Exhibit 2.14 - Agreement and Plan of
Reorganization by and among U.S.A.
Floral Products, Inc., KDI
Acquisition Corp., ▇▇▇▇▇▇▇ &
Dramm, Inc. and the Stockholder
named therein made effective as
of January 16, 1998.
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
U.S.A. Floral Products, Inc.,
KDI Acquisition Corp.,
▇▇▇▇▇▇▇ & Dramm, Inc.
and
The Stockholders Named Therein
made effective as of January 16, 1998
Table of Contents
Page
----
1. THE MERGER............................................................ 1
1.1 The Merger.................................................... 1
1.2 Certificate 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.................. 4
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS............................... 5
3.1 Post-Closing Adjustment....................................... 5
3.2 Pledged Assets................................................ 6
3.3 Stockholders' Representative.................................. 8
4. CLOSING............................................................... 8
4.1 Location and Date............................................. 8
4.2 Effect........................................................ 8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS.... 9
5.1 Due Organization.............................................. 9
5.2 Authorization; Validity....................................... 9
5.3 No Conflicts.................................................. 9
5.4 Capital Stock of the Company.................................. 10
5.5 Transactions in Capital Stock................................. 10
5.6 Subsidiaries, Stock, and Notes................................ 11
5.7 Predecessor Status............................................ 11
5.8 Absence of Claims Against the Company......................... 11
5.9 Company Financial Conditions.................................. 11
5.10 Financial Statements......................................... 11
5.11 Liabilities and Obligations.................................. 12
5.12 Accounts and Notes Receivable................................ 13
5.13 Books and Records............................................ 13
5.14 Permits...................................................... 13
5.15 Real Property................................................ 14
5.16 Personal Property............................................ 15
5.17 Intellectual Property........................................ 16
5.18 Material Contracts and Commitments........................... 17
5.19 Government Contracts......................................... 18
5.20 Insurance.................................................... 19
5.21 Labor and Employment Matters................................. 19
5.22 Employee Benefit Plans....................................... 20
5.23 Conformity with Law; Litigation.............................. 22
5.24 Taxes........................................................ 23
5.25 Absence of Changes........................................... 25
5.26 Deposit Accounts; Powers of Attorney......................... 27
5.27 Environmental Matters........................................ 27
5.28 Relations with Governments................................... 28
5.29 Disclosure................................................... 28
5.30 USFloral Prospectus; Securities Representations.............. 29
5.31 Affiliates................................................... 29
5.32 Location of Chief Executive Offices.......................... 29
5.33 Location of Equipment and Inventory.......................... 29
6. REPRESENTATIONS OF USFLORAL AND NEWCO................................. 30
6.1 Due Organization.............................................. 30
6.2 USFloral Common Stock......................................... 30
6.3 Authorization; Validity of Obligations........................ 30
6.4 No Conflicts.................................................. 30
6.5 Capitalization of USFloral and Ownership of USFloral Stock.... 31
7. COVENANTS............................................................. 31
7.1 Tax Matters................................................... 31
7.2 Related Party Agreements...................................... 32
7.3 Cooperation................................................... 33
7.4 Conduct of Business Pending Closing........................... 33
7.5 Access to Information......................................... 34
7.6 Prohibited Activities......................................... 34
7.7 Sales of USFloral Common Stock................................ 36
7.8 USFloral Stock Options........................................ 37
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO......... 37
8.1 Representations and Warranties; Performance of Obligations.... 37
8.2 No Litigation................................................. 38
8.3 No Material Adverse Change.................................... 38
8.4 Consents and Approvals........................................ 38
8.5 Opinion of Counsel............................................ 38
8.6 Charter Documents............................................. 38
8.7 Quarterly Financial Statements................................ 39
8.8 Due Diligence Review.......................................... 39
8.9 Delivery of Closing Financial Certificate..................... 39
8.10 Employment Agreement......................................... 39
8.11 Stockholders' Release........................................ 39
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9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS.......................................................... 40
9.1 Representations and Warranties; Performance of Obligations.... 40
9.2 No Litigation................................................. 40
9.3 Consents and Approvals........................................ 40
9.4 Employment Agreements......................................... 40
10. INDEMNIFICATION....................................................... 41
10.1 General Indemnification by the Stockholders.................. 41
10.2 Limitation and Expiration.................................... 41
10.3 Indemnification Procedures................................... 42
10.4 Survival of Representations Warranties and Covenants......... 44
10.5 Remedies Cumulative.......................................... 44
10.6 Right to Set Off............................................. 44
11. NONCOMPETITION........................................................ 45
11.1 Prohibited Activities........................................ 45
11.2 Damages...................................................... 45
11.3 Reasonable Restraint......................................... 46
11.4 Severability; Reformation.................................... 46
11.5 Independent Covenant......................................... 46
11.6 Materiality.................................................. 46
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................. 46
12.1 Stockholders................................................. 46
12.2 USFloral..................................................... 47
12.3 Damages...................................................... 47
13. GENERAL............................................................... 47
13.1 Termination.................................................. 47
13.2 Effect of Termination........................................ 48
13.3 Successors and Assigns....................................... 48
13.4 Entire Agreement; Amendment; Waiver.......................... 48
13.5 Counterparts................................................. 49
13.6 Brokers and Agents........................................... 49
13.7 Expenses..................................................... 49
13.8 Specific Performance; Remedies............................... 49
13.9 Notices...................................................... 49
13.10 Governing Law............................................... 50
13.11 Severability................................................ 50
13.12 Absence of Third Party Beneficiary Rights................... 51
13.13 Further Representations..................................... 51
13.14 Accounting Terms............................................ 51
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered into this 16th day of January, 1998, by and among U.S.A. Floral
Products, Inc., a Delaware corporation ("USFloral"), KDI Acquisition Corp., a
Delaware corporation and a newly-formed, wholly-owned subsidiary of USFloral
("Newco"), ▇▇▇▇▇▇▇ & Dramm, Inc., a Delaware corporation (the "Company"),
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ 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 State of 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 Certificate of Incorporation; Bylaws, Directors and Officers.
At the Effective Time:
(a) The Certificate of Incorporation of the Surviving Corporation from
and after the Effective Time shall be the Certificate of Incorporation of Newco,
which shall be amended simultaneously with the consummation of the Merger to
change the name of the Surviving Corporation to "▇▇▇▇▇▇▇ & Dramm, Inc.," until
thereafter amended in accordance with the provisions therein and as provided by
the applicable provisions of the Delaware General Corporation Law.
(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 Certificate of Incorporation of the Surviving Corporation and as
provided by the Delaware General Corporation Law.
(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 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 Delaware General Corporation Law. 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.
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(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
common stock of the Company, $1.00 par value per share ("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 automatically be
canceled and extinguished and converted, without any action on the part of the
holder thereof, into the right to receive (i) an amount of cash equal to the
cash portion of the Merger Consideration divided by the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time and
(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 Merger Consideration
(as defined in Section 2.2) 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
be $10.0 million adjusted pursuant to this Section 2.2 and Section 3.1. Of the
Merger Consideration, $5.0 million shall be paid in cash at Closing in
immediately available funds. The remaining $5.0 million of the Merger
Consideration shall be paid in shares of USFloral Common Stock valued at $16.745
per share (the "Merger Price"). The 298,596 shares of USFloral Common Stock to
be issued (subject to adjustment as provided in this Section 2.2 and Section
3.1) shall be registered under the Securities Act of 1933, as amended (the "1933
Act").
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(b) The Merger Consideration has been calculated based upon several
factors, including the assumption that the net worth (total assets minus total
liabilities) of the Company, calculated in accordance with generally accepted
accounting principles ("GAAP") consistently applied, is equal to or greater than
$3.7 million (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)).
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 assignments separate from
certificate 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 assignments separate from certificate 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 the number of shares of USFloral Common Stock and the amount of cash
as provided by this Article 2 and the applicable provisions of the Delaware
General Corporation Law.
(c) No Further Ownership Rights in Capital Stock of the Company. All
USFloral Common Stock and cash to be delivered (including 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
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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 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) 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 one hundred twenty (120) 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"), and within one
hundred fifty (150) days following the Effective Time to complete 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. Without limiting
the generality of the foregoing, within two weeks after the Closing the
Stockholders shall provide USFloral's Accountants with the information and/or
documents requested on the Post-Closing Audit Checklist set forth as Schedule
3.1 hereto. 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"), (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 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
5
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 thirty (30) 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 30-day period, USFloral shall be
entitled to receive from the Stockholders (which may, at USFloral's sole
reasonable discretion, be from the Pledged Assets as defined in Section 3.2) the
Merger Consideration Adjustment. If, however, the Stockholders' Representative
has delivered notice of such a dispute to USFloral within such 30-day period,
then USFloral's Accountant shall select an independent accounting firm that has
not represented any of the parties hereto within the preceding two (2) years to
review the Surviving Corporation's books, Closing Financial Certificate and
Financial Adjustment Notice (and related information) to determine the amount,
if any, of the Merger Consideration Adjustment. Such independent accounting
firm shall be confirmed by the Stockholders' Representative and USFloral within
five (5) days of its selection, unless there is an actual conflict of interest.
The independent accounting firm shall be directed to consider only those
agreements, contracts, commitments or other documents (or summaries thereof)
that were either (i) delivered or made available to USFloral's Accountant in
connection with the transactions contemplated hereby, or (ii) reviewed by
USFloral's Accountant during the course of the Post-Closing Audit. The
independent accounting firm shall make its determination of the 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 reasonable
discretion, be from the Pledged Assets as defined in Section 3.2) the Merger
Consideration Adjustment, if any. 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.
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) 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 Merger Consideration as the same may have been adjusted pursuant to Section
2.2 or Section 3.1 hereof,
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and the certificates and instruments, if any, representing or evidencing each
such Stockholder's Pledged Assets;
(ii) 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 dividends 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 in trust for USFloral and shall immediately
deliver such property to USFloral to be held hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing property
and all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property.
(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 said terms are defined in Article 10), and (iii)
any indemnification obligations of the Stockholders pursuant to Article 10. For
purposes of the preceding sentence 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 and
(y) the average of the closing price on the Nasdaq National Market per share of
USFloral Common Stock for the five trading days prior to the satisfaction of an
indemnification obligation (the "Market Value") with respect to indemnification
obligations pursuant to Article 10.
(d) The Stockholders shall be entitled to exercise all voting powers
incident to USFloral Common Stock held as Pledged Assets, but shall not be
entitled to exercise any investment or dispositive powers over such USFloral
Common Stock.
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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 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 ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, on January 16, 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
Delaware General Corporation Law (the "Merger Documents"), together with any
required officers' certificates, shall be filed with the Secretary of the State
of Delaware in accordance with the provisions of the Delaware General
Corporation Law. The Merger shall become effective upon such filings or at such
later time as may be specified in such filings (the "Effective Time").
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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 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):
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.
The Company is in good standing as a foreign corporation in each jurisdiction it
which it is required to be qualified. The Company has delivered to USFloral
true, complete and correct copies of the Certificate of Incorporation and Bylaws
of the Company. Such Certificate 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 promptly after the Closing Date, shall 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:
9
(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;
(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 common stock, $1.00 par value, of
which 70,101.80 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
10
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 Company and rights to acquire capital stock of
the Company.
5.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 5.6(a), the Company has no
subsidiaries.
(b) Except as set forth on Schedule 5.6(b), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership 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. 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 (i) as of the end of its most recent
fiscal year was not less than $3.7 million, and (ii) as of the Closing will not
be less than the Net Worth Target. 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 8.9.
(b) The Company's earnings before interest and taxes for (i) its most
recent fiscal year (after the addition of "add-backs" set forth on Schedule
5.9(b)) was not less than $1.3 million and (ii) the two-month period ended
September 30, 1997, was not materially less than $150,000.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete
and correct copies of the Company's audited balance sheet as of July
31, 1997 (the end of its most recently completed fiscal year), and income
statement for the year then ended (collectively, the "Audited
11
Financials") and (b) true, complete and correct copies of the Company's
unaudited balance sheet (the "Interim Balance Sheet") as of October 31, 1997
(the "Balance Sheet Date") and income statement, for the three-month period then
ended (collectively, the "Interim Financials," and together with the Audited
Financials, the "Company Financial Statements"). Except as noted on the
auditors' report accompanying the Audited Financials, the Company Financial
Statements have been prepared in accordance with GAAP consistently applied,
subject to, in the case of the Interim Financials, (i) normal year-end audit
adjustments, which individually or in the aggregate will not be material, (ii)
the exceptions stated on Schedule 5.10, and (iii) the omission of footnote
information. 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
(i) as requested by USFloral to conform the Company's accounting policies to
GAAP or (ii) pursuant to the provision set forth in Section 5.25(o) hereof.
5.11 Liabilities and Obligations.
(a) The Company is not liable for or subject to any liabilities
except for:
(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 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.
12
(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 two (2)
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"). On the Closing Date, the Company will deliver to
USFloral a complete and accurate list, as of a date not more than two (2)
business days prior to the Closing Date, of the Accounts Receivable. All
Accounts Receivable represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. The Accounts
Receivable are current and collectible net of any respective reserves shown on
the Company's books and records as of the Closing Date (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable will be collected in full, without any
set-off, within ninety (90) days after the day on which it first became due and
payable; provided however, those Accounts Receivable set forth on Schedule 5.12
will continue to be collected on a monthly basis, consistent with past practice,
and will be collected in full by the date set forth on Schedule 5.12, unless the
parties otherwise agree. 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.
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"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in
13
the Permits and other applicable orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing. The transactions
contemplated by this Agreement will not result in a default under, or a breach
or violation of, or adversely affect the rights and benefits afforded to the
Company by, any Permit.
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(b) includes all interests in real property
necessary to conduct the current business and operations of the Company.
(c) Except as set forth in Schedule 5.15(c):
(i) The Real Property and all present uses and operations of the Real
Property by the Company comply with all applicable statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments, decrees, awards or
restrictions of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Laws"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property. The
Company has obtained all approvals of governmental authorities (including
certificates of use and occupancy, licenses and permits) required in connection
with the use, occupation and operation of the Real Property by the Company.
(ii) To the Company's knowledge, there are no pending or 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.
(iii) There are no parties other than the Company in possession of
any of the Real Property or any portion thereof, and there are no leases,
subleases, licenses,
14
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.
(iv) To the Company's knowledge, all real property taxes and
assessments that are due and payable with respect to the Real Property have been
paid or will be paid at or prior to Closing.
(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 Leases and the Company's
interests thereunder 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.
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 good 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).
15
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 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
16
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." 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, 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 no more than $25,000.
5.18 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
17
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,
$10,000, or that may generate revenues or income exceeding, during the current
term thereof, $10,000 (collectively with the Related Party Agreements, the
"Material Contracts"). The Company has delivered to USFloral true, complete and
correct copies of the Material Contracts. The Company has complied with all of
its commitments and obligations and is not in default under any 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 7.2, is valid and binding on the Company and is in full force and effect
and is not, to the knowledge of the Company, subject to any default thereunder
by any party obligated to the Company pursuant thereto. The Company [has
obtained/will obtain prior to the Closing Date] all necessary consents, waivers
and approvals of parties to any Material Contracts that are required in
connection with any of the transactions contemplated hereby, or are required by
any governmental agency or other third party or are advisable in order that any
such Material Contract remain in effect without modification after the 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 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) 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
18
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) 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) 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.
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate
list, as of the Balance Sheet Date, of all insurance policies carried by the
Company and all insurance loss runs or workmen's compensation claims received
for the past two policy years. The Company has delivered to USFloral true,
complete and correct copies of all current insurance policies, all of which are
in full force and effect. All premiums payable under all such policies have
been paid and the Company is otherwise in full compliance with the terms of such
policies. Such policies of insurance are of the type and in amounts 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;
19
(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
(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.
5.22 Employee Benefit Plans. Attached hereto as Schedule 5.22 are
complete and accurate copies, as of the Balance Sheet Date, of all employee
benefit plans, all employee welfare benefit plans, all employee pension benefit
plans, all multi-employer plans and all multi-employer welfare arrangements (as
defined in Sections 3(3), (1), (2), (37) and (40), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), which are
currently maintained and/or sponsored by the Company, or to which the Company
currently contributes, or has an obligation to contribute in the future
(including, without limitation, employment agreements and any other agreements
containing "golden parachute" provisions and deferred compensation agreements),
together with copies of any trusts related thereto and a classification of
employees covered thereby (collectively, the "Plans"). Schedule 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. Except as
disclosed on Schedule 5.22, 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
20
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:
(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;
21
(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.
5.23 Conformity with Law; Litigation.
(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,
dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy 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.
22
5.24 Taxes.
(a)
(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.
(v) The Company has a taxable year ended on July 31, in each year
commencing not later than 1976.
(vi) The Company currently utilizes the accrual method of accounting
for income Tax purposes and such method of accounting has not changed in the
past 20 years. The Company has not agreed to, and is not and will not be
required to, make any adjustments under Code Section 481(a) as a result of a
change in accounting methods.
(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.
23
(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 a
Material Adverse Effect on the Company.
(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 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.
(c) The Stockholders have, and as of the Effective Time will have, no
present plan, intention or arrangement to sell, transfer or otherwise dispose of
a number of shares of USFloral Common Stock (whether received in the Merger or
otherwise acquired, held or disposed of by the Stockholders) in excess of the
lesser of (i) the number of shares of USFloral Common Stock to be received by
the Stockholders in the Merger or (ii) that number of shares of USFloral Common
Stock to be received in the Merger that would reduce the Stockholders' ownership
of USFloral Common Stock to a number of shares having a value, as of the close
of the Merger, of less than 50% of the value of all of the issued and
outstanding Company Common Stock immediately prior to the Effective Time.
24
(d) The Merger qualifies as a tax-free
reorganization pursuant to the provisions of Section 368(a)(2)(D) of the Code.
5.25 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;
(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;
25
(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 $50,000;
(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; provided, that, prior to the
date of this Agreement, the Company shall have the right to increase its reserve
for uncollectible accounts receivable to the extent that it deems appropriate;
(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
$10,000;
(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).
26
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:
(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.
5.27 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. 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.
27
(c) Permits. 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 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. 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
28
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 November 18, 1997
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 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.
29
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 the
State of Delaware, and each is 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 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.
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
30
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
(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 9,594,050 shares were outstanding on November 19, 1997. 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. 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:
(a) 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 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.
31
(b) 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 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 Surviving Corporation.
(c) 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.
(d) 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 (other than the
Related-Party Agreement set forth on Schedule 7.2 hereto) which USFloral
requests the Company or Stockholders to terminate.
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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 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
33
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 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 7.7 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 Certificate 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;
34
(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 $100,000, 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;
(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;
35
(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 7.6(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 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 in the Merger prior to the date that is six
months from the Closing Date. No Stockholder will, directly or indirectly,
offer, sell, contract to sell, pledge or otherwise dispose of more than one-
third of the number of shares of USFloral Common Stock to be received by such
Stockholder in the Merger prior to the date that is twelve months from the
Closing Date. No Stockholder will, directly or indirectly, offer, sell,
contract to sell, pledge or otherwise dispose of more than two-thirds of the
number of shares of USFloral Common Stock to be received by such Stockholder in
the Merger prior to the date that is eighteen months from the Closing Date.
(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 7.7(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:
36
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 JANUARY 16, 1998, AMONG THE ISSUER AND THE
STOCKHOLDERS OF ▇▇▇▇▇▇▇ & DRAMM, INC., A DELAWARE CORPORATION. PRIOR TO THE
EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OR ASSIGNMENT. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING
PERIOD HAS EXPIRED.
** Certificates representing one-third of the shares of USFloral Common Stock
issued will read "July 16, 1998," one-third will read "January 16, 1999" and
one-third will read "July 16, 1999."
7.8 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 6.25% 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 in accordance with
USFloral's policies, and authorized and issued under the terms of USFloral's
1997 Long-Term Incentive Plan.
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
37
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.
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
Certificate 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.
38
8.7 Quarterly Financial Statements. USFloral shall have received from the
Company completed quarterly financial statements in a form reasonably
satisfactory to USFloral, and the Merger shall have been approved by USFloral's
lenders.
8.8 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. USFloral shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
8.9 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company 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 as a percent of sales (the "Certified
Year-End EBIT");
(d) the earnings of the Company before interest and taxes for the two-
month period ending on September 30, 1997 (the "Certified Closing EBIT"); and
(e) 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 and the Certified Closing EBIT, the Company shall not take
account of any increase in intangible assets (including without limitation
goodwill, franchises and intellectual property) accounted for after July 31,
1997.
8.10 Employment Agreement. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall have entered into an
employment agreement with the Company in a form reasonably satisfactory to
USFloral.
8.11 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.
39
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 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 ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ an opportunity to enter into an employment agreement with the Company in a
form reasonably satisfactory to USFloral and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
40
10. INDEMNIFICATION
10.1 General Indemnification by the Stockholders. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
jointly and severally, and each of the other Stockholders, 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 Articles 7,
11 and 12 of 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 5.22 (employee benefit plans)
(but solely to the extent set forth on such Schedule 5.22 in response to the
second paragraph of Section 5.22 hereof), 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:
(a) there shall be no liability for indemnification under Section 10.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
$200,000 (the
41
"Indemnification Threshold"); 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) or 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; 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) 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").
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
42
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 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
43
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.
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.
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.
44
11. NONCOMPETITION
11.1 Prohibited Activities. The Stockholders agree that for a period of
two years following the Effective Time, 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;
(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 five
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market or (ii) engaging
in any activity to which USFloral shall have provided its prior written consent.
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
45
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 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.
46
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 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 January 15, 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
47
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, as well as any damages in
accordance with applicable law.
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
48
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.
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.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
49
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and Chief Executive Officer
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
If to any Stockholder to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
(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.
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
50
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.
[Execution Page Following]
51
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/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President & CEO
KDI ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
▇▇▇▇▇▇▇ & DRAMM, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇.▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
STOCKHOLDERS:
/s/ ▇▇▇▇▇▇▇ ▇.▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
52
SCHEDULES
SCHEDULE 1.1 [Form of Plan of Merger]
SCHEDULE 3.1 [Stockholders Post-Closing Audit Checklist]
SCHEDULE 5.1 [Jurisdictions in which Target is Qualified to Do
Business]
SCHEDULE 5.4 [Issued and Outstanding Stock of Target]
SCHEDULE 5.5 [Transactions in Capital Stock]
SCHEDULE 5.6(a) [Subsidiaries]
SCHEDULE 5.6(b) [Other Securities Owned]
SCHEDULE 5.6(c) [Promissory Notes]
SCHEDULE 5.7 [Predecessor Companies]
SCHEDULE 5.9(b) [Add-Backs]
SCHEDULE 5.10 [Company Financial Statements]
SCHEDULE 5.11(c) [Material Capital Expenditures]
SCHEDULE 5.11(d) [Indebtedness]
SCHEDULE 5.12 [Accounts Receivables]
SCHEDULE 5.15(b) [Real Property]
SCHEDULE 5.15(c) [Real Property Exceptions]
SCHEDULE 5.16(a) [Personal Property]
SCHEDULE 5.17(a) [Registered and Unregistered Marks]
SCHEDULE 5.17(b)(i) [Patents]
SCHEDULE 5.17(b)(ii) [Copyright Registrations]
SCHEDULE 5.17(c) [Other Rights]
SCHEDULE 5.18(a) [Material Contracts]
SCHEDULE 5.18(b) [Third Party Consents]
SCHEDULE 5.18(c) [Outstanding Balance on Related Party Agreements]
SCHEDULE 5.18(d) [Default upon Mortgage]
SCHEDULE 5.20 [Insurance Policies]
SCHEDULE 5.22 [Employee Benefit Plans]
SCHEDULE 5.23(a) [Conformity with Law]
SCHEDULE 5.23(c) [Litigation]
SCHEDULE 5.25 [Absence of Changes]
SCHEDULE 5.26 [Deposit Accounts; Powers of Attorney]
SCHEDULE 5.27(a) [Hazardous Material]
SCHEDULE 5.27(d) [Environmental Permits]
SCHEDULE 5.32 [Location of Chief Executive Offices]
SCHEDULE 5.33 [Location of Equipment and Inventory]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.14 to the Commission supplementally upon request
therefor.
i