EXHIBIT 10.07
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
AFS ACQUISITION CORP.
(a Delaware corporation),
AMERICAN FLORIST SUPPLY, INC.
(a Massachusetts corporation),
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Dated as of August 5, 1997
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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 Organization, 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
2. CONVERSION AND EXCHANGE OF STOCK...................................... 4
2.1 Manner of Conversion............................................ 4
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION....................... 4
3.1 Consideration................................................... 4
3.2 Delivery of Company Stock....................................... 5
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES............................. 5
4.1 Determination of Net Worth Deficiencies......................... 5
4.2 Priority of Payment from Indemnity Escrow....................... 6
5. CLOSING; MERGER EFFECTIVE DATE........................................ 6
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER......................... 7
6.1 Due Organization................................................ 7
6.2 Authorization................................................... 7
6.3 Capital Stock of the Company.................................... 7
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 the Company......................................... 8
6.9 Financial Statements............................................ 8
6.10 Liabilities and Obligations..................................... 9
6.11 Accounts and Notes Receivable................................... 9
6.12 Permits and Intangibles......................................... 9
6.13 Real and Personal Property...................................... 10
6.14 Material Contracts and Commitments.............................. 10
6.15 Title to Real Property.......................................... 11
6.16 Insurance....................................................... 11
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6.17 Officers, Directors and Employees Compensation.................. 11
6.18 Employee Plans.................................................. 11
6.19 Compliance with ERISA........................................... 12
6.20 Conformity with Law............................................. 14
6.21 Taxes........................................................... 14
6.22 Completeness; No Violations..................................... 14
6.23 Government Contracts............................................ 15
6.24 Absence of Changes.............................................. 15
6.25 Deposit Accounts; Powers of Attorney............................ 16
6.26 Environmental Matters........................................... 16
6.27 Underground Storage Tanks....................................... 17
6.28 Validity of Obligations......................................... 17
6.29 Relations with Governments...................................... 17
6.30 Disclosure...................................................... 17
6.31 Authority; Ownership............................................ 18
7. REPRESENTATIONS OF USFLORAL AND NEWCO................................. 18
7.1 Due Organization................................................ 18
7.2 USFloral Stock.................................................. 18
7.3 Authorization................................................... 19
7.4 No Conflicts.................................................... 19
7.5 Validity of Obligations......................................... 19
7.6 Other Agreements................................................ 19
8. COVENANTS OF STOCKHOLDER AND COMPANY PRIOR TO CLOSING................. 20
8.1 Access and Cooperation........................................... 20
8.2 Conduct of Business.............................................. 20
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 THE STOCKHOLDER................ 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
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO....... 25
10.1 Representations and Warranties; Performance of Obligations...... 25
10.2 No Litigation................................................... 25
10.3 Examination of Financial Statements............................. 25
10.4 No Material Adverse Change...................................... 26
10.5 Regulatory Review............................................... 26
10.6 Stockholder Release............................................. 26
10.7 Employment Agreement............................................ 26
10.8 Opinion of Counsel.............................................. 26
10.9 Consents and Approvals.......................................... 26
10.10 Additional Liabilities and Obligations.......................... 27
10.11 Additional Contracts............................................ 27
10.12 Good Standing Certificates...................................... 27
10.13 Registration Statement.......................................... 27
10.14 Repayment of Indebtedness....................................... 27
10.15 Annual Adjusted Operating Income................................ 27
10.16 Board of Directors and Stockholder Approval..................... 27
11. COVENANTS OF USFLORAL................................................. 27
11.1 Registration Statement.......................................... 27
11.2 USFloral Stock Options.......................................... 27
11.3 Release From Guarantees......................................... 28
11.4 Piggy-Back Registrations........................................ 28
11.5 Compliance with the 1934 Act.................................... 29
11.6 Certain Transactions............................................ 29
11.7 Earn-Out Consideration.......................................... 29
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES........... 30
12.1 General Indemnification by the Stockholder..................... 30
12.2 Specific Indemnification by the Stockholder.................... 31
12.3 Indemnification by USFloral and Newco.......................... 31
12.4 Third Person Claims............................................ 32
12.5 Limitations on Indemnification................................. 33
12.6 Survival of Representations and Warranties..................... 33
12.7 Sole Remedies.................................................. 34
13. TERMINATION OF AGREEMENT............................................. 34
13.1 Termination by the Parties..................................... 34
13.2 Termination by USFloral........................................ 34
13.3 Liquidated Damages to USFloral................................. 34
13.4 Liquidated Damages to the Stockholder.......................... 34
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14. NONCOMPETITION........................................................ 35
14.1 Prohibited Activities........................................... 35
14.2 Damages......................................................... 36
14.3 Reasonable Restraint............................................ 36
14.4 Severability; Reformation....................................... 36
14.5 Independent Covenant............................................ 36
14.6 Materiality..................................................... 36
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................. 36
15.1 Stockholder..................................................... 36
15.2 USFloral........................................................ 37
15.3 Both Parties.................................................... 37
15.4 Damages......................................................... 37
16. LOCK-UP AGREEMENTS.................................................... 37
17. 1933 ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK............... 38
17.1 Compliance with Law............................................. 38
17.2 Economic Risk; Sophistication................................... 38
18. SECURITIES LEGENDS.................................................... 39
19. GENERAL............................................................... 39
19.1 Cooperation..................................................... 39
19.2 Successors and Assigns.......................................... 40
19.3 Entire Agreement................................................ 40
19.4 Counterparts.................................................... 40
19.5 Brokers and Agents.............................................. 40
19.6 Expenses........................................................ 40
19.7 Notices......................................................... 40
19.8 Governing Law................................................... 41
19.9 Exercise of Rights and Remedies................................. 41
19.10 Time............................................................ 41
19.11 Reformation and Severability.................................... 41
19.12 Remedies Cumulative............................................. 42
19.13 Captions........................................................ 42
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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, among U.S.A. FLORAL
PRODUCTS, INC., a Delaware corporation ("USFloral"); AFS ACQUISITION CORP., a
Delaware corporation ("Newco"); AMERICAN FLORIST SUPPLY, INC., a Massachusetts
corporation (the "Company") and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (the "Stockholder"), who is
the sole stockholder 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 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"), pursuant to the Securities Act of 1933, as
amended (the "1933 Act") with the Securities and Exchange Commission (the
"SEC") within 30 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 14, 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 Commonwealth of Massachusetts; 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 the Company, such transaction 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; and
WHEREAS, the parties hereto entered into that certain Agreement and
Plan of Contribution on July 30, 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
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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 each 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
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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 Organization, Bylaws and Board of Directors of Surviving
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Corporation. At the Merger Effective Date:
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(i) the Articles of Organization of the Company shall become
the Articles of Organization 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 Organization
shall be the Articles of Organization 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 there after 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 Organization and Bylaws of the 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,
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subject to the provisions of the Articles of Organization and Bylaws
of Surviving Corporation, until his successor is elected and
qualified.
1.4 Certain Information with Respect to the Capital Stock of the Company
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and Newco. The designation and number of outstanding shares and voting rights of
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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 5,000
shares of common stock, no par value (the "Company Stock"), of which
1,000 shares are issued and outstanding and all of which are owned,
beneficially and of record, by the Stockholder; 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
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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 and Newco shall be taken and deemed to be transferred to, and vested
in, the respective 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 each 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 and 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 each 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.
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2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of the
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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 the right to receive cash from
USFloral in the amount set forth on Annex II attached hereto and the
Earn Out Consideration pursuant to Section 11.7 hereof, all to be
distributed to the Stockholder at the times specified in Section 5 and
Section 11.7 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 Stockholder 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 Stockholder and the Stockholder
is 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.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 Consideration At the Merger Effective Date, the Stockholder, as the
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holder of all outstanding certificates representing shares of Company Stock
shall, upon surrender of such certificates, be entitled to receive the amount of
cash set forth on Annex II and the Earn-Out Consideration pursuant to Section
11.7 hereof; provided, that $240,000 of the amount of cash set forth on Annex II
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(the "Holdback Amount") shall be delivered by USFloral by wire transfer of
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immediately available funds to a third-party escrow agent reasonably acceptable
to NEWCO (the "Escrow Agent") under an escrow agreement to be entered into on
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the Closing Date by the Stockholder, the Company, USFloral and the Escrow Agent
(the "Escrow Agreement") upon such terms as are reasonably acceptable to the
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Stockholder, the Company and USFloral, which
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terms shall include the right of the Stockholder to buy USFloral Stock from the
Securities Escrow (as defined in Section 11.7) for cash of an equal value and
to satisfy his obligations under the Escrow Agreement with the payment of cash
instead of with USFloral Stock, in the Stockholder's sole discretion. The
Escrow Agreement shall provide for an 12-month escrow of the Holdback Amount
(the "Indemnity Escrow") as security for the indemnification obligation of
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Stockholder pursuant to Section 12 hereof and the payment of amounts pursuant to
Section 4.1 hereof. Pursuant to Section 11.7, the Escrow Agent shall also hold
in a Securities Escrow, as defined, 240,000 shares of USFloral Stock a
percentage of which shall be put into the Indemnity Escrow, as set forth in
Section 11.7.
3.2 Delivery of Company Stock. The Stockholder shall deliver at the
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Closing (as defined in Section 5 hereof) the certificates representing the
shares of Company Stock, duly endorsed in blank by the Stockholder 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 Stockholder's expense, affixed and canceled. The Stockholder agrees 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 Determination of Net Worth Deficiencies. As soon as practicable,
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but in any event within 30 days after the Closing, USFloral shall engage Price
Waterhouse LLP ("Price Waterhouse") to prepare, in accordance with GAAP, applied
on a consistent basis with the basis used by Price Waterhouse in preparing and
auditing financial statements of the Company as of December 31, 1995 and 1996, 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. The parties acknowledge and agree
that the Closing Date Balance Sheet shall be prepared without taking into
account (i) expenses associated with fully funding and removing ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇'▇ deferred compensation plan as outlined in Schedule 6.17 (estimated to
be approximately $30,000) and (ii) the transfer by the Company to ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ of two life insurance policies currently reflected on the Company's
balance sheet within other assets (with an estimated value of $43,000 at
12/31/96) and his educational fund included on the Company's balance sheet
(approximately $27,000 at 12/31/96).
Within five days of the preparation of the Closing Date Balance Sheet,
Price Waterhouse shall deliver a copy to the Stockholder. If the aggregate
shareholders' equity as shown on the Closing Date Balance Sheet is less than the
aggregate shareholders' equity as shown on the Balance Sheet as at December 31,
1996 (such difference, the "Net Worth Deficiency"), the Stockholder shall remit
to USFloral an amount equal to the Net Worth Deficiency, as provided below.
Notwithstanding anything in this Article 4 to the contrary, if there is any Net
Worth Deficiency and the Stockholder disputes any item contained on the Closing
Date Balance Sheet, the Stockholder shall notify USFloral in writing of each
disputed item (collectively, the
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"Disputed Amounts"), and specify the amount thereof in dispute within thirty
business days after the delivery of the Closing Date Balance Sheet to the
Stockholder. If the Stockholder does 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 Stockholder shall pay USFloral
by wire transfer of immediately available funds, an amount equal to the Net
Worth Deficiency. If USFloral and the Stockholder 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 Stockholder
(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 Stockholder so that the Stockholder's aggregate share of such
costs shall bear the same proportion to the total costs that the Disputed
Amounts unsuccessfully contested by the Stockholder (as finally determined by
the Independent Accounting Firm) bear to the total of the Disputed Amounts so
submitted to the Independent Accounting Firm.
4.2 Priority of Payment from Indemnity Escrow. Any indemnification
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obligations of the Stockholder pursuant to Sections 12.1 and 12.2 hereof and
amounts payable pursuant to Section 4.1 hereof shall be satisfied (i) prior to
the payment of the Earn-Out Consideration, first through recourse to the
Holdback Amount and then through recourse to the Securities Escrow, and (ii)
after the payment of the Earn-Out Consideration in accordance with Section 11.7,
first through recourse to the Securities Escrow (valued for such purposes on the
date the indemnification obligation is paid pursuant to Section 12 or ten days
after USFloral notifies the Stockholder of the Net Worth Deficiency pursuant to
Section 4.1) and then to the Holdback Amount, if any, remaining in the Indemnity
Escrow.
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 with the appropriate state authorities of the Articles of
Merger 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 be taken only 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, the Articles of
Merger shall be filed with the appropriate
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state authorities and the Articles of Merger and 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 Stockholder 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 IPO 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 STOCKHOLDER
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, the Stockholder represents and warrants as follows.
6.1 Due Organization. The Company is a corporation duly organized,
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validly existing and in good standing under the laws of Massachusetts 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 adverse effect on the business, operations, properties,
assets or condition, (financial or otherwise) (a "Material Adverse Effect") on
the Company taken as a whole. True, complete and correct copies of the Articles
of Organization (certified by the Secretary of State of Massachusetts) and
Bylaws (certified by the Secretary of the Company) have heretofore been
delivered to USFloral. The stock records and minute books of the Company, as
heretofore made available to USFloral, are correct and complete.
6.2 Authorization. Upon the approval of this Agreement by the
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Stockholder, the Company has the full legal right, power and authority to enter
into this Agreement and has 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 the Company. The authorized capital stock of the
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Company consists solely of the shares as shown on Schedule 6.3, of which the
shares issued and outstanding are shown. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholder 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 Stockholder. Further, such shares were offered, issued, sold and
delivered by the Company in compliance with
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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
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treasury stock. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any of its authorized but
unissued capital stock. Except as set forth on Schedule 6.4, 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. Except as set forth on Schedule 6.5, none of the
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shares of the Company Stock was issued pursuant to awards, grants or bonuses.
6.6 Subsidiaries. The Company does not presently own, of record or
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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. 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
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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 has never been a subsidiary or
division of another corporation nor been a part of an acquisition which was
later rescinded.
6.8 Spin-off by the Company. Since the Balance Sheet Date there has not
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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
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the following audited financial statements (the "Financial Statements") of the
Company: The Company's 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 Balance Sheet
as of each of March 31, 1997 and 1996, (March 31, 1997 being hereinafter
referred to as the "Balance Sheet Date") and Statements of Incomes, Cash Flows
and Retained Earnings for the three (3) 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.
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6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
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accurate list, as of the Balance Sheet Date, of all material liabilities of the
Company, which are reflected in the March 31, 1997 Balance Sheet and any
significant liabilities incurred thereafter in the ordinary course of business,
or material liabilities which are not reflected in the March 31, 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 Stockholder has 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;
(iv) a best estimate by the Company of the maximum amount, if any,
which is likely to become payable with respect to each such liability
(exclusive of defense costs). If no estimate is provided, the Company's
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 date hereof of the accounts and notes receivable of
the Company, including receivables from and advances to employees and the
Stockholder, including any such amounts which are not reflected in the most
recent available balance sheet. The Stockholder 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 date hereof, 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,
9
franchises, etc. are adequate for the operation of the Company business as
presently constituted. Except as set forth on Schedule 6.12, the Stockholder has
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 personal property, which had an original cost in excess
of $25,000, owned or leased by the Company and true and correct copies of leases
for equipment and real 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
Stockholder or affiliates (which term, as used herein, shall have the meaning
ascribed thereto in Rule 144(a)(1) under the ▇▇▇▇ ▇▇▇) 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 Stockholder, 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
Stockholder has heretofore delivered to USFloral copies of all title reports and
title insurance policies received or held by the Company. The Stockholder has
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 date hereof, of all material contracts,
commitments and similar agreements to which the Company is a party or by which
the Company or any of 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 Stockholder has
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
10
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 its 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 Stockholder's knowledge, is any
organization campaign to establish such representation in progress. There is no
pending or, to the best of Stockholder's 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 owns no real property. The
----------------------
property listed on Schedule 6.13 includes all interests in real property
necessary to conduct the business and operations of the Company. None of the
leases set forth on Schedule 6.13 requires the consent or approval of any party
thereto in connection with the consummation of the transactions contemplated
hereby, except for the consents listed on Schedule 6.15 hereto, which shall have
been obtained prior to the Merger Effective Date.
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list,
---------
as of the date hereof, 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 Stockholder has 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 Stockholder's 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
Stockholder has 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 date hereof, 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
11
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 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 Stockholder; (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;
12
(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) except as set forth on Schedule 6.19, 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
Stockholder 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 (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 on account of or in respect of any direct or indirect failure by
the Company and the Stockholder, 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 Stockholder 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) except as set forth on Schedule 6.19, there is no pending
litigation, arbitration, or disputed claim, settlement or adjudication
proceeding, and to the Stockholder's 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
13
(ix) the Company has not incurred liability under Section 4062 of
ERISA.
6.20 Conformity with Law. 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;
and there are no claims, actions, suits or proceedings, pending, or to the
Stockholder's 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. Except as set forth on Schedule 6.21,
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. 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 any of them shall have existed, have
heretofore been delivered by Stockholder to USFloral. The Company (as set forth
on Schedule 6.21) made an election to be taxed under the provisions of
Subchapter S of the Internal Revenue Code in 1987 and has, at no time since
1988, been taxed under the provisions of Subchapter C of the Internal Revenue
Code. The Company currently uses 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
---------------------------
Organization 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
Stockholder, 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
14
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;
(iii) except as set forth in Schedule 6.24, 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) except as set forth in Schedule 6.24, 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;
(v) except as set forth in Schedule 6.24, 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,
Stockholder, 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 Stockholder and his affiliates;
15
(viii) except as set forth on Schedule 6.24 hereto, any cancellation,
or agreement to cancel, any indebtedness or other obligation owing to the
Company, including without limitation any indebtedness or obligation of the
Stockholder or any affiliate of the Stockholder;
(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.
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 Stockholder, 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
16
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. Stockholder knows of
no off-site location to which the Company has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and 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. The Company has never owned or leased any
-------------------------
real estate having any underground storage tanks containing 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 noted in Schedule 6.27, the Company from time to time uses (without a formal
lease) certain facilities located on premises adjacent to its leased facilities
that contain two underground storage tanks.
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 by
the Stockholder of the Company, 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 never made, 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
17
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 the Stockholder becomes aware of any fact
or circumstance which would change a representation or warranty of the
Stockholder in this Agreement or any representation made on behalf of the
Company, the Stockholder shall immediately give notice of such fact or
circumstance to USFloral. However, subject to the provisions of Section 8.8
hereof, 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 Stockholder, at the date of this Agreement and at the closing, shall be a
precondition to the consummation of this transaction.
6.31 Authority; Ownership. The Stockholder has the full legal right,
--------------------
power and authority to enter into this Agreement. The Stockholder owns
beneficially and of record all of the shares of Company stock identified on
Annex II as being owned by him. 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 the 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 Newco, jointly and severally, represent and warrant
to the Company and the Stockholder 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, 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 Certificates of
Incorporation (certified by the Secretary of State of the State 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
Stockholder.
7.2 USFloral Stock. The USFloral Stock to be delivered to Stockholder 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 Stockholder 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
18
registration rights that the Stockholder has, 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 conversion of Company
Stock into Newco Stock, pursuant to the provisions of this Agreement will
transfer valid title to USFloral Stock to the Stockholder, 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 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 Stockholder, certain employment
19
agreements with officers of USFloral and those agreements and letters of intent
listed on Schedule 7.6 hereof.
8. COVENANTS OF STOCKHOLDER 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 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 Stockholder 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, facilities and equipment and other
assets in as good working order and condition as at present, ordinary wear
and tear excepted;
(iii) perform all of its material obligations under debt and lease
instruments and other agreements relating to or affecting its assets,
properties, equipment and rights;
(iv) maintain present debt and lease instruments and not enter in new
or amended debt or lease instruments other than in the ordinary course of
business without the knowledge and consent of Newco;
(v) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(vi) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships and present agreements with suppliers, customers and others
having business relations with the Company;
20
(vii) not effect any change in the capital structure of the Company,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the Company's
capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock;
(viii) not materially increase present salaries and commission levels
for any and all officers, directors, employees and agents;
(ix) prohibit expenditures outside the normal course of business,
and prohibit capital expenditures in excess of $25,000 in the aggregate,
without the prior approval of Newco;
(x) maintain compliance in all material respects with all material
permits, rules, laws, and regulations, consent orders and the like, the
failure to comply with which would have a material, adverse effect on the
Company or its business or assets; and
(xi) not, without the knowledge and consent of Newco, declare any
dividends or make any distribution with respect to its stock, whether now
or hereafter outstanding, nor pay out any extraordinary bonuses, fees,
commissions or any other unusual distributions to the Stockholder,
directors, management or other personnel between the date of this Agreement
and the Closing; provided, however, Newco acknowledges that the Company may
pay dividends, bonuses, and other distributions in the ordinary course of
its business not to exceed what is necessary for the Stockholder to pay
taxes and to continue receiving his current salary, consistent with past
practice.
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 Organization or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) purchase, redeem or otherwise acquire or retire for value any
shares of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in excess of $25,000;
(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;
21
(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 and except
as otherwise contemplated by Section 8.2(xi) hereof;
(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.
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 Stockholder, 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
22
(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 Stockholder and the Company
-------------------------------
shall give prompt notice to USFloral of (i) the occurrence or non-occurrence of
any event known to the 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 the 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 or
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
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 Stockholder because he 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 Stockholder). 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.
23
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER
The obligations of the Stockholder hereunder are, at his option, 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
Stockholder.
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 an Employment Agreement, in the form of Annex III attached hereto, to
the Stockholder. In addition, the Surviving Corporation shall execute and
deliver to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ an employment agreement with a two year term
providing for an annual salary of $100,000, an annual bonus to be determined in
accordance with the policies of USFloral and otherwise having term and
conditions reasonably satisfactory to the Surviving Corporation and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇.
9.4 Opinion of Counsel. Stockholder shall have received an opinion from
------------------
counsel for USFloral, dated the Merger Effective Date, in form and substance
satisfactory to the Stockholder, to the effect that:
(i) USFloral and Newco have been duly organized and are validly
existing and in good standing under the laws of the State of Delaware;
(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
24
(iii) the shares of USFloral Stock to be received by the
Stockholder 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 and a registration statement under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). 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
the 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. The
----------------------------------------------------------
Stockholder shall have delivered to USFloral a certificate dated the Merger
Effective Date and signed by him to the effect that all the representations and
warranties of the Stockholder 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 Stockholder 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.
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 its operations from the financial statements originally furnished by
each Company as set forth in Schedule 6.9. In the opinion of Newco's
independent public accountants, the historical financial statements of the
Company must be suitable or
25
adaptable for incorporation in the Registration Statement and other filings of
USFloral with the SEC.
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 Stockholder 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 Stockholder Release. At the Closing, the Stockholder shall have
-------------------
delivered to USFloral an instrument dated the Merger Effective Date releasing
the Company from any and all claims of the Stockholder against the Company.
10.7 Employment Agreement. The Stockholder shall have executed and
--------------------
delivered an Employment Agreement in the form of Annex III attached hereto.
In addition, the Company shall have terminated the employment agreement dated
April 7, 1997 between the Company and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
10.8 Opinion of Counsel. USFloral shall have received an opinion from
------------------
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP, counsel to the Stockholder, dated the Merger
Effective Date, in the form as set forth on Schedule 10.8 hereto.
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.
26
10.10 Additional Liabilities and Obligations. The Stockholder 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 Stockholder 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 Stockholder 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 state 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
-------------------------
Stockholder shall have repaid the Company in full all amounts owing by the
Stockholder.
10.15 Annual Adjusted Operating Income. The Company shall have annual
--------------------------------
adjusted operating income before management bonuses, interest and taxes
(inclusive of add-backs) as of December 31, 1996 as determined by Price
Waterhouse, LLP ("Price Waterhouse") of at least $737,000.
10.16 Board of Directors and Stockholder Approval. The Board of
-------------------------------------------
Directors of the Company and the Stockholder shall have approved the terms and
conditions of this Agreement and the transactions contemplated hereby.
11. COVENANTS OF USFLORAL
11.1 Registration Statement. As soon as practicable following the
----------------------
execution of this Agreement and in any event within 45 days thereafter, USFloral
shall prepare and file with the SEC the Registration Statement.
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 set forth
in Annex II of this Agreement shall be
27
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 1997 Long-Term Incentive Plan (the "Plan").
11.3 Release From Guarantees. Not later than 120 days following the
-----------------------
Merger Effective Date, USFloral shall cause the Stockholder to be released from
any and all guarantees of any indebtedness set forth on Schedule 11.3 that he
personally guaranteed for the benefit of the Company, with all such guarantees
on indebtedness being assumed by USFloral; provided, that, in 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.
11.4 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
Securities Act of 1933, as amended (the "Securities Act") (other than on Form
S-8 or Form S-4 or their then equivalents relating to shares of Common Stock to
be issued solely in connection with any acquisition of any entity or business
or shares of Common 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 the Company), 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 "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 the
-------- -------
Company 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 the Company or by shareholders who do not have contractual, incidental rights
to include such securities. Except as provided in the previous sentence of this
Section 11.4, any exclusion of Registrable Shares shall be made pro rata among
--- ----
all holders of USFloral stock having registration rights seeking to include such
shares, in proportion to the number of such shares sought to be included by such
Holders. The obligations of the Company under this Section 11.4 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
28
of sale within a three-month period in accordance with the volume and manner-of-
sale limitations of Rule 144 under the Securities Act.
11.5 Compliance with the ▇▇▇▇ ▇▇▇. 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 1933 Act
or any successor rule hereafter promulgated by the SEC ("Rule 144") and (ii)
file with the SEC in a timely manner all reports and other documents required of
USFloral under the 1933 Act and the 1934 Act.
11.6 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 for purposes of Section 351 of the Internal Revenue Code. 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.
11.7 Earn-Out Consideration. (a) If the EBIT (inclusive of the add backs
----------------------
set forth on Schedule 11.7 for the Surviving Corporation's fiscal year ending
December 31, 1997 is equal to or exceeds $800,000 (as determined consistent with
past practice), USFloral shall pay to the Stockholder additional consideration
in the amount of $6.00 for each $1.00 of EBIT achieved in excess of $800,000 for
the year ended December 31, 1997 ("Earn-Out Consideration"), subject to a
maximum of $2,400,000 in total Earn-Out Consideration. The Earn-Out
Consideration shall be paid in USFloral Stock.
(b) 240,000 shares of USFloral Stock, representing the maximum Earn-Out
Consideration (assuming an IPO price of $10 per share), shall be issued in the
name of the Stockholder at Closing and shall be held in escrow (the "Securities
Escrow") by ▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP, as securities escrow agent ("Securities
Escrow Agent"). Promptly following the date on which the Surviving
Corporation's EBIT for its fiscal year ended December 31, 1997 is finally
determined by Price Waterhouse (USFloral hereby agreeing that it shall cause
Price Waterhouse to commence determining the same promptly and with all due
diligence and will in all events cause it to be determined by June 30, 1998),
the Securities Escrow Agent shall deliver to the Stockholder out of the
Securities Escrow such number of shares of USFloral Stock equal to the portion
of the Earn-Out Consideration that the Stockholder is entitled to receive in
USFloral Stock ("Earn-Out Securities"), with the remainder being delivered to
USFloral for cancellation. If the average closing price of the USFloral Stock
on the ten trading days prior to December 31, 1997 is less than is necessary so
that, when multiplied by 240,000, such price produces an amount less than the
portion of the Earn-Out Consideration that the Stockholder is entitled to
receive in USFloral Stock, USFloral shall deliver to the Stockholder, in its
sole discretion, (i) such additional number of shares of USFloral Stock, (ii)
such additional amount of
29
cash or (iii) such combination of shares of USFloral Stock and cash as necessary
to make up the difference. Furthermore, in the event that USFloral enters into
a transaction for the sale of USFloral or the Company (or enters into an
alternative type transaction to a sale that otherwise makes performance by the
Company impossible) prior to December 31,1997, which transaction makes it
impossible for the Company to earn the maximum Earn-Out Consideration, then, (i)
any Earn-Out Consideration actually earned shall be paid to the Stockholder, and
(ii) if the Stockholder can reasonably demonstrate to the Board of Directors of
USFloral that its EBIT was on a pace to meet the maximum Earn-Out Consideration,
then he shall be paid the maximum Earn-Out Consideration. Provided further,
that if at any time prior to December 31, 1997, the Stockholder is terminated
without cause under that certain Employment Agreement of even date herewith, the
maximum Earn-Out Consideration shall be paid to the Stockholder. Notwithstanding
the foregoing, at the time any Earn-Out Securities are delivered by the
Securities Escrow Agent to the Stockholder out of the Securities Escrow, the
Securities Escrow Agent shall retain and place into the Indemnity Escrow that
number of Earn-Out Securities equal in value to 10% of the total Consideration
paid to the Stockholder hereunder as collateral pursuant to Section 4.2 for the
indemnification obligation of the Stockholder pursuant to Section 12 hereof and
the payment of amounts under Section 4.1 hereof (or, in the discretion of the
Stockholder, by the payment of an equal amount of cash), and, if securities are
so escrowed, any cash remaining in the Indemnity Escrow Account at such time
shall be released.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by the Stockholder. Subject to the
------------------------------------------
limitations contained in Section 12.5 hereof, the Stockholder, covenants and
agrees that he 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 Stockholder set forth herein
or on the schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of the Stockholder or the Company
under this Agreement or (iii) any liability under the 1933 Act, the 1934 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 Stockholder, and provided to
USFloral or its counsel by the Company or the Stockholder, 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 Stockholder required to be stated therein or
necessary to make the statements therein not misleading, and not
30
provided to USFloral or its counsel by the Company or the Stockholder,
provided, however, that such indemnity shall not inure to the benefit of
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 Stockholder 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 Stockholder. 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 Stockholder,
covenants and agrees that he 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 (i) that 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 Stockholder of any of his obligations
set forth in Sections 8.2 or 8.3 hereof shall not give rise to any obligations
of the Stockholder 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 Stockholder 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
Stockholder 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, including, without limitation, the
agreement set forth in Section 11.3 hereof, (iii) any liabilities which the
Stockholder may incur due to USFloral's failure to be responsible for the
liabilities and obligations of the Surviving Corporation as provided in Section
1.5 hereof (except to the extent that USFloral has claims against Stockholder 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
31
material fact relating to USFloral (including any entities proposed to be
acquired, directly or indirectly, by USFloral other than the Company (the "Other
Targets")) 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 USFloral (including the Other Targets)
required to be stated therein or necessary to make the statements therein not
misleading.
12.4 Third Person Claims. Promptly after any party hereto (hereinafter
-------------------
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 (hereinafter 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 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
32
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 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 (i) $96,000 prior to the payment of
the Earn-Out Consideration, or (ii) after the payment of the Earn-Out
Consideration, an amount equal to 2% of the sum of $4,800,000 and the Earn-Out
Consideration, 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 Stockholder 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 shareholder's 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 the Stockholder be liable under this Section 12 for an amount which
exceeds the aggregate value of the consideration received by such Stockholder
under this Agreement.
12.6 Survival of Representations and Warranties. The parties agree that
------------------------------------------
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 1934 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 the
Stockholder under Section 12.2 shall survive the Merger Effective Date without
time limitation.
33
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 Stockholder in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the Stockholder.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFloral or the Stockholder may, by
--------------------------
notice in the manner hereinafter provided on or before the Closing Date,
terminate this Agreement (i) if 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) if the Registration Statement has not been
declared effective by December 24, 1997; or (iii) if the Closing has not
occurred by December 31, 1997. Upon any such termination, each party shall
return to the other party all Confidential Information (as set forth in Section
15.1) provided to such party, including, without limitation, all Schedules
provided by the Company and/or the Stockholder to USFloral.
13.2 Termination by USFloral. To the extent that any Schedules required
-----------------------
to be provided by the Company or the Stockholder as of the date of execution of
this Agreement have not been so provided, the Stockholder 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 Stockholder within 10 days
after USFloral's receipt of all such Schedules, and each party shall return to
the other party all Confidential Information (as set forth in Section 15.1)
provided to such party, including, without limitation, all Schedules provided by
the Company and/or the Stockholder to USFloral.
13.3 Liquidated Damages to USFloral. If the Stockholder terminates 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
Stockholder, then, in addition to the other remedies available to USFloral at
law, in equity or pursuant to this Agreement, Stockholder 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 Stockholder. 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 the Company and the Stockholder at
law, in equity or pursuant to this Agreement, USFloral shall pay to the
Stockholder the sum of $500,000 as liquidated damages. It is hereby agreed that
the Stockholder's damages in the event of a termination by USFloral hereunder
are
34
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 Stockholder agrees that for a period of
---------------------
two years following the Merger Effective Date, he shall not:
(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 (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 or 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 or 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 the Stockholder 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) maintaining his directorship in the Meadow Flower, ▇.▇. ▇▇▇▇ farm,
located in Ecuador.
35
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 Stockholder agrees that, in the event of a
breach by him 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 Stockholder 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 business of the Company).
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 Stockholder
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 the 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
Stockholder 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 the 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 Stockholder hereby agrees that this covenant is a
-----------
material and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Stockholder. The Stockholder recognizes and acknowledges that he has
-----------
in the past, currently has, 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
36
policies that are valuable, special and unique assets of the Company and the
Company's business. The Stockholder agrees that he 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 Stockholder. In the event of a breach or
threatened breach by Stockholder of the provisions of this Section, USFloral and
the Surviving Corporation shall be entitled to an injunction restraining
Stockholder 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 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 Stockholder. In the event of
a breach or threatened breach by USFloral of the provisions of this Section,
Stockholder 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 Stockholder from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 Both Parties. Each of USFloral and the Stockholder hereby agrees that
------------
in the event that this Agreement is terminated in accordance with its terms that
(i) it shall promptly either return or destroy written materials provided by
the other party, (ii) until June 29, 1999, it shall not call upon any person
who is, either presently or at any time before June 29, 1999, an employee of the
other party for the purpose or with the intent of enticing such employee away
from or out of his or her employment. The parties specifically acknowledge that
the provisions of paragraph (ii) shall survive the termination of this
Agreement.
15.4 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 Stockholder agrees
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
Stockholder hereby irrevocably agrees 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
37
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 Stockholder agrees that the foregoing shall be
binding upon the Stockholder's 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. 1933 ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The Stockholder acknowledges and agrees that the shares of USFloral Stock
to be delivered to the Stockholder 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 Stockholder represents and warrants
that the USFloral Stock to be acquired by the Stockholder pursuant to this
Agreement is being acquired solely for his own account, for investment purposes
only, and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution.
17.1 Compliance with Law. The Stockholder covenants, warrants and
-------------------
represents that none of the shares of USFloral Stock issued to such Stockholder
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. Stockholder represents and warrants
-----------------------------
that he is able to bear the economic risk of an investment in USFloral Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. He further represents and warrants that he (i) fully
understands the nature, scope and duration of the limitations on transfer
contained in this Agreement and (ii) has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the proposed investment and therefore has the capacity to protect his
own interests in connection with the acquisition of the USFloral Stock.
Stockholder represents and warrants that he has 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.
Stockholder has asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to his satisfaction.
38
17.3 Registration Statement. The Stockholder has received the prospectus
----------------------
included in the draft Registration Statement delivered to him 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. The Stockholder has had an adequate opportunity to ask questions
and receive answers to his 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
Stockholder 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 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. Stockholder 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.
Stockholder will cooperate and use its best efforts to have the present
officers, directors and employees of the Company cooperate with USFloral on and
after the Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
39
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 Stockholder.
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 Stockholder, 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 a valid and binding agreement on the parties thereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by Stockholder (subject to the limitations set
forth below), 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, 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, Stockholder will pay the fees, expenses and disbursements of the
Company, the Stockholder 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 Stockholder and the
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, addressed
to the party to be notified, 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:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
40
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
(b) If to Stockholder, addressed to him at:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a required copy to:
▇▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
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
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.
41
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.
42
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"
AFS ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
"Company"
AMERICA FLORIST SUPPLY, INC.
dba Johnsons Roses
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President
"Stockholder"
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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ANNEXES
ANNEX I [Form of Articles of Merger to be provided]
ANNEX II [Consideration]
ANNEX III [Attach form of Employment Agreement]
SCHEDULE
Schedule 11.7 [Addbacks for Earn-out]
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