Exhibit 2.16
SHARE PURCHASE AGREEMENT
By and Among
U.S.A. Floral Products, Inc.,
▇▇▇▇▇ ▇. ▇▇▇▇▇ Wholesale, Ltd.
and
The Shareholders Named Therein
dated April 3, 1998
Table of Contents
Page
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1. THE SALE AND PURCHASE OF SHARES; THE LOAN.................................1
1.1 The Share Sale and Loan........................................1
1.2 Purchase Price.................................................1
1.3 Certain Information with Respect to Capital of the Company.....4
2. POST CLOSING ADJUSTMENT; PLEDGED ASSETS...................................4
2.1 Post-Closing Adjustment to Initial Consideration...............4
2.2 Pledged Assets.................................................5
2.3 Shareholders' Representative...................................6
3. CLOSING...................................................................7
3.1 Place and Date of Closing......................................7
3.2 Closing Deliveries.............................................7
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS........7
4.1 Due Organization...............................................7
4.2 Authorization; Validity........................................8
4.3 No Conflicts...................................................8
4.4 Capital Stock of the Company...................................9
4.5 Transactions in Capital Stock..................................9
4.6 Subsidiaries, Stock, and Notes.................................9
4.7 Predecessor Status............................................10
4.8 Absence of Claims Against the Company.........................10
4.9 Company Financial Conditions..................................10
4.10 Financial Statements..........................................10
4.11 Liabilities and Obligations...................................10
4.12 Accounts and Notes Receivable.................................11
4.13 Books and Records.............................................11
4.14 Permits.......................................................11
4.15 Real Property.................................................12
4.16 Fixed Assets..................................................15
4.17 Intellectual Property.........................................15
4.18 Material Contracts and Commitments............................17
4.19 Government Contracts..........................................18
4.20 Insurance.....................................................19
4.21 Labor and Employment Matters..................................19
4.22 Employee Benefit Plans........................................20
4.23 Conformity with Law; Litigation...............................22
4.24 Restrictive Covenants.........................................23
4.25 Taxes.........................................................23
4.26 Absence of Changes............................................25
4.27 Deposit Accounts; Powers of Attorney..........................27
4.28 Environmental Matters.........................................27
4.29 Relations with Governments....................................29
4.30 Disclosure....................................................29
4.31 USFloral Prospectus; Securities Representations;
Resale Restrictions...........................................29
4.32 Affiliates....................................................30
4.33 Location of Chief Executive Offices...........................30
4.34 Location of Equipment and Inventory...........................30
4.35 Securities Law Matters........................................30
5. REPRESENTATIONS OF USFLORAL..............................................30
5.1 Due Organization..............................................30
5.2 USFloral Common Stock.........................................31
5.3 Authorization; Validity of Obligations........................31
5.4 No Conflicts..................................................31
5.5 Capitalization of USFloral and Ownership of USFloral Stock....31
6. COVENANTS................................................................32
6.1 Tax Matters...................................................32
6.2 Related Party Agreements......................................33
6.3 Cooperation...................................................33
6.4 Conduct of Business Pending Closing...........................34
6.5 Access to Information.........................................34
6.6 Prohibited Activities.........................................35
6.7 Notice to Bargaining Agents...................................36
6.8 Sales of USFloral Common Stock................................36
6.9 USFloral Stock Options........................................38
6.10 Canadian Securities Filings...................................38
6.11 Composition of Board of Directors.............................38
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL......................38
7.1 Representations and Warranties; Performance of Obligations....38
7.2 No Litigation.................................................39
7.3 No Laws.......................................................39
7.4 No Material Adverse Change....................................39
7.5 Consents and Approvals........................................39
7.6 Opinion of Counsel............................................39
7.7 Charter Documents.............................................39
7.8 Due Diligence Review..........................................40
7.9 Delivery of Closing Financial Certificate.....................40
7.10 Employment Agreements.........................................40
7.11 Shareholders' Release.........................................40
7.12 Related Party Agreements......................................40
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8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS.............................................................41
8.1 Representations and Warranties; Performance of Obligations....41
8.2 No Litigation.................................................41
8.3 Consents and Approvals........................................41
8.4 Employment Agreements.........................................41
9. INDEMNIFICATION..........................................................41
9.1 General Indemnification by the Shareholders...................41
9.2 Limitation and Expiration.....................................43
9.3 Indemnification Procedures....................................44
9.4 Survival of Representations Warranties and Covenants..........46
9.5 Remedies Cumulative...........................................46
9.6 Right to Set Off..............................................46
10. NONCOMPETITION...........................................................46
10.1 Prohibited Activities.........................................46
10.2 Damages.......................................................47
10.3 Reasonable Restraint..........................................47
10.4 Severability; Reformation.....................................47
10.5 Independent Covenant..........................................47
10.6 Materiality...................................................48
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................48
11.1 Shareholders..................................................48
11.2 USFloral......................................................48
11.3 Damages.......................................................48
12. GENERAL..................................................................48
12.1 Termination...................................................49
12.2 Effect of Termination.........................................49
12.3 Successors and Assigns........................................49
12.4 Entire Agreement; Amendment; Waiver...........................50
12.5 Counterparts..................................................50
12.6 Brokers and Agents............................................50
12.7 Expenses......................................................50
12.8 Specific Performance; Remedies................................50
12.9 Notices.......................................................50
12.10 Governing Law.................................................51
12.11 Severability..................................................52
12.12 Absence of Third Party Beneficiary Rights.....................52
12.13 Further Representations.......................................52
12.14 Accounting Terms..............................................52
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SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 3rd day of April, 1998, by and among U.S.A. Floral Products, Inc., a
Delaware corporation ("USFloral"), ▇▇▇▇▇ ▇. ▇▇▇▇▇ Wholesale, Ltd., a British
Columbia corporation (the "Company"), and the shareholders of the Company listed
on the signature page hereof (each a "Shareholder" and collectively, the
"Shareholders").
BACKGROUND
WHEREAS, the Shareholders own all of the issued and outstanding shares of
capital stock of the Company and the Shareholders desire to sell all such shares
to USFloral and USFloral desires to purchase all such shares from the
Shareholders at the purchase price and upon the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE SALE AND PURCHASE OF SHARES; THE LOAN
1.1 The Share Sale and Loan. Subject to the terms and conditions of this
Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
hereinafter defined) each Shareholder shall sell (the "Share Sale") to USFloral
all of the Company Shares (as defined in Section 1.3 hereof) and USFloral shall
purchase from each Shareholder all of the Company Shares, in exchange for the
Purchase Price (as defined in Section 1.2 hereof), subject to adjustment as
provided in Section 1.2 hereof. USFloral shall lend to the Company on the
Closing Date on a non-interest-bearing basis U.S. $1,783,394, which amount the
Company shall use to repay on the Closing Date indebtedness of the Company to
those persons listed on Schedule 4.8 hereto, such repayments to be solely in the
amounts set forth on such Schedule 4.8 with respect to such persons. The
Company, after the consummation of the Share Sale, is sometimes referred to as
the "Surviving Corporation."
1.2 Purchase Price.
(a) For purposes of this Agreement, the "Purchase Price" shall include
the Initial Consideration and the Earn-Out Consideration. The "Initial
Consideration" shall be U.S. $6,168,674, as adjusted pursuant to this Section
1.2 and Section 2.1. Of the Initial Consideration, U.S. $2,192,640 shall be
paid in cash at Closing in immediately available funds. The balance of the
Initial Consideration of U.S. $3,976,034 shall be paid by USFloral delivering to
the Shareholders such number of shares of USFloral Common Stock as shall equal
the quotient obtained when U.S. $3,976,034 is divided by U.S. $22.21 (the
"Initial Price"), subject to Section 1.2(f) hereof. For each U.S. $1.00 by
which the U.S. Dollar 1999 EBIT Equivalent of the Company's earnings before
interest and taxes ("EBIT") for the twelve months ending February 28, 1999 (the
"1999 EBIT") exceeds U.S. $1,154,000, USFloral shall pay to the Shareholders
U.S. $6.00 (the "Earn-Out Consideration"). For purposes of this Agreement, the
"U.S. Dollar Equivalent" of any amount which is expressed in Canadian dollars,
shall on any date, be determined by multiplying such amount by the inverse of
the noon buying rate in New York City on April 2, 1998 for cable transfers in
Canadian dollars as certified for customs purposes by the Federal Reserve Bank
of New York, and the "U.S. Dollar 1999 EBIT Equivalent" of any amount expressed
in Canadian dollars shall be determined by multiplying such amount by the
inverse of the average U.S./Canada spot exchange rate quoted by the Bank of
Canada for the 12 months of March 1998 through to and including February 1999.
The Earn-Out Consideration shall not exceed U.S. $3,800,000 and shall be
calculated as set forth in Section 1.2(d) hereof. The Earn-Out Consideration
shall be paid in USFloral Common Stock valued at the average closing price on
The Nasdaq Stock Market, Inc.'s Nasdaq National Market (the "Nasdaq National
Market") per share of USFloral Common Stock for each trading day during the
thirty calendar day period ending February 27,1999 (the "Earn-Out Price"). The
issuances of shares of USFloral Common Stock to be issued pursuant to the terms
of this Agreement and USFloral's 1997 Long-Term Incentive Plan(subject to
adjustment as provided in this Section 1.2 and Section 2.1) shall, at the time
of the investment decision with respect to their issuance, be registered under
the Securities Act of 1933, as amended (the "1933 Act").
(b) The Purchase Price has been calculated based upon several factors,
including the assumption that the U.S. Dollar Equivalent of the net worth (that
is, the aggregate shareholders' equity) of the Company, calculated in accordance
with generally accepted accounting principles ("GAAP") consistently applied, is
equal to or greater than U.S. $1,500,000 (the "Net Worth Target") as of the
Closing. All references to generally accepted accounting principles means to
principles recommended, from time to time, in the Handbook of the Canadian
Institute of Chartered Accountants and all accounting terms not otherwise
defined in this Agreement have the meanings assigned to them in accordance with
Canadian generally accepted accounting principles.
(c) If, on the Closing Financial Certificate (as defined in Section
7.9), the Certified Closing Net Worth (as defined in Section 7.9) is less than
the Net Worth Target, then the Initial Consideration to be delivered to the
Shareholders may, at USFloral's election, be reduced either (i) at the Closing,
or (ii) after completion of the Post-Closing Audit (as defined in Section 2.1),
by the U.S. Dollar Equivalent of the difference between the Net Worth Target and
the Certified Closing Net Worth set forth on the Closing Financial Certificate
(which reduction, subject to Section 1.2(f) hereof, shall be pro rata in cash
and in USFloral Common Stock valued at the Initial Price in the same proportions
as the cash and USFloral Common Stock components of the Purchase Price as
provided in Section 1.2(a); provided, that if the difference between the Net
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Worth Target and the Certified Closing Net Worth is less than or equal to U.S.
$25,000, then the reduction shall be effected entirely in shares of USFloral
Common Stock (subject to Section 1.2(f) hereof).
(d) Promptly, but in any event within one hundred twenty (120) days,
following February 28, 1999, USFloral shall cause Price Waterhouse LLP
("USFloral's Accountant"), at USFloral's expense, to audit the Company's books
to determine the 1999 EBIT. In calculating the 1999 EBIT, USFloral's Accountant
shall add to EBIT any amounts expensed by the Company in respect of those items
set forth on Schedule 1.2(d) hereof during the period beginning on March 1,
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1998 and ending on the Closing Date. Within ten (10) days of USFloral's
Accountant's determination of the 1999 EBIT, USFloral shall deliver to the
Shareholders' Representative a written notice (the "Earn-Out Determination
Notice"), setting forth (i) the determination made by USFloral's Accountant of
the 1999 EBIT, (ii) the amount of the Earn-Out Consideration, if any, and (iii)
the aggregate value, if any, of the Earn-Out Consideration and, subject to
Section 1.2(f) hereof, the corresponding number of shares of USFloral Common
Stock to be issued in payment of the Earn-Out Consideration, if any. The Earn-
Out Consideration, if any, shall be paid within thirty days of the determination
by USFloral's Accountant of the 1999 EBIT.
(e) The Shareholders' Representative shall have thirty (30) days from
the receipt of the Earn-Out Determination Notice to notify USFloral if the
Shareholders dispute such Earn-Out Determination Notice. Any notice from the
Shareholders' Representative to USFloral regarding the Earn-Out Consideration
shall include the Shareholders' determination of the 1999 EBIT. If
Shareholders' Representative has delivered notice of such a dispute to USFloral
within such 30-day period, then USFloral's Accountant shall select an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years to review the Surviving Corporation's books,
Closing Financial Certificate and Financial Adjustment Notice (and related
information) to determine the amount, if any, of the Earn-Out Consideration.
Such independent accounting firm shall be confirmed by the Shareholders'
Representative and USFloral within five (5) days of its selection, unless there
is an actual conflict of interest. The independent accounting firm shall be
directed to consider only those agreements, contracts, commitments or other
documents (or summaries thereof) that were either (i) delivered or made
available to USFloral's Accountant in connection with the transactions
contemplated hereby, or (ii) reviewed by USFloral's Accountant during the course
of its determination of 1999 EBIT. The independent accounting firm shall make
its determination of the Earn-Out Consideration, if any, within thirty (30) days
of its selection. The determination made by the independent accounting firm
shall be final and binding on the parties hereto. The costs of the independent
accounting firm shall be borne by the party (either USFloral or the Shareholders
as a group) whose determination of the Company's 1999 EBIT was further from the
determination of the independent accounting firm, or equally by USFloral and the
Shareholders in the event that the determination by the independent accounting
firm is equidistant between the determination made by USFloral and the
determination made by the Shareholders.
(f) The USFloral Common Stock to be issued in payment of a portion of
the Initial Consideration shall be issued immediately upon USFloral obtaining
the Orders described in Section 6.10 hereof (the "Orders"). Upon the earliest
of (i) USFloral's receipt of a final determination that such Orders shall not be
issued, (ii) USFloral's failure to obtain such Orders by October 3, 1998 and
(iii) the agreement of USFloral and the Shareholders' Representative, acting
reasonably, that such Orders shall not be issued, then (provided that such
Orders have not, in fact, theretofore been issued): (x) USFloral shall deliver,
in substitution for and in full satisfaction of its obligation to deliver the
USFloral Common Stock portion of the Initial Consideration, cash in the amount
of U.S. $3,976,034 plus interest thereon, which interest shall accrue at the
annual rate of ten percent from the Closing Date, compounded monthly; (y) upon
determination of the Earn-Out Consideration in accordance with this Section 1.2,
the Earn-Out Consideration shall be paid in cash
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within ten days; and (z) for the purposes of all other adjustments contemplated
by this Section 1.2 or Section 2.1 not theretofore made, all such adjustments
shall be effected in cash.
1.3 Certain Information with Respect to Capital of the Company. As of the
date of this Agreement, the authorized capital of the Company consists of
200,000 common shares, of which 30,052 shares are issued and outstanding, and
100,000 preferred shares, of which 45,977 shares are issued and outstanding (the
"Company Shares").
2. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
2.1 Post-Closing Adjustment to Initial Consideration.
(a) The Initial Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 2.1
(b) Within one hundred twenty (120) days following the Closing Date,
USFloral shall cause USFloral's Accountant, at USFloral's expense, to audit the
Company's books to determine the accuracy of the information set forth on the
Closing Financial Certificate (the "Post-Closing Audit"). The parties
acknowledge and agree that for purposes of determining the net worth of the
Company as of the Closing Date, the value of the assets of the Company shall,
except with the prior written consent of USFloral, be calculated as provided in
the last paragraph of Section 7.9. The Shareholders shall cooperate and shall
use their reasonable efforts to cause the officers and employees of the Company
to cooperate with USFloral and USFloral's Accountant after the Closing Date in
furnishing information, documents, evidence and other assistance to USFloral's
Accountant to facilitate the completion of the Post-Closing Audit within the
aforementioned time period. In the event that USFloral's Accountant determines
that the actual Company net worth as of the Closing Date was less than the
Certified Closing Net Worth, USFloral shall deliver a written notice (the
"Financial Adjustment Notice") to the Shareholders' Representative, as defined
in Section 2.3, setting forth (i) the determination made by USFloral's
Accountant of the actual Company net worth (the "Actual Company Net Worth"),
(ii) the adjustment that would have been made to the Initial Consideration at
Closing pursuant to Section 1.2(c) had the Actual Company Net Worth been
reflected on the Closing Financial Certificate instead of the Certified Closing
Net Worth, and (iii) subject to Section 1.2(f) hereof, the amount by which the
amount of cash and number of shares issued as the Initial Consideration would
have been reduced at Closing had the Actual Company Net Worth been used in the
calculations pursuant to Section 1.2(c) (the "Purchase Price Adjustment"). The
Purchase Price Adjustment shall take account of the reduction, if any, to the
Initial Consideration already taken pursuant to Section 1.2(c)(i).
(c) The Shareholders' Representative shall have thirty (30) days from
the receipt of the Financial Adjustment Notice to notify USFloral if the
Shareholders dispute such Financial Adjustment Notice. If USFloral has not
received notice of such a dispute within such 30-day period, USFloral shall be
entitled to receive from the Shareholders (which may, at USFloral's sole
discretion, be from the Pledged Assets as defined in Section 2.2) the Purchase
Price Adjustment. If, however,
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the Shareholders' Representative has delivered notice of such a dispute to
USFloral within such 30-day period, then USFloral's Accountant shall select an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years to review the Surviving Corporation's books,
Closing Financial Certificate and Financial Adjustment Notice (and related
information) to determine the amount, if any, of the Purchase Price Adjustment.
Such independent accounting firm shall be confirmed by the Shareholders'
Representative and USFloral within five (5) days of its selection, unless there
is an actual conflict of interest. The independent accounting firm shall be
directed to consider only those agreements, contracts, commitments or other
documents (or summaries thereof) that were either (i) delivered or made
available to USFloral's Accountant in connection with the transactions
contemplated hereby, or (ii) reviewed by USFloral's Accountant during the course
of the Post-Closing Audit. The independent accounting firm shall make its
determination of the Purchase Price Adjustment, if any, within thirty (30) days
of its selection. The determination made by the independent accounting firm
shall be final and binding on the parties hereto, and upon such determination of
a Purchase Price Adjustment, USFloral shall be entitled to receive from the
Shareholders (which may, at USFloral's sole discretion, be from the Pledged
Assets as defined in Section 2.2) the Purchase Price Adjustment. The costs of
the independent accounting firm shall be borne by the party (either USFloral or
the Shareholders as a group) whose determination of the Company's net worth at
Closing was further from the determination of the independent accounting firm,
or equally by USFloral and the Shareholders in the event that the determination
by the independent accounting firm is equidistant between the Certified Closing
Net Worth and the Actual Company Net Worth.
2.2 Pledged Assets.
(a) As collateral security for the payment of any post-Closing
adjustment to the Initial Consideration under Section 2.1, or any
indemnification obligations of the Shareholders pursuant to Article 9, the
Shareholders shall, on the earliest of the dates specified in Section 1.2(f)(i),
(ii) and (iii) hereof, transfer, pledge and assign to USFloral, for the benefit
of USFloral, a security interest in the following assets (the "Pledged Assets"):
(i) that number of shares of USFloral Common Stock with a value,
based on the Initial Price, equal to twelve and eighty-five one-hundredths
percent (12.85%) of each Shareholder's share of the Initial Consideration as the
same may have been adjusted pursuant to Section 1.2 or Section 2.1 hereof, and
the certificates and instruments, if any, representing or evidencing each such
Shareholder's Pledged Assets (provided, that if no shares of USFloral Common
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Stock have been issued at such time as a result of any of the conditions
contemplated by Section 1.2(f)(i), (ii) and (iii) hereof, then the Pledged
Assets referred to in this clause (i) shall be comprised solely of cash which
shall be delivered by each such Shareholder on such date);
(ii) all securities hereafter delivered to such Shareholder with
respect to or in substitution for such Shareholder's Pledged Assets, all
certificates and instruments representing or evidencing such securities, and all
cash and non-cash dividends and other property at any time received, receivable
or otherwise distributed in respect of or in exchange for any or all thereof;
and in the event such Shareholder receives any such property, such Shareholder
shall hold such property
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in trust for USFloral and shall immediately deliver such property to United
States legal counsel acceptable to the Shareholders, Oregon, as escrow agent to
be held hereunder as Pledged Assets (provided, that if the Pledged Assets
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consist of cash as contemplated by the proviso to clause (a)(i) above, then the
escrow agent shall instead be a Canadian chartered bank with a branch office
located in Vancouver, British Columbia that is reasonably satisfactory to
USFloral); and
(iii) all cash and non-cash proceeds of all of the foregoing
property and all rights (including without limitation, voting rights), titles,
interests, privileges and preferences appertaining or incident to the foregoing
property.
(b) Each certificate, if any, evidencing a Shareholder's Pledged
Assets issued in his or her name pursuant to this Agreement shall be delivered
to an escrow agent directly by the transfer agent, such certificate bearing no
restrictive or cautionary legend other than those imprinted by the transfer
agent at USFloral's request. Each Shareholder shall, at the Closing, deliver to
USFloral, for each such certificate, a stock power duly signed in blank by him
or her.
(c) The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Initial Consideration pursuant to Section 2.1 and any
indemnification obligations of the Shareholders pursuant to Article 9 until the
date which is one year after the Closing Date (the "Release Date"). Promptly
following the Release Date, USFloral shall return or cause to be returned to the
Shareholders the Pledged Assets, less Pledged Assets having an aggregate value
equal to the amount of (i) any post-Closing adjustment to the Purchase Price
under Section 2.1, (ii) any pending claim for indemnification made by any
Indemnified Party (as defined in Article 9), and (iii) any indemnification
obligations of the Shareholders pursuant to Article 9. For purposes of the
preceding sentence and Article 9, the USFloral Common Stock held as Pledged
Assets shall be valued at (x) the Initial Price with respect to any post-Closing
adjustment to the Purchase Price under Section 2.1 and (y) the average of the
closing price on the Nasdaq National Market per share of USFloral Common Stock
for the five trading days prior to the satisfaction of an indemnification
obligation (the "Market Value") with respect to indemnification obligations
pursuant to Article 9.
2.3 Shareholders' Representative.
(a) Each holder of Company Common Stock, by signing this Agreement,
designates ▇▇▇▇▇ ▇▇▇▇▇▇ or, in the event that ▇▇▇▇▇ ▇▇▇▇▇▇ is unable or
unwilling to serve, ▇▇▇▇▇▇▇ ▇▇▇▇, to be the Shareholders' Representative for
purposes of this Agreement. The Shareholders shall be bound by any and all
actions taken by the Shareholders' Representative on their behalf.
(b) USFloral shall be entitled to rely upon any communication or
writings given or executed by the Shareholders' Representative. All
communications or writings to be sent to Shareholders pursuant to this Agreement
may be addressed to the Shareholders' Representative and any communication or
writing so sent shall be deemed notice to all of the Shareholders hereunder. The
Shareholders hereby consent and agree that the Shareholders' Representative is
authorized to accept deliveries, including any notice, on behalf of the
Shareholders pursuant hereto.
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(c) The Shareholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Shareholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Shareholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 9 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of the other Shareholders hereunder and in consideration of
the mutual covenants and agreements made herein, and shall be irrevocable and
shall not be terminated by any act of any Shareholder, by operation of law,
whether by such Shareholder's death or any other event.
3. CLOSING
3.1 Place and Date of Closing. The consummation of the sale and purchase
of shares and the other transactions contemplated by this Agreement (the
"Closing") shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, on
April 6, 1998, providing that all conditions to Closing shall have been
satisfied or waived, or at such other time and date as USFloral, the Company and
the Shareholders may mutually agree, which date shall be referred to as the
"Closing Date."
3.2 Closing Deliveries.
(a) At the Closing the Shareholders, as the holders of all outstanding
certificates representing shares of Company Stock, shall surrender such
certificates to USFloral and USFloral shall deliver to the Shareholders the
Initial Consideration set forth in Section 1.1 above.
(b) The Shareholders shall deliver to USFloral at Closing the
certificates representing the Company Stock, duly endorsed in blank by the
Shareholders, or accompanied by blank irrevocable stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the Shareholders'
expense, affixed and canceled and shall take such steps as shall be necessary to
cause the Company to enter the Purchaser or its nominee(s) upon the books of the
Company as the holder of the Company Shares and to issue one or more share
certificates to the Purchaser or its nominee(s) representing the Company Shares.
The Shareholders agree promptly to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
such Company Stock or with respect to the stock powers accompanying any Company
Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS
To induce USFloral to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and each Shareholder,
jointly and severally, represents and warrants to USFloral as follows (for
purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
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Shareholders and the directors and officers of the Company, including facts of
which the directors and officers, in the reasonably prudent exercise of their
duties, should be aware):
4.1 Due Organization. The Company is a corporation duly organized and
validly existing under the laws of the jurisdiction of its incorporation and has
all necessary corporate power, authority and capacity to own its property and
assets and to carry on its business as presently conducted. The Company is duly
authorized, qualified, registered and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own, operate and
lease its properties and to carry on its business in the places and in the
manner as now conducted except where the failure to be so authorized, qualified,
registered or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Company ("Material Adverse Effect"). Schedule 4.l hereto contains a list of all
jurisdictions in which the Company is authorized, qualified, registered or
licensed to do business. The Company has delivered to USFloral true, complete
and correct copies of the Memorandum of Association and Articles of Association
of the Company. Such Memorandum of Association and Articles of Association are
collectively referred to as the "Charter Documents." The Company is not in
violation of any Charter Documents. The corporate records (including without
limitation, the share certificate book, register of shareholders, register of
transfers and register of directors) minute books of the Company have been made
available to USFloral (and have been delivered, along with the Company's
corporate seal, to USFloral) and are correct and, except as set forth in
Schedule 4.1, complete in all material respects.
4.2 Authorization; Validity. The Company has all requisite corporate power
and authority to enter into and perform its obligations pursuant to the terms of
this Agreement. Each Shareholder has the full legal right and authority to
enter into this Agreement and the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the performance by
the Company of the transactions contemplated herein have been duly and validly
authorized by the Board of Directors of the Company and the Shareholders and
this Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of the Company
and each Shareholder, enforceable in accordance with its terms.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which the Company or any
Shareholder is a party or by which the Company or any Shareholder is bound, or
result in the creation or imposition of any lien, charge or encumbrance on any
of the Company's properties pursuant to (i) any law or regulation to which the
Company or any
8
Shareholder or any of their respective property is subject, or (ii) any
judgment, order or decree to which the Company or any Shareholder is bound or
any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of the Company; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company or any Shareholder is subject or by which the
Company or any Shareholder is bound including, without limitation, the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), together with
all rules and regulations promulgated thereunder.
4.4 Capital Stock of the Company. The authorized share capital of the
Company consists of 200,000 common shares, of which 30,052 shares are issued and
outstanding, and 100,000 shares of preferred stock of which 45,977 are issued
and outstanding. All of the issued and outstanding shares of the share capital
of the Company have been duly authorized and validly issued, are fully paid and
nonassessable and are owned of record and beneficially by the Shareholders in
the amounts set forth in Schedule 4.4. Each Shareholder severally represents
and warrants that such Shareholder owns the number of shares of Company Stock
set forth next to such Shareholder's name on Schedule 4.4 free and clear of all
Liens (defined below). All of the issued and outstanding shares of the capital
stock of the Company were offered, issued, sold and delivered by the Company in
compliance with all applicable, provincial, state and federal laws concerning
the issuance of securities. Further, none of such shares was issued in
violation of any preemptive rights. There are no voting agreements or voting
trusts with respect to any of the outstanding shares of the capital stock of the
Company. For purposes of this Agreement, "Lien" means any mortgage, security
interest, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer (other
than restrictions imposed by federal and state securities laws), preferential
arrangement, or adverse claim of any kind or nature whatsoever (including any
restriction on the transfer of any assets, any conditional sale or other title
retention agreement, any financing lease involving substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the Personal Property Security Act (British Columbia) or
comparable law of any jurisdiction).
4.5 Transactions in Capital Stock. No option, warrant, call, subscription
right, conversion or exchange right or other contract or commitment of any kind
exists of any character, written or oral, which may obligate the Company to
issue, sell or otherwise cause to become outstanding any shares or other
securities of the Company. The Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. As a result of the consummation of the transactions
contemplated by this Agreement, USFloral will be the record and beneficial owner
of all outstanding share capital of the Company and rights to acquire share
capital of the Company.
9
4.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 4.6(a), the Company has no
subsidiaries.
(b) Except as set forth on Schedule 4.6(b), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership, trust,
co-tenancy or other noncorporate entity or business undertaking.
(c) Except as set forth on Schedule 4.6(c), there are no promissory
notes that have been issued to, or are held by, the Company.
4.7 Predecessor Status. Except as set forth on Schedule 4.7, the Company
has not previously used any other names and has not acquired significant assets
from any entity. The Company has never been a subsidiary or division of another
corporation, nor has it been a part of an acquisition that was later rescinded.
4.8 Absence of Claims Against the Company. No Shareholder has any claims
against the Company, except those notes set forth on Schedule 4.8 hereto, which
notes shall have been paid as of the Closing Date.
4.9 Company Financial Conditions.
(a) The Company's net worth as of the end of its most recent fiscal
year was not less than U.S. $1,385,000.
(b) The Company's earnings before interest and taxes (after the
addition of "add-backs" set forth on Schedule 4.9(b)) for its most recent fiscal
year was not less than U.S. $1,154,000.
4.10 Financial Statements. Schedule 4.10 includes true, complete and
correct copies of the Company's balance sheet as of February 28, 1998 (the
"Balance Sheet Date"), and income statement for the year then ended
(collectively, the "Company Financial Statements"). The Company Financial
Statements have been prepared in accordance with GAAP consistently applied. Each
balance sheet included in the Company Financial Statements presents fairly the
assets, liabilities and financial condition of the Company as of the date
indicated thereon, and each of the income statements included in the Company
Financial Statements presents fairly the sales and earnings results of its
operations for the periods indicated thereon. Since the dates of the Company
Financial Statements, there have been no material changes in the Company's
accounting policies other than as requested by USFloral to conform the Company's
accounting policies to GAAP.
4.11 Liabilities and Obligations.
10
(a) The Company is not liable for or subject to any liabilities except
for:
(i) those liabilities reflected on the Balance Sheet and not
previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which liabilities
are not, individually or in the aggregate, material.
(b) The Company has delivered to USFloral, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 4.11(c) also includes a summary description of all plans
or projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the Company
or the Surviving Corporation would require additional material expenditures of
capital.
(d) For purposes of this Section 4.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured, given or agreed to
be given. Schedule 4.11(d) contains a complete list of all indebtedness of the
Company.
4.12 Accounts and Notes Receivable. The Company has delivered to USFloral
a complete and accurate list, as of March 31, 1998, of the accounts and notes
receivable of the Company (including without limitation receivables from and
advances to employees and the Shareholders), which includes an aging of all
accounts and notes receivable showing amounts due in 30-day aging categories
(collectively, the "Accounts Receivable"). On the Closing Date, the Company
will deliver to USFloral a complete and accurate list, as of a date not more
than three (3) business days prior to the Closing Date, of the Accounts
Receivable. All Accounts Receivable represent valid obligations arising from
sales actually made or services actually performed in the ordinary course of
business. The Accounts Receivable are current and collectible net of any
respective reserves shown on the Company's books and records (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable will be collected in full, without any
set-off, within one hundred twenty (120) days after the Closing Date. There is
no contest, defense, claim, or right of set-off, other than rebates and returns
in the
11
ordinary course of business, under any contract with any obligor of an Account
Receivable relating to the amount or validity of such Account Receivable.
4.13 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
4.14 Permits. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing. The
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any Permit.
4.15 Real Property.
(a) For purposes of this Agreement, "Owned Real Property" means all
real property which the Company owns or has agreed to acquire beneficially,
either in fee simple or possession, or in respect of which the Company has
rights or options, and all rights, benefits, entitlements, and improvements
appurtenant thereto, and "Leased Real Property" means all real property leased,
subleased, licensed or otherwise used or occupied by the Company. Collectively,
the Owned Real Property and Leased Real Property shall constitute the Real
Property.
(b) Schedule 4.15(b) contains a complete and accurate description of
all Real Property (including street address, legal description (where known),
beneficial owner, registered title holder and Company's use thereof) and, to the
Company's knowledge, any Liens registered against the Real Property. Schedule
4.15(b) indicates whether the Real Property is owned, leased, subleased,
licensed or otherwise used or occupied by the Company. The Real Property listed
on Schedule 4.15 includes all interests in real property necessary to conduct
the business and operations of the Company.
(c) Except as set forth in Schedule 4.15(c):
12
(i) The Company has good and marketable title to the Owned Real
Property in fee simple, free and clear of any Liens other than (A) liens for
current taxes not yet due and payable, (B) easements, covenants, conditions,
restrictions, and title defects that have been approved by USFloral, as set
forth on Schedule 4.15(c)(i), (C) liens securing indebtedness for borrowed money
that USFloral or one of its affiliates has elected to assume, as set forth on
Schedule 4.15(c)(i), and (D) the matters referred to in subsection 23(1) of the
Land Titles Act (British Columbia) (collectively, "Permitted Encumbrances").
(ii) The legal descriptions for the Owned Real Property contained
in the respective deeds thereof to be delivered to USFloral upon Closing
describe the properties fully and adequately. All structures, facilities and
improvements to the Owned Real Property ("Structures") are located within the
boundary lines of the Owned Real Property and no structures, facilities or other
improvements on any parcel adjacent to the Owned Real Property encroach onto any
portion of the Real Property. None of the Owned Real Property serves any
adjacent parcel for any purpose inconsistent with the use of the Owned Real
Property.
(iii) The Company has good and valid rights of ingress and egress
to and from all Real Property from and to the public street systems for all
usual street, road and utility purposes and necessary for the conduct of the
Company's business.
(iv) All buildings, structures and all structural, mechanical and
other physical systems thereof that: (a) constitute part of the Owned Real
Property and, (b) to the extent the Company is responsible for the maintenance
and repair thereof as tenants or occupants, constitute part of the Leased Real
Property, including but not limited to the walls, roofs and structural elements
thereof and the heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, paving and parking equipment,
systems and facility included therein, and other material items (collectively,
the "Tangible Assets"), at the Owned Real Property and, to the Company's
knowledge, at the Leased Real Property, are free of defects and in good
operating condition and repair. For purposes of this Section, a defect shall
mean a condition relating to the structures or any structural, mechanical or
physical system which requires an expenditure of more than U.S. $10,000 to
correct. No maintenance or repair to the Owned Real Property, or to the
Company's knowledge the Leased Real Property, Structures or any Tangible Asset
has been unreasonably deferred. There is no water, chemical or gaseous seepage,
diffusion or other intrusion into said buildings, including any subterranean
portions, that would impair beneficial use of the Real Property, Structures or
any Tangible Asset.
(v) In respect of the Owned Real Property and, to the Company's
knowledge, in respect of the Leased Real Property: (a) all water, sewer, gas,
electric, telephone and drainage facilities, and all other utilities required by
any applicable law or by the use and operation of the Real Property in the
conduct of the business of the Company's business are installed to the property
lines of the Real Property, (b) are connected pursuant to valid permits to
municipal or public utility services or proper drainage facilities, are fully
operable and are adequate to service the Real Property in the operation of the
Company's business and to permit full compliance with the requirements of all
laws in the operation of such business, and (c) no fact or condition exists
which
13
could result in the termination or material reduction of the current access from
the Real Property to existing roads or to sewer or other utility services
presently serving the Real Property.
(vi) The Owned Real Property and the Company's present uses and
operations thereof and, to the Company's knowledge the Leased Real Property and
the Company's present uses and operations thereof, comply with all applicable
statutes, rules, regulations, ordinances, orders, writs, injunctions, judgments,
decrees, awards or restrictions of any government entity having jurisdiction
over any portion of the Real Property (including, without limitation, applicable
statutes, rules, regulations, orders and restrictions relating to zoning, land
use, safety, health, employment and employment practices and access by the
handicapped) (collectively, "Laws"), covenants, conditions, restrictions,
easements, disposition agreements and similar matters affecting the Real
Property. The Company has obtained all approvals of governmental authorities
(including certificates of use and occupancy, licenses and permits) required in
connection with the construction, ownership, use, occupation and operation of
the Real Property.
(vii) None of the Structures, the appurtenances thereto or the
equipment therein or the operation or maintenance thereof, or the conduct of the
Company's business, violates any restrictive covenant or encroaches on any
property owned by others or any easement, right of way or other Lien or
restriction affecting such Real Property in any respect. The Real Property and
its continued use, occupancy and operation as used, occupied and operated in the
conduct of the Company's business does not constitute a nonconforming use and is
not the subject of a special use permit under any applicable Law.
(viii) There are no pending or, to the Company's knowledge after
having made due inquiry, threatened condemnation, fire, health, safety,
building, zoning or other land use regulatory proceedings, lawsuits or
administrative actions relating to any portion of the Real Property or any other
matters which do or may adversely effect the current use, occupancy or value
thereof, nor has the Company or any of the Shareholders received notice of any
pending or threatened special assessment proceedings affecting any portion of
the Real Property.
(ix) No portion of the Owned Real Property or to the Company's
knowledge the Leased Real Property, the Structures or the Tangible Assets has
suffered any damage by fire or other casualty which has not heretofore been
completely repaired and restored to its original condition.
(x) There are no parties other than the Company in possession of
any of the Real Property or any portion thereof, and there are no leases,
subleases, licenses, concessions or other agreements, written or oral, granting
to any party or parties the right of use or occupancy of any portion of the
Owned Real Property or any portion thereof.
(xi) There are no outstanding options or rights of first refusal
to purchase the Owned Real Property, or any portion thereof or interest therein.
The Company has not transferred any air rights or development rights relating to
the Owned Real Property.
14
(xii) There are no service contracts or other agreements relating
to the use or operation of the Owned Real Property.
(xiii) No portion of the Real Property is located in a wetlands
area, as defined by Laws, or in a designated or recognized flood plain, flood
plain district, flood hazard area or area of similar characterization.
(xiv) All real property taxes and assessments that are due and
payable with respect to the Owned Real Property or with respect to the Company's
use and occupation of the Leased Real Property have been paid or will be paid at
or prior to Closing.
(xv) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which the Company
occupies any Real Property, including all amendments, renewals, extensions,
modifications or supplements to any of the foregoing or substitutions for any of
the foregoing (collectively, the "Leases") are valid and in full force and
effect. The Company has provided USFloral with true and complete copies of all
of the Leases, all amendments, renewals, extensions, modifications or
supplements thereto, and all material correspondence related thereto, including
all correspondence pursuant to which any party to any of the Leases declared a
default thereunder or provided notice of the exercise of any operation granted
to such party under such Lease. The Leases and the Company's interests
thereunder are free of all Liens.
(xvi) None of the Leases requires the consent or approval of any
party thereto in connection with the consummation of the transactions
contemplated hereby.
4.16 Fixed Assets.
(a) Schedule 4.16 sets forth an accurate list of the Company's fixed
assets, machinery, equipment, fixtures, furniture, furnishings, vehicles,
material handling equipment, implements, parts and tools owned or used or held
by the Company, including, without limitation, any which are in storage or in
transit, and other tangible property and facilities used by the Company (the
"Fixed Assets").
(b) The Company currently owns or leases all Fixed Assets necessary to
conduct the business and operations of the Company as they are currently being
conducted.
(c) All of the trucks and other material machinery and equipment of
the Company, are in good working order and condition, ordinary wear and tear
excepted. All fixed assets used by the Company that are material to the
operation of its business are either owned by the Company or leased under an
agreement listed on Schedule 4.16(c). All leases set forth on Schedule 4.16(c)
are in full force and effect and constitute valid and binding agreements of the
Company, and the Company is not in breach of any of their terms.
4.17 Intellectual Property.
15
(a) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use all rights in, the Marks
listed on Schedule 4.17(a). Such schedule lists (i) all of the Marks registered
in the United States Patent and Trademark Office ("PTO") or the equivalent
thereof in any state of the United States or in any foreign country, and (ii)
all of the unregistered Marks, that the Company now owns or uses in connection
with its business. Except with respect to those Marks shown as licensed on
Schedule 4.17(a), the Company owns all of the registered and unregistered
trademarks, service marks, and trade names that it uses. The Marks listed on
Schedule 4.17(a) will not cease to be valid rights of the Company by reason of
the execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby. For purposes of this Section 4.17, the
term "▇▇▇▇" shall mean all right, title and interest in and to any United States
or foreign trademarks, service marks and trade names whether registered or not,
owned by or licensed to, the Company, including any registration or application
for registration of any trademarks and services marks in the PTO or the
equivalent thereof in any state of the United States or in any foreign country,
as well as any unregistered marks used by the Company, and any trade dress
(including logos, designs, company names, business names, fictitious names and
other business identifiers) used by the Company in the United States or any
foreign country.
(b) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on Schedule 4.17(b)(i) and in the Copyrights listed on Schedule
4.17(b)(ii). Such Patents and Copyrights constitute all of the Patents and
Copyrights that the Company now owns or is licensed to use. The Company owns or
is licensed to practice under all patents and copyrights that the Company now
owns or uses in connection with its business. For purposes of this Section
4.17, the term "Patent" shall mean any United States or foreign patent (or
similar rights, including industrial designs) to which the Company has title or
is licensed to use as of the date of this Agreement, as well as any application
for a United States or foreign patent made by the Company; the term "Copyright"
shall mean any United States or foreign copyright owned by or licensed to the
Company as of the date of this Agreement, including any registration of
copyrights, in the United States Copyright Office or the equivalent thereof in
any foreign county, as well as any application for a United States or foreign
copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the
confidential information, trade secrets, franchises, or other intellectual
property rights (collectively, "Other Rights") listed on Schedule 4.17(c).
Those Other Rights constitute all of the Other Rights that the Company now owns
or is licensed to use. The Company owns or is licensed to practice under all
confidential information trade secrets, franchises or other intellectual
property rights that it owns, uses or practices under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on
Schedule 4.17(a), 4.17(b)(i), 4.17(b)(ii), and 4.17(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by the Company is referred to herein collectively as the "Company
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third
16
Party Intellectual Property." Except as indicated on Schedule 4.17(d), the
Company has no obligations to compensate any person for the use of any
Intellectual Property nor has the Company granted to any person any license,
option or other rights to use in any manner any Intellectual Property, whether
requiring the payment of royalties or not.
(e) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations hereunder,
in violation of any Third Party Intellectual Property license, sublicense or
agreement described in Schedule 4.17(a), (b), or (c). No claims with respect to
the Company Intellectual Property or Third Party Intellectual Property are
currently pending or, to the knowledge of the Company, are threatened by any
person, nor, to the Company's knowledge, do any grounds for any claims exist:
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by the Company
infringes on any copyright, patent, trademark, service ▇▇▇▇ or trade secret or
other intellectual property right; (ii) against the use by the Company of any
trademarks, trade names, trade secrets, copyrights, patents, technology, know-
how or computer software programs and applications used in the Company's
business as currently conducted by the Company; (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property or other
trade secret material to the Company; or (iv) challenging the Company's license
or legally enforceable right to use of the Third Party Intellectual Property.
To the Company's knowledge, there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party.
Neither the Company nor any of its subsidiaries (x) has been sued or charged in
writing as a defendant in any claim, suit, action or proceeding which involves a
claim or infringement of trade secrets, any patents, trademarks, service marks,
or copyrights or other intellectual property right and which has not been
finally terminated or been informed or notified by any third party that the
Company may be engaged in such infringement or (y) has knowledge of any
infringement liability with respect to, or infringement by, the Company or any
of its subsidiaries of any trade secret, patent, trademark, service ▇▇▇▇, or
copyright or other intellectual property right of another.
4.18 Material Contracts and Commitments.
(a) Schedule 4.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) to which the Company and any affiliate of the Company or any
officer, director or Shareholder of the Company are parties ("Related Party
Agreements"); or (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, U.S. $25,000, or that may generate
revenues or income exceeding, during the current term thereof, U.S. $25,000,
other than purchases and sales of inventory in the ordinary course of business
(collectively with the Related Party Agreements, the "Material Contracts"). The
Company has delivered to USFloral true, complete and correct copies of the
Material Contracts. The Company has complied with all of its commitments and
obligations and is not in default under any
17
of the Material Contracts, and no notice of default has been received with
respect to any thereof, and there are no Material Contracts that were not
negotiated at arm's length.
(b) Each Material Contract, except those terminated pursuant to
Section 6.3, is valid and binding on the Company and is in full force and effect
and is not subject to any default thereunder by any party obligated to the
Company pursuant thereto. The Company [has obtained/will obtain prior to the
Closing Date] all necessary consents, waivers and approvals of parties to any
Material Contracts that are required in connection with any of the transactions
contemplated hereby, or are required by any governmental agency or other third
party or are advisable in order that any such Material Contract remain in effect
without modification after the Closing and without giving rise to any right to
termination, cancellation or acceleration or loss of any right or benefit
("Third Party Consents"). All Third Party Consents are listed on Schedule
4.18(b).
(c) The outstanding balance on all loans or credit agreements either
(i) between the Company and any entity in which any of the Shareholders owns a
material interest, or (ii) guaranteed by the Company for the benefit of any
entity in which any of the Shareholders owns a material interest, are set forth
in Schedule 4.18(c).
(d) The sale of Company Shares will not, except as set forth on
Schedule 4.18(d), (i) result in the breach or violation of, (ii) constitute a
default under, (iii) create a right of termination under, or (iv) result in the
creation or imposition of (or the obligation to create or impose) any lien upon
any of the assets of the Company (other than a lien created pursuant to the
pledge, hypothecation or mortgage described at the start of this Section
4.18(d)) pursuant to any of the terms and provisions of, any Material Contract
to which the Company is a party or by which the property of the Company is
bound.
4.19 Government Contracts.
(a) Except as set forth on Schedule 4.19, the Company is not a party
to any government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the Canadian or
United States Government, or any provincial, state or local government, nor, to
the knowledge of the Company, has any suspension or debarment action been
threatened or commenced. There is no valid basis for the Company's suspension or
debarment from bidding on contracts or subcontracts for any agency of the
Canadian or United States government or any provincial, state or local
government.
(c) Except as set forth in Schedule 4.19, the Company has not been,
nor is it now being, audited, or investigated by any Governmental Authority or
the inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened. "Governmental Authority" means any government,
regulatory authority, governmental department, agency, commission, board,
tribunal,
18
crown corporation, or court or other law, rule or regulation-making entity
having or purporting to have jurisdiction on behalf of any nation, or province
or state or other subdivision thereof or any municipality, district or other
subdivision thereof.
(d) The Company has no dispute pending before a contracting office of,
nor any current claim (other than the Accounts Receivable) pending against, any
Governmental Authority, relating to a contract.
(e) The Company has not, with respect to any government contract,
received a cure notice advising the Company that it is or was in default or
would, if it failed to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any Governmental Authority.
(g) No employee, agent, consultant, representative, or affiliate of
the Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Company's
business under circumstances where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
4.20 Insurance. Schedule 4.20 sets forth a complete and accurate list of
all insurance policies carried by the Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. The
Company has delivered to USFloral true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Company is
otherwise in full compliance with the terms of such policies. Such policies of
insurance are of the type and in amounts and are against such risks as are
customarily carried by persons conducting businesses similar to that of the
Company. The insurance carried by the Company with respect to its properties,
assets and business is, to the Company's knowledge, with financially sound and
responsible insurers. To the knowledge of the Company, there have been no
threatened terminations of, or material premium increases with respect to, any
of such policies.
4.21 Labor and Employment Matters. With respect to employees of and
service providers to the Company:
(a) the Company is and has been in compliance in all material respects
with all applicable labor and employment laws, including without limitation any
such laws respecting employment discrimination, workers' compensation, pay
equity, income tax, human rights, family and medical leave, the Immigration and
occupational safety and health requirements, and has not and is not engaged in
any unfair labor practice;
19
(b) there are no wrongful dismissal, constructive dismissal or other
employment claims, human rights or pay equity complaints, or employment
standards claims, actual or threatened, relating to employees of the Company or
independent contractors, or orders or judgments issued against the Company in
respect of any such claims or complaints.
(c) there are no written or oral employment agreements between the
Company and any employees or officers which cannot be terminated on reasonable
notice or pay in lieu thereof, or which include terms regarding change of
control of the Company.
(d) there are no contracts between the Company and independent
contractors which cannot be terminated on 30 days or less notice.
(e) there have been no surcharges, penalties, fines, orders or charges
issued against the Company under workers' compensation or occupational health
and safety legislation within the past three years.
(f) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before a provincial labor relations board or
any other comparable authority;
(g) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage or lock-out actually pending or, to the
Company's knowledge, threatened, against or directly affecting the Company;
(h) to the Company's knowledge, no labor organizing campaign exists
nor has there been any such organizing activity within the past three years;
(i) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and no claims therefor exist, to the
Company's knowledge, or have been threatened; and
(j) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company.
4.22 Employee Benefit Plans.
(a) Attached hereto as Schedule 4.22 are complete and accurate copies
of all Pension/Benefit Plans.
(b) Current and complete copies of all written Pension/Benefit Plans
or, where oral, written summaries of the material terms thereof, have been
provided or made available to USFloral together with current and complete copies
of all documents relating to the Pension/Benefit
20
Plans, including, without limitation, as applicable, (i) all documents
establishing, creating or amending any Pension/Benefit Plan; (ii) all trust
agreements, funding agreements, insurance contracts and investment management
agreements; (iii) documents describing the classification of employees covered
by each Pension/Benefit Plan (iv) all financial statements and accounting
statements and reports, and investment reports for each of the last 3 years and
the 3 most recent actuarial reports; (v) all reports, returns, filings and
material correspondence with any regulatory authority in the last 6 years; and
(vi) all booklets, summaries or manuals prepared for or circulated to, and
written communications of a general nature to employees concerning any
Pension/Benefit Plan.
(c) Except as disclosed in Schedule 4.22 each Pension/Benefit Plan is,
and has been, established, registered, qualified, administered and invested, in
compliance with (i) the terms thereof; (ii) all applicable laws, by-laws, rules,
regulations, orders, ordinances, protocols, codes, guidelines, policies,
notices, directions and judgements or other requirements of any Governmental
Authority; and (iii) any applicable collective agreements; and the Company has
not received, in the last 3 years, any notice from any Person questioning or
challenging such compliance (other than in respect of any claim related solely
to that Person), and the Shareholders have no knowledge of any such notice from
any Person questioning or challenging such compliance beyond the last 3 years.
(d) All obligations under the Pension/Benefit Plans (whether pursuant
to the terms thereof or applicable Law) have been satisfied, and there are no
outstanding defaults or violations thereunder by the Company nor does the
Company have any knowledge of any default or violation by any other party to any
Pension/Benefit Plan.
(e) There have been no improvements in benefits promised under the
Pension/Benefit Plans that are not reflected in the terms of the Pension/Benefit
Plans.
(f) All contributions or premiums required to be paid to or in respect
of each Pension/Benefit Plan have been paid in a timely fashion in accordance
with the terms thereof and all applicable Law, and no taxes, penalties or fees
are owing or exigible under any Pension/Benefit Plan.
(g) There is no pending proceeding, action, suit, claim (other than
routine claims for benefits), arbitration or disputed claim, settlement or
adjudication proceeding or any proceeding whether pending or threatened by a
Governmental Authority, with respect to any Pension/Benefit Plan or its assets,
the administrator or the sponsor of any of the Pension/Benefit Plans (in their
capacities as such) (collectively a "Proceeding" and to the Company's knowledge
there is no threatened Proceeding and no facts exist which could reasonably be
expected to give rise to any Proceeding.
(h) No event has occurred respecting any Pension/Benefit Plan which
would entitle any Person (without the consent of the Company) to wind-up or
terminate any Pension/Benefit Plan, in whole or in part, or which could,
reasonably be expected to adversely affect the tax status thereof.
21
(i) There are no going concern unfunded actuarial liabilities, past
service unfunded liabilities or solvency deficiencies respecting any of the
Pension/Benefit Plans.
(j) The Financial Statements as of the Balance Sheet Date reflect the
approximate total pension, medical and other benefit expense for all
Pension/Benefit Plans, and no material funding changes or irregularities are
reflected thereon which would cause such Financial Statements to be not
representative of most prior period and no changes have occurred in respect of
any Pension/Benefit Plan since the date of the most recent financial, accounting
or actuarial report, as applicable, issued in connection with any
Pension/Benefit Plan, which could reasonably be expected to adversely affect the
relevant report (including rendering it misleading in any material respect).
(k) The Company has not received, or applied for, any payment of
surplus out of any Pension/Benefit Plan, and there have been no improper
withdrawals or transfers of assets from any Pension/Benefit Plan.
(l) Where the Company has taken any contribution holidays under any
Pension/Benefit Plan the Company was entitled to do so under the terms of the
Pension/Benefit Plans and under applicable Law.
(m) All employee data necessary to administer each Pension/Benefit
Plan is in the possession of the Company and is complete, correct and in a form
which is sufficient for the proper administration of the Pension/Benefit Plans,
and none of the Pension/Benefit Plans, other than the pension plans or any group
registered retirement savings plan or supplemental pension or retirement plan,
provide benefits to retired employees or to the beneficiaries or dependents of
retired employees.
(n) None of the Pension/Benefit Plans require or permit a retroactive
increase in premiums or payments, and the level of insurance reserves, if any,
under any insured Pension/Benefit Plan is reasonable and sufficient to provide
for all incurred but unreported claims.
For the purposes of this Section 4.22:
"Pension/Benefit Plans" means all plans, arrangements, agreements,
programs, policies or practices, whether oral or written, formal or informal,
funded or unfunded, currently maintained and/or sponsored by the Company and/or
to which the Company is a party or to which the Company currently contributes or
has an obligation to contribute in the future, relating to:
(a) retirement savings or pensions, including, without limitation, any
defined benefit pension plan, defined contribution pension plan, group
registered retirement savings plan, or supplemental pension or retirement plan;
or
(b) any employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements, bonus,
profit sharing, incentive compensation, hospitalization, health, dental,
disability, unemployment insurance, vacation pay,
22
severance pay or other benefit plan with respect to any of its employees or
former employees, individuals working on contract with it or other individuals
providing services to it of a kind normally provided by employees, and all
statutory plans which the Company is required to comply with, including, without
limitation, the Canada or Quebec Pension Plans and plans administered pursuant
to applicable provincial health tax, workers' compensation and unemployment
insurance legislation;
"Person" means any individual, sole proprietorship, partnership,
unincorporated association, unincorporated syndicate, unincorporated
organization, trust, body corporate, Governmental Authority, and a natural
person in such person's capacity as trustee, executor, administrator or other
legal representative.
4.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 4.23(a), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with, and has not received any notice of any
alleged breach of, the requirements, standards, criteria and conditions set
forth in applicable federal, provincial, state and local statutes, ordinances,
permits, licenses, orders, approvals, variances, rules and regulations and is
not in violation of any of the foregoing which might have a Material Adverse
Effect on the Company.
(b) No Shareholder has, at any time: (i) committed any criminal act
(except for minor traffic violations); (ii) engaged in acts of fraud,
dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy, insolvency, winding-up,
liquidation, reorganization or creditors' arrangement.
(c) Except as set forth on Schedule 4.23(c), there are no claims,
actions, suits, investigations, complaints, grievances or proceedings, pending
or, to the knowledge of the Company, threatened against or affecting the Company
at law or in equity, or before or by any federal, provincial, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over it and no notice of any claim, action,
suit or proceeding, whether pending or threatened, has been received. There are
no judgments, orders, injunctions, decrees, stipulations or awards (whether
rendered by a court or administrative agency or by arbitration) against the
Company or against any of its properties or business.
4.24 Restrictive Covenants. The Company is not a party to or bound or
affected by any commitment, agreement or document containing any covenant
limiting the freedom of the Company to compete in any line of business, transfer
or move any of its assets or operations or which does or would reasonably
expected to materially or adversely affect the business practices, operations or
conditions of the Company or the Surviving Company.
23
4.25 Taxes.
(a)
(i) The Company has duly and timely filed its Tax Returns with
the appropriate Governmental Authority and has duly, completely and correctly
reported all income and all other amounts and information required to be
reported thereon.
(ii) The Company has duly and timely paid all Taxes, including
all instalments on account of Taxes for the current year, that are due and
payable by it and the Company has established reserves that are reflected on the
Balance Sheet and that will be reflected on the books and records of the Company
on the Closing Date, that are adequate for the payment by the Company of all
Taxes that are not yet due and payable (and that will not be due and payable by
the Closing Date) and that relate to periods ending on or prior to the Closing
Date.
(iii) The Company has not requested, or entered into any
agreement or other arrangement or executed any waiver providing for, any
extension of time within which (A) to file any Tax Return covering any Taxes for
which the Company is or may be liable; (B) to file any elections, designations
or similar things relating to Taxes for which the Company is or may be liable;
(C) the Company is required to pay or remit any Taxes or amounts on account of
Taxes; or (D) any Governmental Authority may assess or collect Taxes for which
the Company is or may be liable.
(iv) The Canadian federal and provincial income and capital tax
liabilities of the Company has been assessed by the relevant taxing authorities
and notices of assessment have been issued to each such entity by the relevant
taxing authorities for all taxation years prior to and including the taxation
year ended February 28, 1997.
(v) Except as set forth on Schedule 4.25(a)(v), there are no
actions, suits, proceedings, investigations, audits or claims now pending or, to
the knowledge of the Shareholders, threatened, against the Company in respect of
any Taxes and there are no matters under discussion, audit or appeal with any
Governmental Authority relating to Taxes.
(vi) The Company has duly and timely withheld from any amount
paid or credited by it to or for the account or benefit of any Person,
including, without limitation, any of its employees, officers and directors and
any non-resident Person, the amount of all Taxes and other deductions required
by any applicable law, rule or regulation to be withheld from any such amount
and has duly and timely remitted the same to the appropriate Governmental
Authority.
(vii) Except as specifically disclosed in writing to USFloral,
for purposes of the Income Tax Act (Canada) or any applicable provincial or
municipal taxing statute, no Person or group of Persons has ever acquired or had
the right to acquire control of the Company.
(b) For purposes of this Section 4.25:
24
(i) the term "Person" means any individual, sole proprietorship,
partnership, unincorporated association, unincorporated syndicate,
unincorporated organization, trust, body corporate, Governmental Authority, and
a natural person in such person's capacity as trustee, executor, administrator
or other legal representative;
(ii) the term "Taxes" includes, without limitation, all taxes,
duties, fees, premiums, assessments, imposts, levies and other charges of any
kind whatsoever imposed by any Governmental Authority, together with all
interest, penalties, fines, additions to tax or other additional amounts imposed
in respect thereof, including, without limitation, those levied on, or measured
by, or referred to as income, gross receipts, profits, capital, transfer, land
transfer, sales, goods and services, use, value-added, excise, stamp,
withholding, business, franchising, property, payroll, employment, health,
social services, education and social security taxes, all surtaxes, all customs
duties and import and export taxes, all license, franchise and registration fees
and all unemployment insurance, health insurance and Canada, Quebec and other
government pension plan premiums; and
(iii) the term "Tax Returns" includes, without limitation, all
returns, reports, declarations, elections, notices, filings, information returns
and statements filed in respect of Taxes.
(c) Complete and accurate information relating to each of the matters
referred to below is set forth in the Company's corporate tax returns and books
and records:
(i) cost and adjusted cost base of capital properties;
(ii) capital cost allowance deducted in each class of depreciable
assets;
(iii) undepreciated capital cost of each class of depreciable
assets;
(iv) paid-up capital of each class of shares;
(v) capital dividend account balance;
(vi) refundable dividend tax on hand;
(vii) non-capital losses available for carry over (year incurred,
how incurred, e.g., a property loss would be extinguished on a change of
control);
(viii) net capital losses (may be relevant if there are
unrealized gains available for designation under paragraph 111(4)(e);
(ix) cumulative eligible capital;
(x) investment tax credits; and
25
(xi) unclaimed GST input tax credit.
(d) None of the Shareholders is a non-resident for the purposes of the
Income Tax Act (Canada).
(e) The only reserves claimed by the Corporation prior to the
acquisition of control by USFloral are set out in Schedule 4.25(e).
4.26 Absence of Changes. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on Schedule 4.26, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the share capital, or any direct or indirect redemption, purchase or
other acquisition of any of the share capital of the Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers
directors, Shareholders, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with past
practice;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation the Shareholders and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of the Shareholders and their affiliates, provided
that the Company may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
26
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company, either individually or in
the aggregate, exceeding U.S. $25,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements which are not material and
liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
U.S. $25,000;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company,
threat of commencement, of any lawsuit or proceeding against, or investigation
of, the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with USFloral and its representatives regarding the
transactions contemplated by this Agreement).
4.27 Deposit Accounts; Powers of Attorney. Schedule 4.27 sets forth a
complete and accurate list as of the date of this Agreement, of:
27
(a) the name of each financial institution in which the Company has
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding
a general or special power of attorney from the Company and a description of the
terms of such power.
4.28 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 4.28(a),
no underground storage tanks and no amount of any substance that has been
designated, defined or identified by any Governmental Authority or by applicable
federal, state, provincial, local or other applicable orders, ordinances,
protocols, codes, guidelines, policies, notices, directions and judgments to be
a pollutant, contaminant, waste of any nature, deleterious substance or
dangerous or hazardous substance or good or to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum and urea-formaldehyde (a "Hazardous
Material"), excluding office and janitorial supplies properly and safely
maintained are present in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company currently
owns, operates, occupies, leases or has under its charge, management or control
or has owned, operated, occupied or leased or had under its charge, management
or control. Schedule 4.28(a) identifies all underground and aboveground storage
tanks, and the capacity, age, and contents of such tanks, located on Real
Property owned or leased by the Company.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, sold, manufactured, disposed of or released, or exposed its
employees or others to, Hazardous Materials or any product containing a
Hazardous Material (collectively, "Company Hazardous Materials Activities") in
violation of or in non-conformance with any rule, regulation, by-law, order,
ordinance, protocol, code, guideline, policy, notice, direction or judgment,
treaty or statute promulgated by any Governmental Authority in effect prior to
or as of the date hereof to prohibit, regulate or control Hazardous Materials or
any Hazardous Material Activity or relating to the protection of the environment
or public or employee health or safety.
(c) Permits. The Company currently holds all environmental approvals,
permits, certificates, authorizations, instructions, registrations, directions,
licenses, clearances and consents (the "Environmental Permits") required by any
Governmental Authority for the conduct of the Company's Hazardous Material
Activities and other business of the Company as such activities and business are
currently being conducted. All Environmental Permits are in full force and
effect and
28
valid. The Company (A) is in compliance in all material respects with all terms
and conditions of the Environmental Permits and (B) is in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the laws of all Governmental Authorities relating to pollution or
protection of the environment or public or employee health or safety or
contained in any regulation, code, plan, order, decree, judgment, notice, demand
letter, by-law, rule, policy, guideline, or direction issued, entered,
promulgated or approved thereunder. To the Company's knowledge, there are no
circumstances that may prevent or interfere with such compliance in the future.
Schedule 4.28(d) includes a listing and description of all Environmental Permits
currently held by the Company.
(d) Environmental Liabilities. No action, proceeding, prosecution,
revocation proceeding, amendment procedure, writ, injunction, order, direction
or claim has been brought against the Company or its operations or is pending,
or to the knowledge of the Company, threatened concerning any Environmental
Permit, Hazardous Material or any Company Hazardous Materials Activity,
including any administrative complaint, direction, order or sanction issued,
filed or imposed by any Governmental Authority requiring any remediation or
cleanup of any Hazardous Material or requiring that any release or other
activity be reduced, modified or eliminated. There are no past or present
actions, activities, circumstances, conditions, events, or incidents (including,
without limitation, the presence or release of any Hazardous Material in, on or
under any property now or formerly owned, operated, occupied or leased by, or
under the charge, management or control of, the Company) that could involve the
Company (or any person or entity whose liability the Company has retained or
assumed, either by contract or operation of law) in any environmental litigation
or prosecution, or impose upon the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law) any environmental liability pursuant to any law, by-law, rule,
regulation, order, ordinance, protocol, code, guideline, policy, notice,
direction, judgment or other requirement of any Governmental Authority relating
to the protection of the environment or public or employee health or safety or
to Hazardous Materials or pursuant to the common law including, without
limitation, common law tort liability.
(e) No part of the property currently or, to the knowledge of the
Company formerly, owned, occupied, operated, leased or under its charge,
management or control has ever been used as a landfill or for the disposal of
waste.
(f) All material environmental data and studies (including the result
of any environmental audit) relating to the Company have been delivered or made
available to USFloral.
4.29 Relations with Governments. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office, nor has it otherwise taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
4.30 Disclosure. The Company has delivered to USFloral true and complete
copies of each agreement, contract, commitment or other document (or summaries
thereof) that is referred to in the Schedules or that has been requested by
USFloral. Without limiting any exclusion, exception
29
or other limitation contained in any of the representations and warranties made
herein, this Agreement, the schedules hereto and all other documents and
information furnished to USFloral and its representatives pursuant hereto do not
and will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading. If any
Shareholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Shareholder in this Agreement or any
representation made on behalf of the Company, the Shareholder shall immediately
give notice of such fact or circumstance to USFloral. However, such notification
shall not relieve the Company or the Shareholder of their respective obligations
under this Agreement, and at the sole option of USFloral, the truth and accuracy
of any and all warranties and representations of the Shareholders, at the date
of this Agreement and as of the Closing date, shall be a precondition to the
consummation of this transaction.
4.31 USFloral Prospectus; Securities Representations; Resale Restrictions.
Each Shareholder has received and reviewed a copy of the prospectus dated March
18, 1998 including all supplements thereto (as supplemented, the "USFloral
Prospectus") contained in USFloral's shelf registration statement on Form S-1
(File No. 333-39969). Each Shareholder (a) has such knowledge, sophistication
and experience in business and financial matters that they are capable of
evaluating the merits and risks of an investment in the shares of USFloral
Common Stock, (b) fully understands the nature, scope, and duration of the
limitations on transfer contained herein, and under applicable law, and (c) can
bear the economic risk of any investment in the shares of USFloral Common Stock
and can afford a complete loss of such investment. Each Shareholder has had an
adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to its satisfaction) from the officers of
USFloral concerning the business, operations and financial condition of
USFloral. None of the Shareholders has any contract, undertaking, agreement or
arrangement, written or oral, with any other person to sell, transfer or grant
participation in any shares of USFloral Common Stock to be acquired by such
Shareholder in the Share Sale. Each Shareholder acknowledges and agrees that
USFloral has not and will not provide such Shareholder or any other party with a
prospectus for such Shareholder's use in selling USFloral Common Stock. Each
Shareholder acknowledges that the shares of USFloral Common Stock will not be
qualified for distribution in Canada and are being issued pursuant to exemptions
from the registration and prospectus requirements of applicable Canadian
securities legislation and that accordingly, subject to receipt of the Orders
contemplated in Section 6.10 hereof, the USFloral Common Stock will not be
freely tradeable in Canada and will be subject to restrictions on resale under
applicable Canadian securities laws.
4.32 Affiliates. The Shareholders are the only persons who are, in the
reasonable judgment of the Company and each of the Shareholders, affiliates of
the Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the 1933 Act.
4.33 Location of Chief Executive Offices. Schedule 4.33 sets forth the
location of the Company's chief executive offices.
4.34 Location of Equipment and Inventory. All Inventory and Equipment held
on the date hereof by the Company is located at one of the locations shown on
Schedule 4.34. For purposes
30
of this Agreement, (a) the term "Inventory" shall include all merchandise,
inventory and goods, and all additions, substitutions and replacements thereof,
wherever located, together with all goods, supplies, incidentals, packaging
materials, labels, materials and any other items used or usable in
manufacturing, processing, packaging or shipping same; in all stages of
production, and all proceeds therefrom; and (b) the term "Equipment" shall
include all machinery, equipment, furnishings, fixtures and vehicles owned by
the Company, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
4.35 Securities Law Matters. The Company is not a "reporting issuer"
within the meaning of applicable Canadian securities legislation, there is not a
published market in respect of the Company Shares, and the number of holders of
Company Shares is not more than 50, exclusive of holders who are in the
employment of the Company or were formerly in the employment of the Company and
who while in that employment were, and have continued after that employment to
be, holders of Company Shares.
5. REPRESENTATIONS OF USFLORAL
To induce the Company and the Shareholders to enter into this Agreement and
consummate the transactions contemplated hereby, USFloral represents and
warrants to the Company and the Shareholders as follows:
5.1 Due Organization. USFloral is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and is
duly authorized, qualified, registered and licensed to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on its business in the places and in the manner as now conducted, except
where the failure to be so authorized, registered, qualified or licensed would
not have a Material Adverse Effect. Copies of the Certificate of Incorporation
and the Bylaws, as amended, of USFloral (the "USFloral Charter Documents") have
been delivered to the Company. USFloral is not in violation of any USFloral
Charter Document.
5.2 USFloral Common Stock. The issuances of shares of USFloral Common
Stock to be delivered to the Shareholders at the Closing and in payment of the
Earn-Out Consideration and the Option Shares (as defined in Section 6.9 hereof)
shall, at the time of the investment decision with respect to their issuance, be
registered under the 1933 Act and, when delivered in accordance with the terms
of this Agreement or USFloral's 1997 Long-Term Incentive Plan, as the case may
be, will be valid and legally issued shares of USFloral capital stock, fully
paid and nonassessable, and prior to the time such shares may be transferred in
accordance with the provisions of Section 6.9 hereof, will be approved for
quotation on the Nasdaq National Market.
5.3 Authorization; Validity of Obligations. USFloral has all requisite
corporate power and authority to enter into and perform its obligations pursuant
to USFloral to the terms of this Agreement. USFloral has the full legal right,
power and corporate authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by USFloral
and the performance by USFloral of the transactions contemplated herein have
been
31
duly and validly authorized by the Board of Directors of USFloral, and this
Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of USFloral
enforceable in accordance with its terms.
5.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and its
lenders, conflict with, or result in a default (or an event that would
constitute a default but for a requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which USFloral is a party
or by which USFloral is bound, or result in the creation or imposition of any
lien, charge or encumbrance on any of USFloral's properties pursuant to (i) any
law or regulation to which either USFloral or any of its property is subject, or
(ii) any judgment, order or decree to which USFloral is bound or any of their
respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USFloral is subject, or by which USFloral is bound,
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
5.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 12,924,193 shares were outstanding on February 27, 1998. All of
the shares of USFloral Common Stock to be issued to the Shareholders in
accordance herewith and the Options (as defined in Section 6.9) will be offered,
issued, sold and delivered by USFloral in compliance with all applicable,
provincial, state and federal laws concerning the issuance of securities and
none of such shares was or will be issued in violation of the preemptive rights
of any Shareholder of USFloral.
5.6 Accredited Investor.
(a) USFloral is an "accredited investor" as that term is defined in
Rule 501(a) promulgated under the 1933 Act; is acquiring the Company Shares for
investment purposes only, for the account of USFloral and not with the view to
any resale or distribution thereof; is not participating, directly or
indirectly, in an underwriting of such Company Shares; and will not take, or
cause to be taken, any action that would cause itself or the Shareholders to be
deemed an "underwriter," as defined in Section 2(11) of the 1933 Act, of such
Company Shares.
32
(b) USFloral Common Stock is currently listed for quotation on the
Nasdaq National Market. In the event that USFloral Common Stock is not listed
for quotation on the Nasdaq National Market or upon a national securities
exchange registered as such under the U.S. Securities Exchange Act of 1934, as
amended, USFloral covenants and agrees to make publicly available such
information as will satisfy the requirements of Rule 144(c) promulgated under
the 1933 Act.
6. COVENANTS
6.1 Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Shareholders, on the one hand, and the Surviving
Corporation, on the other, for certain tax matters following the Closing Date:
(i) USFloral shall cause to be prepared and filed on a timely
basis, all Tax Returns for the Company for any period which ends on or before
the Closing Date and for which Tax Returns have not been filed as of such date.
USFloral shall also cause to be prepared and filed on a timely basis, all Tax
Returns for the Company for periods beginning before and ending after the
Closing Date. The Shareholders and USFloral shall cooperate fully with each
other and make available to each other in a timely fashion such data and other
information as may reasonably be required for the preparation of any Tax Return
of the Company for a period ending on, prior to or including the Closing Date
and shall preserve such date and other information until the expiration of any
applicable limitation period under any applicable law with respect to Taxes.
(ii) If requested by USFloral, the Company will file an election
under subsection 256(9) of the Income Tax Act (Canada).
(iii) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date. The Shareholders
shall pay to the Surviving Corporation within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Company's books and records as of the Closing Date. Any credits relating to
a taxable period that begins before and ends after the Closing Date shall be
taken into account as though the relevant taxable period ended on the Closing
Date. All determinations necessary to give effect to the foregoing allocations
shall be made in a manner consistent with prior practice of the Surviving
Corporation.
(iv) USFloral and the Surviving Corporation on one hand and the
Shareholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 6.1 and any audit, litigation or other proceeding with
respect to Taxes; (B) make available to the other, as reasonably requested, all
33
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating Tax matters pertinent to the
Company that is in their possession or under their control until the expiration
of any applicable statute of limitations or extensions thereof.
(v) The Shareholders shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from or
relating to the transactions contemplated by this Agreement, and the
Shareholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
USFloral and the Surviving Corporation will join in the execution of any such
Tax Returns and other documentation.
6.2 Related Party Agreements. The Company and/or the Shareholders, as the
case may be, shall terminate any Related Party Agreements which USFloral
requests the Company or Shareholders to terminate.
6.3 Cooperation.
(a) The Company, the Shareholders and USFloral shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such instruments as the other may
reasonably request for the purpose of carrying out this Agreement. In connection
therewith, if required, the president or chief financial officer of the Company
shall execute any documentation reasonably required by USFloral's independent
public accountants (in connection with such accountants' audit of the Company)
or the Nasdaq National Market.
(b) The Shareholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with USFloral on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby
(d) The Company, the Shareholders and USFloral shall file all notices
and other information and documents required under the HSR Act (as defined in
Section 4.3) as promptly as practicable after the date hereof.
6.4 Conduct of Business Pending Closing. Except as set forth in Schedule
4.26, between the date hereof and the Closing Date, the Company will (except as
requested or agreed by USFloral):
34
(a) carry on its business in the ordinary and normal course
substantially the same manner as it has heretofore and not introduce any
material new method of management, operation or accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage and give all notices and present claims thereunder
in a timely fashion;
(e) use all commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and key employees
and maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except for ordinary and customary bonuses and salary increases for employees
(other than employees who are also Shareholders) in accordance with past
practice.
6.5 Access to Information. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of the Company and (ii) such additional financial and operating data
and other information as to the business and properties of the Company as
USFloral may from time to time reasonably request, including without limitation,
access upon reasonable request to the Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or knowledge
obtained in any investigation pursuant to this Section 6.6 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the transactions
contemplated hereby.
6.6 Prohibited Activities. Except as set forth on Schedule 4.26 hereof,
between the date hereof and the Closing Date, the Company will not, without the
prior written consent of USFloral:
(a) make any change in its Memorandum of Association or Articles of
Association, or authorize or propose the same;
35
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, exchange or
conversion rights or commitments relating to its securities of any kind, or
authorize or propose any change in its equity capitalization, or issue or
authorize the issuance of any debt securities;
(c) declare or pay any dividend, or make any distribution (whether in
cash, shares or property) in respect of its shares whether now or hereafter
outstanding, or split, combine or reclassify any of its share capital or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares, or purchase, redeem or otherwise acquire or retire
for value any shares;
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of U.S. $25,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any
officer, director, Shareholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or encumbrance
upon any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company;
(i) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(j) waive any material rights or claims of the Company, provided that
the Company may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material agreement,
permit, license or other right;
36
(l) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with the Company or any officer,
director or Shareholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of USFloral; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 6.6(a) through (o) above, or any action which
would make any of the representations and warranties of the Company and the
Shareholders contained in this Agreement untrue or result in any of the
conditions set forth in Articles 8 and 9 not being satisfied.
6.7 Notice to Bargaining Agents. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by USFloral, and shall provide USFloral with proof that any required notice has
been sent.
6.8 Sales of USFloral Common Stock.
(a) No Shareholder will, directly or indirectly, offer, sell, contract
to sell, pledge or otherwise dispose of the shares of USFloral Common Stock to
be received by such Shareholder in the Share Sale prior to the date that is, (i)
with respect to one-third of the shares, eighteen months from the Closing Date
or February 28, 1999 with respect to the Earn-Out Consideration (if in shares of
USFloral Common Stock), as the case may be, (ii) with respect to two-thirds of
the shares, twelve months from the Closing Date or February 28, 1999 with
respect to the Earn-Out Consideration (if in shares of USFloral Common Stock),
as the case may be and (iii) with respect to all of the shares, six months from
the Closing Date or February 28, 1999 with respect to the Earn-Out Consideration
(if in shares of USFloral Common Stock), as the case may be.
(b) Each Shareholder acknowledges and agrees that USFloral will not
provide such Shareholder with a prospectus for such Shareholder's use in selling
the shares of USFloral Common Stock to be received by such Shareholder in the
Share Sale, and agrees to sell such shares
37
only in accordance with the requirements, if any, of applicable Canadian
securities laws, the Orders contemplated in Section 6.10 hereof and Rule 145(d)
promulgated under the 1933 Act. USFloral acknowledges that the provisions of
this Section 6.8(b) will be satisfied under the 1933 Act as to any sale by a
Shareholder of the USFloral Common Stock such Shareholder may acquire pursuant
to the Share Sale pursuant to Rule 145(d) under the 1933 Act, by a broker's
letter and a letter from the Shareholder with respect to that sale stating that
the applicable requirements of Rule 145(d)(1) have been met or are inapplicable
by virtue of Rule 145(d)(2) or Rule 145(d)(3) provided, however, that USFloral
has no reasonable basis to believe that such sales were not made in compliance
with such provisions of Rule 145(d) and subject to any changes in Rule 145 after
the date of this Agreement. Upon receipt of a broker's letter and a letter from
a Shareholder stating that the USFloral Common Stock acquired hereunder by such
Shareholder is being sold in accordance with the provisions of Rule 145(d),
USFloral shall promptly instruct its transfer agent to remove the Rule 145
legend set forth in Section 6.8(c) below as to all such USFloral Common Stock
sold in the subject transaction.
(c) The certificate or certificates evidencing the shares of USFloral
Common Stock to be delivered to the Shareholders in the Share Sale will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON ***, PURSUANT TO THAT CERTAIN STOCK PURCHASE
AGREEMENT, DATED AS OF APRIL 3, 1998, AMONG THE ISSUER AND THE SHAREHOLDERS
OF ▇▇▇▇▇ ▇. ▇▇▇▇▇ WHOLESALE, LTD., A BRITISH COLUMBIA CORPORATION. PRIOR TO
THE EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT.
UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER
AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH
THE TRANSFER AGENT) WHEN THE HOLDING PERIOD HAS EXPIRED.
*** With respect to the Initial Consideration, certificates representing one-
third of the shares of USFloral Common Stock issued will read "October 3, 1998,"
one-third will read "April 3, 1999" and one-third will read "October 3, 1999."
With respect to the Earn-Out Consideration, certificates
38
representing one-third of the shares of USFloral Common Stock issued will read
"August 28, 1999," one-third will read "February 28, 2000" and one-third will
read "August 28, 2000."
6.9 USFloral Stock Options. As soon as practicable after the Closing,
options (the "Options") to purchase such number of shares of USFloral Common
Stock (the "Option Shares") as shall have a fair market value as of the Closing
Date equal to 6.25% of the Initial Consideration provided for in Section 1.2
above, before any adjustment to the Initial Consideration pursuant to Section
1.2 or 2.1, shall be available for issuance to the key employees (the "Option
Holders") of the Surviving Corporation after the Closing, as determined by the
Surviving Corporation's President (or other officer or director designated by
the Surviving Corporation and acceptable to USFloral) in accordance with
USFloral's policies, and authorized and issued under the terms of USFloral's
1997 Long-Term Incentive Plan. The Options shall vest in four equal
installments of 25% each on the first four anniversaries of the date of grant
and shall have an exercise price equal to the fair market value as of the date
of grant. In the event that USFloral does not obtain the Option Orders
contemplated in Section 6.10 hereof, USFloral shall provide a "phantom stock
option plan" in substitution for the Options, the operative provisions of which
will be equivalent to the terms of the 1997 Long-Term Incentive Plan and which
will provide the same economic benefit to the Option Holders as the Options
would have provided.
6.10 Canadian Securities Filings. As soon as practicable after the
Closing and in any event no later than April 17, 1998, USFloral shall prepare
and file applications for orders, subject to usual conditions (the "Orders"),
from the securities authorities in each of British Columbia, Alberta and, if
necessary, Manitoba such that the resale of the USFloral Common Stock issued and
to be issued pursuant to this Agreement and upon exercise of the Options through
the facilities of a stock exchange outside of Canada or on the Nasdaq National
Market will not be subject to the prospectus requirements of the securities
legislation of such provinces. USFloral shall use its best efforts to obtain
the Orders.
6.11 Composition of Board of Directors. From the Closing Date through
February 28, 2000, USFloral shall not vote its shares of the Surviving
Corporation to alter the composition of the Board of Directors.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL
The obligation of USFloral to consummate the purchase of Company Stock is
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
7.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Shareholders and the Company contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Company and the Shareholders on or before the Closing Date shall have been duly
complied with,
39
performed or satisfied; and a certificate to the foregoing effects dated the
Closing Date and signed by the President and by the Chief Financial Officer on
behalf of the Company and by each of the Shareholders shall have been delivered
to USFloral.
7.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Closing shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit claim or proceeding of any nature
pending or threatened against USFloral or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the Company.
7.3 No Laws. No laws, by-laws, rules, regulations, orders or any other
requirements of any Governmental Authority shall have been enacted, introduced
or announced which may materially and adversely affect the Company or the
business carried on by it.
7.4 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company, taken as a whole, since the Balance Sheet Date;
and USFloral shall have received a certificate signed by each Shareholder dated
the Closing Date to such effect.
7.5 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Shareholders of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the transactions contemplated hereby under the
HSR Act shall have expired or been terminated, and no action by the Department
of Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
7.6 Opinion of Counsel. USFloral shall have received an opinion from
counsel to the Company and the Shareholders, dated the Closing Date, in a form
reasonably satisfactory to USFloral.
7.7 Charter Documents. USFloral shall have received (a) a copy of the
Memorandum of Association of the Company certified by an appropriate authority
in the Province of its incorporation and (b) a copy of the Articles of
Association of the Company certified by the Secretary of the Company, and such
documents shall be in form and substance reasonably acceptable to USFloral.
40
7.8 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. USFloral shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
7.9 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company, setting forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (including,
without limitation, and to the extent that net worth is impacted thereby, the
earnings of the Company for the period from February 28, 1998 to the Closing
Date, and including the excess of the fair market value of the Company's
interest in the ▇▇▇▇▇▇▇▇▇ Growth Fund as of the Closing Date over the book value
of the Company's interest in such find as reflected in the Company's February
28, 1998 financial statements) (the "Certified Closing Net Worth");
(c) the earnings of the Company before interest and taxes (after the
addition of "add-backs" set forth on Schedule 4.9(b)(i)) for the most recent
fiscal year preceding the Closing Date (the "Certified Year-End EBIT"); and
(d) a statement that all of the Company financial conditions set forth
in Section 4.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth, the Company shall not take account of any increase in
intangible assets (including without limitation goodwill, franchises and
intellectual property) accounted for after February 28, 1997.
7.10 Employment Agreements. ▇▇▇▇▇ ▇▇▇▇▇▇ shall have entered into an
employment agreement with the Company in a form reasonably satisfactory to
USFloral.
7.11 Shareholders' Release. The Shareholders shall each have delivered to
USFloral an instrument dated the Closing Date releasing the Company from any and
all claims of such Shareholder against the Company.
7.12 Related Party Agreements. The Company shall have delivered to
USFloral evidence of repayment of all amounts due to the Company from the
Shareholders and any entities in which any Shareholder has an interest.
41
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDERS
The obligation of the Shareholders and the Company to consummate the sale
of the Company Shares are subject to the satisfaction or waiver, at or before
the Closing, of the following conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral contained in this Agreement shall
be true, correct and complete on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of such
date; all of the terms, covenants, agreements and conditions of this Agreement
to be complied with, performed or satisfied by USFloral on or before the Closing
Date shall have been duly complied with, performed or satisfied; and a
certificate to the foregoing effects dated the Closing Date and signed by the
President or any Vice President of USFloral on behalf of USFloral shall have
been delivered to the Company and the Shareholders.
8.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Closing shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened, against USFloral or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the USFloral and its subsidiaries taken as a
whole.
8.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral of the transactions contemplated herein, shall have been obtained
and made. Any waiting period applicable to the consummation of the transactions
contemplated hereby under the HSR Act shall have expired or been terminated, and
no action by the Department of Justice or Federal Trade Commission challenging
or seeking to enjoin the consummation of the transactions contemplated hereby
shall be pending.
8.4 Employment Agreements. The Company shall have afforded ▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇ an opportunity to enter into an employment agreement with the
Company in a form reasonably satisfactory to USFloral.
9. INDEMNIFICATION
42
9.1 General Indemnification by the Shareholders. Each Shareholder,
jointly and severally, covenants and agrees to indemnify, defend, protect and
hold harmless USFloral and the Surviving Corporation and their respective
officers, directors, employees, Shareholders, assigns, successors and affiliates
(individually, an "Indemnified Party" and collectively, "Indemnified Parties")
from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description and all costs incurred in investigating or
pursuing any of the foregoing) (collectively, "Damages") suffered, sustained,
incurred or paid by the Indemnified Parties in connection with, resulting from
or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Shareholders or the Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of any Shareholder or the Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Shareholders or, prior to the Effective Time, the Company, under this Agreement;
or
(iii) the business, operations or assets of the Company prior to
the Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or the Schedules to this Agreement; or
(iv) the presence of any Hazardous Material prior to Closing upon
or within any property (including underlying soils and substrata, surface water
and groundwater) now or formerly owned, occupied or leased by or under the
charge, management or control of the Company or the presence of any Hazardous
Material prior to Closing upon or within any property (including underlying
soils and substrata, surface water and groundwater) proximate to such property
where such presence relates to any act or omission of the Company or the
carrying on of business by the Company prior to Closing;
(v) any environmental administrative complaint, direction, order
or sanction which is issued, imposed or proposed by any Governmental Authority
in connection with the business of the Company or any property (including
underlying soils and substrata, surface water and groundwater) now or formerly
owned, occupied or leased by or under the charge, management or control of the
Company relating to any condition, event or circumstance existing or occurring
prior to Closing, or in connection with any property proximate to such property
where such complaint, direction, order or sanction relates to any act or
omission of the Company or the carrying on of business by the Company prior to
Closing, including without limitation any order requiring
43
any remediation or clean up of any Hazardous Material or requiring any release
or other activity relating to a Hazardous Material be reduced, modified or
eliminated;
(vi) any other Damages imposed at any time by any third parties
in connection with environmental matters relating to any period prior to
Closing;
(vii) the matters disclosed on Schedules 4.23 (conformity with
law; litigation), 4.25 (taxes), and 4.28 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 9.1.
9.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 9.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
(i) prior to the determination of the Earn-Out Consideration, U.S. $140,000; or
(ii) upon determination of the Earn-Out Consideration, the sum of $140,000 plus
one-percent of the Earn-Out Consideration (the "Indemnification Threshold");
provided, however, that the Indemnification Threshold shall not apply to (i)
adjustments to the Initial Consideration as set forth in Sections 2.2 and 3.1;
(ii) Damages arising out of any breaches of the covenants of the Shareholders
set forth in this Agreement or representations and warranties made in Sections
4.4 (capital stock of the Company), 4.5 (transactions in capital stock), 4.9
(Company financial conditions), 4.18 (material contracts and commitments), 4.23
(conformity with law; litigation), 4.25 (taxes), or 4.28 (environmental
matters), or (iii) Damages described in Section 9.1(a)(iv);
(b) the aggregate amount of the Shareholders' liability under this
Article 9 shall not exceed the Purchase Price; provided, however, that the
Shareholders' liability for Damages arising out of any breaches of the
representations made in Sections 4.25 (taxes) or 4.28 (environmental matters) or
Damages described in Section 9.1(a)(ii) and Section 9.1(a)(iv) shall not be
subject to such limitation;
(c) the indemnification obligations under this Article 9, or under any
certificate or writing furnished in connection herewith, shall terminate at the
date that is the later of clause (i) or (ii) of this Section 9.2(c):
(i)
(1) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 9.2(c), the first anniversary of the
Closing Date, or
(2) with respect to representations and warranties contained
in Sections 4.22 (employee benefit plans), 4.28 (environmental matters), and the
indemnification set forth in Section 9.1(a)(ii), (iii) or (iv), on (A) the date
that is six (6) months after the expiration of the longest applicable federal or
state statute of limitation (including extensions thereof), or (B) if
44
there is no applicable statute of limitation, (x) ten (10) years after the
Closing Date if the Claim is related to the cost of investigating, containing,
removing, or remediating a release of Hazardous Material into the environment,
or (y) five (5) years after the Closing Date for any other Claim covered by
clause (i)(2)(B) of this Section 9.2(c); with respect to representations and
warranties contained in Section 4.28 (environmental matters), the
indemnification obligations under this Article 9 shall not terminate; or
(3) with respect to representations and warranties contained
in Section 4.25 (taxes), the date that is 90 days after the relevant authorities
shall no longer be entitled to assess liability for tax against the Company for
any particular taxation year ended on or prior to the Closing Date, having
regard without limitation, to any waivers given by the Company in respect of any
taxation year;
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 9.2(c) (such claims
referred to as "Pending Claims");
(iii) Notwithstanding the limitations set forth in Section 9.2,
any Claim which is based on title to the Company Shares, intentional
misrepresentation or fraud may be brought at any time.
9.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 9 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 9.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Shareholders' Representative of such Claim,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). If the Shareholders'
Representative does not notify the Indemnified Party within thirty days after
the date of delivery of the Claim Notice that the Indemnifying Party disputes
such Claim, with a detailed statement of the basis of such position, the amount
of such Claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with this
Section 9.3(a), the Indemnified Party shall respond in a written statement to
the objection within thirty days and, for sixty days thereafter, attempt in good
faith to agree upon the rights of the respective parties with respect to each of
such Claims (and, if the parties should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice to the Shareholders' Representative. The
Shareholders' Representative shall have thirty days from the date of delivery of
the Claim Notice to notify the Indemnified Party (A) whether the Indemnifying
Party disputes
45
liability to the Indemnified Party hereunder with respect to the Third Party
Claim, and, if so, the basis for such a dispute, and (B) if such party does not
dispute liability, whether or not the Indemnifying Party desires, at the sole
cost and expense of the Indemnifying Party, to defend against the Third Party
Claim, provided that the Indemnified Party is hereby authorized (but not
obligated) to file any motion, answer or other pleading and to take any other
action which the Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests.
(ii) In the event that Shareholders' Representative timely
notifies the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at its sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified Party against a
Third Party Claim, whether by failure of such party to give the Indemnified
Party timely notice as provided herein or otherwise, then the Indemnified Party,
without waiving any rights against such party, may settle or defend against such
Third Party Claim in the Indemnified Party's sole discretion and the Indemnified
Party shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the
Shareholders' Representative, any Third Party Claim seeks material prospective
relief which could have an adverse effect on any Indemnified Party or the
Surviving Corporation or any subsidiary, the Indemnified Party shall have the
right to control or assume (as the case may be) the defense of any such Third
Party Claim and the amount of any judgment or settlement and the reasonable
costs and expenses of defense shall be included as part of the indemnification
obligations of the Indemnifying Party hereunder. If the Indemnified Party elects
to exercise such right, the Indemnifying Party shall have the right to
participate in, but not control, the defense of such Third Party Claim at the
sole cost and expense of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 9.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 9.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the
46
Indemnifying Party of any liability which the Indemnifying Party may have to the
Indemnified Party unless the failure to give such notice materially and
adversely prejudiced the Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 9, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
(f) Any indemnification payment made to USFloral shall be deemed to be
a reduction of the Purchase Price.
9.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the Shareholders
and USFloral in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Shareholders will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 9.2. The
representations of USFloral will survive the Closing and will remain in effect
until, and will expire upon the first anniversary of the Closing date, except
for the representations set forth in Section 5.2, which will expire (i) upon the
second anniversary of the Closing Date, as to the shares of USFloral Common
Stock (if any) issued as part of the Initial Consideration or the Earn-Out
Consideration, and (ii) upon the earlier of the exercise, termination or
expiration of each Option.
9.5 Remedies Cumulative. The remedies set forth in this Article 9 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
9.6 Right to Set Off. USFloral shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 9.3 to be owed to USFloral by the Shareholders
under Section 9.1 hereof.
10. NONCOMPETITION
10.1 Prohibited Activities. The Shareholders listed on Schedule 10.1 agree
that for a period of two years following the Closing Date, they shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with the Surviving
Corporation or USFloral, including without limitation the importing, brokerage,
manufacture, assembly, packaging, distribution, shipping or marketing of floral
products (including,
47
without limitation, hardgoods), or any business engaging in the consolidation of
the floral industry within the United States of America (the "Territory");
(b) call upon any person who is, at that time, within the Territory,
an employee of USFloral or any subsidiary of USFloral in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of USFloral or such subsidiary;
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of USFloral or any
subsidiaries of USFloral, the Company within the Territory for the purpose of
soliciting or selling floral products within the Territory;
(d) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon by
any of them or for which any of them made an acquisition analysis for themselves
or USFloral or any subsidiaries of USFloral, the Company; or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Shareholders from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market or (ii) engaging
in any activity to which USFloral shall have provided its prior written consent.
10.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFloral and the Surviving Corporation for which they would
have no other adequate remedy, the Shareholders agree that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporation by, without limitation, injunctions and
restraining orders.
10.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 10 impose a reasonable restraint on the Shareholders
in light of the activities and business of USFloral on the date of the execution
of this Agreement and the current and future plans of USFloral and the Surviving
Corporation (as successors to the businesses of the Company).
10.4 Severability; Reformation. The covenants in this Article 10 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
48
10.5 Independent Covenant. All of the covenants in this Article 10 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Shareholders
against the Company, the Surviving Corporation or USFloral, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
years stated above, shall be computed by excluding from such computation any
time during which any Shareholder is in violation of any provision of this
Article 10 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
the Surviving Corporation seeks to enforce the agreements and covenants of the
Shareholders or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if any Shareholder is found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
10.6 Materiality. The Company and each Shareholder hereby agree that the
covenants set forth in this Article 10 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1 Shareholders. The Shareholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as, without limitation,
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company and the Company's business.
The Shareholders agree that they will not disclose any confidential information
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of USFloral, unless the
Shareholders can show that such information has become known to the public
generally through no fault of the Shareholders. In the event of a breach or
threatened breach by the Shareholders of the provisions of this Article 12,
USFloral and the Surviving Corporation shall be entitled to an injunction
restraining the Shareholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
USFloral and the Surviving Corporation from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
11.2 USFloral. USFloral recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. USFloral agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the Shareholders. In the event of
a breach or threatened breach by USFloral of the provisions of this Article 12,
the Shareholders shall be entitled to an injunction restraining USFloral from
disclosing,
49
in whole or in part, such confidential information. Nothing contained herein
shall be construed as prohibiting the Shareholders from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
11.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Surviving Corporation and the Shareholders agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
12. GENERAL
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the boards of directors of USFloral and the
Company; or
(b) by the Shareholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if the Closing shall not have occurred on or
before April __, 1998, provided that the right to terminate this Agreement under
this Section 12.1(b) shall not be available to either party (with the
Shareholders and the Company deemed to be a single party for this purpose) whose
material misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Shareholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Shareholders and the Company deemed to be a single party for this purpose) of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Shareholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there shall be a final nonappealable order
of a federal, provincial or state court in effect preventing consummation of the
Share Sale; or there shall be any action taken, or any statute, rule regulation
or order enacted, promulgated or issued or deemed applicable to the Share Sale
by any Governmental Authority which would make the consummation of the Share
Sale illegal.
12.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.1, this Agreement shall forthwith become
ineffective, and there shall be no liability
50
or obligation on the part of any party hereto or its officers, directors or
shareholders. Notwithstanding the foregoing sentence, (i) the provisions of this
Article 12 shall remain in full force and effect and survive any termination of
this Agreement; (ii) each party shall remain liable for any breach of this
Agreement prior to its termination; and (iii) in the event of termination of
this Agreement pursuant to Section 12.1(c) above, then notwithstanding the
provisions of Section 12.7 below, the breaching party (with the Shareholders and
the Company deemed to be a single party for purposes of this Article 12), shall
be liable to the other party to the extent of the expenses incurred by such
other party in connection with this Agreement and the transactions contemplated
hereby, as well as any damages in accordance with applicable law.
12.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Shareholders.
12.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto, or in accordance with Section 10.4. Any
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
12.5 Counterparts. This Agreement may be executed by facsimile in any
number of counterparts and any party hereto may execute any such counterpart,
each of which when executed and delivered shall be deemed to be an original, and
all of which counterparts taken together shall constitute but one and the same
instrument.
12.6 Brokers and Agents. USFloral represents and warrants to the Company
and the Shareholders, and the Company and each Shareholder represents to
USFloral, that it has not employed any broker or agent in connection with the
transactions contemplated by this Agreement and agrees to indemnify the other
against all losses, damages or expenses relating to or arising out of claims for
fees or commission of any broker or agent employed or alleged to have been
employed by such party.
12.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement. The
Shareholders (and not the Company) have and will pay the fees, expenses and
disbursements of the Shareholders, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
51
12.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 10 and the confidentiality
obligations set forth in Article 11. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
12.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to USFloral or the Surviving Corporation to:
U.S.A. Floral Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and Chief Executive Officer
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
with a required copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
If to any Shareholder to:
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇ Wholesale Ltd.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
52
with a required copy to:
J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fraser & ▇▇▇▇▇▇
15th Floor, The Grosvenor Building
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
12.10 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the Province of British
Columbia, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction.
12.11 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 10.4.
12.12 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
12.13 Further Representations. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
12.14 Accounting Terms. Except as otherwise expressly provided herein or in
the Schedules, all accounting terms used in this Agreement shall be interpreted,
and all financial statements, Schedules, certificates and reports as to
financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
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[Execution Pages Following]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U.S.A. FLORAL PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and CEO
▇▇▇▇▇ ▇. ▇▇▇▇▇ WHOLESALE, LTD.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇ ▇▇▇▇▇▇
Title: President
SHAREHOLDERS:
▇▇▇ ▇▇▇▇▇▇ Holdings Inc.
by:
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Name:
Title:
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/s/ Antonius Graaf
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Antonius Graaf
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/s/ ▇▇▇▇▇ Street
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▇▇▇▇▇ Street
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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SCHEDULES
SCHEDULE 1.2 [Add-backs]
SCHEDULES TO ARTICLE 4 [Schedules of exceptions to the representations and
warranties]
SCHEDULE 10.01 [List of shareholders subject to noncompetition
provisions]
The Schedules to this Agreement will be provided to the Commission
supplementally upon request.
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