<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended February 28, 1998
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to __________________
Commission File Number:
0-5531
FLORAFAX INTERNATIONAL, INC.
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(Exact name of small business issuer as specified 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)
561-563-0263
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
---- ----
The registrant had 8,350,886 shares of common stock, $0.01 par value, issued at
February 28, 1998.
Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X]
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Consolidated Balance Sheets
February 28, 1998 and August 31, 1997 1 - 2
Consolidated Statements of Income and
Accumulated Deficit
Three and Six Months Ended February 28, 1998
and February 28, 1997 3 - 4
Consolidated Statements of Cash Flows
Six Months Ended February 28, 1998
and February 28, 1997 5 - 6
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
PART II OTHER INFORMATION
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13 - 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14 -17
Signatures 17
</TABLE>
<PAGE> 3
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS)
FEBRUARY 28 AUGUST 31
1998 1997
------------ ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,405 $ 4,170
Restricted cash 99 97
Accounts receivable:
Trade, less allowances of
$512 at February 28, 1998
and $509 at August 31, 1997 2,338 1,317
Charge card issuers 412 343
Other 197 94
------- -------
2,947 1,754
Deferred tax asset 264 264
Prepaid and other assets 294 40
------- -------
TOTAL CURRENT ASSETS 8,009 6,325
Property and equipment, at
cost:
Fixtures and equipment 1,552 1,324
Computer systems 935 798
Communication systems 1,060 1,010
Land, building and leasehold improvements 1,280 524
------- -------
4,827 3,656
Accumulated depreciation
and amortization 2,833 2,713
------- -------
1,994 943
Excess of cost over net
assets of acquired business 1,995 1,995
Deferred tax asset, net of allowance 872 1,236
Other 164 95
------- -------
3,031 3,326
TOTAL ASSETS $13,034 $10,594
======= =======
</TABLE>
See accompanying notes
1
<PAGE> 4
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS)
FEBRUARY 28 AUGUST 31
1998 1997
---------- --------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,675 $ 3,754
Accrued expenses 1,269 1,308
Member benefits 146 147
-------- --------
TOTAL CURRENT LIABILITIES 7,090 5,209
Long term debt, less current maturities 80 80
Membership security deposits 59 52
-------- --------
TOTAL LIABILITIES 7,229 5,341
STOCKHOLDERS' EQUITY
Preferred stock ($10 par value,
600,000 shares authorized at
February 28, 1998 and August 31, 1997,
none issued)
Common stock - ($.01 par value, 70,000,000
shares authorized, 8,350,886 and 8,253,004 shares
issued at February 28, 1998 and August 31, 1997,
respectively 83 83
Additional paid-in capital 10,120 10,108
Treasury stock at cost (1,616) (1,438)
Accumulated deficit (2,782) (3,500)
-------- --------
TOTAL STOCKHOLDERS' EQUITY $ 5,805 $ 5,253
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,034 $ 10,594
======== ========
</TABLE>
See accompanying notes
2
<PAGE> 5
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 28 FEBRUARY 28 FEBRUARY 28
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES:
Member dues and fees $ 723 $ 624 $ 1,352 $ 1,134
Floral and other order
processing 2,323 1,915 3,644 2,923
Directory and advertising fees 464 353 824 656
Charge card processing 483 395 907 792
Other revenue 47 8 80 12
------- ------- ------- -------
4,040 3,295 6,807 5,517
EXPENSES:
General and administrative 1,876 1,669 3,212 2,843
Selling and advertising 1,374 950 2,152 1,561
Directory publishing 140 97 231 187
Depreciation, amortization
and retirements 82 67 151 127
------- ------- ------- -------
3,472 2,783 5,746 4,718
------- ------- ------- -------
OPERATING INCOME 568 512 1,061 799
OTHER INCOME (EXPENSE)
Interest expense (1) (1) (3) (4)
Other 6 915 8 916
Interest income 40 45 76 74
------- ------- ------- -------
45 959 81 986
------- ------- ------- -------
INCOME BEFORE TAXES 613 1,471 1,142 1,785
Income taxes 233 33 424 2
------- ------- ------- -------
NET INCOME $ 380 $ 1,438 $ 718 $ 1,783
</TABLE>
See accompanying notes
3
<PAGE> 6
FLORAFAX INTERNATIONAL ,INC.
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- -------------------------
FEBRUARY 28 FEBRUARY 28 FEBRUARY 28 FEBRUARY 28
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME: $ 380 $ 1,438 $ 718 $ 1,783
Accumulated deficit at
Beginning of period (3,162) (6,588) (3,500) (6,933)
------- ------- ------- -------
ACCUMULATED DEFICIT AT
END OF PERIOD $(2,782) $(5,150) $(2,782) $(5,150)
------- ------- ------- -------
Basic earnings per common share: $.05 $0.17 $.09 $0.22
WEIGHTED AVERAGE
SHARES OUTSTANDING 7,345 8,221 7,677 8,217
Fully diluted earnings per
common share: $.04 $0.16 $.08 $0.20
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,722 8,806 8,714 8,797
</TABLE>
See accompanying notes
4
<PAGE> 7
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
FEBRUARY 28 FEBRUARY 28
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 718 $ 1,783
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation, amortization, and
retirements 120 76
Provision for doubtful accounts 86 99
Deferred income taxes 364 (35)
Increase (decrease) in cash flows due to changes in:
Accounts receivable (1,279) (688)
Prepaid and other assets (254) (92)
Other assets 31 143
Accounts payable 1,921 964
Accrued liabilities (40) 386
Membership security deposits 7 5
------- -------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,674 2,641
INVESTING ACTIVITIES
Capital expenditures (1,171) (427)
Purchase of common stock (100)
(Increase) decrease in restricted cash (2) 22
------- -------
NET CASH (USED IN) INVESTING ACTIVITIES $(1,273) $ (405)
</TABLE>
See accompanying notes
(CONTINUED)
5
<PAGE> 8
FLORAFAX INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------
FEBRUARY 28 FEBRUARY 28
1998 1997
---------- -----------
<S> <C> <C>
FINANCING ACTIVITIES
Purchases of treasury stock (178)
Proceeds from issuing stock 12 11
Payments of debt (333)
------- -------
NET CASH (USED IN)
FINANCING ACTIVITIES (166) (322)
------- -------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 235 1,914
Cash and cash equivalents
at beginning of year 4,170 3,671
------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 4,405 5,585
======= =======
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1
Cash paid during the period for
income tax $ 60 $ 24
======= =======
</TABLE>
See accompanying notes
6
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE (1) MANAGEMENT'S OPINION AND ACCOUNTING POLICIES
The accompanying interim financial statements should be read in conjunction with
the Florafax International, Inc. (the Company's) Form 10-KSB for the year ended
August 31, 1997.
In the opinion of Management the unaudited consolidated financial statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the Company's consolidated financial position as of
February 28, 1998 and the consolidated results of operations and cash flows for
the three and six months ended February 28, 1998.
Historically, the Company's flowers-by-wire operation is seasonal in that its
member florists send a much larger volume of orders during Thanksgiving, the
Christmas season, Valentine's Day, Easter and Mother's Day. Therefore, the
results of operations of an interim period may not necessarily be indicative of
the results expected for a full year. In an effort to increase orders to member
florists, the Company continues to engage in non traditional campaigns through
it's wholly owned subsidiary, The Flower Club (800-800 SEND). The Flower Club
was formed to generate additional orders by pursuing relationships with
nationally recognized corporations. The Company engages in joint marketing
campaigns with these corporations not only during holidays, but also during
non-seasonal periods in an effort to provide member florists with orders during
slow periods of the year.
NOTE (2) CONTINGENCIES
During the quarter ended February 28, 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 in that quarter, which is the primary component of other
income in 1997.
NOTE (3) RECENT PRONOUNCEMENTS
EARNINGS PER SHARE - In February 1997, the FASB issued Statement No. 128,
EARNINGS PER SHARE, which is effective for periods ending after December 15,
1997. As a result, the Company implemented Statement No. 128 during the quarter
ended February 28, 1998. 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. In addition, Statement No. 128
requires restatement of all prior periods. Accordingly, the quarter and six
months ended February 28, 1997 have been restated to conform to Statement No.
128.
7
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION (SFAS 131), which supersedes Financial
Accounting Standards No. 14. SFAS 131 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. SFAS 131 is effective for fiscal years beginning after December 31,
1997. Management is currently assessing the impact of this Standard.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS
130). SFAS 130 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 changes in stockholders' equity
exclusive of transactions with owners such as capital contributions and
dividends. SFAS is effective for fiscal years beginning after December 15, 1997.
Management is currently assessing the impact of this Standard.
NOTE (4) CREDIT FACILITY
During the second quarter of 1998 the Company secured a $5 million revolving
credit facility with First Union National Bank of Florida. The credit facility,
collateralized by all the Company's assets, is for two years at the bank's prime
rate of interest, and will be used primarily to finance the acquisition of
companies that provide a strategic fit with Florafax's business. A $2 million
sublimit is also available for general working capital.
NOTE (5) AMENDMENT TO THE MANAGEMENT INCENTIVE STOCK PLAN
At the annual shareholder meeting held during the second quarter of fiscal 1998
the shareholders voted to approve an amendment to the Management Incentive Stock
Plan (Incentive Plan) to increase the aggregate number of shares that may be
subject to awards under the Incentive Plan from 500,000 shares to 1,000,000
shares of common stock of the Company
8
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company continues to generate significant cash flows. Cash provided by
operating activities was $1,674,000 for the six months ended February 28, 1998
compared to $2,641,000 (which includes proceeds of $1,041,000 from a litigation
settlement) for the six months ended February 28, 1997.
Operating cash flows historically have been generated primarily from processing
floral orders and charge card transactions for the Company's member florists, as
well as collecting dues, fees and directory advertising from the members. Floral
order processing may require settlement with the fulfilling florist before
collection of funds from the sending florist. Charge card processing, however,
generally allows the Company to collect funds from the charge card issuer prior
to settlement with the merchant. Since in both types of transactions the Company
is both collecting and settling funds, the timing of these cash flows has a
significant impact on the Company's liquidity.
As discussed in Note 1 to the consolidated financial statements the Company
continues to engage in non traditional campaigns through it's wholly owned
subsidiary, The Flower Club (800 800 SEND). This has helped to improve the
Company's cash flow as the majority of orders generated through The Flower Club
are paid for by credit cards. This allows the Company to receive a significant
portion of its funds within days after processing the transaction.
During the second quarter of 1998 the Company purchased the land and building
which were previously leased as the Company's corporate headquarters. The
purchase price was $672,500. In addition, the Company purchased a new telephone
switch in the amount of $220,000. As a result of the Company's cash position,
both of these purchases were funded with operating cash flows.
RESULTS OF OPERATIONS
General Comments
Revenues are up in every category for the quarter and six months ended February
28, 1998 when compared to the same periods in the previous year. Total net
revenues were up 23% for both the quarter and six months ended February 28, 1998
when compared to the same periods in the prior year. Operating income increased
by 11% for the quarter and 33% for the six months ended February 28, 1998 when
compared to the same periods in the prior year.
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Revenues
Revenue from member dues and fees has increased for both the quarter and six
months ended February 28, 1998 when compared to the same periods in the prior
year. This increase is primarily attributable to an increase in member florists.
Floral order revenue increased for both the quarter and six months ended
February 28, 1998 when compared to the same periods last year. This is
attributable primarily to an increase in Flower Club revenues as well as an
increase in shop to shop revenues. In addition, the Company is experiencing
positive results from its gift basket program and also the Talking Bouquet, a
product introduced by the Company last year.
Net revenues from credit card operations increased for both the quarter and six
months ended February 28, 1998 when compared to the same periods in the prior
year, which is primarily attributable to an increase in gross dollars processed
by the Company's merchants.
Advertising and directory fees increased for both the quarter and six months
ended February 28, 1998 when compared to the same periods in the prior year.
This is due primarily to the issuance of an additional directory in 1998 when
compared to 1997, and also an increase in advertising by member florists.
Expenses
Member support, general and administrative expenses increased for both the
quarter and six months ended February 28, 1998 when compared to the same periods
in the prior year. The primary components of the increase were labor costs,
telephone expense, consulting fees and investor relation expenses. The labor
costs increased moderately as a result of increased Flower Club order volume and
general wage increases. The increase in telephone related expenses was due to an
increase in order volume and certain expenses related to the new phone equipment
in the Companies order centers. The increased consulting fees and investor
relation expenses are a result of the Companies efforts to utilize the talents
of certain individuals on an "as needed" basis, including a public relations
firm to assist in familiarizing the investment community with the Company.
Selling and advertising expenses increased for both the quarter and six months
ended February 28, 1998 when compared to the same periods in the prior year.
There are two main reasons for the increase. First, the Company has increased
its sales and marketing staff in order to continue to grow its floral membership
and generate additional orders for member florists. Second, the Company paid
higher marketing commissions and printing costs related to the increased Flower
Club order volume in 1998 when compared to 1997.
10
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Income Taxes
The Company accounts for income taxes using Financial Accounting Standard Board
statement No. 109, ACCOUNTING FOR INCOME TAXES, which requires the asset and
liability method of accounting for income taxes. Under the asset and liability
method 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. Until 1996, the Company had provided the full valuation allowance on net
deferred tax assets based on the Company's history of losses and the uncertainty
surrounding the Company's ability to recognize such assets in the future.
However, during the year ended August 31, 1996 the Company re-evaluated its
historical losses, 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. At that time the valuation allowance was reduced resulting in
a net deferred tax benefit. At August 31, 1996 the Company still had available
certain income tax benefits related primarily to timing differences and
operating loss carryforwards for which a valuation allowance was recorded, due
to uncertainties surrounding the Company's ability to ultimately realize the
entire amount of these benefits. During 1996 as the Company incurred income tax
expense there were corresponding reductions in the valuation allowance, thereby
resulting in certain income tax benefits. These income tax benefits exceeded the
income tax expense causing no income tax expense to be shown in 1996.
At August 31, 1997 the Company further reduced the valuation allowance so that
the deferred tax asset reflected the ultimate amount of tax benefits expected to
be realized. Consequently, during the quarter and six months ended February 28,
1998 the Company recorded a net income tax expense, as there were no income tax
benefits to offset the income tax expense.
Year 2000 Issue
The Company believes that it has adequately addressed the year 2000 issues. For
externally purchased software the Company has performed various test
transactions and concluded that these applications are ready for use in the year
2000. For internally developed software the Company has assessed the
applications and determined that relatively minor changes will be required for
the year 2000 at a minimal cost and effort.
11
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements
When used in this report, the words "plan(s)", "intends(s)", "expect(s)",
"feel(s)", "will", "may", "believe(s)", "anticipate(s)", and similar expressions
are intended to identify forward-looking statements. The events described in
such statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements which speak only
as of the date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. Readers are also
urged to carefully review and consider the various disclosures made by the
Company which attempt to advise interested parties of the factors which affect
the Company's business, including the disclosures made under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the report, as well as the Company's periodic reports of Form
10-KSB, 10-QSB and 8-K filed with the Securities and Exchange Commission.
The events described in such statements, and the success of the management
strategies described by those statements, are subject to certain risks and
uncertainties which could cause actual results to differ from those discussed;
among those risks and uncertainties which are particular to the Company are:
continued consumer spending on discretionary items such as flowers and gifts,
the success of the Company in maintaining relations with corporate marketing
partners, the success of the Company in maintaining a strong membership base,
the continued use of credit cards as the preferred method of payment by
customers of members, increased labor costs and the health of the retail flower
industry as a whole.
12
<PAGE> 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings
For a summary of legal proceedings, reference is made to Item 3, Legal
Proceedings, included in the Company's annual report on Form 10-KSB for the year
ended August 31, 1997 and to Note 2 of the Notes to Consolidated Financial
Statements included in this filing.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. The Submission of Matters to a Vote of Security Holders
An annual meeting of the shareholders of the Company was held on January 27,
1998 pursuant to notice of the meeting and the proxy statement for the annual
meeting first mailed on or about December 18, 1997 to all shareholders of record
as of November 28, 1997.
The meeting was held:
1) To elect six directors;
2) To consider and vote upon approval to amend the Company's Management
Incentive Stock Plan ("Incentive Plan") to increase the aggregate number of
shares that may be subject to awards under the Incentive Plan from 500,000
shares to 1,000,000 shares of common stock of the Company; and
3) To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The following individuals were nominated as directors and were the only nominees
submitted to the shareholders. The number of shares voted and those withheld
from each such nominee are listed below:
13
<PAGE> 16
FOR WITHHELD
--- --------
T. Craig Benson 7,463,600 6,395
S. Oden Howell 7,463,900 6,095
William E. Mercer 7,463,900 6,095
Kenneth G. Puttick 7,463,600 6,395
James H. West 7,463,900 6,095
Andrew W. Williams 7,463,900 6,095
There were no abstentions or broker non-votes.
Other matters submitted to a vote by the shareholders are shown below, along
with the votes for and against each matter.
<TABLE>
<CAPTION>
BROKER
FOR AGAINST ABSTAIN NON VOTES
--- ------- ------- ---------
<S> <C> <C> <C> <C>
To increase the aggregate number of
shares that may be subject to awards
under the Incentive Plan from 500,000
shares to 1,000,000 shares of common
stock of the Company 3,944,724 45,923 13,483 3,465,865
</TABLE>
There was no other business to come before the meeting. The total number of
shares present at the meeting in person or by proxy was 7,469,995 representing
97% of the shares outstanding, 7,724,742.
Item 5. Other Information
None
Item 6. Exhibits and Reports on form 8-K
Exhibits
14
<PAGE> 17
EXHIBIT REFERENCE
- -----------------
(10) Material Contracts
(a) Amendment dated January 7, 1998 to building purchase
agreement between Registrant and Alvin Wunderlich Sr. Trust
Number 1
(b) Promissory note agreement dated January 16, 1998 in the
amount of $5,000,000 between Registrant and First Union
National Bank
(c) Loan agreement dated January 16, 1998 between Registrant and
First Union National Bank.
(d) Security Agreement dated January 16, 1998 between Registrant
and First Union National Bank.
(e) Closing Statement dated January 16, 1998 between Registrant
and First Union National Bank.
(27) Financial Data Schedule (for SEC use only).
The following items have been included as exhibits in filings by the Company in
a previous filing and, accordingly, are incorporated here by 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.).
15
<PAGE> 18
EXHIBIT REFERENCE
(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. 7% Convertible Promissory Note in
the amount of $2,500,000 dated Dated February 28, 1996 due
February 28, 1997.
(n) Security agreement dated February 28, 1996 executed in
connection with the $2,500,000 Convertible Promissory Note.
(o) Common Stock Purchase Warrant for 250,000 shares of the
registrants common stock expiring January 1, 2001.
(p) Common Stock Purchase Warrant for 400,000 shares of the
registrants Common stock expiring January 1, 2001.
16
<PAGE> 19
EXHIBIT REFERENCE
(q) Construction Agreement dated September 30, 1996 between
Registrant And C.E. Block, Architect of Vero Beach, Florida.
(r) Building purchase Agreement between Registrant and Alvin
Wunderlich Sr. Trust Number 1.
(s) Building lease Agreement between Registrant and Verne W.
Anderson and Mariella Anderson Living Trust
(t) Nonqualified, Nonplan Option Agreement between Registrant
and Andrew W. Williams, Chairman of the Board and CEO.
(u) Nonqualified, Nonplan Option Agreement between Registrant
and James H. West, President and CFO.
(v) Nonqualified, Nonplan Option Agreement between Registrant
and Kelly S. McMakin, Treasurer and Secretary.
(w) Nonqualified, Nonplan Option Agreement between Registrant
and James J. Pagano, Vice President and Marketing Director
(22) Subsidiaries of the Registrant
Reports on Form 8-K
No reports on Form 8-K were filed during the second quarter of fiscal 1998.
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: April 10, 1998 JAMES H. WEST
-------------- -------------------
President and Chief
Financial Officer
17
<PAGE> 1
Exhibit 10.A
SECOND AMENDMENT TO
PURCHASE CONTRACT
This Second Amendment to Purchase Contract (the "Amendment") is entered
into between ALVIN WUNDERLICH, JR., Trustee of Testamentary Trust Share No. 1 as
set forth in item Four under the Last Will and Testament of Alvin Wunderlich, as
Seller, and FLORAFAX INTERNATIONAL, INC., as Buyer, to be effective the 7th day
of January, 1998, for the purpose of amending that one certain Purchase Contract
entered into between Buyer and Seller on or about August 21, 1997 and amended
pursuant to that certain First Amendment to Purchase Contract ("First
Amendment")(together, the "Contract"). The terms of this Amendment shall be
construed as a part of the terms of the Contract in all respects. In the event
the terms, covenants or conditions of this Amendment conflict with the terms,
covenants or conditions of the Contract, the terms of this Amendment shall
control.
WHEREAS, the parties desire to amend the form and amount of
consideration currently described in Section 2 of the Contract.
NOW, THEREFORE, for and in consideration of the mutual agreements set
out hereunder and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Buyer and Seller agree as follows:
Section 2 is amended to read as follows: "As full consideration for the
Property, Buyer agrees to pay Seller at Closing cash, or cash
equivalent, in the sum of Six Hundred Seventy-Two Thousand Five Hundred
and No/100 Dollars ($672,500.00)."
In all other respects the Contract remains in full force and effect.
Except as otherwise defined herein, all terms used herein shall have
the same meaning as they have in the Contract.
The parties agree that for purposes of the execution of this Amendment,
facsimile copies of signatures shall be sufficient to bind the parties hereto.
This Amendment may be executed in multiple counterparts and shall be
effective as of the date referenced above. The counterparts bearing facsimile
signatures shall be deemed to constitute originals and shall bind the parties
hereto.
SELLER:
/s/ Alvin W. Wunderlich, Jr.
----------------------------------------------------
ALVIN W. WUNDERLICH, JR., Trustee of
Testamentary Trust Share No. 1 as set forth in
Item Four under the Last Will and Testament of Alvin
Wunderlich
BUYER:
FLORAFAX INTERNATIONAL, INC.
a Delaware corporation
By: /s/ Andrew W. Williams
------------------------------------------------
Andrew W. Williams, Chief Executive Officer
<PAGE> 1
Exhibit 10.B
PROMISSORY NOTE
$5,000,000.00 January 16, 1998
FLORAFAX INTERNATIONAL, INC.
8075 20TH ST
VERO BEACH, FLORIDA 32966
(Individually and collectively, "Borrower")
FIRST UNION NATIONAL BANK ("Bank")
214 NORTH HOGAN STREET, FL0070
JACKSONVILLE, FLORIDA 32202
(Hereinafter referred to as the "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Five Million Dollars and No Cents ($5,000,000.00), or such
sum as may be advanced from time to time with interest on the unpaid principal
balance at the rate and on the terms provided in this Promissory Note (including
all renewals, extensions or modifications hereof, this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents including, but not limited to, personal property
collateral described in that certain Security Agreement of even date herewith.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of each
Advance (defined herein) under this Note from the date such Advance is made
available to the Borrower hereof, at the rate of Bank's Prime Rate, as that rate
may change from time to time with changes to occur on the date Bank's Prime Rate
changes ("Interest Rate"). Bank's Prime Rate shall be that rate announced by
Bank from time to time as its prime rate and is one of several interest rate
bases used by Bank. Bank lends at rates both above and below Bank's Prime Rate,
and Borrower acknowledges that Bank's Prime Rate is not represented or intended
to be the lowest or most favorable rate of interest offered by Bank.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus three
percent (3%) ("Default Rate"). The Default Rate shall also apply from
acceleration until the Obligations or any judgment thereon is paid in full.
INTEREST COMPUTATION (ACTUAL/360). Interest shall be computed on the basis of a
360-day year for the actual number of days in the interest period ("Actual/360
Computation"). The Actual/360 Computation determines the annual effective
interest yield by taking the stated (nominal) interest rate for a year's period
and then dividing said rate by 360 to determine the daily periodic rate to be
applied for each day in the interest period. Application of the Actual/360
Computation produces an annualized effective interest rate exceeding that of the
nominal rate.
REPAYMENT TERMS. This Note shall be due and payable as set forth in the
Repayment Schedule attached hereto and made a part hereof.
SCHEDULED PAYMENT ADJUSTMENT. At Bank's option and with notice to Borrower, the
scheduled payment amount will increase as is necessary (i) to pay all accruals
of interest for the period and previous periods and (ii) to maintain principal
repayment according to the amortization that would have occurred if the Interest
Rate in effect on the date of this Note had remained constant. The increased
payment amount shall remain in effect for as long as the original scheduled
payment amount is insufficient to pay accrued interest and principal and shall
be further adjusted upward or downward to reflect changes in the variable
interest rate. The scheduled payment amount will not be reduced below the
original scheduled payment amount.
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APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations, shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
LOAN DOCUMENTS AND OBLIGATIONS. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and may include, without limitation, a commitment
letter that survives closing, a loan agreement, this Note, guaranty agreements,
security agreements, security instruments, financing statements, mortgage
instruments, letters of credit and any renewals or modifications, but however,
does not include swap agreements as defined in 11 U.S.C. section 101 whenever
executed.
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations as defined in the
respective Loan Documents, and all obligations under any swap agreements as
defined in 11 U.S.C. section 101 between Borrower and Bank whenever executed.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to five percent (5%) of each payment past due for ten
(10) or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note, or if permitted under the law of that state, five percent (5%) of
each payment past due for ten (10) or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. Regardless of any other provision of this Note or other Loan Documents,
if for any reason the effective interest should exceed the maximum lawful
interest, the effective interest shall be deemed reduced to, and shall be, such
maximum lawful interest, and (i) the amount which would be excessive interest
shall be deemed applied to the reduction of the principal balance of this Note
and not to the payment of interest, and (ii) if the loan evidenced by this Note
has been or is thereby paid in full, the excess shall be returned to the party
paying same, such application to the principal balance of this Note or the
refunding of excess to be a complete settlement and acquittance thereof.
BORROWER'S ACCOUNTS. Except as prohibited by law, Borrower grants Bank a
security interest in all of Borrower's accounts with Bank and any of its
affiliates.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: NONPAYMENT; NONPERFORMANCE. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. FALSE WARRANTY. A warranty or representation made in the Loan
Documents or furnished Bank in connection with the loan evidenced by this Note
proves materially false, or if of a continuing nature, becomes materially false.
CROSS DEFAULT. At Bank's option, any default in payment or performance of any
obligation under any other loans, contracts or agreements of Borrower, any
Subsidiary or Affiliate of Borrower, any general partner of or the holder(s) of
the majority ownership interests of Borrower with Bank or its affiliates
("Affiliate" shall have the meaning as defined in 11 U.S.C. section 101, except
that the term "debtor" therein shall be substituted by the term "Borrower"
herein. "Subsidiary" shall mean any corporation of which more than 50% of the
issued or outstanding voting stock is owned directly or indirectly by Borrower).
CESSATION; BANKRUPTCY. The death of, appointment of guardian for, dissolution
of, termination of existence of, loss of good standing status by, appointment of
a receiver for, assignment for the benefit of creditors of, or commencement of
any bankruptcy or insolvency proceeding by or against the Borrower, its
Subsidiaries or Affiliates, if any, or any general partner of or the holder(s)
of the majority ownership interests of Borrower, or any party to the Loan
Documents. MAJOR CAPITAL STRUCTURE OR BUSINESS ALTERATION. Without prior written
consent of Bank, (i) a material alteration in the kind or type of Borrower's
business or that of its Subsidiaries or Affiliates, if any; (ii) the acquisition
of
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substantially all of Borrower's, any Subsidiary's, any Affiliate's, or
guarantor's business or assets, or a material portion (10% or more) of such
business or assets if such a sale is outside Borrower's, any Subsidiary's, any
Affiliate's or any guarantor's, ordinary course of business, or more than 50% of
its outstanding stock or voting power in a single transaction or a series of
transactions; (iii) or the acquisition of substantially all of the business or
assets or more than 50% of the outstanding stock or voting power of any other
entity; or (iv) should any Borrower, Subsidiary, Affiliate, or guarantor enter
into any merger or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take of the following actions: BANK
LIEN AND SET-OFF. Exercise its right of set-off or to foreclose its lien against
any account of any nature or maturity of Borrower without notice. ACCELERATION
UPON DEFAULT. Accelerate the maturity of this Note and all other Obligations,
shall be immediately due and payable. CUMULATIVE. Exercise any rights and
remedies as provided under the Note and other Loan Documents, or as provided by
law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any other person liable under this Note waives presentment,
protest, notice of dishonor, demand for payment, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of sale and all
other notices of any kind. Further, each agrees that Bank may extend, modify or
renew this Note or make a novation of the loan evidenced by this Note for any
period and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any Borrower or any person
liable under this Note or other Loan Documents and without affecting the
liability of Borrower or any person who may be liable under this Note or other
Loan Documents.
MISCELLANEOUS PROVISIONS. ASSIGNMENT. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Note and other Loan Documents are freely assignable, in whole
or in part, by Bank. Borrower shall not assign its rights and interest hereunder
without the prior written consent of Bank, and any attempt by Borrower to assign
without Bank's prior written consent is null and void. Any assignment shall not
release Borrower from the Obligations. APPLICABLE LAW; CONFLICT BETWEEN
DOCUMENTS. This Note and other Loan Documents shall be governed by and construed
under the laws of the state where Bank first shown above is located without
regard to that state's conflict of laws principles. If the terms of this Note
should conflict with the terms of the loan agreement or any commitment letter
that survives closing, the terms of this Note shall control. JURISDICTION.
Borrower irrevocably agrees to non-exclusive personal jurisdiction in the state
in which the office of Bank first shown above is located. SEVERABILITY. If any
provision of this Note or of the other Loan Documents shall be prohibited or
invalid under applicable law, such provision shall be ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Note or other such
document. NOTICES. Any notices to Borrower shall be sufficiently given, if in
writing and mailed or delivered to the Borrower's address shown above or such
other address as provided hereunder; and to Bank, if in writing and mailed or
delivered to Bank's office address shown above or such other address as Bank may
specify in writing from time to time. In the event that Borrower changes
Borrower's address at any time prior to the date the Obligations are paid in
full, Borrower agrees to promptly give written notice of said change of address
by registered or certified mail, return receipt requested, all charges prepaid.
PLURAL; CAPTIONS. All references in the Loan Documents to Borrower, guarantor,
person, document or other nouns of reference mean both the singular and plural
form, as the case may be, and the term "person" shall mean any individual,
person or entity. The captions contained in the Loan Documents are inserted for
convenience only and shall not affect the meaning or interpretation of the Loan
Documents. BINDING Contract. Borrower by execution of and Bank by acceptance of
this Note agree that each party is bound to all terms and provisions of this
Note. ADVANCES. Bank in its sole discretion may make other advances and
readvances under this Note pursuant hereto. POSTING OF PAYMENTS. All payments
received during normal banking hours after 2:00 p.m. local time at the office of
Bank first shown above shall be deemed received at the opening of the next
banking day. JOINT AND SEVERAL OBLIGATIONS. Each person who signs this Note is a
Borrower and is jointly and severally obligated. FEES AND TAXES. Borrower shall
promptly pay all documentary, intangible recordation and/or similar taxes on
this transaction whether assessed at closing or arising from time to time.
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ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any dispute, claim or controversy
arising out of, connected with or relating to this Note and any other Loan
Documents ("Disputes") between or among parties to this Note and any other Loan
Documents shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, disputes as to whether a matter is subject to
arbitration, claims brought as class actions, claims arising from Loan Documents
executed in the future, or claims arising out of or connected with the
transaction reflected by this Note.
Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in the city in which the office of Bank first stated above is
located. The expedited procedures set forth in Rule 51 ET SEQ. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.00. All
applicable statutes of limitation shall apply to any Dispute. A judgment upon
the award may be entered in any court having jurisdiction. The panel from which
all arbitrators are selected shall be comprised of licensed attorneys. The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction, state or federal, of the state where
the hearing will be conducted or if such person is not available to serve, the
single arbitrator may be a licensed attorney. Notwithstanding the foregoing,
this arbitration provision does not apply to disputes under or related to swap
agreements.
PRESERVATION AND LIMITATION OF REMEDIES. Notwithstanding the preceding binding
arbitration provisions, Bank and Borrower agree to preserve, without diminution,
certain remedies that any party hereto may employ or exercise freely,
independently or in connection with an arbitration proceeding or after an
arbitration action is brought. Bank and Borrower shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale granted
under the Loan Documents or under applicable law or by judicial foreclosure and
sale, including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set off,
and peaceful possession of personal property; (iii) obtaining provisional or
ancillary remedies including injunctive relief, sequestration, garnishment,
attachment, appointment of receiver and filing an involuntary bankruptcy
proceeding; and (iv) when applicable, a judgment by confession of judgment.
Preservation of these remedies does not limit the power of an arbitrator to
grant similar remedies that may be requested by a party in a Dispute.
Borrower and Bank agree that they shall not have a remedy of punitive and
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or exemplary damages they have now or which may arise in the
future in connection with any Dispute whether the Dispute is resolved by
arbitration or judicially.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this note to be executed under seal.
FLORAFAX INTERNATIONAL, INC.
By:/s/ Peggy O'Neal
Corporate ----------------------------------------
Seal Peggy O'Neal, Vice President
TAXPAYER IDENTIFICATION NUMBER(S):
FLORAFAX INTERNATIONAL, INC. 41-0719035
Access #28890
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REPAYMENT SCHEDULE
First Union National Bank (hereafter "Bank" or "First Union") has included the
attached Repayment Schedule to this Promissory Note dated January 16, 1998
executed by FLORAFAX INTERNATIONAL, INC.
All acquisition advance requests to be funded for a period of two (2) years on
an interest only basis beginning thirty (30) days from the date of any draws,
and will be based on the principal amount outstanding at any one time during the
draw period. Draw period will begin from the date of this Note and end on
February 16, 2000. If no draws are made during the draw period, then the
Commitment will automatically expire at the end of this period. Each request
will be subject to bank approval based on indentified repayment sources and
collateral deemed satisfactory to the bank. Any principal amount outstanding at
the end of the draw period will convert to a 36 month fully amortizing loan
based on level principal payments plus interest.
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<PAGE> 1
Exhibit 10.C
LOAN AGREEMENT
FIRST UNION NATIONAL BANK ("Bank")
214 NORTH HOGAN STREET, FL0070
JACKSONVILLE, FLORIDA 32202
(Hereinafter referred to as the "Bank")
FLORAFAX INTERNATIONAL, INC.
8075 20TH ST
VERO BEACH, FL 32966
(Individually and collectively, "Borrower")
This Loan Agreement ("Agreement") is entered into this sixteenth day of January,
1998, by and between Bank and FLORAFAX INTERNATIONAL, INC., a corporation
organized under the laws of the State of Delaware.
Borrower has applied to Bank for a loan or loans (individually and collectively,
the "loan") evidenced by one or more promissory notes (whether one or more, the
"Note") as follows:
o Revolver with termout - in the principal amount of $5,000,000.00 which
is evidenced by the Promissory Note dated January 16, 1998 (the
"Note"). The loan proceeds are to be used by Borrower solely for
business acquisitions and general working capital needs.
This Agreement applies to the loan and all Loan Documents. The terms "Loan
Documents" and "Obligations," as used in this Agreement, are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As used
in this Agreement as to Borrower, "Subsidiary" shall mean any corporation of
which more than 50% of the issued and outstanding voting stock is owned directly
or indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C. section 101, except that the term "debtor" therein shall be
substituted by the term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: ACCURATE INFORMATION. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower's financial condition will
accurately reflect Borrower's financial condition as of the date(s) thereof,
(including all contingent liabilities of every type, and Borrower further
represents that its financial condition has not changed materially or adversely
since the date(s) of such documents. AUTHORIZATION; NON-CONTRAVENTION. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly authorized officers of Borrower and any guarantors and if necessary, by
making appropriate filings with any governmental agency or unit and are the
legal, binding, valid and enforceable obligations of Borrower and any
guarantors; and do not (i) contravene, or constitute (with or without the giving
of notice or lapse of time or both) a violation of any provision of applicable
law, a violation of the organizational documents of Borrower or any guarantor,
or a default under any agreement, judgment, injunction, order, decree or other
instrument binding upon or affecting Borrower or any guarantor, (ii) result in
the creation or imposition of any lien (other than the lien(s) created by the
Loan Documents) on any of Borrower's or guarantor's assets, or (iii) give cause
for the acceleration of any obligations of Borrower or any guarantor to any
other creditor. ASSET OWNERSHIP. Borrower has good and marketable title to all
of the properties and assets reflected on the balance sheets and financial
statements supplied Bank by Borrower, and all such
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properties and assets are free and clear of mortgages, security deeds, pledges,
liens, charges, and all other encumbrances, except as otherwise disclosed to
Bank by Borrower in writing ("Permitted Liens"). To Borrower's knowledge, no
default has occurred under any Permitted Liens and no claims or interests
adverse to Borrower's present rights in its properties and assets have arisen.
DISCHARGE OF LIENS AND TAXES. Borrower has duly filed, paid and/or discharged
all taxes or other claims which may become a lien on any of its property or
assets, except to the extent that such items are being appropriately contested
in good faith and an adequate reserve for the payment thereof is being
maintained. SUFFICIENCY OF CAPITAL. Borrower is not, and after consummation of
this Agreement and after giving effect to all indebtedness incurred and liens
created by Borrower in connection with the Loan, will not be insolvent within
the meaning of 11 U.S.C. section 101(32). COMPLIANCE WITH LAWS. Borrower is in
compliance in all respects with all federal, state and local laws, rules and
regulations applicable to its properties, operations, business, and finances,
including, without limitation, any federal or state laws relating to liquor
(including 18 U.S.C. section 3617 ET SEQ.) or narcotics (including 21 U.S.C.
section 801 ET SEQ.) and/or any commercial crimes; all applicable federal, state
and local laws and regulations intended to protect the environment; and the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), if
applicable. ORGANIZATION AND AUTHORITY. Each corporate or limited liability
company Borrower and any guarantor, as applicable, is duly created, validly
existing and in good standing under the laws of the state of its organization,
and has all powers, governmental licenses, authorizations, consents and
approvals required to operate its business as now conducted. Each corporate or
limited liability company Borrower and any guarantor, if any, is duly qualified,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its business or the character and
location of its property, business or customers, and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. NO
LITIGATION. There are no pending or threatened suits, claims or demands against
Borrower or any guarantor that have not been disclosed to Bank by Borrower in
writing. ERISA. Each employee pension benefit plan, as defined in ERISA,
maintained by Borrower meets, as of the date hereof, the minimum funding
standards of ERISA and all applicable regulations thereto and requirements
thereof, and of the Internal Revenue Code of 1954, as amended. No "Prohibited
Transaction" or "Reportable Event" (as both terms are defined by ERISA) has
occurred with respect to any such plan.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing: BUSINESS CONTINUITY. Borrower shall conduct its business in
substantially the same manner and locations as such business is now and has
previously been conducted. MAINTAIN PROPERTIES. Borrower shall maintain,
preserve and keep its property in good repair, working order and condition,
making all needed replacements, additions and improvements thereto, to the
extent allowed by this Agreement. ACCESS TO BOOKS & RECORDS. Borrower shall
allow Bank, or its agents, during normal business hours, access to the books,
records and such other documents of Borrower as Bank shall reasonably require,
and allow Bank to make copies thereof at Bank's expense. INSURANCE. Borrower
shall maintain adequate insurance coverage with respect to its properties and
business against loss or damage of the kinds and in the amounts customarily
insured against by companies of established reputation engaged in the same or
similar businesses including, without limitation, commercial general liability
insurance, workmen's compensation insurance, and business interruption
insurance, and upon all Collateral (as defined in the Loan Documents) securing
the Obligations, such insurance as specified in the Loan Documents; all acquired
in such amounts and from such companies as Bank may reasonably require. NOTICE
OF DEFAULT AND OTHER NOTICES. (a) NOTICE OF DEFAULT. Borrower shall furnish to
Bank immediately upon becoming aware of the existence of any condition or event
which constitutes a Default (as defined in the Loan Documents) or any event
which, upon the giving of notice or lapse of time or both, may become a Default,
written notice specifying the nature and period of existence thereof and the
action which Borrower is taking or proposes to take with respect thereto. (b)
OTHER NOTICES. Borrower shall promptly notify Bank in writing of (i) any
material adverse change in its financial condition or its business; (ii) any
default under any material agreement, contract or other instrument to which it
is a party or by which any of its properties are bound, or any acceleration of
the maturity of any indebtedness owed by Borrower; (iii) any material adverse
claim against or affecting Borrower; or any part of its properties; (iv) the
commencement of, and any material determination in, any litigation with any
third party or any proceeding before any governmental agency or unit affecting
Borrower; and (v) at least thirty (30) days prior thereto, any change in
Borrower's name or address as shown above, and/or any change in Borrower's
structure. COMPLIANCE WITH OTHER AGREEMENTS. Borrower shall comply with all
terms and conditions contained in this Agreement, and any other
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Loan Documents, and swap agreements, if applicable, as defined in the Note.
PAYMENTS OF DEBTS. Borrower shall pay and discharge when due, and before subject
to penalty or further charge, and otherwise satisfy before maturity or
delinquency, all obligations, debts, taxes, and liabilities of whatever nature
or amount, except those which Borrower in good faith disputes. OTHER FINANCIAL
INFORMATION. Borrower shall deliver promptly such other information regarding
the operation, business affairs, and financial condition of Borrower which Bank
may reasonably request. NON-DEFAULT CERTIFICATE FROM BORROWER. Borrower shall
deliver to Bank, with the financial statements required above, a certificate
signed by Borrower or by a principal financial officer of Borrower warranting
that no "Default" as specified in the Loan Documents, nor any event which, upon
the giving of notice or lapse of time or both, would constitute such a Default,
has occurred. ESTOPPEL CERTIFICATE. Borrower, within fifteen (15) days after
request by Bank, will furnish a written statement duly acknowledged of the
amount due under the Loan and whether offsets or defenses exist against the
Obligations. DEPOSIT RELATIONSHIP. Borrower will maintain its primary depository
relationship with Bank. CASH MANAGEMENT RELATIONSHIP. Borrower will maintain its
cash management account with Bank. ANNUAL CLEAN UP REQUIREMENT- Borrower's
usage under the proposed $2,000,000.00 working capital sub-limit is subject to a
30 consecutive day annual clean up period.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing: GOVERNMENT INTERVENTION. Borrower shall not permit the
assertion or making of any seizure, vesting or intervention by or under
authority of any government by which the management of Borrower or any guarantor
is displaced of its authority in the conduct of its respective business or such
business is curtailed or materially impaired. PREPAYMENT OF OTHER DEBT. Borrower
shall not retire any long-term debt entered into prior to the date of this
Agreement at a date in advance of its legal obligation to do so. RETIRE OR
REPURCHASE CAPITAL STOCK. Borrower shall not retire or otherwise acquire any of
its capital stock. DEFAULT ON OTHER CONTRACTS OR OBLIGATIONS. Borrower shall not
default on any material contract with or obligations when due to a third party
or default in the performance of any obligation to a third party incurred for
money borrowed. JUDGMENT ENTERED. Borrower shall not permit the entry of any
monetary judgment or the assessment against, the filing of any tax lien against,
or the issuance of any writ of garnishment or attachment against any property of
or debts due Borrower. CHANGE IN FISCAL YEAR. Borrower shall not change its
fiscal year without the consent of Bank. LIMITATION ON DEBT. Borrower shall be
permitted to incur additional debt in the ordinary course of business provided,
however, that such additional debt, contingent or direct, does not exceed
$1,000,000.00. Any additional debt above this level will require prior written
consent of the bank. For the purposes of this calculation, "additional debt"
shall include all other bank debt, with the exception of the proposed
$5,000,000.00 Revolving Credit Facility, any outstanding L/C's ( if applicable),
and capitalized leases. ACQUISITION APPROVAL: Bank's approval shall be required
for all proposed acquisitions. Such approval will be based on the target
acquisition's strategic fit with the borrower's business as well as the
financial performance of the company to be acquired.
FINANCIAL REPORTS. Borrower agrees to the following provision(s) from the date
of this Agreement and until final payment in full of the Obligations, unless
Bank shall otherwise consent in writing: ANNUAL FINANCIAL STATEMENTS. Borrower
shall deliver to Bank, within 120 days after the close of each fiscal year,
audited financial statements reflecting its operations during such fiscal year,
including, without limitation, a balance sheet, profit and loss statement and
statement of cash flows, with supporting schedules; all on a consolidated basis
and on consolidated and consolidating basis and in reasonable detail, prepared
in conformity with generally accepted accounting principles, applied on a basis
consistent with that of the preceding year. All such statements shall be
examined by an independent certified public accountant acceptable to Bank. The
opinion of such independent certified public accountant shall not be acceptable
to Bank if qualified due to any limitations in scope imposed by Borrower. Any
other qualification of the opinion by the accountant shall render the
acceptability of the financial statements subject to Bank's approval. ACCOUNTS
PAYABLE AGING. Borrower shall, from time to time hereafter but not less than
annually in conjunction with each fiscal year-end deliver to Bank within 120
days of the end of each such period, a detailed aging of payables by total, a
summary aging of payables by vendor and vendor address, and a reconciliation
statement. Said aging should also include the original date of each invoice.
ACCOUNTS RECEIVABLE AGING. Borrower shall, from time to time hereafter but not
less than annually in conjunction with each fiscal year-end deliver to Bank
within 120 days of the end of each such period, a detailed aging of accounts by
total, a summary aging of accounts by customer and customer address, and a
reconciliation statement. Said aging should also include the original date of
each invoice. ADDITIONAL REPORTS: Borrower is required to provide to the bank
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<PAGE> 4
within 120 days of its fiscal year end a copy of its annual report, 10-K report
and "Proforma Profit and Loss Statement by quarter for the coming year".
Additionally, within 45 days of filing, the bank to receive copies of all 10-Q
reports.
FINANCIAL COVENANTS. Borrower agrees to the following provisions from the date
of this Agreement and until final payment in full of the Obligations, unless
Bank shall otherwise consent in writing: COVENANT COMPLIANCE. Will be tested
annually as of fiscal year end. CURRENT RATIO. Borrower shall, as of fiscal year
end, maintain a Current Ratio of not less than 1.20 to 1.00. "Current Ratio"
shall mean the ratio of current assets divided by current liabilities. TANGIBLE
NET WORTH. Borrower shall, as of fiscal year end, maintain a Tangible Net Worth
of at least Three Million Dollars and No Cents ($3,000,000.00). "Tangible Net
Worth" shall mean total assets minus total liabilities. For purposes of this
computation, the aggregate amount of any intangible assets of Borrower including
without limitation, goodwill, franchises, licenses, patents, trademarks, trade
names, copyrights, service marks, and brand names, shall be subtracted from
total assets, and total liabilities shall include subordinated debt. TOTAL
LIABILITIES TO TANGIBLE NET WORTH RATIO. Borrower shall, as of fiscal year end,
maintain a ratio of Total Liabilities, including subordinated debt, divided by
Tangible Net Worth of not more than 2.00 to 1.00. For purposes of this
computation, "Total Liabilities" shall mean all liabilities, including
capitalized leases and all reserves for deferred taxes and other deferred sums
appearing on the liabilities side of a balance sheet, in accordance with
generally accepted accounting principles applied on a consistent basis.
"Tangible Net Worth" shall mean total assets minus total liabilities. For
purposes of this computation, the aggregate amount of any intangible assets of
Borrower including without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets, and total liabilities shall include subordinated
debt.
CONDITIONS PRECEDENT. The obligations of Bank to make the loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
ADDITIONAL DOCUMENTS. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request. COMPLIANCE WITH LOAN DOCUMENTS.
Borrower's full compliance with the Loan Documents. PRIOR TO INITIAL ADVANCE.
The obligations of Bank to make the initial advance for the loan pursuant to
this Agreement are subject to the following conditions precedent: Resolutions.
Bank shall have received from Borrower, as applicable, certified copies of
resolutions of the Board of Directors of Borrower authorizing the execution,
delivery and performance of this Agreement and all other Loan Documents.
CERTIFICATE OF GOOD STANDING. On or prior to the date of any borrowing
hereunder, Bank shall have received from Borrower, a certificate from the
Secretary of State of the state of Borrower's incorporation or organization, as
applicable, as to the good standing of Borrower. OPINION OF COUNSEL. On or prior
to the date of any borrowing hereunder, Bank shall have received a written
opinion of the counsel of Borrower acceptable to Bank that included confirmation
of the following: (a) The accuracy of the representations set forth in this
Agreement in the Representations Subparagraphs entitled "Authorization;
Non-Contravention"; "Compliance with Laws", and "Organization and Authority".
(b) This Agreement and other Loan Documents have been duly executed and
delivered by Borrower and constitute the legal, valid and binding obligations of
Borrower, enforceable in accordance with their terms. (c) No registration with,
consent of, approval of, or other action by, any federal, state or other
governmental authority or regulatory body to the execution and delivery of the
Agreement, the borrowing under this Agreement or other Loan Documents, is
required by law, or, if so required, such registration has been made, and
consent or approval given or such other appropriate action taken. (d) The loan
is not usurious. (e) The Loan Documents create the priority of lien on or
security interest in the Collateral (as defined in the Loan Documents) that is
contemplated by the Loan Documents.
IN WITNESS WHEREOF, Borrower, on the day and year first written above, has
caused this Agreement to be executed under seal.
FLORAFAX INTERNATIONAL, INC.
By:/s/ Peggy O'Neal
Corporate -----------------------------
Seal Peggy O'Neal, Vice President
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<PAGE> 5
TAXPAYER IDENTIFICATION NUMBER(S):
FLORAFAX INTERNATIONAL, INC. 41-0719035
FIRST UNION NATIONAL BANK
By:/s/ Nancy Beckwith
----------------------------------------
Nancy Beckwith, Vice President
Access #28890
Page 5 of 5
<PAGE> 1
Exhibit 10.D
SECURITY AGREEMENT
January 16, 1998
FLORAFAX INTERNATIONAL, INC.
8075 20TH ST
VERO BEACH, FLORIDA 32966
(Individually and collectively "Debtor")
FIRST UNION NATIONAL BANK
214 North Hogan Street, FL0070
Jacksonville, Florida 32202
(Hereinafter referred to as the "Bank")
For value received and to secure payment and performance of the Promissory Note
executed by the Debtor dated January 16, 1998, in the original principal amount
of $5,000,000.00, payable to Bank, and any extensions, renewals, modifications
or novations thereof (the "Note"), this Security Agreement and the other Loan
Documents, and any other obligations of Debtor to Bank however created, arising
or evidenced, whether direct or indirect, absolute or contingent, now existing
or hereafter arising or acquired, due or to become due, including swap
agreements (as defined in 11 U.S.C. section 101), future advances, and all costs
and expenses incurred by Bank to obtain, preserve, perfect and enforce the
security interest granted herein and to maintain, preserve and collect the
property subject to the security interest (collectively, "Obligations"),
Debtor hereby grants to Bank a continuing security interest in and lien upon the
following described property, now owned or hereafter acquired, any additions,
accessions, and substitutions thereof and thereto, and all proceeds and products
thereof, including cash or non-cash dividends (collectively, "Collateral"):
* All accounts, contract rights, leases, and any other rights of Debtor
to payment for goods sold or leased or for services rendered;
furniture; furnishings; fixtures; equipment; machinery; accessories;
moveable trade fixtures; goods held for sale or being processed for
sale in Debtor's business, including all raw materials, supplies, and
other materials used or consumed in Debtor's business, goods in
process, finished goods, and all other items customarily classified as
inventory; building improvement and construction materials, supplies
and equipment; chattel paper; instruments; documents; all funds on
deposit with Bank and its affiliates; and all general intangibles; as
well as all parts, replacements, substitutions, profits, products and
cash and non-cash proceeds of the foregoing (including insurance and
condemnation proceeds payable by reason of condemnation of or loss or
damage thereto) in any form and wherever located. The foregoing
fixture Collateral is located at or affixed to real property known as
8075 20TH STREET, VERO BEACH, FLORIDA, wherein the record owner is
FLORAFAX INTERNATIONAL, INC.
* All books, records, files, computer programs, data processing records,
computer software, documents and other information, property, or
general intangibles, at any time evidencing, describing, or pertaining
to, and all containers and packages for, the property described above.
* All products and proceeds of any of the property described above in
any form, and all proceeds of such proceeds, including, without
limitation, all cash and credit balances, rents, revenues and profits
from sale, lease or license of any of the collateral, all payments
under any indemnity, warranty or guaranty with respect to any of such
property, all proceeds of fire or other insurance, including any
refunds of unearned premiums in connection with any cancellation,
adjustment, or termination of any insurance policy, all proceeds
obtained as a result of any legal action or proceeding with respect to
any of such property, and claims by Debtor against third parties for
loss or damage to, or destruction of, any of such property.
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<PAGE> 2
Debtor hereby represents and agrees that:
OWNERSHIP. Debtor owns the Collateral or Debtor will purchase and acquire rights
in the Collateral within ten days of the date advances are made under the Note.
If Collateral is being acquired with the proceeds of an advance under the Note,
the Debtor authorizes Bank to disburse proceeds directly to the seller of the
Collateral. The collateral is free and clear of all liens, security interests,
and claims except those previously reported in writing to Bank, and Debtor will
keep the Collateral free and clear from all liens, security interests and
claims, other than those granted to the Bank.
NAME AND OFFICES. There has been no change in the name of the Debtor, or the
name under which the Debtor conducts business, within the five years preceding
the date of execution of this Security Agreement and Debtor has not moved its
executive offices or residence within the five years preceding the date of
execution of this Security Agreement except as previously reported in writing to
Bank. The taxpayer identification number of Debtor as provided herein is
correct.
TITLE/TAXES. Debtor has good and marketable title to the Collateral and will
warrant and defend same against all claims. Debtor will not transfer, sell, or
lease the Collateral (except in the ordinary course of business). Debtor agrees
to pay promptly all taxes and assessments upon or for the use of the Collateral
and on this Security Agreement. At its option, Bank may discharge taxes, liens,
security interests or other encumbrances at any time levied or placed on the
Collateral. Debtor agrees to reimburse Bank, on demand, for any such payment
made by Bank. Any amounts so paid shall be added to the Obligations.
WAIVERS. Debtor waives presentment, demand, protest, notice of dishonor, notice
of default, demand for payment, notice of intention to accelerate, and notice of
acceleration of maturity. Debtor further agrees not to assert against Bank as a
defense (legal or equitable), as a setoff, as a counterclaim, or otherwise, any
claims Debtor may have against any seller or lessor that provided personal
property or services relating to any part of the Collateral. Debtor waives all
exemptions and homestead rights with regards to the collateral. DEBTOR WAIVES
ANY AND ALL RIGHTS TO NOTICE OR TO HEARING PRIOR TO BANK'S TAKING IMMEDIATE
POSSESSION OR CONTROL OF ANY OF COLLATERAL, and to any bond or security which
might be required by applicable law prior to the exercise of any of Bank's
remedies against any Collateral.
EXTENSIONS, RELEASES. Debtor agrees that Bank may extend, renew or modify any of
the Obligations and grant any releases, compromises or indulgences with respect
to any security for the Obligations, or with respect to any party liable for the
Obligations, all without notice to or consent of Debtor and without affecting
the liability of the Debtor or the enforceability of this Security Agreement.
NOTIFICATIONS OF CHANGE. Debtor will notify Bank in writing at least thirty (30)
days prior to any change in: (i) Debtor's chief place of business and/or
residence; (ii) Debtor's name or identity; or (iii) Debtor's corporate
structure. Debtor will keep the Collateral at the location(s) previously
provided to Bank until such time as Bank provides written advance consent to a
change of location. Debtor will bear the cost of preparing and filing any
documents necessary to protect Bank's liens.
COLLATERAL CONDITION AND LAWFUL USE. Debtor represents that Collateral is in
good repair and condition and that Debtor shall use reasonable care to prevent
Collateral from being damaged or depreciating. Debtor shall immediately notify
Bank of any material loss or damage to the Collateral. Debtor shall not permit
any item of equipment to become a fixture to real estate or an accession to
other personal property. Debtor represents it is in compliance in all respects
with all federal, state and local laws, rules and regulations applicable to its
properties, Collateral, operations, business and finances, including, without
limitation, any federal or state laws relating to liquor (including 18 U.S.C.
3617, et seq.) or narcotics (including 21 U.S.C. section 801, et seq.) and all
applicable federal, state and local laws and regulations intended to protect the
environment.
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<PAGE> 3
RISK OF LOSS AND INSURANCE. Debtor shall bear all risk of loss with respect to
the Collateral. The injury to or loss of the Collateral, either partial or
total, shall not release Debtor from payment or other performance hereof. Debtor
agrees to obtain and keep in force casualty and hazard insurance on Collateral
naming Bank as loss payee. Such insurance is to be in form and amounts
satisfactory to Bank. All such policies shall provide to Bank a minimum of
thirty (30) days written notice of cancellation. Debtor shall furnish to Bank
such policies, or other evidence of such policies satisfactory to Bank. Bank is
authorized, but not obligated, to purchase any or all insurance or "Single
Interest Insurance" protecting such interest as Bank deems appropriate against
such risks and for such coverage and for such amounts, including either the loan
amount or value of the Collateral at its discretion, all at Debtor's expense. In
such event, Debtor agrees to reimburse Bank for the cost of such insurance and
Bank may add such cost to the Obligations. Debtor shall bear the risk of loss to
the extent of any deficiency in the effective insurance coverage with respect to
loss or damage to any of the Collateral. Debtor hereby assigns to Bank the
proceeds of all such insurance and directs any insurer to make payments directly
to Bank. Debtor hereby appoints Bank its attorney-in-fact, which appointment
shall be irrevocable and coupled with an interest for so long as the Obligations
are unpaid, to file proof of loss and/or any other forms required to collect
from any insurer any amount due from any damage or destruction of the
Collateral, to agree to and bind Debtor as to the amount of said recovery, to
designate payee(s) of such recovery, to grant releases to insurer, to grant
subrogation rights to any insurer, and to endorse any settlement check or draft.
Debtor agrees not to exercise any of the foregoing powers granted to Bank
without the Bank's prior written consent.
ADDITIONAL COLLATERAL. If at any time the Collateral is unsatisfactory to Bank,
then on demand of Bank, Debtor shall immediately furnish such additional
Collateral satisfactory to Bank to be held by Bank as if originally pledged
hereunder and shall execute such additional security agreements and financing
statements as requested by Bank.
FINANCING STATEMENTS. No Financing Statement (other than any filed by Bank or
disclosed above) covering any of the Collateral or proceeds thereof is on file
in any public filing office. This Security Agreement, or a copy thereof, or any
Financing Statement executed hereunder may be recorded. On request of Bank,
Debtor will execute one or more Financing Statements in form satisfactory to
Bank and will pay all costs and expenses of filing the same or of filing this
Security Agreement in any and all public filing offices, wherever filing is
deemed by Bank to be desirable. Bank is authorized to file Financing Statements
relating to Collateral without Debtor's signature where authorized by law.
Debtor appoints Bank as its attorney-in-fact to execute such documents necessary
to accomplish perfection of Bank's security interest. The appointment is coupled
with an interest and shall be irrevocable as long as any Obligations remain
outstanding. Debtor further agrees to take such other actions as might be
requested for the perfection, continuation and assignment, in whole or in part,
of the security interests granted herein. If certificates are issued or
outstanding as to any of the Collateral, Debtor will cause the security
interests of Bank to be properly protected, including perfection by notation
thereon.
LANDLORD/MORTGAGEE WAIVERS. Debtor shall cause each mortgagee of real property
owned by Debtor and each landlord of real property leased by Debtor to execute
and deliver instruments satisfactory in form and substance to Bank by which such
mortgagee or landlord waives its rights, if any, in the Collateral.
CONTRACTS, CHATTEL PAPER, ACCOUNTS, GENERAL INTANGIBLES. Debtor warrants that
the Collateral consisting of contract rights, chattel paper, accounts general
intangibles is (i) genuine and enforceable in accordance with its terms except
as limited by law; (ii) not subject to any defense, set-off, claim or
counterclaim of a material nature against Debtor except as to which Debtor has
notified Bank in writing; and (iii) not subject to any other circumstances that
would impair the validity, enforceability or amount of such Collateral except as
to which Debtor has notified Bank in writing. Debtor shall not amend, modify or
supplement any lease, contract or agreement contained in the Collateral or waive
any provision therein, without prior written consent of Bank.
ACCOUNT INFORMATION. From time to time, at Bank's request, Debtor shall provide
Bank with schedules describing all accounts and contracts, including customers'
addresses, credited or acquired by Debtor and at Bank's request shall execute
and deliver written assignments of contracts and other documents evidencing such
accounts and contracts to Bank. Together with each schedule, Debtor shall, if
requested by Bank, furnish Bank with copies
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<PAGE> 4
of Debtor's sales journals, invoices, customer purchase orders or the
equivalent, and original shipping or delivery receipts for all goods sold, and
Debtor warrants the genuineness thereof.
ACCOUNT AND CONTRACT DEBTORS. Bank shall have the right to notify the account
and contract debtors obligated on any or all of the Collateral to make payment
thereof directly to Bank and Bank may take control of all proceeds of any such
Collateral, which rights Bank may exercise at any time. The cost of such
collection and enforcement, including attorneys' fees and expenses, shall be
borne solely by Debtor whether the same is incurred by Bank or Debtor. Upon
demand of Bank, Debtor will, upon receipt of all checks, drafts, cash and other
remittances in payment on Collateral, deposit the same in a special bank account
maintained with Bank, over which Bank also has the power of withdrawal.
If Default occurs, no discount, credit, or allowance shall be granted by Debtor
to any account or contract debtor and no return of merchandise shall be accepted
by Debtor without Bank's consent. Bank may, after Default, settle or adjust
disputes and claims directly with account contract debtors for amounts and upon
terms that Bank considers advisable, and in such cases, Bank will credit the
Obligations with the net amounts received by Bank, after deducting all of the
expenses incurred by Bank. Debtor agrees to indemnify and defend Bank and hold
it harmless with respect to any claim or proceeding arising out of any matter
related to collection of the Collateral.
GOVERNMENT CONTRACTS. If any accounts receivable or proceeds of inventory
covered hereby arises from obligations due to the Debtor from any governmental
unit or organization, Debtor shall immediately notify Bank in writing and
execute all documents and take all actions demanded by Bank to ensure
recognition by such governmental unit or organization of the rights of Bank in
the Collateral.
INSTRUMENTS, CHATTEL PAPER. Any Collateral that is instruments, chattel paper
and negotiable documents will be properly assigned to, deposited with and held
by Bank, unless Bank shall hereafter otherwise direct or consent in writing.
Bank may, without notice, before or after maturity of the Obligations, exercise
any or all rights of collection, conversion, or exchange and other similar
rights, privileges and options pertaining to the Collateral, but shall have no
duty to do so.
COLLATERAL DUTIES. Bank shall have no custodial or ministerial duties to perform
with respect to Collateral pledged except as set forth herein; and by way or
explanation and not by way of limitation, Bank shall incur no liability for any
of the following: (i) loss or depreciation of the Collateral (unless caused by
its willful misconduct), (ii) its failure to present any paper for payment or
protest, to protest or give notice of nonpayment, or any other notice with
respect to any paper or Collateral, or (iii) its failure to present or surrender
for redemption, conversion or exchange any bond, stock, paper or other security
whether in connection with any merger, consolidation, recapitalization, or
reorganization, arising out of the refunding of the original security, or for
any other reason, or its failure to notify any party hereto that the Collateral
should be so presented or surrendered.
TRANSFER OF COLLATERAL. Bank may assign its rights in the Collateral or any part
thereof, to the assignee, as well as any subsequent holder hereof, who shall
thereupon become vested with all the powers and rights herein given to the Bank
with respect to the property so transferred and delivered, and Bank shall
thereafter be forever relieved and fully discharged from any liability with
respect to such property so transferred, but with respect to any property not so
transferred, Bank shall retain all rights and powers hereby given.
SUBSTITUTE COLLATERAL. With prior written consent of Bank, other Collateral may
be substituted for the original Collateral herein in which event all rights,
duties, obligations, remedies and security interests provided for, created or
granted shall apply fully to such substitute Collateral.
INSPECTION, BOOKS AND RECORDS. Debtor will at all times keep accurate and
complete records covering each item of Collateral, including the proceeds
therefrom. Bank, or any of its agents, shall have the right, at intervals to be
determined by Bank and without hindrance or delay, to inspect, audit, and
examine the Collateral and to make extracts from the books, records, journals,
orders, receipts, correspondence and other data relating to the
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<PAGE> 5
Collateral, Debtor's business or any other transaction between the parties
hereto. Debtor will at its expense furnish Bank copies thereof upon request.
CROSS COLLATERALIZATION LIMITATION. As to any other existing or future consumer
purpose loan by Bank to Debtor, within the meaning of the Federal Consumer
Credit Protection Act, Bank expressly waives any security interest granted
herein in the Collateral that Debtor uses as a principal dwelling and household
goods.
ATTORNEYS' FEES AND OTHER COSTS OF COLLECTION. Debtor shall pay all of Bank's
reasonable expenses incurred in enforcing this Agreement and in preserving and
liquidating the Collateral, including but not limited to, reasonable
arbitration, paralegals', attorneys' and experts' fees and expenses, whether
incurred without the commencement of a suit, in any trial, arbitration, or
administrative proceeding, or in any appellate or bankruptcy proceeding.
DEFAULT. If any of the following occurs, a default ("Default") under this
Security Agreement shall exist: (i) the failure of timely payment or performance
of any of the Obligations or a default under any Loan Document; (ii) any breach
of any representation or agreement contained or referred to in this Security
Agreement or other Loan Document; (iii) any loss, theft, substantial damage, or
destruction of the Collateral not fully covered by insurance, or as to which
insurance proceeds are not remitted to Bank within thirty (30) days of the loss;
any sale (except the sale of inventory in the ordinary course of business),
lease, or encumbrance of any of the Collateral without prior written consent of
Bank; or the making of any levy, seizure, or attachment on or of the Collateral
which is not removed within ten (10) days; or (iv) the death of, appointment of
guardian for, dissolution of, termination of existence of, loss of good standing
status by, appointment of a receiver for, assignment for the benefit of
creditors of, or commencement of any bankruptcy or insolvency proceeding by or
against Debtor, its Subsidiaries or Affiliates, if any, or any general partner
of or the holder(s) of the majority ownership interests of Debtor or any party
to the Loan Documents.
REMEDIES ON DEFAULT (INCLUDING POWER OF SALE): If a Default occurs, all of the
Obligations shall be immediately due and payable, without notice and Bank shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code. Without limitation thereto, Bank shall have the following rights and
remedies: (i) to take immediate possession of the Collateral, without notice or
resort to legal process, and for such purpose, to enter upon any premises on
which the Collateral or any part thereof may be situated and to remove the same
therefrom, or, at its option, to render the Collateral unusable or dispose of
said Collateral on Debtor's premises. (ii) To require Debtor to assemble the
Collateral and make it available to Bank at a place to be designated by Bank.
(iii) To exercise its right of set-off or bank lien as to any monies of Debtor
deposited in demand, checking, time, savings, certificate of deposit or other
accounts of any nature maintained by Debtor with Bank or Affiliates of Bank,
without advance notice, regardless of whether such accounts are general or
special. (iv) To dispose of the Collateral, as a unit or in parcels, separately
or with any real property interests also securing the Obligations, in any county
or place to be selected by Bank, at either private or public sale (at which
public sale, bank may be the purchaser) with or without having the Collateral
physically present at said sale. (v) Any notice of sale, disposition or other
action by Bank required by law and sent to Debtor at Debtor's address shown
above, or at such other address of Debtor as may from time to time be shown on
the records of Bank, at least five (5) days prior to such action, shall
constitute reasonable notice to Debtor. Notice shall be deemed given or sent
when mailed postage prepaid to Debtor's address as provided herein. (vi) Bank
shall be entitled to apply the proceeds of any sale or other disposition of the
Collateral, and the payments received by Bank with respect to any of the
Collateral, to the Obligations in such order and manner as Bank may determine.
(vii) Collateral that is subject to rapid declines in value and is customarily
sold in recognized markets may be disposed of by Bank in a recognized market for
such collateral without providing notice of sale.
MISCELLANEOUS. (i) AMENDMENTS AND WAIVERS. No waivers, amendments or
modifications of any provision of this Security Agreement shall be valid unless
in writing and signed by an officer of Bank. No waiver by Bank of any Default
shall operate as a waiver of any other Default or of the same Default on a
future occasion. Neither the failure of, nor any delay by, Bank in exercising
any right, power or privilege granted pursuant to this Security Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any
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<PAGE> 6
other or further exercise of any other right, power or privilege. (ii)
ASSIGNMENT. All rights of Bank hereunder are freely assignable, in whole or in
part, and shall inure to the benefit of and be enforceable by Bank, its
successors, assigns and affiliates. Debtor shall not assign its rights and
interest hereunder without the prior written consent of Bank, and any attempt by
Debtor to assign without Bank's prior written consent is null and void. Any
assignment shall not release Debtor from the Obligations. This Security
Agreement shall be binding upon the Debtor, and the heirs, personal
representatives, successors, and assigns of Debtor. (iii) APPLICABLE LAW;
CONFLICT BETWEEN DOCUMENTS. This Security Agreement shall be governed by and
construed under the law of the state in which the office of Bank as stated above
is located without regard to that state's conflict of laws principles. If any
terms of this Security Agreement conflict with the terms of any commitment
letter or loan proposal, the terms of this Security Agreement shall control.
(iv) JURISDICTION. Debtor irrevocably agrees to non-exclusive personal
jurisdiction in the state in which the office of Bank as stated above is
located. (v) SEVERABILITY. If any provision of this Security Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective but only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Security Agreement. (vi) NOTICES. Any notices to Debtor shall be sufficiently
given, if in writing and mailed or delivered to the address of Debtor shown
above or such other address as provided hereunder; and to Bank, if in writing
and mailed or delivered to Bank's office address shown above or such other
address as Bank may specify in writing from time to time. In the event that
Debtor changes Debtor's address at any time prior to the date this Note is paid
in full, Debtor agrees to promptly give written notice of said change of address
by registered or certified mail, return receipt requested, all charges prepaid.
(vii) CAPTIONS. The captions contained herein are inserted for convenience only
and shall not affect the meaning or interpretation of this Security Agreement or
any provision hereof. The use of the plural shall also mean the singular, and
vice versa. (viii) LOAN DOCUMENTS. The term "Loan Documents" refers to all
documents executed in connection with the Obligations and may include, without
limitation, commitment letters, loan agreements, guaranty agreements, other
security agreements, letters of credit, instruments, financing statements,
mortgages, deeds of trust, deeds to secure debt, and any amendments or
supplements (excluding swap agreements as defined in 11 U.S.C. section 101).
(ix) JOINT AND SEVERAL LIABILITY. If more than one person has signed this
Security Agreement, such parties are jointly and severally obligated hereunder.
(x) BINDING CONTRACT. Debtor by execution and Bank by acceptance of this
Security Agreement, agree that each party is bound by all terms and provisions
of this Security Agreement.
IN WITNESS WHEREOF, Debtor, on the day and year first written above, has caused
this Agreement to be executed under seal.
FLORAFAX INTERNATIONAL, INC.
By:/s/ Peggy O'Neal
Corporate --------------------------------
Seal Peggy O'Neal, Vice President
TAXPAYER IDENTIFICATION NUMBER: 41-0719035
Access #28890
Page 6 of 6
<PAGE> 1
Exhibit 10.E
FIRST UNION NATIONAL BANK
CLOSING STATEMENT
For: FLORAFAX INTERNATIONAL, INC.
8075 20TH ST.
VERO BEACH, FLORIDA 32966
DATE OF CLOSING: JANUARY 16, 1998
- -------------------------------------------------------------------------------
AMOUNT OF LOAN $5,000,000.00
CLOSING COSTS:
- --------------
Commitment Fee: $12,500.00
Out of State Closing Fee: $450.00
UCC FEES:
- ---------
Pre Search $35.00
UCC-1 Filing $37.60
Post Search: $10.00
TOTAL CLOSING COSTS: $13,032.60
I hereby approve the above statement and authorize disbursement in accordance
with the same.
FLORAFAX INTERNATIONAL, INC.
By:/s/ Peggy O'Neal
Corporate -------------------------------
Seal Peggy O'Neal, Vice President
The foregoing is a correct account of the funds received by us in connection
with this transaction.
FIRST UNION NATIONAL BANK
By:/s/ Nancy Beckwith
Corporate --------------------------------
Seal Nancy Beckwith, Vice President
Access #28890
Page 1 of 1
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<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
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<PP&E> 4,827,000
<DEPRECIATION> 2,833,000
<TOTAL-ASSETS> 13,034,000
<CURRENT-LIABILITIES> 7,090,000
<BONDS> 80,000
0
0
<COMMON> 83,000
<OTHER-SE> 5,722,000
<TOTAL-LIABILITY-AND-EQUITY> 13,034,000
<SALES> 0
<TOTAL-REVENUES> 6,807,000
<CGS> 0
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<INCOME-PRETAX> 1,142,000
<INCOME-TAX> 424,000
<INCOME-CONTINUING> 718,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 718,000
<EPS-PRIMARY> .09
<EPS-DILUTED> .08
</TABLE>
