-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FjpcfxiIZrI2/iSDt1s6muwgnjwbBHQV0HlHd0isVkUKgh9rTuATWGOMXeA6J+iH dK1skEcBDgFju2pslFbUwA== /in/edgar/work/0001116502-00-500052/0001116502-00-500052.txt : 20001109 0001116502-00-500052.hdr.sgml : 20001109 ACCESSION NUMBER: 0001116502-00-500052 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20001106 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GERALD STEVENS INC/ CENTRAL INDEX KEY: 0000037525 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 650971499 STATE OF INCORPORATION: FL FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-05531 FILM NUMBER: 755634 BUSINESS ADDRESS: STREET 1: PO BOX 350526 CITY: FT LAUDERDALE STATE: FL ZIP: 33335-0526 BUSINESS PHONE: 9547135000 MAIL ADDRESS: STREET 1: 301 EAST LAS OLAS BLVD STREET 2: SUITE 300 CITY: FT LAUDERDALE STATE: FL ZIP: 33301 FORMER COMPANY: FORMER CONFORMED NAME: FLORAFAX INTERNATIONAL INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SPOTTS FLORAFAX CORP DATE OF NAME CHANGE: 19740924 FORMER COMPANY: FORMER CONFORMED NAME: SPOTTS CORP DATE OF NAME CHANGE: 19671205 8-K 1 0001.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): November 6, 2000 ---------------- GERALD STEVENS, INC. -------------------- (Exact name of registrant as specified in its charter) Florida 0-05531 65-0971499 ---------------- ---------------------- --------------- (State or other (Commission File (IRS Employer jurisdiction of Number) Identification No.) incorporation) P.O. Box 350526, Fort Lauderdale, Florida 33335-0526 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 954/627-1000 Item 5. Other Events. ------------ On November 6, 2000, we entered into Amendment Agreement No. 3 to Amended and Restated Credit Agreement with Bank of America, N.A. The amendment provides a new $7 million working capital line of credit through February 28, 2001 to fund seasonal cash requirements. The amendment also eliminates scheduled commitment reductions to our existing $36 million revolving credit commitment until June 30, 2002 and relaxes certain financial covenants. In connection with the amendment, we issued warrants for 10% of our common stock on a diluted basis at $.01 per share. If we repay all borrowings under the credit agreement prior to June 30, 2001, 75% of the warrants will terminate, and if we repay all borrowings prior to December 31, 2001, 50% of the warrants will terminate. Pursuant to a participation agreement, three members of management will participate in $1 million of the working capital line and will receive a proportionate share of the warrants. The amendment, the warrants and the participation agreement are attached as exhibits to this Report and are incorporated herein by reference. On November 6, 2000, our board of directors voted to effect a 1-for-5 reverse stock split. The reverse stock split will have a record date of November 14, 2000 and an effective date of November 28, 2000. Any fractional interest in a share of common stock resulting from the stock split will be treated as a whole for purposes of this stock split. With completion of the stock split, the number of shares outstanding will be approximately 9,840,000. Our November 7, 2000 press release announcing the amendment to the credit agreement and the reverse stock split is also attached as an exhibit to this Report and is incorporated herein by reference. Item 7. Financial Statements and Exhibits. --------------------------------- Exhibit No. Description ----------- ----------- 4.1 Amendment Agreement No. 3 to Amended and Restated Credit Agreement, dated as of November 6, 2000 4.2 Warrant Certificate No. 1 issued to Bank of America, N.A. on November 6, 2000 4.3 Warrant Certificate No. 2 issued to Steven R. Berrard on November 6, 2000 4.4 Warrant Certificate No. 3 issued to John G. Hall on November 6, 2000 4.5 Warrant Certificate No. 4 issued to Thomas W. Hawkins on November 6, 2000 4.6 Participation Agreement, dated November 6, 2000, among Bank of America, N.A., Steven R. Berrard, John G. Hall and Thomas W. Hawkins 99.1 Press Release dated November 7, 2000 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed by the undersigned, thereunto duly authorized. GERALD STEVENS, INC. --------------------------------- (Registrant) By /s/ WAYNE MOOR ---------------------- Wayne Moor Senior Vice President and Chief Financial Officer Dated: November 8, 2000 GERALD STEVENS, INC. Current Report on Form 8-K Exhibit Index ------------- Exhibit No. Description 4.1 Amendment Agreement No. 3 to Amended and Restated Credit Agreement, dated as of November 6, 2000 4.2 Warrant Certificate No. 1 issued to Bank of America, N.A. on November 6, 2000 4.3 Warrant Certificate No. 2 issued to Steven R. Berrard on November 6, 2000 4.4 Warrant Certificate No. 3 issued to John G. Hall on November 6, 2000 4.5 Warrant Certificate No. 4 issued to Thomas W. Hawkins on November 6, 2000 4.6 Participation Agreement, dated November 6, 2000, among Bank of America, N.A., Steven R. Berrard, John G. Hall and Thomas W. Hawkins 99.1 Press Release dated November 7, 2000 EX-4.1 2 0002.txt AMENDMENT AGREEMENT NO. 3 AMENDMENT AGREEMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT THIS AMENDMENT AGREEMENT NO. 3 TO AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment Agreement") is made and entered into as of this 6th day of November, 2000, by and among GERALD STEVENS, INC., a Florida corporation (the "Parent"), GERALD STEVENS RETAIL, INC., a Delaware corporation (collectively with the Parent, the "Borrower"), BANK OF AMERICA, N.A., successor by merger of NationsBank, N.A., a national banking association, as Agent (the "Agent") for the Lenders parties, from time to time (the "Lender" or "Lenders" as the case may be), to the Credit Agreement described below. W I T N E S S E T H: WHEREAS, the Borrower, the Agent and Bank of America, N.A., as Lender, have entered into an Amended and Restated Credit Agreement dated June 4, 1999, as amended by Amendment Agreement No. 1 dated as of June 13, 2000 and Amendment No. 2 dated July 31, 2000 (the "Credit Agreement") pursuant to which the Lender has agreed to make available to the Borrower a revolving credit facility of up to $36,000,000; and WHEREAS, each Subsidiary of the Parent (other than the Borrower) (each a "Guarantor" and collectively the "Guarantors") have executed a Facility Guaranty pursuant to which the Guarantors have guaranteed the payment and performance of the Borrowers' Obligations arising under the Credit Agreement; and WHEREAS, the Borrower has requested that the Lender make available to the Borrower a short term working capital facility of $7,000,000 in addition to the revolving credit facility and that the Credit Agreement be further amended pursuant to the terms and conditions set forth herein; and WHEREAS, the Lender is willing to provide the additional working capital facility and to so amend the Credit Agreement upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants, promises and conditions herein set forth, it is hereby agreed as follows: 1. Definitions. The term "Credit Agreement" as used herein and in the Loan Documents shall mean that certain Credit Agreement as heretofore and hereby amended and as from time to time further amended or modified. Unless the context otherwise requires, all capitalized terms used herein without definition shall have the respective meanings provided therefor in the Credit Agreement. 2. Amendments. Subject to the conditions set forth herein, the Credit Agreement shall be and hereby is amended, effective as of the date hereof, as follows: 1 (a) The Lenders shall continue to make Advances, Swing Line Loans and issue Letters of Credit subject to the terms of the Credit Agreement and Amendment No. 3; provided, however, that Eurodollar Rate Loans shall not be available pursuant to Sections 2.1 and 2.8 and all Loans shall bear interest at the Base Rate. (b) The following new definitions are hereby added to Section 1.2 in the appropriate alphabetical order: "Amendment No. 3" means Amendment Agreement No. 3 dated November 6, 2000 to this Agreement. "Bank of America" means Bank of America, N.A. "Blocked Account" means one or more accounts established by the Agent for the benefit of the Agent and the Lenders over which the Agent shall have complete dominion and control in accordance with the terms of the Blocked Account Agreement. "Blocked Account Agreement" means the Blocked Account Agreement in the form of Exhibit L executed by the Parent and its Subsidiaries and delivered to the Agent for the establishment of the Blocked Accounts, as the same may be amended, modified, supplemented or restated from time to time. "Tier I Proceeds" means the first $7,000,000 (on a cumulative basis) of the Net Proceeds from the sale of Maple Lee Farm `N' Garden Center, Avant Gardens and all Asset Dispositions occurring after the date of Amendment No. 3. "Tier II Proceeds" means the next $3,000,000 after the Tier I Proceeds (on a cumulative basis) of the Net Proceeds from all Asset Dispositions occurring after the date of Amendment No. 3. "Tier III Proceeds" means the next $5,000,000 after the Tier II Proceeds (on a cumulative basis) of the Net Proceeds from all Asset Dispositions occurring after the date of Amendment No. 3. "Tier IV Proceeds" means the next $13,000,000 after the Tier III Proceeds (on a cumulative basis) of the Net Proceeds from all Asset Dispositions occurring after the date of Amendment No. 3. "Tier V Proceeds" means all of the Net Proceeds from all Asset Dispositions after the Tier IV Proceeds occurring after the date of Amendment No. 3. "Total Working Capital Commitment" means an amount not to exceed $7,000,000. 2 "Working Capital Commitment" means, with respect to each Lender, the obligation of such Lender to make Working Capital Loans to the Borrower up to an aggregate principal amount at any one time outstanding equal to such Lender's Applicable Commitment Percentage of the Total Working Capital Commitment. "Working Capital Facility" means the facility described in Section 2.15 hereof providing for Working Capital Loans to the Borrower by the Lenders in the aggregate principal amount of the Total Working Capital Commitment. "Working Capital Loans" means any borrowing pursuant to an Advance under the Working Capital Facility in accordance with Section 2.15. "Working Capital Outstandings" means, as of any date of determination, the aggregate amount of all Working Capital Loans then outstanding. "Working Capital Note" means, collectively, the promissory notes of the Borrower evidencing Working Capital Loans executed and delivered to the Lenders as provided in Section 2.5(c) substantially in the form of Exhibit F-3, with appropriate insertions as to amounts, dates and names of Lenders. "Working Capital Termination Date" means (i) February 28, 2001 or (ii) such earlier date of termination of the Lenders' obligations pursuant to Section 10.1 upon the occurrence of an Event of Default, or (iii) such date as the Borrower may voluntarily and permanently terminate the Working Capital Facility by payment, whether mandatory or voluntary, in full of all Working Capital Outstandings. (c) The following definitions in Section 1.2 are hereby amended in their entirety so that as amended they shall read as follows: "Advance" means a borrowing under the Revolving Credit Facility or the Working Capital Facility. "Applicable Margin" means from the date of Amendment No. 3 two percent (2%) for Base Rate Loans. "Loan" or "Loans" means, collectively, the Swing Line Loans, the Revolving Loans and the Working Capital Loans. "Outstandings" means, collectively, at any date, the Letter of Credit Outstandings, Swing Line Oustandings, Revolving Credit Outstandings and Working Capital Outstandings on such date. "Notes" means, collectively, the Revolving Notes, the Swing Line Notes and the Working Capital Notes. 3 "Stated Termination Date" means June 30, 2002. "Total Letter of Credit Commitment" means an amount not to exceed $1,750,000. "Total Revolving Credit Commitment" means a principal amount equal to $36,000,000, as such amount is reduced from time to time in accordance with Sections 2.7 and 2.14. (d) The last sentence in Section 2.1(b) is hereby deleted in its entirety. (e) A new subsection (d) is hereby added to Section 2.1 to read as follows: (d) The Borrower shall repay Revolving Credit Outstandings by the amount of cash balances of the Parent and its Subsidiaries, on a consolidated basis, at the end of each Business Day. Amounts so repaid under this Section 2.1(d) may be reborrowed in accordance with the other provisions of this Section 2.1. (f) The last sentence of Section 2.2(b) is hereby amended in its entirety so that as amended it reads as follows: "Interest on each Loan shall be paid monthly in arrears on the last Business Day of each calendar month and upon payment in full of the principal amount of such Loan." (g) The last sentence in Section 2.3 is hereby deleted in its entirety. (h) Section 2.5 is hereby amended by adding a new subsection (c) to read as follows: (c) Working Capital Notes. Working Capital Loans made by each Lender shall be evidenced by the Working Capital Note payable to the order of such Lender in the respective amount of its Applicable Commitment Percentage of the Total Working Capital Commitment, which Working Capital Note shall be dated as of the date of Amendment No. 3 or a later date pursuant to an Assignment and Acceptance and shall be duly completed, executed and delivered by the Borrower. (i) Section 2.14 is hereby amended in its entirety so that as amended it reads as follows: 2.14 Mandatory Prepayments. (a) The Borrower shall make, or shall cause each applicable Subsidiary to make, unless the Lenders agree otherwise, a prepayment from the proceeds, to the extent received on or subsequent to the date of Amendment No. 3, of (i) each private or public offering of equity securities of the Parent or any Subsidiary (other than securities issued by a Subsidiary to the 4 Parent) in an amount equal to seventy-five percent (75%) of the Net Proceeds of each issuance of equity securities of the Parent or any Subsidiary (including without limitation any security not constituting Indebtedness exchangeable, exercisable or convertible for or into equity securities), and (ii) the issuance of any Indebtedness for Money Borrowed permitted by the Required Lenders, in an amount equal to one hundred percent (100%) of the Net Proceeds from the issuance of such Indebtedness excluding Indebtedness permitted to be issued under Section 9.5(d), (f) and (g). (b) The Borrower shall make, or shall cause each applicable Subsidiary to make, unless the Lenders agree otherwise, a prepayment from the Net Proceeds of each Asset Disposition not otherwise permitted under Section 9.6 which is approved by the Lender in an amount equal to (i) one hundred percent (100%) of the Tier I Proceeds, (ii) one hundred percent (100%) of the Tier II Proceeds, (iii) one hundred percent (100%) of the Tier IV Proceeds, and (iv) eighty percent (80%) of the Tier V Proceeds. No prepayments shall be required with respect to the Tier III Proceeds. (c) All mandatory prepayments made pursuant to this Section 2.14 shall be (i) made simultaneously with the receipt of such Net Proceeds and shall be accompanied or preceded by written notice to the Agent, which notice shall include a certificate of an Authorized Representative setting forth in reasonable detail the calculations utilized in computing the amount of such prepayment and (ii) applied first to permanently reduce the Working Capital Outstandings and the Total Working Capital Commitment and then to permanently reduce the Revolving Credit Outstandings and the Total Revolving Credit Commitment. (j) A new Section 2.15 is hereby added to read as follows: 2.15 Working Capital Facility. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Advances to the Borrower under the Working Capital Facility from time to time from the date of Amendment No. 3 until the Working Capital Termination Date on a pro rata basis as to the total borrowing requested by the Borrower on any day determined by such Lender's Applicable Commitment Percentage up to but not exceeding the Working Capital Commitment of such Lender; provided, however, that the Lenders will not be required and shall have no obligation to make any such Advance (i) so long as a Default or Event of Default has occurred and is continuing or (ii) if the Agent has accelerated the maturity of any of the Notes as a result of an Event of Default; provided, further, however, that immediately after giving effect to each such Advance, the amount of Working Capital Outstandings shall not exceed the Total Working Capital Commitment; provided, further, that the availability of the Working Capital Facility shall be limited to $2,000,000 on the date of Amendment No. 3 and such availability will increase by $1,000,000 on each one week anniversary thereafter until the Total Working Capital Commitment is available. Within such limits, the Borrower may borrow under 5 the Working Capital Facility on a Business Day from the Closing Date until, but not including, the Working Capital Termination Date. Except as otherwise permitted by the Lenders from time to time, the amount of Working Capital Outstandings shall not exceed at any time the Total Working Capital Commitment, and, in the event there shall be any such excess, the Borrower shall immediately make such payments and prepayments as shall be necessary to comply with this restriction. If the Working Capital Termination Date occurs as a result of subsection (i) of the definition of Working Capital Termination Date and there is availability under the Revolving Credit Facility on such date, the Borrower may repay the Working Capital Outstandings with Revolving Loans to the extent the Total Revolving Credit Commitment exceeds the sum of the Letter of Credit Outstandings, Swing Line Outstandings and Revolving Credit Outstandings, notwithstanding anything in Section 2.3 to the contrary. Advances under the Working Capital Facility may be used for working capital purposes. Amounts may not be reborrowed under the Working Capital Facility once repaid. (k) A new Section 4.5 is hereby added to Article IV to read as follows: 4.5 Blocked Accounts. As security for the full and timely payment and performance of (a) all Obligations now existing or hereafter arising and (ii) if applicable, the Guarantors' Obligations under the Facility Guaranty, the Borrower shall, and shall cause each Guarantor to, on or before the date of Amendment No. 3, deliver to the Agent, in form and substance reasonably acceptable to the Agent, the Blocked Account Agreement to establish the Blocked Accounts and shall make all payments and cause its Subsidiaries to make all payments received from account debtors exclusively to the Blocked Accounts. The Borrower shall cause all credit card clearing amounts to be paid directly to the Blocked Accounts. All receipts in the Blocked Accounts shall be deposited daily into a deposit account or accounts maintained by the Agent or an affiliate of the Agent pursuant to the Blocked Account Agreement as security for the Revolving Credit Facility and Working Capital Facility. (l) A new Section 6.3 is hereby added which shall read as follows: 6.3 Conditions of Working Capital Loans. The obligations of the Lenders to make any Working Capital Loans hereunder on or subsequent to the date of Amendment No. 3 are subject to the satisfaction of the following conditions: (a) the Agent shall have received a Borrowing Notice; (b) after giving effect to Amendment No. 3 the representations and warranties of the Credit Parties set forth in Article VII and in each of the other Loan Documents shall be true and correct in all material respects on and as of the date of such Advance with the same effect as though such representations and warranties had been made on and as of such date, except to the extent that such representations and warranties expressly 6 relate to an earlier date and except that the financial statements referred to in Section 7.6(a)(i) shall be deemed to be those financial statements most recently delivered to the Agent and the Lenders pursuant to Section 8.1 from the date financial statements are delivered to the Agent and the Lenders in accordance with such Section; (c) at the time of (and after giving effect to) each Advance, no Default or Event of Default specified in Article X shall have occurred and be continuing; (d) immediately after giving effect to a Working Capital Loan, the aggregate principal balance of all Working Capital Loans for each Lender shall not exceed such Lender's Working Capital Commitment and the aggregate principal amount of Working Capital Outstandings shall not exceed the Total Working Capital Commitment; and (e) Bank of America, as Lender, shall have entered into a participation agreement, in form and substance acceptable to it in its sole discretion, with certain members of management of the Parent pursuant to which such members of management of the Parent shall agree to participate in the Working Capital Commitment for $1,000,000. (m) A new Section 7.22 is hereby added to Article VII which section shall read as follows: "7.22 Blocked Account Agreement. All obligors, account parties and licensees of the Borrower and its Subsidiaries have been instructed to direct all payments to the appropriate Blocked Account." (n) Paragraph (k) of Section 8.1 is hereby amended by deleting the word "eight" in the second line thereof and inserting in lieu thereof the word "thirteen". (o) New Sections 8.22, 8.23 and 8.24 are hereby added to Article VIII which sections shall read as follows: "8.22 Board Member. The Parent shall permit the Agent to designate one board member to the board of directors of the Parent at such time as the Agent chooses to do so in its sole discretion. The Parent shall take any and all such corporate actions as shall be necessary to appoint such board member promptly following such designation. 8.23 Operation Plan Analysis. The Borrower shall provide the Agent an analysis of the Borrowers' operations, including but not limited to an analysis of core versus non-core business units not later than January 16, 2001." 7 (p) Section 9.1 is hereby amended in its entirety so that as amended it shall read as follows: "9.1 Financial Covenants. ------------------- (a) Minimum Consolidated EBITDA. Permit Consolidated EBITDA (a) as of the end of the 3 month fiscal period ending February 28, 2001 to be less than $7,200,000, (b) as of the end of the 6 month fiscal period ending May 31, 2001 to be less than $14,000,000, (c) as of the end of the 9 month fiscal period ending August 31, 2001 to be less than $13,200,000, and (d) as of the end of any Four-Quarter Period ending on or after November 30, 2001 to be less than $13,750,000." (b) Maximum Capital Expenditures. Make or become committed to make Capital Expenditures (on a noncumulative basis, with the effect that amounts not expended may not be carried forward to a subsequent period) which exceed in the aggregate in any fiscal quarter $500,000; provided, that the Parent and its Subsidiaries may also expend up to $3,800,000 in Capital Expenditures in connection with the acquisition and implementation of a standardized point of sale and management information system." (q) Section 13.5 is hereby amended by inserting the following phrase at the end of the first sentence thereof: "and the reasonable fees and expenses of PriceWaterhouseCoopers to follow up on work previously performed for the Agent, as may be requested from time to time by the Agent." (r) Exhibit A is hereby amended in its entirety and shall be in the form of Exhibit A attached to this Amendment Agreement. (s) Exhibit D-1 is hereby amended in its entirety and shall be in the form of Exhibit D-1 attached to this Amendment Agreement. (t) A new Exhibit F-3 is hereby added to the Credit Agreement and shall be in the form of Exhibit F-3 attached to this Amendment Agreement. (u) Exhibit H is hereby amended in its entirety and shall be in the form of Exhibit H attached to this Amendment Agreement. (v) A new Exhibit L is hereby added to the Credit Agreement and shall be in the form of Exhibit L attached to this Amendment Agreement. (w) Schedule 2.14 is hereby deleted in its entirety. 3. Guarantors. Each of the Guarantors has joined into the execution of this Amendment Agreement for the purpose of consenting to the amendment contained herein and 8 reaffirming its guaranty of the Obligations as increased by the terms of this Amendment Agreement. 4. Borrower's Representations and Warranties. The Borrower and the Guarantors each hereby represent, warrant and certify that: (a) The representations and warranties made by it in Article VII of the Credit Agreement are true on and as of the date hereof before and after giving effect to this Amendment Agreement except that the financial statements referred to in Section 7.6(a) shall be those most recently furnished to each Lender pursuant to Section 8.1(a) and (b) of the Credit Agreement; (b) It has the power and authority to execute and perform this Amendment Agreement and has taken all action required for the lawful execution, delivery and performance thereof; (c) Except as disclosed to the Lender in writing, there has been no material adverse change in the consolidated condition, financial or otherwise, of the Parent and its Subsidiaries, taken as a whole, since the date of the most recent financial reports of the Parent received by each Lender under Section 8.1 of the Credit Agreement, other than changes in the ordinary course of business, none of which has been a material adverse change; (d) The business and properties of the Parent and its Subsidiaries are not, and since the date of the most recent financial report of the Parent and its Subsidiaries received by the Lender under Section 8.1 of the Credit Agreement have not been, adversely affected in any substantial way as the result of any fire, explosion, earthquake, accident, strike, lockout, combination of workmen, flood, embargo, riot, activities of armed forces, war or acts of God or the public enemy, or cancellation or loss of any major contracts; and (e) After giving effect to this Amendment Agreement, no event has occurred and no condition exists which, upon the consummation of the transaction contemplated hereby, constituted a Default or an Event of Default on the part of the Parent or the Borrower under the Credit Agreement or the Notes either immediately or with the lapse of time or the giving of notice, or both. 5. Conditions to Effectiveness. This Amendment Agreement shall become effective upon receipt by the Lender of the following: (a) four (4) counterparts of this Amendment Agreement executed by the parties hereto; (b) a Working Capital Note in the amount of the Lender's Working Capital Commitment duly executed by both Borrowers; 9 (c) three-year warrants for 8.5% of the common stock of the Parent with such piggy-back and demand registration, antidilution and other rights acceptable to the Lender and similar warrants for 1.5% of the common stock of the Parent to the Participant (as defined in the Participation Agreement referred to in Section 6.3(a) of the Agreement); (d) payment to the Lender of the Net Proceeds from Asset Dispositions in an aggregate amount off $595,000 which Net Proceeds shall be used to immediately prepay the Working Capital Outstandings pursuant to Section 2.14 of the Credit Agreement; (e) an opinion of counsel for the Borrower and each of the Guarantors in form acceptable to the Lender; (f) copies of resolutions of the Boards of Directors of the Borrower and each of the Guarantors authorizing the transaction contemplated by this Amendment Agreement certified by the Secretary or Assistant Secretary of each Borrower and Guarantor; (g) such other instruments and documents as the Lender may reasonably request; and (h) payment to the Lender of all reasonable out-of-pocket expenses of the Agent and Lender incurred in connection with this Amendment Agreement, including reasonable fees and expenses of its counsel. 6. Waiver and Consent. The Lender hereby waives the failure by the Parent and its Subsidiaries to comply as at August 31, 2000 with the requirement of Section 9.1(e). Notwithstanding the provisions of Section 9.5 the Parent may incur up to $1,125,000 of Indebtedness in lieu of making a payment to a third party in November 2000, so long as such Indebtedness is subordinated to the prior payment of the Obligations on terms acceptable to the Lender. 7. Entire Agreement. The existing Loan Documents and this Amendment Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. None of the terms or conditions of this Amendment Agreement may be changed, modified, waived or canceled orally or otherwise, except by writing, signed by all the parties hereto, specifying such change, modification, waiver or cancellation of such terms or conditions, or of any proceeding or succeeding breach thereof. 8. Full Force and Effect of Agreement. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all of the other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. 10 9. Counterparts. This Amendment Agreement may be executed in any number of counterparts and all the counterparts taken together shall be deemed to constitute one and the same instrument. 10. Governing Law. This Amendment Agreement shall be governed by the laws of the State of Florida. [Remainder of page intentionally left blank.] 11 IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement to be duly executed by their duly authorized officers, all as of the day and year first above written. PARENT: GERALD STEVENS, INC. WITNESS: By: - -------------------------------- --------------------------------- Print Name: R. Malloy McKeithen Name: Jeffrey M. Mattson Title: Vice President - -------------------------------- Print Name: Terry L. Witcher BORROWER: GERALD STEVENS RETAIL, INC. WITNESS: By: - --------------------------------- --------------------------------- Print Name: R. Malloy McKeithen Name: Jeffrey M. Mattson Title: Vice President - ------------------------------ Print Name: Terry L. Witcher 12 GUARANTORS: A.G.A. Flowers, Inc. Dr. Delphinium Designs, Inc. Preuss Acquisition Corp. GS Accounts Receivable Co. GS Call/Credit Card Holding Co. GS Catalog Holding Co. GS Database Co. GS Database Management Co. GS East Holding Co. GS Finance Co. GS Intangibles Management Co. GS Interactive, Inc. GS Internet Holdings Co. GS Master Holding Co. GS Nevada, Inc. GS Retail Holding Co. Gerald Stevens Properties, Inc. Martina's NV, Inc. The Rose Shop NV, Inc. By: --------------------------------- Name: Thomas L. Boesen Title: President 13 GS Arizona, Inc. GS Michigan, Inc. Gerald Stevens Pennsylvania, Inc. GS North Carolina, Inc. GS Ohio, Inc. Martina's, Inc. GSI Acquisition, Inc. GS Florida Flowers, Inc. National Flora, Inc. Thrifty Acquisition, Inc. Credit Card Management System, Inc. Buning Acquisition, Inc. Florafax Financial Services Corp. Gerald Stevens Operations Co. Gerald Stevens Delaware, Inc. GS Call Center Co. GS Gift Certificate Co. GS Missouri, Inc. GS South Carolina, Inc. GS Tennessee, Inc. GS Texas General, Inc. GS Wisconsin General, Inc. National Flora Florida, Inc. GS California, Inc. GS Illinois, Inc. GS Minnesota, Inc. Flower View Gardens, Inc. Flower Club International, Inc. Calyx & Corolla, Inc. Gerald Stevens Pittsburgh, Inc. Worldwide Floral & Gifts, Inc. By: --------------------------------- Name: Jeffrey M. Mattson Title: Vice President Kuhn & Exotic LLC By: Gerald Stevens, Inc., its Sole Member By: --------------------------------- Name: Jeffrey M. Mattson Title: Vice President 14 Gerald Stevens Texas, L.P. By: GS Texas General, Inc., its General Partner By: --------------------------------- Name: Jeffrey M. Mattson Title: Vice President Gerald Stevens Wisconsin Limited Partnership By: GS Wisconsin General, Inc., its General Partner By: --------------------------------- Name: Jeffrey M. Mattson Title: Vice President Gerald Stevens Georgia, L.P. By: Martina's, Inc. By: --------------------------------- Name: Jeffrey M. Mattson Title: Vice President 15 AGENT AND LENDER: BANK OF AMERICA, N.A. By: --------------------------------- Name: Dewitt W. King, III Title: Managing Director EXHIBIT A Applicable Commitment Percentages
- ---------------------------------------------------------------------------------------------------------------------- Revolving Working Capital Applicable Credit Commitment Commitment Commitment Percentage - ---------------------------------------------------------------------------------------------------------------------- Bank of America, N.A. $36,000,000 $7,000,000 100% - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
17 EX-4.2 3 0003.txt COMMON STOCK WARRANT CERTIFICATE THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS, OR GERALD STEVENS, INC. (THE "COMPANY") RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED UNDER APPLICABLE LAW. COMMON STOCK WARRANT CERTIFICATE GERALD STEVENS, INC. November 6, 2000 No. 1 For the Purchase of 4,668,875 Shares of Common Stock of Gerald Stevens, Inc. FOR VALUE RECEIVED, Bank of America, N.A. (including its successors, assigns and transfers, the "Holder") or the Holder's registered assigns is hereby granted the right to purchase from Gerald Stevens, Inc., a Florida corporation (the "Company"), 4,668,875 shares (the "Warrant Shares", which number shall be adjusted from time to time in accordance with Section 2 hereof) of the Company's Common Stock, par value $.01 per share (the "Common Stock"), at a purchase price of $0.01 per share (as adjusted from time to time in accordance with Section 2 hereof, the "Exercise Price") on the terms and conditions set forth in this Warrant (this "Warrant"), exercisable in whole or in part at any time and from time to time from November 6, 2000 until 6:00 p.m. on the date that is three years after the date hereof (the "Exercise Period"), on the terms and condition set forth in this Warrant (this "Warrant"); provided, that until July 1, 2001 not more than twenty-five percent (25%) of the Warrant Shares shall be exercisable and until January 1, 2002, not more than fifty percent (50%) of the Warrant Shares shall be exercisable. I Exercise -------- 1.1 Exercise of Warrant. This Warrant may be exercised, in whole or in part, at any time or from time to time, during the Exercise Period by (i) surrendering this Warrant Certificate, with the form of exercise notice attached hereto as Exhibit A duly executed by the Holder, to the Company at its principal office, and (ii) making payment to the Company of the aggregate Exercise Price for the applicable Warrant Shares in cash, by certified check, bank check or wire transfer to an account designated by the Company. The minimum number of shares of Common Stock with respect to which this Warrant may be exercised, in whole or in part, at any time shall be the lesser of twenty-five percent (25%) of the total number of Warrant Shares which may be purchased under this Warrant or the maximum number of Warrant Shares available for purchase under this Warrant at the time of exercise. Upon any partial exercise of this Warrant, the Company, at its expense, shall promptly issue to the Holder for Holder's surrendered Warrant Certificate a replacement Warrant Certificate identical in all respects to this Warrant Certificate, except that the number of Warrant Shares shall be reduced accordingly. 1.2 Issuance of Warrant Shares. The Warrant Shares purchased by Holder shall be issued as of the close of business on the date on which all actions required to be taken by the Holder and all payments required to be received by the Company, pursuant to Section 1.1, shall have been so taken and received and, the Holder shall be entitled to receive the Warrant Shares or other securities or property (including money) to which the Holder would have been entitled had the Holder been the record holder of such Warrant Shares or other securities or property on such date. Certificates for the Warrant Shares so purchased shall be delivered to the Holder as soon as practicable after this Warrant is surrendered and the Exercise Price is received. II Adjustments to Warrant. ----------------------- The number of Warrant Shares for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth below. 2.1 Stock Dividends, Subdivisions and Combinations. If the Company shall, at any time or from time to time: (a) make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend payable in, or other distribution of, additional shares of Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (i) the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to the occurrence of any such event shall be adjusted so that the Holder of this Warrant upon exercise on or after that date shall be entitled to receive the aggregate number of Warrant Shares which the Holder of this Warrant would have owned and been entitled to receive as a result of such event had this Warrant been exercised immediately prior thereto, and (ii) the Exercise Price in effect immediately prior to such event shall be adjusted by multiplying such Exercise Price by a fraction, the numerator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event, and the denominator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately thereafter. 2.2 Dividends and Distributions in Other Securities. If the Company shall, at any time or from time to time, make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend or other distribution payable in other securities of the Company or in securities of any subsidiary of the Company (other than shares of Common Stock), then lawful and adequate provision shall be made so that the Holder of this Warrant shall be entitled to receive upon exercise of this Warrant, for the aggregate Exercise Price in effect prior thereto, in addition to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant, the kind and number of other securities of the Company or securities of any subsidiary of the Company, which the Holder would have owned and been entitled to receive had this Warrant been exercised immediately prior to that date. 2.3 Reorganizations, Mergers, Consolidations or Sales of Assets. If any of the following transactions (each, a "Special Transaction") shall become effective: (a) a capital 2 reorganization, whether by reclassification, exchange, substitution or otherwise (other than a stock dividend, subdivision, combination or other distribution provided for elsewhere in this Section 2), (b) a consolidation or merger of the Company with another entity (other than a consolidation or merger in which the Company is the continuing entity), or (c) a sale or conveyance of all or substantially all of the Company's assets; then as a condition of any such Special Transaction, lawful and adequate provision shall be made so that the Holder of this Warrant shall thereafter have the right to purchase and receive upon exercise of this Warrant, in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant, for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock as may be issued or payable in and pursuant to the terms of such Special Transaction to the holders of the shares of Common Stock for which this Warrant could have been exercised immediately prior to such Special Transaction. In connection with any Special Transaction, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions of this Warrant (including without limitation the provisions of this Section 2) shall thereafter be applicable, as nearly as may be practicable, to any shares of stock thereafter deliverable upon the exercise of this Warrant. In the event that all or any portion of the consideration payable in and pursuant to the terms of such Special Transaction to the holders of Common Stock consists of property other than shares of stock then such portion of the Warrant having a value equal to the difference between (x) the aggregate Exercise Price allocable to the non-stock property and (y) the fair market value of such non-stock property, shall, without any action on the part of the Holder, be deemed to be automatically exercised in exchange for such non-stock property and the remaining portion of the Warrant shall entitle the Holder to purchase the shares of stock at an aggregate Exercise Price allocable to the shares of stock. Notwithstanding anything to the contrary set forth herein, if the fair market value of the non-stock property is less than the aggregate Exercise Price allocable to such property then the portion of the Warrant attributable to the non-stock property shall be deemed expired. 2.4 Notice. In the event that: (a) the Company shall fix a record date for the holders of shares of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of shares of Common Stock or other securities of the Company; or (b) the Company shall enter into any agreement or adopt any plan for a capital reorganization of the Company, the consolidation or merger of the Company with or into another entity, or the sale or conveyance of all or substantially all of the assets of the Company to another entity; or (c) the Company shall adopt any plan for or otherwise shall become subject to any voluntary or involuntary dissolution, liquidation or winding up of the Company; or (d) the Company shall propose to take any other action which would require an adjustment pursuant to Section 2.1 through 2.3, then, and in each case, the Company shall mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be: (i) the date on which a record is to be fixed for the purpose of such dividend or distribution, and stating the amount and character of such 3 dividend or distribution, or (ii) the date on which such reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up or other action is to become effective, and the time, if any, to be fixed, as to which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up or other action. Such notice shall be mailed at least 20 days prior to the date therein specified and this Warrant may be exercised prior to said date during the Exercise Period. 2.5 Fractional Interests. The Company shall not be required to issue fractions of shares of Common Stock upon the exercise of this Warrant. If any fraction of a share of Common Stock would be issuable upon the exercise of this Warrant, the Company shall, in lieu of such issuance, pay to the exercising Holder an amount in cash equal to the current value of such fraction, computed on the basis of the Current Market Price of the Common Stock on the last business day prior to the date of exercise upon which a sale of Common Stock shall have been effected. As used in this Warrant, the term "Current Market Price" means with respect to the Common Stock: (a) for so long as the issuer is a Public Entity (as hereafter defined) and the Common Stock is traded on an organized exchange, the average closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ for the immediately preceding five (5) trading days; and (b) for so long as the issuer is not a Public Entity or the Common Stock is not traded on an organized exchange, the price per share of the Common Stock as determined in good faith by the Company's board of directors. If such valuation is objected to by the Holder of this Warrant, such valuation will be made by a reputable investment bank of national standing mutually selected by the Holder and the Company, the expense of which will be paid by the Company. "Public Entity" means an entity (i) whose Common Stock is then registered pursuant to Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended, and (ii) in which the aggregate market value of Common Stock held by non-affiliates which is then available for public trading is not less than Twenty-Five Million Dollars ($25,000,000.00), computed by reference to the closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ. 2.6 Effect of Alternate Securities. If at any time, as a result of an adjustment made pursuant to this Section 2, the Holder of this Warrant shall thereafter become entitled to receive any securities of the Company other than shares of Common Stock, then the number of such other securities receivable upon exercise of this Warrant shall be subject to adjustment from time to time on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares as contained in this Section 2. 2.7 Successive Application; Readjustment. The provisions of this Section 2 shall similarly apply from time to time to successive events covered by this Section. If the Company shall fix a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution and shall, thereafter and before the distribution to shareholder thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record date and any such adjustment previously made in respect thereof shall be rendered void and annulled. 4 2.8 Certificate as to Adjustments. In the event of an adjustment in the number of Warrant Shares or in the Exercise Price, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate executed by an executive officer of the Company setting forth such adjustment and showing in detail the facts upon which such adjustment is based. The Company will forthwith mail a copy of each such certificate to the Holder. III Rights of the Holder -------------------- 3.1 No Rights as Shareholder. The Holder shall not, solely by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, or to receive any notice of special or annual meetings of shareholders, except as may be specifically provided for herein. 3.2 No Impairment; Certain Covenants. The Company shall not by any action including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) take all such action as may be necessary or appropriate in order that the Warrant Shares will, upon issuance in accordance with the terms hereof and the payment of the Exercise Price therefor, be duly authorized, validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof, (b) at all times during the Exercise Period have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant in full, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant; provided that the obligation of the Company to register this Warrant or any Warrant Shares shall be governed by Article 6. IV Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants to and agrees with the Holder as follows: 4.1 Sufficient Shares. The Company has authorized, and shall at all times hereafter reserve and keep available, sufficient shares of Common Stock to fulfill the Company's obligations under this Warrant and all of the other warrants, options and convertible securities issued by the Company. On exercise of this Warrant and satisfaction of the Exercise Price, the Warrant Shares issued to the Holder will be validly issued, fully paid, non-assessable and free and clear of all liens, claims and encumbrances, except as may be permitted by or imposed by the Holder. 5 4.2 Authority. The Company has taken all necessary action to authorize the execution and delivery of this Warrant and the issuance of the Warrant Shares on the exercise of this Warrant. This Warrant is a valid, binding and enforceable obligation of the Company. The execution, delivery and performance of this Warrant will not violate: (a) any provision of the organizational documents or charter of the Company; (b) any order, writ, injunction or decree of any court, administrative agency or governmental body applicable to the Company or the Common Stock; or (c) any material contract, lease, note, bond, mortgage or other material agreement to which the Company is a party, by which the Company is bound or to which any of the Company's assets are subject. 4.3 Interests. The Warrant Shares represent not less than eight and one-half percent (8 1/2%) of the total equity interests of the Company as at the date hereof on a diluted basis and subject to further adjustment as provided herein. 4.4 Registration. If the Warrant Shares or any securities of the Company issuable upon the exercise of the Warrants require registration with, or approval of, any governmental authority (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), or the taking of any other action (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), under the laws of the United States of America or any state or political subdivision thereof, before such securities may be validly offered or sold to the Holder hereunder in compliance with such laws, then the Company covenants that at its expense it will, in good faith and as expeditiously as practicable, endeavor to secure and maintain such registration or approval or to take such other action, as the case may be; provided, however, that the Company will not be required to register this Warrant or any Warrant Shares under any federal or state securities laws except in accordance with Article 6 hereof, or to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. V Restrictive Legend. ------------------- 5.1 This Warrant is being acquired and any Warrant Shares to be acquired by the Holder pursuant to this Warrant (collectively, "Securities") will be acquired for investment for the Holder's own account and not for resale in connection with any distribution of such Securities within the meaning of the Securities Act of 1933 (as amended, the "Securities Act"). The Securities will not be sold, transferred or otherwise disposed of without registration under the Securities Act and state securities laws or qualification for exemptions therefrom. The Holder agrees that, until the Company has caused the registration of such shares under the Securities Act, each certificate evidencing the Warrant Shares may be inscribed with a legend to the foregoing effect, which legend will be as follows: The shares represented by this certificate have been acquired solely for investment purposes and have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction, and may not be sold, transferred, assigned or otherwise disposed of unless and until such shares are first registered or qualified under the Securities Act 6 and all applicable state securities laws and all rules and regulations promulgated thereunder, or unless and until the holder hereof provides an opinion of counsel, in form and substance satisfactory to the Company, that such registration and qualification is not required under applicable law. VI Registration Rights. -------------------- 6.1 Demand Registration. During the Exercise Period the Holder may irrevocably request, not more than two times (the "Demand Registration"), the Company to register under the Securities Act all but not less than 25% of all of the original number of Warrant Shares issuable hereunder (or the Warrant to the extent necessary to be registered in connection with the registration of the Warrant Shares) (collectively, the "Registrable Securities") for sale in the manner specified in such notice; provided, however, that the Company may, by notice to the Holder, delay such Demand Registration if the Company's Board of Directors determines that such registration at the time requested would likely have a material adverse effect on the Company; provided, however, that the Company's ability to delay such registration shall be limited to durations of no longer than ninety (90) days and the Company shall not delay more than once during any twelve (12) month period. The Holder agrees that it shall not be entitled to request a second Demand Registration unless six (6) months has lapsed since the effective date of the registration pursuant to the first Demand Registration. The Company will pay all Registration Expenses in connection with such registration of Registrable Securities requested pursuant to this Section 6.1. As used in this Warrant, the term "Registration Expenses" includes all registration and filing fees, NASDAQ or NASD registration fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities laws, fees of transfer agents and registrars, and the reasonable fees and disbursements of one counsel for the Holder (including the sellers) of the Registrable Securities. The Holder (including the sellers) shall be responsible for the payment of any discounts and/or commissions resulting from the engagement by such Holder of underwriters or placement agents in connection with resales of Registrable Securities subject to registration under this Section 6.1. The Company shall have the right to register the Warrants and Warrant Shares and to maintain all required registrations and filings so that the Warrants and Warrant Shares are freely tradeable at all times. 6.2 Piggy-Back Registration. If the Company proposes to register any of its Common Stock under the Securities Act (other than a registration on Form S-8 or Form S-4 or any successor or similar forms, relating to (i) Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or (ii) in connection with a direct or indirect acquisition by the Company of another entity), whether or not for sale for its own account, it will each such time give prompt written notice at least 15 days prior to the anticipated filing date of the registration statement relating to such registration to the Holder, which notice shall set forth such Holder's rights under this Section 6.2 and shall offer such Holder the opportunity to include in such registration statement such number of Registrable Securities as such Holder may request (a "Piggy-Back Registration"). Subject to the foregoing and the limitation set forth below in this Section 6.2, upon the written request of any 7 Holder made within 5 days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will use reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by such Holder, to the extent required to permit the disposition of the Registrable Securities so to be registered; provided that (A) if such registration involves an underwritten public offering, such Holder requesting to be included in the Company's registration must sell its Registrable Securities to the underwriters on the same terms and conditions as apply to the Company and (B) if, at any time after giving written notice of its intention to register any Registrable Securities pursuant to this Section 6.2 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall, in its sole and absolute discretion, determine for any reason not to register such Registrable Securities, the Company shall give written notice to such Holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 6.2. The Holder shall be responsible for the payment of any discounts and/or commissions resulting from the engagement by such Holder of underwriters or placement agents in connection with resales of Registrable Securities subject to any registration pursuant to this Section 6.2. Notwithstanding any other provision of this Section 6.2, if the underwriter of such registration advises the Company in writing with a copy to the Holders that marketing factors require a limitation of the number of shares of Registrable Securities to be underwritten, the Company shall so advise all Holders, and the number of securities including Registrable Securities that may be included in such registration shall be apportioned pro rata, based on the number of shares requested to be included in such registration by the Holders and by all other holders of securities participating in such registration; provided that in no event will the Holder be entitled pursuant to this Section 6.2 to limit the number of shares that the Company would be entitled to otherwise sell pursuant to its proposed registration. In addition, the rights contained in this Section 6.2 shall not be used in such a way as to limit the number of shares which any other holder of demand registration rights would otherwise be entitled to sell pursuant to a demand for registration made by such holder. 6.3 Holdback Agreements. If any registration of Registrable Securities shall be in connection with an underwritten public offering, the Holder agrees not to effect any sale or distribution, including, without limitation, any sale pursuant to Rule 144 or any provision under the Securities Act, of any Warrant Shares, and not to effect any sale or distribution of any stock convertible into or exchangeable or exercisable for any Common Stock of the Company (in each case, other than as part of such public offering) during the 20 trading days prior to the effective date of such registration statement or during the period after such effective date equal to the lesser of (i) such period of time as agreed between such managing underwriter and the Company and (ii) 180 days. 6.4 Filings; Information. In connection with any registration under this Section 6, the Company will use its reasonable best efforts to effect the registration of such Registrable Securities as promptly as is practicable, and in connection with any such request: (a) The Company shall use its reasonable best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days. 8 (b) The Company will, if requested, prior to filing such registration statement or any amendment or supplement thereto, furnish to the Holder and each applicable managing underwriter, if any, copies thereof, and thereafter furnish to the Holder and each such underwriter, if any, such number of copies of such registration statement, amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such registration statement (including each preliminary prospectus) as the Holder or each such underwriter may reasonably request in order to facilitate the sale of the Registrable Securities. (c) After the filing of the registration statement, the Company will promptly notify the Holder of any stop order issued or, to the Company's knowledge, threatened to be issued by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (d) The Company will endeavor to qualify the Registrable Securities for offer and sale under such other securities or blue sky laws of such jurisdictions in the United States as the Holder reasonably requests; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6.4(d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction. (e) The Company will as promptly as is practicable notify the Holder at any time when a prospectus relating to the sale of the Registrable Securities is required by law to be delivered in connection with sales by an underwriter or dealers of the occurrence of any event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and promptly make available to the Holder and to the underwriters any such supplement or amendment. The Holder agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in the preceding sentence, the Holder will forthwith discontinue the offer and sale of Registrable Securities pursuant to the registration statement covering such Registrable Securities until receipt by the Holder and the underwriters of the copies of such supplemented or amended prospectus and, if so directed by the Company, the Holder will deliver to the Company all copies, other than permanent file copies then in the Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company gives such notice, the Company will extend the period during which such registration statement will be maintained effective as provided in Section 6.4(a) by the number of days during the period from and including the date of the giving of such notice to the date when the Company makes available to the Holder such supplemented or amended prospectus. (f) The Company will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the sale of such Registrable Securities. 9 (g) The Company will use its reasonable best efforts to cause all Warrant Shares to be listed on each securities exchange and/or market on which the Company's shares of Common Stock are then listed, and prepare and file any required filings with the National Association of Securities Dealers, Inc. or any exchange or market where the shares of Common Stock are traded. 6.5 Shareholder Information. The Company may require the Holder promptly to furnish in writing to the Company such information regarding the Holder and its affiliates, its and its affiliates' holdings of securities of the Company, the plan of distribution of the Registrable Securities and other information as the Company may from time to time reasonably request in connection with such registration. 6.6 Company Indemnity. The Company will indemnify the Holder, each of its officers, directors and partners, and each person controlling such Holder, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Article 6, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each Holder, each of its directors, officers and partners, and each person controlling such Holder, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such case to a Holder to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use therein. The indemnity agreement contained in this Section 6.6 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld or delayed). 6.7 Holder Indemnity. Each Holder will, severally and not jointly, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, partners and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, each other Holder (if any), and each of their directors, officers and partners, and each person controlling such other Holder(s), against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, in each case only insofar as such untrue statement 10 or alleged untrue statement or omission relates to such Holder, and will reimburse the Company and each such other Holder and its directors, officers and partners, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such prospectus (including any related registration statement, preliminary prospectus, notification or the like) in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated specifically for use therein, and provided that the maximum amount for which such Holder shall be liable under this indemnity shall not exceed the net proceeds received by such Holder from the sale of the Registrable Securities. The indemnity agreement contained in this Section 6.7 shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld or delayed). 6.9 Procedure. Each party entitled to indemnification under this Article 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld or delayed), and the Indemnified Party may participate in such defense at its expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. 6.10 Contribution. If the indemnification provided for in Article 6 is unavailable to any Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and any Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of such Holder in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of any Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a materiel fact related to information supplied by the Company or by such Holder. 11 In no event shall the obligation of any Indemnifying Party to contribute under this Section 6.10 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 6.6 or 6.7 hereof had been available under the circumstances. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6.10 were determined by pro rata allocation (even if the Holders or the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account the equitable considerations referred to in the immediately preceding paragraphs. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim (unless such defense had been undertaken by the Indemnifying Party). Notwithstanding the provisions of this section, no Holder or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any Holder, the net proceeds received by such Holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such Holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement, omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 6.11 Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the Company and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights. 12 VII Termination. ------------ Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of June 4, 1999 by and among the Company, Bank of America, N.A. as agent and the lenders from time to time party thereto (as amended, modified, supplemented or amended and restated from time to time, the "Credit Agreement"). If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before June 30, 2001, this Warrant shall thereupon expire as to seventy-five percent (75%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before December 31, 2001, this Warrant shall thereupon expire as to fifty percent (50%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. VIII Transfer or Loss of Warrant. ---------------------------- 8.1 Transfer. Subject to compliance with federal and state securities laws, the Holder may sell, assign, transfer or otherwise dispose of all or any portion of this Warrant or the Warrant Shares acquired upon any exercise hereof at any time and from time to time. Upon the sale, assignment, transfer or other disposition of all or any portion of this Warrant, the Holder shall deliver to Company a written notice of such in the form attached hereto as Exhibit B duly executed by Holder which includes the identity and address of any purchaser, assignee, or transferee. On such delivery, the Company will, subject to the conditions set forth herein, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant will promptly be cancelled. The conditions to transferability specified in this Warrant are intended to provide certain protections to the Holder and the Company and to ensure compliance with the provisions of the Securities Act and applicable state securities laws in respect to the transfer of any Warrant or any Warrant Shares and are to be strictly construed. 8.2 Lost, Stolen, Destroyed or Mutilated Warrants. In case any Warrant is mutilated, lost, stolen or destroyed, the Company agrees to issue a new Warrant of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or in lieu of any Warrant lost, stolen or destroyed, on receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant. IX Miscellaneous. -------------- 9.1 Notices. Any notice, demand or communication required or permitted to be given by any provision of this Warrant must be in writing and will be deemed to have been given and received when delivered personally or by telefacsimile to the party designated to receive such notice, or on the date following the day sent by overnight courier, or on the third (3rd) business day after the same is sent by certified mail, postage and charges prepaid, directed to the following addresses or to such other or additional addresses as any party may designate by written notice to the other parties: 13 To the Company: Gerald Stevens, Inc. 1800 Eller Drive Suite 300 Fort Lauderdale, Florida 33316 Attn: President Fax: (954) 627-1330 To the Holder: Bank of America, N.A. 101 North Tryon Street NC1-001-15-04 Charlotte, North Carolina 28255 Attention: Agency Services Fax: (704) 386-9923 9.2 Expenses; Taxes. Any sales tax, stamp duty, deed transfer or other tax (except only taxes based on the income of Holder and taxes arising from the issuance of Warrant Shares in a name other than that of the Holder) arising out of the issuance and sale of this Warrant or the Warrant Shares issuable upon exercise of this Warrant and consummation of the transactions contemplated by this Warrant Certificate shall be paid by the Company. 9.3 Amendment; Waiver. This Warrant Certificate may not be modified, amended, supplemented, cancelled or discharged, except by written instrument executed by the Company and the Holder. No failure to exercise, and no delay in exercising, any right, power or privilege under this Warrant Certificate shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege provided that this Warrant shall not be exercisable subsequent to the expiration of the Exercise Period. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the Company and the Holder. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. 9.4 Headings. The headings contained in this Warrant Certificate are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Warrant Certificate. 9.5 Governing Law. This Warrant is being delivered and is intended to be performed in the State of Florida and will be construed and enforced in accordance with, and the rights of the parties will be governed by, the law of such state, without regard to its conflict of laws principles. 9.6 Severability. Should any part of this Warrant for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in full force and effect as if this Warrant had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties hereto that they would have executed and accepted the remaining portion of this Warrant 14 without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid. [Remainder of page intentionally left blank.] 15 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed and delivered as of the day and year first above written. GERALD STEVENS, INC., a Florida corporation By: -------------------------- Name: Jeffrey M. Mattson Title: Vice President 16 EXHIBIT A --------- EXERCISE NOTICE --------------- [To be executed only upon exercise of Warrant] The undersigned registered owner of the attached Warrant Certificate irrevocably exercises this Warrant for the purchase of the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, and herewith makes payment therefor, all at the price and on the terms and conditions specified in the attached Warrant Certificate and requests that certificates for the shares of Common Stock hereby purchased (and any such securities or other property issuable upon such exercise) be issued in the name of and delivered to the person specified below whose address is set forth below, and, if such shares of Common Stock shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company shall, at its own expense, promptly issue to the undersigned a new Warrant Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder. Date: ------------------------------- Amount of Shares Purchased: ------------------------------------ Aggregate Purchase Price: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Exercise Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Stock Certificates to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 17 EXHIBIT B --------- ASSIGNMENT NOTICE ----------------- [To be executed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the person named below, whose address is set forth below, the rights represented by the attached Warrant Certificate to purchase the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, to which the attached Warrant Certificate relates, and appoints _____________________________________, attorney to transfer such rights on the books of the Company with full power of substitution in the premises. If such shares of Common Stock of the Company shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company, at its own expense, shall promptly issue to the undersigned a new Warrant Certificate of like tenor and date of the balance of the Common Stock issuable thereunder. Date: ------------------------------- Amount of Rights Transferred ------------------------------------ Amount of Rights Retained: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Assignment Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Warrant Certificate for transferred Warrants to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 18 EX-4.3 4 0004.txt COMMON STOCK WARRANT CERTIFICATE THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS, OR GERALD STEVENS, INC. (THE "COMPANY") RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED UNDER APPLICABLE LAW. COMMON STOCK WARRANT CERTIFICATE GERALD STEVENS, INC. November 6, 2000 No. 2 For the Purchase of 535,547 Shares of Common Stock of Gerald Stevens, Inc. FOR VALUE RECEIVED, STEVEN R. BERRARD (including successors, assigns and transfers, the "Holder") or the Holder's registered assigns is hereby granted the right to purchase from Gerald Stevens, Inc., a Florida corporation (the "Company"), 535,547 shares (the "Warrant Shares", which number shall be adjusted from time to time in accordance with Section 2 hereof) of the Company's Common Stock, par value $.01 per share (the "Common Stock"), at a purchase price of $0.01 per share (as adjusted from time to time in accordance with Section 2 hereof, the "Exercise Price") on the terms and conditions set forth in this Warrant (this "Warrant"), exercisable in whole or in part at any time and from time to time from November 6, 2000 until 6:00 p.m. on the date that is three years after the date hereof (the "Exercise Period"), on the terms and condition set forth in this Warrant (this "Warrant"); provided, that until July 1, 2001 not more than twenty-five percent (25%) of the Warrant Shares shall be exercisable and until January 1, 2002, not more than fifty percent (50%) of the Warrant Shares shall be exercisable. I Exercise -------- 1.1 Exercise of Warrant. This Warrant may be exercised, in whole or in part, at any time or from time to time, during the Exercise Period by (i) surrendering this Warrant Certificate, with the form of exercise notice attached hereto as Exhibit A duly executed by the Holder, to the Company at its principal office, and (ii) making payment to the Company of the aggregate Exercise Price for the applicable Warrant Shares in cash, by certified check, bank check or wire transfer to an account designated by the Company. The minimum number of shares of Common Stock with respect to which this Warrant may be exercised, in whole or in part, at any time shall be the lesser of twenty-five percent (25%) of the total number of Warrant Shares which may be purchased under this Warrant or the maximum number of Warrant Shares available for purchase under this Warrant at the time of exercise. Upon any partial exercise of this Warrant, the Company, at its expense, shall promptly issue to the Holder for Holder's surrendered Warrant Certificate a replacement Warrant Certificate identical in all respects to this Warrant Certificate, except that the number of Warrant Shares shall be reduced accordingly. 1.2 Issuance of Warrant Shares. The Warrant Shares purchased by Holder shall be issued as of the close of business on the date on which all actions required to be taken by the Holder and all payments required to be received by the Company, pursuant to Section 1.1, shall have been so taken and received and, the Holder shall be entitled to receive the Warrant Shares or other securities or property (including money) to which the Holder would have been entitled had the Holder been the record holder of such Warrant Shares or other securities or property on such date. Certificates for the Warrant Shares so purchased shall be delivered to the Holder as soon as practicable after this Warrant is surrendered and the Exercise Price is received. II Adjustments to Warrant. ----------------------- The number of Warrant Shares for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth below. 2.1 Stock Dividends, Subdivisions and Combinations. If the Company shall, at any time or from time to time: (a) make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend payable in, or other distribution of, additional shares of Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (i) the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to the occurrence of any such event shall be adjusted so that the Holder of this Warrant upon exercise on or after that date shall be entitled to receive the aggregate number of Warrant Shares which the Holder of this Warrant would have owned and been entitled to receive as a result of such event had this Warrant been exercised immediately prior thereto, and (ii) the Exercise Price in effect immediately prior to such event shall be adjusted by multiplying such Exercise Price by a fraction, the numerator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event, and the denominator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately thereafter. 2.2 Dividends and Distributions in Other Securities. If the Company shall, at any time or from time to time, make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend or other distribution payable in other securities of the Company or in securities of any subsidiary of the Company (other than shares of Common Stock), then lawful and adequate provision shall be made so that the Holder of this Warrant shall be entitled to receive upon exercise of this Warrant, for the aggregate Exercise Price in effect prior thereto, in addition to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant, the kind and number of other securities of the Company or securities of any subsidiary of the Company, which the Holder would have owned and been entitled to receive had this Warrant been exercised immediately prior to that date. 2.3 Reorganizations, Mergers, Consolidations or Sales of Assets. If any of the following transactions (each, a "Special Transaction") shall become effective: (a) a capital reorganization, whether by reclassification, exchange, substitution or otherwise (other than a 2 stock dividend, subdivision, combination or other distribution provided for elsewhere in this Section 2), (b) a consolidation or merger of the Company with another entity (other than a consolidation or merger in which the Company is the continuing entity), or (c) a sale or conveyance of all or substantially all of the Company's assets; then as a condition of any such Special Transaction, lawful and adequate provision shall be made so that the Holder of this Warrant shall thereafter have the right to purchase and receive upon exercise of this Warrant, in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant, for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock as may be issued or payable in and pursuant to the terms of such Special Transaction to the holders of the shares of Common Stock for which this Warrant could have been exercised immediately prior to such Special Transaction. In connection with any Special Transaction, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions of this Warrant (including without limitation the provisions of this Section 2) shall thereafter be applicable, as nearly as may be practicable, to any shares of stock thereafter deliverable upon the exercise of this Warrant. In the event that all or any portion of the consideration payable in and pursuant to the terms of such Special Transaction to the holders of Common Stock consists of property other than shares of stock then such portion of the Warrant having a value equal to the difference between (x) the aggregate Exercise Price allocable to the non-stock property and (y) the fair market value of such non-stock property, shall, without any action on the part of the Holder, be deemed to be automatically exercised in exchange for such non-stock property and the remaining portion of the Warrant shall entitle the Holder to purchase the shares of stock at an aggregate Exercise Price allocable to the shares of stock. Notwithstanding anything to the contrary set forth herein, if the fair market value of the non-stock property is less than the aggregate Exercise Price allocable to such property then the portion of the Warrant attributable to the non-stock property shall be deemed expired. 2.4 Notice. In the event that: (a) the Company shall fix a record date for the holders of shares of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of shares of Common Stock or other securities of the Company; or (b) the Company shall enter into any agreement or adopt any plan for a capital reorganization of the Company, the consolidation or merger of the Company with or into another entity, or the sale or conveyance of all or substantially all of the assets of the Company to another entity; or (c) the Company shall adopt any plan for or otherwise shall become subject to any voluntary or involuntary dissolution, liquidation or winding up of the Company; or (d) the Company shall propose to take any other action which would require an adjustment pursuant to Section 2.1 through 2.3, then, and in each case, the Company shall mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be: (i) the date on which a record is to be fixed for the purpose of such dividend or distribution, and stating the amount and character of such dividend or distribution, or (ii) the date on which such reorganization, consolidation, merger, 3 conveyance, dissolution, liquidation or winding up or other action is to become effective, and the time, if any, to be fixed, as to which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up or other action. Such notice shall be mailed at least 20 days prior to the date therein specified and this Warrant may be exercised prior to said date during the Exercise Period. 2.5 Fractional Interests. The Company shall not be required to issue fractions of shares of Common Stock upon the exercise of this Warrant. If any fraction of a share of Common Stock would be issuable upon the exercise of this Warrant, the Company shall, in lieu of such issuance, pay to the exercising Holder an amount in cash equal to the current value of such fraction, computed on the basis of the Current Market Price of the Common Stock on the last business day prior to the date of exercise upon which a sale of Common Stock shall have been effected. As used in this Warrant, the term "Current Market Price" means with respect to the Common Stock: (a) for so long as the issuer is a Public Entity (as hereafter defined) and the Common Stock is traded on an organized exchange, the average closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ for the immediately preceding five (5) trading days; and (b) for so long as the issuer is not a Public Entity or the Common Stock is not traded on an organized exchange, the price per share of the Common Stock as determined in good faith by the Company's board of directors. If such valuation is objected to by the Holder of this Warrant, such valuation will be made by a reputable investment bank of national standing mutually selected by the Holder and the Company, the expense of which will be paid by the Company. "Public Entity" means an entity (i) whose Common Stock is then registered pursuant to Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended, and (ii) in which the aggregate market value of Common Stock held by non-affiliates which is then available for public trading is not less than Twenty-Five Million Dollars ($25,000,000.00), computed by reference to the closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ. 2.6 Effect of Alternate Securities. If at any time, as a result of an adjustment made pursuant to this Section 2, the Holder of this Warrant shall thereafter become entitled to receive any securities of the Company other than shares of Common Stock, then the number of such other securities receivable upon exercise of this Warrant shall be subject to adjustment from time to time on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares as contained in this Section 2. 2.7 Successive Application; Readjustment. The provisions of this Section 2 shall similarly apply from time to time to successive events covered by this Section. If the Company shall fix a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution and shall, thereafter and before the distribution to shareholder thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record date and any such adjustment previously made in respect thereof shall be rendered void and annulled. 2.8 Certificate as to Adjustments. In the event of an adjustment in the number of Warrant Shares or in the Exercise Price, the Company at its expense will promptly compute such 4 adjustment in accordance with the terms of this Warrant and prepare a certificate executed by an executive officer of the Company setting forth such adjustment and showing in detail the facts upon which such adjustment is based. The Company will forthwith mail a copy of each such certificate to the Holder. III Rights of the Holder -------------------- 3.1 No Rights as Shareholder. The Holder shall not, solely by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, or to receive any notice of special or annual meetings of shareholders, except as may be specifically provided for herein. 3.2 No Impairment; Certain Covenants. The Company shall not by any action including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) take all such action as may be necessary or appropriate in order that the Warrant Shares will, upon issuance in accordance with the terms hereof and the payment of the Exercise Price therefor, be duly authorized, validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof, (b) at all times during the Exercise Period have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant in full, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant; provided that the obligation of the Company to register this Warrant or any Warrant Shares shall be governed by Article 6. IV Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants to and agrees with the Holder as follows: 4.1 Sufficient Shares. The Company has authorized, and shall at all times hereafter reserve and keep available, sufficient shares of Common Stock to fulfill the Company's obligations under this Warrant and all of the other warrants, options and convertible securities issued by the Company. On exercise of this Warrant and satisfaction of the Exercise Price, the Warrant Shares issued to the Holder will be validly issued, fully paid, non-assessable and free and clear of all liens, claims and encumbrances, except as may be permitted by or imposed by the Holder. 4.2 Authority. The Company has taken all necessary action to authorize the execution and delivery of this Warrant and the issuance of the Warrant Shares on the exercise of this Warrant. This Warrant is a valid, binding and enforceable obligation of the Company. The 5 execution, delivery and performance of this Warrant will not violate: (a) any provision of the organizational documents or charter of the Company; (b) any order, writ, injunction or decree of any court, administrative agency or governmental body applicable to the Company or the Common Stock; or (c) any material contract, lease, note, bond, mortgage or other material agreement to which the Company is a party, by which the Company is bound or to which any of the Company's assets are subject. 4.3 Interests. The Warrant Shares represent not less than 0.975 percent of the total equity interests of the Company as at the date hereof on a diluted basis and subject to further adjustment as provided herein. 4.4 Registration. If the Warrant Shares or any securities of the Company issuable upon the exercise of the Warrants require registration with, or approval of, any governmental authority (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), or the taking of any other action (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), under the laws of the United States of America or any state or political subdivision thereof, before such securities may be validly offered or sold to the Holder hereunder in compliance with such laws, then the Company covenants that at its expense it will, in good faith and as expeditiously as practicable, endeavor to secure and maintain such registration or approval or to take such other action, as the case may be; provided, however, that the Company will not be required to register this Warrant or any Warrant Shares under any federal or state securities laws except in accordance with Article 6 hereof, or to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. V Restrictive Legend. ------------------- 5.1 This Warrant is being acquired and any Warrant Shares to be acquired by the Holder pursuant to this Warrant (collectively, "Securities") will be acquired for investment for the Holder's own account and not for resale in connection with any distribution of such Securities within the meaning of the Securities Act of 1933 (as amended, the "Securities Act"). The Securities will not be sold, transferred or otherwise disposed of without registration under the Securities Act and state securities laws or qualification for exemptions therefrom. The Holder agrees that, until the Company has caused the registration of such shares under the Securities Act, each certificate evidencing the Warrant Shares may be inscribed with a legend to the foregoing effect, which legend will be as follows: The shares represented by this certificate have been acquired solely for investment purposes and have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction, and may not be sold, transferred, assigned or otherwise disposed of unless and until such shares are first registered or qualified under the Securities Act and all applicable state securities laws and all rules and regulations promulgated thereunder, or unless and until the holder hereof provides an opinion of counsel, in form and substance satisfactory 6 to the Company, that such registration and qualification is not required under applicable law. VI Registration Rights. -------------------- 6.1 Intentionally omitted. --------------------- 6.2 Piggy-Back Registration. If the Company proposes to register any of its Common Stock under the Securities Act (other than a registration on Form S-8 or Form S-4 or any successor or similar forms, relating to (i) Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or (ii) in connection with a direct or indirect acquisition by the Company of another entity), whether or not for sale for its own account, it will each such time give prompt written notice at least 15 days prior to the anticipated filing date of the registration statement relating to such registration to the Holder, which notice shall set forth such Holder's rights under this Section 6.2 and shall offer such Holder the opportunity to include in such registration statement such number of Registrable Securities as such Holder may request (a "Piggy-Back Registration"). Subject to the foregoing and the limitation set forth below in this Section 6.2, upon the written request of any Holder made within 5 days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will use reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by such Holder, to the extent required to permit the disposition of the Registrable Securities so to be registered; provided that (A) if such registration involves an underwritten public offering, such Holder requesting to be included in the Company's registration must sell its Registrable Securities to the underwriters on the same terms and conditions as apply to the Company and (B) if, at any time after giving written notice of its intention to register any Registrable Securities pursuant to this Section 6.2 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall, in its sole and absolute discretion, determine for any reason not to register such Registrable Securities, the Company shall give written notice to such Holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 6.2. The Holder shall be responsible for the payment of any discounts and/or commissions resulting from the engagement by such Holder of underwriters or placement agents in connection with resales of Registrable Securities subject to any registration pursuant to this Section 6.2. Notwithstanding any other provision of this Section 6.2, if the underwriter of such registration advises the Company in writing with a copy to the Holders that marketing factors require a limitation of the number of shares of Registrable Securities to be underwritten, the Company shall so advise all Holders, and the number of securities including Registrable Securities that may be included in such registration shall be apportioned pro rata, based on the number of shares requested to be included in such registration by the Holders and by all other holders of securities participating in such registration; provided that in no event will the Holder be entitled pursuant to this Section 6.2 to limit the number of shares that the Company would be entitled to otherwise sell pursuant to its proposed registration. In addition, the rights contained in this Section 6.2 shall not be used in such a way as to limit the 7 number of shares which any other holder of demand registration rights would otherwise be entitled to sell pursuant to a demand for registration made by such holder. 6.3 Holdback Agreements. If any registration of Registrable Securities shall be in connection with an underwritten public offering, the Holder agrees not to effect any sale or distribution, including, without limitation, any sale pursuant to Rule 144 or any provision under the Securities Act, of any Warrant Shares, and not to effect any sale or distribution of any stock convertible into or exchangeable or exercisable for any Common Stock of the Company (in each case, other than as part of such public offering) during the 20 trading days prior to the effective date of such registration statement or during the period after such effective date equal to the lesser of (i) such period of time as agreed between such managing underwriter and the Company and (ii) 180 days. 6.4 Filings; Information. In connection with any registration under this Section 6, the Company will use its reasonable best efforts to effect the registration of such Registrable Securities as promptly as is practicable, and in connection with any such request: (a) The Company shall use its reasonable best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days. (b) The Company will, if requested, prior to filing such registration statement or any amendment or supplement thereto, furnish to the Holder and each applicable managing underwriter, if any, copies thereof, and thereafter furnish to the Holder and each such underwriter, if any, such number of copies of such registration statement, amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such registration statement (including each preliminary prospectus) as the Holder or each such underwriter may reasonably request in order to facilitate the sale of the Registrable Securities. (c) After the filing of the registration statement, the Company will promptly notify the Holder of any stop order issued or, to the Company's knowledge, threatened to be issued by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (d) The Company will endeavor to qualify the Registrable Securities for offer and sale under such other securities or blue sky laws of such jurisdictions in the United States as the Holder reasonably requests; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6.4(d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction. (e) The Company will as promptly as is practicable notify the Holder at any time when a prospectus relating to the sale of the Registrable Securities is required by law to be delivered in connection with sales by an underwriter or dealers of the occurrence of any event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein 8 or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and promptly make available to the Holder and to the underwriters any such supplement or amendment. The Holder agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in the preceding sentence, the Holder will forthwith discontinue the offer and sale of Registrable Securities pursuant to the registration statement covering such Registrable Securities until receipt by the Holder and the underwriters of the copies of such supplemented or amended prospectus and, if so directed by the Company, the Holder will deliver to the Company all copies, other than permanent file copies then in the Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company gives such notice, the Company will extend the period during which such registration statement will be maintained effective as provided in Section 6.4(a) by the number of days during the period from and including the date of the giving of such notice to the date when the Company makes available to the Holder such supplemented or amended prospectus. (f) The Company will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the sale of such Registrable Securities. (g) The Company will use its reasonable best efforts to cause all Warrant Shares to be listed on each securities exchange and/or market on which the Company's shares of Common Stock are then listed, and prepare and file any required filings with the National Association of Securities Dealers, Inc. or any exchange or market where the shares of Common Stock are traded. 6.5 Shareholder Information. The Company may require the Holder promptly to furnish in writing to the Company such information regarding the Holder and its affiliates, its and its affiliates' holdings of securities of the Company, the plan of distribution of the Registrable Securities and other information as the Company may from time to time reasonably request in connection with such registration. 6.6 Company Indemnity. The Company will indemnify the Holder, each of its officers, directors and partners, and each person controlling such Holder, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Article 6, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each Holder, each of its directors, officers and partners, and each person controlling such Holder, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such 9 case to a Holder to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use therein. The indemnity agreement contained in this Section 6.6 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld or delayed). 6.7 Holder Indemnity. Each Holder will, severally and not jointly, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, partners and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, each other Holder (if any), and each of their directors, officers and partners, and each person controlling such other Holder(s), against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, in each case only insofar as such untrue statement or alleged untrue statement or omission relates to such Holder, and will reimburse the Company and each such other Holder and its directors, officers and partners, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such prospectus (including any related registration statement, preliminary prospectus, notification or the like) in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated specifically for use therein, and provided that the maximum amount for which such Holder shall be liable under this indemnity shall not exceed the net proceeds received by such Holder from the sale of the Registrable Securities. The indemnity agreement contained in this Section 6.7 shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld or delayed). 6.9 Procedure. Each party entitled to indemnification under this Article 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld or delayed), and the Indemnified Party may participate in such defense at its expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any 10 settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. 6.10 Contribution. If the indemnification provided for in Article 6 is unavailable to any Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and any Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of such Holder in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of any Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a materiel fact related to information supplied by the Company or by such Holder. In no event shall the obligation of any Indemnifying Party to contribute under this Section 6.10 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 6.6 or 6.7 hereof had been available under the circumstances. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6.10 were determined by pro rata allocation (even if the Holders or the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account the equitable considerations referred to in the immediately preceding paragraphs. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim (unless such defense had been undertaken by the Indemnifying Party). Notwithstanding the provisions of this section, no Holder or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any Holder, the net proceeds received by such Holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such Holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement, omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 6.11 Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the Company and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting 11 agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights. VII Termination. ------------ Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of June 4, 1999 by and among the Company, Bank of America, N.A. as agent and the lenders from time to time party thereto (as amended, modified, supplemented or amended and restated from time to time, the "Credit Agreement"). If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before June 30, 2001, this Warrant shall thereupon expire as to seventy-five percent (75%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before December 31, 2001, this Warrant shall thereupon expire as to fifty percent (50%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. VIII Transfer or Loss of Warrant. ---------------------------- 8.1 Transfer. Subject to compliance with federal and state securities laws, the Holder may sell, assign, transfer or otherwise dispose of all or any portion of this Warrant or the Warrant Shares acquired upon any exercise hereof at any time and from time to time. Upon the sale, assignment, transfer or other disposition of all or any portion of this Warrant, the Holder shall deliver to Company a written notice of such in the form attached hereto as Exhibit B duly executed by Holder which includes the identity and address of any purchaser, assignee, or transferee. On such delivery, the Company will, subject to the conditions set forth herein, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant will promptly be cancelled. The conditions to transferability specified in this Warrant are intended to provide certain protections to the Holder and the Company and to ensure compliance with the provisions of the Securities Act and applicable state securities laws in respect to the transfer of any Warrant or any Warrant Shares and are to be strictly construed. 8.2 Lost, Stolen, Destroyed or Mutilated Warrants. In case any Warrant is mutilated, lost, stolen or destroyed, the Company agrees to issue a new Warrant of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or in lieu of any Warrant lost, stolen or destroyed, on receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant. IX Miscellaneous. -------------- 9.1 Notices. Any notice, demand or communication required or permitted to be given by any provision of this Warrant must be in writing and will be deemed to have been given and received when delivered personally or by telefacsimile to the party designated to receive such notice, or on the date following the day sent by overnight courier, or on the third (3rd) business day after the same is sent by certified mail, postage and charges prepaid, directed to the 12 following addresses or to such other or additional addresses as any party may designate by written notice to the other parties: To the Company: Gerald Stevens, Inc. 1800 Eller Drive Suite 300 Fort Lauderdale, Florida 33316 Attn: President Fax: (954) 627-1330 To the Holder: Steven R. Berrard New River Capital Partners One Financial Plaza Suite 1100 Fort Lauderdale, Florida 33394 Fax: (954) 713-1175 9.2 Expenses; Taxes. Any sales tax, stamp duty, deed transfer or other tax (except only taxes based on the income of Holder and taxes arising from the issuance of Warrant Shares in a name other than that of the Holder) arising out of the issuance and sale of this Warrant or the Warrant Shares issuable upon exercise of this Warrant and consummation of the transactions contemplated by this Warrant Certificate shall be paid by the Company. 9.3 Amendment; Waiver. This Warrant Certificate may not be modified, amended, supplemented, cancelled or discharged, except by written instrument executed by the Company and the Holder. No failure to exercise, and no delay in exercising, any right, power or privilege under this Warrant Certificate shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege provided that this Warrant shall not be exercisable subsequent to the expiration of the Exercise Period. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the Company and the Holder. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. 9.4 Headings. The headings contained in this Warrant Certificate are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Warrant Certificate. 9.5 Governing Law. This Warrant is being delivered and is intended to be performed in the State of Florida and will be construed and enforced in accordance with, and the rights of the parties will be governed by, the law of such state, without regard to its conflict of laws principles. 9.6 Severability. Should any part of this Warrant for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in full force and effect as if this Warrant had been 13 executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties hereto that they would have executed and accepted the remaining portion of this Warrant without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid. [Remainder of page intentionally left blank.] 14 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed and delivered as of the day and year first above written. GERALD STEVENS, INC., a Florida corporation By: ----------------------- Name: Jeffrey M. Mattson Title: Vice President 15 EXHIBIT A --------- EXERCISE NOTICE --------------- [To be executed only upon exercise of Warrant] The undersigned registered owner of the attached Warrant Certificate irrevocably exercises this Warrant for the purchase of the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, and herewith makes payment therefor, all at the price and on the terms and conditions specified in the attached Warrant Certificate and requests that certificates for the shares of Common Stock hereby purchased (and any such securities or other property issuable upon such exercise) be issued in the name of and delivered to the person specified below whose address is set forth below, and, if such shares of Common Stock shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company shall, at its own expense, promptly issue to the undersigned a new Warrant Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder. Date: ------------------------------- Amount of Shares Purchased: ------------------------------------ Aggregate Purchase Price: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Exercise Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Stock Certificates to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 16 EXHIBIT B --------- ASSIGNMENT NOTICE ----------------- [To be executed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the person named below, whose address is set forth below, the rights represented by the attached Warrant Certificate to purchase the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, to which the attached Warrant Certificate relates, and appoints _____________________________________, attorney to transfer such rights on the books of the Company with full power of substitution in the premises. If such shares of Common Stock of the Company shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company, at its own expense, shall promptly issue to the undersigned a new Warrant Certificate of like tenor and date of the balance of the Common Stock issuable thereunder. Date: ------------------------------- Amount of Rights Transferred ------------------------------------ Amount of Rights Retained: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Assignment Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Warrant Certificate for transferred Warrants to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 17 EX-4.4 5 0005.txt COMMON STOCK WARRANT CERTIFICATE THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS, OR GERALD STEVENS, INC. (THE "COMPANY") RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED UNDER APPLICABLE LAW. COMMON STOCK WARRANT CERTIFICATE GERALD STEVENS, INC. November 6, 2000 No. 3 For the Purchase of 123,588 Shares of Common Stock of Gerald Stevens, Inc. FOR VALUE RECEIVED, JOHN G. HALL (including successors, assigns and transfers, the "Holder") or the Holder's registered assigns is hereby granted the right to purchase from Gerald Stevens, Inc., a Florida corporation (the "Company"), 123,588 shares (the "Warrant Shares", which number shall be adjusted from time to time in accordance with Section 2 hereof) of the Company's Common Stock, par value $.01 per share (the "Common Stock"), at a purchase price of $0.01 per share (as adjusted from time to time in accordance with Section 2 hereof, the "Exercise Price") on the terms and conditions set forth in this Warrant (this "Warrant"), exercisable in whole or in part at any time and from time to time from November 6, 2000 until 6:00 p.m. on the date that is three years after the date hereof (the "Exercise Period"), on the terms and condition set forth in this Warrant (this "Warrant"); provided, that until July 1, 2001 not more than twenty-five percent (25%) of the Warrant Shares shall be exercisable and until January 1, 2002, not more than fifty percent (50%) of the Warrant Shares shall be exercisable. I Exercise -------- 1.1 Exercise of Warrant. This Warrant may be exercised, in whole or in part, at any time or from time to time, during the Exercise Period by (i) surrendering this Warrant Certificate, with the form of exercise notice attached hereto as Exhibit A duly executed by the Holder, to the Company at its principal office, and (ii) making payment to the Company of the aggregate Exercise Price for the applicable Warrant Shares in cash, by certified check, bank check or wire transfer to an account designated by the Company. The minimum number of shares of Common Stock with respect to which this Warrant may be exercised, in whole or in part, at any time shall be the lesser of twenty-five percent (25%) of the total number of Warrant Shares which may be purchased under this Warrant or the maximum number of Warrant Shares available for purchase under this Warrant at the time of exercise. Upon any partial exercise of this Warrant, the Company, at its expense, shall promptly issue to the Holder for Holder's surrendered Warrant Certificate a replacement Warrant Certificate identical in all respects to this Warrant Certificate, except that the number of Warrant Shares shall be reduced accordingly. 1.2 Issuance of Warrant Shares. The Warrant Shares purchased by Holder shall be issued as of the close of business on the date on which all actions required to be taken by the Holder and all payments required to be received by the Company, pursuant to Section 1.1, shall have been so taken and received and, the Holder shall be entitled to receive the Warrant Shares or other securities or property (including money) to which the Holder would have been entitled had the Holder been the record holder of such Warrant Shares or other securities or property on such date. Certificates for the Warrant Shares so purchased shall be delivered to the Holder as soon as practicable after this Warrant is surrendered and the Exercise Price is received. II Adjustments to Warrant. ----------------------- The number of Warrant Shares for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth below. 2.1 Stock Dividends, Subdivisions and Combinations. If the Company shall, at any time or from time to time: (a) make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend payable in, or other distribution of, additional shares of Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (i) the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to the occurrence of any such event shall be adjusted so that the Holder of this Warrant upon exercise on or after that date shall be entitled to receive the aggregate number of Warrant Shares which the Holder of this Warrant would have owned and been entitled to receive as a result of such event had this Warrant been exercised immediately prior thereto, and (ii) the Exercise Price in effect immediately prior to such event shall be adjusted by multiplying such Exercise Price by a fraction, the numerator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event, and the denominator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately thereafter. 2.2 Dividends and Distributions in Other Securities. If the Company shall, at any time or from time to time, make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend or other distribution payable in other securities of the Company or in securities of any subsidiary of the Company (other than shares of Common Stock), then lawful and adequate provision shall be made so that the Holder of this Warrant shall be entitled to receive upon exercise of this Warrant, for the aggregate Exercise Price in effect prior thereto, in addition to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant, the kind and number of other securities of the Company or securities of any subsidiary of the Company, which the Holder would have owned and been entitled to receive had this Warrant been exercised immediately prior to that date. 2.3 Reorganizations, Mergers, Consolidations or Sales of Assets. If any of the following transactions (each, a "Special Transaction") shall become effective: (a) a capital reorganization, whether by reclassification, exchange, substitution or otherwise (other than a 2 stock dividend, subdivision, combination or other distribution provided for elsewhere in this Section 2), (b) a consolidation or merger of the Company with another entity (other than a consolidation or merger in which the Company is the continuing entity), or (c) a sale or conveyance of all or substantially all of the Company's assets; then as a condition of any such Special Transaction, lawful and adequate provision shall be made so that the Holder of this Warrant shall thereafter have the right to purchase and receive upon exercise of this Warrant, in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant, for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock as may be issued or payable in and pursuant to the terms of such Special Transaction to the holders of the shares of Common Stock for which this Warrant could have been exercised immediately prior to such Special Transaction. In connection with any Special Transaction, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions of this Warrant (including without limitation the provisions of this Section 2) shall thereafter be applicable, as nearly as may be practicable, to any shares of stock thereafter deliverable upon the exercise of this Warrant. In the event that all or any portion of the consideration payable in and pursuant to the terms of such Special Transaction to the holders of Common Stock consists of property other than shares of stock then such portion of the Warrant having a value equal to the difference between (x) the aggregate Exercise Price allocable to the non-stock property and (y) the fair market value of such non-stock property, shall, without any action on the part of the Holder, be deemed to be automatically exercised in exchange for such non-stock property and the remaining portion of the Warrant shall entitle the Holder to purchase the shares of stock at an aggregate Exercise Price allocable to the shares of stock. Notwithstanding anything to the contrary set forth herein, if the fair market value of the non-stock property is less than the aggregate Exercise Price allocable to such property then the portion of the Warrant attributable to the non-stock property shall be deemed expired. 2.4 Notice. In the event that: (a) the Company shall fix a record date for the holders of shares of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of shares of Common Stock or other securities of the Company; or (b) the Company shall enter into any agreement or adopt any plan for a capital reorganization of the Company, the consolidation or merger of the Company with or into another entity, or the sale or conveyance of all or substantially all of the assets of the Company to another entity; or (c) the Company shall adopt any plan for or otherwise shall become subject to any voluntary or involuntary dissolution, liquidation or winding up of the Company; or (d) the Company shall propose to take any other action which would require an adjustment pursuant to Section 2.1 through 2.3, then, and in each case, the Company shall mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be: (i) the date on which a record is to be fixed for the purpose of such dividend or distribution, and stating the amount and character of such dividend or distribution, or (ii) the date on which such reorganization, consolidation, merger, 3 conveyance, dissolution, liquidation or winding up or other action is to become effective, and the time, if any, to be fixed, as to which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up or other action. Such notice shall be mailed at least 20 days prior to the date therein specified and this Warrant may be exercised prior to said date during the Exercise Period. 2.5 Fractional Interests. The Company shall not be required to issue fractions of shares of Common Stock upon the exercise of this Warrant. If any fraction of a share of Common Stock would be issuable upon the exercise of this Warrant, the Company shall, in lieu of such issuance, pay to the exercising Holder an amount in cash equal to the current value of such fraction, computed on the basis of the Current Market Price of the Common Stock on the last business day prior to the date of exercise upon which a sale of Common Stock shall have been effected. As used in this Warrant, the term "Current Market Price" means with respect to the Common Stock: (a) for so long as the issuer is a Public Entity (as hereafter defined) and the Common Stock is traded on an organized exchange, the average closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ for the immediately preceding five (5) trading days; and (b) for so long as the issuer is not a Public Entity or the Common Stock is not traded on an organized exchange, the price per share of the Common Stock as determined in good faith by the Company's board of directors. If such valuation is objected to by the Holder of this Warrant, such valuation will be made by a reputable investment bank of national standing mutually selected by the Holder and the Company, the expense of which will be paid by the Company. "Public Entity" means an entity (i) whose Common Stock is then registered pursuant to Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended, and (ii) in which the aggregate market value of Common Stock held by non-affiliates which is then available for public trading is not less than Twenty-Five Million Dollars ($25,000,000.00), computed by reference to the closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ. 2.6 Effect of Alternate Securities. If at any time, as a result of an adjustment made pursuant to this Section 2, the Holder of this Warrant shall thereafter become entitled to receive any securities of the Company other than shares of Common Stock, then the number of such other securities receivable upon exercise of this Warrant shall be subject to adjustment from time to time on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares as contained in this Section 2. 2.7 Successive Application; Readjustment. The provisions of this Section 2 shall similarly apply from time to time to successive events covered by this Section. If the Company shall fix a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution and shall, thereafter and before the distribution to shareholder thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record date and any such adjustment previously made in respect thereof shall be rendered void and annulled. 2.8 Certificate as to Adjustments. In the event of an adjustment in the number of Warrant Shares or in the Exercise Price, the Company at its expense will promptly compute such 4 adjustment in accordance with the terms of this Warrant and prepare a certificate executed by an executive officer of the Company setting forth such adjustment and showing in detail the facts upon which such adjustment is based. The Company will forthwith mail a copy of each such certificate to the Holder. III Rights of the Holder -------------------- 3.1 No Rights as Shareholder. The Holder shall not, solely by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, or to receive any notice of special or annual meetings of shareholders, except as may be specifically provided for herein. 3.2 No Impairment; Certain Covenants. The Company shall not by any action including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) take all such action as may be necessary or appropriate in order that the Warrant Shares will, upon issuance in accordance with the terms hereof and the payment of the Exercise Price therefor, be duly authorized, validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof, (b) at all times during the Exercise Period have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant in full, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant; provided that the obligation of the Company to register this Warrant or any Warrant Shares shall be governed by Article 6. IV Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants to and agrees with the Holder as follows: 4.1 Sufficient Shares. The Company has authorized, and shall at all times hereafter reserve and keep available, sufficient shares of Common Stock to fulfill the Company's obligations under this Warrant and all of the other warrants, options and convertible securities issued by the Company. On exercise of this Warrant and satisfaction of the Exercise Price, the Warrant Shares issued to the Holder will be validly issued, fully paid, non-assessable and free and clear of all liens, claims and encumbrances, except as may be permitted by or imposed by the Holder. 4.2 Authority. The Company has taken all necessary action to authorize the execution and delivery of this Warrant and the issuance of the Warrant Shares on the exercise of this Warrant. This Warrant is a valid, binding and enforceable obligation of the Company. The 5 execution, delivery and performance of this Warrant will not violate: (a) any provision of the organizational documents or charter of the Company; (b) any order, writ, injunction or decree of any court, administrative agency or governmental body applicable to the Company or the Common Stock; or (c) any material contract, lease, note, bond, mortgage or other material agreement to which the Company is a party, by which the Company is bound or to which any of the Company's assets are subject. 4.3 Interests. The Warrant Shares represent not less than 0.225 percent of the total equity interests of the Company as at the date hereof on a diluted basis and subject to further adjustment as provided herein. 4.4 Registration. If the Warrant Shares or any securities of the Company issuable upon the exercise of the Warrants require registration with, or approval of, any governmental authority (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), or the taking of any other action (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), under the laws of the United States of America or any state or political subdivision thereof, before such securities may be validly offered or sold to the Holder hereunder in compliance with such laws, then the Company covenants that at its expense it will, in good faith and as expeditiously as practicable, endeavor to secure and maintain such registration or approval or to take such other action, as the case may be; provided, however, that the Company will not be required to register this Warrant or any Warrant Shares under any federal or state securities laws except in accordance with Article 6 hereof, or to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. V Restrictive Legend. ------------------- 5.1 This Warrant is being acquired and any Warrant Shares to be acquired by the Holder pursuant to this Warrant (collectively, "Securities") will be acquired for investment for the Holder's own account and not for resale in connection with any distribution of such Securities within the meaning of the Securities Act of 1933 (as amended, the "Securities Act"). The Securities will not be sold, transferred or otherwise disposed of without registration under the Securities Act and state securities laws or qualification for exemptions therefrom. The Holder agrees that, until the Company has caused the registration of such shares under the Securities Act, each certificate evidencing the Warrant Shares may be inscribed with a legend to the foregoing effect, which legend will be as follows: The shares represented by this certificate have been acquired solely for investment purposes and have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction, and may not be sold, transferred, assigned or otherwise disposed of unless and until such shares are first registered or qualified under the Securities Act and all applicable state securities laws and all rules and regulations promulgated thereunder, or unless and until the holder hereof provides an opinion of counsel, in form and substance satisfactory 6 to the Company, that such registration and qualification is not required under applicable law. VI Registration Rights. -------------------- 6.1 Intentionally omitted. --------------------- 6.2 Piggy-Back Registration. If the Company proposes to register any of its Common Stock under the Securities Act (other than a registration on Form S-8 or Form S-4 or any successor or similar forms, relating to (i) Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or (ii) in connection with a direct or indirect acquisition by the Company of another entity), whether or not for sale for its own account, it will each such time give prompt written notice at least 15 days prior to the anticipated filing date of the registration statement relating to such registration to the Holder, which notice shall set forth such Holder's rights under this Section 6.2 and shall offer such Holder the opportunity to include in such registration statement such number of Registrable Securities as such Holder may request (a "Piggy-Back Registration"). Subject to the foregoing and the limitation set forth below in this Section 6.2, upon the written request of any Holder made within 5 days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will use reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by such Holder, to the extent required to permit the disposition of the Registrable Securities so to be registered; provided that (A) if such registration involves an underwritten public offering, such Holder requesting to be included in the Company's registration must sell its Registrable Securities to the underwriters on the same terms and conditions as apply to the Company and (B) if, at any time after giving written notice of its intention to register any Registrable Securities pursuant to this Section 6.2 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall, in its sole and absolute discretion, determine for any reason not to register such Registrable Securities, the Company shall give written notice to such Holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 6.2. The Holder shall be responsible for the payment of any discounts and/or commissions resulting from the engagement by such Holder of underwriters or placement agents in connection with resales of Registrable Securities subject to any registration pursuant to this Section 6.2. Notwithstanding any other provision of this Section 6.2, if the underwriter of such registration advises the Company in writing with a copy to the Holders that marketing factors require a limitation of the number of shares of Registrable Securities to be underwritten, the Company shall so advise all Holders, and the number of securities including Registrable Securities that may be included in such registration shall be apportioned pro rata, based on the number of shares requested to be included in such registration by the Holders and by all other holders of securities participating in such registration; provided that in no event will the Holder be entitled pursuant to this Section 6.2 to limit the number of shares that the Company would be entitled to otherwise sell pursuant to its proposed registration. In addition, the rights contained in this Section 6.2 shall not be used in such a way as to limit the 7 number of shares which any other holder of demand registration rights would otherwise be entitled to sell pursuant to a demand for registration made by such holder. 6.3 Holdback Agreements. If any registration of Registrable Securities shall be in connection with an underwritten public offering, the Holder agrees not to effect any sale or distribution, including, without limitation, any sale pursuant to Rule 144 or any provision under the Securities Act, of any Warrant Shares, and not to effect any sale or distribution of any stock convertible into or exchangeable or exercisable for any Common Stock of the Company (in each case, other than as part of such public offering) during the 20 trading days prior to the effective date of such registration statement or during the period after such effective date equal to the lesser of (i) such period of time as agreed between such managing underwriter and the Company and (ii) 180 days. 6.4 Filings; Information. In connection with any registration under this Section 6, the Company will use its reasonable best efforts to effect the registration of such Registrable Securities as promptly as is practicable, and in connection with any such request: (a) The Company shall use its reasonable best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days. (b) The Company will, if requested, prior to filing such registration statement or any amendment or supplement thereto, furnish to the Holder and each applicable managing underwriter, if any, copies thereof, and thereafter furnish to the Holder and each such underwriter, if any, such number of copies of such registration statement, amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such registration statement (including each preliminary prospectus) as the Holder or each such underwriter may reasonably request in order to facilitate the sale of the Registrable Securities. (c) After the filing of the registration statement, the Company will promptly notify the Holder of any stop order issued or, to the Company's knowledge, threatened to be issued by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (d) The Company will endeavor to qualify the Registrable Securities for offer and sale under such other securities or blue sky laws of such jurisdictions in the United States as the Holder reasonably requests; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6.4(d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction. (e) The Company will as promptly as is practicable notify the Holder at any time when a prospectus relating to the sale of the Registrable Securities is required by law to be delivered in connection with sales by an underwriter or dealers of the occurrence of any event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein 8 or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and promptly make available to the Holder and to the underwriters any such supplement or amendment. The Holder agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in the preceding sentence, the Holder will forthwith discontinue the offer and sale of Registrable Securities pursuant to the registration statement covering such Registrable Securities until receipt by the Holder and the underwriters of the copies of such supplemented or amended prospectus and, if so directed by the Company, the Holder will deliver to the Company all copies, other than permanent file copies then in the Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company gives such notice, the Company will extend the period during which such registration statement will be maintained effective as provided in Section 6.4(a) by the number of days during the period from and including the date of the giving of such notice to the date when the Company makes available to the Holder such supplemented or amended prospectus. (f) The Company will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the sale of such Registrable Securities. (g) The Company will use its reasonable best efforts to cause all Warrant Shares to be listed on each securities exchange and/or market on which the Company's shares of Common Stock are then listed, and prepare and file any required filings with the National Association of Securities Dealers, Inc. or any exchange or market where the shares of Common Stock are traded. 6.5 Shareholder Information. The Company may require the Holder promptly to furnish in writing to the Company such information regarding the Holder and its affiliates, its and its affiliates' holdings of securities of the Company, the plan of distribution of the Registrable Securities and other information as the Company may from time to time reasonably request in connection with such registration. 6.6 Company Indemnity. The Company will indemnify the Holder, each of its officers, directors and partners, and each person controlling such Holder, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Article 6, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each Holder, each of its directors, officers and partners, and each person controlling such Holder, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such 9 case to a Holder to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use therein. The indemnity agreement contained in this Section 6.6 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld or delayed). 6.7 Holder Indemnity. Each Holder will, severally and not jointly, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, partners and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, each other Holder (if any), and each of their directors, officers and partners, and each person controlling such other Holder(s), against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, in each case only insofar as such untrue statement or alleged untrue statement or omission relates to such Holder, and will reimburse the Company and each such other Holder and its directors, officers and partners, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such prospectus (including any related registration statement, preliminary prospectus, notification or the like) in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated specifically for use therein, and provided that the maximum amount for which such Holder shall be liable under this indemnity shall not exceed the net proceeds received by such Holder from the sale of the Registrable Securities. The indemnity agreement contained in this Section 6.7 shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld or delayed). 6.9 Procedure. Each party entitled to indemnification under this Article 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld or delayed), and the Indemnified Party may participate in such defense at its expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any 10 settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. 6.10 Contribution. If the indemnification provided for in Article 6 is unavailable to any Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and any Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of such Holder in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of any Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a materiel fact related to information supplied by the Company or by such Holder. In no event shall the obligation of any Indemnifying Party to contribute under this Section 6.10 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 6.6 or 6.7 hereof had been available under the circumstances. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6.10 were determined by pro rata allocation (even if the Holders or the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account the equitable considerations referred to in the immediately preceding paragraphs. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim (unless such defense had been undertaken by the Indemnifying Party). Notwithstanding the provisions of this section, no Holder or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any Holder, the net proceeds received by such Holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such Holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement, omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 6.11 Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the Company and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting 11 agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights. VII Termination. ------------ Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of June 4, 1999 by and among the Company, Bank of America, N.A. as agent and the lenders from time to time party thereto (as amended, modified, supplemented or amended and restated from time to time, the "Credit Agreement"). If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before June 30, 2001, this Warrant shall thereupon expire as to seventy-five percent (75%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before December 31, 2001, this Warrant shall thereupon expire as to fifty percent (50%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. VIII Transfer or Loss of Warrant. ---------------------------- 8.1 Transfer. Subject to compliance with federal and state securities laws, the Holder may sell, assign, transfer or otherwise dispose of all or any portion of this Warrant or the Warrant Shares acquired upon any exercise hereof at any time and from time to time. Upon the sale, assignment, transfer or other disposition of all or any portion of this Warrant, the Holder shall deliver to Company a written notice of such in the form attached hereto as Exhibit B duly executed by Holder which includes the identity and address of any purchaser, assignee, or transferee. On such delivery, the Company will, subject to the conditions set forth herein, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant will promptly be cancelled. The conditions to transferability specified in this Warrant are intended to provide certain protections to the Holder and the Company and to ensure compliance with the provisions of the Securities Act and applicable state securities laws in respect to the transfer of any Warrant or any Warrant Shares and are to be strictly construed. 8.2 Lost, Stolen, Destroyed or Mutilated Warrants. In case any Warrant is mutilated, lost, stolen or destroyed, the Company agrees to issue a new Warrant of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or in lieu of any Warrant lost, stolen or destroyed, on receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant. IX Miscellaneous. -------------- 9.1 Notices. Any notice, demand or communication required or permitted to be given by any provision of this Warrant must be in writing and will be deemed to have been given and received when delivered personally or by telefacsimile to the party designated to receive such notice, or on the date following the day sent by overnight courier, or on the third (3rd) business day after the same is sent by certified mail, postage and charges prepaid, directed to the 12 following addresses or to such other or additional addresses as any party may designate by written notice to the other parties: To the Company: Gerald Stevens, Inc. 1800 Eller Drive Suite 300 Fort Lauderdale, Florida 33316 Attn: President Fax: (954) 627-1330 To the Holder: John G. Hall c/o Gerald Stevens, Inc. 1800 Eller Drive Suite 300 Fort Lauderdale, Florida 33316 Attn: President Fax: (954) 627-1330 9.2 Expenses; Taxes. Any sales tax, stamp duty, deed transfer or other tax (except only taxes based on the income of Holder and taxes arising from the issuance of Warrant Shares in a name other than that of the Holder) arising out of the issuance and sale of this Warrant or the Warrant Shares issuable upon exercise of this Warrant and consummation of the transactions contemplated by this Warrant Certificate shall be paid by the Company. 9.3 Amendment; Waiver. This Warrant Certificate may not be modified, amended, supplemented, cancelled or discharged, except by written instrument executed by the Company and the Holder. No failure to exercise, and no delay in exercising, any right, power or privilege under this Warrant Certificate shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege provided that this Warrant shall not be exercisable subsequent to the expiration of the Exercise Period. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the Company and the Holder. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. 9.4 Headings. The headings contained in this Warrant Certificate are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Warrant Certificate. 9.5 Governing Law. This Warrant is being delivered and is intended to be performed in the State of Florida and will be construed and enforced in accordance with, and the rights of the parties will be governed by, the law of such state, without regard to its conflict of laws principles. 9.6 Severability. Should any part of this Warrant for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining 13 portion, which remaining portion shall remain in full force and effect as if this Warrant had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties hereto that they would have executed and accepted the remaining portion of this Warrant without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid. [Remainder of page intentionally left blank.] 14 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed and delivered as of the day and year first above written. GERALD STEVENS, INC., a Florida corporation By: ----------------------- Name: Jeffrey M. Mattson Title: Vice President 15 EXHIBIT A --------- EXERCISE NOTICE --------------- [To be executed only upon exercise of Warrant] The undersigned registered owner of the attached Warrant Certificate irrevocably exercises this Warrant for the purchase of the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, and herewith makes payment therefor, all at the price and on the terms and conditions specified in the attached Warrant Certificate and requests that certificates for the shares of Common Stock hereby purchased (and any such securities or other property issuable upon such exercise) be issued in the name of and delivered to the person specified below whose address is set forth below, and, if such shares of Common Stock shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company shall, at its own expense, promptly issue to the undersigned a new Warrant Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder. Date: ------------------------------- Amount of Shares Purchased: ------------------------------------ Aggregate Purchase Price: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Exercise Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Stock Certificates to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 16 EXHIBIT B --------- ASSIGNMENT NOTICE ----------------- [To be executed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the person named below, whose address is set forth below, the rights represented by the attached Warrant Certificate to purchase the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, to which the attached Warrant Certificate relates, and appoints _____________________________________, attorney to transfer such rights on the books of the Company with full power of substitution in the premises. If such shares of Common Stock of the Company shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company, at its own expense, shall promptly issue to the undersigned a new Warrant Certificate of like tenor and date of the balance of the Common Stock issuable thereunder. Date: ------------------------------- Amount of Rights Transferred ------------------------------------ Amount of Rights Retained: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Assignment Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Warrant Certificate for transferred Warrants to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 17 EX-4.5 6 0006.txt COMMON STOCK WARRANT CERTIFICATE THIS WARRANT AND ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED, OR OTHERWISE DISPOSED OF UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE SECURITIES LAWS OF OTHER JURISDICTIONS, OR GERALD STEVENS, INC. (THE "COMPANY") RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED UNDER APPLICABLE LAW. COMMON STOCK WARRANT CERTIFICATE GERALD STEVENS, INC. November 6, 2000 No. 4 For the Purchase of 164,783 Shares of Common Stock of Gerald Stevens, Inc. FOR VALUE RECEIVED, THOMAS W. HAWKINS (including successors, assigns and transfers, the "Holder") or the Holder's registered assigns is hereby granted the right to purchase from Gerald Stevens, Inc., a Florida corporation (the "Company"), 164,783 shares (the "Warrant Shares", which number shall be adjusted from time to time in accordance with Section 2 hereof) of the Company's Common Stock, par value $.01 per share (the "Common Stock"), at a purchase price of $0.01 per share (as adjusted from time to time in accordance with Section 2 hereof, the "Exercise Price") on the terms and conditions set forth in this Warrant (this "Warrant"), exercisable in whole or in part at any time and from time to time from November 6, 2000 until 6:00 p.m. on the date that is three years after the date hereof (the "Exercise Period"), on the terms and condition set forth in this Warrant (this "Warrant"); provided, that until July 1, 2001 not more than twenty-five percent (25%) of the Warrant Shares shall be exercisable and until January 1, 2002, not more than fifty percent (50%) of the Warrant Shares shall be exercisable. I Exercise -------- 1.1 Exercise of Warrant. This Warrant may be exercised, in whole or in part, at any time or from time to time, during the Exercise Period by (i) surrendering this Warrant Certificate, with the form of exercise notice attached hereto as Exhibit A duly executed by the Holder, to the Company at its principal office, and (ii) making payment to the Company of the aggregate Exercise Price for the applicable Warrant Shares in cash, by certified check, bank check or wire transfer to an account designated by the Company. The minimum number of shares of Common Stock with respect to which this Warrant may be exercised, in whole or in part, at any time shall be the lesser of twenty-five percent (25%) of the total number of Warrant Shares which may be purchased under this Warrant or the maximum number of Warrant Shares available for purchase under this Warrant at the time of exercise. Upon any partial exercise of this Warrant, the Company, at its expense, shall promptly issue to the Holder for Holder's surrendered Warrant Certificate a replacement Warrant Certificate identical in all respects to this Warrant Certificate, except that the number of Warrant Shares shall be reduced accordingly. 1.2 Issuance of Warrant Shares. The Warrant Shares purchased by Holder shall be issued as of the close of business on the date on which all actions required to be taken by the Holder and all payments required to be received by the Company, pursuant to Section 1.1, shall have been so taken and received and, the Holder shall be entitled to receive the Warrant Shares or other securities or property (including money) to which the Holder would have been entitled had the Holder been the record holder of such Warrant Shares or other securities or property on such date. Certificates for the Warrant Shares so purchased shall be delivered to the Holder as soon as practicable after this Warrant is surrendered and the Exercise Price is received. II Adjustments to Warrant. ----------------------- The number of Warrant Shares for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth below. 2.1 Stock Dividends, Subdivisions and Combinations. If the Company shall, at any time or from time to time: (a) make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend payable in, or other distribution of, additional shares of Common Stock, (b) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or (c) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, then (i) the number of Warrant Shares issuable upon the exercise of this Warrant immediately prior to the occurrence of any such event shall be adjusted so that the Holder of this Warrant upon exercise on or after that date shall be entitled to receive the aggregate number of Warrant Shares which the Holder of this Warrant would have owned and been entitled to receive as a result of such event had this Warrant been exercised immediately prior thereto, and (ii) the Exercise Price in effect immediately prior to such event shall be adjusted by multiplying such Exercise Price by a fraction, the numerator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately prior to such event, and the denominator of which is the aggregate number of Warrant Shares purchasable upon exercise of this Warrant immediately thereafter. 2.2 Dividends and Distributions in Other Securities. If the Company shall, at any time or from time to time, make (or fix a record date for the holders of shares of its Common Stock entitled to receive) a dividend or other distribution payable in other securities of the Company or in securities of any subsidiary of the Company (other than shares of Common Stock), then lawful and adequate provision shall be made so that the Holder of this Warrant shall be entitled to receive upon exercise of this Warrant, for the aggregate Exercise Price in effect prior thereto, in addition to the number of Warrant Shares immediately theretofore issuable upon exercise of this Warrant, the kind and number of other securities of the Company or securities of any subsidiary of the Company, which the Holder would have owned and been entitled to receive had this Warrant been exercised immediately prior to that date. 2.3 Reorganizations, Mergers, Consolidations or Sales of Assets. If any of the following transactions (each, a "Special Transaction") shall become effective: (a) a capital reorganization, whether by reclassification, exchange, substitution or otherwise (other than a 2 stock dividend, subdivision, combination or other distribution provided for elsewhere in this Section 2), (b) a consolidation or merger of the Company with another entity (other than a consolidation or merger in which the Company is the continuing entity), or (c) a sale or conveyance of all or substantially all of the Company's assets; then as a condition of any such Special Transaction, lawful and adequate provision shall be made so that the Holder of this Warrant shall thereafter have the right to purchase and receive upon exercise of this Warrant, in lieu of the Warrant Shares immediately theretofore issuable upon exercise of this Warrant, for the aggregate Exercise Price in effect immediately prior to such consummation, such shares of stock as may be issued or payable in and pursuant to the terms of such Special Transaction to the holders of the shares of Common Stock for which this Warrant could have been exercised immediately prior to such Special Transaction. In connection with any Special Transaction, appropriate provision shall be made with respect to the rights and interests of the Holder of this Warrant to the end that the provisions of this Warrant (including without limitation the provisions of this Section 2) shall thereafter be applicable, as nearly as may be practicable, to any shares of stock thereafter deliverable upon the exercise of this Warrant. In the event that all or any portion of the consideration payable in and pursuant to the terms of such Special Transaction to the holders of Common Stock consists of property other than shares of stock then such portion of the Warrant having a value equal to the difference between (x) the aggregate Exercise Price allocable to the non-stock property and (y) the fair market value of such non-stock property, shall, without any action on the part of the Holder, be deemed to be automatically exercised in exchange for such non-stock property and the remaining portion of the Warrant shall entitle the Holder to purchase the shares of stock at an aggregate Exercise Price allocable to the shares of stock. Notwithstanding anything to the contrary set forth herein, if the fair market value of the non-stock property is less than the aggregate Exercise Price allocable to such property then the portion of the Warrant attributable to the non-stock property shall be deemed expired. 2.4 Notice. In the event that: (a) the Company shall fix a record date for the holders of shares of its Common Stock for the purpose of entitling them to receive any dividend or other distribution of shares of Common Stock or other securities of the Company; or (b) the Company shall enter into any agreement or adopt any plan for a capital reorganization of the Company, the consolidation or merger of the Company with or into another entity, or the sale or conveyance of all or substantially all of the assets of the Company to another entity; or (c) the Company shall adopt any plan for or otherwise shall become subject to any voluntary or involuntary dissolution, liquidation or winding up of the Company; or (d) the Company shall propose to take any other action which would require an adjustment pursuant to Section 2.1 through 2.3, then, and in each case, the Company shall mail or cause to be mailed to the Holder of this Warrant a notice specifying, as the case may be: (i) the date on which a record is to be fixed for the purpose of such dividend or distribution, and stating the amount and character of such dividend or distribution, or (ii) the date on which such reorganization, consolidation, merger, 3 conveyance, dissolution, liquidation or winding up or other action is to become effective, and the time, if any, to be fixed, as to which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up or other action. Such notice shall be mailed at least 20 days prior to the date therein specified and this Warrant may be exercised prior to said date during the Exercise Period. 2.5 Fractional Interests. The Company shall not be required to issue fractions of shares of Common Stock upon the exercise of this Warrant. If any fraction of a share of Common Stock would be issuable upon the exercise of this Warrant, the Company shall, in lieu of such issuance, pay to the exercising Holder an amount in cash equal to the current value of such fraction, computed on the basis of the Current Market Price of the Common Stock on the last business day prior to the date of exercise upon which a sale of Common Stock shall have been effected. As used in this Warrant, the term "Current Market Price" means with respect to the Common Stock: (a) for so long as the issuer is a Public Entity (as hereafter defined) and the Common Stock is traded on an organized exchange, the average closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ for the immediately preceding five (5) trading days; and (b) for so long as the issuer is not a Public Entity or the Common Stock is not traded on an organized exchange, the price per share of the Common Stock as determined in good faith by the Company's board of directors. If such valuation is objected to by the Holder of this Warrant, such valuation will be made by a reputable investment bank of national standing mutually selected by the Holder and the Company, the expense of which will be paid by the Company. "Public Entity" means an entity (i) whose Common Stock is then registered pursuant to Section 12(b) or Section 12(g) of the Securities Exchange Act of 1934, as amended, and (ii) in which the aggregate market value of Common Stock held by non-affiliates which is then available for public trading is not less than Twenty-Five Million Dollars ($25,000,000.00), computed by reference to the closing price of the Common Stock on the stock exchange where the Common Stock is traded or the last bid price as quoted on the NASDAQ. 2.6 Effect of Alternate Securities. If at any time, as a result of an adjustment made pursuant to this Section 2, the Holder of this Warrant shall thereafter become entitled to receive any securities of the Company other than shares of Common Stock, then the number of such other securities receivable upon exercise of this Warrant shall be subject to adjustment from time to time on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares as contained in this Section 2. 2.7 Successive Application; Readjustment. The provisions of this Section 2 shall similarly apply from time to time to successive events covered by this Section. If the Company shall fix a record date for the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution and shall, thereafter and before the distribution to shareholder thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record date and any such adjustment previously made in respect thereof shall be rendered void and annulled. 2.8 Certificate as to Adjustments. In the event of an adjustment in the number of Warrant Shares or in the Exercise Price, the Company at its expense will promptly compute such 4 adjustment in accordance with the terms of this Warrant and prepare a certificate executed by an executive officer of the Company setting forth such adjustment and showing in detail the facts upon which such adjustment is based. The Company will forthwith mail a copy of each such certificate to the Holder. III Rights of the Holder -------------------- 3.1 No Rights as Shareholder. The Holder shall not, solely by virtue of this Warrant and prior to the issuance of the Warrant Shares upon due exercise hereof, be entitled to any rights of a shareholder of the Company, including, without limitation, the right to receive dividends or subscription rights, the right to vote, to consent, to exercise any preemptive right, or to receive any notice of special or annual meetings of shareholders, except as may be specifically provided for herein. 3.2 No Impairment; Certain Covenants. The Company shall not by any action including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) take all such action as may be necessary or appropriate in order that the Warrant Shares will, upon issuance in accordance with the terms hereof and the payment of the Exercise Price therefor, be duly authorized, validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof, (b) at all times during the Exercise Period have authorized and reserved sufficient shares of Common Stock to provide for the exercise of this Warrant in full, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant; provided that the obligation of the Company to register this Warrant or any Warrant Shares shall be governed by Article 6. IV Representations and Warranties of the Company. --------------------------------------------- The Company represents and warrants to and agrees with the Holder as follows: 4.1 Sufficient Shares. The Company has authorized, and shall at all times hereafter reserve and keep available, sufficient shares of Common Stock to fulfill the Company's obligations under this Warrant and all of the other warrants, options and convertible securities issued by the Company. On exercise of this Warrant and satisfaction of the Exercise Price, the Warrant Shares issued to the Holder will be validly issued, fully paid, non-assessable and free and clear of all liens, claims and encumbrances, except as may be permitted by or imposed by the Holder. 4.2 Authority. The Company has taken all necessary action to authorize the execution and delivery of this Warrant and the issuance of the Warrant Shares on the exercise of this Warrant. This Warrant is a valid, binding and enforceable obligation of the Company. The 5 execution, delivery and performance of this Warrant will not violate: (a) any provision of the organizational documents or charter of the Company; (b) any order, writ, injunction or decree of any court, administrative agency or governmental body applicable to the Company or the Common Stock; or (c) any material contract, lease, note, bond, mortgage or other material agreement to which the Company is a party, by which the Company is bound or to which any of the Company's assets are subject. 4.3 Interests. The Warrant Shares represent not less than 0.3 percent of the total equity interests of the Company as at the date hereof on a diluted basis and subject to further adjustment as provided herein. 4.4 Registration. If the Warrant Shares or any securities of the Company issuable upon the exercise of the Warrants require registration with, or approval of, any governmental authority (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), or the taking of any other action (in addition to such as the Company is required to obtain pursuant to Article 6 hereof), under the laws of the United States of America or any state or political subdivision thereof, before such securities may be validly offered or sold to the Holder hereunder in compliance with such laws, then the Company covenants that at its expense it will, in good faith and as expeditiously as practicable, endeavor to secure and maintain such registration or approval or to take such other action, as the case may be; provided, however, that the Company will not be required to register this Warrant or any Warrant Shares under any federal or state securities laws except in accordance with Article 6 hereof, or to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. V Restrictive Legend. ------------------- 5.1 This Warrant is being acquired and any Warrant Shares to be acquired by the Holder pursuant to this Warrant (collectively, "Securities") will be acquired for investment for the Holder's own account and not for resale in connection with any distribution of such Securities within the meaning of the Securities Act of 1933 (as amended, the "Securities Act"). The Securities will not be sold, transferred or otherwise disposed of without registration under the Securities Act and state securities laws or qualification for exemptions therefrom. The Holder agrees that, until the Company has caused the registration of such shares under the Securities Act, each certificate evidencing the Warrant Shares may be inscribed with a legend to the foregoing effect, which legend will be as follows: The shares represented by this certificate have been acquired solely for investment purposes and have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or the securities laws of any state or other jurisdiction, and may not be sold, transferred, assigned or otherwise disposed of unless and until such shares are first registered or qualified under the Securities Act and all applicable state securities laws and all rules and regulations promulgated thereunder, or unless and until the holder hereof provides an opinion of counsel, in form and substance satisfactory 6 to the Company, that such registration and qualification is not required under applicable law. VI Registration Rights. -------------------- 6.1 Intentionally omitted. --------------------- 6.2 Piggy-Back Registration. If the Company proposes to register any of its Common Stock under the Securities Act (other than a registration on Form S-8 or Form S-4 or any successor or similar forms, relating to (i) Common Stock issuable upon exercise of employee stock options or in connection with any employee benefit or similar plan of the Company or (ii) in connection with a direct or indirect acquisition by the Company of another entity), whether or not for sale for its own account, it will each such time give prompt written notice at least 15 days prior to the anticipated filing date of the registration statement relating to such registration to the Holder, which notice shall set forth such Holder's rights under this Section 6.2 and shall offer such Holder the opportunity to include in such registration statement such number of Registrable Securities as such Holder may request (a "Piggy-Back Registration"). Subject to the foregoing and the limitation set forth below in this Section 6.2, upon the written request of any Holder made within 5 days after the receipt of notice from the Company (which request shall specify the number of Registrable Securities intended to be disposed of by such Holder and the intended method of disposition thereof), the Company will use reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by such Holder, to the extent required to permit the disposition of the Registrable Securities so to be registered; provided that (A) if such registration involves an underwritten public offering, such Holder requesting to be included in the Company's registration must sell its Registrable Securities to the underwriters on the same terms and conditions as apply to the Company and (B) if, at any time after giving written notice of its intention to register any Registrable Securities pursuant to this Section 6.2 and prior to the effective date of the registration statement filed in connection with such registration, the Company shall, in its sole and absolute discretion, determine for any reason not to register such Registrable Securities, the Company shall give written notice to such Holder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such registration. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 6.2. The Holder shall be responsible for the payment of any discounts and/or commissions resulting from the engagement by such Holder of underwriters or placement agents in connection with resales of Registrable Securities subject to any registration pursuant to this Section 6.2. Notwithstanding any other provision of this Section 6.2, if the underwriter of such registration advises the Company in writing with a copy to the Holders that marketing factors require a limitation of the number of shares of Registrable Securities to be underwritten, the Company shall so advise all Holders, and the number of securities including Registrable Securities that may be included in such registration shall be apportioned pro rata, based on the number of shares requested to be included in such registration by the Holders and by all other holders of securities participating in such registration; provided that in no event will the Holder be entitled pursuant to this Section 6.2 to limit the number of shares that the Company would be entitled to otherwise sell pursuant to its proposed registration. In addition, the rights contained in this Section 6.2 shall not be used in such a way as to limit the 7 number of shares which any other holder of demand registration rights would otherwise be entitled to sell pursuant to a demand for registration made by such holder. 6.3 Holdback Agreements. If any registration of Registrable Securities shall be in connection with an underwritten public offering, the Holder agrees not to effect any sale or distribution, including, without limitation, any sale pursuant to Rule 144 or any provision under the Securities Act, of any Warrant Shares, and not to effect any sale or distribution of any stock convertible into or exchangeable or exercisable for any Common Stock of the Company (in each case, other than as part of such public offering) during the 20 trading days prior to the effective date of such registration statement or during the period after such effective date equal to the lesser of (i) such period of time as agreed between such managing underwriter and the Company and (ii) 180 days. 6.4 Filings; Information. In connection with any registration under this Section 6, the Company will use its reasonable best efforts to effect the registration of such Registrable Securities as promptly as is practicable, and in connection with any such request: (a) The Company shall use its reasonable best efforts to cause such filed registration statement to become and remain effective for a period of not less than 180 days. (b) The Company will, if requested, prior to filing such registration statement or any amendment or supplement thereto, furnish to the Holder and each applicable managing underwriter, if any, copies thereof, and thereafter furnish to the Holder and each such underwriter, if any, such number of copies of such registration statement, amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein) and the prospectus included in such registration statement (including each preliminary prospectus) as the Holder or each such underwriter may reasonably request in order to facilitate the sale of the Registrable Securities. (c) After the filing of the registration statement, the Company will promptly notify the Holder of any stop order issued or, to the Company's knowledge, threatened to be issued by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (d) The Company will endeavor to qualify the Registrable Securities for offer and sale under such other securities or blue sky laws of such jurisdictions in the United States as the Holder reasonably requests; provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6.4(d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction. (e) The Company will as promptly as is practicable notify the Holder at any time when a prospectus relating to the sale of the Registrable Securities is required by law to be delivered in connection with sales by an underwriter or dealers of the occurrence of any event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein 8 or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and promptly make available to the Holder and to the underwriters any such supplement or amendment. The Holder agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in the preceding sentence, the Holder will forthwith discontinue the offer and sale of Registrable Securities pursuant to the registration statement covering such Registrable Securities until receipt by the Holder and the underwriters of the copies of such supplemented or amended prospectus and, if so directed by the Company, the Holder will deliver to the Company all copies, other than permanent file copies then in the Holder's possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. In the event the Company gives such notice, the Company will extend the period during which such registration statement will be maintained effective as provided in Section 6.4(a) by the number of days during the period from and including the date of the giving of such notice to the date when the Company makes available to the Holder such supplemented or amended prospectus. (f) The Company will enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the sale of such Registrable Securities. (g) The Company will use its reasonable best efforts to cause all Warrant Shares to be listed on each securities exchange and/or market on which the Company's shares of Common Stock are then listed, and prepare and file any required filings with the National Association of Securities Dealers, Inc. or any exchange or market where the shares of Common Stock are traded. 6.5 Shareholder Information. The Company may require the Holder promptly to furnish in writing to the Company such information regarding the Holder and its affiliates, its and its affiliates' holdings of securities of the Company, the plan of distribution of the Registrable Securities and other information as the Company may from time to time reasonably request in connection with such registration. 6.6 Company Indemnity. The Company will indemnify the Holder, each of its officers, directors and partners, and each person controlling such Holder, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Article 6, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any state securities law or in either case, any rule or regulation thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such registration, qualification or compliance, and will reimburse each Holder, each of its directors, officers and partners, and each person controlling such Holder, for any legal and any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided that the Company will not be liable in any such 9 case to a Holder to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by or on behalf of such Holder and stated to be specifically for use therein. The indemnity agreement contained in this Section 6.6 shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent will not be unreasonably withheld or delayed). 6.7 Holder Indemnity. Each Holder will, severally and not jointly, if Registrable Securities held by it are included in the securities as to which such registration, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, partners and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, each other Holder (if any), and each of their directors, officers and partners, and each person controlling such other Holder(s), against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus (including any related registration statement, preliminary prospectus, notification or the like) or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, in each case only insofar as such untrue statement or alleged untrue statement or omission relates to such Holder, and will reimburse the Company and each such other Holder and its directors, officers and partners, underwriters or control persons for any legal or any other expenses reasonably incurred in connection with investigating and defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such prospectus (including any related registration statement, preliminary prospectus, notification or the like) in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder and stated specifically for use therein, and provided that the maximum amount for which such Holder shall be liable under this indemnity shall not exceed the net proceeds received by such Holder from the sale of the Registrable Securities. The indemnity agreement contained in this Section 6.7 shall not apply to amounts paid in settlement of any such claims, losses, damages or liabilities if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld or delayed). 6.9 Procedure. Each party entitled to indemnification under this Article 6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim in any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld or delayed), and the Indemnified Party may participate in such defense at its expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Article except to the extent that the Indemnifying Party is materially and adversely affected by such failure to provide notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any 10 settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. 6.10 Contribution. If the indemnification provided for in Article 6 is unavailable to any Indemnified Parties in respect of any losses, claims, damages or liabilities referred to herein (other than by reason of the exceptions provided therein), then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities as between the Company on the one hand and any Holder on the other, in such proportion as is appropriate to reflect the relative fault of the Company and of such Holder in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of any Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a materiel fact related to information supplied by the Company or by such Holder. In no event shall the obligation of any Indemnifying Party to contribute under this Section 6.10 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 6.6 or 6.7 hereof had been available under the circumstances. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6.10 were determined by pro rata allocation (even if the Holders or the underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account the equitable considerations referred to in the immediately preceding paragraphs. The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraphs shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim (unless such defense had been undertaken by the Indemnifying Party). Notwithstanding the provisions of this section, no Holder or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any Holder, the net proceeds received by such Holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, the amount of any damages that such Holder or underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement, omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 6.11 Participation in Underwritten Registrations. No Holder may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's securities on the basis provided in any underwriting arrangements approved by the Company and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting 11 agreements and other documents reasonably required under the terms of such underwriting arrangements and these registration rights. VII Termination. ------------ Reference is hereby made to that certain Amended and Restated Credit Agreement dated as of June 4, 1999 by and among the Company, Bank of America, N.A. as agent and the lenders from time to time party thereto (as amended, modified, supplemented or amended and restated from time to time, the "Credit Agreement"). If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before June 30, 2001, this Warrant shall thereupon expire as to seventy-five percent (75%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. If the Company shall repay all Obligations (as defined in the Credit Agreement) and terminate the Credit Agreement on or before December 31, 2001, this Warrant shall thereupon expire as to fifty percent (50%) of the Warrant Shares originally covered hereby at the beginning of the Exercise Period. VIII Transfer or Loss of Warrant. ---------------------------- 8.1 Transfer. Subject to compliance with federal and state securities laws, the Holder may sell, assign, transfer or otherwise dispose of all or any portion of this Warrant or the Warrant Shares acquired upon any exercise hereof at any time and from time to time. Upon the sale, assignment, transfer or other disposition of all or any portion of this Warrant, the Holder shall deliver to Company a written notice of such in the form attached hereto as Exhibit B duly executed by Holder which includes the identity and address of any purchaser, assignee, or transferee. On such delivery, the Company will, subject to the conditions set forth herein, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and this Warrant will promptly be cancelled. The conditions to transferability specified in this Warrant are intended to provide certain protections to the Holder and the Company and to ensure compliance with the provisions of the Securities Act and applicable state securities laws in respect to the transfer of any Warrant or any Warrant Shares and are to be strictly construed. 8.2 Lost, Stolen, Destroyed or Mutilated Warrants. In case any Warrant is mutilated, lost, stolen or destroyed, the Company agrees to issue a new Warrant of like date, tenor and denomination and deliver the same in exchange and substitution for and upon surrender and cancellation of any mutilated Warrant, or in lieu of any Warrant lost, stolen or destroyed, on receipt of evidence reasonably satisfactory to the Company of the loss, theft or destruction of such Warrant. IX Miscellaneous. -------------- 9.1 Notices. Any notice, demand or communication required or permitted to be given by any provision of this Warrant must be in writing and will be deemed to have been given and received when delivered personally or by telefacsimile to the party designated to receive such notice, or on the date following the day sent by overnight courier, or on the third (3rd) business day after the same is sent by certified mail, postage and charges prepaid, directed to the 12 following addresses or to such other or additional addresses as any party may designate by written notice to the other parties: To the Company: Gerald Stevens, Inc. 1800 Eller Drive Suite 300 Fort Lauderdale, Florida 33316 Attn: President Fax: (954) 627-1330 To the Holder: Thomas W. Hawkins c/o Gerald Stevens, Inc. 1800 Eller Drive Suite 300 Fort Lauderdale, Florida 33316 Attn: President Fax: (954) 627-1330 9.2 Expenses; Taxes. Any sales tax, stamp duty, deed transfer or other tax (except only taxes based on the income of Holder and taxes arising from the issuance of Warrant Shares in a name other than that of the Holder) arising out of the issuance and sale of this Warrant or the Warrant Shares issuable upon exercise of this Warrant and consummation of the transactions contemplated by this Warrant Certificate shall be paid by the Company. 9.3 Amendment; Waiver. This Warrant Certificate may not be modified, amended, supplemented, cancelled or discharged, except by written instrument executed by the Company and the Holder. No failure to exercise, and no delay in exercising, any right, power or privilege under this Warrant Certificate shall operate as a waiver, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the exercise of any other right, power or privilege provided that this Warrant shall not be exercisable subsequent to the expiration of the Exercise Period. No waiver of any breach of any provision shall be deemed to be a waiver of any preceding or succeeding breach of the same or any other provision, nor shall any waiver be implied from any course of dealing between the Company and the Holder. No extension of time for performance of any obligations or other acts hereunder or under any other agreement shall be deemed to be an extension of the time for performance of any other obligations or any other acts. 9.4 Headings. The headings contained in this Warrant Certificate are for convenience of reference only and are not to be given any legal effect and shall not affect the meaning or interpretation of this Warrant Certificate. 9.5 Governing Law. This Warrant is being delivered and is intended to be performed in the State of Florida and will be construed and enforced in accordance with, and the rights of the parties will be governed by, the law of such state, without regard to its conflict of laws principles. 9.6 Severability. Should any part of this Warrant for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining 13 portion, which remaining portion shall remain in full force and effect as if this Warrant had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties hereto that they would have executed and accepted the remaining portion of this Warrant without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid. [Remainder of page intentionally left blank.] 14 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed and delivered as of the day and year first above written. GERALD STEVENS, INC., a Florida corporation By: ------------------------ Name: Jeffrey M. Mattson Title: Vice President 15 EXHIBIT A --------- EXERCISE NOTICE --------------- [To be executed only upon exercise of Warrant] The undersigned registered owner of the attached Warrant Certificate irrevocably exercises this Warrant for the purchase of the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, and herewith makes payment therefor, all at the price and on the terms and conditions specified in the attached Warrant Certificate and requests that certificates for the shares of Common Stock hereby purchased (and any such securities or other property issuable upon such exercise) be issued in the name of and delivered to the person specified below whose address is set forth below, and, if such shares of Common Stock shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company shall, at its own expense, promptly issue to the undersigned a new Warrant Certificate of like tenor and date for the balance of the shares of Common Stock issuable thereunder. Date: ------------------------------- Amount of Shares Purchased: ------------------------------------ Aggregate Purchase Price: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Exercise Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Stock Certificates to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 16 EXHIBIT B --------- ASSIGNMENT NOTICE ----------------- [To be executed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto the person named below, whose address is set forth below, the rights represented by the attached Warrant Certificate to purchase the number of shares of Common Stock of Gerald Stevens, Inc. (the "Company") as is set forth below, to which the attached Warrant Certificate relates, and appoints _____________________________________, attorney to transfer such rights on the books of the Company with full power of substitution in the premises. If such shares of Common Stock of the Company shall not include all of the shares of Common Stock now and hereafter issuable as provided in the attached Warrant Certificate, then the Company, at its own expense, shall promptly issue to the undersigned a new Warrant Certificate of like tenor and date of the balance of the Common Stock issuable thereunder. Date: ------------------------------- Amount of Rights Transferred ------------------------------------ Amount of Rights Retained: $ ------------------------------------ Printed Name of Registered Holder: ------------------------------------ Signature of Registered Holder: ------------------------------------ NOTICE: The signature on this Assignment Notice must correspond with the name as written upon the face of the attached Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever. Warrant Certificate for transferred Warrants to be issued and registered in the following name, and delivered to the following address: Name: -------------------------------- Street Address: ------------------------------- City, State, Zip Code: ------------------------------- 17 EX-4.6 7 0007.txt PARTICIPATION AGREEMENT PARTICIPATION AGREEMENT ----------------------- THIS PARTICIPATION AGREEMENT ("Participation Agreement"), dated as of November 6, 2000, is by and among BANK OF AMERICA, N.A., a national banking association ("Bank of America"), and THE MANAGEMENT OF THE PARENT PARTY HERETO (each a "Shareholder" and collectively, the "Participant"). RECITALS -------- A. Bank of America is party to that certain Amended and Restated Credit Agreement dated as of June 4, 1999 as amended by Amendment No. 1 dated as of June 13, 2000 and Amendment No. 2 dated July 31, 2000 (as so amended and as further amended from time to time in accordance with its terms, including by Amendment No. 3 described below, the "Credit Agreement") by and among Bank of America, as Agent and Lender and Gerald Stevens, Inc. (the "Parent") and Gerald Stevens Retail, Inc. (collectively with the Parent, the "Borrower"), as Borrower. B. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Credit Agreement. C. In connection with the execution and delivery of Amendment Agreement No. 3 to the Credit Agreement dated as of the date hereof, Bank of America is requiring, as a condition to the effectiveness thereof, that the Participant execute and deliver this Participation Agreement. D. Bank of America agrees to sell to Participant, and Participant irrevocably agrees to purchase from Bank of America, an undivided interest as provided herein (the "Participation") in the Loan Documents and all collateral therefor and guarantees thereof in regard to the Borrower's obligations to pay to Lender the Working Capital Loan described in the Credit Agreement, which Credit Agreement provides for the making of various loans to the Borrower, including a Revolving Loan of $36,000,000 (the "Revolving Loan") evidenced by a Revolving Note dated July 31, 2000 (the "Revolving Note") and a Working Capital Loan of $7,000,000 (the "Working Capital Loan") evidenced by a Working Capital Note dated November 6, 2000 (the "Working Capital Note"). The loans made pursuant to the Credit Agreement include the Revolving Loan, the Working Capital Loan, and a Swingline Loan of up to $2,000,000 (collectively the "Loans"). The Loans are secured by real and personal property of the Parent and its Subsidiaries described in the Security Instruments (the "Collateral"). IT IS THEREFORE AGREED AS FOLLOWS: 1. Participation Interest. Upon and subject to the terms and conditions set forth in this Participation Agreement, Bank of America hereby sells to Participant and Participant hereby purchases from Bank of America a 14.2857143% fractional undivided participation interest (the "Applicable Commitment Percentage") in the Working Capital Loan and a like interest in any payments recovered by Bank of America in respect of the Working Capital Loan by reason of liquidation or sale of Collateral or payment with respect to guarantees thereof. The percentage interest of the Participant purchased pursuant to the terms hereof is referred to herein from time to time as the Participant's "pro rata share" or "pro rata participation." 2. Payment of Participation Amount. Upon execution of this Participation Agreement by the parties hereto, Participant shall pay to Bank of America $1,000,000 (the "Participation Amount") as of the date of such execution by paying the Participation Amount to Bank of America. Each Shareholder's portion of the Participation Amount is set forth next to its signature on the signature pages hereto. Payment of the Participation Amount shall be made by wire transfer to Bank of America at 101 North Tryon Street, Independence Center, NC1-001-15-04, Charlotte, North Carolina, ABA No. 053000196, Attention: Agency Services, Acct. No. 3751733979, Reference: Gerald Stevens, Inc. (the "Participation Account"). Such payment shall be made prior to 3:30 p.m. Charlotte, North Carolina time on the date of execution hereof. The Participation Amount shall be held in the Participation Account until the Participant's pro rata share of each Advance under the Credit Agreement is disbursed therefrom pursuant to the terms of the Credit Agreement. All accrued interest on the funds in the Participation Account and any unused portion of the Participation Amount shall be refunded to the Participant on the Working Capital Termination Date. 3. Payments on Working Capital Loan. Whenever Bank of America receives any payment in respect of principal, interest or fees with respect to the Working Capital Loan in which Participant has a Participation, as specified above, or whenever Bank of America makes an application of funds in connection therewith, Bank of America shall promptly pay over to Participant, to the extent and in the kind of funds so received or applied for the benefit of the Participant, an amount equal to its Applicable Commitment Percentage of such payment or application; provided that if Bank of America shall have received immediately available, fully collected funds for such payment or application, it shall make such payment or application to the Participant in accordance with the wire transfer instructions provided by Participant on the signature pages hereto, as such instructions may be modified from time to time by notice in writing from the Participant to Bank of America (the "Participant Wire Instructions"). Participant shall not be entitled to receive any amounts except as expressly stated in this paragraph. The excess, if any, of fees payable under the Credit Agreement over fees payable to Participant hereunder shall be retained by Bank of America as a fee for services rendered in connection with the Loan Documents and this Participation Agreement. 4. Computation of Interest. All computations of interest and fees shall be made on the basis set forth in the applicable Credit Agreement. It is agreed that any determination by Bank of America as to the allocation of any payment or application to Participant's pro rata share shall be final and conclusive absent manifest error. 5. Amounts Not Received. Bank of America may, but shall not be obligated to, transfer funds to Participant which may be due from the Borrower on the date as due prior to receipt of such funds from the Credit Parties. If any portion of such funds are not then received from the Borrower, Participant shall, on demand by Bank of America, repay to Bank of America its pro rata share of the amount not received, with interest thereon at the applicable Federal Funds Rate for each day from the date of receipt by Participant of such funds to (but not including) the date such funds are repaid by Participant to Bank of America. 6. Representations of Bank of America. Bank of America warrants and represents that (i) it has the right, power and authority to sell and assign to Participant a participating interest in Bank of America's interest in the Working Capital Loan free and clear of all claims, liens and encumbrances whatsoever, (ii) Bank of America has entered into the Credit Agreement in its regular course of business, (iii) to the best of its actual knowledge no Default or Event of Default exists as of the date hereof, and (iv) it has given the Participant copies of the Credit Agreement and all amendments and waivers thereof. Bank of America makes no other representation or warranty to the Participant of any kind or character, including, but not limited to, any warranties concerning prospects for payment or collection of the Working Capital Loan or other amounts. Bank of America assumes no responsibility for the financial condition of the Borrower or any other Person or the performance of their respective obligations. Bank of America assumes no responsibility for the validity, authority or enforceability of any of the Loan Documents or any documents received by Bank of America from the Borrower or any other Person in connection with the Loans. 7. Expenses. Participant shall, upon demand, reimburse Bank of America for Participant's Applicable Commitment Percentage of the out-of-pocket expenses reasonably incurred by Bank of America as the holder of the Working Capital Loan, or arising out of Bank of America's obligations under the Credit Agreement with respect to the Working Capital Loan in accordance with the terms thereof, to the extent the same are not recovered from the Borrower or any other party, including without limitation all expenses incurred by Bank of America to enforce any of its rights under or to collect amounts due under the Working Capital Note, including reasonable attorneys' fees incurred in connection with the foregoing. Such reimbursement shall be made by Participant in the proportion that the outstanding principal balance of its Participation in the Working Capital Loan bears to the outstanding principal balance on the Working Capital Loan Obligations on the date such expenses were incurred. 8. Assignments. (a) The Participant shall not sell, assign, transfer, mortgage, pledge or otherwise dispose of any or all interest in the Working Capital Loan, the Credit Agreement, any of the documents executed in connection therewith, or this Participation Agreement without the prior written consent of Bank of America. Prior to consent to such disposition or transfer of interest by Participant, Bank of America shall have no duty to any transferee or assignee and the assigning or transferring Participant shall hold Bank of America harmless in connection with any action or claim by any transferee or assignee of the assigning or transferring Participant. (b) Notwithstanding the terms of the preceding subparagraph (a), no sale, assignment, transfer, mortgage, pledge or other disposition shall be made by Participant of its interest in the Working Capital Loan, the Credit Agreement or any of the documents executed in connection therewith which would violate the terms of any of such documents, statutes of the State of Florida or the United States government, or any rules, regulations or interpretations thereunder. 9. Amendments and Waivers. Bank of America reserves the right, in its sole discretion, in each instance, without prior notice to Participant, to agree to the modification, waiver or release of any of the terms of the Credit Agreement, or any document relative thereto, to consent to any action or failure to act by either of the Borrowers, and to exercise or refrain from exercising any powers or rights which Bank of America may have under or in respect of the Credit Agreement or any document relative thereto, including, without limitation, the right to enforce the obligations of the Borrower, or any other party. Bank of America agrees to furnish to the Participant with a copy of any amendment or modification to the Credit Agreement. 10. No Enforcement Rights. Participant hereby agrees that it shall not have any right or responsibility to enforce the obligations of the Borrower and any other parties under the Loan Documents, and except as expressly provided herein to the contrary, all rights pursuant to the Loan Documents (or otherwise) of Bank of America to secure payment of the obligations of the Borrower under the Loan Documents shall be so held (and such rights shall be exercised solely by and at the option of Bank of America) for the ratable benefit of Bank of America and Participant. Participant hereby acknowledges and agrees that this Participation Agreement and the participation created hereby do not confer on Participant any right to vote on, approve or sign amendments or waivers, any other independent benefit or any legal or equitable right, remedy or other claim under the Credit Agreement or the other Loan Documents. 11. Pro Rata Support; No Interest in Other Loans. Any and all collateral security and all guarantees, agreements and assignments of the Borrower which may hereafter come into the possession of Bank of America as direct guarantees of or collateral security for the Working Capital Loan, shall be held by Bank of America for the ratable benefit of Bank of America and the Participant. However, the Participant shall have no interest in any property taken as collateral security for any other loan or loans made by Bank of America to the Borrower, or in any property now or hereafter in Bank of America's possession or control which may be or become collateral security for the Loan by reason of the general description contained in any general loan or collateral agreement or collateral note held by Bank of America or by reason of any right of set-off, counterclaim, banker's lien or otherwise, except that if such property or the proceeds thereof shall be applied to the Working Capital Loan the Participant shall be entitled to its pro rata share in such application. 12. Sharing of Payments. If the Participant shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of its participation in the Working Capital Loan in excess of its pro rata share of payments on account of its Participation, Participant shall purchase from Bank of America such additional participations in the Loans as shall be necessary to cause Participant to share such excess payment ratably with Bank of America, provided that if all or any portion of such excess payment is thereafter recovered from Participant, such purchase shall be rescinded and the purchase price restored to the extent of such recovery. Furthermore, Participant shall repay to Bank of America any sums paid to Bank of America by the Borrower and distributed by Bank of America to Participant which Bank of America shall be required to return to the Borrower or to any receiver, trustee, or custodian for the Borrower. In the event Participant fails or refuses to make any such payment or fails or refuses to refund any amount required to be refunded to Bank of America pursuant to the Paragraph 5, then, in addition to any of its rights at law or in equity, Bank of America shall be entitled to refund by offset against Participant's portion of all sums received by Bank of America under Paragraph 3 until reimbursed therefor by such offset or by Participant. Any such amount paid by Bank of America on behalf of Participant shall be payable to Bank of America on demand and shall bear interest for each day from the date of such payment until it is repaid by Participant at the Federal Funds Rate. 13. Liability of Bank of America. Bank of America shall not be liable to Participant for any error in judgment or for any action taken or omitted to be taken by Bank of America in effecting collection of the Working Capital Loan or other amounts, except for any action taken or omitted to be taken by Bank of America which constitutes willful misconduct or gross negligence. Bank of America further shall not be liable to Participant for any error in judgment or for any action taken or omitted to be taken by Bank of America in good faith and believed by Bank of America to be within the discretion or power conferred upon Bank of America by this Participation Agreement or any of the Loan Documents. Bank of America will exercise the same care in exercising its rights under and with regard to the Working Capital Loan, any document executed in connection therewith and any collateral security therefor and guarantee thereof as Bank of America exercises with respect to similar loans in which no participations are allotted by Bank of America and Bank of America shall have no liability or responsibility to Participant except for actions taken or omitted to be taken by Bank of America which constitute willful misconduct or gross negligence. 14. Reliance. Bank of America shall be entitled to rely upon any writing, telegram, telex, telefacsimile or teletype message, resolution, notice, consent, certificate, letter, cablegram, statement, or order or other documents or conversation by telephone or otherwise reasonably believed by it to be genuine and correct and to have been properly signed, sent or made, and upon opinions of counsel and other professional advisors selected by Bank of America in good faith. 15. Credit Decision. Participant acknowledges that it has (i) received and approved copies of the Credit Agreement and other documents which evidence or secure the Working Capital Loan and (ii) made an independent investigation regarding the transactions described in the Loan Documents, including without limitation the Working Capital Loan and other Loans, the adequacy of the security therefor and the creditworthiness of the parties responsible for the repayment thereof. Participant further acknowledges that Bank of America has made no representation with respect to any of the foregoing or otherwise in respect of the Working Capital Loan, the Loan Documents or any of the matters described therein. 16. Notices of Action. Bank of America shall advise Participant of any remedial action it proposes to take with respect to the Borrower or any Collateral prior to taking such action. 17. Bank of America in its Individual Capacity. Bank of America and its affiliates may, without liability to account, make loans to, accept deposits from, act as trustee under indenture of, and generally engage in any kind of banking or trust business with, the Borrower, or any of their respective subsidiaries and affiliates as though it were not a party to this Participation Agreement. 18. No Recourse. Notwithstanding any other term of this Participation Agreement, Participant acknowledges and agrees that it shall have no recourse against Bank of America for either the principal or interest or fees on the Working Capital Loan, of the Credit Agreement or any other document executed in connection therewith (except to the extent of Participant's Applicable Commitment Percentage of amounts actually collected by Bank of America on the Working Capital Loan) and that Bank of America's only obligation is to perform as required under the terms of this Participation Agreement. 19. Tax Status. The Participant represents and warrants to, and agrees with, Bank of America that under applicable law and treaties no taxes will be required to be withheld by Bank of America with respect to any payment to be made to the Participant hereunder. 20. Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given (i) if delivered personally, (ii) when transmitted via telefacsimile to the telefacsimile number set forth below, (iii) the day following the day on which the same has been delivered prepaid to a national overnight air courier service providing overnight service to the place of destination addressed as set forth below, or (iv) the third Business Day following the day on which the same is sent by registered or certified mail, postage prepaid, addressed as set forth below: If to the Participant: C/o Steven Berrard New River Capital Partners 100 Southeast 3rd Avenue,Suite 1100 Fort Lauderdale, Florida 33394 Telefacsimile: 954.713.1175 Telephone: _____________________ if to Bank of America: Bank of America, N. A. 101 North Tryon Street, NC1-001-15-04 Charlotte, North Carolina 28202 Attention: Agency Services Telefacsimile: 704.386.9923 21. Choice of Law. This Participation Agreement and all rights conferred and obligations imposed hereunder shall be interpreted and construed by reference to the laws (including the common law and choice of law rules) of the State of Florida. 22. Entire Agreement, Etc. This Participation Agreement (a) embodies the entire agreement between the parties and supersedes all prior agreements and understandings between such parties, if any, relating to the subject matter hereof, and may be amended only by an instrument in writing executed jointly by an authorized officer of each party hereto, and (b) has been executed in a number of identical counterparts, each of which shall be deemed an original for all purposes and all of which constitute, collectively, one agreement; but, in making proof of this Participation Agreement, it shall not be necessary to provide or account for more than one such counterpart. 23. Successors and Assigns. This Participation Agreement shall bind and shall inure to the benefit of the parties hereto, their successors and assigns. All references to Bank of America herein shall also refer to any successor Lender and/or Agent, as their interests appear. IN WITNESS WHEREOF, the parties have caused this Participation Agreement to be executed, each by its duly authorized officer, all on the day and year first above written. BANK OF AMERICA, N. A. By ---------------------------------- Name: Dewitt W. King, III Title: Managing Director PARTICIPANT: Portion of Participation Amount: $150,000 ------------------------------------ John Hall Portion of Participation Amount: $200,000 ------------------------------------ Thomas Hawkins Portion of Participation Amount: $650,000 ------------------------------------ Steve Berrard Participant Wire Instructions: Bank: Bank of America, N.A., Tampa, Florida ABA #063100277 Account No.: 0238238 Account Name: Berrard Holdings Limited Partnership Attention: _________________________________ EX-99.1 8 0008.txt CREDIT AGREEMENT AMENDMENT FOR IMMEDIATE RELEASE Contact: ------- Thomas W. Hawkins Sr. Vice President and Chief Administrative Officer 954-627-1000 tom.hawkins@geraldstevens.com Gerald Stevens, Inc. Amends Credit Agreement; Announces Reverse Stock Split FORT LAUDERDALE, FL - November 7, 2000. Gerald Stevens, Inc. (Nasdaq: GIFT), the nation's largest specialty retailer and marketer of floral products, has amended its credit agreement with Bank of America, N.A. to provide the company with additional liquidity and restructure its existing credit facility. Credit Agreement Amendment The amendment provides the company with a new $7 million working capital line of credit through February 28, 2001 to fund seasonal cash requirements. The amendment also eliminates scheduled commitment reductions to the company's existing $36 million revolving credit commitment until June 30, 2002 and relaxes certain financial covenants. "We are very pleased that Bank of America has agreed to provide the company with the liquidity needed to fund our requirements as we continue to implement a turnaround of Gerald Stevens. We believe this amendment validates our revised strategy of rationalizing our operations around our core businesses and selectively taking advantage of non-core asset sales as we position the Company for future growth" said John G. Hall, the company's president and chief executive officer. "With approximately $7 million of non-core asset sales completed to date and the new seasonal working capital line, the company now has adequate liquidity as we head into the floral industry's strong seasonal period, which runs from Thanksgiving through Mother's Day. Management can now focus all of its efforts on operations and our employees can focus on providing customers with the highest quality products and service that Gerald Stevens was founded to provide." In connection with the amendment, Gerald Stevens issued warrants for 10% of its common stock on a diluted basis at $ .01 per share. If the Company repays all borrowings under the credit agreement prior to June 30, 2001, 75% of the warrants will terminate, and if repaid prior to December 31, 2001, 50% of the warrants will terminate. Certain members of management will participate in $1 million of the working capital line and will receive a proportionate share of the warrants. Reverse Stock Split The company also announced that its board of directors voted to effect a 1-for-5 reverse stock split. The Board of Directors believes that the reverse stock split may improve the marketability and liquidity of the Company's common stock by appealing to a broader range of investors. The reverse stock split will have a record date of November 14, 2000 and an effective date of November 28, 2000. Fractional interests in a share of common stock will be treated as a whole for purposes of this stock split. With completion of the stock split, the number of shares outstanding will be approximately 9,840,000. Gerald Stevens, Inc. (Nasdaq: GIFT) (www.geraldstevens.com) is the largest specialty retailer and marketer of floral products in the country. The Company currently operates the largest network of floral specialty retail stores in the United States with over 300 locations across the country and in Toronto, Canada. It also operates Florafax, a national wire service with over 5,000 member florists covering all 50 states, three regional call centers and Internet businesses that take orders 24 hours a day, 7 days a week. Additionally, Gerald Stevens owns National Flora, a leading national floral marketing company with premium-placed advertisements in over 1,000 Yellow Page directories; the Flower Club, a leading corporate affinity marketer with over 50 corporate partners; and upscale floral direct marketer, Calyx & Corolla, Inc. Gerald Stevens also owns its own import and sourcing operation in Miami, Florida. This announcement contains "forward-looking" information. Future results may differ from those discussed in this announcement. Some of the factors that could cause such differences can be found under the headings "Forward-Looking Statements" and "Risk Factors" in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on November 24, 1999, and in our Form 10-Q filed with the Securities and Exchange Commission on July 17, 2000. ## -----END PRIVACY-ENHANCED MESSAGE-----