EXHIBIT 10.05
--------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
AGFS ACQUISITION CORP.
(a Delaware corporation),
ALPINE GEM FLOWER SHIPPERS, INC.
(a Montana corporation),
and
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
and
▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇
Dated as of August 5, 1997
--------------------------------------------------------------------------------
Table Of Contents
-----------------
Page
----
1. THE MERGER.....................................................................................................................2
1.1 Delivery and Filing of Articles of Merger..........................................................................2
1.2 Merger Effective Date..............................................................................................2
1.3 Articles of Incorporation, Bylaws and Board of Directors of
Surviving Corporation..............................................................................................2
1.4 Certain Information with Respect to the Capital Stock of the Company
and Newco..........................................................................................................3
1.5 Effect of Merger...................................................................................................3
1.6 AAA Distribution...................................................................................................3
2. CONVERSION AND EXCHANGE OF STOCK...............................................................................................3
2.1 Manner of Conversion...............................................................................................3
2.2 Calculation of USFloral Shares.....................................................................................4
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION................................................................................4
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES......................................................................................5
5. CLOSING; MERGER EFFECTIVE DATE.................................................................................................7
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.................................................................................7
6.1 Due Organization...................................................................................................7
6.2 Authorization......................................................................................................8
6.3 Capital Stock of Each Company......................................................................................8
6.4 Transactions in Capital Stock......................................................................................8
6.5 No Bonus Shares....................................................................................................8
6.6 Subsidiaries.......................................................................................................8
6.7 Predecessor Status; etc............................................................................................8
6.8 Spin-off by Company................................................................................................9
6.9 Financial Statements...............................................................................................9
6.10 Liabilities and Obligations........................................................................................9
6.11 Accounts and Notes Receivable.....................................................................................10
6.12 Permits and Intangibles...........................................................................................10
6.13 Real and Personal Property........................................................................................10
6.14 Material Contracts and Commitments................................................................................11
6.15 Title to Real Property............................................................................................11
6.16 Insurance.........................................................................................................11
6.17 Officers, Directors and Employees Compensation....................................................................12
6.18 Employee Plans....................................................................................................12
6.19 Compliance with ERISA.............................................................................................12
i
6.20 Conformity with Law..............................................................................................14
6.21 Taxes............................................................................................................14
6.22 Completeness; No Violations......................................................................................15
6.23 Government Contracts.............................................................................................15
6.24 Absence of Changes...............................................................................................15
6.25 Deposit Accounts; Powers of Attorney.............................................................................16
6.26 Environmental Matters............................................................................................17
6.27 Underground Storage Tanks........................................................................................17
6.28 Validity of Obligations..........................................................................................18
6.29 Relations with Governments.......................................................................................18
6.30 Disclosure.......................................................................................................18
6.31 Authority; Ownership.............................................................................................18
7. REPRESENTATIONS OF USFLORAL AND NEWCO........................................................................................19
7.1 Due Organization.................................................................................................19
7.2 USFloral Stock...................................................................................................19
7.3 Authorization....................................................................................................19
7.4 No Conflicts.....................................................................................................19
7.5 Validity of Obligations..........................................................................................20
7.6 Other Agreements.................................................................................................20
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING.......................................................................20
8.1 Access and Cooperation...........................................................................................20
8.2 Conduct of Business..............................................................................................21
8.3 Prohibited Activities............................................................................................21
8.4 Supplier Approval................................................................................................22
8.5 Notice to Bargaining Agents......................................................................................22
8.6 No Shop..........................................................................................................22
8.7 Notification of Certain Matters..................................................................................23
8.8 Amendment of Schedules...........................................................................................23
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS..........................................................................24
9.1 Representations and Warranties; Performance of Obligations.......................................................24
9.2 No Litigation....................................................................................................24
9.3 Employment Agreements............................................................................................24
9.4 Opinion of Counsel...............................................................................................24
9.5 Registration Statement...........................................................................................25
9.6 Market Capitalization............................................................................................25
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
USFLORAL AND NEWCO..........................................................................................................25
10.1 Representations and Warranties; Performance of Obligations.......................................................25
ii
10.2 No Litigation...................................................................................................25
10.3 Examination of Financial Statements.............................................................................25
10.4 No Material Adverse Change......................................................................................25
10.5 Regulatory Review...............................................................................................26
10.6 Stockholders Release............................................................................................26
10.7 Employment Agreements...........................................................................................26
10.8 Opinion of Counsel..............................................................................................26
10.9 Consents and Approvals..........................................................................................27
10.10 Additional Liabilities and Obligations..........................................................................28
10.11 Additional Contracts............................................................................................28
10.12 Good Standing Certificates......................................................................................28
10.13 Registration Statement..........................................................................................28
10.14 Repayment of Indebtedness.......................................................................................28
10.15 Earnings........................................................................................................28
11. COVENANTS OF USFLORAL.......................................................................................................28
11.1 Release From Guarantees.........................................................................................28
11.3 Leases..........................................................................................................29
11.4 Exchange Act Reporting Requirements.............................................................................29
11.5 Certain Transactions............................................................................................29
11.6 Piggy-Back Registrations........................................................................................29
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES..............................................................................................................30
12.1 General Indemnification by Stockholders.........................................................................30
12.2 Specific Indemnification by the Stockholders....................................................................30
12.3 Indemnification by USFloral and Newco...........................................................................31
12.4 Third Person Claims.............................................................................................31
12.5 Limitations on Indemnification..................................................................................32
12.6 Survival of Representations and Warranties......................................................................33
12.7 Sole Remedies...................................................................................................33
13. TERMINATION OF AGREEMENT....................................................................................................33
13.1 Termination by the Parties......................................................................................33
13.2 Termination by USFloral.........................................................................................33
13.3 Liquidated Damages to USFloral..................................................................................34
13.4 Liquidated Damages to the Stockholders..........................................................................34
14. NONCOMPETITION..............................................................................................................34
14.1 Prohibited Activities...........................................................................................34
14.2 Damages.........................................................................................................35
14.3 Reasonable Restraint............................................................................................35
iii
14.4 Severability; Reformation......................................................................................35
14.5 Independent Covenant...........................................................................................35
14.6 Materiality....................................................................................................36
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...................................................................................36
15.1 Stockholders...................................................................................................36
15.2 USFloral.......................................................................................................36
15.3 Damages........................................................................................................36
16. LOCK-UP AGREEMENTS.........................................................................................................37
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK......................................................37
17.1 Compliance with Law............................................................................................37
17.2 Economic Risk; Sophistication..................................................................................37
17.3 Registration Statement.........................................................................................38
18. SECURITIES LEGENDS..........................................................................................................38
19. GENERAL.....................................................................................................................38
19.1 Cooperation....................................................................................................38
19.2 Successors and Assigns.........................................................................................39
19.3 Entire Agreement...............................................................................................39
19.4 Counterparts...................................................................................................39
19.5 Brokers and Agents.............................................................................................39
19.6 Expenses.......................................................................................................39
19.7 Notices........................................................................................................39
19.8 Governing Law..................................................................................................40
19.9 Exercise of Rights and Remedies................................................................................40
19.10 Time...........................................................................................................40
19.11 Reformation and Severability...................................................................................40
19.12 Remedies Cumulative............................................................................................40
19.13 Captions.......................................................................................................40
iv
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement")
is made as of the 5th day of August, 1997, between U.S.A. FLORAL PRODUCTS, INC.,
a Delaware corporation ("USFloral"), AGFS Acquisition Corp., a Delaware
corporation ("Newco") formed for the sole purpose of effecting this transaction,
Alpine Gem Flower Shippers, Inc., a Montana Corporation (the "Company") and
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇ (collectively referred to as the
"Stockholders"), who are all of the stockholders of the Company.
WHEREAS, USFloral was incorporated on April 2, 1997 (the "Formation") under
the laws of the State of Delaware for the purpose of acquiring floral products
businesses in different locations; and
WHEREAS, USFloral intends to undertake an initial public offering of its
common stock (the "IPO") on or about September 15, 1997 and in connection
therewith intends to file a Registration Statement on Form S-1 (the
"Registration Statement") with the Securities and Exchange Commission (the
"SEC") within 15 days of the execution and delivery of this Agreement;
WHEREAS, Newco has been duly organized and is existing under the laws of
the State of Delaware, having been incorporated on July 1, 1997, solely for
the purpose of completing this transaction, and is a wholly-owned subsidiary
of USFloral; and
WHEREAS, the Company is a corporation organized and existing under the laws
of the State of Montana; and
WHEREAS, the respective Boards of Directors of USFloral, Newco and the
Company (all of which companies are hereinafter collectively referred to as
the "Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that Newco
merge with and into the Company pursuant to this Agreement and the applicable
provisions of the laws of the respective states of incorporation of Newco and
Company, such transactions being herein called the "Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351 of
the Internal Revenue Code of 1986, as amended;
WHEREAS, the parties hereto entered into that certain Agreement and Plan of
Contribution on July 1, 1997 (the "Original Agreement") and now wish to amend
and restate the Original Agreement in its entirety as of August 5, 1997 in
order to achieve conformity with similar agreements USFloral has entered into
with other floral products businesses;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations
-----------------------------------------
will cause Articles of Merger in substantially the form of Annex I attached
hereto or with such changes therein as may be required by applicable state laws
(the "Articles of Merger") to be signed, verified and delivered to the
Secretaries of State of the appropriate states of incorporation of Newco and the
Company on or before the Merger Effective Date (as defined in Section 5).
1.2 Merger Effective Date. The "Merger Effective Date" shall be the date
---------------------
specified in Section 5. At the Merger Effective Date, Newco shall be merged
with and into the Company in accordance with the Articles of Merger and the
separate existence of Newco shall cease. The Company, as the party surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
---------------------------------------------------------------------
Corporation. At the Merger Effective Date:
-----------
(i) the Articles of Incorporation of the Company shall become the Articles
of Incorporation of the Surviving Corporation (with such amendments thereto as
may be set forth in the Articles of Merger); and subsequent to the Merger
Effective Date, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation until changed as provided by law;
(ii) the Bylaws of the Company shall become the Bylaws of the Surviving
Corporation; and subsequent to the Merger Effective Date, such Bylaws shall be
the Bylaws of the Surviving Corporation until they shall thereafter be duly
amended;
(iii) the name of the person who shall serve as the sole member of the
Board of Directors of the Surviving Corporation shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the state of incorporation and of the Articles of
Incorporation and Bylaws of each Surviving Corporation.
(iv) the officers of the Company immediately prior to the Merger Effective
Date shall continue as the officers of the Surviving Corporation in the same
capacity or capacities, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and Bylaws of the Surviving
Corporation, until his successor is elected and qualified.
2
1.4 Certain Information with Respect to the Capital Stock of the Company and
------------------------------------------------------------------------
Newco. The respective designations and numbers of outstanding shares and voting
-----
rights of each class of outstanding capital stock of the Company and Newco as of
the date of this Agreement are as follows:
(i) the authorized capital stock of the Company consists of 50,000 shares
of common stock, without par value (the "Company Stock"), of which 20,000
shares are issued and outstanding; and
(ii) the authorized capital stock of Newco consists of 1,000 shares of
common stock, $.01 par value (the "Newco Stock"), of which 100 shares are
issued and outstanding.
1.5 Effect of Merger. Except as herein specifically set forth, the
----------------
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of the Company shall continue unaffected and unimpaired by the
Merger, and the Surviving Corporation shall be fully vested therewith. At the
Merger Effective Date, the separate existence of Newco shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
the Company or Newco shall be taken and deemed to be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all property,
rights and privileges, powers and franchises and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Company and Newco; and the title to any real estate, or
interest therein, whether by deed or otherwise, under the laws of the state of
incorporation vested in the Company or Newco, shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thenceforth
be responsible and liable for all the liabilities and obligations of the Company
and Newco and any claim existing, or action or proceeding pending, by or against
the Company or Newco may be prosecuted as if the Merger had not taken place, or
the Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of the Company or Newco shall be
impaired by the Merger, and all debts, liabilities and duties of the Company and
Newco shall attach to the Surviving Corporation, and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
1.6 AAA Distribution. The parties agree that, immediately prior to the
----------------
Closing, the Company shall distribute to its stockholders the amount of the
Company's accumulated adjustment account.
2. CONVERSION AND EXCHANGE OF STOCK
3
2.1 Manner of Conversion. The manner of converting the shares of the
--------------------
Company Stock issued and outstanding immediately prior to the Merger Effective
Date into cash and shares of common stock of USFloral, $0.001 par value
("USFloral Stock"), shall be as follows:
As of the Merger Effective Date:
(i) all of the shares of Company Stock issued and outstanding immediately
prior to the Merger Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, automatically be converted into
that number of shares of USFloral Stock and the right to receive cash from
USFloral as determined pursuant to Section 2.2 below, all to be distributed to
Stockholders in the percentages set forth on Annex II and at the times
specified in Section 5 hereof; and
(ii) each share of Newco Stock issued and outstanding immediately prior to
the Merger Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of stock of the Surviving Corporation
which shall constitute all of the outstanding shares of the Surviving
Corporation immediately after the Merger Effective Date.
All USFloral Stock to be received by the Stockholders as a result of the
merger shall, except for restrictions on resale or transfer described in Section
16 hereof, have the same rights as the majority of outstanding USFloral Stock.
All voting rights are fully exercisable by the Stockholders and the Stockholders
are neither deprived nor restricted in exercising those rights. At the Merger
Effective Date, USFloral shall have no class of capital stock issued and
outstanding which shall have any rights or preferences senior to the shares of
USFloral Stock, including, without limitation, any rights or preferences as to
dividends or as to the assets of USFloral upon liquidation or dissolution or as
to voting rights.
2.2 Calculation of USFloral Shares. The Company Stock shall be converted,
------------------------------
as a result of the Merger, into such number of shares of USFloral Stock and the
amount of cash set forth on Annex II attached hereto.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 At the Merger Effective Date:
(i) The Stockholders, as the holders of all outstanding certificates
representing shares of Company Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of USFloral Stock
set forth on Annex II opposite the name of each Stockholder; and
4
(ii) Until the certificates representing the Company Stock have been
surrendered by the Stockholders and replaced by certificates representing the
USFloral Stock, the certificates for the Company Stock shall, for all
corporate purposes be deemed to evidence ownership of the USFloral Stock
notwithstanding the number of shares of Company Stock such certificates
represent.
3.2 The Stockholders shall deliver at the Closing (as defined in Section 5
hereof) the certificates representing the respective shares of Company Stock,
duly endorsed in blank by the Stockholders or accompanied by blank stock powers,
with signatures guaranteed by a national bank, and with all necessary transfer
tax and other revenue stamps, acquired at the Stockholders' expense, affixed and
canceled. The Stockholders agree 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. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES
4.1 As soon as practicable, but in any event within 30 days after the
Closing, USFloral shall engage Price Waterhouse to prepare, in accordance with
GAAP, a balance sheet of the Company (the "Closing Date Balance Sheet") as of
the end of business on the day prior to the Closing Date (as defined in Section
5 hereof). If the aggregate stockholders' equity as shown on the Closing Date
Balance Sheet is less than the aggregate stockholders' equity as shown on the
Consolidated Balance Sheet as at December 31, 1996 (such difference the "Net
Worth Deficiency"), the Stockholders shall pay an amount equal to the Net Worth
Deficiency to USFloral as provided below. Notwithstanding anything in this
Article 4 to the contrary, if there is any Net Worth Deficiency and the
Stockholders dispute any item contained on the Closing Date Balance Sheet, the
Stockholders shall notify USFloral in writing of each disputed item
(collectively, the "Disputed Amounts"), and specify the amount thereof in
dispute within thirty business days after the delivery of the Closing Date
Balance Sheet. If the Stockholders do not notify USFloral of any Disputed
Amount within the thirty business day period, then within ten business days
after the expiration of the thirty business day period, the Stockholders shall
pay USFloral by wire transfer of immediately available funds, an amount equal to
the Net Worth Deficiency. If USFloral and the Stockholders cannot resolve any
such dispute which would eliminate or reduce the amount of the Net Worth
Deficiency, then such dispute shall be resolved by an independent nationally
recognized accounting firm which is reasonably acceptable to USFloral and the
Stockholders (the "Independent Accounting Firm"). The determination of the
Independent Accounting Firm shall be made as promptly as practical and shall be
final and binding on the parties, absent manifest error which error may only be
corrected by such Independent Accounting Firm. Any disputed amount of the Net
Worth Deficiency shall be paid to USFloral by wire transfer of immediate funds
within ten business days of the resolution of such dispute. Any expenses
relating to the engagement of the Independent Accounting Firm shall be allocated
between USFloral and the Stockholders so that the Stockholders' aggregate share
of such costs shall bear the same proportion to the total costs that the
Disputed Amounts unsuccessfully contested by the Stockholders (as finally
determined by the Independent
5
Accounting Firm) bear to the total of the Disputed Amounts so submitted to the
Independent Accounting Firm.
4.2 (a) Any indemnification obligations of the Stockholders pursuant to
Sections 12.1 and 12.2 hereof and amounts payable pursuant to Section 4.1 hereof
shall be satisfied initially through recourse to the assets pledged for such
purpose under the following paragraph (valued for such purposes on the date the
indemnification obligation is paid pursuant to Section 12 or ten days after
USFloral notifies the Stockholders of the Net Worth Deficiency pursuant to
Section 4.1).
(b) At the Closing each Stockholder shall, and by execution hereof does
hereby, transfer, pledge and assign to USFloral, for the benefit of USFloral, a
security interest in the following assets:
(i) the number of shares of USFloral Stock set forth beside such
Stockholder's name in the column entitled "Number of Shares Pledged"
(collectively with respect to all Stockholders, the "Pledged Securities") on
Annex II, the certificates and instruments representing or evidencing such
Stockholder's Pledged Securities, and all cash and non-cash dividends and
other property at any time received or otherwise distributed in respect of or
in exchange for any or all of such Stockholder's Pledged Securities; and in
the event such Stockholder receives any such certificates or property, such
Stockholder shall immediately deliver such certificates or property to
USFloral to be held hereunder as Pledged Securities;
(ii) all securities hereafter delivered to such Stockholder in substitution
for any of the foregoing, 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 Stockholder
receives any such property, such Stockholder shall immediately deliver such
property to USFloral to be held hereunder as Pledged Securities; and
(iii) all cash and non-cash proceeds of all of the foregoing property and
all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property.
(c) Each certificate evidencing a Stockholder's Pledged Securities
issued in his or her name in the Merger, shall, at the Closing, be delivered to
USFloral, together with a stock power duly signed in blank by him or her, such
certificate bearing no restrictive or cautionary legend other than those
imprinted by USFloral's transfer agent at USFloral's request.
(d) The Stockholders shall be entitled to exercise any voting powers
incident to the Pledged Securities and to receive and retain all cash dividends
paid thereon.
6
(e) The Pledged Securities shall be available to satisfy any payment
obligations pursuant to Section 4.1 hereof and any indemnification obligations
of the Stockholders pursuant to Sections 12.1 and 12.2 until the date that is 12
months after the Merger Effective Date (the "Release Date"). Within five (5)
days following the Release Date, USFloral shall return the Pledged Securities to
the respective Stockholders (or cause them to be so returned), less Pledged
Securities having an aggregate value equal to the amount of (i) an amount due
pursuant to Section 4.1, (ii) any pending claim for indemnification made by any
Indemnified Party (as defined in Section 12) and (iii) any indemnification
obligations of the Stockholders pursuant to Section 12.
5. CLOSING; MERGER EFFECTIVE DATE
Within two business days following the date on which the price of the shares
of USFloral Stock in the IPO described in Section 9.5 shall have been
determined, the parties shall take all actions necessary to effect the Merger
(other than the filing of the Articles of Merger with the appropriate state
authorities which shall be filed on the Merger Effective Date) and to effect the
conversion and delivery of shares referred to in Section 3 hereof (hereinafter
referred to as the "Closing"); provided, that such actions shall not include the
actual completion of the Merger or the conversion and delivery of the shares
referred to in Section 3 hereof, which actions shall only be taken on the Merger
Effective Date as herein provided. The Closing shall take place at the offices
of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The date on which the Closing shall occur shall be referred
to as the "Closing Date." Concurrently with the closing in respect of the IPO,
Articles of Merger shall be filed with the appropriate state authorities, the
Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery of a
check or checks in an amount equal to the cash which the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Section 3 hereof,
shall occur and be deemed to be completed. The date on which the Merger is
effected shall be referred to as the "Merger Effective Date." During the period
from the Closing Date to the Merger Effective Date, this Agreement may only be
terminated by the parties if the underwriting agreement in respect of the
initial public offering of USFloral Stock is terminated pursuant to the terms of
such agreement. This Agreement shall in any event terminate if the Merger
Effective Date has not occurred within 10 business days of the Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each Stockholder, jointly and severally, represents and warrants
as follows.
6.1 Due Organization. The Company is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the state of Montana, and is
duly authorized, qualified and licensed 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 (i) as set forth on Schedule
6.1 or (ii) where the failure to be so authorized, qualified or licensed would
not have a material
7
adverse effect on the business, operations, properties, assets or condition,
(financial or otherwise) (a "Material Adverse Effect") of the Company taken as a
whole. True, complete and correct copies of the Articles of Incorporation
(certified by the Secretary of State of the state of incorporation of the
Company) and Bylaws (certified by the Secretary of the Company) have heretofore
been delivered to USFloral. The stock records and minute books of each Company,
as heretofore made available to USFloral, are correct and complete.
6.2 Authorization. The Stockholders and the Company have the full legal
-------------
right, power and authority to enter into this Agreement and have the full legal
right, power and authority to enter into the Merger. The conversion of Company
Stock into Newco Stock pursuant to the provisions of this Agreement will
transfer valid title in the Company Stock to Newco, free and clear of all liens,
encumbrances and claims of every kind.
6.3 Capital Stock of Each Company. The authorized capital stock of the
-----------------------------
Company consists solely of 50,000 shares of common stock, of which 20,000 shares
are issued and outstanding. All of the issued and outstanding shares of the
capital stock of the Company are owned by the Stockholders, and are free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of Company Stock have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the Stockholders and further, such shares were offered, issued, sold and
delivered by each Company in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder.
6.4 Transactions in Capital Stock. The Company has never acquired any
-----------------------------
treasury stock. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any of their respective
authorized but unissued capital stock. In addition, 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.
6.5 No Bonus Shares. None of the shares of the Company Stock was issued
---------------
pursuant to awards, grants or bonuses.
6.6 Subsidiaries. Except as set forth in Schedule 6.6, 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. Except as set forth
on Schedule 6.6, the Company is not, directly or indirectly, a participant in
any joint venture, partnership or other noncorporate entity.
6.7 Predecessor Status; etc. Set forth in Schedule 6.7 is a listing of all
-----------------------
names of all predecessor companies of the Company, including the names of any
entities from whom the Company previously acquired significant assets. Except as
set forth on Schedule 6.7, the Company
8
has never been a subsidiary or division of another corporation nor has it been a
part of an acquisition which was later rescinded.
6.8 Spin-off by Company. Since the Balance Sheet Date, there has not been
-------------------
any sale or spin-off of significant assets of the Company other than in the
ordinary course of business.
6.9 Financial Statements. Attached hereto as Schedule 6.9 are copies of the
--------------------
following audited financial statements (the "Financial Statements") of the
Company: Balance Sheet as of December 31, 1996, 1995 and 1994 and Statements of
Incomes, Cash Flows and Retained Earnings for each of the years in the three
year period ended December 31, 1996, and the Company's unaudited Balance Sheet
as of each of April 30, 1997 and 1996, (April 30, 1997 being hereinafter
referred to as the "Balance Sheet Date") and Statements of Incomes, Cash Flows
and Retained Earnings for the four (4) month periods then ended. Such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted). Except as set forth on Schedule 6.9, such Balance Sheets
present fairly the financial position of the Company as of the dates indicated
thereon, and such Statements of Incomes, Cash Flows and Retained Earnings
present fairly the results of the Company's operations for the periods indicated
thereon.
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
---------------------------
accurate list, as of the Balance Sheet Date, of all material liabilities of the
Company, which are reflected in the April 30, 1997 Balance Sheet and any
significant liabilities incurred thereafter in the ordinary course of business,
or material liabilities which are not reflected in the April 30, 1997 Balance
Sheet, of any kind, character and description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, together with, in the case of
those liabilities which are not fixed, an estimate of the maximum amount which
may be payable. For each such liability for which the amount is not fixed or is
contested, the Stockholders have provided USFloral with the following
information:
(i) a summary description of the liability together with the following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
(c) names of claimant and all other parties to the claim, suit or
proceeding.
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(iii) the date such claim, suit or proceeding was instituted;
9
(iv) a best estimate by the Stockholders of the maximum amount, if any,
which is likely to become payable with respect to each such liability. If no
estimate is provided, the Stockholders' best estimate shall for purposes of
this Agreement be deemed to be zero.
6.11 Accounts and Notes Receivable. Attached hereto as Schedule 6.11 is an
-----------------------------
accurate list as of the Balance Sheet Date of the accounts and notes receivable
of the Company, including receivables from and advances to employees and the
Stockholders, including any such amounts which are not reflected in the most
recent available balance sheet. The Stockholders shall provide USFloral with an
aging of all accounts and notes receivable showing amounts due in 30 day aging
categories. The accounts receivable reflected on the Closing Date Balance Sheet
will be collectible in the ordinary course of business in the amounts reflected
thereon, net of any provision for bad debts set forth in the Closing Date
Balance Sheet.
6.12 Permits and Intangibles. Attached hereto as Schedule 6.12 is an
-----------------------
accurate list and summary description, as of the Balance Sheet Date, of all
permits, titles, licenses, franchises, certificates, trademarks, trade names,
service marks, patents, patent applications and copyrights owned or held by the
Company all of which are now valid, in good standing and in full force and
effect. Except as set forth on Schedule 6.12, such permits, licenses, orders,
approvals, franchises, etc. are adequate for the operation of the Company's
business as presently constituted. Except as set forth on Schedule 6.12, the
Stockholders have delivered to USFloral a description and copies as of the date
of this Agreement, of all material records, reports, notifications, permits,
pending permit applications, engineering studies, environmental impact studies,
filed or submitted or required to be filed or submitted to governmental agencies
and of all material notifications from such governmental agencies relating to
the above or relating to the discharge or release of materials into the
environment or otherwise relating to the protection of the public health or the
environment.
6.13 Real and Personal Property. Attached hereto as Schedule 6.13 is an
--------------------------
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the real and personal property (which in the case of personal
property had an original cost in excess of $10,000) owned or leased by the
Company including true and correct copies of leases for equipment and properties
on which are situated buildings, warehouses and other structures used in the
operation of the business of the Company and including an indication as to which
assets were formerly owned by the Stockholders or affiliates (which term, as
used herein, shall have the meaning ascribed thereto in Rule 144(a)(1) under the
Securities Act of 1933, as amended) of the Company. Except as set forth on
Schedule 6.13, substantially all of the trucks, machinery and equipment of the
Company are in good working order and condition, ordinary wear and tear
excepted. All leases set forth on Schedule 6.13 have been duly authorized,
executed and delivered and constitute the legal, valid and binding obligations
of the Company and, to the knowledge of the Stockholders, no other party to any
such lease is in default thereunder and such leases constitute the legal, valid
and binding obligations of such other parties. All fixed assets used by the
Company in the operation of its business are either owned by the Company or
leased under an agreement set forth on Schedule 6.13. The Stockholders have
heretofore delivered to USFloral copies of all title reports and title insurance
policies received
10
or held by the Company. The Stockholders have indicated on Schedule 6.13 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 devoted
any significant effort or expenditure in the two year period prior to the date
of this Agreement, which if pursued by the Company would require additional
expenditures of significant efforts or capital.
6.14 Material Contracts and Commitments. Attached hereto as Schedule 6.14 is
----------------------------------
an accurate list, as of the Balance Sheet Date, of all material contracts,
commitments and similar agreements to which the Company is a party or by which
the Company or its properties are bound (including, but not limited to, joint
venture or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements). The Stockholders
have heretofore delivered to USFloral true copies of such agreements. Except as
set forth on Schedule 6.14, the Company has complied with all material
commitments and obligations pertaining to it, and is not in material default
under any such agreement and no notice of default has been received. The
Company is not a party to any contract, agreement or other instrument or
commitment which cannot be terminated by the Company on 30 days notice without
any liability to the Company which would have a Material Adverse Effect on the
Company taken as a whole. Except as set forth on Schedule 6.14, the Company is
not bound by or subject to (and none of their respective assets or properties is
bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 6.14, no employees of the Company are represented by any labor
union or covered by any collective bargaining agreement nor, to the
Stockholders' knowledge, is any organization campaign to establish such
representation in progress. There is no pending or, to the Stockholders'
knowledge, threatened labor dispute involving the Company and any group of its
employees nor has the Company experienced any labor interruptions over the past
three years and the Company considers its relationship with employees to be
good.
6.15 Title to Real Property. The Company has good and insurable title to the
----------------------
real property owned and used in its business, subject to no mortgage, pledge,
lien, conditional sales agreement, encumbrance or charge, except for:
(i) liens, if any, reflected on Schedules 6.10 and 6.13 as securing
specified liabilities (with respect to which no material default exists);
(ii) liens for current taxes and assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to title
shown of record in the office of the County Clerks in which the properties,
assets and leasehold estates are located, which in USFloral's sole discretion,
do not adversely affect USFloral's intended use of the property.
11
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list, as of
---------
the Balance Sheet Date, of all insurance policies carried by the Company and an
accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. The Stockholders have heretofore
delivered to USFloral complete copies of all policies currently in effect. The
insurance carried by the Company with respect to its properties, assets and
business is, to the Stockholders' knowledge, with financially sound insurers.
Such insurance policies are currently in full force and effect and shall remain
in full force and effect through the Merger Effective Date. The Company's
insurance has never been canceled and the Company has never been denied
coverage.
6.17 Officers, Directors and Employees Compensation. Attached hereto as
----------------------------------------------
Schedule 6.17 is an accurate schedule showing all officers, directors and
employees of the Company and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date. The
Stockholders have heretofore delivered to USFloral copies of the payroll lists
covering all employees of the Company as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.17, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
6.18 Employee Plans. Attached hereto as Schedule 6.18 are complete and
--------------
accurate copies, as of the Balance Sheet Date, of all employee benefit plans,
all employee welfare benefit plans, all employee pension benefit plans, all
multi-employer plans and all multi-employer welfare arrangements (as defined in
Sections 3(3), (1), (2), (37) and (40), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which are currently
maintained and/or sponsored by the Company, or to which the Company currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), together
with copies of any trusts related thereto and a classification of employees
covered thereby (collectively, the "Plans"). Schedule 6.18 sets forth all of
the Plans that have been terminated within the past three years.
6.19 Compliance with ERISA. All Plans are in substantial compliance with all
---------------------
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable laws, and, in all material respects, have been
administered, operated and managed in substantial accordance with the governing
documents. All Plans that are intended to qualify (the "Qualified Plans") under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code")
have been determined by the Internal Revenue Service to be so qualified, and
copies of the current plan determination letters, most recent actuarial
valuation reports, if any, most recent Form 5500, or, as applicable, Form 5500-
C/R filed with respect to each such Qualified Plan or employee welfare benefit
plan and most recent trustee or custodian report, are included as part of
Schedule 6.18. To the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within 120
days after the Closing Date. All reports and other documents
12
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, annual reports,
summary annual reports, actuarial reports, PBGC-1 Forms, audits or tax returns)
have been timely filed or distributed. None of: (i) the Stockholders; (ii) any
Plan; or (iii) the Company has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the Company does not currently have (nor
at the Closing Date will have) any direct or indirect liability whatsoever
(including being subject to any statutory lien to secure payment of any such
liability), to the Pension Benefit Guaranty Corporation ("PBGC") with respect to
any such Plan under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty; and neither the Company nor any member of a "controlled
group" (as defined in ERISA Section 4001(a)(14)) currently has (or at the
Closing Date will have) any obligation whatsoever to contribute to any "multi-
employer pension plan" (as defined in ERISA Section 4001(a)(14), nor has any
withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further:
(i) there have been no terminations, partial terminations or discontinuance
of contributions to any Qualified Plan without notice to and approval by the
Internal Revenue Service;
(ii) no Plan which is subject to the provisions of Title IV of ERISA has
been terminated;
(iii) there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(iv) the valuation of assets of any Qualified Plan, as of the Closing Date,
shall exceed the actuarial present value of all accrued pension benefits under
any such Qualified Plan in accordance with the assumptions contained in the
Regulations of the PBGC governing the funding of terminated defined benefit
plans;
(v) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the Company and the Stockholders have complied (and on the Closing
Date will have complied), in all respects with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed
thereunder as and when applicable to such plans, and the Company has no (and
will incur no) direct or indirect liability and is not (and will not be)
subject to any loss, assessment, excise tax penalty, loss of federal income
tax deduction or other sanction, arising
13
on account of or in respect of any direct or indirect failure by the Company
or the Stockholders, at any time prior to the Closing Date, to comply with any
such federal or state benefit continuation requirement, which is capable of
being assessed or asserted before or after the Closing Date directly or
indirectly against the Company or the Stockholders with respect to such group
health plans;
(vi) The Company is not now nor has it been within the past five years a
member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the Stockholders' knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement
or adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party
in interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect the
approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of most prior
periods; and
(ix) The Company has not incurred liability under Section 4062 of ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, 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, taken as a whole; and except as set
forth on Schedule 6.20, there are no claims, actions, suits or proceedings,
pending or, to the Stockholders' knowledge, threatened, against or affecting the
Company, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. The Company has
conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, 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, taken
as a whole.
6.21 Taxes. The Company has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing Date. There are no open years, examinations in
progress or claims against the Company for federal and other taxes (including
penalties and interest) for any period or periods prior to and including the
Balance Sheet Date and no notice of any claim, whether pending or threatened,
for taxes has been received.
14
The amounts shown as accruals for taxes on the Financial Statements, as of the
Balance Sheet Date, are sufficient for the payment of all taxes of the kinds
indicated (including penalties and interest) for all fiscal periods ended on or
before that date. True, correct and complete copies of (i) all tax
examinations, (ii) extensions of statutory limitations and (iii) the federal and
local income tax returns and franchise tax returns of the Company for the last
three fiscal years, or such shorter period of time as it shall have existed,
have heretofore been delivered by the Stockholders to USFloral. The Company
made an election to be taxed under the provisions of Subchapter S of the
Internal Revenue Code within 75 days of its original organization and has at no
time been taxed under the provisions of Subchapter C of the Internal Revenue
Code. The Company has a taxable year ended December 31 and has not made an
election to retain a fiscal year other than December 31 under Section 444 of the
Internal Revenue Code. The Company currently utilizes the cash receipts and
disbursements method of accounting for income tax purposes and has not changed
its method of accounting in the past five years.
6.22 Completeness; No Violations. The certified copies of the Articles of
---------------------------
Incorporation and Bylaws, both as amended to date, of the Company, and the
copies of all leases, instruments, agreements, licenses, permits, certificates
or other documents which are included on schedules attached hereto or have been
delivered to USFloral in connection with the transactions contemplated hereby
are complete and correct; neither the Company nor, to the knowledge of the
Stockholders, any other party thereto, is in material default thereunder; and,
except as set forth in the schedules and documents attached to this Agreement,
the rights and benefits of the Company thereunder will not be materially and
adversely affected by the transactions contemplated hereby; and the execution of
this Agreement and the performance of the obligations hereunder will not result
in a material violation or breach or constitute a material default under any of
the terms or provisions thereof. Except as set forth on Schedule 6.22, none of
such leases, instruments, agreements, contracts, licenses, permits, certificates
or other documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions contemplated
hereby to remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.23 Government Contracts. The Company is not now nor has it ever been a
--------------------
party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Absence of Changes. Since the Balance Sheet Date, there has not been:
------------------
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by insurance)
which has had a Material Adverse Effect on the Company, taken as a whole;
15
(iii) any change in the authorized capital of the Company or in its
securities outstanding or any change in its ownership interests or any grant
of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in respect
of the capital stock or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the Company except for dividends,
bonuses and other distributions to the Stockholders in amounts not in excess
of those necessary to cover the payment of income taxes by the Stockholders
attributable to the Company's Subchapter S income;
(v) any increase in the compensation, bonus, sales commissions or fees
arrangement payable or to become payable by the Company to any of its
officers, directors, Stockholders, employees, consultants or agents other than
ordinary salary increases implemented on a basis consistent with past
practices;
(vi) any work interruptions, labor grievances or claims filed, or any
proposed law or regulation or any event or condition of any character, which
has had a Material Adverse Effect on the Company, taken as a whole;
(vii) 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 Stockholders and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to the Company, including without limitation any indebtedness
or obligation of any Stockholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of the assets, properties or rights of
the Company or requiring consent of any party to the transfer and assignment
of any such assets, properties or rights;
(x) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any properties, rights or assets of the Company;
(xi) any waiver of any material rights or claims of the Company;
(xii) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party; or
(xiii) any transaction by the Company outside the ordinary course of its
business.
16
6.25 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule 6.25
------------------------------------
is an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 6.25 also sets forth 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.
6.26 Environmental Matters. To the knowledge of the Stockholders, the
---------------------
Company has complied with and is in material compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to the Company
or any of its properties, assets, operations and business relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances (as such terms are defined in any applicable
Environmental Law) except to the extent that noncompliance with any
Environmental Law, either singly or in the aggregate, would not have a Material
Adverse Effect on the Company, taken as a whole. The Company has obtained and
adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances and has reported, to the extent required by all Environmental Laws,
all past and present sites owned and operated by the Company where Hazardous
Wastes or Hazardous Substances have been treated, stored, disposed of or
otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in or on any property owned or operated
by the Company except as permitted by Environmental Laws. The Stockholders know
of no off-site location to which the Company has transported or disposed of
Hazardous Wastes or Hazardous Substances or arranged for the transportation of
Hazardous Wastes or Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the Company, USFloral or Newco for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. The Company has
no contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
6.27 Underground Storage Tanks. Except as set forth on Schedule 6.27, the
-------------------------
Company has never owned or leased any real estate having any underground storage
tanks containing
17
petroleum products or wastes or other hazardous substances regulated by 40 CFR
280 and/or other applicable federal, state or local laws, rules and regulations
and requirements. As to each such underground storage tank ("UST") identified
in Schedule 6.27, the Company has provided the following to USFloral:
(i) The location of the UST and whether the Company currently owns or
leases the property in which the UST is located;
(ii) copies of all of the UST's manufacturer's literature, brochures,
proposals and contract documents describing the UST system and all
manufacturer's warranties covering the UST system;
(iii) the date of installation and specific use or uses of the UST;
(iv) copies of all UST tank and piping tightness tests and cathodic
protection tests and similar studies or reports for all periods;
(v) a copy of the Company's Notification For UST;
(vi) all other records with regard to the UST including, without
limitation, the results of groundwater and soil tests; and
(vii) a summary description of all instances in which the UST failed to
meet applicable standards and regulations for tightness or otherwise.
6.28 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by the Company and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the Company and
the Stockholders, and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
Company.
6.29 Relations with Governments. The Company has not given, offered or
--------------------------
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has the Company otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended or any law of similar effect.
6.30 Disclosure. Without limiting any exclusion, exception or other
----------
limitation contained in any of the representations and warranties made herein,
this Agreement and 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
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholder shall immediately
18
give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve the Company or the Stockholder 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
Stockholders, at the date of this Agreement and as of the Closing date, shall be
a precondition to the consummation of this transaction.
6.31 Authority; Ownership. Each Stockholder has the full legal right, power
--------------------
and authority to enter into this Agreement. Each Stockholder owns beneficially
and of record all of the shares of Company stock identified on Annex II as being
owned by such Stockholder. The conversion of Company Stock into USFloral Stock
and cash pursuant to the provisions of this Agreement will transfer to USFloral
valid title in the shares of Company Stock owned by such Stockholder, free and
clear of all liens, encumbrances and claims of every kind.
7. REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFloral and each Newco, jointly and severally, represent and
warrant as follows.
7.1 Due Organization. USFloral and Newco are duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware,
respectively, and are duly authorized, qualified and licensed under all
applicable laws, regulations, and ordinances of public authorities to carry on
their respective businesses in the places and in the manner as now conducted
except the states where the failure to be so authorized, qualified or licensed
would not have a Material Adverse Effect on their respective businesses. Copies
of the Articles of Incorporation (certified by the Secretary of State of the
States of Delaware) and the Bylaws, as amended, of USFloral and Newco (certified
by the Secretary of the respective corporations) have heretofore been delivered
by USFloral to the Stockholders.
7.2 USFloral Stock. The USFloral Stock to be delivered to the Stockholders
--------------
at the Merger Effective Date, when delivered in accordance with the terms of
this Agreement, will constitute valid and legally issued shares of USFloral
capital stock, fully paid and nonassessable, and with the exception of
restrictions upon resale, will be legally equivalent in all respects to the
majority of USFloral Stock issued and outstanding as of the date hereof. The
restrictions on resale imposed on the Stockholders are no more restrictive than
those imposed on the stockholders of the other companies being acquired by
USFloral prior to the IPO ("Founding Stockholders"). Furthermore, neither the
Founding Stockholders nor ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (i) have
registration rights with respect to USFloral Stock that are superior to
registration rights that the Stockholders have, or (ii) will have the right to
include any USFloral Stock in the IPO.
7.3 Authorization. The representatives of USFloral and Newco executing this
-------------
Agreement have the corporate authority to enter into and bind USFloral and Newco
by the terms of this Agreement. USFloral and Newco have full legal right, power
and authority to enter into this Agreement and have the full legal right, power
and authority to enter into the Merger, and the
19
conversion of Company Stock into Newco Stock, pursuant to the provisions of this
Agreement will transfer valid title to USFloral Stock to the Stockholders, free
and clear of all liens, encumbrances and claims of every kind.
7.4 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the Certificate
of Incorporation or Bylaws of either USFloral or Newco,
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which either
USFloral or Newco is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any of USFloral's or Newco's properties
pursuant to (A) any law or regulation to which USFloral or Newco, or any of
their property is subject, or (B) any judgment, order or decree to which
USFloral or Newco is bound or any of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(iv) require any filing or other notice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvement Act.
7.5 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by USFloral and Newco and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
USFloral and the Board of Directors and the stockholder of Newco, 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 and
Newco, respectively.
7.6 Other Agreements. Prior to the consummation of the Merger, USFloral and
----------------
Newco have no material properties or assets and are not party to any contracts
other than this Agreement, the letters of intent between USFloral and the
Stockholders, certain employment agreements with officers of USFloral and those
agreements and letters of intent listed on Schedule 7.6 hereof.
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access during normal business hours to all of the
Company's sites, properties, books and records and will
20
furnish USFloral with 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 in writing. The Company will cooperate
with the reasonable requests of USFloral, its representatives, engineers,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by any
governmental agency. USFloral will cause all information obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 15 hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, the Stockholders will cause the Company to:
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation
or accounting;
(ii) 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;
(iii) perform all of its material obligations under agreements relating to
or affecting its assets, properties or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) use its best efforts to maintain and preserve its business organization
intact, retain its present employees and maintain its relationships with
suppliers, customers and others having business relations with the Company;
(vi) maintain compliance with all permits, laws, rules and regulations,
consent orders of any court or federal, state or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction;
(vii) maintain present debt and lease instruments and not enter into new or
amended debt or lease instruments, without the knowledge and written consent
of USFloral; and
(viii) maintain present salaries and commission levels for all officers,
directors, employees and agents.
8.3 Prohibited Activities. Between the Balance Sheet Date and the Merger
---------------------
Effective Date, the Company will not, without prior written consent of USFloral:
(i) make any change in its Articles of Incorporation or Bylaws;
21
(ii) issue any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind;
(iii) declare or pay any dividend or make any distribution in respect of
its stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock except for
dividends, bonuses and other distributions to the Stockholders in amounts not
in excess of those necessary to cover the payment of income taxes by the
Stockholders attributable to the Company's Subchapter S income;
(iv) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures in excess of $50,000;
(v) increase the compensation payable or to become payable to any officer,
director, Stockholder, employee or agent other than ordinary salary increases
implemented on a basis consistent with past practices, or make any bonus or
management fee payment to any such person;
(vi) create, assume or permit to exist any mortgage, pledge or other lien
or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except as set forth in Schedule 8.3(vi);
(vii) sell, assign, lease or otherwise transfer or dispose of any property
or equipment, except in the normal course of business;
(viii) negotiate for the acquisition of any business or the start-up of any
new business;
(ix) merge or consolidate or agree to merge or consolidate with or into any
other corporation;
(x) waive any material rights or claims;
(xi) breach or permit a breach, amend or terminate any material agreement
or any permit, license or other right; or
(xii) enter into any other transaction outside the ordinary course of its
business or prohibited hereunder.
8.4 Supplier Approval. Prior to the Closing Date, the Company shall satisfy
-----------------
any requirement for notice and approval of the transactions contemplated by this
Agreement under applicable supplier agreements, and shall provide USFloral with
satisfactory evidence of such approvals.
22
8.5 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, and shall
provide USFloral with proof that any required notice has been sent.
8.6 No Shop. None of the Stockholders, the Company or any agent, officer,
-------
director or any representative of any of the foregoing will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Merger Effective Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than USFloral or Newco
relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company.
8.7 Notification of Certain Matters. The Stockholders and the Company shall
-------------------------------
give prompt notice to USFloral of (i) the occurrence or non-occurrence of any
event known to any Stockholder or the Company the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained in
Section 6 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of any
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. USFloral
shall give prompt notice to each Stockholder of (i) the occurrence or non-
occurrence of any event known to USFloral the occurrence of non-occurrence of
which would be likely to cause any representation or warranty contained in
Section 7 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of USFloral
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 8.7 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 8.8, (ii) modify the conditions set forth in Sections 9
and 10 or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
8.8 Amendment of Schedules. Each party hereto agrees that, with respect to
----------------------
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Merger Effective Date
to supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
23
Schedules, provided that no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to the Company may be made
unless USFloral consents to such amendment or supplement; and provided further,
however, that USFloral may not withhold consent to such amendment or supplement
if the same relates to (i) changes in facts or circumstances occurring
subsequent to the date hereof, or (ii) facts and circumstances existing as of
the date hereof that were not disclosed by the Stockholders because they did not
have knowledge of them (but, with respect to facts and circumstances described
in (ii) only to the extent that the omission thereof from the Schedules attached
hereto as of the date hereof was not the result of a lack of good faith
diligence on the part of the Stockholders). No amendment of or supplement to a
Schedule shall be made later than 48 hours prior to the anticipated
effectiveness of the Registration Statement defined in Section 9.5.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of the Stockholders hereunder are subject to the satisfaction
on or prior to the Closing Date (or such earlier date specified below) of the
following conditions.
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFloral and Newco contained in Section 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by USFloral and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of USFloral shall have been delivered to the
Stockholders.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of the
Company as a result of which the management of the Company deems it inadvisable
to proceed with the transactions hereunder.
9.3 Employment Agreements. The Surviving Corporation shall execute and
---------------------
deliver Employment Agreements, in the form of Annex III attached hereto, to each
of the persons listed on Schedule 9.3 hereto.
9.4 Opinion of Counsel. The Stockholders shall have received an opinion
------------------
from counsel for USFloral, dated the Merger Effective Date, in form and
substance satisfactory to the Stockholders, to the effect that:
(i) USFloral and Newco have been duly organized and are validly existing in
good standing under the laws of the State of Delaware;
24
(ii) this Agreement has been duly authorized, executed and delivered by
USFloral and Newco and constitutes a valid and binding agreement of USFloral
and Newco enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting
the rights of creditors and except (X) as the same may be subject to the
effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein; and
(iii) the shares of USFloral Stock to be received by the Stockholders on
the Merger Effective Date shall be duly authorized, fully paid and
nonassessable.
9.5 Registration Statement. USFloral shall have filed with the SEC the
----------------------
Registration Statement. The Registration Statement shall have been declared
effective by the SEC not later than December 24, 1997 and the underwriters named
therein shall have agreed to acquire, subject to the conditions set forth in the
underwriting agreement, the shares of USFloral Stock covered by such
Registration Statement.
9.6 Market Capitalization. The aggregate post-closing market
---------------------
capitalization of USFloral (determined by multiplying the number of shares of
USFloral Stock to be outstanding upon consummation of the IPO by the Price to
Public in the IPO) shall be not less than $50 million.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFloral and Newco hereunder are, at their option, subject
to the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions.
10.1 Representations and Warranties; Performance of Obligations. Stockholders
----------------------------------------------------------
shall have delivered to USFloral a certificate dated the Merger Effective Date
and signed by them to the effect that all the representations and warranties of
Stockholders contained in this Agreement shall be true on and as of the Closing
Date and as of the Merger Effective Date with the same effect as though such
representations and warranties had been made on and as of such dates, except for
matters expressly disclosed in the certificate or a Schedule thereto; each and
all of the agreements of the Stockholders and the Company to be performed on or
before the Closing Date pursuant to the terms hereof shall have been performed.
10.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of USFloral
as a result of which the management of USFloral deems it inadvisable to proceed
with the transactions hereunder.
25
10.3 Examination of Financial Statements. Prior to the Closing Date,
-----------------------------------
USFloral shall have had sufficient time to review the unaudited balance sheets
of the Company as of June 30, 1997, and the unaudited statements of income, cash
flow and retained earnings of the Company for the periods then ended, disclosing
no material adverse change in the financial condition of the Company or the
results of their respective operations from the financial statements originally
furnished by the Company as set forth in Schedule 6.9
10.4 No Material Adverse Change. No material adverse change in the results
--------------------------
of operations, financial position or business of the Company shall have
occurred, and the Company shall not have suffered any material loss or damages
to any of its properties or assets, whether or not covered by insurance, since
the Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and USFloral shall
have received on the Closing Date a certificate signed by the Stockholders dated
the Merger Effective Date to such effect.
10.5 Regulatory Review. USFloral, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
the Company including, but not limited to, environmental and land use practices,
import and export laws, compliance with contracts and federal, state and local
laws and regulations governing the respective operations of the Company, which
review reflects compliance with all applicable laws governing the Company,
disclosing no material actual or probable violations, compliance problems,
required capital expenditures or other substantive environmental, real estate
and land use related concerns and which review is otherwise satisfactory in all
respects to USFloral, in its sole discretion.
10.6 Stockholders Release. At the Closing Date, the Stockholders shall have
--------------------
delivered to USFloral an instrument dated the Merger Effective Date releasing
the Company from any and all claims of the Stockholders against the Company.
10.7 Employment Agreements. Each of the persons listed on Schedule 9.3 shall
---------------------
execute and deliver an Employment Agreement, in the form of Annex III attached
hereto.
10.8 Opinion of Counsel. USFloral shall have received an opinion from
------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, counsel to the Stockholders, dated the Merger Effective
Date, in form and substance satisfactory to USFloral, to the effect that with
respect to the Company:
(i) the Company has been duly organized and is validly existing in good
standing under the laws of the state of its incorporation;
(ii) to the knowledge of such counsel, the Company is duly authorized,
qualified and licensed under all applicable laws, regulations, ordinances or
orders of public authorities to carry on its business in the places and in the
manner as now conducted;
26
(iii) the authorized and outstanding capital stock of the Company is as
represented by the Stockholders in this Agreement and each share of such stock
has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
stockholder;
(iv) to the knowledge of such counsel, the Company does not have any
outstanding options, warrants, calls, conversion rights or other commitments
of any kind to issue or sell any of its capital stock;
(v) this Agreement has been duly authorized, executed and delivered by the
Company and the Stockholders and constitutes a valid and binding agreement of
the Company and the Stockholders enforceable in accordance with its terms
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to or
affecting the rights of creditors and except (X) as the same may be subject to
the effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein;
(vi) to the knowledge of such counsel, except to the extent set forth on
Schedule 6.20, the Company is not in violation of or default under any law or
regulation, or under any order of any court, commission, board, bureau, agency
or instrumentality wherever located and there are no claims, actions, suits or
proceedings pending, or threatened against or affecting the Company, at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality wherever
located;
(vii) to the knowledge of such counsel, except to the extent set forth on
Schedule 6.14, the Company is not in default under any of its material
contracts or agreements or has received notice of such default;
(viii) no notice to, consent, authorization, approval or order of any court
or governmental agency or body or to the knowledge of such counsel of any
other third party is required in connection with the execution, delivery or
consummation of this Agreement by any Stockholders or for the transfer to
USFloral of the Company Stock; and
(ix) the execution of this Agreement and the performance of the obligations
hereunder will not violate or result in a breach or constitute a default under
any of the terms or provisions of the Company's Articles of Incorporation or
the by-laws of the Company or to the knowledge of such counsel of any lease,
instrument, license, permit or any other agreement to which the Company is a
party or by which the Company or any Stockholder is bound.
27
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 Consents and Approvals. All necessary consents of and filings with any
----------------------
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
USFloral's acquisition of the Company Stock and no governmental agency or body
shall have taken any other action or made any request of USFloral as a result of
which USFloral deems it inadvisable to proceed with the transactions hereunder.
10.10 Additional Liabilities and Obligations. The Stockholders shall have
--------------------------------------
delivered to USFloral a schedule (Schedule 10.10), dated the Merger Effective
Date, setting forth all liabilities and obligations of the Company arising since
the Balance Sheet Date.
10.11 Additional Contracts. The Stockholders shall have delivered to USFloral
--------------------
a schedule (Schedule 10.11), dated the Merger Effective Date, showing all
material contracts and agreements, together with copies thereof, entered into by
the Company since the Balance Sheet Date.
10.12 Good Standing Certificates. The Stockholders shall have delivered to
--------------------------
USFloral certificates, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's states of incorporation and, unless waived by USFloral, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.13 Registration Statement. The Registration Statement shall have been
----------------------
declared effective by the SEC, and the underwriters named therein shall have
agreed to acquire, subject to the conditions set forth in the Underwriting
Agreement, the shares of USFloral Stock covered thereby.
10.14 Repayment of Indebtedness. Prior to the Closing Date, the Stockholders
-------------------------
shall have repaid the Company in full all amounts owing by the Stockholders.
10.15 Earnings. The Company shall have aggregate earnings for the period from
--------
January 1, 1997 through the day immediately prior to the Closing Date as
determined by Price Waterhouse, LLP, of not less than $300,000.
11. COVENANTS OF USFLORAL
11.1 Release From Guarantees. Not later than 120 days following the Merger
-----------------------
Effective Date, USFloral shall cause the Stockholders to be released from any
and all guarantees of any indebtedness set forth on Schedule 11.1 that they
personally guaranteed for the benefit of the Company, with all such guarantees
on indebtedness being assumed by USFloral; provided, that, in
28
the event that the beneficiary of any such guarantee is unwilling to permit the
assumption by USFloral of the obligations under such guarantee, USFloral shall
repay the indebtedness to which such guarantee relates together with all
interest and prepayment penalties, if any, then due and owing.
11.2 USFloral Stock Options. As soon as practicable after the Closing,
----------------------
options to purchase such number of shares of USFloral Stock as shall have a fair
market value on the Closing Date equal to 6.25% of the Consideration (as such
term is defined in Annex II of this Agreement) shall be available for issuance
to the key employees 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 Amended and Restated 1997 Long-Term Incentive Plan (the "Plan").
11.3 Leases. At the Merger Effective Date, the Surviving Corporation shall
------
enter into lease arrangements with each of the persons or entities listed in
Schedule 11.2 with respect to the corresponding properties or assets listed on
Schedule 11.2 in accordance with the terms and conditions of the form of lease
agreement attached hereto as Annex IV.
11.4 Exchange Act Reporting Requirements. For a period of two years
-----------------------------------
following the Merger Effective Date, USFloral shall (i) make and keep public
information available, as those terms are defined in Rule 144 promulgated under
the Securities Act of 1993, as amended (the "1933 Act") by the SEC and (ii) file
with the SEC in a timely manner all reports and other documents required to be
filed by USFloral under the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
11.5 Certain Transactions. USFloral's existing stockholders will
--------------------
participate, within the standards established by Rev. Proc. 77-37, in the
transactions contemplated by this agreement to the extent necessary to cause the
group consisting of (i) those existing stockholders who purchase USFloral Stock
from USFloral at the time of the IPO, (ii) the persons acquiring stock in the
IPO and (iii) the persons acquiring stock as a result of the Merger and the
other concurrent mergers to possess at least 80% of the outstanding stock of
USFloral. Each of the concurrent mergers will be a reverse triangular merger in
which not more than 60% of the consideration being transferred to each
Stockholder of the target corporations shall consist of USFloral Stock.
11.6 Piggy-Back Registrations. If at any time after the expiration of the
------------------------
restrictions contained in Section 16 USFloral shall determine to register shares
of USFloral Stock for its own account or the account of others under the 1933
Act (other than on Form S-8 or Form S-4 or their then equivalents relating to
shares of USFloral Stock to be issued solely in connection with any acquisition
of any entity or business or shares of USFloral Stock issuable in connection
with stock option or other employee benefit plans, and other than any "shelf"
registration statement relating to securities to be issued by USFloral), then it
shall send to each holder of shares of USFloral Stock issued in the Merger
("Registrable Shares") (all such security holders and being referred to as
29
"Holders") written notice of such determination. If, within 15 days after
receipt of such notice, such Holder shall so request in writing, then USFloral
shall use its best efforts to include in such registration statement all or any
part of the Registrable Shares such Holder requests to be registered, except
that if, in connection with any offering involving an underwriting of USFloral
Stock to be issued by USFloral, the managing underwriter shall impose a
limitation on the number of shares of such USFloral Stock which may be included
in the registration statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution, then USFloral shall be
obligated to include in such registration statement only such limited portion of
the Registrable Shares with respect to which such Holder has requested inclusion
hereunder; provided, however, that USFloral shall not so exclude any Registrable
-------- -------
Shares unless it has first excluded all securities to be offered and sold by
directors, officers or other employees of USFloral or by shareholders who do not
have contractual, incidental rights to include such securities. Except as
provided in the previous sentence of this Section 11.6 any exclusion of
Registrable Shares shall be made pro rata among the Holders of Registrable
--- ----
Shares seeking to include such shares, in proportion to the number of such
shares sought to be included by such Holders. The obligations of USFloral under
this Section 11.6 may be waived at any time upon the written consent of Holders
of a majority-in-interest of the Registrable Shares and shall expire as to each
Holder immediately upon all of such Holder's Registrable Shares being capable of
sale within a three-month period in accordance with the volume and manner-of-
sale limitations of Rule 144 under the 1933 Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by Stockholders. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, each Stockholder, jointly and severally,
covenants and agrees that such Stockholder will indemnify, defend, protect and
hold harmless USFloral, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement until the
Expiration Date (as defined in Section 12.6) from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by USFloral, Newco or
the Surviving Corporation as a result of or arising from (i) any breach of the
representations and warranties made by the Stockholders set forth herein or on
the schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of Stockholders or the Company under
this Agreement or (iii) any liability under the 1933 Act, the Exchange Act or
other Federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to the Company or the Stockholders, and provided to
USFloral or its counsel by the Company or the Stockholders, contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
relating to the Company or the Stockholders required to be stated therein or
necessary to make the statements therein not misleading, and not provided to
USFloral or its counsel by the Company or the Stockholders, provided, however,
that such indemnity shall not inure to the benefit of
30
USFloral, Newco and the Surviving Corporation to the extent that such untrue
statement (or alleged untrue statement) was made in, or omission (or alleged
omission) occurred in, any preliminary prospectus and the Stockholders provided,
in writing, corrected information to USFloral for inclusion in the final
prospectus, and such information was not so included.
12.2 Specific Indemnification by the Stockholders. Subject to the
--------------------------------------------
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the Schedules or Exhibits hereto, and
notwithstanding any investigation by USFloral or Newco, the Stockholders
covenant and agree that they will indemnify, defend, protect and hold harmless
USFloral, Newco and the Surviving Corporation and their respective officers,
stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, costs and
expenses whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by USFloral, Newco or
the Surviving Corporation as a result of or incident to: (a) the existence of
liabilities of the Company in excess of the liabilities set forth on Schedule
6.10, but only to the extent of such excess, with the parties acknowledging and
agreeing that (i) the existence of liabilities (such as accounts payable) of the
Company on the Merger Effective Date that are different (but not in the
aggregate greater) than the liabilities of the Company set forth on Schedule
6.10 on the date hereof shall not give rise to any obligations of the
Stockholder under the provisions of this Section 12 and (ii) the existence of
liabilities that arise in the ordinary course of business of the Company that do
not arise as a result of a breach by the Stockholders of any of their
obligations set forth in Sections 8.2 or 8.3 hereof shall not give rise to any
obligations of the Stockholders under the provisions of this Section 12; and (b)
all liability resulting from the litigation matters listed on Schedule 6.20.
12.3 Indemnification by USFloral and Newco. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFloral and Newco, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
the Stockholders at all times from and after the date of this Agreement from and
against all claims, damages actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
Stockholders as a result of or arising from (i) any breach of the
representations and warranties made by USFloral and Newco set forth herein or on
the schedules or certificates attached hereto, (ii) any nonfulfillment of any
agreement on the part of USFloral under this Agreement, (iii) any liabilities
which the Stockholders may incur due to USFloral's failure to be responsible for
the liabilities and obligations of any Surviving Corporation as provided in
Section 1.5 hereof (except to the extent that USFloral has claims against the
Stockholders by reason of such liabilities); or (iv) any liability under the
1933 Act, the Exchange Act or other Federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to USFloral contained in
any preliminary prospectus, the Registration Statement or any prospectus forming
a part thereof, or any amendment thereof or supplement thereto, or arising out
of or based
31
upon any omission or alleged omission to state therein a material fact relating
to USFloral required to be stated therein or necessary to make the statements
therein not misleading.
12.4 Third Person Claims. Promptly after any party hereto (the "Indemnified
-------------------
Party") has received notice of or has knowledge of any claim by a person not a
party to this Agreement (a "Third Person") or the commencement of any action or
proceeding by a Third Person, the Indemnified Party shall, as a condition
precedent to a claim with respect thereto being made against any party obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (the
"Indemnifying Party"), give the Indemnifying Party written notice of such claim
or the commencement of such action or proceeding. Such notice shall state the
nature and the basis of such claim and a reasonable estimate of the amount
thereof. The Indemnifying Party shall have the right to defend and settle, at
its own expense and by its own counsel, any such matter so long as the
Indemnifying Party pursues the same in good faith and diligently. If the
Indemnifying Party undertakes to defend or settle, it shall promptly notify the
Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. Notwithstanding the foregoing, the
Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel); provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and out-of-
pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section 12 with respect to such Third Person claim shall be limited
to the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the Indemnified
Party may settle such matter, and the Indemnifying Party shall reimburse the
Indemnified Party for the amount paid in such settlement and any other
liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim
32
without the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld.
12.5 Limitations on Indemnification. No Indemnified Party shall assert any
------------------------------
claim (other than a Third Person claim) for indemnification hereunder until such
time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall exceed an amount equal to 2% of the sum of
(i) $1,600,000 and (ii) 160,000 times the price at which shares of USFloral
Stock are sold to the public in the IPO, at which time, an Indemnified Party
shall be entitled to seek indemnification for all claims not previously asserted
pursuant to this Section. For purposes of the preceding sentence, USFloral,
Newco and the Surviving Corporation shall be considered to be a single
Indemnifying and Indemnified Party and the Stockholders shall be considered to
be a single Indemnifying and Indemnified Party. "Excess Net Worth" shall mean
the amount, if any, by which the aggregate shareholder's equity as shown on the
Closing Date Balance Sheet is greater than the aggregate shareholders' equity as
shown on the December 31 Balance Sheet. All indemnification obligations of the
Stockholder with respect to unpaid accounts receivable pursuant to Section 6.11
hereof shall be reduced by the amount of any Excess Net Worth (but only to the
extent such Excess Net Worth has not previously been utilized to reduce an
indemnification obligation under this sentence). Notwithstanding any other term
of this Agreement, in no event shall any Stockholder be liable under this
Section 12 for an amount which exceeds the aggregate value (determined at the
Merger Effective Date) of the consideration received by such Stockholder under
this Agreement.
12.6 Survival of Representations and Warranties. The parties agree that the
------------------------------------------
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of twelve (12) months from the Merger Effective Date (which
date is hereinafter called the "Expiration Date"), except that (i) the
representations and warranties contained in Section 6.21 hereof shall survive
until such time as the limitations period has run for all tax periods ended
prior to the Merger Effective Date, which shall be deemed to be the Expiration
Date for purposes of this clause (i), (ii) the representations and warranties
contained in Sections 6.26 and 6.27 hereof shall survive for a period of three
years from the Merger Effective Date, which shall be deemed the Expiration Date
for purposes of this clause (ii), (iii) solely for purposes of Section 12.1(iii)
hereof, and solely to the extent that USFloral actually incurs liability under
the 1933 Act, the Exchange Act, or any other Federal or state securities laws,
the representations and warranties set forth herein shall survive for a period
of three years from the Merger Effective Date, which shall be deemed to be the
Expiration Date for purposes of this clause (iii) and (iv) any representations
and warranties which serve as a basis of the indemnity obligations of
Stockholders under Section 12.2 shall survive the Merger Effective Date without
time limitation.
12.7 Sole Remedies. The provisions of this Section 12 shall be the exclusive
-------------
basis for assertion of claims against, or the imposition of liability on, the
Stockholders in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or
33
otherwise, except to the extent that any such claim or liability is based on
intentional misstatement, fraud or misrepresentation by the Stockholders.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFloral or Stockholders may, by notice in
--------------------------
the manner hereinafter provided on or before the Closing Date, terminate this
Agreement if (i) a material default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date and shall not reasonably be
expected to occur; (ii) the Registration Statement has not been declared
effective by December 24, 1997; or (iii) the Merger Effective Date has not
occurred by December 31, 1997.
13.2 Termination by USFloral. To the extent that any Schedules required to
-----------------------
be provided by the Company or the Stockholders as of the date of execution of
this Agreement have not been so provided, the Stockholders shall deliver such
Schedules to USFloral within 14 days of the date of this Agreement. USFloral
may terminate this Agreement upon written notice to the Stockholders within 10
days after USFloral's receipt of all of such Schedules.
13.3 Liquidated Damages to USFloral. If the Stockholders terminate this
------------------------------
Agreement after the satisfaction of the conditions set forth in Article 9 or if
the merger fails to occur because of the default of the Company or the
Stockholders, then, in addition to the other remedies available to USFloral at
law, in equity or pursuant to this Agreement, Stockholders shall pay to USFloral
the sum of $500,000 as liquidated damages. It is hereby agreed that USFloral's
damages in the event of a termination or default by Company hereunder are
uncertain and impossible to ascertain and that the foregoing constitutes a
reasonable liquidation of such damages and is intended not as penalty but as
liquidated damages.
13.4 Liquidated Damages to the Stockholders. If USFloral terminates this
--------------------------------------
Agreement after the satisfaction of the conditions set forth in Article 10 or if
the merger fails to occur because of the default of USFloral or Newco, then, in
addition to the other remedies available to USFloral at law, in equity or
pursuant to this Agreement, USFloral shall pay to the Stockholders the sum of
$500,000 as liquidated damages. It is hereby agreed that the Stockholders'
damages in the event of a termination or default by USFloral hereunder are
uncertain and impossible to ascertain and that the foregoing constitutes a
reasonable liquidation of such damages and is intended not as penalty but as
liquidated damages.
14. NONCOMPETITION
14.1 Prohibited Activities. The Stockholders agree that for a period of two
---------------------
years following the Merger Effective Date, they shall not:
34
(i) 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, shipping or marketing of floral products, or any business engaging
in the consolidation of the floral industry within the United States of
America (the "Territory");
(ii) 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;
(iii) 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;
(iv) 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
(v) 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 Stockholders 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, (ii) engaging in
any activity to which USFloral shall have provided its prior written consent, or
(iii) owning or engaging in the business of Jeffco, as presently conducted.
14.2 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 Stockholders 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.
14.3 Reasonable Restraint. It is agreed by the parties that the foregoing
--------------------
covenants in this Section 14 impose a reasonable restraint on the Stockholders
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).
35
14.4 Severability; Reformation. The covenants in this Section 14 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.
14.5 Independent Covenant. All of the covenants in this Section 14 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 Stockholders 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 Stockholder is in violation of any provision of this Section 14 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
Stockholders 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 Stockholder 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.
14.6 Materiality. The Stockholders hereby agree that this covenant is a
-----------
material and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Stockholders. The Stockholders 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 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 Stockholders
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 such
information becomes known to the public generally through no fault of the
Stockholders. In the event of a breach or threatened breach by the Stockholders
of the provisions of this Section, USFloral and the Surviving Corporation shall
be entitled to an injunction restraining the Stockholders 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.
15.2 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
36
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 Stockholders. In the event of a breach or threatened
breach by USFloral of the provisions of this Section, the Stockholders shall be
entitled to an injunction restraining USFloral from disclosing, in whole or in
part, such confidential information. Nothing contained herein shall be
construed as prohibiting the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.3 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 Stockholders 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.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, the
Stockholders hereby irrevocably agree that for a period of 180 days after the
date of the effectiveness of the Registration Statement, as the same may be
amended, not to (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of (except as
contemplated in Section 4.2 hereof), directly or indirectly, any shares of
USFloral Stock or any securities convertible into or exercisable or exchangeable
for shares of USFloral Stock, or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the USFloral Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of USFloral Stock or such
other securities, in cash or otherwise without the prior written consent of the
underwriters in the IPO. The Stockholders agree that the foregoing shall be
binding upon the Stockholders' transferees, successors, assigns, heirs, and
personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. In furtherance of the foregoing, USFloral and its
transfer agent are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Article 16.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The Stockholders acknowledge and agree that the shares of USFloral Stock to be
delivered to the Stockholders pursuant to this Agreement have not been and will
not be registered under the 1933 Act and therefore may not be resold without
compliance with the 1933 Act. The Stockholders represent and warrant that the
USFloral Stock to be acquired by the Stockholders pursuant to this Agreement is
being acquired solely for their own account, for investment purposes only, and
with
37
no present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
17.1 Compliance with Law. The Stockholders covenant, warrant and represent
-------------------
that none of the shares of USFloral Stock issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC.
17.2 Economic Risk; Sophistication. The Stockholders represent and warrant
-----------------------------
that they are able to bear the economic risk of an investment in the USFloral
Stock acquired pursuant to this Agreement and can afford to sustain a total loss
of such investment. The Stockholders further represent and warrant that they
(i) fully understand the nature, scope and duration of the limitations on
transfer contained in this Agreement and (ii) have such knowledge and experience
in financial and business matters that they are capable of evaluating the merits
and risks of the proposed investment and therefore have the capacity to protect
their own interests in connection with the acquisition of the USFloral Stock.
The Stockholders represent and warrant that they have had an adequate
opportunity to ask questions and receive answers from the officers of USFloral
concerning any and all matters relating to the acquisition of USFloral Stock as
contemplated by this Agreement including, without limitation, the background and
experience of the officers and directors of USFloral, the plans for the
operations of the business of USFloral, and any plans for additional
acquisitions and the like. The Stockholders have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction.
17.3 Registration Statement. Each Stockholder has received the prospectus
----------------------
included in the draft Registration Statement delivered to him or her on or about
August 2, 1997 that describes, among other things, the Merger, the other
acquisitions proposed to be undertaken by USFloral and the target companies of
the other acquisitions. Each Stockholder has had an adequate opportunity to ask
questions and receive answers to his or her satisfaction from the officers of
USFloral concerning the business, operations and financial condition of
USFloral.
18. SECURITIES LEGENDS
The certificates evidencing the USFloral Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as USFloral may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
38
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
1933 ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS, UNLESS, IN THE OPINION
(WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO USFLORAL) OF COUNSEL
SATISFACTORY TO USFLORAL, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear such other legends as counsel for
USFloral reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 Cooperation. Stockholders 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 additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
Stockholders will cooperate and use their best efforts to have the present
officers, directors and employees of Company cooperate with USFloral on and
after the Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
19.2 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 Stockholders.
19.3 Entire Agreement. This Agreement (including the schedules, exhibits and
----------------
annexes attached hereto) and the documents delivered pursuant hereto constitute
the entire agreement and understanding between the Stockholders, the Company,
USFloral and Newco and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon execution,
constitutes the valid and binding agreement of the parties thereto enforceable
in accordance with its terms and may be modified or amended only by a written
instrument executed by the Stockholders, the Company, USFloral, and Newco acting
through their respective officers, duly authorized by their respective Boards of
Directors.
19.4 Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19.5 Brokers and Agents. Each party represents and warrants that it employed
------------------
no broker or agent in connection with this transaction and agrees to indemnify
the other against all loss,
39
cost, damages or expense arising out of claims for fees or commissions of
brokers employed or alleged to have been employed by such indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall be
--------
consummated, USFloral will pay the fees, expenses and disbursements of USFloral
and Newco and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto.
Whether or not the transactions herein contemplated shall be consummated, the
Company will pay the fees, expenses and disbursements of the Company and the
Stockholders and their agents, representatives, accountants and counsel incurred
in connection with the subject matter of this Agreement and any amendments
hereto and all other costs and expenses incurred in the performance and
compliance with all conditions to be performed by the Stockholders and Company
under this Agreement.
19.7 Notices. All notices of communication required or permitted hereunder
-------
shall be in writing and shall be given by overnight courier service, or by
delivering the same in person to an officer or agent of such party.
(a) If to USFloral or Newco, addressed to them at:
U.S.A. Floral Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) If to Stockholders, addressed to them at:
____________________________________
____________________________________
19.8 Governing Law. This Agreement shall be construed in accordance with the
-------------
laws of the State of Delaware.
19.9 Exercise of Rights and Remedies. Except as otherwise provided herein, no
-------------------------------
delay of or omission in the exercise of any right, power or remedy accruing to
any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
40
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 Time. Time is of the essence with respect to this Agreement.
----
19.11 Reformation and Severability. In case any provision of this Agreement
----------------------------
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
19.12 Remedies Cumulative. No right, remedy or election given by any term of
-------------------
this Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
19.13 Captions. The headings of this Agreement are inserted for convenience
--------
only and shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFloral"
U.S.A. FLORAL PRODUCTS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President/CEO
"Newco"
AGFS ACQUISITION CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
41
"Company"
ALPINE GEM FLOWER SHIPPERS, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
"Stockholders"
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇
---------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇-▇▇▇▇▇▇
42
ANNEXES
ANNEX I [Form of Articles of Merger]
ANNEX II [Consideration]
ANNEX III [Form of Employment Agreements]
ANNEX IV [Form of Lease Agreement]