Exhibit 2.21
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
U.S.A. Floral Products, Inc.,
ASG Acquisition Corp.,
AFB Marketing, Inc.
d/b/a ▇▇▇▇▇ ▇▇▇▇▇▇▇ Greenhouses
and
The Stockholders Named Therein
dated April 3, 1998
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1. THE MERGER 1
1.1 The Merger............................................ 1
1.2 Articles of Incorporation; Bylaws,
Directors and Officers.............................. 1
1.3 Effects of the Merger................................. 2
2. CONVERSION AND EXCHANGE OF STOCK........................... 2
2.1 Manner of Conversion.................................. 2
2.2 Merger Consideration.................................. 3
2.3 Exchange of Certificates and Payment of Cash.......... 5
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS.................... 6
3.1 Post-Closing Adjustment............................... 6
3.2 Pledged Assets........................................ 8
3.3 Stockholders' Representative.......................... 9
4. CLOSING 10
4.1 Location and Date.....................................10
4.2 Effect................................................10
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS...............................................10
5.1 Due Organization.....................................11
5.2 Authorization; Validity..............................11
5.3 No Conflicts.........................................11
5.4 Capital Stock of the Company.........................12
5.5 Transactions in Capital Stock........................12
5.6 Subsidiaries, Stock, and Notes.......................12
5.7 Predecessor Status...................................13
5.8 Absence of Claims Against the Company................13
5.9 Company Financial Conditions.........................13
5.10 Financial Statements.................................13
5.11 Liabilities and Obligations..........................13
5.12 Accounts and Notes Receivable........................14
5.13 Books and Records....................................15
5.14 Permits..............................................15
5.15 Real Property........................................15
5.16 Personal Property....................................17
5.17 Intellectual Property................................17
5.18 Material Contracts and Commitments...................19
5.19 Government Contracts.................................20
5.20 Insurance............................................21
5.21 Labor and Employment Matters.........................21
5.22 Employee Benefit Plans...............................22
5.23 Conformity with Law; Litigation......................23
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5.24 Taxes................................................24
5.25 Absence of Changes...................................26
5.26 Deposit Accounts; Powers of Attorney.................27
5.27 Environmental Matters................................28
5.28 Relations with Governments...........................29
5.29 Disclosure...........................................29
5.30 USFloral Prospectus; Securities Representations......29
5.31 Affiliates...........................................30
5.32 Location of Chief Executive Offices..................30
5.33 Location of Equipment and Inventory..................30
6. REPRESENTATIONS OF USFLORAL AND NEWCO......................30
6.1 Due Organization......................................30
6.2 USFloral Common Stock.................................31
6.3 Authorization; Validity of Obligations................31
6.4 No Conflicts..........................................31
6.5 Capitalization of USFloral and Ownership of
USFloral Stock........................................32
7. COVENANTS.................................................32
7.1 Tax Matters..........................................32
7.2 Related Party Agreements.............................33
7.3 Cooperation..........................................33
7.4 Conduct of Business Pending Closing..................34
7.5 Access to Information................................34
7.6 Prohibited Activities................................35
7.7 Notice to Bargaining Agents..........................36
7.8 Sales of USFloral Common Stock.......................36
7.9 USFloral Stock Options...............................38
7.10 Conduct of Business of Surviving Corporation.........38
7.11 Post-Closing Access to Books and Records.............38
7.12 Compliance with Rule 144.............................38
7.13 Release of Personal Guarantees.......................38
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
USFLORAL AND NEWCO.........................................39
8.1 Representations and Warranties; Performance
of Obligations.......................................39
8.2 No Litigation........................................39
8.3 No Material Adverse Change...........................39
8.4 Consents and Approvals...............................39
8.5 Opinion of Counsel...................................39
8.6 Charter Documents....................................40
8.7 Due Diligence Review.................................40
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8.8 Delivery of Closing Financial Certificate............40
8.9 Employment Agreements................................40
8.10 Stockholders' Release................................40
8.11 Related Party Agreements.............................40
8.12 Termination of Payments for Add-Backs................41
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY AND THE STOCKHOLDERS...............................41
9.1 Representations and Warranties; Performance
of Obligations......................................41
9.2 No Litigation.......................................41
9.3 Consents and Approvals..............................41
9.4 Employment Agreements...............................42
10. INDEMNIFICATION............................................42
10.1 General Indemnification by the Stockholders.........42
10.2 Limitation and Expiration...........................42
10.3 Indemnification Procedures..........................44
10.4 Survival of Representations Warranties and
Covenants...........................................46
10.5 Remedies Cumulative.................................46
10.6 Right to Set Off....................................46
11. NONCOMPETITION.............................................46
11.1 Prohibited Activities...............................46
11.2 Damages.............................................47
11.3 Reasonable Restraint................................47
11.4 Severability; Reformation...........................47
11.5 Independent Covenant................................47
11.6 Materiality.........................................48
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION..................48
12.1 Stockholders........................................48
12.2 USFloral............................................48
12.3 Damages.............................................48
13. GENERAL....................................................48
13.1 Termination.........................................49
13.2 Effect of Termination...............................49
13.3 Successors and Assigns..............................49
13.4 Entire Agreement; Amendment; Waiver.................50
13.5 Counterparts........................................50
13.6 Brokers and Agents..................................50
13.7 Expenses............................................50
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13.8 Specific Performance; Remedies......................50
13.9 Notices.............................................50
13.10 Governing Law.......................................51
13.11 Severability........................................52
13.12 Absence of Third Party Beneficiary Rights...........52
13.13 Further Representations.............................52
13.14 Accounting Terms....................................52
13.15 Legal Expenses......................................52
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into this 3rd day of April, 1998, by and among U.S.A. Floral Products,
Inc., a Delaware corporation ("USFloral"), ASG Acquisition Corp., a Delaware
corporation and a newly-formed, wholly-owned subsidiary of USFloral ("Newco"),
AFB Marketing, Inc., a California corporation d/b/a ▇▇▇▇▇ ▇▇▇▇▇▇▇ Greenhouses
(the "Company"), and ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ (each a "Stockholder" and
collectively, the "Stockholders").
BACKGROUND
WHEREAS, the respective Boards of Directors of Newco and the Company
(which together are sometimes referred to as the "Constituent Corporations")
deem it advisable and in the best interests of the Constituent Corporations and
their respective stockholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement, the Plan of Merger (defined below) and the
applicable provisions of the laws of the States of California and Delaware.
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 4.2), the
Company shall be merged with and into Newco pursuant to this Agreement and a
plan of merger (the "Plan of Merger") substantially in the form attached as
Schedule 1.1 hereto, and the separate corporate existence of the Company shall
cease. Newco, as it exists from and after the Effective Time, is sometimes
referred to as the "Surviving Corporation."
1.2 Articles of Incorporation; Bylaws, Directors and Officers. At the
Effective Time:
(a) The Articles of Incorporation of the Surviving Corporation from
and after the Effective Time shall be the Articles of Incorporation of Newco
until thereafter amended in accordance with the provisions therein and as
provided by the applicable provisions of the State Corporation Laws.
(b) The Bylaws of the Surviving Corporation from and after the
Effective Time shall be the Bylaws of Newco in effect immediately prior to the
Effective Time, continuing until thereafter amended in accordance with their
terms and the Articles of Incorporation of the Surviving Corporation and as
provided by the Delaware and California Corporation Laws.
(c) The initial director of the Surviving Corporation shall be ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ until his successor is elected and qualified, and the initial
officers of the Surviving Corporation shall be the officers of the Company
immediately prior to the Effective Time, with the addition of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
as Vice President and Assistant Secretary of the Surviving Corporation, in each
case until their successors are duly elected and qualified.
1.3 Effects of the Merger. The Merger shall have the effects provided
therefor by the California and Delaware Corporation Laws. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time (i) all
the rights, privileges, immunities, powers 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 without limitation subscriptions to
shares, and all other choses in action, and all and every other interest of or
belonging to or due to the Company or Newco shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, immunities, powers and franchises
and all and every other interest shall be thereafter as effectually the property
of the Surviving Corporation, as they were of the Company and Newco, and (ii)
all debts, liabilities, duties and obligations of the Company and Newco, subject
to the terms hereof, shall become the debts, liabilities and duties of the
Surviving Corporation and the Surviving Corporation shall thenceforth be
responsible and liable for all the debts, liabilities, duties and obligations of
the Company and Newco and neither the rights of creditors nor any liens upon the
property of the Company or Newco shall be impaired by the Merger, and may be
enforced against the Surviving Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. At the Effective Time, by virtue of the Merger
and without any action on the part of USFloral, Newco, the Company or any
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of
capital stock of Newco shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable Common
Stock of the Surviving Corporation. Each stock certificate of Newco evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company.
All shares of capital stock of the Company that are owned directly or indirectly
by the Company shall be canceled and no stock of USFloral or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section
2.1(d), and Sections 2.2, 3.1 and 3.2, each issued and outstanding share of
capital stock of the Company (without par value) ("Company Common Stock") (other
than shares to be canceled pursuant to Section 2.1(b)), that is issued and
outstanding immediately prior to the Effective Time shall
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automatically be canceled and extinguished and converted, without any action on
the part of the holder thereof, into the right to receive from USFloral (i) an
amount of cash equal to the cash portion of the Initial Consideration (as
defined in Section 2.2) divided by the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time, (ii) that number of shares
of USFloral common stock, $.001 par value ("USFloral Common Stock"), valued at
the Merger Price (as defined in Section 2.2), that is equal in value to the
USFloral Common Stock portion of the Initial Consideration divided by the number
of shares of Company Common Stock outstanding immediately prior to the Effective
Time, (iii) an amount of cash equal to the cash portion of the Earn-Out
Consideration (as defined in Section 2.2) divided by the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time, and
(iv) that number of shares of USFloral Common Stock, valued at the Earn-Out
Price (as defined in Section 2.2), that is equal in value to the USFloral Common
Stock portion of the Earn-Out Consideration divided by the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time. All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the
consideration therefor upon the surrender of such certificate in accordance with
Section 2.3 of this Agreement.
(d) Fractional Shares. No fractional shares of USFloral Common Stock
shall be issued, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to receive a fraction of a share of
USFloral Common Stock shall receive from USFloral an amount of cash equal to the
Merger Price, as defined in Section 2.2(a), multiplied by the fraction of a
share of USFloral Common Stock to which such holder would otherwise be entitled.
The fractional share interests of each Stockholder shall be aggregated, so that
no Stockholder shall receive cash in an amount greater than the value of one
full share of USFloral Common Stock.
2.2 Merger Consideration.
(a) For purposes of this Agreement, the "Merger Consideration" shall
include the Initial Consideration and the Earn-Out Consideration. The "Initial
Consideration" shall be $3,850,000, less the aggregate amount of the long-term
indebtedness of the Company, including any current portion thereof, adjusted
pursuant to this Section 2.2 and Section 3.1. Of the Initial Consideration,
$1,925,000 less long-term debt shall be paid in cash at Closing in immediately
available funds. The remaining $1,925,000 of the Initial Consideration shall be
paid within 10 days after the Closing Date in shares of USFloral Common Stock
valued at $22.7438 per share (the "Merger Price"). For each $1.00 by which the
Company's and the Surviving Corporation's earnings before interest and taxes
("EBIT") for the twelve months ending March 31, 1999 (the "1999 EBIT") exceeds
$755,000, USFloral shall pay to the Stockholder $6.00 (the "Earn-Out
Consideration"). The Earn-Out Consideration shall not exceed $6,000,000. Of
the Earn-Out Consideration, 50% shall be paid in cash and 50% shall be paid in
USFloral Common Stock valued at the average closing price on the Nasdaq National
Market per share of USFloral Common Stock for each trading day during the thirty
calendar day period ending March 31, 1999 (the "Earn-Out Price"). The Earn-Out
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Consideration, if any, shall be paid within thirty days of the determination by
Price Waterhouse LLP ("USFloral's Accountant") of the 1999 EBIT.
(b) The Merger Consideration has been calculated based upon several
factors, including the assumption that the net worth of the Company, calculated
in accordance with generally accepted accounting principles ("GAAP")
consistently applied, is equal to or greater than $123,000 (the "Net Worth
Target") as of the Closing.
(c) If, on the Closing Financial Certificate (as defined in Section
8.9), the Certified Closing Net Worth (as defined in Section 8.9) is less than
the Net Worth Target, then the Merger Consideration to be delivered to the
Stockholders may, at USFloral's election, be reduced either (i) at the Closing,
or (ii) after completion of the Post-Closing Audit (as defined in Section 3.1),
by the difference between the Net Worth Target and the Certified Closing Net
Worth set forth on the Closing Financial Certificate (which reduction shall be
pro rata in cash and in USFloral Common Stock valued at the Merger Price in the
same proportions as the cash and USFloral Common Stock components of the Merger
Consideration as provided in Section 2.2(a)).
(d) The Earn-Out Consideration has been calculated based upon several
factors, including the assumption that the Surviving Corporation's earnings
before interest and taxes for the twelve months ended March 31, 2000 (the "2000
EBIT") will be no less than the 1999 EBIT. For each $1.00 by which the 2000
EBIT is less than the lesser of (i) 1999 EBIT or (ii) $1,755,000, the
Stockholders will repay USFloral $3.00 in cash and $3.00 in USFloral Common
Stock, valued at the Earn-Out Price, up to the amount of the Earn-Out
Consideration.
(i) Within ninety (90) days following March 31, 1999, USFloral shall
cause Price Waterhouse LLP ("USFloral's Accountant"), to audit the Company's
books to determine the 1999 EBIT. In calculating the 1999 EBIT, USFloral's
Accountant shall add to EBIT any amounts expensed by the Company in respect of
those items set forth on Schedule 5.9(b)(ii) hereof during the period beginning
on April 1, 1998 and ending on the Closing Date. Within ten (10) days of
USFloral's Accountant's determination of the 1999 EBIT, USFloral shall deliver
to the Stockholders' Representative a written notice (the "Earn-Out
Determination Notice"), setting forth (i) the determination made by USFloral's
Accountant of the 1999 EBIT, (ii) the amount of the Earn-Out Consideration, if
any and (iii) the number of shares of USFloral Common Stock to be issued in
payment of the Earn-Out Consideration, if any. The Earn-Out Consideration, if
any, shall be paid within thirty days of the determination by USFloral's
Accountant of the 1999 EBIT.
(ii After delivery of the Earn-Out Determination Notice,
USFloral shall make available to the Stockholders' Representative, at the
Stockholders' Representative's request, the books and records of the Company.
The Stockholders' Representative shall have thirty (30) days from the receipt of
the Earn-Out Determination Notice to notify USFloral if the Stockholders dispute
such Earn-Out Determination Notice. Any notice from the Stockholders'
Representative to USFloral regarding the Earn-Out Consideration shall include
the Stockholders' determination of the 1999 EBIT. If the Stockholders'
Representative has delivered notice of such a dispute to USFloral within such
30-day period, then the Independent Accounting Firm shall review the Surviving
Corporation's
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books, Closing Financial Certificate and Financial Adjustment Notice (and
related information) to determine the amount, if any, of the Earn-Out
Consideration. The Independent Accounting Firm shall be directed to consider
only those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to USFloral's
Accountant in connection with the transactions contemplated hereby, or (ii)
reviewed by USFloral's Accountant during the course of its determination of 1999
EBIT. The Independent Accounting Firm shall make its determination of the Earn-
Out Consideration, if any, within thirty (30) days of its selection. The
determination made by the Independent Accounting Firm shall be final and binding
on the parties hereto. The costs of the Independent Accounting Firm shall be
borne by the party (either USFloral or the Stockholders as a group) whose
determination of the Company's 1999 EBIT was further from the determination of
the independent accounting firm, or equally by USFloral and the Stockholders in
the event that the determination by the Independent Accounting Firm is
equidistant between the determination made by USFloral and the determination
made by the Stockholders.
2.3 Exchange of Certificates and Payment of Cash.
(a) USFloral to Provide Cash and Common Stock. In exchange for the
outstanding shares of capital stock of the Company, USFloral shall cause to be
made available to the Stockholders the Merger Consideration (including cash in
an amount sufficient for payment in lieu of fractional shares pursuant to
Section 1.2(d)), as adjusted pursuant to Section 2.2 and Section 3.1. The
certificates evidencing the USFloral Common Stock component of the Merger
Consideration shall bear appropriate legends pursuant to the terms of this
Agreement and USFloral shall be entitled to issue appropriate stop transfer
instructions to its transfer agent consistent with the terms of this Agreement.
(b) Certificate Delivery Requirements. At the Effective Time, the
Stockholders shall deliver to USFloral the certificates (the "Certificates")
representing Company Common Stock, accompanied by blank stock powers duly
executed by the Stockholders and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholders' expense, affixed and canceled. The
Stockholders shall promptly cure any deficiencies with respect to the stock
powers accompanying such Certificates. The Certificates so delivered shall
forthwith be canceled. Until delivered as contemplated by this Section 2.3(b),
each Certificate shall be deemed at any time after the Effective Time to
represent the right to receive upon such surrender that portion of the Merger
Consideration as provided by this Article 2 and the applicable provisions of the
California and Delaware Corporation Laws.
(c) No Further Ownership Rights in Capital Stock of the Company. All
USFloral Common Stock and cash to be delivered (including the cash and USFloral
Common Stock, if any, to be delivered in payment of the Earn-Out Consideration
and the USFloral Common Stock delivered pursuant to Section 3.2(b) but withheld)
upon the surrender for exchange of shares of Company Common Stock in accordance
with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and following the Effective Time the Certificates shall have no further rights
to, or ownership in, shares of capital stock of the Company. There shall be no
further registration of transfers on the stock
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transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be canceled and exchanged as provided in this Section
2.3.
(d) Lost, Stolen or Destroyed Certificates. If any certificates
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, then USFloral shall cause payment to be made in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of USFloral Common Stock and cash as
provided in Section 2.1; provided, however that USFloral may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
USFloral with respect to the certificates alleged to have been lost, stolen or
destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this
Section 2.3, none of the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 Post-Closing Adjustment.
(a) The Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 3.1.
(b) Within ninety (90) days following the Effective Time, USFloral
shall cause Price Waterhouse LLP ("USFloral's Accountant") to audit the
Surviving Company's books to determine the accuracy of the information set forth
on the Closing Financial Certificate (the "Post-Closing Audit"). The parties
acknowledge and agree that for purposes of determining the net worth of the
Company as of the Closing Date, the value of the assets of the Company shall,
except with the prior written consent of USFloral, be calculated as provided in
the last paragraph of Section 8.9. The Stockholders shall cooperate and shall
use their reasonable efforts to cause the officers and employees of the Company
to cooperate with USFloral and USFloral's Accountant after the Closing Date in
furnishing information, documents, evidence and other assistance to USFloral's
Accountant to facilitate the completion of the Post-Closing Audit within the
aforementioned time period. In the event that USFloral's Accountant determines
that the actual Company net worth as of the Closing Date was less than the
Certified Closing Net Worth, USFloral shall deliver a written notice (the
"Financial Adjustment Notice") to the Stockholders' Representative, as defined
in Section 3.3, setting forth (i) the determination made by USFloral's
Accountant of the actual Company net worth (the "Actual Company Net Worth") with
accompanying related balance sheet, (ii) the amount of the Merger Consideration
that would have been payable at Closing pursuant to Section 2.2(c) had the
Actual Company Net Worth been reflected on the Closing Financial Certificate
instead of the
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Certified Closing Net Worth, and (iii) the amount by which the number of shares
issued as the Merger Consideration would have been reduced at Closing had the
Actual Company Net Worth been used in the calculations pursuant to Section
2.2(c) (the "Merger Consideration Adjustment"). The Merger Consideration
Adjustment shall take account of the reduction, if any, to the Merger
Consideration already taken pursuant to Section 2.2(c)(i).
(c) The Stockholders' Representative shall have forty-five (45) days
from the receipt of the Financial Adjustment Notice to notify USFloral if the
Stockholders dispute such Financial Adjustment Notice. If USFloral has not
received notice of such a dispute within such 45-day period, USFloral shall be
entitled to receive from the Stockholders (which may, at USFloral's sole
discretion, be from the Pledged Assets as defined in Section 3.2; provided
however if the Merger Consideration Adjustment does not exceed $25,000, the
Merger Consideration Adjustment shall be paid from the Pledged Assets) the
Merger Consideration Adjustment as the sole remedy for any difference between
the Certified Closing Net Worth and the Actual Company Net Worth. If, however,
the Stockholders' Representative has delivered notice of such a dispute to
USFloral within such 45-day period, then McGladrey & ▇▇▇▇▇▇ LLP (the
"Independent Accounting Firm") shall review the Surviving Corporation's books,
Closing Financial Certificate and Financial Adjustment Notice (and related
information) to determine the amount, if any, of the Merger Consideration
Adjustment. The Independent Accounting Firm shall be directed to consider only
those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to USFloral's
Accountant in connection with the transactions contemplated hereby, or (ii)
reviewed by USFloral's Accountant during the course of the Post-Closing Audit.
The Independent Accounting Firm shall make its determination of the Merger
Consideration Adjustment, if any, within thirty (30) days of its selection. The
determination made by the Independent Accounting Firm shall be final and binding
on the parties hereto, and upon such determination, USFloral shall be entitled
to receive from the Stockholders (which may, at USFloral's sole discretion, be
from the Pledged Assets as defined in Section 3.2) the Merger Consideration
Adjustment. The costs of the Independent Accounting Firm shall be borne by the
party (either USFloral or the Stockholders as a group) whose determination of
the Company's net worth at Closing was further from the determination of the
Independent Accounting Firm, or equally by USFloral and the Stockholders in the
event that the determination by the Independent Accounting Firm is equidistant
between the Certified Closing Net Worth and the Actual Company Net Worth.
(d) Within ninety (90) days following March 31, 2000 USFloral shall
cause USFloral's Accountant to determine the 2000 EBIT. In the event that
USFloral's Accountant determines that the 2000 EBIT was less than the 1999 EBIT,
USFloral shall deliver a written notice (the "Earn-Out Adjustment Notice") to
the Stockholders' Representative, setting forth (i) the determination made by
USFloral's Accountant of the 2000 EBIT, (ii) the amount of the Earn-Out
Consideration that would have been payable had the Earn-Out Consideration been
calculated based on the 2000 EBIT rather than the 1999 EBIT and (iii) the amount
by which the amount of cash and number of shares issued as the Earn-out
Consideration would have been reduced had the 2000 EBIT been used to calculate
the Earn-Out Consideration (the "Earn-Out Consideration Adjustment").
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(e) After delivery of the Earn-Out Adjustment Notice, USFloral shall
make available to the Stockholders' Representative, at the Stockholders'
Representative's request, the books and records of the Company. The
Stockholders' Representative shall have forty-five (45) days from the receipt of
the Earn-Out Adjustment Notice to notify USFloral if the Stockholders dispute
such Earn-Out Adjustment Notice. Such notice shall include the Stockholders'
determination of the amount of 2000 EBIT. If USFloral has not received notice of
such a dispute within such 45-day period, USFloral shall be entitled to receive
from the Stockholders the Earn-Out Consideration Adjustment. If, however, the
Stockholders' Representative has delivered notice of such a dispute to USFloral
within such 45-day period, then the Independent Accounting Firm shall review the
Surviving Corporations' books and Earn-Out Adjustment Notice (and related
information) to determine the amount, if any, of the Earn-Out Consideration
Adjustment. The Independent Accounting Firm shall make its determination of the
Earn-Out Consideration Adjustment, if any, within thirty (30) days of its
selection. The determination made by the Independent Accounting Firm shall be
final and binding on the parties hereto, and upon such determination, USFloral
shall be entitled to receive from the Stockholders the Earn-Out Consideration
Adjustment. The costs of the Independent Accounting Firm shall be borne by the
party (either USFloral or the Stockholders) whose determination of 1999 EBIT was
further from the determination of the Independent Accounting Firm, or equally by
USFloral and the Stockholders in the event that the determination by the
Independent Accounting Firm is equidistant between USFloral's and the
Stockholders' determination of 1999 EBIT.
3.2 Pledged Assets.
(a) As collateral security for the payment of any post-Closing
adjustment to the Merger Consideration under Section 3.1, or any indemnification
obligations of the Stockholders pursuant to Article 10, the Stockholders shall,
and by execution hereof do hereby, transfer, pledge and assign to USFloral, for
the benefit of USFloral, a security interest in the following assets (the
"Pledged Assets"):
(i) at the Closing, that number of shares of USFloral Common Stock
with a value, based on the Merger Price, equal to ten percent (10%) of each
Stockholder's share of the Initial Consideration as the same may have been
adjusted pursuant to Section 2.2 or Section 3.1 hereof, and the certificates and
instruments, if any, representing or evidencing each such Stockholder's Pledged
Assets;
(ii) upon determination of the Earn-Out Consideration, that
number of shares of USFloral Common Stock with a value, based on the Earn-Out
Price equal to fifty percent (50%) of each Stockholder's share of the Earn-Out
Consideration (the "Earn-Out Pledged Assets");
(iii) all securities hereafter delivered to such Stockholder with
respect to or in substitution for such Stockholder's Pledged Assets, all
certificates and instruments representing or evidencing such securities, and all
cash and non-cash dividends and other property at any time received, receivable
or otherwise distributed in respect of or in exchange for any or all thereof;
and in the event such Stockholder receives any such property, such Stockholder
shall hold such property
8
in trust for USFloral and shall immediately deliver such property to USFloral to
be held hereunder as Pledged Assets; and
(iv) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing a Stockholder's Pledged
Assets issued in his or her name in the Merger shall be delivered to USFloral
directly by the transfer agent, such certificate bearing no restrictive or
cautionary legend other than those imprinted by the transfer agent at USFloral's
request. Each Stockholder shall, at the Closing, deliver to USFloral, for each
such certificate, a stock power duly signed in blank by him or her. Any cash
comprising a Stockholder's Pledged Assets shall be withheld by USFloral from
distribution to such Stockholder.
(c) The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Merger Consideration pursuant to Section 3.1 and any
indemnification obligations of the Stockholders pursuant to Article 10 until the
date which is one year after the Effective Time (the "Release Date"). Promptly
following the Release Date, USFloral shall return or cause to be returned to the
Stockholders the Pledged Assets, less Pledged Assets having an aggregate value
equal to the amount of (i) any post-Closing adjustment to the Merger
Consideration under Section 3.1, (ii) any pending claim for indemnification made
by any Indemnified Party (as defined in Article 10), and (iii) any
indemnification obligations of the Stockholders pursuant to Article 10.
Notwithstanding the preceding two sentences the Earn-out Pledged Assets shall be
available to satisfy any adjustment to the Earn-out Consideration until the
determination by USFloral's Accountant's of the 2000 EBIT. Promptly following
such determination, and upon repayment by the Stockholders of the cash portion
of the Earn-Out Consideration Adjustment, if any, USFloral shall cause to be
returned to the Stockholders the Earn-out Pledged Assets, less Earn-out Pledged
Assets having an aggregate value equal to the amount of the stock portion of the
Earn-out Consideration Adjustment under Section 3.1. For purposes of this
Section 3.2(c) and Article 10, the USFloral Common Stock held as Pledged Assets
shall be valued at (x) the Merger Price with respect to any post-Closing
adjustment to the Merger Consideration under Section 3.1, (y) the Earn-out Price
with respect to any adjustment to the Earn-out Consideration and (z) the average
of the closing price on the Nasdaq National Market per share of USFloral Common
Stock for the five trading days prior to the satisfaction of an indemnification
obligation (the "Market Value") with respect to indemnification obligations
pursuant to Article 10.
3.3 Stockholders' Representative.
(a) Each holder of Company Common Stock, by signing this Agreement,
designates ▇▇▇▇ ▇▇▇▇▇ or, in the event that ▇▇▇▇ ▇▇▇▇▇ is unable or unwilling to
serve, ▇▇▇▇▇ ▇▇▇▇▇▇▇ to be the Stockholders' Representative for purposes of this
Agreement. The Stockholders shall be bound by any and all actions taken by the
Stockholders' Representative on their behalf.
(b) USFloral and Newco shall be entitled to rely upon any
communication or writings given or executed by the Stockholders' Representative.
All communications or writings
9
to be sent to Stockholders pursuant to this Agreement may be addressed to the
Stockholders' Representative and any communication or writing so sent shall be
deemed notice to all of the Stockholders hereunder. The Stockholders hereby
consent and agree that the Stockholders' Representative is authorized to accept
deliveries, including any notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 10 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of the other Stockholders hereunder and in consideration of
the mutual covenants and agreements made herein, and shall be irrevocable and
shall not be terminated by any act of any Stockholder, by operation of law,
whether by such Stockholder's death or any other event.
4. CLOSING
4.1 Location and Date. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, on April 3, 1998, providing that all
conditions to Closing shall have been satisfied or waived, or at such other time
and date as USFloral, the Company and the Stockholders may mutually agree, which
date shall be referred to as the "Closing Date."
4.2 Effect. On the Closing Date, the articles of merger, certificate of
merger, or other appropriate documents executed in accordance with the
California and Delaware Corporation Laws (the "Merger Documents"), together with
any required officers' certificates, shall be filed with the Secretary of the
States of California and Delaware in accordance with the provisions of the
California and Delaware Corporation Laws. The Merger shall become effective
upon such filings or at such later time as may be specified in such filings (the
"Effective Time").
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
To induce USFloral and Newco to enter into this Agreement and consummate
the transactions contemplated hereby, each of the Company and each Stockholder,
jointly and severally, represents and warrants to USFloral and Newco as follows
(for purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
Stockholders and the current directors and officers of the Company, including
facts of which the directors and officers, in the reasonably prudent exercise of
their duties, should be aware):
10
5.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted except where the failure to be so authorized,
qualified or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Company ("Material Adverse Effect"). Schedule 5.l hereto contains a list of all
jurisdictions in which the Company is authorized or qualified to do business.
Except as provided in Schedule 5.1 the Company is in good standing as a foreign
corporation in each jurisdiction it which it does business. The Company has
delivered to USFloral true, complete and correct copies of the Articles of
Incorporation and Bylaws of the Company. Such Articles of Incorporation and
Bylaws are collectively referred to as the "Charter Documents." The Company is
not in violation of any Charter Documents. The minute books of the Company have
been made available to USFloral (and as of the Closing Date have been delivered,
along with the Company's original stock ledger and corporate seal, to USFloral)
and are correct and, except as set forth in Schedule 5.1, complete in all
material respects.
5.2 Authorization; Validity. The Company has all requisite corporate power
and authority to enter into and perform its obligations pursuant to the terms of
this Agreement. The Company has the full legal right, corporate power and
authority to enter into this Agreement and the transactions contemplated hereby.
Each Stockholder has the full legal right and authority to enter into this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the performance by the Company of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of the Company and the Stockholders and this Agreement has
been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of the Company and each
Stockholder, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which the Company or any
Stockholder is a party or by which the Company or any Stockholder is bound, or
result in the creation or imposition of any lien, charge or encumbrance on any
of the Company's properties pursuant to (i) any law or regulation to which the
Company or any Stockholder or any of their respective property is subject, or
(ii) any judgment, order or decree to which the Company or any Stockholder is
bound or any of their respective property is subject;
11
(c) result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of the Company; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company or any Stockholder is subject or by which the
Company or any Stockholder is bound including, without limitation, the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), together with
all rules and regulations promulgated thereunder.
5.4 Capital Stock of the Company. The authorized capital stock of the
Company consists of 100,000 shares of capital stock, without par value, of which
20,000 shares are issued and outstanding. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and are owned of record and
beneficially by the Stockholders in the amounts set forth in Schedule 5.4 free
and clear of all Liens (defined below). All of the issued and outstanding
shares of the capital stock of the Company were offered, issued, sold and
delivered by the Company in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of any preemptive rights. There are no voting agreements or
voting trusts with respect to any of the outstanding shares of the capital stock
of the Company. For purposes of this Agreement, "Lien" means any mortgage,
security interest, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise), charge, preference, priority or
other security agreement, option, warrant, attachment, right of first refusal,
preemptive, conversion, put, call or other claim or right, restriction on
transfer (other than restrictions imposed by federal and state securities laws),
or preferential arrangement of any kind or nature whatsoever (including any
restriction on the transfer of any assets, any conditional sale or other title
retention agreement, any financing lease involving substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
5.5 Transactions in Capital Stock. Except as set forth on Schedule 5.5,
no option, warrant, call, subscription right, conversion right or other contract
or commitment of any kind exists of any character, written or oral, which may
obligate the Company to issue, sell or otherwise cause to become outstanding any
shares of capital stock. The Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof. As a result of the Merger, USFloral will be the record and
beneficial owner of all outstanding capital stock of the Surviving Corporation
and rights to acquire capital stock of the Surviving Corporation.
5.6 Subsidiaries, Stock, and Notes.
(a) The Company has no subsidiaries.
(b) The Company does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity
12
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
(c) Except as set forth on Schedule 5.6(c), there are no promissory
notes that have been issued to, or are held by, the Company.
5.7 Predecessor Status. Schedule 5.7 sets forth a list of all names of
all predecessor companies of the Company, including the names of any entities
from which the Company previously acquired significant assets. Except as set
forth on Schedule 5.7, the Company has never been a subsidiary or division of
another corporation, nor has it been a part of an acquisition that was later
rescinded.
5.8 Absence of Claims Against the Company. No Stockholder has any claims
against the Company.
5.9 Company Financial Conditions.
(a) The Company's net worth as of the end of its most recent fiscal
year was not less than $153,000 (including the addition of $240,000 relating to
the contribution of certain personal property to the Company) in accordance with
Schedule 5.9(a). For purposes of this Section 5.9(a), calculation of amounts as
of the Closing shall be made in accordance with the last paragraph of Section
8.8.
(b) The Company's earnings before interest and taxes (after the
addition of "add-backs" set forth on Schedule 5.9(b)) for its most recent fiscal
year was not less than $755,000.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete and
correct copies of the Company's unaudited balance sheet as of August 31, 1997
(the end of its most recently completed fiscal year), and income statement for
the year then ended (collectively, the "Year-End Financials") and (b) true,
complete and correct copies of the Company's unaudited balance sheet (the
"Interim Balance Sheet") as of February 28, 1998 (the "Balance Sheet Date") and
income statement, for the six-month period then ended (collectively, the
"Interim Financials," and together with the Year-End Financials, the "Company
Financial Statements"). Except as set forth on Schedule 5.10, each balance
sheet included in the Company Financial Statements presents fairly the financial
condition of the Company as of the date indicated thereon, and each of the
income statements included in the Company Financial Statements presents fairly
the results of its operations for the periods indicated thereon. Since the dates
of the Company Financial Statements, there have been no material changes in the
Company's accounting policies other than as requested by USFloral to conform the
Company's accounting policies to GAAP.
5.11 Liabilities and Obligations.
(a) The Company is not liable for or subject to any liabilities except
for:
13
(i) those liabilities reflected on the Interim Balance Sheet and
not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which liabilities
are not, individually or in the aggregate, material.
(b) The Company has delivered to USFloral, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 5.11(c) also includes a summary description of all future
plans or projects involving the opening of new operations, expansion of any
existing operations or the acquisition of any real property or existing
business, to which management of the Company has made any material expenditure
in the two-year period prior to the date of this Agreement, which if pursued by
the Company or the Surviving Corporation would require additional material
expenditures of capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured. Schedule 5.11(d)
contains a complete list of all indebtedness of the Company.
5.12 Accounts and Notes Receivable. The Company has delivered to USFloral
a complete and accurate list, as of a date not more than three (3) business days
prior to the date hereof, of the accounts and notes receivable of the Company
(including without limitation receivables from and advances to employees and the
Stockholders), which includes an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories (collectively, the "Accounts
Receivable"). All Accounts Receivable represent valid obligations arising from
sales actually made or services actually performed in the ordinary course of
business. The Accounts Receivable are collectible net of any respective
reserves shown on the Company's books and records (which reserves are adequate
and calculated consistent with past practice). Subject to such reserves, except
as set forth on Schedule 5.12, each of the Accounts Receivable will be collected
in full, without any set-off, within one-hundred twenty (120) days after the day
on which it first became due and payable. There is no contest, claim, or right
of set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of an Account Receivable relating to the
amount or validity of such Account Receivable. Notwithstanding anything herein
to the contrary, no party
14
hereto shall be damaged by any inaccuracy in this Section 5.12 until an Account
Receivable is actually written off by the Surviving Corporation, and Damages
shall then be limited to the amount of the write-off.
5.13 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
5.14 Permits. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"); (ii) the Permits are valid, and the Company has not received any
notice that any governmental authority intends to modify, cancel, terminate or
fail to renew any Permit. No present or former officer, manager, member or
employee of the Company or any affiliate thereof, or any other person, firm,
corporation or other entity, owns or has any proprietary, financial or other
interest (direct or indirect) in any Permits; (iii) the Company has conducted
and is conducting its business in compliance with the requirements, standards,
criteria and conditions set forth in the Permits and other applicable orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing; and (iv) the transactions contemplated by this Agreement will not
result in a default under, or a breach or violation of, or adversely affect the
rights and benefits afforded to the Company by, any Permit.
5.15 Real Property.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by the Company, together with any additions thereto or
replacements thereof.
(b) Schedule 5.15(b) contains a complete and accurate description of
all Real Property (including street address, legal description (where known),
owner, and Company's use thereof) and, to the Company's knowledge, any Liens.
Schedule 5.15(b) indicates whether the Real Property is owned or leased. The
Real Property listed on Schedule 5.15 includes all interests in real property
necessary to conduct the business and operations of the Company as presently
conducted.
(c) Except as set forth in Schedule 5.15(c):
(i) To the Company's knowledge, all structures and all structural,
mechanical and other physical systems thereof that constitute part of the Real
Property, including but not limited to the walls, roofs and structural elements
thereof and the heating, ventilation, air conditioning, plumbing, electrical,
mechanical, sewer, waste water, storm water, paving and parking
15
equipment, systems and facility included therein, and other material items at
the Real Property (collectively, the "Tangible Assets"), are free of defects and
in good operating condition and repair. For purposes of this Section, a defect
shall mean a condition relating to the structures or any structural, mechanical
or physical system which requires an expenditure of more than $3,000 to correct.
No maintenance or repair to the Real Property, Structures or any Tangible Asset
has been unreasonably deferred. There is no water, chemical or gaseous seepage,
diffusion or other intrusion into said buildings, including any subterranean
portions, that would impair beneficial use of the Real Property, Structures or
any Tangible Asset.
(ii) The Company's use and operation of the Real Property comply
with all applicable statutes, rules, regulations, ordinances, orders, writs,
injunctions, judgments, decrees, awards or restrictions of any government entity
applicable to the Company having jurisdiction over any portion of the Real
Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Laws"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property. The
Company has obtained all approvals of governmental authorities (including
certificates of use and occupancy, licenses and permits) required to be obtained
by the Company in connection with the use, occupation and operation of the Real
Property.
(iii) There are no pending or, to the Company's knowledge,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof, nor has the Company or any
of the Stockholders received notice of any pending or threatened special
assessment proceedings affecting any portion of the Real Property.
(iv) There are no parties other than the Company in possession of
any of the Real Property or any portion thereof, and to the Company's knowledge
there are no leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any party or parties the right of use or occupancy
of any portion of the Real Property or any portion thereof.
(v) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which the Company
leases from any other party any real property, including all amendments,
renewals, extensions, modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively, the "Leases") are valid
and in full force and effect. The Company has provided USFloral with true and
complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
operation granted to such party under such Lease. The Company's interests in
the Leases are free of all Liens.
(vi) None of the Leases requires the consent or approval of any
party thereto in connection with the consummation of the transactions
contemplated hereby.
16
5.16 Personal Property.
(a) Schedule 5.16(a) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by the Company with a current book value in excess of
$5,000 both (i) as of the Balance Sheet Date and (ii) acquired since the Balance
Sheet Date, including in each case true, complete and correct copies of leases
for material equipment and an indication as to which assets are currently owned,
or were formerly owned, by any Stockholder or business or personal affiliates of
any Stockholder or of the Company.
(b) The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company as they are
currently being conducted.
(c) All of the trucks and other material machinery and equipment of
the Company, including those listed on Schedule 5.16(a), are in reasonable
working order and condition, ordinary wear and tear excepted. All leases set
forth on Schedule 5.16(a) are in full force and effect and constitute valid and
binding agreements of the Company, and the Company is not in breach of any of
their terms. All fixed assets used by the Company that are material to the
operation of its business are either owned by the Company or leased under an
agreement listed on Schedule 5.16(a).
5.17 Intellectual Property.
(a) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks listed on Schedule 5.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Company now owns or
uses in connection with its business. Except with respect to those Marks shown
as licensed on Schedule 5.17(a), the Company owns all of the registered and
unregistered trademarks, service marks, and trade names that it uses. The Marks
listed on Schedule 5.17(a) will not cease to be valid rights of the Company by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. For purposes of this
Section 5.17, the term "▇▇▇▇" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names now held
by the Company, including any registration or application for registration of
any trademarks and services marks in the PTO or the equivalent thereof in any
state of the United States or in any foreign country, as well as any
unregistered marks used by the Company, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by the Company in the United States or any foreign country.
(b) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on Schedule 5.17(b)(i) and in the Copyright registrations listed on
Schedule 5.17(b)(ii). Such Patents and Copyrights constitute all of the Patents
and Copyrights that the Company now owns or is licensed to use. The Company
17
owns or is licensed to practice under all patents and copyright registrations
that the Company now owns or uses in connection with its business. For purposes
of this Section 5.17, the term "Patent" shall mean any United States or foreign
patent to which the Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by the Company;
the term "Copyright" shall mean any United States or foreign copyright owned by
the Company as of the date of this Agreement, including any registration of
copyrights, in the United States Copyright Office or the equivalent thereof in
any foreign county, as well as any application for a United States or foreign
copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "Other Rights") listed on
Schedule 5.17(c). Those Other Rights constitute all of the Other Rights that
the Company now owns or is licensed to use. The Company owns or is licensed to
practice under all trade secrets, franchises or similar rights that it owns,
uses or practices under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on
Schedules 5.17(a), 5.17(b)(i), 5.17(b)(ii), and 5.17(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by the Company is referred to herein collectively as the "Company
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third Party Intellectual Property." Except as indicated on
Schedule 5.17(d), the Company has no obligations to compensate any person for
the use of any Intellectual Property nor has the Company granted to any person
any license, option or other rights to use in any manner any Intellectual
Property, whether requiring the payment of royalties or not.
(e) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations hereunder,
in violation of any Third Party Intellectual Property license, sublicense or
agreement described in Schedule 5.17(a), (b), or (c). No claims with respect to
the Company Intellectual Property or Third Party Intellectual Property are
currently pending or, to the knowledge of the Company, are threatened by any
person, nor, to the Company's knowledge, do any grounds for any claims exist:
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by the Company
infringes on any copyright, patent, trademark, service ▇▇▇▇ or trade secret;
(ii) against the use by the Company of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in the Company's business as currently conducted by the
Company; (iii) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property or other trade secret material to the Company;
or (iv) challenging the Company's license or legally enforceable right to use of
the Third Party Intellectual Property. To the Company's knowledge, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party. Neither the Company nor any of its
subsidiaries (x) has been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim or infringement of
trade secrets, any patents, trademarks, service marks, or copyrights and which
has not been finally terminated or been informed or notified by any third party
that the Company may be engaged in such infringement or (y) has knowledge of any
infringement liability with respect to, or infringement by,
18
the Company or any of its subsidiaries of any trade secret, patent, trademark,
service ▇▇▇▇, or copyright of another.
(f) All Intellectual Property in the form of computer software that is
utilized by the Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first centuries
or can be rendered capable of processing such data by the expenditure of not
more than $25,000.
5.1 Material Contracts and Commitments.
(a) Schedule 5.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) to which the Company and any affiliate of the Company or any
officer, director or stockholder of the Company are parties ("Related Party
Agreements"); or (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, $25,000, or that may generate
revenues or income exceeding, during the current term thereof, $25,000
(collectively with the Related Party Agreements, the "Material Contracts"). The
Company has delivered to USFloral true, complete and correct copies of written,
and summaries of any oral Material Contracts. The Company has complied with all
of its commitments and obligations and is not in default under any of the
Material Contracts, and no notice of default has been received with respect to
any thereof, and there are no Material Contracts that were not negotiated at
arm's length.
(b) Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Company and is in full force and effect
and is not subject to any default thereunder by any party obligated to the
Company pursuant thereto. The Company shall obtain all necessary consents,
waivers and approvals of parties to any Material Contracts, including those set
forth on Schedule 5.18(b), that are required in connection with any of the
transactions contemplated hereby, or are required by any governmental agency or
other third party or are advisable in order that any such Material Contract
remain in effect without modification after the Merger and without giving rise
to any right to termination, cancellation or acceleration or loss of any right
or benefit ("Third Party Consents"). All Third Party Consents are listed on
Schedule 5.18(b).
(c) The outstanding balance on all loans or credit agreements either
(i) between the Company and any Person in which any of the Stockholders owns a
material interest, or (ii) guaranteed by the Company for the benefit of any
Person in which any of the Stockholders owns a material interest, are set forth
in Schedule 5.18(c).
(d) The pledge, hypothecation or mortgage of all or substantially all
of the Company's assets (including, without limitation, a pledge of the
Company's contract rights under any Material Contract) will not, except as set
forth on Schedule 5.18(d), (i) result in the breach or
19
violation of, (ii) constitute a default under, (iii) create a right of
termination under, or (iv) result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of the assets of the Company
(other than a lien created pursuant to the pledge, hypothecation or mortgage
described at the start of this Section 5.18(d)) pursuant to any of the terms and
provisions of, any Material Contract to which the Company is a party or by which
the property of the Company is bound.
5.19 Government Contracts.
(a) Except as set forth on Schedule 5.19, the Company is not a party
to any government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company, has any suspension or debarment action been threatened or commenced.
There is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
(c) Except as set forth in Schedule 5.19, the Company has not been,
nor is it now being, audited, or investigated by any government agency, or the
inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened.
(d) The Company has no dispute pending before a contracting office of,
nor any current claim (other than the Accounts Receivable) pending against, any
agency or instrumentality of the United States Government or any state or local
government, relating to a contract.
(e) The Company has not, with respect to any government contract,
received a cure notice advising the Company that it is or was in default or
would, if it failed to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate of
the Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Company's
business under circumstances where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
20
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate list of
all insurance policies presently carried by the Company and all insurance loss
runs or workmen's compensation claims received for the past two policy years.
The Company has delivered to USFloral true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Company is
otherwise in full compliance with the terms of such policies. Such policies of
insurance are of the type and in amounts customarily carried by persons
conducting businesses similar to that of the Company. The insurance carried by
the Company with respect to its properties, assets and business is, to the
Company's knowledge, with financially sound insurers. To the knowledge of the
Company, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
5.21 Labor and Employment Matters. With respect to employees of and
service providers to the Company:
(a) the Company is and has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and has not and is not engaged in
any unfair labor practice;
(b) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before the National Labor Relations Board or
any other comparable authority;
(c) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to the Company's
knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization
effort exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
21
(g) all persons classified by the Company as independent contractors
do satisfy and have satisfied the requirements of law to be so classified, and
the Company has fully and accurately reported their compensation on IRS Forms
1099 when required to do so.
5.2 Employee Benefit Plans. The Company has previously provided to
USFloral complete and accurate copies of all employee benefit plans, all
employee welfare benefit plans, all employee pension benefit plans, all multi-
employer plans and all multi-employer welfare arrangements (as defined in
Sections 3(3), (1), (2), (37) and (40), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which are currently
maintained and/or sponsored by the Company, or to which the Company currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), together
with copies of any trusts related thereto and a classification of employees
covered thereby (collectively, the "Plans"). Schedule 5.22 sets forth all of
the Plans that have been terminated within the past three years.
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 5.22. 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 Stockholders; (ii) any Plan; or (iii) the
Company has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company does not currently have (nor at the
Closing Date will have) any direct or indirect liability whatsoever (including
being subject to any statutory lien to secure payment of any such liability), to
the Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Plan
under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty; and neither the Company nor any member of a "controlled group" (as
defined in ERISA Section 4001(a)(14)) currently has (or at the Closing Date will
have) any obligation whatsoever to contribute to any "multi-employer pension
plan" (as defined in ERISA Section 4001(a)(14), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further:
22
(a) 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;
(b) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(c) 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;
(d) 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;
(e) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the Company and the Stockholders have complied (and on the Closing
Date will have complied), in all respects with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the Company has no (and will incur no)
direct or indirect liability and is not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect failure
by the Company or the Stockholders, at any time prior to the Closing Date, to
comply with any such federal or state benefit continuation requirement, which is
capable of being assessed or asserted before or after the Closing Date directly
or indirectly against the Company or the Stockholders with respect to such group
health plans;
(f) 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);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the Stockholders' knowledge, there
is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(h) 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
(i) the Company has not incurred liability under Section 4062 of
ERISA.
5.2 Conformity with Law; Litigation.
23
(a) Except as set forth on Schedule 5.23(a), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with 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.
(b) No Stockholder has, at any time: (i) committed any criminal act
(except for minor traffic violations); (ii) engaged in acts of fraud or gross
negligence; (iii) filed for personal bankruptcy; or (iv) been an officer,
director, manager, trustee or controlling shareholder of a company that filed
for bankruptcy or Chapter 11 protection.
(c) Except as set forth on Schedule 5.23(c), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of the Company,
threatened against or affecting the Company at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. There are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against the Company or against any of its properties or
business.
5.2 Taxes.
(a) Except as set forth on Schedule 5.24:
(i) The Company has timely filed all Tax Returns due on or before the
Closing Date and all such Tax Returns are true, correct and complete in all
respects.
(ii) The Company has paid in full on a timely basis all Taxes
owed by it, whether or not shown on any Tax Return.
(iii) The amount of the Company's liability for unpaid Taxes as
of the Balance Sheet Date did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the Interim
Balance Sheet, and the amount of the Company's liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for Deferred Taxes) as such accruals are reflected on the books and
records of the Company on the Closing Date.
(iv) There are no ongoing examinations or claims against the
Company for Taxes, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received.
24
(v) The Company has a taxable year ended on August 31, in each
year commencing since August 19, 1992.
(vi) The Company currently utilizes the accrual method of
accounting for income Tax purposes. The Company converted from the cash method
of accounting to the accrual method for the year ended August 31, 1997.
(vii) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or third
party.
(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of the Company for the last five fiscal years have been delivered to
USFloral.
(ix) There are (and as of immediately following the Closing there
will be) no Liens on the assets of the Company relating to or attributable to
Taxes.
(x) To the Company's knowledge, there is no basis for the assertion of
any claim relating to or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Company or otherwise have an
adverse effect on the Company or its business.
(xi) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to any payment (or portion thereof) that would not be deductible
pursuant to Sections 280G, 404 or 162 of the Code.
(xii) The Company is not, and has not been at any time, a party to
a tax sharing, tax indemnity or tax allocation agreement, and the Company has
not assumed the tax liability of any other person under contract.
(xiii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental
charge, impost or levy (including without limitation income taxes, franchise
taxes, transfer taxes or fees, sales taxes, use taxes, gross receipt taxes,
value added taxes, employment taxes, excise taxes, ad valorem taxes, property
taxes, withholding taxes, payroll taxes, minimum taxes or windfall profit
25
taxes) together with any related penalties, fines, additions to tax or interest
imposed by the United States or any state, county, local or foreign government
or subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice, form, estimate or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any tax.
5.2 Absence of Changes. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on Schedule 5.25, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers
directors, Stockholders, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with past
practice;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation the Stockholders and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of the Stockholders and their affiliates, provided
that the Company may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice;
26
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company, either individually or in
the aggregate, exceeding $25,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements which are not material and
liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
$25,000;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company,
threat of commencement, of any lawsuit or proceeding against, or investigation
of, the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with USFloral and its representatives regarding the
transactions contemplated by this Agreement).
5.26 Deposit Accounts; Powers of Attorney. Schedule 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
27
(a) the name of each financial institution in which the Company has
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding
a general or special power of attorney from the Company and a description of the
terms of such power.
5.2 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 5.27(a),
no underground storage tanks and no amount of any substance that has been
designated by any governmental entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "Hazardous Material"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased. Schedule 5.27(a) identifies all underground and
aboveground storage tanks, and the capacity, age, and contents of such tanks,
located on Real Property owned or leased by the Company.
(b) Hazardous Materials Activities. Except as set forth on Schedule
5.27(b), the Company has not transported, stored, used, manufactured, disposed
of or released, or exposed its employees or others to, Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has the
Company disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (collectively, "Company Hazardous Materials Activities") in
violation of any rule, regulation, treaty or statute promulgated by any
governmental entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. Except as set forth on Schedule 5.27(c), the Company
currently holds all environmental approvals, permits, licenses, clearances and
consents (the "Environmental Permits") necessary for the conduct of the
Company's Hazardous Material Activities and other business of the Company as
such activities and business are currently being conducted. All Environmental
Permits are in full force and effect. The Company (A) is in compliance in all
material respects with all terms and conditions of the Environmental Permits and
(B) is in compliance in all
28
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the laws of all Governmental Entities relating to pollution or
protection of the environment or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. To the Company's knowledge, there are no circumstances that
may prevent or interfere with such compliance in the future. Schedule 5.27(d)
includes a listing and description of all Environmental Permits currently held
by the Company.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of the Company, threatened concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity. There are no
past or present actions, activities, circumstances, conditions, events, or
incidents that could involve the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law) in any environmental litigation, or impose upon the Company (or any
person or entity whose liability the Company has retained or assumed, either by
contract or operation of law) any environmental liability including, without
limitation, common law tort liability.
5.28 Relations with Governments. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office, nor has it otherwise taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. The Company has delivered to USFloral and Newco true and
complete copies of each agreement, contract, commitment or other document (or
summaries thereof) that is referred to in the Schedules or that has been
requested by USFloral in writing. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, this Agreement, the schedules hereto and all other documents and
information furnished to USFloral and its representatives pursuant hereto do not
and will not include any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein not misleading. If any
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholder shall immediately
give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve the Company or the Stockholder of their
respective obligations under this Agreement, and at the sole option of USFloral,
the truth and accuracy of any and all warranties and representations of the
Stockholders, at the date of this Agreement and as of the Closing date, shall be
a precondition to the consummation of this transaction.
5.30 USFloral Prospectus; Securities Representations. Each Stockholder has
received and reviewed a copy of the prospectus dated March 18, 1998 including
all supplements thereto (as supplemented, the "USFloral Prospectus") contained
in USFloral's shelf registration statement on Form S-1 (File No. 333-39969).
Each Stockholder (a) has such knowledge, sophistication and experience in
business and financial matters that they are capable of evaluating the merits
and risks
29
of an investment in the shares of USFloral Common Stock, (b) fully
understands the nature, scope, and duration of the limitations on transfer
contained herein, in the Affiliate Agreement (if applicable), and under
applicable law, and (c) can bear the economic risk of any investment in the
shares of USFloral Common Stock and can afford a complete loss of such
investment. Each Stockholder has had an adequate opportunity to ask questions
and receive answers (and has asked such questions and received answers to its
satisfaction) from the officers of USFloral concerning the business, operations
and financial condition of USFloral. None of the Stockholders has any contract,
undertaking, agreement or arrangement, written or oral, with any other person to
sell, transfer or grant participation in any shares of USFloral Common Stock to
be acquired by such Stockholder in the Merger. Each Stockholder acknowledges and
agrees that USFloral has not and will not provide such Stockholder or any other
party with a prospectus for such Stockholder's use in selling USFloral Common
Stock.
5.31 Affiliates. The Stockholders are the only persons who are, in the
reasonable judgment of the Company and each of the Stockholders, affiliates of
the Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the 1933 Act.
5.32 Location of Chief Executive Offices. Schedule 5.32 sets forth the
location of the Company's chief executive offices.
5.33 Location of Equipment and Inventory. All Inventory and Equipment
held on the date hereof by the Company is located at one of the locations shown
on Schedule 5.33. For purposes of this Agreement, (a) the term "Inventory" shall
mean any "inventory" as such term is defined in the Uniform Commercial Code as
in effect on October 16, 1997 in the State of New York (the "N.Y.U.C.C.") owned
by the Company as of the date hereof, and, in any event, shall include, but
shall not be limited to, all merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production, and all proceeds therefrom; and (b)
the term "Equipment" shall mean any "equipment" as such term is defined in the
N.Y.U.C.C. owned by the Company as of October 16, 1997, and, in any event, shall
include, but shall not be limited to, all machinery, equipment, furnishings,
fixtures and vehicles owned by the Company, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
6. REPRESENTATIONS OF USFLORAL AND NEWCO
To induce the Company and the Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, each of USFloral and Newco
represents and warrants to the Company and the Stockholders as follows:
6.1 Due Organization. Each of USFloral and Newco is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and each is
30
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted, except
where the failure to be so authorized, qualified or licensed would not have a
Material Adverse Effect. Copies of the Certificate of Incorporation and the
Bylaws, each as amended, of USFloral and Newco (collectively, the "USFloral
Charter Documents") have been made available to the Company. Neither USFloral
nor Newco is in violation of any USFloral Charter Document.
6.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Stockholders at the Effective Time and upon payment of the
Earn-Out Consideration shall be registered under the 1933 Act and, when
delivered in accordance with the terms of this Agreement, will be valid and
legally issued shares of USFloral capital stock, fully paid and nonassessable,
and prior to the time such shares may be transferred in accordance with the
provisions of Section 7.8 hereof, will be approved for quotation on the Nasdaq
National Market.
6.3 Authorization; Validity of Obligations. The representatives of
USFloral and Newco executing this Agreement have all requisite corporate power
and authority to enter into and bind USFloral and Newco to the terms of this
Agreement. USFloral and Newco have the full legal right, power and corporate
authority to enter into this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by USFloral and Newco and the
performance by each of USFloral and Newco of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of USFloral and 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 each of USFloral and Newco enforceable in accordance
with its terms.
6.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and its
lenders, conflict with, or result in a default (or would constitute a default
but for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which 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 (i) any law or regulation to
which either USFloral or Newco or any of their respective property is subject,
or (ii) any judgment, order or decree to which USFloral or Newco is bound or any
of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
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(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USFloral or Newco is subject, or by which USFloral or Newco
is bound, (including, without limitation, the HSR Act, together with all rules
and regulations promulgated thereunder).
6.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 12,924,193 shares were outstanding on March 18, 1998. The
authorized capital stock of Newco consists of 1,000 shares of Common Stock, of
which 100 shares are outstanding. All of the issued and outstanding shares of
Newco are owned beneficially, and of record by USFloral. All of the shares of
USFloral Common Stock to be issued to the Stockholders in accordance herewith
will be offered, issued, sold and delivered by USFloral in compliance with all
applicable state and federal laws concerning the issuance of securities and none
of such shares was or will be issued in violation of the preemptive rights of
any stockholder of USFloral.
7. COVENANTS
7.1 Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Stockholders, on the one hand, and the Surviving
Corporation, on the other, for certain tax matters following the Closing Date:
(i) The Stockholders shall prepare or cause to be prepared and file or
cause to be filed, within the time and in the manner provided by law, all Tax
Returns of the Company for all periods ending on or before the Closing Date that
are due after the Closing Date. Stockholders shall pay to the Surviving
Corporation on or before the due date of such Tax Returns the amount of all
Taxes shown as due on such Tax Returns to the extent that such Taxes are not
reflected in the current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Company's books and records as of the Closing Date.
Such Returns shall be prepared and filed in accordance with applicable law and
in a manner consistent with past practices and shall be subject to review and
approval by USFloral. To the extent reasonably requested by the Stockholders or
required by law, USFloral and the Surviving Corporation shall participate in the
filing of any Tax Returns filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date. The Stockholders
shall pay to the Surviving Corporation within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Company's books and records as of the Closing Date. For purposes of this
Section 7.1, in the case of any Taxes that are imposed on a periodic basis and
are payable for a taxable period that includes (but does not end on) the Closing
Date, the portion of such
32
Tax which relates to the portion of such taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date. Any credits relating to a taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Company.
(iii) USFloral and the Surviving Corporation on one hand and the
Stockholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 7.1 and any audit, litigation or other proceeding with
respect to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating Tax matters pertinent to the
Company that is in their possession or under their control until the expiration
of any applicable statute of limitations or extensions thereof.
(iv) The Stockholders shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from or
relating to the transactions contemplated by this Agreement, and the
Stockholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
USFloral and the Surviving Corporation will join in the execution of any such
Tax Returns and other documentation.
7.2 Related Party Agreements. The Company and/or the Stockholders, as the
case may be, shall terminate any Related Party Agreements which USFloral
requests the Company or Stockholders to terminate.
7.3 Cooperation.
(a) The Company, the Stockholders, USFloral and Newco shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such instruments as the
other may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by USFloral's
independent public accountants (in connection with such accountants' audit of
the Company) or the Nasdaq National Market.
(b) The Stockholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with USFloral on and after the Closing Date in furnishing
information, evidence, testimony and other
33
assistance in connection with any filing obligations, actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby
(d) The Company, the Stockholders and USFloral shall file all notices
and other information and documents required under the HSR Act (as defined in
Section 5.3) as promptly as practicable after the date hereof.
7.4 Conduct of Business Pending Closing. Between the date hereof and the
Effective Time, the Company will (except as requested or agreed by USFloral):
(a) 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;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and key employees
and maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except for ordinary and customary bonuses and salary increases for employees
(other than employees who are also Stockholders) in accordance with past
practice.
7.5 Access to Information. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of the Company and (ii) such additional financial and
34
operating data and other information as to the business and properties of the
Company as USFloral may from time to time reasonably request, including without
limitation, access upon reasonable request to the Company's employees,
customers, vendors, suppliers and creditors for due diligence inquiry. No
information or knowledge obtained in any investigation pursuant to this Section
7.6 shall affect or be deemed to modify any representation or warranty contained
in this Agreement or the conditions to the obligations of the parties to
consummate the Merger.
7.6 Prohibited Activities. Between the date hereof and the Effective
Time, the Company will not, without the prior written consent of USFloral:
(a) make any change in its Articles of Incorporation or Bylaws, or
authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities;
(c) declare or pay any dividend, or make any distribution (whether in
cash, stock or property) in respect of its stock whether now or hereafter
outstanding, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of $25,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any
officer, director, Stockholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or encumbrance
upon any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company;
35
(i) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(j) waive any material rights or claims of the Company, provided that
the Company may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material agreement,
permit, license or other right;
(l) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with the Company or any officer,
director or Stockholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of USFloral; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.7(a) through (o) above, or any action which
would make any of the representations and warranties of the Company and the
Stockholders contained in this Agreement untrue or result in any of the
conditions set forth in Articles 8 and 9 not being satisfied.
7.7 Notice to Bargaining Agents. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by USFloral, and shall provide USFloral with proof that any required notice has
been sent.
7.8 Sales of USFloral Common Stock.
(a) No Stockholder will, directly or indirectly, offer, sell, contract
to sell, pledge or otherwise dispose of the shares of USFloral Common Stock to
be received by such Stockholder
36
in the Merger prior to, (i) with respect to one-third of the shares, eighteen
months from the Closing Date, or the payment of the Earn-Out Consideration, as
the case may be, (ii) with respect to two-thirds of the shares, twelve months
from the Closing Date, or the payment of the Earn-Out Consideration, as the case
may be and (iii) with respect to all of the shares, six months from the Closing
Date, or the payment of the Earn-Out Consideration, as the case may be.
(b) Each Stockholder acknowledges and agrees that USFloral will not
provide such Stockholder with a prospectus for such Stockholder's use in selling
the shares of USFloral Common Stock to be received by such Stockholder in the
Merger, and agrees to sell such shares only in accordance with the requirements,
if any, of Rule 145(d) promulgated under the 1933 Act. USFloral acknowledges
that the provisions of this Section 7.9(b) will be satisfied as to any sale by a
Stockholder of the USFloral Common Stock Stockholder may acquire pursuant to the
Merger pursuant to Rule 145(d) under the Securities Act, by a broker's letter
and a letter from the Stockholder with respect to that sale stating that the
applicable requirements of Rule 145(d)(1) have been met or are inapplicable by
virtue of Rule 145(d)(2) or Rule 145(d)(3) provided, however, that USFloral has
no reasonable basis to believe that such sales were not made in compliance with
such provisions of Rule 145(d) and subject to any changes in Rule 145 after the
date of this Agreement.
(c) The certificate or certificates evidencing the shares of USFloral
Common Stock to be delivered to the Stockholders in the Merger will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON ***, PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN
OF REORGANIZATION, DATED AS OF APRIL 3, 1998, AMONG THE ISSUER AND THE
STOCKHOLDERS OF AFB MARKETING, INC. A CALIFORNIA CORPORATION d/b/a ▇▇▇▇▇
▇▇▇▇▇▇▇ GREENHOUSES. PRIOR TO THE EXPIRATION OF SUCH HOLDING PERIOD, SUCH
SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT. UPON
THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) WHEN THE HOLDING PERIOD HAS EXPIRED.
37
*** With respect to the Initial Consideration, certificates representing one-
third of the shares of USFloral Common Stock issued will read "October 3, 1998,"
one-third will read "April 3, 1999" and one-third will read "October 3, 1999."
7.9 USFloral Stock Options. As soon as practicable after the Closing,
options to purchase such number of shares of USFloral Common Stock as shall have
a fair market value as of the Closing Date equal to 4.5% of the Merger
Consideration provided for in Section 2.2 above shall be available for issuance
to the key employees of the Surviving Corporation after the Closing, as
determined by the Surviving Corporation's President (or other officer or
director designated by the Surviving Corporation and acceptable to USFloral) in
accordance with USFloral's policies, and authorized and issued under the terms
of USFloral's 1997 Long-Term Incentive Plan.
7.10 Conduct of Business of Surviving Corporation. During the period
commencing on the Closing Date and ending March 31, 2000, for purposes of
providing the Stockholders with a reasonable opportunity to be entitled to the
Earn-Out Consideration, USFloral shall (i) cause the Surviving Corporation to be
managed and operated in substantially the same manner as the Company was managed
prior to the Merger, (ii) not allocate to the Surviving Corporation any charge
or expense for the amortization of goodwill or any charges for corporate
overhead in excess of the amounts expended (including, without limitation and as
applicable, salaries, benefits, rent, utilities and other charges, costs and
expenses) by the Company in the twelve months ended March 31, 1998 (after giving
effect to the "add-backs" pursuant to Schedule 5.9(b)(i)) for the corresponding
functions and services, less amounts for such services incurred directly by the
Company, and (iii) act fairly and in good faith in dealings with the
Stockholders and the Surviving Corporation.
7.11 Post-Closing Access to Books and Records. Following the Closing,
USFloral will afford, and will cause the Surviving Corporation to afford, to the
Stockholders, their counsel and their accountants, during normal business hours,
reasonable access to the books, records, other data and personnel of the
Surviving Corporation with respect to periods prior to the Closing. USFloral
shall, and shall cause the Surviving Corporation to, preserve substantially all
the material books, records and other data with respect to the business and
operations of the Company prior to the Closing (the "Records"), until the
respective tax returns for which the years to which such Records pertain are
closed, and USFloral shall, prior to the disposition of any Records, provide
thirty days notice to the Stockholders.
7.12 Compliance with Rule 144. For a period of two years following the
Closing Date, USFloral shall make available to the public such information as
will enable the Stockholders to make sales of Common Stock pursuant to Rule 144
under the 1933 Act, as such Rule may be amended from time to time.
7.13 Release of Personal Guarantees. US Floral shall cause the
Stockholders to be released from their personal guarantees of the Penske leases
described on Schedule 5.11(4) within 90 days after the Closing Date.
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7.14 Qualification. Each party agrees to use reasonable best efforts not
to take any action which could cause the underlying transaction to fail to
qualify as a reorganization pursuant to the provisions of Section 368(a)(2)(D)
of the Code.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO
The obligation of USFloral and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Company and the Stockholders on or before the Closing Date shall have been duly
complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed on behalf of the Company and by each
of the Stockholders shall have been delivered to USFloral.
8.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit claim or proceeding of any nature
pending or threatened against USFloral, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the Company.
8.3 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company, taken as a whole, since the Balance Sheet Date;
and USFloral shall have received a certificate signed by each Stockholder dated
the Closing Date to such effect.
8.4 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholders of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated, and no action by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
39
8.5 Opinion of Counsel. USFloral shall have received an opinion from
counsel to the Company and the Stockholders, dated the Closing Date, in a form
reasonably satisfactory to USFloral.
8.6 Charter Documents. USFloral shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company, and such documents shall be in form
and substance reasonably acceptable to USFloral.
8.7 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. USFloral shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
8.8 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company and by each of the Stockholders,
setting forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the
"Certified Closing Net Worth");
(c) the earnings of the Company before interest and taxes (after the
addition of "add-backs" set forth on Schedule 5.9(b)(i)) for the most recent
fiscal year preceding the Closing Date (the "Certified Year-End EBIT"); and
(d) a statement that all of the Company financial conditions set forth
in Section 5.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth, the Company shall not take account of any increase in
intangible assets (including without limitation goodwill, franchises and
intellectual property) accounted for after August 31, 1997.
8.9 Employment Agreements. Each of ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall
have entered into an employment agreement with the Company in the form attached
as Annex I hereto.
8.10 Stockholders' Release. The Stockholders shall each have delivered to
USFloral an instrument dated the Closing Date releasing the Company from any and
all claims of such Stockholder against the Company in the form attached as Annex
II hereto.
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8.11 Related Party Agreements. The Company shall have delivered to
USFloral:
(a) an executed Flower Supply Agreement, in the form of Annex III
attached hereto, between the Company and those farms in which the Stockholders
have an interest which are listed on Schedule 8.11(a) attached hereto; and
(b) evidence of repayment of all amounts due from the Stockholders and
all entities in which the Stockholders have an interest.
8.12 Termination of Payments for Add-Backs. USFloral shall have received a
certificate, dated as of the Closing Date, signed on behalf of the Surviving
Corporation in the form attached hereto as Annex IV.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS
The obligation of the Stockholders and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
9.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by USFloral and Newco on
or before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of USFloral shall have been
delivered to the Company and the Stockholders.
9.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened, against USFloral, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the USFloral and its subsidiaries taken as a
whole.
9.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting
41
period applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated, and no action by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
9.4 Employment Agreements. The Company shall have afforded ▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇ an opportunity to enter into an employment agreement with the
Company in a form reasonably satisfactory to USFloral.
10. INDEMNIFICATION
10.1 General Indemnification by the Stockholders. Each Stockholder,
jointly and severally, covenants and agrees to indemnify, defend, protect and
hold harmless USFloral, Newco and the Surviving Corporation and their respective
officers, directors, employees, stockholders, assigns, successors and affiliates
(individually, an "Indemnified Party" and collectively, "Indemnified Parties")
from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the Stockholders
or the Company set forth in this Agreement or any Schedule or certificate,
delivered by or on behalf of any Stockholder or the Company in connection
herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Stockholders or, prior to the Effective Time, the Company, under this Agreement;
or
(iii) the business, operations or assets of the Company prior to
the Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters disclosed on Schedules 5.23 (conformity with
law; litigation), 5.24 (taxes), and 5.27 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10.2 Limitation and Expiration. Notwithstanding the above:
42
(a) there shall be no liability for indemnification under Section 10.1
unless, and solely to the extent that, the aggregate amount of Damages not paid
by the Stockholders exceeds: (i) until determination of the Earn-Out
Consideration, $75,000; and (ii) upon determination of the Earn-Out
Consideration, $75,000 plus one and one-half percent of the Earn-Out
Consideration (the "Indemnification Threshold"); provided, however, that to the
extent the Stockholders pay Damages in excess of the threshold determined in
clause (i) that would not have been paid under clause (ii), the Stockholders
shall be reimbursed for such excess amount; provided, however, that the
Indemnification Threshold shall not apply to (i) adjustments to the Merger
Consideration as set forth in Sections 2.2 and 3.1; (ii) Damages arising out of
any breaches of the covenants of the Stockholders set forth in this Agreement or
representations and warranties made in Sections 5.4 (capital stock of the
Company), 5.5 (transactions in capital stock), 5.9 (Company financial
conditions), 5.18 (material contracts and commitments), 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters), or (iii) Damages
described in Section 10.1(a)(iv);
(b) the aggregate amount of the Stockholders' liability under this
Article 10 shall not exceed the Merger Consideration (net of any adjustments
pursuant to Section 2.2 and 3.1); provided, however, that the Stockholders'
liability for Damages arising out of any breaches of the representations made in
Sections 5.24 (taxes) or 5.27 (environmental matters) or Damages described in
Section 10.1(a)(ii) (except to the extent any covenant may relate to the
accuracy of Stockholders' representations and warranties hereunder) and Section
10.1(a)(iv) shall not be subject to such limitation;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.2(c):
(i)
(1) except as to representations, warranties, and covenants specified
in clause (i)(2) of this Section 10.2(c), the first anniversary of the Closing
Date, or
(2) with respect to representations and warranties contained in
Sections 5.22 (employee benefit plans), 5.24 (taxes), 5.27 (environmental
matters), and the indemnification set forth in Section 10.1(a)(ii), (iii) or
(iv), on (A) the date that is six (6) months after the expiration of the longest
applicable federal or state statute of limitation (including extensions
thereof), or (B) if there is no applicable statute of limitation, (x) ten (10)
years after the Closing Date if the Claim is related to the cost of
investigating, containing, removing, or remediating a release of Hazardous
Material into the environment, or (y) five (5) years after the Closing Date for
any other Claim covered by clause (i)(2)(B) of this Section 10.2(c); or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 10.2(c) (such claims
referred to as "Pending Claims").
43
10.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 10.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholders' Representative of such Claim,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). If the Stockholders'
Representative does not notify the Indemnified Party within thirty days after
the date of delivery of the Claim Notice that the Indemnifying Party disputes
such Claim, with a detailed statement of the basis of such position, the amount
of such Claim shall be conclusively deemed a liability of the Indemnifying Party
hereunder. In case an objection is made in writing in accordance with this
Section 10.3(a), the Indemnified Party shall respond in a written statement to
the objection within thirty days and, for sixty days thereafter, attempt in good
faith to agree upon the rights of the respective parties with respect to each of
such Claims (and, if the parties should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party (a "Third Party Claim"), the Indemnified Party shall
deliver a Claim Notice to the Stockholders' Representative. The Stockholders'
Representative shall have thirty days from the date of delivery of the Claim
Notice to notify the Indemnified Party (A) whether the Indemnifying Party
disputes liability to the Indemnified Party hereunder with respect to the Third
Party Claim, and, if so, the basis for such a dispute, and (B) if such party
does not dispute liability, whether or not the Indemnifying Party desires, at
the sole cost and expense of the Indemnifying Party, to defend against the Third
Party Claim, provided that the Indemnified Party is hereby authorized (but not
obligated) to file any motion, answer or other pleading and to take any other
action which the Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests.
(ii) In the event that Stockholders' Representative timely
notifies the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement the Indemnified Party may do so at its sole cost and expense. If
the Indemnifying Party elects not to defend the Indemnified Party against a
Third Party Claim, whether by failure of such party to give the Indemnified
Party timely notice as provided herein or otherwise, then the Indemnified Party,
without waiving any rights against such party, may settle or defend against such
Third Party Claim in the Indemnified Party's sole discretion and the Indemnified
Party
44
shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Stockholders'
Representative, any Third Party Claim seeks material prospective relief which
could have an adverse effect on any Indemnified Party or the Surviving
Corporation or any subsidiary, the Indemnified Party shall have the right to
control or assume (as the case may be) the defense of any such Third Party Claim
and the amount of any judgment or settlement and the reasonable costs and
expenses of defense shall be included as part of the indemnification obligations
of the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, the Indemnifying Party shall have the right to participate in, but
not control, the defense of such Third Party Claim at the sole cost and expense
of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 10.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 10.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
(f) In the event the Indemnified Party believes that it has the right
to seek indemnification from the Stockholder as the result of the Stockholder's
breach of any representation or covenant herein which is curable, the
Indemnified Party shall allow the Stockholder a reasonable opportunity to cure
the condition giving rise to such breach (the "Condition"), unless the
Indemnified Party in its good faith judgment does not believe the Stockholder is
capable of effecting a cure in compliance with the terms hereof on a timely
basis. As long as the Stockholder is diligently pursuing a cure of the
Condition (and provided that the Stockholder's cure is in compliance with all
laws and regulations applicable to the Condition and all parties affected by the
Condition and its cure, and that such actions are reasonably expected to cure
the Condition), the Indemnified Party shall not itself cure the Condition.
Notwithstanding the foregoing, however, if at any time the Stockholder is not so
diligently pursuing such a cure or, in the Indemnified Party's good faith
judgment, the Indemnified Party determines at any time that the Stockholder will
not be able to
45
effect a cure on a timely basis, Indemnified Party shall so notify the
Stockholder and may itself immediately undertake such cure, without forfeiting
any rights to indemnification.
10.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the Stockholders,
USFloral and Newco in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Stockholders will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 10.2. The
representations of USFloral and Newco will survive the Closing and will remain
in effect until, and will expire upon the first anniversary of the Closing Date,
except with respect to the representations set forth in Section 6.2 hereof which
will remain in effect until, and will expire upon the third anniversary of the
Closing Date.
10.5 Remedies Cumulative. The remedies set forth in this Article 10 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
10.6 Right to Set Off. USFloral shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 10.3 to be owed to USFloral by the Stockholders
under Section 10.1 hereof.
11. NONCOMPETITION
11.1 Prohibited Activities. The Stockholders agree that for a period of
two years following the Merger Effective Date, they shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with the Surviving
Corporation or USFloral, including without limitation the importing, brokerage,
manufacture, assembly, packaging, distribution, shipping or marketing of floral
products (including, without limitation, hardgoods), or any business engaging in
the consolidation of the floral industry within the United States of America
(the "Territory");
(b) call upon any person who is, at that time, within the Territory,
an employee of USFloral or any subsidiary of USFloral in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of USFloral or such subsidiary;
46
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of USFloral or any
subsidiaries of USFloral, the Company within the Territory for the purpose of
soliciting or selling floral products within the Territory;
(d) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon by
any of them or for which any of them made an acquisition analysis for themselves
or USFloral or any subsidiaries of USFloral, the Company; or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Stockholders from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market ; (ii) engaging
in any activity to which USFloral shall have provided its prior written consent;
or (iii) engaging in activities on behalf of ▇▇▇▇▇ ▇▇▇▇▇ International, LLC or
Creative Horticulture Inc. consistent with past practice.
11.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFloral and the Surviving Corporation for which they would
have no other adequate remedy, the Stockholders agree that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporation by, without limitation, injunctions and
restraining orders.
11.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Stockholders
in light of the activities and business of USFloral on the date of the execution
of this Agreement and the current and future plans of USFloral and the Surviving
Corporation (as successors to the businesses of the Company).
11.4 Severability; Reformation. The covenants in this Article 11 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.
11.5 Independent Covenant. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholders
against the Company, the Surviving Corporation or USFloral, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
years stated above, shall be computed by excluding from such computation any
time during which any Stockholder is
47
in violation of any provision of this Article 11 and any time during which there
is pending in any court of competent jurisdiction any action (including any
appeal from any judgment) brought by any person, whether or not a party to this
Agreement, in which action USFloral or the Surviving Corporation seeks to
enforce the agreements and covenants of the Stockholders or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement; provided, however, that if
any Stockholder is found not to be in violation of the agreements or covenants
in any such activity the period during which the action was pending shall not be
excluded from such computation.
11.6 Materiality. The Company and each Stockholder hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 Stockholders. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's business. The Stockholders
agree that they will not disclose any confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of USFloral, unless the
Stockholders can show that such information has become known to the public
generally through no fault of the Stockholders. In the event of a breach or
threatened breach by the Stockholders of the provisions of this Article 12,
USFloral and the Surviving Corporation shall be entitled to an injunction
restraining the Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
USFloral and the Surviving Corporation from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
12.2 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 Stockholders. In the event of
a breach or threatened breach by USFloral of the provisions of this Article 12,
the Stockholders shall be entitled to an injunction restraining USFloral from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would
48
be caused for which they would have no other adequate remedy, USFloral, the
Surviving Corporation and the Stockholders agree that, in the event of a breach
by any of them of the foregoing covenant, the covenant may be enforced against
them by injunctions and restraining orders.
13. GENERAL
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the boards of directors of USFloral and the
Company; or
(b) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if the Closing shall not have occurred on or
before April 3, 1998, provided that the right to terminate this Agreement under
this Section 13.1(b) shall not be available to either party (with the
Stockholders and the Company deemed to be a single party for this purpose) whose
material misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholders and the Company deemed to be a single party for this purpose) of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
governmental entity which would make the consummation of the Merger illegal.
13.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 13 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
13.1(c) above, then notwithstanding the provisions of Section 13.7 below, the
breaching party (with the Stockholders and the Company deemed to be a single
party for purposes of this Article 13), shall be liable to the other party to
the extent of the expenses incurred by such other party in connection with this
Agreement and the transactions contemplated hereby.
49
13.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Stockholders.
13.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto, or in accordance with Section 11.4. Any
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 Brokers and Agents. USFloral and Newco (as a group) and the Company
and each Stockholder (as a group) each represents and warrants to the other that
it has not employed any broker or agent in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
13.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and Newco and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement. The Stockholders (and not the Company) have and will pay the fees,
expenses and disbursements of the Stockholders, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
13.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
50
13.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to USFloral, Newco or the Surviving Corporation to:
U.S.A. Floral Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and Chief Executive Officer
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
with a required copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
If to any Stockholder to:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇) (Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
with a required copy to:
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇, Hargreaves & Savitch
▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
51
13.10 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without giving effect to any of the conflicts of laws provisions thereof that
would require the application of the substantive laws of any other jurisdiction.
13.11 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 11.4.
13.12 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
13.13 Further Representations. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
13.14 Accounting Terms. Except as otherwise expressly provided herein or in
the Schedules, all accounting terms used in this Agreement shall be interpreted,
and all financial statements, Schedules, certificates and reports as to
financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
13.15 Legal Expenses. The prevailing Party in any legal action brought by
one Party against the other and arising out of this Agreement shall be entitled,
in addition to any other rights and remedies it may have, to reimbursement for
its expenses, including court costs and reasonable attorneys' fees.
[Execution Page Following]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U.S.A. FLORAL PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and CEO
ASG ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
AFB MARKETING, INC.
d/b/a ▇▇▇▇▇ ▇▇▇▇▇▇▇ GREENHOUSES
By: /s/ ▇▇▇▇ ▇▇▇▇▇, President
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STOCKHOLDERS:
/s/ ▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇
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SCHEDULES
SCHEDULE 1.1 [Form of Plan of Merger]
SCHEDULES TO ARTICLE 5 [Schedules of exceptions to the representations
and warranties]
SCHEDULE 8.11 [Related Party Agreements]
ANNEXES
ANNEX I [Form of Employment Agreement]
ANNEX II [Form of Stockholders' Release]
ANNEX III [Form of Flower Supply Agreement]
ANNEX IV [Form of Certificate regarding Termination
of Payment]
The Schedules and Annexes to this Agreement will be provided to the Commission
Supplementally upon request.
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