-by-wire industry
competitors provide credit card processing services to their members. The
selection of one credit card processor over another can be affected by a variety
of factors including price, services offered and the capability of providing
specialized functions to accommodate the particular credit card processing
requirements of certain businesses. The Company believes that its credit card
processing services are competitive in the retail and wholesale floral industry
in particular and in the general credit card processing industry as a whole.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company's corporate headquarters were moved from Tulsa, Oklahoma, to Vero
Beach, Florida in 1994. The Vero Beach facilities are currently leased; however,
the Company has contracted with the owner to purchase this facility, for a
purchase price of $500,000 cash plus 30,000 shares of common stock of the
Company. The closing of this transaction is currently scheduled for January
1998. During 1997, the Company added an additional 8,000 square feet to the Vero
Beach facility at a cost of $480,000, bringing the total square footage of
corporate headquarters to approximately 16,000. The Company used working capital
to finance this transaction. The Company's administration, accounting, finance,
credit, marketing, and customer service departments all reside at the Vero Beach
facility. In addition, the new portion of the building houses a modern order
center capable of accommodating 150 telephone sales representatives.
The Company's Tulsa facilities are leased under a five year operating lease
agreement expiring September 1, 2002. The lease agreement requires monthly
payments of $3,338 plus utilities. The Tulsa facility maintains all computer
operations, programming and data management operations. In addition, the
facility is capable of accommodating up to 125 telephone sales representatives.
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ITEM 3. LEGAL PROCEEDINGS
During the Company's fiscal year ended August 31, 1997, the Company received a
$1,041,000 court award related to a dispute that arose in 1990 with GTE/Market
Resources, Inc. There were no conditions attached to the award and accordingly,
the amount was included in income for the fiscal year ended August 31, 1997.
The Company is from time to time subject to pending claims and lawsuits arising
in the ordinary course of business. In the opinion of management, the ultimate
resolution of such claims and lawsuits will not have a materially adverse affect
on the Company's operations or consolidated financial position. There are no
material legal proceedings to which any director, officer or affiliate of the
Company, or any owner of record or beneficiary of more than 5% of the Company's
outstanding capital stock, is a party adverse to the Company or has a material
interest adverse to the Company.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders of the Company in the fourth
quarter of fiscal 1997.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Florafax Common Stock started trading on the National Association of Securities
Dealers, Inc. (NASD) SmallCap Market, with a symbol of FIIF on May 30, 1997.
Prior to that date, the stock was traded in the "Over the Counter" of "Pink
Street" market. The number of registered shareholders of Common Stock at
November 7, 1997 was 1,236 based on information furnished by the Company's
transfer agent. In addition, the Company believes that, at November 7, 1997,
there were an additional 500 to 1,000 holders of Common Stock who held in
"street" or "nominee" name, based on the prior year number of proxies and
annual reports requested by brokers, dealers, banks and voting trustees of
which the Company is aware.
The table below sets forth by quarter for its fiscal years ended August 31, 1997
and 1996, the high and low bid prices for the Florafax Common Stock as reported
by the NASD. The quotations for 1996 and the first three quarters of 1997 are
based on Over the Counter market quotations which reflect inter-dealer prices,
without retail mark-up, mark-down or commissions, and may not represent actual
transactions.
BID PRICES
HIGH LOW
1997:
First quarter $ 2-13/16 $ 1-15/16
Second quarter 3- 7/16 2- 3/8
Third quarter 3- 3/8 2- 7/16
Fourth quarter 4- 1/8 3- 1/8
1996:
First quarter $ 1- 7/8 $ 9/16
Second quarter 1- 3/4 3/4
Third quarter 2- 3/16 1- 3/8
Fourth quarter 2- 3/8 1-11/16
On November 7, 1997, the closing bid quotation of Florafax Common Stock as
reported by published financial sources was $5.38.
Florafax has never paid dividends on its Common Stock. Payment of dividends on
its Common Stock in the future will be at the discretion of the Company's Board
of Directors and will be dependent upon the Company's earnings, financial
condition, capital requirements and other factors deemed relevant by the Board
of Directors.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS AND SELECTED FINANCIAL DATA
LIQUIDITY AND CAPITAL RESOURCES
Operating activities for 1997 provided cash of $3,091,000 (including a
litigation settlement of $1,041,000, as discussed in note 4 to the consolidated
financial statements), investing activities used cash of $842,000 and financing
activities used cash of $1,750,000, resulting in a net cash increase of
$499,000. In addition to ordinary expenditures, in 1997 the Company decided to
use it's excess cash to invest in facilities to improve operations and to
increase earnings per share of the Company, as discussed in the following three
paragraphs.
First, during the first quarter of 1997 the Company retired $333,000 of long
term debt bearing interest at 10%, thereby eliminating nearly all interest
expense of the Company. This 10% interest rate was well in excess of the short
term rates the Company would be able to obtain if it chose to hold and invest
this cash.
Second, at the end of the third quarter of 1997 the Company completed the
expansion of it's headquarters in Vero Beach, Florida. The cost of the expansion
was approximately $480,000. The expansion provides for additional administrative
and marketing offices and increases the capacity of the Company's call center to
allow for nearly 150 telephone sales representatives.
Third, in an effort to increase earnings per share, during the third quarter of
1997 the Company began repurchasing shares of it's own common stock. As of
August 31, 1997 the Company has 480,975 shares of it's own common stock held as
treasury shares at a cost of $1,438,000. The Company may from time to time
purchase additional shares of it's own common stock.
Operating cash flow historically has 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. The terms of the Company's
receivables are 30 days, which management believes are consistent within the
industry. Charge card processing, however, generally allows the Company to
collect funds from the charge card issuer prior to settlement with the member
florist. Since in both types of transactions the Company is collecting and
settling funds, the timing of these cash flows has a significant impact on the
Company's liquidity.
During 1997 and 1996, cash flows benefited significantly from orders generated
by The Flower Club. All Flower Club orders are paid for by credit cards, which
allows the Company to receive a significant portion of the money from these
orders within days after processing the transaction. Gross floral orders and
related handling fees generated by The Flower Club in 1997 were in excess of
$18,300,000 (approximately 372,000 orders) which generated net revenues of
$4,942,000, before marketing expenses. Gross floral orders and related handling
fees generated by The Flower Club in 1996 were in excess of $15,400,000
(approximately 318,000 orders) which generated net revenues of $4,499,000,
before marketing expenses.
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During 1993 and 1994 the Company developed and began marketing the FloraNet 5000
terminal. The FloraNet 5000 terminal was a point-of-sale credit card terminal
that allowed florists to send and receive orders on the same terminal, as well
as process credit card transactions.
During 1995, management analyzed the marketing program for the FloraNet 5000
terminals. The analysis indicated that the FloraNet 5000 terminals were not
achieving the results that the Company had expected when the program was
implemented. Consequently, after careful consideration the Company decided to
discontinue further funding of the FloraNet 5000 program. During fiscal 1996,
the Company terminated the FloraNet 5000 program in its entirety.
In 1995 and 1996, the Company incurred capital expenditures of only $136,000 and
$190,000, respectively, as the Company's facilities and resources were adequate
to accommodate the respective levels of business. However, the growth of the
Company during the current year caused the Company to operate at full capacity
during certain peak seasons of the year. Consequently, during 1997 the Company
increased the size of it's Vero Beach facility. The building addition houses a
modern order center capable of employing up to 150 telephone sales
representatives, as well as additional marketing and administrative offices. The
cost of this expansion was $480,000. In addition to the building expansion, the
Company incurred expenditures of $364,000 for leasehold improvements, furniture
and various computer hardware and software. These expenditures, in conjunction
with the Vero Beach building addition, should allow the Company to accommodate
the anticipated increase in business throughout fiscal 1998.
On November 30, 1995, the Company restructured the outstanding $2,921,000
balance of its 9-1/2% convertible subordinated notes such that the notes would
mature on September 15, 1996, except for $354,000 which was due December 31,
1995. Prior to the restructuring, the notes were to mature on June 30, 1996.
As more fully discussed in Note 2 to the consolidated financial statements, on
February 28, 1996 the Company issued a $2,500,000 (face value) convertible
promissory note bearing interest at 7%, maturing on February 28, 1997, plus
warrants to acquire 650,000 shares of common stock of the Company. The proceeds
of this 7% convertible promissory note were used to retire the outstanding
balance of the 9-1/2% convertible subordinated notes. In connection with the
repayment of the 9 1/2% notes, the Company negotiated a discount of $128,000,
which was reported as an extraordinary gain, in 1996. On August 30, 1996, the
holder of the $2,500,000 convertible promissory note converted the note plus
approximately $89,000 of accrued interest to 2,071,000 shares of common stock of
the Company. In addition, the unamortized value of the warrants amounting to
$97,000 was charged to interest expense upon conversion. However, the majority
of the warrants, which have an exercise price of one dollar per share, remain
unexercised.
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RESULTS OF OPERATIONS
GENERAL COMMENTS
1997 was the Company's most profitable year ever. The Company had operating
income of $1,918,000 for 1997 compared to operating income of $1,562,000 in 1996
and $952,000 in 1995. Revenues for 1997 are up over the prior year in every
major category. Management attributes the increase in revenues to the Company's
ability to generate orders through The Flower Club, provide innovative programs
for it's member florists, and offer the lowest dues structure in the industry.
NET REVENUES
Net revenues from member dues and fees during 1997 increased by 19% from 1996
compared to a 3% increase from 1995 to 1996. During 1997, the Company continued
to experience an increase in its dues-paying floral members. Dues-paying members
at August 31, 1997 totaled approximately 4,850 compared to 4,300 at August 31,
1996. Management believes that the increased number of orders the Company is
providing to its members has assisted the Company in retaining its member
florists as well as add new members.
Floral order processing revenue has experienced significant growth over the past
several years, increasing by 10% from 1996 to 1997 and by 52% from 1995 to 1996.
The increase is due primarily to orders generated by The Flower Club. The Flower
Club has established joint marketing campaigns with numerous nationally
recognized companies which allows The Flower Club to market directly to the
customers of these companies. Since its formation in 1994 The Flower Club has
experienced considerable growth, generating floral orders and handling fees of
approximately $18,300,000 during 1997, $15,400,000 during 1996 and $10,100,000
in 1995. The gross amount of all floral orders recorded by the Company totaled
$30,197,000 in 1997, $27,484,000 in 1996, and $21,978,000 in 1995. The average
amount of each order reported to the Company by its members in 1997 increased to
$42.01 (1.9% increase) compared to $41.24 (3.5% increase) in 1996 and $39.83 in
1995.
For the first time in several years the Company is reporting a noticeable
increase in directory and advertising fees (a 10% increase in 1997). Directory
and advertising fees generally increase or decrease in relation to the size of
the Company's membership. As previously mentioned, the Company has experienced a
growth in membership during 1997, which is the primary reason for the increase
in directory and advertising fees.
Net revenues from charge card processing increased by 17% during 1997 compared
to a decline of 9% during 1996. The increase during 1997 is attributable to an
increase in dollar volumes processed. During 1997 gross dollars processed were
$318,000,000 compared to $261,000,000 in 1996, and $210,000,000 in 1995. During
1997 the Company did not experience a significant increase in cost from the
credit card companies. However, as in the past few years, the Company lowered
the discount rate charged to certain customers to remain competitive. In 1996
the Company experienced an increase in dollars processed, but also
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experienced a cost increase from its sponsoring bank and from the credit card
companies. These cost increases, in conjunction with lowering discount rates to
certain customers, caused a decline in 1996 net revenues when compared to the
prior year.
The Company also earns revenue from the sale and lease of credit card terminals
and printers. Sale and lease revenues amounted to $232,000 in 1997, $293,000 in
1996 and $349,000 in 1995.
EXPENSES
General and administrative expenses increased from $5,123,000 in 1996 to
$5,668,000 in 1997, or $545,000. The main component of this increase was in
salaries and wages, which increased due to an increase in phone operators needed
to handle the increased Flower Club volume, as well as general wage increases
necessary to remain competitive in the job market. In addition to greater labor
costs there was also an increase in building rent necessary to accommodate the
additional telephone operators. Building rent in the upcoming year should
decline as the Company has entered into a less expensive lease for the Tulsa
facility, and will be purchasing the Vero Beach facility in 1998. Conversely,
the Company negotiated a new telephone contract with it's long distance carrier
thereby reducing telephone expense in 1997. In addition, during 1997 the Company
was successful in reducing it's legal, consulting, and contract labor costs when
compared to the prior year.
General and administrative expenses were $5,123,000 in 1996, compared to
$4,553,000 in 1995. General and administrative expenses were higher in 1996 for
several reasons. A significant reason for the 1996 increase was the need for
additional personnel to handle the order revenue generated by The Flower Club,
which increased by over 50% when compared to 1995. In addition, a portion of the
increase is due to a general increase in salaries and related expenses. The
Company also used only its own facilities during 1996 to place Flower Club
orders, whereas in 1995 the Company contracted with certain third parties to
handle excess order volume. Legal fees were higher than anticipated in 1996. In
1996 the Company restructured and later retired its primary debt, filed several
registration statements, and explored a potential acquisition, all of which
necessitated expenditures on legal fees. 1996 also had greater postage and
freight expense than 1995 because of the Company's growing membership. For 1996,
the Company did not experience an expected increase in telephone cost related to
Flower Club orders because of a new telephone contract which reduced per minute
phone cost on most Flower Club orders.
Selling and advertising expenses have experienced a steady increase from 1995 to
1997. The primary cause for this increase are the marketing expenses associated
with generating and maintaining The Flower Club order volume. The Flower Club
expenses included in selling expenses are commissions paid to an outside
marketing firm whose responsibilities include attracting and maintaining new
clients, printing costs for marketing pieces provided to The Flower Club members
which assist them when ordering through The Flower Club, and certain promotional
floral arrangements.
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In addition to Flower Club related expense increases, in 1997 the Company also
incurred increased costs in sales salaries and commissions. The Company has
hired a Marketing Director as well as additional sales persons, in an effort to
continue the growth in revenues experienced over the past few years.
Depreciation and amortization includes ordinary depreciation of the Company's
property and equipment, as well as amortization of a trademark and consulting
agreement related to the acquisition of The Flower Club during 1994. As
previously discussed, until fiscal 1997 the Company had curtailed expenditures
on capital equipment. Consequently, the amount of property and equipment being
placed into service was not significant, and older assets were becoming fully
depreciated. Accordingly, depreciation and amortization has been declining over
the past few years. In addition, during the second quarter of 1997 a consulting
agreement related to The Flower Club acquisition was terminated. Consideration
for the agreement had been recorded as an intangible asset, and was being
amortized over the life of the agreement. This amortization was included in
Depreciation and amortization. Upon termination of the agreement the remaining
balance was charged to other income, thereby reducing amortization expense for
the last half of 1997. However, in 1997 the Company incurred significant capital
expenditures, primarily related to expanding the Vero Beach facility.
Consequently, depreciation and amortization is expected to increase in the
upcoming year.
OTHER INCOME (EXPENSE)
Interest expense for 1997 was virtually eliminated, as the company had total
debt in 1997 of only $80,000 for the majority of the year.
Interest expense for 1996 is greater when compared to the prior year due to a
loan obtained in 1996 with terms necessitating the recording of a note discount.
This discount was to be amortized to interest expense over the life of the note,
which had an original maturity date of February 28, 1997. However, prior to year
end this note was converted to common stock of the Company and, accordingly, the
entire unamortized discount was recorded as interest expense at that time. See
Note 2 to the consolidated financial statements for a more complete discussion
of this transaction.
Interest income has increased over the past three years resulting from the
Companies improved operations, that provided funds which were maintained in
interest-bearing accounts.
Other income for 1997 consisted of litigation proceeds (see Note 4 to the
consolidated financial statements), which were offset by a charge to earnings
for the unamortized balance of a consulting agreement, and a charge to earnings
for a certain contingency reserve.
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INCOME TAXES
The Company recorded a net income tax benefit in 1996 of $817,000 consisting of
a current provision for federal alternative minimum taxes of $46,000 and a
benefit of $863,000 related to the reduction of the valuation allowance
established in prior years. At August 31, 1995, the full valuation allowance was
provided on net deferred tax assets of $3,543,000 based upon the Company's
history of losses over several years and the uncertainty surrounding the
Company's ability to recognize such assets. During the year ended August 31,
1996, management reevaluated its historical losses, which no longer resulted in
a net cumulative loss position over the current and preceding two years, and its
projected future earnings, and reached the conclusion that it was more likely
than not that some portion of the deferred tax asset would be realized. In light
of the continuing presence of certain of the underlying uncertainties that
originally gave rise to the valuation allowance, management estimated the
portion that was more likely than not expected to be recognized amounted to the
benefit that would be realized on one year's projected net income, or $863,000.
The remaining valuation allowance at August 31, 1996 amounts to $2,152,000
related to net operating loss carryforwards, certain general business credits,
depreciation and allowances for bad debts.
During 1997 the Company's sustained profitability affirmed management's
conclusion regarding the reduction of the valuation allowance established in
prior years. As a result, during 1997 the Company recorded a net income tax
benefit of $519,000, consisting of a deferred income tax benefit of $637,000 and
a current income tax expense of $118,000. The remaining valuation allowance at
August 31, 1997 consists primarily of general business credits that may expire
prior to the Company's ability to utilize them. As of August 31, 1997, the
Company has available net operating loss carryforwards of $2,949,000, which
expire in the year 2012.
RECENT PRONOUNCEMENTS
- ---------------------
EARNINGS PER SHARE
In February 1997, the FASB issued Statement No. 128, Earnings per Share, which
is effective for years ending after December 15, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements, primary
earnings per share is replaced with basic earnings per share which excludes the
dilutive effect of stock options and other common stock equivalents. Simple
earnings per share would have been higher than primary earnings per share by
$.03 and $.02 for the fiscal years ending August 31, 1997 and 1996,
respectively. Statement 128 would have had no impact on primary earning per
share in 1995.
SEGMENTS
In June 1997, the FASB issued Statement No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION, which supersedes FASB Statement No. 14.
The Statement uses a management approach to report financial and descriptive
information about a Company's operating segments. Operating segments are
revenue-producing components of the
-14-
<PAGE> 17
enterprise for which separate financial information is produced internally for
the Company's management. The Statement is effective for financial statements
for fiscal years beginning after December 15, 1997.
COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, REPORTING COMPREHENSIVE INCOME.
The Statement requires that total comprehensive income and comprehensive income
per share be disclosed with equal prominence as net income and earnings per
share. Comprehensive income is defined as all changes in stockholders' equity
exclusive of transactions with owners such as capital contributions and
dividends. The statement is effective for fiscal years beginning after December
15, 1997.
INFLATION
Over the past three years, inflation has not had a material effect on the
Company's operations and is not anticipated to have an effect in the near
future. A portion of the increase in the average dollar value of wire orders
reported to the Company represents a response by florists to general price level
increases.
-15-
<PAGE> 18
Selected Financial Data:
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993
---------- ---------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Selected income statement data:
Net revenues $ 11,609 $ 10,299 $ 8,449 $ 7,567 $ 7,164
Net income (loss) (1,2,3) $ 3,433 $ 2,262 $ 707 $ (311) $ (401)
Primary earnings (loss) per share $ 0.40 $ 0.36 $ 0.12 $ (0.06) $ (0.08)
Full diluted earnings per share $ 0.39 $ 0.35 $ 0.12 $ (0.06) $ (0.08)
</TABLE>
(1) The Company recorded income of $1,041,000 in 1997 related to cash received
from a court award. See Note 4 to the Notes to the Consolidated Financial
Statements.
(2) Net income in 1997 and 1996 includes income tax benefits of $637 and $863,
respectively, primarily from the recognition of benefits related to net
operating loss carryforwards. See note 6 to the Notes to the Consolidated
Financial Statements.
(3) Net income in 1996 includes and extraordinary gain of $128 from the
forgiveness of certain debt.
<TABLE>
<CAPTION>
AUGUST 31,
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Selected balance sheet data:
Current assets $ 6,325 $ 5,686 $ 3,733 $ 2,847 $ 2,610
Current liabilities 5,209 5,198 5,131 5,259 4,270
Working capital (deficiency) 1,116 488 (1,398) (2,412) (1,660)
Total assets 10,594 8,822 6,468 5,946 5,257
Long-term debt, less current
maturities 80 334 3,034 3,142 3,007
Stockholders' equity (deficiency)
5,253 3,237 (1,756) (2,215) (2,209)
</TABLE>
16
<PAGE> 19
ITEM 7. FINANCIAL STATEMENTS
-17-
<PAGE> 20
Report of Independent Certified Public Accountants
The Board of Directors and Stockholders
Florafax International, Inc.
We have audited the accompanying consolidated balance sheets of Florafax
International, Inc. as of August 31, 1997 and 1996, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended August 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Florafax International, Inc. at August 31, 1997 and 1996, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended August 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Tampa, Florida
October 3, 1997
-18-
<PAGE> 21
Florafax International, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
AUGUST 31
1997 1996
------- -------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,170 $ 3,671
Restricted cash 97 99
Accounts receivable:
Trade, less allowances of $509 at August 31, 1997
and $532 at August 31, 1996 1,317 1,202
Charge card issuers 343 326
Other 94 73
1,754 1,601
Deferred tax asset, net of allowance 264 261
Prepaid and other assets 40 54
Total current assets 6,325 5,686
Property and equipment, at cost:
Fixtures and equipment 1,324 1,188
Computer systems 798 670
Communication systems 1,010 929
Leasehold improvements 524 25
3,656 2,812
Accumulated depreciation and amortization 2,713 2,534
943 278
Other assets:
Excess of cost over net assets of acquired business 1,995 1,995
Deferred tax asset, net of allowance 1,236 602
Other 95 261
3,326 2,858
Total assets $10,594 $ 8,822
</TABLE>
SEE ACCOMPANYING NOTES.
-19-
<PAGE> 22
Florafax International, Inc.
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
AUGUST 31
1997 1996
-------- --------
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ -- $ 79
Accounts payable 3,754 3,913
Accrued liabilities:
Member benefits 147 170
Other 1,308 1,036
Total current liabilities 5,209 5,198
Long-term debt, less current maturities 80 334
Membership security deposits 52 53
Total liabilities 5,341 5,585
Stockholders' equity:
Preferred stock ($10 par value, 600,000 shares
authorized at August 31, 1997 and 1996,
respectively, none issued) -- --
Common stock ($0.01 par value, 70,000,000
shares authorized, 8,253,004 and 8,232,727 issued
at August 31, 1997 and 1996, respectively) 83 83
Additional paid-in capital 10,108 10,087
Accumulated deficit (3,500) (6,933)
Treasury stock, at cost (480,975 and 23,000 shares
at August 31, 1997 and 1996, respectively) (1,438) --
Total stockholders' equity 5,253 3,237
Total liabilities and stockholders' equity $ 10,594 $ 8,822
</TABLE>
SEE ACCOMPANYING NOTES.
-20-
<PAGE> 23
Florafax International, Inc.
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
1997 1996 1995
-------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net revenues:
Member dues and fees $ 2,392 $ 2,013 $ 1,953
Floral order processing 6,162 5,584 3,670
Directory and advertising fees 1,405 1,278 1,273
Charge card processing 1,618 1,378 1,519
Other revenue 32 46 34
11,609 10,299 8,449
Expenses:
General and administrative 5,668 5,123 4,553
Selling, advertising and promotion 3,209 2,629 1,912
Provision for doubtful accounts 170 210 173
Directory publishing 383 382 369
Depreciation, amortization and
retirements 261 393 490
9,691 8,737 7,497
Operating income 1,918 1,562 952
Other income (expense):
Interest expense (6) (361) (309)
Interest income 183 115 60
Other 819 1 4
996 (245) (245)
Income before income taxes and
extraordinary item 2,914 1,317 707
Income taxes:
Current income taxes (118) (46) --
Deferred income tax benefit 637 863 --
519 817
Income before extraordinary item 3,433 2,134 707
Extraordinary item:
Extraordinary gain from forgiveness
of debt -- 128 --
Net income $ 3,433 $ 2,262 $ 707
</TABLE>
SEE ACCOMPANYING NOTES
-21-
<PAGE> 24
Florafax International, Inc.
Consolidated Statements of Income (continued)
<TABLE>
YEAR ENDED AUGUST 31
1997 1996 1995
--------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Weighted average common and common
equivalent shares outstanding:
Primary 8,637 6,279 5,777
Fully diluted 8,715 6,375 5,872
Primary earnings per share:
Income before extraordinary item $ 0.40 $ 0.34 $ 0.12
Extraordinary gain from forgiveness
of debt -- 0.02 --
Net income $ 0.40 $ 0.36 $ 0.12
Full diluted earnings per share:
Income before extraordinary item $ 0.39 $ 0.33 $ 0.12
Extraordinary gain from forgiveness
of debt -- 0.02 --
Net income $ 0.39 $ 0.35 $ 0.12
</TABLE>
SEE ACCOMPANYING NOTES.
-22-
<PAGE> 25
Florafax International, Inc.
Consolidated Statements of Changes in
Stockholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK
NUMBER OF ADDITIONAL
SHARES PAR PAID-IN ACCUMULATED TREASURY
ISSUED VALUE CAPITAL DEFICIT STOCK TOTAL
------------ ------- ---------- ----------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance at August 31, 1994 5,549 $ 56 $ 7,331 $(9,902) $ -- $(2,515)
Issuance of common stock 245 2 50 -- -- 52
Net income -- -- -- 707 -- 707
Balance at August 31, 1995 5,794 58 7,381 (9,195) -- (1,756)
Issuance of common stock 368 4 41 -- -- 45
Issuance of warrants -- -- 97 -- -- 97
Conversion of debt 2,071 21 2,568 -- -- 2,589
Net income -- -- -- 2,262 -- 2,262
Balance at August 31, 1996 8,233 83 10,087 (6,933) -- 3,237
Issuance of common stock 20 -- 21 -- -- 21
Purchase of treasury stock -- -- -- -- (1,438) (1,438)
Net income -- -- -- 3,433 -- 3,433
Balance at August 31, 1997 8,253 $ 83 $10,108 $(3,500) $(1,438) $ 5,253
</TABLE>
SEE ACCOMPANYING NOTES.
-23-
<PAGE> 26
Florafax International, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,433 $ 2,262 $ 707
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary gain from forgiveness of debt -- (128) --
Income tax benefit (637) (863) --
Depreciation and amortization 261 391 490
Provision for doubtful accounts 170 210 173
Noncash compensation expense -- -- 62
Amortization of discount on debt -- 97 --
Interest paid in connection with debt
conversion -- 89 --
Changes in operating assets and
liabilities:
Accounts receivable (323) (647) 8
Prepaid and other assets 14 (23) (1)
Other assets 84 -- --
Accounts payable (159) 378 821
Accrued liabilities 249 76 147
Membership security deposits (1) (6) (1)
Net cash provided by operating activities 3,091 1,836 2,406
INVESTING ACTIVITIES
Capital expenditures (844) (190) (136)
Decrease (increase) in restricted cash 2 (33) 464
Sale (purchase) of restricted investment -- 500 (500)
Net cash (used in) provided by investing
activities (842) 277 (172)
</TABLE>
-24-
<PAGE> 27
Florafax International, Inc.
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt and warrants $ -- $ 2,500 $ 356
Proceeds from issuing stock options and warrants -- 45 --
Proceeds from exercise of stock options and warrants 21 -- --
Purchase of treasury stock (1,438) -- --
(Reduction) in bank overdraft -- -- (1,065)
Payments of long-term debt (333) (2,959) (111)
Net cash used in financing activities (1,750) (414) (820)
Net increase in cash and cash equivalents 499 1,699 1,414
Cash and cash equivalents at beginning of year 3,671 1,972 558
Cash and cash equivalents at end of year $ 4,170 $ 3,671 $ 1,972
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 1 $ 317 $ 310
Cash paid during the year for income taxes 52 -- --
Supplemental financing noncash transaction:
Conversion of long-term debt, plus related
accrued interest of $89, to common stock $ -- $ 2,589 $ --
</TABLE>
SEE ACCOMPANYING NOTES.
-25-
<PAGE> 28
Florafax International, Inc.
Notes to Consolidated Financial Statements
August 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of Consolidation
The consolidated financial statements include the accounts of Florafax
International, Inc. and its wholly owned subsidiaries (the Company). All
significant intercompany accounts and transactions have been eliminated in
consolidation. Florafax International, Inc. is principally engaged in the
flowers-by-wire business of generating floral orders and providing floral order
placement services to retail florists throughout the United States. The Company
is also engaged in the business of credit and charge card processing for third
parties companies.
(b) Cash and Cash Equivalents
The Company considers as cash equivalents all highly liquid overnight investing
accounts at banking institutions plus other interest bearing deposits having
original maturities of less than three months.
(c) Restricted Cash and Investment
Restricted cash at August 31, 1997 and 1996 pertains to the Company's credit
card processor agreement with the Company's credit card sponsoring bank totaling
$97,000 and $99,000, respectively.
(d) Floral Orders - Revenue Recognition
Floral order processing net revenues consist primarily of two types of
transactions. First, there are orders placed through the Company's order center,
which are recorded at the time the order is placed which coincides with
delivery. Second, there are orders sent between the Company's member florists,
which are recorded upon receipt of the reporting document, prepared by the
delivering florist, that confirms delivery.
(e) Member Dues and Directory Advertising
Member dues, fees and advertising are billed monthly and recognized as income at
that time. Billings for directories occur twice per year, while the actual
directories are
-26-
<PAGE> 29
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
produced and distributed several times per year. Directory revenues are deferred
until the directories are distributed to member florists.
(f) Recognition of Service and Collection Fees
The service and collection fees and interest income relating to accounts that
have been canceled are not recognized as income until collected since collection
is not certain.
(g) Concentration of Credit Risk
A significant portion of the Company's accounts receivables are concentrated in
the floral wire service industry. Credit risk is inherent in the floral wire
service industry. Consequently, to reduce this risk the Company reviews new
member applications for credit worthiness. If a florist applying for membership
does not meet certain credit standards the florists application for membership
is usually declined. Once a florist has been accepted as a member, the account
is monitored by accounts receivable analysts who maintain continuous direct
contact with the florist. If the account becomes delinquent, the florist is
turned over to a collection agency to begin immediate collection procedures.
(h) Property and Equipment Depreciation
The provisions for depreciation and amortization are computed using the
straight-line method for financial reporting purposes with the following
estimated useful lives:
DESCRIPTION ESTIMATED USEFUL LIVES
----------- ----------------------
Fixtures and equipment 2 to 10 years
Computer systems 3 to 10 years
Communication systems 2 to 5 years
Leasehold improvements 3 to 13 years
(i) Amortization of Excess of Cost Over Net Assets (Goodwill)
Goodwill of $1,995,000 arose prior to October 31, 1970 and, therefore, is not
required to be amortized.
-27-
<PAGE> 30
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In accordance with FASB 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND ASSETS TO BE DISPOSED OF, the Company has analyzed the carrying value of its
goodwill and other long-lived assets using an undiscounted projected cash flow
approach. After reviewing the results and considering other qualitative factors,
management is of the opinion that the carrying amount of the goodwill has not
been impaired.
(j) Income Taxes
The Company accounts for income taxes using Financial Accounting Standard Board
(FASB) Statement No. 109, ACCOUNTING FOR INCOME TAXES. FASB Statement No. 109
requires the asset and liability method of accounting for income taxes. Under
the asset and liability method of FASB Statement No. 109 deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to be recovered or
settled. Under FASB Statement No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recorded in income in the period that
includes the enactment date.
(k) Weighted Average Number of Shares Outstanding
The weighted average number of shares outstanding is adjusted to recognize the
dilutive effect, if any, of outstanding stock options and warrants and the
weighted average conversion rights of convertible debt.
(l) Reclassification of prior year balances
Certain prior year balances have been reclassified in order to conform to
current year presentation.
(m) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
-28-
<PAGE> 31
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(n) Impact of Recently Issued Accounting Standards
In February 1997, the FASB issued Statement No. 128, Earnings per Share, which
IS effective for years ending after December 15, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements, primary
earnings per share is replaced with basic earnings per share which excludes the
dilutive effect of stock options and other common stock equivalents. Simple
earnings per share would have been higher than primary earnings per share by
$.03 and $.02 for the fiscal years ending August 31, 1997 and 1996,
respectively. Statement 128 would have had no impact on primary earning per
share in 1995.
SEGMENTS
In June 1997, the FASB issued Statement No. 131, DISCLOSURES ABOUT SEGMENTS OF
AN ENTERPRISE AND RELATED INFORMATION, which supersedes FASB Statement No. 14.
The Statement uses a management approach to report financial and descriptive
information about a Company's operating segments. Operating segments are
revenue-producing components of the enterprise for which separate financial
information is produced internally for the Company's management. The Statement
is effective for financial statements for fiscal years beginning after December
15, 1997.
COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement No. 130, REPORTING COMPREHENSIVE INCOME.
The Statement requires that total comprehensive income and comprehensive income
per share be disclosed with equal prominence as net income and earnings per
share. Comprehensive income is defined as all changes in stockholders' equity
exclusive of transactions with owners such as capital contributions and
dividends. The statement is effective for fiscal years beginning after December
15, 1997.
(o) Stock-based Compensation
The Company accounts for stock-based compensation in accordance with APB No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and, in cases where exercise prices
equal or exceed fair market value, recognizes no compensation expense for the
stock option grants. In cases where exercise prices are less than fair value,
compensation is recognized over the period of performance or the vesting period.
(p) Advertising Costs
Advertising costs are expensed as incurred. Advertising expense amounted to
$881,000, $741,000 and $393,000 in 1997, 1996 and 1995, respectively.
-29-
<PAGE> 32
2. CONVERTIBLE SUBORDINATED AND OTHER DEBT
In July 1986, the Company issued $4,000,000 in 9-1/2% convertible subordinated
notes (the "9-1/2% Notes") with an original maturity date of June 30, 1996. The
9-1/2% Notes were restructured once in December 1988, and on November 30, 1995,
the Company again restructured the outstanding $2,921,000 balance of the 9-1/2%
Notes such that they would mature on September 15, 1996, except for $354,000
which matured on December 31, 1995.
On February 28, 1996, the Company issued a $2,500,000 secured convertible
promissory note bearing interest at seven percent per annum with a maturity date
of February 28, 1997 (the "7% Note"). The 7% Note was convertible into common
stock of the Company at a rate of $1.25 per share on certain terms and
conditions contained in the 7% Note.
The proceeds from the 7% Note were used to repay the 9-1/2% Notes due to mature
September 15, 1996. In connection with the repayment of the 9-1/2% Notes the
Company negotiated a discount of $128,000 which is reported as an extraordinary
item in the consolidated statement of operations.
In conjunction with the issuance of the 7% Note, the Company issued warrants to
purchase 650,000 shares of common stock of the Company with an exercise price of
$1.00 per share, on terms and conditions contained in the warrants as well as
certain registration rights for resale of the shares of common stock issuable
upon exercise of the warrants. The warrants expire January 1, 2001. Proceeds
attributable to the warrants, using an estimated fair value of $97,000, were
recorded as a discount to the 7% Note with a credit to paid in capital. The
discount was being amortized over the life of the 7% Note using the effective
method.
On August 30, 1996, the 7% Note plus accrued interest was converted to 2,071,166
common shares of the Company. As a condition to the 7% Note conversion, certain
Board members and other shareholders purchased all but 71,166 of the shares
issued. As a result of the 7% Note conversion the unamortized balance of the 7%
Note discount was charged to interest expense in 1996.
At August 31, 1997, long term debt consisted of a 5% subordinate debenture in
the amount of $80,000, maturing on December 27, 1998 with interest payable
annually on December 31.
At August 31, 1996, long term debt included a 5% subordinate debenture in the
amount of $80,000, maturing on December 27, 1998 with interest payable annually
on December 31. Long term debt also included a note payable to Citrus Bank in
the amount of $333,000, with principal and interest payments due monthly bearing
interest at ten percent maturing August 30, 2000, and guaranteed by the Chairman
of the Board of Directors. On September 16, 1996, the Company repaid the note,
although the classification in the accompanying financial statements remains
long-term in accordance with the original terms.
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<PAGE> 33
3. LEASES
Obligations of the Company for annual payments under various operating leases
for buildings and equipment are as follows:
MINIMUM
LEASE
PAYMENTS
1998 $105,000
1999 77,000
2000 49,000
2001 43,000
2002 40,000
$314,000
Total rental expense for years 1997, 1996, and 1995 was $261,000, $245,000 and
$242,000, respectively. Of these amounts, annual rentals for office facilities
for years 1997, 1996 and 1995 were $155,000, $116,000 and $123,000,
respectively. The Company's building lease for its Vero Beach location (annual
rental $33,000 plus sales tax) is with a relative of the Chairman of the Board
of Directors.
4. CONTINGENCIES
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 the Company. On November 23, 1993, a
jury awarded the Company $1,481,000 in damages against GTE/MR. GTE/MR appealed
the case, which was ultimately ruled on by the Oklahoma Supreme Court. During
the current fiscal year, the Oklahoma Supreme Court upheld the decision of the
trial court, and ruled in favor of the Company. The Company recognized a pretax
gain, net of related legal fees, of $1,041,000 resulting from the award, which
is included in other income in the Consolidated Statement of Income.
5. STOCKHOLDERS' EQUITY
The Company has authorized a total of 600,000 shares of preferred stock with a
par value of ten dollars. At August 31, 1997 and August 31, 1996, there were no
shares of preferred stock issued.
On October 26, 1995, the Board of Directors approved a Nonemployee Directors'
Stock Option Plan ("Director Plan"). On January 30, 1996, the shareholders of
the Company approved the Director Plan. Under the terms of the Director Plan
each nonemployee director shall be granted an option to purchase 20,000 shares
at fair market value as of the date the Director is elected as a Board member.
After the initial grant to the directors, each director shall be granted
additional options to purchase 20,000 shares upon each
-31-
<PAGE> 34
5. STOCKHOLDERS' EQUITY (CONTINUED)
respective reelection to the Board of Directors. At August 31, 1997, 500,000
shares of the Company's common stock were authorized under the Director Plan,
options covering 180,000 shares have been granted which expire on February 2,
2006 and January 31, 2007. As of August 31, 1997, none of the options have been
exercised.
On October 26, 1995, the Board of Directors approved a Management Incentive
Stock Plan ("Management Plan"). On January 30, 1996, the shareholders of the
Company approved the Management Plan. Under the terms of the Management Plan,
the Board of Directors, at their discretion, may grant options to purchase
common shares of the Company to various employees of the Company. The maximum
number of options which may be granted under the Management Plan is 500,000. As
of August 31, 1997, options covering 354,500 shares have been granted which
expire on January 29, 2006 and November 13, 2006. Options exercised during
fiscal year 1997 were 1,250. No options were exercised in 1996.
Options granted to employees under the Management Plan vest 25% upon issuance
with additional vesting of 25% after each year of continuous employment.
As of August 31, 1997 and 1996, options exercisable under the Management Plan
totaled 118,875 and 30,250, respectively.
On November 16, 1996 the Board of Directors granted options to purchase 50,000
shares of common stock at fair market value to a Board member. This option
vested 25% upon issuance with additional vesting of 25% each year. As of August
31, 1997, none of these options had been exercised.
On June 25, 1997, the Board of Directors granted options for the purchase of
305,000 shares of common stock at fair market value to officers and key
employees of the Company. These shares vest in 25% increments when the market
price of the Company's common stock reaches $5.00, $7.50, $10.00 and $12.50 per
share, respectively. As of August 31, 1997, none of the shares were exercisable.
During 1995, the Company granted a total of 245,000 shares of common stock to
certain employees and marketing consultants of the Company. These grants were
charged to expense based on the market price of the Company's stock on the date
of the grant.
On January 28, 1997 the shareholders approved an increase in the number of
shares of authorized common stock from 18,000,000 to 70,000,000.
-32-
<PAGE> 35
5. STOCKHOLDERS' EQUITY (CONTINUED)
Information regarding stock options for years 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
EXERCISE
NUMBER PRICE TOTAL
OF RANGE PER EXERCISE
SHARES SHARE PRICE
<S> <C> <C> <C>
Shares under option at August 31,
1997 888,000 $1.41 to $4.00 $2,529,000
1996 221,000 $1.41 to $1.56 327,000
1995 400,000 $ .20 to $ .25 85,000
Options granted during year ended
August 31,
1997 668,000 $2.66 to $4.00 2,204,000
1996 221,000 $1.41 to $1.56 327,000
1995 400,000 $ .20 to $ .25 85,000
Options exercised during year
ended August 31,
1997 1,000 $1.41 1,000
1996 400,000 $.20 to $ .25 85,000
1995 -- -- --
Options expired or canceled
during year ended August 31,
1997 -- -- --
1996 -- -- --
1995 -- -- --
Options exercisable at August 31, 1997 311,000 $1.41 to $2.88 659,000
Shares were reserved at August 31, 1997 for:
Director stock option plan 500,000
Management stock option plan 499,000
999,000
</TABLE>
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123, ACCOUNTING AND DISCLOSURE OF STOCK--BASED COMPENSATION (Statement 123),
which encourages, but does not require companies to recognize stock awards based
on their fair value at the date of grant.
Pro forma information regarding net income and earnings per share is required by
Statement 123, which also requires that the information be determined as if the
Company had accounted for its employee stock options granted subsequent to
December 31, 1994, under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the
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<PAGE> 36
5. STOCKHOLDERS' EQUITY (CONTINUED)
following weighted-average assumptions for 1997 and 1996: risk free interest
rates of 6.0%; dividend yield of zero; volatility factors of the expected market
price of the Company's common stock based on historical trends; and
weighted-average expected lives of the options from four to ten years.
Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company's employee
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option's vesting period. The Company's pro
forma information is as follows:
1997 1996
------ ------
(IN THOUSANDS)
Pro forma net income $3,016 $2,108
Pro forma earnings per share
Primary $ 0.35 $ 0.34
Fully diluted 0.35 0.33
Weighted average shares
Primary 8,637 6,279
Fully diluted 8,715 6,375
6. INCOME TAXES
The Company accounts for income taxes under FASB Statement No. 109, "ACCOUNTING
FOR INCOME TAXES". Deferred income tax assets and liabilities are determined
based upon differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
The components of the income tax provision (benefit) as of August 31, 1997, 1996
and 1995 are as follows:
1997 1996 1995
----- ----- -----
IN THOUSANDS
Current $ 118 $ 46 $ --
Deferred (637) (863) --
Total $(519) $(817) $ --
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<PAGE> 37
6. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes as of August 31, 1997 and 1996 are as
follows:
1997 1996
------- -------
(IN THOUSANDS)
Allowances for bad debts $ 191 $ 184
Accrued liabilities and other 73 87
Depreciation and amortization 216 217
Net operating losses 1,110 2,123
General business credits 456 404
2,046 3,015
Valuation allowance (546) (2,152)
Total deferred taxes $ 1,500 $ 863
FASB 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all the evidence, both positive and negative, management has
determined that a $546,000 valuation allowance at August 31, 1997 is necessary
to reduce the deferred tax assets to the amount that will more likely than not
be realized. The change in the valuation allowance for the current year is
$1,606,000. As of August 31, 1997, the Company has available net operating loss
carryforwards of $2,949,000, which expire in the years 2000 through 2012.
7. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the balance sheet
for cash and cash equivalents approximate their fair values.
Accounts receivable and accounts payable: The carrying amounts reported in the
balance sheet for accounts receivable and accounts payable approximate their
fair value.
Long-term debt: The fair values of the Company's long-term debt are estimated
using discounted cash flow analyses based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The carrying
amounts reported in the balance sheet for long-term debt approximate their fair
value.
-35-
<PAGE> 38
8. RELATED PARTY TRANSACTIONS
During 1997, the Company entered into an agreement with a relative of the
Chairman of the Board to purchase, effective January 1998, the Vero Beach
facility and land currently being leased by the Company. The agreement calls for
consideration in the amount of $500,000 cash and 30,000 shares of common stock
of the Company. A recent appraised market value of the facility and land
approximates the purchase price.
9. FOURTH QUARTER ADJUSTMENTS
As more fully discussed in Note 6, the Company reduced its valuation allowance
against deferred tax assets resulting in a credit to income of $637,000 and
$863,000 in 1997 and 1996, respectively. This adjustment was recorded in the
fourth quarter of 1997 and 1996, when all of the information upon which to make
the estimate became available to management of the Company.
10. RETIREMENT PLAN
The Company sponsors a 401(k) retirement plan covering all full-time employees
who have completed one year of service. Eligible employees may elect quarterly
to contribute up to 15% of their compensation, up to the maximum contribution
allowed by law. The Company matches contributions up to a maximum of 3% of
compensation. In connection with the matching contribution, the Company's
contribution in 1997 was $30,000. 1997 was the first year of existence of the
plan and, accordingly, there were no contributions for 1996 and 1995.
11. OTHER INCOME
Other income in 1997 of $819,000 consists primarily of the GTE/MR lawsuit
settlement proceeds (see note 4 to the consolidated financial statements),
reduced by a charge to earnings of the unamortized balance of a terminated
consulting agreement and a contingency reserve.
12. BUSINESS SEGMENTS
The Company operates in two business segments: Flowers-by-wire services and
charge card processing for member florists, and charge card processing for
customers outside the floral industry. Net revenues, operating income before and
after allocating general and administrative expenses, identifiable assets,
depreciation expense and capital expenditures for the two segments are provided
for below:
-36-
<PAGE> 39
12. BUSINESS SEGMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Business Segments
Net revenues:
Flowers-by-wire $10,416 $ 9,041 $ 7,196
Charge card processing 1,193 1,258 1,253
$11,609 $10,299 $ 8,449
Operating profit before allocation of
general and administrative expenses:
Flowers-by-wire $ 6,559 $ 5,587 $ 4,472
Charge card processing 1,109 1,200 1,135
$ 7,668 $ 6,787 $ 5,607
Operating profit after allocation of general
and administrative expenses:
Flowers-by-wire $ 2,772 $ 2,176 $ 1,508
Charge card processing 98 233 90
$ 2,870 $ 2,409 $ 1,598
Identifiable assets:
Flowers-by-wire $ 4,139 $ 3,737 $ 3,910
Charge card processing 472 325 227
$ 4,611 $ 4,062 $ 4,137
Depreciation expense:
Flowers-by-wire $ 146 $ 272 $ 333
Charge card processing 33 19 55
$ 179 $ 291 $ 388
Capital expenditures:
Flowers-by-wire $ 625 $ 162 $ 93
Charge card processing 219 28 43
$ 844 $ 190 $ 136
</TABLE>
-37-
<PAGE> 40
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
-38-
<PAGE> 41
PART III
ITEMS 9, 10, 11, AND 12 are incorporated by reference to the Company's
definitive proxy statement, pursuant to Regulation 14A, which will involve the
election of directors. However, if such definitive proxy statement is not filed
with the Securities And Exchange Commission within 120 days following August 31,
1997, such items will be filed as an amendment to this Form 10-KSB not later
than the end of the 120-day period.
-39-
<PAGE> 42
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
<S> <C>
(a) 1. Financial Statements
Included in Part II of this report:
Report of Independent Certified Public Accountants 18
Consolidated Balance Sheets at August 31, 1997 and 1996 19
Consolidated Statements of Income for the years
ended August 31, 1997, 1996 and 1995 21
Consolidated Statements of Changes in Stockholders'
Equity (Deficiency) for the years ended
August 31, 1997, 1996 and 1995 23
Consolidated Statements of Cash Flows for the years
ended August 31, 1997, 1996 and 1995 24
Notes to Consolidated Financial Statements 26
</TABLE>
3. Exhibits
EXHIBIT REFERENCE
The following items pertain to this report and, accordingly, are filed herewith:
(10) Material contracts:
a) Building purchase Agreement between Registrant and Alvin
Wunderlich Sr. Sr. Trust Number 1.
b) Building Lease Agreement between Registrant and Verne W.
Anderson and Mariella Anderson Living Trust.
c) Non-qualified, Non-plan Option Agreement between Registrant
and Andrew W. Williams, Chairman of the Board and CEO.
d) Non-qualified, Non-plan Option Agreement between Registrant
and James H. West, President and CFO.
e) Non-qualified, Non-plan Option Agreement between Registrant
and Kelly S. McMakin, Vice President, Secretary and
Treasurer.
(11) Computation of per share earnings
(23) Consent of Independent Certified Public Accountants
(27) Financial Data Schedule (For SEC use only)
-40-
<PAGE> 43
The following items have been included as exhibits in filings by the Company in
a previous filing and, accordingly, are incorporated hereby reference.
EXHIBIT REFERENCE
(3) Articles of incorporation and Bylaws of the Registrant, as amended.
(10) Material Contracts
(a) Convertible subordinated notes due to Clark Estates maturing
June 30, 1996.
(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.).
(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.
(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.
-41-
<PAGE> 44
(10) Material Contracts (continued)
(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 Warrants for 250,000 shares of the
registrants common stock expiring January 1, 2001.
(q) Common Stock Purchase Warrants for 400,000 shares of the
registrants common stock expiring January 1, 2001.
(r) Construction Agreement dated September 30, 1996 between
Registrant and C.E. Block, Architect of Vero Beach, Florida.
(s) Management Incentive Stock Option Plan approved January 30,
1996.
(t) Non-Employee Director Stock Option Plan approved January 30,
1996.
(22) Subsidiaries of the Registrant
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of fiscal 1997.
-42-
<PAGE> 45
EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
1997 1996 1995
------ ------ ------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Primary
Average shares outstanding 8,076 5,988 5,701
Net effect of dilutive stock options and
warrants based on the treasury stock
method using average market price 561 291 76
Total 8,637 6,279 5,777
Net income $3,433 $2,262 $ 707
Per share amount $ 0.40 $ 0.36 $ 0.12
Fully diluted
Average shares outstanding 8,076 5,988 5,701
Net effect of dilutive stock options and
warrants-based on the treasury stock
method using the year-end market price 639 387 171
Total 8,715 6,375 5,872
Per share amount $ 0.39 $ 0.35 $ 0.12
</TABLE>
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<PAGE> 46
EXHIBIT 23
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-10067), (Form S-8 No. 333-07271) and (Form S-8 No. 333-07267)
of Florafax International, Inc. and in the related prospectuses of our report
dated October 3, 1997, with respect to the consolidated financial statements of
Florafax International, Inc. included in this Annual Report (Form 10-KSB) for
the year ended August 31, 1997.
/s/ Ernst & Young LLP
Tampa, Florida
November 24, 1997
-44-
<PAGE> 47
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: November 26, 1997 James H. West
----------------- -----------------------------
President and Chief
Financial Officer
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<PAGE> 48
<TABLE>
<S> <C> <C>
DIRECTORS AND
PRINCIPAL OCCUPATIONS OFFICERS OFFICES
T. CRAIG BENSON* ANDREW W. WILLIAMS CORPORATE HEADQUARTERS
President, Corporate Equities Chairman of the Board and 8075 20th Street
Division of Service Chief Executive Officer Vero Beach, Florida 32966
Corporation International 561-563-0263
Houston, Texas JAMES H. WEST
President and Chief Financial
SOLOMON O. HOWELL, JR. *+ Officer FORM 10-KSB
Secretary-Treasurer
H&N Constructors, Inc. KELLY S. MCMAKIN A copy of the exhibits
Louisville, Kentucky Vice President, Treasurer accompanying the Form 10-KSB
and Secretary report filed with The Securities
WILLIAM E. MERCER*+ & Exchange Commission can be
Chairman of the Board and obtained by writing to:
Chief Executive Officer AUDITORS Kelly S. McMakin
Southwest Guaranty Trust 8075 20th Street
Company ERNST & YOUNG LLP Vero Beach, Florida 32966
Houston, Texas Tampa, Florida
KENNETH G. PUTTICK*+
Owner of Ken Puttick Buick-Cadillac
Vero Beach, Florida CORPORATE COUNSEL
CAUTHORN, HALE, HORNBERGER,
JAMES H. WEST FULLER, SHEEHAN & BECKER
President of One Riverwalk Place, Suite 620
Florafax International, Inc. 700 North St. Mary's Street
Vero Beach, Florida San Antonio, Texas 78205
ANDREW W. WILLIAMS TRANSFER AGENT
Chairman of the Board AND REGISTRAR
Florafax International, Inc.
Certified Public Accountant REGISTRAR AND TRANSFER COMPANY
Andrew W. Williams, P.A. 10 Commerce Drive
Vero Beach, Florida Cranford, New Jersey 07016
</TABLE>
+Member of audit committee
*Member of compensation committee
-46-
<PAGE> 1
Exhibit 10(a)
PURCHASE CONTRACT
THIS PURCHASE CONTRACT ("Contract") is entered into as of the _____ day
of ___________, 1997, between ALVIN W. WUNDERLICH, JR., TRUSTEE OF THE ALVIN W.
WUNDERLICH, SR., TRUST NUMBER 1 ("Seller"), whose address is 616 Azalea Lane,
Vero Beach, Florida 32963, and FLORAFAX INTERNATIONAL, INC. ("Buyer"), a
Delaware corporation, whose address is 8075 20th Street, Vero Beach, Florida
32966.
1. SALE AND PROPERTY. Subject to the terms and conditions of this
Contract, Seller agrees to sell and convey to Buyer, and Buyer agrees to
purchase from Seller, the following property (the "Property") in the City of
Vero Beach, Indian River County, Florida:
(a) a parcel of land containing 5 acres, more or less, located at
8075 20th Street, being more fully described on EXHIBIT "A"
attached hereto and incorporated herein;
(b) all buildings and improvements ("Improvements") located on the
Property;
(c) all mechanical systems, fixtures and equipment, including, but
not limited to, compressors, and engines; electrical systems,
fixtures and equipment; plumbing fixtures, systems and
equipment, heating fixtures, systems and equipment; air
conditioning fixtures, systems and equipment; furniture,
carpets, drapes and other furnishings; maintenance equipment
and tools; and all other machinery, equipment, fixtures and
personal property of every kind and character, if any, owned
by the Seller and located in, or on or used in connection
with, the Property or the Improvements or the operations
thereon ("Personal Property");
(d) all site plans, surveys, soil and substrata studies,
architectural renderings, plans and specifications,
engineering plans and studies, floor plans, landscape plans
and other plans, diagrams or studies of any kind, if any, in
Seller's possession which relate to the Property, the
Improvements or the Personal Property;
(e) all plans and building specifications, environmental studies
and other materials of any kind in Seller's possession solely
related to the Improvements.
(f) Seller's interest, being all of landlord's interest, in any
and all leases and rental agreements with tenants occupying,
or having the right to occupy, space situated in the
Improvements or otherwise having rights with regard to the use
of the Property or the Improvements ("Leases"), and all
security deposits, if any, held in connection with such
Leases.
2. CONSIDERATION. As full consideration for the Property, Buyer agrees
to pay to Seller at Closing (i) cash in the sum of $500,000.00, and (ii) 30,000
shares of common stock of Buyer, par value one cent ($.01) per share (the
"Purchase Price").
3. EARNEST MONEY. Upon the signing of this Contract, Buyer shall
deposit the sum of $10,000.00 (the "Earnest Money"), as earnest money to bind
this sale, with Chicago Title Insurance Company ("Escrow Agent"), 7616 LBJ
Freeway, Suite 300, Dallas, Texas 75251, Attention: Tom Garner - National
Business Unit. Upon Closing, the Earnest Money shall be applied to the Purchase
Price. The Earnest Money shall be deposited by Escrow Agent in a
Federally-insured
<PAGE> 2
interest-bearing account, and the interest earned on the deposit shall be
credited to Buyer (Federal ID No. 41-0719035).
4. DEPOSIT DATE. The date on which a copy of this Contract executed by
Seller and Buyer and a check for the Earnest Money are deposited with Escrow
Agent is referred to herein as the "Deposit Date."
5. SURVEY. Within 30 days after the Deposit Date, Buyer, at its option,
may obtain a current boundary and topographical survey and field notes of the
Property (the "Survey") prepared and certified in A.L.T.A. form by a licensed
surveyor acceptable to Escrow Agent.
6. TITLE COMMITMENT. Within 30 days after the Deposit Date, Buyer, at
its expense, shall cause Escrow Agent to deliver to Buyer an Owner's Policy
Title Commitment issued by Escrow Agent, together with true copies of all
recorded documents referred to therein (the "Title Commitment"). The Title
Commitment shall obligate Escrow Agent to issue an Owner's Policy of Title
Insurance underwritten by Chicago Title Insurance Company insuring title to the
Property in Buyer in the amount of the Purchase Price, upon delivery and
recording of the instruments referred to herein.
7. BUYER'S OBJECTIONS. Buyer hereby waives any objection to the
following exceptions, as referenced in that certain title policy issued by First
American Title Insurance Company (Policy No. FA-35-032610):
(i) Easement to Florida Power & Light Company from First Bankers
of Indian River County recorded March 15, 1984, in Official
Records, Volume 681, Page 2240 of the Public Records of Indian
River County, Florida.
(ii) All canals, ditches and rights of way, if any, of the Indian
River Farms Drainage District.
(iii) Rights of First Union National Bank of Florida, now in
possession under an unrecorded lease.
(iv) The following matters shown on that certain survey of the
subject property prepared by CARTER ASSOCIATES, INC., dated
February 24, 1995 and bearing Project No. 95-1535:
(a) encroachment of asphalt paving off the subject
property to the North;
(b) encroachments of asphalt paving with the land covered
by Florida Power and Light Easement recorded in
Official Records Book 681, Page 2240, of the Public
Records of Indian River County, Florida.
Notwithstanding the above-referenced exceptions which are accepted by Buyer, if
there are any other exceptions stated in the Title Commitment or any matters
shown on the Survey which, in Buyer's judgment, will interfere with Buyer's
intended use of the Property or will materially impair its marketability, Buyer
shall, within 15 days after receipt of the latter of the Title Commitment and
the Survey, specify to Seller in writing the exceptions or matters to which
Buyer objects. Seller shall have no obligation to cure any objections raised by
Buyer. If for any reason Buyer's objections are not removed (or waived by Buyer
in writing) on or prior to the Closing Date, either party may terminate this
Contract by written notice to the other, in which event the Earnest Money and
accrued
-2-
<PAGE> 3
interest thereon shall be promptly delivered to Buyer, and neither party shall
have any further obligation hereunder.
8. OWNERSHIP DOCUMENTS. Within fifteen (15) days after the Deposit
Date, Seller shall, if available, furnish to Buyer true and correct copies of
the items listed below (collectively, "Ownership Documents"):
a. all management, maintenance or other service agreements;
b. executed copies of all Leases, and amendments thereto (other
than the lease by and between Seller and Buyer); and
c. any surveys or reports in Seller's possession, including but
not limited to environmental, asbestos, drainage, and water
retention studies.
9. FEASIBILITY. Buyer shall have 90 days after the Deposit Date (the
"Feasibility Period") to examine the Property and any Ownership Documents. Such
examination may include any matters that Buyer finds relevant to its decision to
purchase the Property, including without limitation, a soil, hazardous
substance, engineering and feasibility study. If Buyer disapproves of, or is
dissatisfied with the physical condition of the Property or the results of any
investigation made concerning the Property, in Buyer's sole and absolute
discretion Buyer may, prior to expiration of the Feasibility Period, terminate
this Contract by giving Seller written notice of said termination. If Buyer
fails to give Seller timely written notice of such termination, all objections
will be waived, and this Contract will become binding on both parties. If Buyer
terminates this Contract as provided herein in this Section, the Escrow Agent,
without further authorization or direction from Seller, will immediately refund
the Earnest Money and accrued interest thereon to Buyer. Thereafter, neither
Buyer nor Seller will have any further obligations or liabilities under this
Contract.
10. NO FURTHER CONTRACTS. From the Deposit Date hereof until the date
of the Closing Date or the earlier termination of this Contract, Seller shall
(a) maintain and operate the Property in the same manner in which the Property
was operated as of the Closing Date, and will not knowingly permit to be
committed any waste on the Property, (b) continue all Leases, and insurance
policies relative to the Property in full force and effect, (c) neither cancel,
amend, enter into nor renew any lease, without the written consent of Buyer
(which consent will not be withheld unreasonably), (d) not knowingly enter into
any agreement or instrument which would constitute an encumbrance on the
Property without prior written consent of Buyer (which consent will not be
withheld unreasonably), and (e) not remove Personal Property owned by Seller
from the Improvements and/or Property.
11. CLOSING. The sale and purchase of the Property shall be closed (the
"Closing") at the offices of the Escrow Agent specified in Section 3 on January
5, 1998, or on such other date as may be agreed upon in writing by the parties
(the "Closing Date").
12. DEED TO BUYER. At Closing, Seller at its expense shall execute and
deliver to Buyer a General Warranty Deed in recordable form conveying to Buyer
good and indefeasible fee simple title to the Property, subject only to the
following (the "Permitted Exceptions"):
(a) Exceptions set forth in the Title Commitment which have been
accepted or deemed accepted by Buyer pursuant to Section 7;
-3-
<PAGE> 4
(b) Ad valorem taxes on the Property for the year of Closing and
subsequent years, not yet due and payable; and
(c) Existing building and zoning ordinances.
13. SELLER'S CLOSING OBLIGATIONS. At Closing, Seller shall also deliver
to Buyer, at Seller's sole cost and expense, each of the following items:
(a) a Bill of Sale transferring all of the Personal Property
associated with the Property and an assignment of such Personal
Property;
(b) an assignment of all warranties, guaranties and service
contracts associated with the Property, if any;
(c) an assignment of all Leases associated with the Property;
(d) signed estoppel certificate(s) from each tenant on such
form as shall be provided by Buyer's counsel, and approved by Seller;
(e) executed letters to each tenant of the Property notifying
them of the change in ownership of the Property; and
(f) termination letters to all providers of service to the
Property, if any, if Buyer elects not to assume the contracts relating
to said services.
14. TITLE POLICY. At Closing, the Escrow Agent shall deliver to Buyer,
at Buyer's sole cost and expense, an Owner' Policy of Title Insurance ("Title
Policy") issued by the Escrow Agent and underwritten by Chicago Title Insurance
Company in Buyer's favor in the full amount of the Purchase Price insuring
Buyer's fee simple title to the Property. The Title Policy shall be in A.L.T.A.
form, with the general exceptions deleted at Buyer's expense, and shall be
subject to no special exceptions other than the Permitted Exceptions.
15. AD VALOREM TAXES. At Closing, ad valorem taxes on the Property for
the year of Closing shall be paid by Buyer.
16. STAMP TAX. The Florida stamp tax payable with respect to the
execution and delivery of Seller's General Warranty Deed shall be paid by Buyer,
and the stamps representing payment of such tax shall be affixed to such Deed at
Closing.
17. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller warrants and
represents the following is true and correct as of the date of Closing:
(a) Seller has full power and authority to enter into this
Contract, and requires no further action or approval in order to
constitute this Contract as binding and enforceable obligations of
Seller. Further, the execution and delivery of this Contract by Seller
and the due observation and performance by Seller of its terms,
provisions and covenants shall not contravene, violate or constitute a
default under any contract, agreement or undertaking to which Seller is
a party or by the terms of which Seller or the Property are bound.
-4-
<PAGE> 5
(b) To the best of Seller's knowledge, no litigation or
proceeding is pending or threatened relating specifically to the
Property, which if adversely determined, could have a material adverse
effect on title to and/or the use, or which could, in any way,
interfere with the consummation of this Contract.
(c) To the best of Seller's knowledge, it has not received
written notification of condemnation proceedings which may affect the
Property in the future, which has not otherwise been disclosed to Buyer
or its agents.
(d) To the best of Seller's knowledge, it has not received
written notification of any violations of applicable federal, state or
local codes, regulations or laws affecting any material portion of the
Property, which has not otherwise been disclosed to Buyer or its
agents.
(e) To the best of Seller's knowledge, the Property is not
currently being used, and Seller has no knowledge that it has ever been
used, for the storage or disposal of any hazardous or toxic materials,
which has not otherwise been disclosed to Buyer or its agents.
18. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer warrants and
represents the following is true and correct as of the date of Closing:
(a) In accordance with Buyer's Certificate of Incorporation,
as amended, the total number of shares which Buyer is authorized to issue is (i)
eighteen million (18,000,000) shares of common stock, par value one cent ($.01)
per share and (ii) six hundred thousand (600,000) shares of preferred stock, par
value ten dollars ($10.00) per share ("Preferred Stock"). There are no issued
and outstanding shares of Preferred Stock.
19. COMMISSION. Seller and Buyer represent and warrant to each other
that no real estate commission or finder's fee is or shall be payable to any
third party with respect to this Contract or the sale herein contemplated.
20. COSTS. At or prior to Closing, Buyer shall pay all surveying costs,
all costs associated with the issuance of the Title Commitment and the Title
Policy, the Florida stamp tax, all escrow fees, and the costs of recording all
closing instruments. Each party shall pay its own attorneys' fees.
21. RIGHT OF ENTRY. At any time and from time to time prior to the
Closing, and at Buyer's sole expense, Buyer or its authorized agents shall have
the right to enter upon the Property for any lawful purpose, including, without
limitation, making surveys and site analyses, test borings, and engineering
studies. Buyer agrees to indemnify and hold harmless Seller from any damages or
liability to persons or property that might arise therefrom, and Buyer agrees to
repair, or pay to Seller the cost of, any damages caused by such entry. The
provisions of this Section shall survive the Closing or earlier termination of
this Contract.
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<PAGE> 6
22. DAMAGE OR DESTRUCTION PRIOR TO CLOSING. In the event that either
the Improvements or Personal Property associated with the Property should be
damaged by any casualty prior to such Closing, and if the cost of repairing such
damage, as estimated by an independent contractor ("Independent Contractor")
retained by Buyer (and approved by Seller, which approval shall not be withheld
unreasonably or unduly delayed) is:
(a) less than Fifty Thousand Dollars ($50,000.00), then, at
Seller's option: (i) Seller shall repair such damage prior to the
Closing date, restoring the damaged Property at least to its condition
immediately prior to such damage, or (ii) elect to close the
transaction and Buyer shall receive a credit at such Closing in an
amount necessary to make such repairs as determined by the Independent
Contractor, or if said cost is
(b) equal to or more than Fifty Thousand Dollars ($50,000.00)
then the Buyer may elect within twenty (20) days of notification to
Buyer of such occurrence to (i) terminate this Contract or (ii) require
Seller to assign to Buyer at Closing, all insurance proceeds payable
for such damage, and pay to Buyer at Closing the amount of any
deductible required by Seller's insurance policies, and the sale shall
be closed without the Seller's repairing such damage.
23. EMINENT DOMAIN. If prior to Closing a material portion of the
Property, as determined by Buyer in its sole discretion, shall be taken by any
governmental authority under the power of eminent domain or by any private
organization possessing the power of eminent domain, this Contract shall
terminate on the date of taking, and the Escrow Agent shall thereupon promptly
return to Buyer the Earnest Money, and the parties hereto shall thereafter be
released of any obligation or liability by reason of the execution of this
Contract.
24. ASSIGNMENT. Buyer may assign this Contract and all rights hereunder
to a party owned or controlled by Buyer without Seller's consent, provided the
assignee shall assume in writing all the obligations of Buyer hereunder, and,
provided further, Buyer has furnished Seller with an executed copy of such
assignment. Except with Seller's prior written consent, which consent shall not
be unreasonably withheld or delayed, Buyer may not otherwise assign this
Contract to an unrelated third party.
25. TIME OF ESSENCE. Time is of the essence of this Contract.
26. UNENFORCEABILITY OR INAPPLICABLE PROVISIONS. If any provision
hereof is for any reason unenforceable or inapplicable, the other provisions
hereof will remain in full force and effect in the same manner as if such
unenforceable or inapplicable provision had never been contained herein.
27. COUNTERPARTS. This Contract may be executed in any number of
counterparts, each of which will for all purposes be deemed to be an original,
and all of which are identical.
28. APPLICABLE LAW. This Contract shall be construed under and in
accordance with the laws of the State of Florida.
29. ATTORNEY'S FEES. In the event either Buyer or Seller should bring
suit against the other in respect to any matters provided for in this Contract,
the prevailing party shall be entitled to recover from the other party
reasonable attorney's fees in connection with such suit.
30. FURTHER ASSURANCES. In addition to the acts and deeds recited
herein and contemplated to be performed at the Closing, Seller and Buyer agree
to perform such other acts, and to execute and/or deliver such other instruments
and documents as either Seller or Buyer, or their respective counsel, may
reasonably require in order to effect the intents and purposes of this Contract.
Further, Seller and Buyer each agree to deliver to the Title Company affidavits
and such other assurances as may reasonably be necessary or required to enable
the Title Company to issue the Title Policy as contemplated in this Contract.
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<PAGE> 7
31. TIME PERIODS. Unless otherwise expressly provided, all periods for
delivery or review and the like shall be determined on a "calendar" day basis.
If any date for performance, approval, delivery or Closing falls on a Saturday,
Sunday or legal holiday, the time therefor shall be extended to the next
business day.
32. NOTICES. All notices given hereunder shall be in writing and shall
be delivered in person to the addressee or shall be sent by registered, express
or certified mail (postage prepaid). Any such notice shall be effective when
delivered, if delivered in person, or when deposited in the mail, if mailed as
above provided. Notices shall be addressed to the parties at their respective
addresses set forth in the preamble to this Contract.
33. DEFAULT. If Seller fails to comply with any provision of this
Contract and fails to cure the default within 10 days after notice from Buyer,
Buyer may, as its sole remedy, receive a refund of the Earnest Money, in which
latter event Seller shall be released from this Contract. If Buyer fails to
comply with any provision of this Contract and fails to cure the default within
10 days after notice from Seller, Seller may, as its sole remedy, retain the
Earnest Money, including interest, as liquidated damages, in which latter event
Buyer shall be released from this Contract.
34. EFFECT. This Contract contains the entire agreement of the parties
with respect to the sale of the Property and supersedes all prior agreements,
oral or written, with respect to the subject matter hereof. This Contract may
not be amended except by an instrument in writing signed by all parties. This
Contract shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, assigns and legal representatives.
35. DEPOSIT WITH ESCROW AGENT. If a copy of this Contract executed by
Seller and Buyer and a check for the Earnest Money are not deposited with Escrow
Agent by the close of business on August 29, 1997, this Contract shall be void
and of no force or effect.
Executed in counterparts as of the date first above written.
- -------------------------------- ----------------------------------------
First Witness ALVIN W. WUNDERLICH, JR.,
Name: Trustee of the Alvin W. Wunderlich, Sr.,
--------------------------- Trust Number 1
Second Witness
Name:
---------------------------
- -------------------------------- FLORAFAX INTERNATIONAL, INC.
First Witness
Name:
--------------------------- By:
-------------------------------------
James H. West, President
- --------------------------------
Second Witness
Name:
---------------------------
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<PAGE> 8
EXHIBIT "A"
(insert property description)
The West 5 acres of the East 15 acres of Tract 12, Section 1, Township
33 South, Range 38 East, according to the last general plat of lands of
the Indian River Farms Company filed in the office of the Clerk of the
Circuit Court of St. Lucie County, Florida, in Plat Book 2, Page 25;
said land now lying and being in Indian River County, Florida.
<PAGE> 1
Exhibit 10(b)
REAL PROPERTY LEASE
THIS REAL PROPERTY LEASE ("Lease") is made and entered into as of the last
date of execution by the parties hereto, by and between VERNE W. ANDERSON and
MARIELLA ANDERSON LIVING TRUST (together "Landlord"), and FLORAFAX
INTERNATIONAL, INC., a Delaware corporation ("Tenant"). For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, office and warehouse space located within Landlord's building
("Building"), which office and warehouse space contains a total of approximately
ten thousand thirteen (10,013) square feet in area ("Premises"), being comprised
of approximately seven thousand two hundred eighty-five (7,285) square feet of
office space and two thousand seven hundred twenty-eight (2,728) square feet of
warehouse space, as depicted on EXHIBIT "A", attached hereto and incorporated
herein. The actual square footage of office and warehouse space shall be
ascertained by Landlord prior to the Rent Commencement Date (defined below) and
shall be determined in accordance with the Building Owner's and Manager's
Association ("BOMA") standards. Landlord shall deliver written notice of
Landlord's determination of such square footage within ten (10) days after such
calculation is made. If Tenant disputes such determination in writing within
thirty (30) days of its receipt of such written notice from Landlord, the
parties shall meet in good faith to resolve the issue, barring which the issue
shall be resolved through arbitration in accordance with arbitration procedures
promulgated by the American Arbitration Association. The Premises is situated in
the City of Tulsa, Oklahoma, and is commonly referred to as 6923 East 14th
Street, Tulsa, Oklahoma 74112.
2. TERM, EFFECTIVE DATE; RENT COMMENCEMENT DATE.
a. TERM. The term of this Lease ("Term") shall be five (5) years from
the "Rent Commencement Date" (as hereinafter defined). The Term shall commence
on the Rent Commencement Date and shall end at 12:01 A.M. on the date which is
five (5) years after the Rent Commencement Date.
b. EFFECTIVE DATE. The term "Effective Date" shall mean the latest date
of execution of this Lease by the parties hereto.
c. LEASE YEAR. The term "Lease Year" shall mean any period of twelve
(12) calendar months commencing on the Rent Commencement Date or an anniversary
thereof and ending on the last day of the twelfth (12th) month thereafter.
d. RENT COMMENCEMENT DATE. The term "Rent Commencement Date" shall mean
the earlier of (i) the date upon which Tenant opens for business at the
Premises, or (ii) the date that the Landlord's Work (hereinafter defined) for
the Premises is completed, it being Landlord's estimate that the Premises will
be "ready for occupancy" on or before September 1, 1997. Notwithstanding the
above-stated language, Tenant is not required to open for business at the
Premises prior to September 1, 1997.
3. LANDLORD'S WORK. Landlord shall, at Landlord's sole cost and expense,
provide the improvements ("Landlord's Work") for the Premises described in
EXHIBIT "B" attached hereto and incorporated herein. Upon completion of
Landlord's Work, Landlord shall deliver the Premises to Tenant. Landlord
estimates that the Premises will be "ready for occupancy" on or before September
1, 1997. In the event Landlord fails to deliver the Premises to Tenant in a
"ready for occupancy"
<PAGE> 2
condition, on September 1, 1997, then Landlord shall reimburse Tenant, upon
written demand, all rental and other charges incurred by Tenant under its
existing lease, dated September 1, 1994, by and between 4175 South Memorial
Development Co., as landlord, and Tenant, as tenant. In the event Landlord fails
to so reimburse Tenant, then upon Tenant's occupancy of the Premises, Tenant
shall be entitled to offset such sums from the Base Rent owing to Landlord
hereunder.
4. RENT.
a. BASE RENT. During the Term of this Lease, Tenant shall pay to
Landlord, as base rent ("Rent") for the Premises, commencing on the Rent
Commencement Date, an annual sum equal to Four Dollars ($4.00) per square foot
(being approximately Forty Thousand Fifty-Two Dollars ($40,052.00), payable on a
monthly basis in the approximate sum of Three Thousand Three Hundred
Thirty-Seven and 67/100 Dollars ($3,337.67). If the Rent Commencement Date is a
day other than the first day of a month, the Rent for the first and last month
of the Term shall be prorated.
b. PAYMENT DATE. Rent is payable in advance on or before the first (1st)
day of each and every calendar month, at the address of Landlord set forth
herein, without demand.
5. CONDITION OF THE PREMISES. Landlord warrants that it has good title to
the Premises; that at the beginning of the Term, Landlord shall deliver
possession of the Premises to Tenant free of all other tenancies in the
Premises; and that at such time, the condition of the Premises will comply with
all laws and ordinances applicable to the Premises and its intended use.
6. QUIET ENJOYMENT. Landlord agrees that if Tenant is not in default
hereunder, Tenant's quiet and peaceable enjoyment of the Premises during the
Term of this Lease shall not be disturbed by Landlord.
7. USE. Tenant shall use and occupy the Premises for computer and/or
telemarketing operations or any other lawful business.
8. LAWS AND STANDARDS. Notwithstanding the terms of Section 5 above, during
the Term, Tenant shall promptly comply with all laws, ordinances, rules and
regulations of all Federal, state, county and municipal governments now in force
or that may be enacted hereafter, with all directions, rules and regulations of
the fire marshal, health officer, building inspector or other proper officers of
the governmental agencies having jurisdiction and with such standards
established from time to time by the National Board of Fire Underwriters of the
National Fire Protective Association, or any similar bodies which are applicable
to Tenant's use and occupancy of the Premises.
9. UTILITIES AND OTHER COSTS.
*a. From and after the Rent Commencement Date, Tenant shall pay seventy
percent (70%) of all water, fuel, light, power, heat, security system services,
sewer and rubbish services supplied to the Premises. Accordingly, Landlord shall
forward to Tenant, each month, copies of all invoices from said providers.
Tenant shall remit to Landlord, within ten (10) days of Tenant's receipt
thereof, seventy percent (70%) of said invoices. Landlord shall not be liable to
Tenant if said utilities or services are interrupted or terminated because of
necessary repairs, installations, improvements or any cause beyond Landlord's
control; provided however, if Tenant
* if Florafax is the only occupant they will pay 100%.
2
<PAGE> 3
is unable to operate its business, there shall be an abatement of all rental
obligations hereunder during such time period.
b. Tenant shall, at Tenant's expense, furnish, install and maintain
Tenant's own telephone, computer, wireless and any other telephone and
electronic equipment deemed necessary by Tenant, including all wiring,
electrical, hookups and connections, false flooring or any other requirements
for the operation of such equipment. From and after the Rent Commencement Date,
Tenant shall pay one hundred percent (100%) of all telephone, computer and
related bills. Tenant's obligations contained in this Subsection (b) are
exclusive of the general utility bills as indicated in Subsection (a) above.
10. REPAIR AND MAINTENANCE. Except for repairs caused by the negligent acts
or omissions of Tenant, its agents, employees or assigns, Landlord shall have
the obligation to maintain and keep in repair the exterior walls, roof, and
foundation of the Building, and the sewer, water, gas and electric lines, as
well as all other plumbing, heating and air conditioning equipment relating to
the Building and the Premises. Except for repairs caused by the negligent acts
or omissions of Landlord, its agents, employees or assigns, Tenant shall keep
and maintain the Premises in a clean and sanitary order and in good condition
and repair; including but not limited to the floors, windows, doors, ceilings,
and interior walls.
11. ALTERATIONS; SIGNS.
a. Tenant shall have the right to make structural and non-structural
changes or alterations to the Building or improvements on the Premises. Prior to
the commencement of any construction for alterations, Tenant shall furnish to
Landlord, for its approval, which shall not be unreasonably withheld or delayed,
plans and specifications for such alterations. In the event Landlord fails to
approve or disapprove, as the case may be, such plans within five (5) days from
the date of submission to Landlord, then Landlord shall be deemed to have
approved the same.
b. Tenant shall have the right, at Tenant's sole cost, to erect,
install, maintain, and operate on the Premises such equipment, trade and
business fixtures and signs as Tenant may deem advisable for the operation of
Tenant's business. Such items shall not be deemed to be part of the Premises,
but shall remain the property of Tenant. All shall installations shall be
effected in compliance with applicable governmental laws, ordinances and
regulations. At any time during the Term of this Lease, Tenant shall have the
right to remove its equipment, trade or business fixtures, signs and other
personal property from the Premises provided that (i) Tenant is not then in
default, and (ii) Tenant shall repair any damage to the improvements and
building of the Premises resulting from such removal.
12. LIABILITY INSURANCE.
a. Landlord shall procure and maintain throughout the Term of this
Lease a policy or policies of insurance, at its sole cost and expense, causing
the Building to be insured under standard fire and extended coverage insurance
and liability insurance (plus whatever endorsements or special coverages
Landlord, in its reasonable discretion, may consider appropriate), to the extent
necessary to comply with Landlord's obligations pursuant to other provisions of
this Lease. The limits of Landlord's liability policy shall be in an amount not
less than $1,000,000 per occurrence.
3
<PAGE> 4
b. Tenant shall procure and maintain throughout the Term of this Lease
a policy or policies of insurance, at its sole cost and expense, causing
Tenant's fixtures and contents to be insured under standard fire and extended
coverage insurance and, with regard to liability insurance, insuring both
Landlord and Tenant against all claims, demands or actions arising out of or in
connection with Tenant's use or occupancy of the Premises, or by the condition
of the Premises. The limits of Tenant's liability policy or policies shall be in
an amount not less than $1,000,000 per occurrence, and shall be written by
insurance companies reasonably satisfactory to Landlord.
13. DAMAGES BY CASUALTY.
a. If the Building or other improvements shall be damaged or destroyed
during the Term by fire or other casualty, Tenant shall have the right, but not
the obligation, to elect to cancel or terminate this Lease. Said right shall be
exercised in writing and delivered to Landlord within sixty (60) days after the
date of such occurrence as set forth in this Section. Upon such termination,
Landlord shall be entitled to all insurance proceeds covering the Premises (but
not covering Tenant's equipment, trade or business fixtures or personal
property, furnishings or furniture) resulting from such damage or destruction.
b. If the Building or other improvements shall be damaged or destroyed
during the Term by fire or other casualty, and Tenant elects not to terminate
the Lease, as permitted above, then promptly after adjustment of the insurance
claim, Landlord shall repair and restore the Building, Premises and improvements
to approximately the same condition as existed immediately prior to the date of
such damage or destruction. During the time of such repair and restoration, if
Tenant is unable to operate its business, there shall be an abatement of all
rental obligations hereunder. In the event the Premises are partially destroyed
or damaged by fire or other hazard so that the Premises can be only partially
used by Tenant for the purpose herein provided, then there shall be a partial
abatement in the Tenant's rental obligations corresponding to the time and
extent which the Premises cannot be used by Tenant. Tenant agrees that during
any period of reconstruction or repair of the Premises, it will continue the
operation of its business within the Premises to the extent practicable.
14. MECHANIC'S LIENS. Tenant agrees and covenants that it will not allow
any mechanic's liens, or other liens for any labor performed or materials
furnished which may cloud or impair title to the Premises, and that if any such
liens shall arise, within ten (10) days after request from Landlord, Tenant
shall either discharge and cancel the lien of record or post a bond (in
connection with which Tenant may contest any claims of any persons who have
provided or alleged to have provided, work to the Premises) in favor of
Landlord.
15. INDEMNITY.
a. Landlord shall not be liable for any damage or liability of any
kind, for any injury or death of persons, or damage to property of Tenant or any
other person occurring from and after the date of execution of this Lease, from
any cause whatsoever, by reason of the use or occupancy of the Premises by
Tenant or any person thereon or holding under Tenant, unless such damage is
caused by the negligent or willful act or omission of Landlord, its employees or
agents. Tenant shall indemnify and save Landlard harmless from all liability
whatsoever, on account of any such real or claimed damage or injury and from all
liens, claims and demands arising out of the use or occupancy of the Premises
and its facilities, or any repairs, alterations or improvements which
4
<PAGE> 5
Tenant may make to the Premises, unless such liability is caused by the
negligent or wilful act or omission of Landlord, its agents or employees.
b. Landlord shall and does hereby agree to indemnify Tenant and to hold
Tenant harmless of and from any and all claims, demands, costs and expenses
(including, but not limited to Tenant's reasonable attorneys' fees), damages and
causes of action of every nature whatsoever arising from or related to
Landlord's use or occupancy of the Building; or arising from any act, omission,
or negligence of Landlord, its agents, servants, employees, licensees or
invitees; or arising from any accident, injury or damage whatsoever caused to
any person or persons or property occurring in, on or about the Building or any
part thereof during the entire Term of this Lease, except where caused by the
negligence or wilful act or omission of Tenant, its agents, employees or
contractors.
16. WAIVER OF SUBROGATION. The parties release each other, and their
respective authorized representatives, from any claims for damage to any person
or property of either Landlord or Tenant in or on the Premises that are caused
by or result from risks insured against under any insurance policies carried by
the parties and in force at the time of any such damage. The parties further
agree neither party shall be liable to the other for any damage caused by fire
or any of the risks insured against under any insurance policy required by this
Lease, and each party shall cause each insurance policy obtained by it to
provide that the insurance company waives all right of recovery by way of
subrogation against either party in connection with any covered damage.
17. PROPERTY TAXES.
a. During the Term of this Lease, Landlord shall pay and discharge all
ad valorem, special assessments, and other taxes levied or asserted against the
Premises or any part thereof (collectively, "Property Taxes"). Property Taxes
shall not include Landlord's federal or state income, franchise, inheritance or
estate taxes. Tenant shall pay all taxes assessed against personal property of
Tenant located on the Premises.
b. Tenant shall pay all taxes and assessments, as specified herein, at
least thirty (30) days prior to the latest date upon which such taxes and
assessments may be paid prior to delinquency or other costs, expenses or charges
being added thereto.
18. BANKRUPTCY OR INSOLVENCY.
a. In the event of the filing or commencement of any proceeding by or
against Tenant under the Bankruptcy Code, the duly appointed Trustee, subject to
Court approval, shall have the right to assume this Lease if the Trustee shall
(i) cure any default or provide adequate assurance that the Trustee will
promptly cure such default; (ii) compensate or provide adequate assurance that
the Trustee will promptly compensate the Landlord for any actual loss resulting
from such default; and (iii) provide adequate assurance of future performance of
the covenants, agreements and obligations of Tenant under the terms of this
Lease.
b. The failure by the Trustee to assume or reject this Lease within
sixty (60) days after the order for relief (Chapter 7), or within sixty (60)
days of confirmation of a plan (Chapter 11), shall, at Landlord's option, be
deemed a rejection.
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<PAGE> 6
19. DEFAULT.
a. The default on the part of Tenant shall exist under this Lease
when:
(1) Tenant fails to pay any monetary sum due hereunder, including
without limitation, Rent or any other charges as and when due, and such
failure continues for ten (10) days after written notice thereof by
Landlord to Tenant;
(2) Tenant fails to observe or perform any other provision, covenant
or condition of this Lease to be observed or performed by Tenant, and such
failure continues for thirty (30) days after written notice thereof by
Landlord to Tenant; provided if such default cannot reasonably be cured
within thirty (30) days, then Tenant shall have additional time to cure
such default as is reasonable and necessary; provided that Tenant
diligently, continuously and in good faith prosecutes the cure of such
default;
(3) A general assignment by Tenant of the benefit of creditors occurs
or the filing by or against Tenant of any proceeding under any insolvency
or bankruptcy law occurs, or the appointment of a trustee or receiver to
take possession of all or substantially all of Tenant's assets located upon
the Premises or of Tenant's interest in this Lease, unless such seizure is
discharged within sixty (60) days thereof for the purpose of effecting a
moratorium upon or composition of its debts occurs within sixty (60) days.
b. In the event of a default, Landlord may treat same as a breach of
this Lease, and, in addition to any or all other rights or remedies of
Landlord, and by the law provided and without being considered an election
of remedies, Landlord shall have the option without further notice or
demand: (i) to declare the Term hereof ended and to reenter the Premises
and take possession thereof and remove all persons therefrom, and Tenant
shall have no further claim thereon or hereunder; or (ii) without declaring
this Lease terminated, to reenter the Premises and occupy the whole or any
part thereof for and on account of Tenant and to collect any unpaid rentals
and any other charges which have become payable or which may thereafter
become payable; or (iii) even though Landlord may have reentered the
Premises, to thereafter elect to terminate this Lease and all of the rights
of Tenant in or to the Premises.
c. Landlord shall not be deemed to have terminated this Lease or the
liability of Tenant to pay any rental or other charges thereafter accruing,
or to have terminated Tenant's liability for damages under any of the
provisions hereof, by any such reentry or by any action in unlawful
detainee, or otherwise, to obtain possession of the Premises, unless
Landlord shall have notified Tenant in writing that Landlord has so elected
to terminate this Lease. The service by Landlord of any notice pursuant to
the unlawful detainer statutes of the state where the Premises are situated
and the surrender of possession pursuant to such notice shall not (unless
Landlord elects to the contrary at the time of or at any time subsequent to
the serving of such notices and such election is evidenced by a written
notice to Tenant) be deemed to be a termination of this Lease. In the
event of any entry or taking possession of the Premises as aforesaid,
Landlord shall have the right, but not the obligation, to remove therefrom
all or any part of the personal property located therein and may place the
same in storage at a public warehouse at the expense and risk of Tenant.
d. Should Landlord elect to terminate this Lease, Landlord may
recover from Tenant as damages: (i) the worth at the time of award of
judgment of the unpaid rent which had
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<PAGE> 7
been earned at the time of termination; plus (ii) the worth at the time of award
of judgment of the amount by which the unpaid rent for the balance of the term
of the Lease exceeds the fair rental value of the Premises; plus (iii) any
reasonable costs or expenses incurred by Landlord in, (a) retaking possession of
the Premises, including reasonable attorney's fees therefor, (b) leasing
commissions, and (c) any other reasonable costs necessary or appropriate to
relet the Premises; plus (d) such other reasonable amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by the laws of the
state where the Premises are situated.
e. Efforts by the Landlord to mitigate the damages caused by the
Tenant's breach of the Lease do not waive the Landlord's right to recover
damages.
f. Even though Tenant has breached this Lease and abandoned the
Premises, this Lease shall remain in effect for so long as Landlord does
not terminate the Lease, and the Landlord may enforce all its rights and
remedies under this Lease, including the right to recover the Rent as it
becomes due under this Lease. The following do not constitute a
termination of Tenant's right to possession: (i) acts of maintenance or
preservation; (ii) efforts to relet the Premises; or (iii) the appointment
of a receiver on initiation by Landlord to protect its interest under this
Lease. Should Landlord relet the Premises on account of the Tenant, the
Landlord shall not be obligated to terminate this Lease, and in addition to
such other relief as may be allowed by law, Landlord may recover from
Tenant the past due Rent and unpaid Rent for the balance of the Term of the
Lease, less the amount of rent collected under the reletting of the
Premises, plus (iii) any reasonable costs or expenses incurred by Landlord
in, (a) retaking possession of the Premises, including reasonable attorneys
fees therefor, (b) leasing commissions, and (c) any other reasonable costs
necessary or appropriate to relet the Premises. Landlord shall have no
obligation or duty to Tenant to relet the Premises.
g. The rights of Landlord are not exclusive and shall be
cumulative to all other rights or remedies now or hereafter given to
Landlord by law or by the terms of this Lease. Nothing herein affects the
right of Landlord to equitable relief where such relief is appropriate. The
bringing of an action as described herein does not affect Landlord's right
to bring a separate action for relief on termination, or in equity but no
relief shall be requested and no damages shall be recovered in the
subsequent action for any detriment for which a claim for damages was made
and determined on the merits in the previous action.
20. CONDEMNATION.
a. If thirty percent (30%) or more of the rentable area of the
Premises shall be acquired or condemned by power of condemnation or eminent
domain, or be sold in lieu thereof, then Tenant, by written notice given within
sixty (60) days after notice of such taking or acquisition, may terminate this
Lease effective on the date that title vests in the condemning authority.
Tenant shall pay all Rent, additional rentals and all other charges and expenses
as shall be prorated and payable to the date of such termination, and Tenant
shall promptly vacate the Premises. Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease.
b. If all or any portion of the Premises shall be acquired by
authority of any governmental authority pursuant to the exercise of its power
of eminent domain or by deed in lieu thereof and the Lease is not terminated
then, commencing on the date of such acquisition, the Rent and all additional
rentals provided shall be reduced in the same proportion that the fair rental
value of the Premises immediately after such acquisition and any restoration
agreed to be performed by
7
<PAGE> 8
the parties hereto bears to the fair rental value of the Premises immediately
prior to such acquisition. In addition, if Tenant shall restore the remaining
portion of the Premises to as close to its previously existing condition as
possible, then Tenant shall first be entitled to recover its expenses incurred
in such restoration out of any such award and the balance shall be allocated to
Landlord, as aforesaid. If the parties are unable to agree on such fair rental
values within ninety (90) days after the date of such acquisition, the same
shall be determined by appraisal. Until the new Rent and additional rentals
shall have been determined, Tenant shall continue to pay Rent and additional
rentals at the rate in effect immediately prior to such acquisition, and upon
such determination, an appropriate adjustment shall be made.
c. If the parties do not agree upon any fair rental value, then
Landlord shall within ten (10) days provide Tenant with the name of three (3)
appraisers. Tenant shall within ten (10) days select one of the named
appraisers, who shall determine the fair rental value. All appraisers appointed
shall be licensed by the State of Oklahoma, shall be members of the Appraisal
Institute and shall be qualified by experience and ability to determine the
foregoing fair rental value, and the fees and other costs shall be shared
equally by both Landlord and Tenant.
21. ASSIGNMENT.
a. Tenant shall have the right to assign this Lease, or its rights
hereunder, or to sublet all or any part of the Premises to an affiliate of
Tenant without the prior written consent of the Landlord. In all other cases,
Tenant must obtain Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed. In the event of an assignment or sublease,
Tenant shall remain primarily liable for any and all obligations under this
Lease. No assignment or sublease shall alter, affect or modify any of the
rights of Landlord under this Lease.
b. Tenant may mortgage, pledge or otherwise encumber its interest in
this Lease or in the Premises to any financial institution advancing
purchase-money financing for Tenant's operations on the Premises; provided,
however, that in the event of a foreclosure of the interest of such financial
institution, the Premises may be used only in the manner permitted by this
Lease.
22. NOTICES. Any and all notices or demands by or from Landlord to
Tenant, or Tenant to Landlord shall be in writing. They shall be served either
personally, via messenger or overnight carrier, or by certified mail. If served
personally, service shall be conclusively deemed made at the time of service.
If served by certified mail, service shall be conclusively deemed made
twenty-four (24) hours after deposit thereof in the United States mail, postage
prepaid.
Any notice or demand to Landlord may be given unto them at:
Verne Anderson and Mariella Anderson Living Trust
1520 East 7th Street
Okmulgee, Oklahoma 74447
Attention: Verne Anderson
8
<PAGE> 9
Any notice or demand to Tenant may be given unto it at:
Florafax International, Inc.
8075 20th Street
Vero Beach, Florida 32966
Attention: James H. West
With copy to:
Drew R. Fuller, Jr.
Cauthorn Hale Hornberger Fuller
Sheehan & Becker, Incorporated
700 North St. Mary's Street, Suite 620
San Antonio, Texas 78205
Said addresses may be changed from time to time by notice given in
accordance with the provisions of this Section.
23. TERMINATION. On the last day of the Term of this Lease or sooner
termination as provided herein, Tenant shall peaceably and quietly leave the
Premises in good working order, condition and repair, damage by events or acts
beyond the reasonable control of Tenant and permitted alterations excepted.
The Premises shall be returned in a broom clean condition.
24. HOLDING OVER. Tenant shall not continue to conduct its business at
the Premises after the last day of the Term herein created. Any holding over
shall create no more than a month-to-month tenancy, subject to all of the terms
and conditions of this Lease provided herein.
25. HAZARDOUS SUBSTANCES.
a. Tenant shall not cause or permit to occur: (i) any violation of
any federal, state, or local law, ordinance, or regulation now or hereafter
enacted, related to environmental conditions on, under, or about the Premises;
or (ii) the use, generation, release, manufacture, refining, production,
processing, storage, or disposal of any hazardous substances on, under, or
about the Premises, other than used in Tenant's ordinary course of business.
b. Tenant shall comply with all laws regulating the use,
generation, storage, transportation, or disposal of hazardous substances.
c. If Tenant fails to fulfill any duty imposed under this
provision, then Landlord may take whatever actions are necessary to correct the
situation, and Tenant shall reimburse Landlord for all costs associated
therewith (including reasonable attorney's fees).
d. Tenant shall indemnify, defend, and hold harmless the Landlord
from all fines, suits, procedures, claims and actions of every kind, and all
costs associated therewith arising out of or in any way connected with any
deposit, spill, discharge, or other release of hazardous substances that occurs
during the Term of this Lease.
e. Landlord shall indemnify, defend and hold harmless the Tenant
from all fines, suits, procedures, claims and actions of every kind, and all
costs associated therewith arising out
9
<PAGE> 10
of or in any way connected with any deposit, spill, discharge or other release
of hazardous substances that occur before or after the Term of this Lease.
26. OPTION TO LEASE ADDITIONAL SPACE. So long as Tenant is not in default
(beyond any applicable cure period) under this Lease, during the Term, upon
sixty (60) days prior written notice from Tenant to Landlord, Tenant shall have
the right to lease the remaining office and warehouse space located in the
Building (being approximately 9,987 square feet in area). In the event Tenant
exercises this option, upon occupancy by Tenant of such additional space, the
parties shall execute a new lease for a term of five (5) years on the entire
Building. The new lease shall have the same terms and conditions of this Lease
except that (i)Tenant shall pay one hundred percent (100%) of all utilities and
other costs specified in Section 9 above and (ii) each Lease Year, Tenant shall
pay to Landlord any increase in Property Taxes from the preceding Lease Year.
Further, in the event Tenant exercises this option as provided herein, Landlord
agrees to improve the additional space in the same manner as set forth on
EXHIBIT "B" (except that Landlord will be required to surface and strip
_________ (__) square feet of land surrounding the Building for vehicular
parking), or as otherwise agreed by Landlord and Tenant. Landlord will have six
(6) months after Tenant's exercise of the option to complete such work.
Landlord agrees that upon Tenant's occupancy of the additional space, the
conditions of such space will comply with all applicable laws and ordinances
applicable to the additional space.
27. LEASING COMMISSION. Landlord and Tenant each represent and warrant
to the other that there are no claims for broker's commissions or finder's fees
in connection with the execution and delivery of this Lease, and Landlord and
Tenant each agree to indemnify the other against and hold such party harmless
from all liabilities arising from a breach of the representation and warranty
made by such party herein, including, without limitation, reasonable attorney's
fees and related court costs.
28. MISCELLANEOUS PROVISIONS.
a. Nothing contained in this Lease shall be deemed or construed
by the parties hereto, or any third party, to create the relationship of
principal and agent, or of partnership or of joint venture, or of trustee and
beneficiary, or of any other association between the parties hereto, and
neither the method of payment of any monies hereunder, nor any other
provisions in this Lease, nor any acts of the parties hereto, shall be deemed
to create any relationship set forth hereinabove.
b. No waiver of default by the party or parties hereunder shall be
implied from any omission by party or parties to take action on account of
such default if such default persists or is repeated, and no express waiver
shall affect any default other than the default specified in the express
waiver, and that only for the time and to the extent therein stated. One or
more waivers of any covenant, term or condition of this lease by a party or
parties shall not be deemed to waive or render unnecessary the consent to or
approval of said party or parties of any subsequent or similar acts by a party
or parties.
c. This Lease may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, but such
counterparts together shall constitute but one Lease.
d. This Lease shall be construed according to the laws of the State
in which the Premises are located.
<PAGE> 11
e. Time is of the essence of this Lease.
f. Should any portion of this Lease be declared invalid and
unenforceable, then such portion shall be deemed to be severable from this
Lease and shall not affect the remainder thereof.
g. It is expressly understood that this Lease contains all terms,
covenants, conditions and agreements between the parties hereto relating to the
subject matter of this Lease, and that no prior agreements or understandings,
either oral or written, pertaining to the same, shall be valid or of any force
or effect, and that the terms, covenants, conditions and provisions of this
Lease cannot be altered, changed, modified or added to except in writing by all
the parties hereto.
h. Should any party or parties hereto institute any action or
proceeding in Court or by arbitration to enforce any provision or provisions
hereof, or for damages by reason of any default under this Lease, or for a
declaration of such party's or parties' rights or obligations hereunder, or for
any other judicial remedies, the prevailing party or parties shall be entitled
to receive from the losing party or parties such amount as the Court may find to
be reasonable and actual attorney's fees and costs incurred for the services
rendered the party or parties prevailing in any such action or proceeding or on
appeal therefrom.
i. This Lease shall be binding upon and inure to the benefit of the
personal and legal representatives, successors and assigns of the parties.
j. The time for the completion of any alterations, repairs or
improvements shall be deemed extended by time lost due to delays resulting from
acts of God, strikes, unavailability of materials, civil riots, floods, other
unusually inclement weather (but not including seasonally inclement weather),
national or labor restrictions by governmental authority, and any other cause
not within the control of such party.
k. Tenant accepts this Lease subject and subordinate to any
mortgage, deed of trust or other lien presently existing upon the Premises and
to any renewals and extensions thereof; provided that Tenant and holder of said
mortgage, deed of trust or other lien now or hereafter existing shall have
executed and delivered a non-disturbance agreement reasonably acceptable to said
lienholder and Tenant. Tenant further agrees that any such mortgagee shall have
the right at any time to subordinate such mortgage, deed of trust or other lien
to this Lease. Landlord is hereby irrevocably vested with full power and
authority to, upon execution of a non-disturbance agreement as set forth above,
subordinate this Lease to any mortgage, deed of trust or other lien hereafter
placed upon the Premises, and Tenant agrees upon demand to execute such further
instruments subordinating the Lease upon the express condition that this Lease
shall be recognized by the mortgagee by the execution of a non-disturbance
agreement acceptable to Tenant and mortgagee, and that the rights of Tenant
shall remain in full force and effect during the term of this Lease so long as
Tenant shall continue to perform all of the covenants and conditions of this
Lease.
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<PAGE> 12
The parties hereto have executed this Lease as of the dates set forth below.
LANDLORD:
VERNE ANDERSON AND MARIELLA ANDERSON
LIVING TRUST, dated May 31, 1997
/s/ Verne W. Anderson
By: /s/ Mariella P. Anderson
--------------------------------
_______________________, Trustee
Date: May 31, 1997
TENANT:
FLORAFAX INTERNATIONAL, INC.
BY: /s/ James H. West
----------------------------------
James H. West, President
Date: May 27, 1997
12
<PAGE> 13
EXHIBIT "A"
The area considered consists of approximately 10,013 square feet of contiguous
area, consisting of 4,417 square feet of office space, 1,400 square feet of
process space, 2,728 square feet of warehouse space and 1,468 square feet of
auxiliary space.
<PAGE> 14
EXHIBIT "B"
-----------
[Description of Landlord's Work]
Landlord shall provide the following to Tenant at Landlord's sole expense
("Landlord's Work"):
1. replacement of existing carpet located in the Premises with
________________.
2. replacement of existing linoleum located in the Premises with
________________.
3. painting of all interior surfaces located in the Premises with
________________.
4. surfacing and striping of adequate space to park at least 100 cars.
5. installation of outdoor lighting in parking area, to Tenant's
satisfaction.
6. installation of a security system, to Tenant's satisfaction.
(existing security system already installed)
<PAGE> 1
Exhibit 10(c)
NON-QUALIFIED STOCK OPTION AGREEMENT - CERTIFICATE 2
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Agreement") is made and
entered into effective as of the 25th day of June, 1997, by and between FLORAFAX
INTERNATIONAL, INC., a Delaware corporation (the "Company") and Andrew W.
Williams (the "Optionee").
BACKGROUND
A. The Company has determined to reward and to provide incentives to those who
are primarily responsible for the operations of the Company and for shaping and
carrying out the long-range plans of the Company and aiding in its continued
growth and financial success.
B. In furtherance of these purposes, the Board of Directors of the Company has
authorized the grant to Optionee of a stock option to purchase certain shares of
the common stock, par value $.01 per share, of the Company ("Common Stock") by
resolution dated June 25, 1997.
C. The Company and Optionee wish to confirm the terms, conditions, and
restrictions of this option.
For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 GRANT OF OPTION. Subject to the terms, restrictions, limitations,
and conditions stated herein, the Company hereby grants to Optionee an option
(the "Option") to purchase 150,000 shares of Common Stock (the "Option Shares").
The date first written above shall be the date on which the Option has been
granted (the "Grant Date").
1.2 EXERCISE OF THE OPTION (a) The Option may be exercised with respect
to all or any portion of the Option Shares at any time during the Option Period
(as defined below) by the delivery to the Company, at its principal place of
business, of (i) a written notice of exercise which shall be delivered to the
Company no earlier than thirty (30) days and no later than ten (10) days prior
to the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the Company in
the amount of the Exercise Price (as defined below) multiplied by the number of
Option Shares being purchased (the "Purchase Price") or by delivery of a number
of shares of Common Stock, which have been held by Optionee for at least six
months, having a fair market value, as
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<PAGE> 2
of the date the Option is exercised, at least equal to the Purchase Price OR by
a certified check payable to the Company in an amount less than the Exercise
Price and by delivery of a number of shares of Common Stock, which have been
held by Optionee for at least six months, having a fair market value, as of the
date the Option is exercised, at least equal to the balance of the Purchase
Price; and (iii) except as permitted in Paragraph 1.2(b) below, a certified
check payable to the Company in the amount of all withholding tax obligations
(whether federal state or local), imposed on the Company by reason of the
exercise of the Option, or the Withholding Election described in Section 1.2(b).
Upon acceptance of such notice, receipt of payment in full, the Company shall
cause a certificate representing the shares of Common Stock as to which the
Option has been exercised to be issued and delivered to the Optionee.
(b) In lieu of paying the withholding tax obligation in cash, as described in
Section 1.2(a) (iii), the Optionee may elect to have the actual number of shares
issuable upon exercise of the Option reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the fair market value of the
Common Stock as of the date the Option is exercised, is sufficient to satisfy
the amount of the withholding tax obligations imposed on the Company by reason
of the exercise thereof (the "Withholding Election"). The Optionee may take a
Withholding Election only if all of the following conditions are met:
(i) the Withholding Election must be made by electing the
Withholding Election in the written notice of exercise; and by
executing and delivering to the Company a properly completed
Notice of Withholding Election; and
(ii) any Withholding Election made will be irrevocable;
however, the Company may, in its sole discretion, disapprove
and not give effect to any Withholding Election.
1.3 EXERCISE PRICE. The exercise price for each share of Common Stock
shall be $4.00 (the "Exercise Price").
1.4 "TERM AND TERMINATION OF OPTION. Except as otherwise provided
herein, the term of the Option ("Option Period") shall commence on the Grant
Date and terminate on June 25, 2006. Subject to paragraph 1.6 below, this Option
shall become exercisable as to one-fourth (1/4) of the total number of Option
Shares at such time as the Fair Market Value (as defined below) of the Common
Stock of the Company Is equal to or greater than Five Dollars ($5.00) per share,
for twenty (20) consecutive trading days. This Option shall become exercisable
as to an additional one-fourth (1/4) of the total number of Option Shares at
such time as the Fair Market Value of the Common Stock of the Company is equal
or greater than
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<PAGE> 3
Seven and 50/100 Dollars ($7.50) per share, for twenty (20) consecutive trading
days. This Option shall become exercisable as to an additional one-fourth (1/4)
of the total number of Option Shares at such time as the Fair Market Value of
the Common Stock of the Company is equal or greater than Ten and No/100 Dollars
($10.00) per share, for twenty (20) consecutive trading days. This Option shall
become exercisable as to the remaining one-fourth (1/4) of the total number of
Option Shares at such time as the Fair Market Value of the Common Stock of the
Company is equal to or greater than Twelve and 50/100 Dollars ($12.50) per
share, for twenty (20) consecutive trading days. Once the right to purchase
shares has accrued, such shares may thereafter be purchased at any time, or in
part from time to time, until the termination date of this Option, subject to
the provisions of Paragraph 1.6 below. In no case may this Option be exercised
for a fraction of a share."
Upon the expiration of the Option Period as set forth above, this
Option, and all unexercised rights granted to the Optionee hereunder shall
terminate, and thereafter be null and void.
1.5 RIGHTS AS STOCKHOLDER. Optionee, or, if applicable, any Transferee
(as defined in Section 3.13 (d)) shall have no rights as a stockholder with
respect to any shares covered by the Option until a stock certificate for the
shares is issued in Optionee's or Transferee's name. No adjustment to the Option
shall be made pursuant to Section 3.1 hereof for dividends paid or declared on
or with respect to Common Stock in cash, securities other than Common Stock, or
other property, for which the record date is prior to the date of exercise
hereof.
"1.6 EARLY TERMINATION OF OPTION. The Option Period shall terminate on
the date of the first to occur of the following:
(a) June 25, 2006:
(b) June 25, 2002, in the event all Option Shares have not vested;
(c) the date immediately preceding the consummation of: (i) dissolution
or liquidation of the Company; (ii) merger of the Company into another
corporation, or any consolidation, share exchange, combination, reorganization,
or like transaction in which the Company is not the survivor; or (iii) sale or
transfer (other than as security of the Company's obligations) of at least a
majority of the assets of the Company. The Company will use its best efforts to
provide written notice to Optionee of such dissolution, liquidation, merger,
consolidation, acquisition, separation, reorganization, sale, transfer, or like
transaction, at least (30) days prior to the closing of such transaction to
permit Optionee to exercise the Option."
Page 3
<PAGE> 4
ARTICLE 2
RESTRICTION ON OPTION AND OPTION SHARES
2.1 RESTRICTIONS ON TRANSFER OF OPTION. The Option evidenced hereby is
non transferable other than by will or the laws of descent and distribution, and
shall be exercisable during the lifetime of Optionee only by Optionee (or, in
the event of Optionee's death or Disability, by a permitted Transferee).
2.2 RESTRICTIONS ON TRANSFER OF OPTION SHARES. Any Option Share
acquired upon exercise of the Option shall be subject to the following
restrictions:
(a) Except for transfers made in compliance with Section 2.2(b) below,
or as otherwise required or permitted hereunder, none of the Option
Shares may be conveyed, pledged, assigned, transferred, hypothecated,
encumbered, or otherwise disposed of by the Optionee, or in the case of
exercise of an Option by a Transferee, by such Transferee. The
foregoing notwithstanding, the Company may, but shall not be obligated
to, approve the transfer of such Option Shares upon the condition that
the transferee thereof execute and deliver to the Company such
documents and agreements as the Company shall reasonably require to
evidence the fact that the Option Shares to be owned, either directly
or beneficially, by such transferee shall continue to be subject to all
the restrictions set forth elsewhere herein, and that such transferee
is subject to and bound by such restrictions and provisions. Any Option
Shares transferred by bequest or by operation of the laws of descent
and distribution shall remain subject to the restrictions set forth in
this Section 2.2 and all applicable rights in favor of the Company set
forth elsewhere herein in the hands of any transferee thereof. Nothing
contained herein, however, shall be deemed to impose any requirement
that any transferee be an officer, director, or employee of, or
consultant to, the Company.
(b) The Option Shares may be transferred by the Optionee to a
Transferee upon the death or Disability of the Optionee, provided that
all such Option Shares shall remain subject to the restrictions set
forth in this Section 2.2 and all applicable rights in favor of the
Company set forth elsewhere herein in the hands the Transferee and of
any subsequent transferee of the Transferee.
Page 4
<PAGE> 5
ARTICLE 3
GENERAL PROVISIONS
3.1 CHANGE IN CAPITALIZATION. If the number of outstanding shares of
the Common Stock shall be increased or decreased by a change in par value,
split-up, stock split, reverse stock split, reclassification, distribution of
common stock dividend, or other similar capital adjustment, an appropriate
adjustment shall be made by the Board of Directors in the number and kind of
shares as to which the Option, or the portion thereof then unexercised, shall be
or become exercisable, such that Optionee's proportionate interest shall be
maintained as before the occurrence of the event. The adjustment shall be made
without change in the total price applicable to the unexercised portion of the
Option and with a corresponding adjustment in the Exercise Price. No fractional
shares shall be issued or made subject to the Option in making such adjustment.
All adjustments made by the Board of Directors under this Section shall be
final, binding, and conclusive.
3.2 LEGENDS. Each certificate representing the Option Shares purchased
upon exercise of the Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IF RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR
SIMILAR STATE SECURITIES LAWS APPLICABLE TO SUCH SECURITIES
(COLLECTIVELY THE "ACTS") AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER
SUCH ACTS COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE SECURITIES ACT, OR
SIMILAR STATE SECURITIES LAW, OR (3) THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACTS.
Optionee agrees that the Company may also include any other legends
required by applicable federal or state securities laws.
3.3 GOVERNING LAWS. This Agreement shall be construed, administered and
enforced according to the laws of the State of Delaware.
Page 5
<PAGE> 6
3.4 SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
3.5 NOTICE. Except as otherwise specified herein, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
3.6 SEVERABILITY. In the event that any one or more of the provisions
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
3.7 ENTIRE AGREEMENT. This Agreement expresses the entire understanding
and Agreement of the parties with respect to the subject matter hereof. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
instrument.
3.8 VIOLATION. Any transfer, pledge, sale, assignment, or hypothecation
of the Option or any portion thereof made in violation of the terms of this
Agreement shall be void and without effect.
3.9 HEADINGS. Paragraph headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
3.10 SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
3.11 NO EMPLOYMENT RIGHTS CREATED. The grant of the Option hereunder
shall not be construed as giving Optionee the right to continued employment with
the Company.
Page 6
<PAGE> 7
3.12 SPECIAL LIMITATION ON EXERCISE. Notwithstanding anything contained
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Company, which approval may be withheld if
the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Company, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Company shall avail itself of any exemptions from registration
contained in applicable federal and state securities laws which are reasonably
available to the Company on terms which, in its sole and absolute discretion, it
deems reasonable and not unduly burdensome or costly. If the Option cannot be
exercised at the time it would otherwise expire due to the restrictions
contained in this Section 3.12, the exercise period may, upon request of
Optionee, be extended for successive one-year periods until it can be exercised
in accordance with this Section 3.12. Optionee shall deliver to the Company,
prior to the exercise of the Option, such information, representations, and
warranties as the Company may reasonably request in order for the Company to be
able to satisfy itself that the Option Shares to be acquired pursuant to the
exercise of the Option are being acquired in accordance with the terms of an
applicable exemption from the securities registration requirements of applicable
federal and state securities laws.
3.13 CERTAIN DEFINITIONS. The capitalized terms listed below are used
herein with the meaning thereafter ascribed:
(a) "Cause" means conduct amounting to (1) fraud or dishonesty against
the Company, (2) repeated intoxication with alcohol or drugs while on
the Company's premises or otherwise in a manner which materially
interferes with Optionee's performance of duties of employment, or (3)
a conviction or plea of guilty or nolo contendere to a felony or a
crime involving dishonesty.
(b) "Disability" means (1) the inability of Optionee to perform the
duties of Optionee's employment with the Company due to physical or
emotional incapacity or illness, where such inability is expected to be
of long-continued and indefinite duration or (2) Optionee shall be
entitled to (i) disability retirement benefits under the federal Social
Security Act or (ii) recover benefits under any long-term disability
plan or policy maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Board of Directors
and shall be supported by advice of a physician competent in the area
to which such Disability relates.
(c) "Fair Market Value" means of the applicable prices selected from
the following
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<PAGE> 8
alternatives for the date as of which Fair Market Value is to be
determined as quoted in the Wall Street Journal (or in such other
reliable publication as the committee, in it's discretion, may
determine to rely upon): (i) if the common stock is listed on the New
York Stock Exchange, the highest and lowest sales prices per share of
the Common Stock as quoted in the NYSE - Composite transactions listing
for such date, (ii) if the common Stock is not listed on such exchange,
the highest and lowest sales prices per share of Common stock for such
date on (or on any composite index including) the principal United
States Securities Exchange registered under the 1934 Act on which the
Common Stock is listed, or (iii) if the Common Stock is not listed on
any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the National Associates of Securities
Dealers Automated Quotations Systems or any successor system then in
use ("NASDAQ"). If there are no such sales price quotations for the
date as of which Fair Market Value is to be determined but there are
such sales price quotations within a reasonable period both before and
after such date, then Fair Market Value shall be determined by taking a
weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date
before, and the nearest date after, the date as of which Fair Market
Value is to be determined. The average should be weighted inversely by
the respective numbers of trading days between the selling dates and
the date as of which Fair Market Value is to be determined. If there
are no such sales price quotations on, or within a reasonable period
both before and after, the date as of which Fair Market Value is to be
determined, then Fair Market Value of the Common Stock shall be the
mean between the bonafide bid and asked prices per share of Common
Stock as so quoted for such date on NASDAQ, or if none, the weighted
average of the means between such bonafide bid and asked prices on the
nearest trading date before, and the nearest trading date after, the
date as of which Fair Market Value is to be determined, if both such
dates are within a reasonable period. If the Fair Market Value of the
Common Stock cannot be determined on the basis set forth in this
definition for the date as of which Fair Market Value is to be
determined, the Committee shall in good faith determine the Fair Market
Value of the Common Stock on such date. Fair Market Value shall be
determined without regard to any restriction, other than a restriction
which, by its terms, will never lapse."
(d) "Transferee" means the estate, or the executor or administrator of
the estate, of a deceased Optionee, or the personal representative of
an Optionee suffering a Disability.
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<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
ATTEST: FLORAFAX INTERNATIONAL, INC.
by:
- ----------------------------------- ----------------------------
Kelly S. McMakin, Treasurer James H. West, President
ACCEPTED:
- -----------------------------------
Andrew W. Williams
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<PAGE> 1
Exhibit 10(d)
NON-QUALIFIED STOCK OPTION AGREEMENT - CERTIFICATE 3
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Agreement") is made and
entered into effective as of the 25th day of June, 1997, by and between FLORAFAX
INTERNATIONAL, INC., a Delaware corporation (the "Company") and James H. West
(the "Optionee").
BACKGROUND
A. The Company has determined to reward and to provide incentives to those who
are primarily responsible for the operations of the Company and for shaping and
carrying out the long-range plans of the Company and aiding in its continued
growth and financial success.
B. In furtherance of these purposes, the Board of Directors of the Company has
authorized the grant to Optionee of a stock option to purchase certain shares of
the common stock, par value $.01 per share, of the Company ("Common Stock") by
resolution dated June 25, 1997.
C. The Company and Optionee wish to confirm the terms, conditions, and
restrictions of this option.
For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 GRANT OF OPTION. Subject to the terms, restrictions, limitations,
and conditions stated herein, the Company hereby grants to Optionee an option
(the "Option") to purchase 75,000 shares of Common Stock (the "Option Shares").
The date first written above shall be the date on which the Option has been
granted (the "Grant Date").
1.2 EXERCISE OF THE OPTION (a) The Option may be exercised with respect
to all or any portion of the Option Shares at any time during the Option Period
(as defined below) by the delivery to the Company, at its principal place of
business, of (i) a written notice of exercise which shall be delivered to the
Company no earlier than thirty (30) days and no later than ten (10) days prior
to the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the Company in
the amount of the Exercise Price (as defined below) multiplied by the number of
Option Shares being purchased (the "Purchase Price") OR by delivery of a number
of shares of Common Stock, which have been held by Optionee for at least six
months, having a fair market value, as of the date the Option is exercised, at
least equal to the Purchase Price OR by a certified check payable to the Company
in an amount less than the Exercise Price and by delivery of a number of shares
of Common Stock, which have been held by Optionee for at least six months,
having a fair market value, as
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<PAGE> 2
of the date the Option is exercised, at least equal to the balance of the
Purchase Price; and (iii) except as permitted in Paragraph 1.2(b) below, a
certified check payable to the Company in the amount of all withholding tax
obligations (whether federal state or local), imposed on the Company by reason
of the exercise of the Option, or the Withholding Election described in Section
1.2(b). Upon acceptance of such notice, receipt of payment in full, the Company
shall cause a certificate representing the shares of Common Stock as to which
the Option has been exercised to be issued and delivered to the Optionee.
(b) In lieu of paying the withholding tax obligation in cash, as described in
Section 1.2(a) (iii), the Optionee may elect to have the actual number of shares
issuable upon exercise of the Option reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the fair market value of the
Common Stock as of the date the Option is exercised, is sufficient to satisfy
the amount of the withholding tax obligations imposed on the Company by reason
of the exercise thereof (the "Withholding Election"). The Optionee may take a
Withholding Election only if all of the following conditions are met:
(i) the Withholding Election must be made by electing the
Withholding Election in the written notice of exercise; and by
executing and delivering to the Company a properly completed
Notice of Withholding Election; and
(ii) any Withholding Election made will be irrevocable;
however, the Company may, in its sole discretion, disapprove
and not give effect to any Withholding Election.
1.3 EXERCISE PRICE. The exercise price for each share of Common Stock
shall be $4.00 (the "Exercise Price").
1.4 "TERM AND TERMINATION OF OPTION. Except as otherwise provided
herein, the term of the Option ("Option Period") shall commence on the Grant
Date and terminate on June 25, 2006. Subject to paragraph 1.6 below, this Option
shall become exercisable as to one-fourth (1/4) of the total number of Option
Shares at such time as the Fair Market Value (as defined below) of the Common
Stock of the Company Is equal to or greater than Five Dollars ($5.00) per share,
for twenty (20) consecutive trading days. This Option shall become exercisable
as to an additional one-fourth (1/4) of the total number of Option Shares at
such time as the Fair Market Value of the Common Stock of the Company is equal
or greater than
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<PAGE> 3
Seven and 50/100 Dollars ($7.50) per share, for twenty (20) consecutive trading
days. This Option shall become exercisable as to an additional one-fourth (1/4)
of the total number of Option Shares at such time as the Fair Market Value of
the Common Stock of the Company is equal or greater than Ten and No/100 Dollars
($10.00) per share, for twenty (20) consecutive trading days. This Option shall
become exercisable as to the remaining one-fourth (1/4) of the total number of
Option Shares at such time as the Fair Market Value of the Common Stock of the
Company is equal to or greater than Twelve and 50/100 Dollars ($12.50) per
share, for twenty (20) consecutive trading days. Once the right to purchase
shares has accrued, such shares may thereafter be purchased at any time, or in
part from time to time, until the termination date of this Option, subject to
the provisions of Paragraph 1.6 below. In no case may this Option be exercised
for a fraction of a share."
Upon the expiration of the Option Period as set forth above, this
Option, and all unexercised rights granted to the Optionee hereunder shall
terminate, and thereafter be null and void.
1.5 RIGHTS AS STOCKHOLDER. Optionee, or, if applicable, any Transferee
(as defined in Section 3.13 (d)) shall have no rights as a stockholder with
respect to any shares covered by the Option until a stock certificate for the
shares is issued in Optionee's or Transferee's name. No adjustment to the Option
shall be made pursuant to Section 3.1 hereof for dividends paid or declared on
or with respect to Common Stock in cash, securities other than Common Stock, or
other property, for which the record date is prior to the date of exercise
hereof.
"1.6 EARLY TERMINATION OF OPTION. The Option Period shall terminate on
the date of the first to occur of the following:
(a) June 25, 2006:
(b) June 25, 2002, in the event all Option Shares have not vested;
(c) the date immediately preceding the consummation of: (i) dissolution
or liquidation of the Company; (ii) merger of the Company into another
corporation, or any consolidation, share exchange, combination, reorganization,
or like transaction in which the Company is not the survivor; or (iii) sale or
transfer (other than as security of the Company's obligations) of at least a
majority of the assets of the Company. The Company will use its best efforts to
provide written notice to Optionee of such dissolution, liquidation, merger,
consolidation, acquisition, separation, reorganization, sale, transfer, or like
transaction, at least (30) days prior to the closing of such transaction to
permit Optionee to exercise the Option."
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<PAGE> 4
ARTICLE 2
RESTRICTION ON OPTION AND OPTION SHARES
2.1 RESTRICTIONS ON TRANSFER OF OPTION. The Option evidenced hereby is
non transferable other than by will or the laws of descent and distribution, and
shall be exercisable during the lifetime of Optionee only by Optionee (or, in
the event of Optionee's death or Disability, by a permitted Transferee).
2.2 RESTRICTIONS ON TRANSFER OF OPTION SHARES. Any Option Share
acquired upon exercise of the Option shall be subject to the following
restrictions:
(a) Except for transfers made in compliance with Section 2.2(b) below,
or as otherwise required or permitted hereunder, none of the Option
Shares may be conveyed, pledged, assigned, transferred, hypothecated,
encumbered, or otherwise disposed of by the Optionee, or in the case of
exercise of an Option by a Transferee, by such Transferee. The
foregoing notwithstanding, the Company may, but shall not be obligated
to, approve the transfer of such Option Shares upon the condition that
the transferee thereof execute and deliver to the Company such
documents and agreements as the Company shall reasonably require to
evidence the fact that the Option Shares to be owned, either directly
or beneficially, by such transferee shall continue to be subject to all
the restrictions set forth elsewhere herein, and that such transferee
is subject to and bound by such restrictions and provisions. Any Option
Shares transferred by bequest or by operation of the laws of descent
and distribution shall remain subject to the restrictions set forth in
this Section 2.2 and all applicable rights in favor of the Company set
forth elsewhere herein in the hands of any transferee thereof. Nothing
contained herein, however, shall be deemed to impose any requirement
that any transferee be an officer, director, or employee of, or
consultant to, the Company.
(b) The Option Shares may be transferred by the Optionee to a
Transferee upon the death or Disability of the Optionee, provided that
all such Option Shares shall remain subject to the restrictions set
forth in this Section 2.2 and all applicable rights in favor of the
Company set forth elsewhere herein in the hands the Transferee and of
any subsequent transferee of the Transferee.
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<PAGE> 5
ARTICLE 3
GENERAL PROVISIONS
3.1 CHANGE IN CAPITALIZATION. If the number of outstanding shares of
the Common Stock shall be increased or decreased by a change in par value,
split-up, stock split, reverse stock split, reclassification, distribution of
common stock dividend, or other similar capital adjustment, an appropriate
adjustment shall be made by the Board of Directors in the number and kind of
shares as to which the Option, or the portion thereof then unexercised, shall be
or become exercisable, such that Optionee's proportionate interest shall be
maintained as before the occurrence of the event. The adjustment shall be made
without change in the total price applicable to the unexercised portion of the
Option and with a corresponding adjustment in the Exercise Price. No fractional
shares shall be issued or made subject to the Option in making such adjustment.
All adjustments made by the Board of Directors under this Section shall be
final, binding, and conclusive.
3.2 LEGENDS. Each certificate representing the Option Shares purchased
upon exercise of the Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IF RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR
SIMILAR STATE SECURITIES LAWS APPLICABLE TO SUCH SECURITIES
(COLLECTIVELY THE "ACTS") AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER
SUCH ACTS COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE SECURITIES ACT, OR
SIMILAR STATE SECURITIES LAW, OR (3) THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACTS.
Optionee agrees that the Company may also include any other legends
required by applicable federal or state securities laws.
3.3 GOVERNING LAWS. This Agreement shall be construed, administered and
enforced according to the laws of the State of Delaware.
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<PAGE> 6
3.4 SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
3.5 NOTICE. Except as otherwise specified herein, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
3.6 SEVERABILITY. In the event that any one or more of the provisions
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
3.7 ENTIRE AGREEMENT. This Agreement expresses the entire understanding
and Agreement of the parties with respect to the subject matter hereof. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
instrument.
3.8 VIOLATION. Any transfer, pledge, sale, assignment, or hypothecation
of the Option or any portion thereof made in violation of the terms of this
Agreement shall be void and without effect.
3.9 HEADINGS. Paragraph headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
3.10 SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
3.11 NO EMPLOYMENT RIGHTS CREATED. The grant of the Option hereunder
shall not be construed as giving Optionee the right to continued employment with
the Company.
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<PAGE> 7
3.12 SPECIAL LIMITATION ON EXERCISE. Notwithstanding anything contained
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Company, which approval may be withheld if
the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Company, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Company shall avail itself of any exemptions from registration
contained in applicable federal and state securities laws which are reasonably
available to the Company on terms which, in its sole and absolute discretion, it
deems reasonable and not unduly burdensome or costly. If the Option cannot be
exercised at the time it would otherwise expire due to the restrictions
contained in this Section 3.12, the exercise period may, upon request of
Optionee, be extended for successive one-year periods until it can be exercised
in accordance with this Section 3.12. Optionee shall deliver to the Company,
prior to the exercise of the Option, such information, representations, and
warranties as the Company may reasonably request in order for the Company to be
able to satisfy itself that the Option Shares to be acquired pursuant to the
exercise of the Option are being acquired in accordance with the terms of an
applicable exemption from the securities registration requirements of applicable
federal and state securities laws.
3.13 CERTAIN DEFINITIONS. The capitalized terms listed below are used
herein with the meaning thereafter ascribed:
(a) "Cause" means conduct amounting to (1) fraud or dishonesty against
the Company, (2) repeated intoxication with alcohol or drugs while on
the Company's premises or otherwise in a manner which materially
interferes with Optionee's performance of duties of employment, or (3)
a conviction or plea of guilty or nolo contendere to a felony or a
crime involving dishonesty.
(b) "Disability" means (1) the inability of Optionee to perform the
duties of Optionee's employment with the Company due to physical or
emotional incapacity or illness, where such inability is expected to be
of long-continued and indefinite duration or (2) Optionee shall be
entitled to (i) disability retirement benefits under the federal Social
Security Act or (ii) recover benefits under any long-term disability
plan or policy maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Board of Directors
and shall be supported by advice of a physician competent in the area
to which such Disability relates.
(c) "Fair Market Value" means of the applicable prices selected from
the following
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<PAGE> 8
alternatives for the date as of which Fair Market Value is to be
determined as quoted in the Wall Street Journal (or in such other
reliable publication as the committee, in it's discretion, may
determine to rely upon): (i) if the common stock is listed on the New
York Stock Exchange, the highest and lowest sales prices per share of
the Common Stock as quoted in the NYSE - Composite transactions listing
for such date, (ii) if the common Stock is not listed on such exchange,
the highest and lowest sales prices per share of Common stock for such
date on (or on any composite index including) the principal United
States Securities Exchange registered under the 1934 Act on which the
Common Stock is listed, or (iii) if the Common Stock is not listed on
any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the National Associates of Securities
Dealers Automated Quotations Systems or any successor system then in
use ("NASDAQ"). If there are no such sales price quotations for the
date as of which Fair Market Value is to be determined but there are
such sales price quotations within a reasonable period both before and
after such date, then Fair Market Value shall be determined by taking a
weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date
before, and the nearest date after, the date as of which Fair Market
Value is to be determined. The average should be weighted inversely by
the respective numbers of trading days between the selling dates and
the date as of which Fair Market Value is to be determined. If there
are no such sales price quotations on, or within a reasonable period
both before and after, the date as of which Fair Market Value is to be
determined, then Fair Market Value of the Common Stock shall be the
mean between the bonafide bid and asked prices per share of Common
Stock as so quoted for such date on NASDAQ, or if none, the weighted
average of the means between such bonafide bid and asked prices on the
nearest trading date before, and the nearest trading date after, the
date as of which Fair Market Value is to be determined, if both such
dates are within a reasonable period. If the Fair Market Value of the
Common Stock cannot be determined on the basis set forth in this
definition for the date as of which Fair Market Value is to be
determined, the Committee shall in good faith determine the Fair Market
Value of the Common Stock on such date. Fair Market Value shall be
determined without regard to any restriction, other than a restriction
which, by its terms, will never lapse."
(d) "Transferee" means the estate, or the executor or administrator of
the estate, of a deceased Optionee, or the personal representative of
an Optionee suffering a Disability.
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<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
ATTEST: FLORAFAX INTERNATIONAL, INC.
by:
- -------------------------------- --------------------------------
Kelly S. McMakin, Treasurer Andrew W. Williams, Chairman
ACCEPTED:
- --------------------------------
James H. West
Page 9
<PAGE> 1
Exhibit 10(e)
NON-QUALIFIED STOCK OPTION AGREEMENT - CERTIFICATE 5
THIS NON-QUALIFIED STOCK OPTION AGREEMENT ("Agreement") is made and
entered into effective as of the 25th day of June, 1997, by and between FLORAFAX
INTERNATIONAL, INC., a Delaware corporation (the "Company") and Kelly S. McMakin
(the "Optionee").
BACKGROUND
A. The Company has determined to reward and to provide incentives to those who
are primarily responsible for the operations of the Company and for shaping and
carrying out the long-range plans of the Company and aiding in its continued
growth and financial success.
B. In furtherance of these purposes, the Board of Directors of the Company has
authorized the grant to Optionee of a stock option to purchase certain shares of
the common stock, par value $.01 per share, of the Company ("Common Stock") by
resolution dated June 25, 1997.
C. The Company and Optionee wish to confirm the terms, conditions, and
restrictions of this option.
For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 GRANT OF OPTION. Subject to the terms, restrictions, limitations,
and conditions stated herein, the Company hereby grants to Optionee an option
(the "Option") to purchase 30,000 shares of Common Stock (the "Option Shares").
The date first written above shall be the date on which the Option has been
granted (the "Grant Date").
1.2 EXERCISE OF THE OPTION (a) The Option may be exercised with respect
to all or any portion of the Option Shares at any time during the Option Period
(as defined below) by the delivery to the Company, at its principal place of
business, of (i) a written notice of exercise which shall be delivered to the
Company no earlier than thirty (30) days and no later than ten (10) days prior
to the date upon which Optionee desires to exercise all or any portion of the
Option (the "Exercise Date"); (ii) a certified check payable to the Company in
the amount of the Exercise Price (as defined below) multiplied by the number of
Option Shares being purchased (the "Purchase Price") OR by delivery of a number
of shares of Common Stock, which have been held by Optionee for at least six
months, having a fair market value, as of the date the Option is exercised, at
least equal to the Purchase Price OR by a certified check payable to the Company
in an amount less than the Exercise Price and by delivery of a number of shares
of Common Stock, which have been held by Optionee for at least six months,
having a fair market value, as
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of the date the Option is exercised, at least equal to the balance of the
Purchase Price; and (iii) except as permitted in Paragraph 1.2(b) below, a
certified check payable to the Company in the amount of all withholding tax
obligations (whether federal state or local), imposed on the Company by reason
of the exercise of the Option, or the Withholding Election described in Section
1.2(b). Upon acceptance of such notice, receipt of payment in full, the Company
shall cause a certificate representing the shares of Common Stock as to which
the Option has been exercised to be issued and delivered to the Optionee.
(b) In lieu of paying the withholding tax obligation in cash, as described in
Section 1.2(a) (iii), the Optionee may elect to have the actual number of shares
issuable upon exercise of the Option reduced by the smallest number of whole
shares of Common Stock which, when multiplied by the fair market value of the
Common Stock as of the date the Option is exercised, is sufficient to satisfy
the amount of the withholding tax obligations imposed on the Company by reason
of the exercise thereof (the "Withholding Election"). The Optionee may take a
Withholding Election only if all of the following conditions are met:
(i) the Withholding Election must be made by electing the
Withholding Election in the written notice of exercise; and by
executing and delivering to the Company a properly completed
Notice of Withholding Election; and
(ii) any Withholding Election made will be irrevocable;
however, the Company may, in its sole discretion, disapprove
and not give effect to any Withholding Election.
1.3 EXERCISE PRICE. The exercise price for each share of Common Stock
shall be $4.00 (the "Exercise Price").
1.4 "TERM AND TERMINATION OF OPTION. Except as otherwise provided
herein, the term of the Option ("Option Period") shall commence on the Grant
Date and terminate on June 25, 2006. Subject to paragraph 1.6 below, this Option
shall become exercisable as to one-fourth (1/4) of the total number of Option
Shares at such time as the Fair Market Value (as defined below) of the Common
Stock of the Company Is equal to or greater than Five Dollars ($5.00) per share,
for twenty (20) consecutive trading days. This Option shall become exercisable
as to an additional one-fourth (1/4) of the total number of Option Shares at
such time as the Fair Market Value of the Common Stock of the Company is equal
or greater than
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<PAGE> 3
Seven and 50/100 Dollars ($7.50) per share, for twenty (20) consecutive trading
days. This Option shall become exercisable as to an additional one-fourth (1/4)
of the total number of Option Shares at such time as the Fair Market Value of
the Common Stock of the Company is equal or greater than Ten and No/100 Dollars
($10.00) per share, for twenty (20) consecutive trading days. This Option shall
become exercisable as to the remaining one-fourth (1/4) of the total number of
Option Shares at such time as the Fair Market Value of the Common Stock of the
Company is equal to or greater than Twelve and 50/100 Dollars ($12.50) per
share, for twenty (20) consecutive trading days. Once the right to purchase
shares has accrued, such shares may thereafter be purchased at any time, or in
part from time to time, until the termination date of this Option, subject to
the provisions of Paragraph 1.6 below. In no case may this Option be exercised
for a fraction of a share."
Upon the expiration of the Option Period as set forth above, this
Option, and all unexercised rights granted to the Optionee hereunder shall
terminate, and thereafter be null and void.
1.5 RIGHTS AS STOCKHOLDER. Optionee, or, if applicable, any Transferee
(as defined in Section 3.13 (d)) shall have no rights as a stockholder with
respect to any shares covered by the Option until a stock certificate for the
shares is issued in Optionee's or Transferee's name. No adjustment to the Option
shall be made pursuant to Section 3.1 hereof for dividends paid or declared on
or with respect to Common Stock in cash, securities other than Common Stock, or
other property, for which the record date is prior to the date of exercise
hereof.
"1.6 EARLY TERMINATION OF OPTION. The Option Period shall terminate on
the date of the first to occur of the following:
(a) June 25, 2006:
(b) June 25, 2002, in the event all Option Shares have not vested;
(c) the date immediately preceding the consummation of: (i) dissolution
or liquidation of the Company; (ii) merger of the Company into another
corporation, or any consolidation, share exchange, combination, reorganization,
or like transaction in which the Company is not the survivor; or (iii) sale or
transfer (other than as security of the Company's obligations) of at least a
majority of the assets of the Company. The Company will use its best efforts to
provide written notice to Optionee of such dissolution, liquidation, merger,
consolidation, acquisition, separation, reorganization, sale, transfer, or like
transaction, at least (30) days prior to the closing of such transaction to
permit Optionee to exercise the Option."
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ARTICLE 2
RESTRICTION ON OPTION AND OPTION SHARES
2.1 RESTRICTIONS ON TRANSFER OF OPTION. The Option evidenced hereby is
non transferable other than by will or the laws of descent and distribution, and
shall be exercisable during the lifetime of Optionee only by Optionee (or, in
the event of Optionee's death or Disability, by a permitted Transferee).
2.2 RESTRICTIONS ON TRANSFER OF OPTION SHARES. Any Option Share
acquired upon exercise of the Option shall be subject to the following
restrictions:
(a) Except for transfers made in compliance with Section 2.2(b) below,
or as otherwise required or permitted hereunder, none of the Option
Shares may be conveyed, pledged, assigned, transferred, hypothecated,
encumbered, or otherwise disposed of by the Optionee, or in the case of
exercise of an Option by a Transferee, by such Transferee. The
foregoing notwithstanding, the Company may, but shall not be obligated
to, approve the transfer of such Option Shares upon the condition that
the transferee thereof execute and deliver to the Company such
documents and agreements as the Company shall reasonably require to
evidence the fact that the Option Shares to be owned, either directly
or beneficially, by such transferee shall continue to be subject to all
the restrictions set forth elsewhere herein, and that such transferee
is subject to and bound by such restrictions and provisions. Any Option
Shares transferred by bequest or by operation of the laws of descent
and distribution shall remain subject to the restrictions set forth in
this Section 2.2 and all applicable rights in favor of the Company set
forth elsewhere herein in the hands of any transferee thereof. Nothing
contained herein, however, shall be deemed to impose any requirement
that any transferee be an officer, director, or employee of, or
consultant to, the Company.
(b) The Option Shares may be transferred by the Optionee to a
Transferee upon the death or Disability of the Optionee, provided that
all such Option Shares shall remain subject to the restrictions set
forth in this Section 2.2 and all applicable rights in favor of the
Company set forth elsewhere herein in the hands the Transferee and of
any subsequent transferee of the Transferee.
Page 4
<PAGE> 5
ARTICLE 3
GENERAL PROVISIONS
3.1 CHANGE IN CAPITALIZATION. If the number of outstanding shares of
the Common Stock shall be increased or decreased by a change in par value,
split-up, stock split, reverse stock split, reclassification, distribution of
common stock dividend, or other similar capital adjustment, an appropriate
adjustment shall be made by the Board of Directors in the number and kind of
shares as to which the Option, or the portion thereof then unexercised, shall be
or become exercisable, such that Optionee's proportionate interest shall be
maintained as before the occurrence of the event. The adjustment shall be made
without change in the total price applicable to the unexercised portion of the
Option and with a corresponding adjustment in the Exercise Price. No fractional
shares shall be issued or made subject to the Option in making such adjustment.
All adjustments made by the Board of Directors under this Section shall be
final, binding, and conclusive.
3.2 LEGENDS. Each certificate representing the Option Shares purchased
upon exercise of the Option shall be endorsed with the following legend and
Optionee shall not make any transfer of the Option shares without first
complying with the restrictions on transfer described in such legend:
TRANSFER IF RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR
SIMILAR STATE SECURITIES LAWS APPLICABLE TO SUCH SECURITIES
(COLLECTIVELY THE "ACTS") AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER
SUCH ACTS COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN
COMPLIANCE WITH RULE 144 PROMULGATED UNDER THE SECURITIES ACT, OR
SIMILAR STATE SECURITIES LAW, OR (3) THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION REQUIREMENTS OF THE ACTS.
Optionee agrees that the Company may also include any other legends
required by applicable federal or state securities laws.
3.3 GOVERNING LAWS. This Agreement shall be construed, administered and
enforced according to the laws of the State of Delaware.
Page 5
<PAGE> 6
3.4 SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the heirs, legal representatives, successors, and permitted assigns
of the parties.
3.5 NOTICE. Except as otherwise specified herein, all notices and other
communications under this Agreement shall be in writing and shall be deemed to
have been given if personally delivered or if sent by registered or certified
United States mail, return receipt requested, postage prepaid, addressed to the
proposed recipient at the last known address of the recipient. Any party may
designate any other address to which notices shall be sent by giving notice of
the address to the other parties in the same manner as provided herein.
3.6 SEVERABILITY. In the event that any one or more of the provisions
or portion thereof contained in this Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect, the same shall not
invalidate or otherwise affect any other provisions of this Agreement, and this
Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
3.7 ENTIRE AGREEMENT. This Agreement expresses the entire understanding
and Agreement of the parties with respect to the subject matter hereof. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
instrument.
3.8 VIOLATION. Any transfer, pledge, sale, assignment, or hypothecation
of the Option or any portion thereof made in violation of the terms of this
Agreement shall be void and without effect.
3.9 HEADINGS. Paragraph headings used herein are for convenience of
reference only and shall not be considered in construing this Agreement.
3.10 SPECIFIC PERFORMANCE. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
3.11 NO EMPLOYMENT RIGHTS CREATED. The grant of the Option hereunder
shall not be construed as giving Optionee the right to continued employment with
the Company.
Page 6
<PAGE> 7
3.12 SPECIAL LIMITATION ON EXERCISE. Notwithstanding anything contained
herein to the contrary, no purported exercise of the Option shall be effective
without the written approval of the Company, which approval may be withheld if
the exercise of this Option, together with the exercise of other previously
exercised stock options and/or offers and sales pursuant to any prior or
contemplated offering of securities, would, in the sole and absolute judgment of
the Company, require the filing of a registration statement with the United
States Securities and Exchange Commission, or with the securities commission of
any state. The Company shall avail itself of any exemptions from registration
contained in applicable federal and state securities laws which are reasonably
available to the Company on terms which, in its sole and absolute discretion, it
deems reasonable and not unduly burdensome or costly. If the Option cannot be
exercised at the time it would otherwise expire due to the restrictions
contained in this Section 3.12, the exercise period may, upon request of
Optionee, be extended for successive one-year periods until it can be exercised
in accordance with this Section 3.12. Optionee shall deliver to the Company,
prior to the exercise of the Option, such information, representations, and
warranties as the Company may reasonably request in order for the Company to be
able to satisfy itself that the Option Shares to be acquired pursuant to the
exercise of the Option are being acquired in accordance with the terms of an
applicable exemption from the securities registration requirements of applicable
federal and state securities laws.
3.13 CERTAIN DEFINITIONS. The capitalized terms listed below are used
herein with the meaning thereafter ascribed:
(a) "Cause" means conduct amounting to (1) fraud or dishonesty against
the Company, (2) repeated intoxication with alcohol or drugs while on
the Company's premises or otherwise in a manner which materially
interferes with Optionee's performance of duties of employment, or (3)
a conviction or plea of guilty or nolo contendere to a felony or a
crime involving dishonesty.
(b) "Disability" means (1) the inability of Optionee to perform the
duties of Optionee's employment with the Company due to physical or
emotional incapacity or illness, where such inability is expected to be
of long-continued and indefinite duration or (2) Optionee shall be
entitled to (i) disability retirement benefits under the federal Social
Security Act or (ii) recover benefits under any long-term disability
plan or policy maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Board of Directors
and shall be supported by advice of a physician competent in the area
to which such Disability relates.
(c) "Fair Market Value" means of the applicable prices selected from
the following
Page 7
<PAGE> 8
alternatives for the date as of which Fair Market Value is to be
determined as quoted in the Wall Street Journal (or in such other
reliable publication as the committee, in it's discretion, may
determine to rely upon): (i) if the common stock is listed on the New
York Stock Exchange, the highest and lowest sales prices per share of
the Common Stock as quoted in the NYSE - Composite transactions listing
for such date, (ii) if the common Stock is not listed on such exchange,
the highest and lowest sales prices per share of Common stock for such
date on (or on any composite index including) the principal United
States Securities Exchange registered under the 1934 Act on which the
Common Stock is listed, or (iii) if the Common Stock is not listed on
any such exchange, the highest and lowest sales prices per share of the
Common Stock for such date on the National Associates of Securities
Dealers Automated Quotations Systems or any successor system then in
use ("NASDAQ"). If there are no such sales price quotations for the
date as of which Fair Market Value is to be determined but there are
such sales price quotations within a reasonable period both before and
after such date, then Fair Market Value shall be determined by taking a
weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date
before, and the nearest date after, the date as of which Fair Market
Value is to be determined. The average should be weighted inversely by
the respective numbers of trading days between the selling dates and
the date as of which Fair Market Value is to be determined. If there
are no such sales price quotations on, or within a reasonable period
both before and after, the date as of which Fair Market Value is to be
determined, then Fair Market Value of the Common Stock shall be the
mean between the bonafide bid and asked prices per share of Common
Stock as so quoted for such date on NASDAQ, or if none, the weighted
average of the means between such bonafide bid and asked prices on the
nearest trading date before, and the nearest trading date after, the
date as of which Fair Market Value is to be determined, if both such
dates are within a reasonable period. If the Fair Market Value of the
Common Stock cannot be determined on the basis set forth in this
definition for the date as of which Fair Market Value is to be
determined, the Committee shall in good faith determine the Fair Market
Value of the Common Stock on such date. Fair Market Value shall be
determined without regard to any restriction, other than a restriction
which, by its terms, will never lapse."
(d) "Transferee" means the estate, or the executor or administrator of
the estate, of a deceased Optionee, or the personal representative of
an Optionee suffering a Disability.
Page 8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first set forth above.
ATTEST: FLORAFAX INTERNATIONAL, INC.
by:
- ----------------------------------- --------------------------
James J. Pagano, Marketing Director James H. West, President
ACCEPTED:
- --------------------------
Kelly S. McMakin
Page 9
<PAGE> 1
EXHIBIT 11: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
1997 1996 1995
------ ------ ------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Primary
Average shares outstanding 8,076 5,988 5,701
Net effect of dilutive stock options and
warrants based on the treasury stock
method using average market price 561 291 76
Total 8,637 6,279 5,777
Net income $3,433 $2,262 $ 707
Per share amount $ 0.40 $ 0.36 $ 0.12
Fully diluted
Average shares outstanding 8,076 5,988 5,701
Net effect of dilutive stock options and
warrants-based on the treasury stock
method using the year-end market price 639 387 171
Total 8,715 6,375 5,872
Per share amount $ 0.39 $ 0.35 $ 0.12
</TABLE>
-43-
<PAGE> 1
EXHIBIT 23
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in the Registration Statements
(Form S-3 No. 333-10067), (Form S-8 No. 333-07271) and (Form S-8 No. 333-07267)
of Florafax International, Inc. and in the related prospectuses of our report
dated October 3, 1997, with respect to the consolidated financial statements of
Florafax International, Inc. included in this Annual Report (Form 10-KSB) for
the year ended August 31, 1997.
/s/ Ernst & Young LLP
Tampa, Florida
November 24, 1997
-44-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 4,267,000
<SECURITIES> 0
<RECEIVABLES> 2,263,000
<ALLOWANCES> 509,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,325,000
<PP&E> 3,656,000
<DEPRECIATION> 2,713,000
<TOTAL-ASSETS> 10,594,000
<CURRENT-LIABILITIES> 5,209,000
<BONDS> 80,000
0
0
<COMMON> 83,000
<OTHER-SE> 5,170,000
<TOTAL-LIABILITY-AND-EQUITY> 10,594,000
<SALES> 0
<TOTAL-REVENUES> 11,609,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,691,000
<LOSS-PROVISION> 170,000
<INTEREST-EXPENSE> 6,000
<INCOME-PRETAX> 2,914,000
<INCOME-TAX> (519,000)
<INCOME-CONTINUING> 3,433,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,433,000
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.39
</TABLE>
