Exhibit 2.15
STOCK PURCHASE AGREEMENT
By and Among
U.S.A. Floral Products, Inc.,
Maxima Farms, Inc.
Maxima Farms, Ltd.
and
The Principal Beneficial Owner of Maxima Farms, Ltd.
dated April 3, 1998
Table of Contents
Page
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1. THE SALE AND PURCHASE OF SHARES....................................... 1
1.1 The Stock Purchase............................................ 1
1.2 Purchase Price................................................ 1
1.3 Certain Information with Respect to Capital Stock
of the Company.............................................. 2
2. POST CLOSING ADJUSTMENT; PLEDGED ASSETS............................... 2
2.1 Post-Closing Adjustment....................................... 2
2.2 Pledged Assets................................................ 4
3. CLOSING............................................................... 6
3.1 Location and Date............................................. 6
3.2 Closing Deliveries............................................ 6
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER..... 6
4.1 Due Organization.............................................. 6
4.2 Authorization; Validity....................................... 7
4.3 No Conflicts.................................................. 7
4.4 Capital Stock of the Company.................................. 8
4.5 Transactions in Capital Stock................................. 8
4.6 Subsidiaries, Stock, and Notes................................ 8
4.7 Predecessor Status............................................ 9
4.8 Absence of Claims Against the Company......................... 9
4.9 Company Financial Conditions.................................. 9
4.10 Financial Statements.......................................... 9
4.11 Liabilities and Obligations................................... 9
4.12 Accounts and Notes Receivable................................. 10
4.13 Books and Records............................................. 10
4.14 Permits....................................................... 11
4.15 Real Property................................................. 11
4.16 Personal Property............................................. 12
4.17 Intellectual Property......................................... 13
4.18 Material Contracts and Commitments............................ 14
4.19 Government Contracts.......................................... 15
4.20 Insurance..................................................... 16
4.21 Labor and Employment Matters.................................. 16
4.22 Employee Benefit Plans........................................ 17
4.23 Conformity with Law; Litigation............................... 19
4.24 Taxes......................................................... 20
4.25 Absence of Changes............................................ 21
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4.26 Deposit Accounts; Powers of Attorney.......................... 23
4.27 Environmental Matters......................................... 23
4.28 Relations with Governments.................................... 24
4.29 Disclosure.................................................... 25
4.30 USFloral Prospectus; Securities Representations............... 25
4.31 Affiliates.................................................... 25
4.32 Location of Chief Executive Offices........................... 25
4.33 Location of Equipment and Inventory........................... 25
5. REPRESENTATIONS OF USFLORAL........................................... 26
5.1 Due Organization.............................................. 26
5.2 USFloral Common Stock......................................... 26
5.3 Authorization; Validity of Obligations........................ 26
5.4 No Conflicts.................................................. 26
5.5 Capitalization of USFloral and Ownership of USFloral Stock.... 27
6. COVENANTS............................................................. 27
6.1 Tax Matters................................................... 27
6.2 Related Party Agreements...................................... 28
6.3 Cooperation................................................... 28
6.4 Conduct of Business Pending Closing........................... 29
6.5 Access to Information......................................... 30
6.6 Prohibited Activities......................................... 30
6.7 Notice to Bargaining Agents................................... 32
6.8 Sales of USFloral Common Stock................................ 32
6.9 USFloral Stock Options........................................ 33
6.10 Conduct of Business of Surviving Corporation.................. 33
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL................... 33
7.1 Representations and Warranties; Performance of Obligations.... 33
7.2 No Litigation................................................. 34
7.3 No Material Adverse Change.................................... 34
7.4 Consents and Approvals........................................ 34
7.5 Opinion of Counsel............................................ 34
7.6 Charter Documents............................................. 34
7.7 Quarterly Financial Statements................................ 34
7.8 Due Diligence Review.......................................... 34
7.9 Delivery of Closing Financial Certificate..................... 35
7.10 Employment Agreements......................................... 35
7.11 Stockholders' Release......................................... 35
7.12 Supply Agreements............................................. 35
7.13 Repayment of Indebtedness..................................... 35
7.14 Termination of Payments for Add-Backs......................... 35
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8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDER........................................................... 36
8.1 Representations and Warranties; Performance of Obligations... 36
8.2 No Litigation................................................ 36
8.3 Consents and Approvals....................................... 36
9. INDEMNIFICATION....................................................... 36
9.1 General Indemnification by the Stockholder................... 36
9.2 Limitation and Expiration.................................... 37
9.3 Indemnification Procedures................................... 38
9.4 Survival of Representations Warranties and Covenants......... 40
9.5 Remedies Cumulative.......................................... 40
9.6 Right to Set Off............................................. 40
10. NONCOMPETITION........................................................ 40
10.1 Prohibited Activities........................................ 40
10.2 Damages...................................................... 41
10.3 Reasonable Restraint......................................... 41
10.4 Severability; Reformation.................................... 41
10.5 Independent Covenant......................................... 41
10.6 Materiality.................................................. 42
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................. 42
11.1 Stockholder and Principal.................................... 42
11.2 USFloral..................................................... 42
11.3 Damages...................................................... 42
12. GENERAL............................................................... 43
12.1 Termination.................................................. 43
12.2 Effect of Termination........................................ 43
12.3 Successors and Assigns....................................... 44
12.4 Entire Agreement; Amendment; Waiver.......................... 44
12.5 Counterparts................................................. 44
12.6 Brokers and Agents........................................... 44
12.7 Expenses..................................................... 44
12.8 Specific Performance; Remedies............................... 44
12.9 Notices...................................................... 45
12.10 Governing Law................................................ 45
12.11 Severability................................................. 46
12.12 Absence of Third Party Beneficiary Rights.................... 46
12.13 Guarantee.................................................... 46
12.14 Further Representations...................................... 46
12.15 Accounting Terms............................................. 46
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
this 3rd day of April, 1998, by and among U.S.A. Floral Products, Inc., a
Delaware corporation ("USFloral"), Maxima Farms, Inc., a Florida corporation
(the "Company"), Maxima Farms Ltd., the sole stockholder of the Company (the
"Stockholder") and the principal beneficial owner of the Stockholder (the
"Principal").
BACKGROUND
WHEREAS, the Stockholder owns all of the issued and outstanding shares of
capital stock of the Company and desires to sell all such shares to USFloral and
USFloral desires to purchase all such shares from the Stockholder at the
purchase price and upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE SALE AND PURCHASE OF SHARES
1.1 The Stock Purchase. Subject to the terms and conditions of this
Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
hereinafter defined) the Stockholder shall sell to USFloral all of the Company
Stock (as defined in Section 1.3 hereof) and USFloral shall purchase (the "Stock
Purchase") from the Stockholder all of the Company Stock, in exchange for the
Purchase Price (as defined in Section 1.2 hereof), subject to adjustment as
provided in Section 1.2 hereof. The Company, after the consummation of the
Stock Purchase, is sometimes referred to as the "Surviving Corporation."
1.2 Purchase Price.
(a) For purposes of this Agreement, the "Purchase Price" shall
include the Initial Consideration and the Earn-Out Consideration. The "Initial
Consideration" shall be $10,600,000, less the aggregate amount of the long-term
indebtedness of the Company, including the current portion thereof, adjusted
pursuant to this Section 1.2 and Section 2.1. Of the Initial Consideration,
$5,300,000 less long-term debt shall be paid in cash at Closing in immediately
available funds. The remaining $5,300,000 of the Initial Consideration shall be
paid in shares of USFloral Common Stock valued at $22.706 per share (the
"Initial Price"). For each $1.00 by which the Company's and the Surviving
Corporation's earnings before interest and taxes ("EBIT") for the twelve months
ending December 31, 1998 (the "1998 EBIT") exceeds $1,674,000, USFloral shall
pay to the Stockholder $6.00 (the "Earn-Out Consideration"). The Earn-Out
Consideration shall not exceed $6,000,000. The Earn-Out Consideration shall be
paid in USFloral Common Stock valued at the average closing price on the Nasdaq
National Market per share of USFloral Common Stock for each trading day during
the thirty calendar day period ending December 31,1998 (the "Earn-Out Price").
The Earn-
Out Consideration, if any, shall be paid within thirty days of the determination
by Price Waterhouse of the 1998 EBIT. In calculating the 1998 EBIT, Price
Waterhouse LLP ("USFloral's Accountant") shall add to EBIT any amounts paid by
the Company in respect of those items set forth on Schedule 4.9(b)(ii) hereof
during the period beginning on January 1, 1998 and ending on the Closing Date.
The shares of USFloral Common Stock to be issued (subject to adjustment as
provided in this Section 1.2 and Section 2.1) shall be registered under the
Securities Act of 1933, as amended (the "1933 Act").
(b) The Purchase Price has been calculated based upon several
factors, including the assumption that the net worth of the Company, calculated
in accordance with generally accepted accounting principles ("GAAP")
consistently applied, is equal to or greater than $2,294,000 (the "Net Worth
Target") as of the Closing.
(c) If, on the Closing Financial Certificate (as defined in Section
7.9), the Certified Closing Net Worth (as defined in Section 7.9) is less than
the Net Worth Target, then the Purchase Price to be delivered to the Stockholder
may, at USFloral's election, be reduced either (i) at the Closing, or (ii) after
completion of the Post-Closing Audit (as defined in Section 2.1), by the
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 Initial Price in the same
proportions as the cash and USFloral Common Stock components of the Purchase
Price as provided in Section 1.2(a)).
(d) The Earn-Out Consideration has been calculated based upon several
factors, including the assumption that the Surviving Corporation's earnings
before interest and taxes for the year ended December 31, 1999 (the "1999 EBIT")
will be no less than the 1998 EBIT. For each $1.00 by which the 1999 EBIT is
less than the lesser of (i) 1998 EBIT or (ii) $2,674,000, the Stockholder will
repay USFloral $6.00 in USFloral Common Stock, valued at the Earn-Out Price, up
to the amount of the Earn-Out Consideration received by the Stockholder.
1.3 Certain Information with Respect to Capital Stock of the Company. As
of the date of this Agreement, the authorized capital stock of the Company
consists of 200,000 shares of common stock, par value $.001 per share (the
"Company Stock"), of which 112,544 shares of Company Stock are issued and
outstanding.
2. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
2.1 Post-Closing Adjustment.
(a) The Purchase Price shall be subject to adjustment after the
Closing Date as specified in this Section 2.1.
(b) Within one hundred twenty (120) days following the Closing Date,
USFloral shall cause USFloral's Accountant to audit the Surviving Company's
books to determine the accuracy
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of the information set forth on the Closing Financial Certificate (the "Post-
Closing Audit"). The parties acknowledge and agree that for purposes of
determining the net worth of the Company as of the Closing Date, the value of
the assets of the Company shall, except with the prior written consent of
USFloral, be calculated as provided in the last paragraph of Section 7.9. The
Stockholder shall cooperate and shall use its 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
Stockholder shall provide USFloral's Accountant with the information and/or
documents requested on the Post-Closing Audit Checklist set forth as Schedule
2.1 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 Stockholder 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 Purchase Price that would have been payable at
Closing pursuant to Section 1.2(c) had the Actual Company Net Worth been
reflected on the Closing Financial Certificate instead of the Certified Closing
Net Worth, and (iii) the amount by which the number of shares issued as the
Purchase Price would have been reduced at Closing had the Actual Company Net
Worth been used in the calculations pursuant to Section 1.2(c) (the "Purchase
Price Adjustment"). The Purchase Price Adjustment shall take account of the
reduction, if any, to the Purchase Price already taken pursuant to Section
1.2(c)(i).
(c) The Stockholder shall have thirty (30) days from the receipt of
the Financial Adjustment Notice to notify USFloral if the Stockholder disputes
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 Stockholder (which may, at USFloral's sole discretion, be from the Pledged
Assets as defined in Section 3.2) the Purchase Price Adjustment. If, however,
the Stockholder has delivered notice of such a dispute to USFloral within such
30-day period, then USFloral's Accountant shall select a "Big-Five" independent
accounting firm that has not represented any of the parties hereto within the
preceding two (2) years to review the Surviving Corporation's books, Closing
Financial Certificate and Financial Adjustment Notice (and related information)
to determine the amount, if any, of the Purchase Price Adjustment. Such
independent accounting firm shall be confirmed by the Stockholder and USFloral
within five (5) days of its selection, unless there is an actual conflict of
interest. The independent accounting firm shall be directed to consider only
those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to USFloral's
Accountant in connection with the transactions contemplated hereby, or (ii)
reviewed by USFloral's Accountant during the course of the Post-Closing Audit.
The independent accounting firm shall make its determination of the Purchase
Price Adjustment, if any, within thirty (30) days of its selection. The
determination made by the independent accounting firm shall be final and binding
on the parties hereto, and upon such determination, USFloral shall be entitled
to receive from the Stockholder (which may, at USFloral's sole discretion, be
from the Pledged Assets as defined in Section 2.2) the Purchase Price
Adjustment. The costs of the independent accounting firm shall be borne by the
party (either USFloral or the Stockholder) whose determination of the Company's
net worth at Closing was further from the
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determination of the independent accounting firm, or equally by USFloral and the
Stockholder in the event that the determination by the independent accounting
firm is equidistant between the Certified Closing Net Worth and the Actual
Company Net Worth.
(d) Within one hundred twenty days following December 31, 1999
USFloral shall cause USFloral's Accountant to determine the Surviving
Corporation's 1999 EBIT. In the event that USFloral's Accountant determines
that the Surviving Corporation's 1999 EBIT was less than the 1998 EBIT, USFloral
shall deliver a written notice (the "Earn-Out Adjustment Notice") to the
Stockholder, setting forth (i) the determination made by USFloral's Accountant
of the 1999 EBIT, (ii) the amount of the Earn-Out Consideration that would have
been payable had the Earn-Out Consideration been calculated based on the 1999
EBIT rather than the 1998 EBIT and (iii) the amount by which the number of
shares issued as the Earn-Out Consideration would have been reduced at Closing
had the 1999 EBIT been used to calculate the Earn-Out Consideration (the "Earn-
Out Consideration Adjustment").
(e) The Stockholder shall have thirty (30) days from the receipt of
the Earn-Out Adjustment Notice to notify USFloral if the Stockholder disputes
such Earn-Out Adjustment Notice. Such notice shall include the Stockholder's
determination of the amount of 1999 EBIT. If USFloral has not received notice of
such a dispute within such 30-day period, USFloral shall be entitled to receive
from the Stockholder the Earn-Out Consideration Adjustment. If, however, the
Stockholder has delivered notice of such a dispute to USFloral within such 30-
day period, then USFloral's Accountant shall select a "Big-Five" 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 and Earn-
Out Adjustment Notice (and related information) to determine the amount, if any,
of the Earn-Out Consideration Adjustment. Such independent accounting firm
shall be confirmed by the Stockholder and USFloral within five (5) days of its
selection, unless there is an actual conflict of interest. The independent
accounting firm shall make its determination of the Earn-Out Consideration
Adjustment, if any, within thirty (30) days of its selection. The determination
made by the independent accounting firm shall be final and binding on the
parties hereto, and upon such determination, USFloral shall be entitled to
receive from the Stockholder the Earn-Out Consideration Adjustment. The costs
of the independent accounting firm shall be borne by the party (either USFloral
or the Stockholder) whose determination of 1999 EBIT was further from the
determination of the independent accounting firm, or equally by USFloral and the
Stockholder in the event that the determination by the independent accounting
firm is equidistant between USFloral's and the Stockholder's determination of
1999 EBIT.
2.2 Pledged Assets.
(a) As collateral security for the payment of any post-Closing
adjustment to the Purchase Price under Section 2.1, or any indemnification
obligations of the Stockholder pursuant to Article 9, the Stockholder 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"):
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(i) at the Closing, that number of shares of USFloral Common
Stock with a value, based on the Initial Price, equal to ten percent (10%) of
the Initial Consideration as the same may have been adjusted pursuant to Section
1.2 or Section 2.1 hereof, and the certificates and instruments, if any,
representing or evidencing each such Stockholder's Pledged Assets; upon
determination of the Earn-Out Consideration, that number of shares of USFloral
Common Stock with a value, based on the Earn-Out Price, equal to ten percent
(10%) of the Earn-Out Consideration, and the certificates and instruments, if
any, representing or evidencing the Pledged Assets;
(ii) upon determination of the Earn-Out Consideration, that
number of shares of USFloral Common Stock with a value, based on the Earn-Out
Price equal to fifty percent (50%) of the Earn-Out Consideration (the "Earn-Out
Pledged Assets");
(iii) all securities hereafter delivered to such Stockholder
with respect to or in substitution for the Pledged Assets, all certificates and
instruments representing or evidencing such securities, and all cash and non-
cash dividends and other property at any time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and in the
event the Stockholder receives any such property, the 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
(iv) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing the Pledged Assets issued in
the Stockholder's name in the Stock Purchase 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. The 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 the Pledged Assets shall be withheld by USFloral from distribution to
the Stockholder.
(c) The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Purchase Price pursuant to Section 2.1 and any indemnification
obligations of the Stockholder pursuant to Article 9 until the date which is one
year after the Closing Date (the "Release Date"). Promptly following the Release
Date, USFloral shall return or cause to be returned to the Stockholder the
Pledged Assets, less Pledged Assets having an aggregate value equal to the
amount of (i) any post-Closing adjustment to the Purchase Price under Section
2.1, (ii) any pending claim for indemnification made by any Indemnified Party
(as defined in Article 9), and (iii) any indemnification obligations of the
Stockholder pursuant to Article 9. Notwithstanding the preceding two sentences
the Earn-Out Pledged Assets shall be available to satisfy any adjustment to the
Earn-Out Consideration until the determination by USFloral's Accountant's of the
1999 EBIT. Promptly following such determination, USFloral shall cause to be
returned to the Stockholder the Earn-Out Pledged Assets, less Earn-Out Pledged
Assets having an aggregate value equal to the amount of any adjustment to the
Earn-Out Consideration under Section 2.1. For purposes of this Section 2.2(c)
and Article 9, the USFloral Common Stock held as Pledged Assets shall be valued
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at (x) the Initial Price with respect to any post-Closing adjustment to the
Purchase Price under Section 2.1, (y) the Earn-Out Price with respect to any
adjustment to the Earn-Out Consideration and (z) the average of the closing
price on the Nasdaq National Market per share of USFloral Common Stock for the
five trading days prior to the satisfaction of an indemnification obligation
(the "Market Value") with respect to indemnification obligations pursuant to
Article 9.
3. CLOSING
3.1 Location and Date. The Stock Purchase and the other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, on April 3, 1998, providing that all conditions
to Closing shall have been satisfied or waived, or at such other time and date
as USFloral, the Company and the Stockholder may mutually agree, which date
shall be referred to as the "Closing Date."
3.2 Closing Deliveries.
(a) At the Closing the Stockholder, as the holder of all outstanding
certificates representing shares of Company Stock, shall surrender such
certificates to USFloral and USFloral shall deliver to the Stockholder the
Initial Consideration set forth in Section 1.2 above.
(b) The Stockholder shall deliver to USFloral at Closing the
certificates representing the Company Stock, duly endorsed in blank by the
Stockholder, or accompanied by blank irrevocable stock powers, and with all
necessary transfer tax and other revenue stamps, acquired at the Stockholder's
expense, affixed and canceled and shall take such steps as shall be necessary to
cause the Company to enter USFloral or its nominee(s) upon the books of the
Company as the holder of the Company Stock and to issue one or more share
certificates to USFloral or its nominee(s) representing the Company Stock. The
Stockholder agrees promptly to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
such Company Stock or with respect to the stock powers accompanying any Company
Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
To induce USFloral to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Stockholder,
jointly and severally, represents and warrants to USFloral as follows (for
purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
Stockholder and the directors and officers of the Company, including facts of
which the directors and officers, in the reasonably prudent exercise of their
duties, should be aware):
4.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly authorized,
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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 4.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 does business. The Company
has delivered to USFloral true, complete and correct copies of the Articles of
Incorporation and Bylaws of the Company. Such Articles of Incorporation and
Bylaws are collectively referred to as the "Charter Documents." The Company is
not in violation of any Charter Documents. The minute books of the Company have
been made available to USFloral (and 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 4.1, complete in all material respects.
4.2 Authorization; Validity. The Company has all requisite corporate power
and authority to enter into and perform its obligations pursuant to the terms of
this Agreement. The Company has the full legal right, corporate power and
authority to enter into this Agreement and the transactions contemplated hereby.
Each of the Stockholder and the Principal 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 Stockholder, 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,
the Stockholder, enforceable in accordance with its terms.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which the Company or the
Stockholder is a party or by which the Company or the 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 the Stockholder or any of their respective property is subject, or
(ii) any judgment, order or decree to which the Company or the 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
7
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company or the Stockholder is subject or by which the
Company or the Stockholder is bound including, without limitation, the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), together with
all rules and regulations promulgated thereunder.
4.4 Capital Stock of the Company. The authorized capital stock of the
Company consists of 200,000 shares of common stock, $.001 par value, of which
112,544 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 Stockholder in the amounts set forth in Schedule 4.4 free
and clear of all Liens (defined below). All of the issued and outstanding
shares of the capital stock of the Company were offered, issued, sold and
delivered by the Company in compliance with all applicable 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).
4.5 Transactions in Capital Stock. No option, warrant, call, subscription
right, conversion right or other contract or commitment of any kind exists of
any character, written or oral, which may obligate the Company to issue, sell or
otherwise cause to become outstanding any shares of capital stock. The Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. As a result of the Stock
Purchase, 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.
4.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 4.6(a), the Company has no
subsidiaries.
(b) Except as set forth on Schedule 4.6(b), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
8
(c) Except as set forth on Schedule 4.6(c), there are no promissory
notes that have been issued to, or are held by, the Company.
4.7 Predecessor Status. Schedule 4.7 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.
4.8 Absence of Claims Against the Company. The Stockholder has no claims
against the Company.
4.9 Company Financial Conditions.
(a) The Company's net worth (i) as of the end of its most recent
fiscal year was not less than $2,294,000, and (ii) as of the Closing will not be
less than the Net Worth Target. For purposes of this Section 4.9(a),
calculation of amounts as of the Closing shall be made in accordance with the
last paragraph of Section 7.9.
(b) The Company's earnings before interest and taxes (after the
addition of "add-backs" set forth on Schedule 4.9(b)) for its most recent fiscal
year was not less than $1,674,000.
4.10 Financial Statements. Schedule 4.10 includes true, complete and
correct copies of the Company's unaudited balance sheet as of December 31, 1997
(the "Balance Sheet Date") (the end of its most recently completed fiscal year),
and income statement for the year then ended (collectively, the "Company
Financial Statements"). The Company Financial Statements have been prepared in
accordance with GAAP consistently applied. Each balance sheet included in the
Company Financial Statements presents fairly the financial condition of the
Company as of the date indicated thereon, and each of the income statements
included in the Company Financial Statements presents fairly the results of its
operations for the periods indicated thereon. Since the dates of the Company
Financial Statements, there have been no material changes in the Company's
accounting policies other than as requested by USFloral to conform the Company's
accounting policies to GAAP.
4.11 Liabilities and Obligations.
(a) The Company is not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Balance Sheet and not
previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
9
(iii) those liabilities incurred since the Balance Sheet Date
in the ordinary course of business consistent with past practice, which
liabilities are not, individually or in the aggregate, material.
(b) The Company has delivered to USFloral, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 4.11(c) also includes a summary description of all
plans or projects involving the opening of new operations, expansion of any
existing operations or the acquisition of any real property or existing
business, to which management of the Company has made any material expenditure
in the two-year period prior to the date of this Agreement, which if pursued by
the Company or the Surviving Corporation would require additional material
expenditures of capital.
(d) For purposes of this Section 4.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured. Schedule 4.11(d)
contains a complete list of all indebtedness of the Company.
4.12 Accounts and Notes Receivable. The Company has delivered to USFloral
a complete and accurate list, as of 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, the
Stockholder and the Principal), 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 (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. 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.
4.13 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
10
4.14 Permits. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing. The
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any Permit.
4.15 Real Property.
(a) For purposes of this Agreement, "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 4.15(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 4.15(b) indicates whether the Real Property is owned or leased. The
Real Property listed on Schedule 4.15 includes all interests in real property
necessary to conduct the business and operations of the Company.
(c) Except as set forth in Schedule 4.15(c):
(i) The Real Property and all present uses and operations of
the Real Property substantially 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
licenses and permits) required in connection with the use, occupation and
operation of the Real Property.
(ii) There are no pending or, to the Company's knowledge,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof, nor has the Company
11
or the Stockholder received notice of any pending or threatened special
assessment proceedings affecting any portion of the Real Property.
(iii) Except as set forth on Schedule 4.15(c), there are no
parties other than the Company in possession of any of the Real Property or any
portion thereof, and there are no leases, subleases, licenses, concessions or
other agreements, written or oral, granting to any party or parties the right of
use or occupancy of any portion of the Real Property or any portion thereof.
(iv) 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. Except as set forth on
Schedule 4.15(c), the Leases and the Company's interests thereunder are free of
all Liens.
(v) None of the Leases requires the consent or approval of
any party thereto in connection with the consummation of the transactions
contemplated hereby.
4.16 Personal Property.
(a) Schedule 4.16(a) sets forth a complete and accurate list of all
personal property included on the Balance Sheet and all other personal property
owned or leased by the Company with a current book value in excess of $10,000
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 the Stockholder, the Principal or business or personal
affiliates of the Stockholder, the Principal or 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 4.16(a), are in good working
order and condition, ordinary wear and tear excepted. All leases set forth on
Schedule 4.16(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 4.16(a).
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4.17 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 4.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Company now owns or
uses in connection with its business. Except with respect to those Marks shown
as licensed on Schedule 4.17(a), the Company owns all of the registered and
unregistered trademarks, service marks, and trade names that it uses. The Marks
listed on Schedule 4.17(a) will not cease to be valid rights of the Company by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. For purposes of this
Section 4.17, the term "▇▇▇▇" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names 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 4.17(b)(i) and in the Copyright registrations listed on
Schedule 4.17(b)(ii). Such Patents and Copyrights constitute all of the Patents
and Copyrights that the Company now owns or is licensed to use. The Company
owns or is licensed to practice under all patents and copyright registrations
that the Company now owns or uses in connection with its business. For purposes
of this Section 4.17, the term "Patent" shall mean any United States or foreign
patent 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 4.17(c). Those Other Rights constitute all of the Other Rights that
the Company now owns or is licensed to use. The Company owns or is licensed to
practice under all trade secrets, franchises or similar rights that it owns,
uses or practices under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on
Schedules 4.17(a), 4.17(b)(i), 4.17(b)(ii), and 4.17(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by the Company is referred to herein collectively as the "Company
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third Party Intellectual Property." Except as indicated on
Schedule 4.17(d), the Company has no
13
obligations to compensate any person for the use of any Intellectual Property
nor has the Company granted to any person any license, option or other rights to
use in any manner any Intellectual Property, whether requiring the payment of
royalties or not.
(e) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations hereunder,
in violation of any Third Party Intellectual Property license, sublicense or
agreement described in Schedule 4.17(a), (b), or (c). No claims with respect to
the Company Intellectual Property or Third Party Intellectual Property are
currently pending or, to the knowledge of the Company, are threatened by any
person, nor, to the Company's knowledge, do any grounds for any claims exist:
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by the Company
infringes on any copyright, patent, trademark, service ▇▇▇▇ or trade secret;
(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.
4.18 Material Contracts and Commitments.
(a) Schedule 4.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) to which the Company and any affiliate of the Company or any
officer, director or 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, $50,000, or that may generate
revenues or income exceeding, during the current term thereof, $50,000
(collectively with the Related Party Agreements, the "Material Contracts"). The
Company has delivered to USFloral true, complete and correct copies of the
14
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 6.4, is valid and binding on the Company and is in full force and effect
and is not subject to any default thereunder by any party obligated to the
Company pursuant thereto. The Company [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 Stock Purchase and without giving rise to any
right to termination, cancellation or acceleration or loss of any right or
benefit ("Third Party Consents"). All Third Party Consents are listed on
Schedule 4.18(b).
(c) The outstanding balance on all loans or credit agreements either
(i) between the Company and any Person in which the Stockholder or the Principal
owns a material interest, or (ii) guaranteed by the Company for the benefit of
any Person in which the Stockholder or the Principal owns a material interest,
are set forth in Schedule 4.18(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 4.18(d), (i) result in the breach or violation of, (ii)
constitute a default under, (iii) create a right of termination under, or (iv)
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the assets of the Company (other than a lien created
pursuant to the pledge, hypothecation or mortgage described at the start of this
Section 4.18(d)) pursuant to any of the terms and provisions of, any Material
Contract to which the Company is a party or by which the property of the Company
is bound.
4.19 Government Contracts.
(a) Except as set forth on Schedule 4.19, the Company is not a party
to any government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company, has any suspension or debarment action been threatened or commenced.
There is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
(c) Except as set forth in Schedule 4.19, the Company has not been,
nor is it now being, audited, or investigated by any government agency, or the
inspector general or auditor general
15
or similar functionary of any agency or instrumentality, nor, to the knowledge
of the Company, has such audit or investigation been threatened.
(d) The Company has no dispute pending before a contracting office
of, nor any current claim (other than the Accounts Receivable) pending against,
any agency or instrumentality of the United States Government or any state or
local government, relating to a contract.
(e) The Company has not, with respect to any government contract,
received a cure notice advising the Company that it is or was in default or
would, if it failed to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate of
the Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Company's
business under circumstances where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
4.20 Insurance. Schedule 4.20 sets forth a complete and accurate list of
all insurance policies carried by the Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. The
Company has delivered to USFloral true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Company is
otherwise in full compliance with the terms of such policies. Such policies of
insurance are of the type and in amounts 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.
4.21 Labor and Employment Matters. With respect to employees of and
service providers to the Company:
(a) the Company is and has been in compliance in all material respects
with all applicable 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
16
Reform and Control Act, and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there
been, any unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before the National Labor Relations Board or
any other comparable authority;
(c) there is not now, nor within the past three years has there
been, any labor strike, slowdown or stoppage actually pending or, to the
Company's knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization
effort exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(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.
4.22 Employee Benefit Plans. Attached hereto as Schedule 4.22 are
complete and accurate copies of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multi-employer plans and
all multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), which are currently maintained and/or sponsored by
the Company, or to which the Company currently contributes, or has an obligation
to contribute in the future (including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions and
deferred compensation agreements), together with copies of any trusts related
thereto and a classification of employees covered thereby (collectively, the
"Plans"). Schedule 4.22 sets forth all of the Plans that have been terminated
within the past three years.
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") have been determined by
the Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent
17
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 4.22. To the extent that any Qualified Plans have not been amended
to comply with applicable law, the remedial amendment period permitting
retroactive amendment of such Qualified Plans has not expired and will not
expire within 120 days after the Closing Date. All reports and other documents
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, annual reports,
summary annual reports, actuarial reports, PBGC-1 Forms, audits or tax returns)
have been timely filed or distributed. None of: (i) the Stockholder; (ii) any
Plan; or (iii) the Company has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the Company does not currently have (nor
at the Closing Date will have) any direct or indirect liability whatsoever
(including being subject to any statutory lien to secure payment of any such
liability), to the Pension Benefit Guaranty Corporation ("PBGC") with respect to
any such Plan under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty; and neither the Company nor any member of a "controlled
group" (as defined in ERISA Section 4001(a)(14)) currently has (or at the
Closing Date will have) any obligation whatsoever to contribute to any "multi-
employer pension plan" (as defined in ERISA Section 4001(a)(14), nor has any
withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further:
(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 Stockholder have complied (and on the Closing Date
will have complied), in all respects with all reporting, disclosure, notice,
election and other benefit continuation requirements imposed thereunder as and
when applicable to such plans, and the Company has 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
18
Company or the Stockholder, at any time prior to the Closing Date, to comply
with any such federal or state benefit continuation requirement, which is
capable of being assessed or asserted before or after the Closing Date directly
or indirectly against the Company or the Stockholder with respect to such group
health plans;
(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 Company's knowledge, there is
no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(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.
4.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 4.23(a), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with 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) The Stockholder has not, 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 4.23(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
19
a court or administrative agency or by arbitration) against the Company or
against any of its properties or business.
4.24 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 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, and since , 19 has had, a
----------- --
taxable year ended on December 31.
(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 three 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.
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(x) To the Company's knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have an adverse effect on the Company or its business.
(xi) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company that, individually or
collectively, could give rise to any payment (or portion thereof) that would not
be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(xii) The Company is not, and has not been at any time, a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the tax liability of any other person under contract.
(xiii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar
governmental charge, impost or levy (including without limitation income taxes,
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipt
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes or windfall
profit 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.
4.25 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 4.25, 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;
21
(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;
(j) any purchase or acquisition of, or agreement, plan or
arrangement to purchase or acquire, any property, rights or assets outside of
the ordinary course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company, either individually or in
the aggregate, exceeding $25,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
22
(p) any creation or assumption by the Company of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements which are not material
and liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or
non-renewal by the Company of any contract, lease transaction, commitment or
other right or obligation requiring aggregate payments by the Company in excess
of $25,000;
(r) any loan by the Company to any person or entity, incurring by
the Company, of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company,
threat of commencement, of any lawsuit or proceeding against, or investigation
of, the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with USFloral and its representatives
regarding the transactions contemplated by this Agreement).
4.26 Deposit Accounts; Powers of Attorney. Schedule 4.26 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.
4.27 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule
4.27(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,
23
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 4.27(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.
(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 4.27(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.
4.28 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.
24
4.29 Disclosure. The Company has delivered to USFloral true and complete
copies of each agreement, contract, commitment or other document (or summaries
thereof) that is referred to in the Schedules or that has been requested by
USFloral. Without limiting any exclusion, exception or other limitation
contained in any of the representations and warranties made herein, this
Agreement, the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If any
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholder shall immediately
give notice of such fact or circumstance to USFloral. However, such notification
shall not relieve the Company or the Stockholder of their respective obligations
under this Agreement, and at the sole option of USFloral, the truth and accuracy
of any and all warranties and representations of the Stockholders, at the date
of this Agreement and as of the Closing date, shall be a precondition to the
consummation of this transaction.
4.30 USFloral Prospectus; Securities Representations. The Stockholder has
received and reviewed a copy of the prospectus dated March 18, 1998 including
all supplements thereto (as supplemented, the "USFloral Prospectus") contained
in USFloral's shelf registration statement on Form S-1 (File No. 333-39969). The
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,
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. The 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 the Stockholder in the Stock Purchase. The Stockholder
acknowledges and agrees that USFloral has not and will not provide the
Stockholder or any other party with a prospectus for the Stockholder's use in
selling USFloral Common Stock.
4.31 Affiliates. The Stockholder and the Principal are the only persons
who are, in the reasonable judgment of the Company, the Stockholder, and the
Principal, affiliates of the Company within the meaning of Rule 145 (each such
person an "Affiliate") promulgated under the 1933 Act.
4.32 Location of Chief Executive Offices. Schedule 4.32 sets forth the
location of the Company's chief executive offices.
4.33 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 4.33. 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
25
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.
5. REPRESENTATIONS OF USFLORAL
To induce the Company and the Stockholder to enter into this Agreement and
consummate the transactions contemplated hereby, USFloral represents and
warrants to the Company and the Stockholder as follows:
5.1 Due Organization. USFloral is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, 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 (collectively, the
"USFloral Charter Documents") have been made available to the Company. USFloral
is not in violation of any USFloral Charter Document.
5.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Stockholder at the Closing Date, 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.
5.3 Authorization; Validity of Obligations. The representatives of
USFloral executing this Agreement have all requisite corporate power and
authority to enter into and bind USFloral to the terms of this Agreement.
USFloral has the full legal right, power and corporate authority to enter into
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by USFloral and the performance by USFloral of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of USFloral, and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of USFloral enforceable in accordance with its terms.
5.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
26
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and
its lenders, conflict with, or result in a default (or would constitute a
default but for a requirement of notice or lapse of time or both) under any
document, agreement or other instrument to which USFloral is a party, or result
in the creation or imposition of any lien, charge or encumbrance on any of
USFloral's properties pursuant to (i) any law or regulation to which USFloral or
any of its property is subject, or (ii) any judgment, order or decree to which
USFloral is bound or any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USFloral is subject, or by which USFloral is bound,
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
5.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 12,924,193 shares were outstanding on February 27, 1998. All of
the shares of USFloral Common Stock to be issued to the Stockholder 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.
6. COVENANTS
6.1 Tax Matters. The following provisions shall govern the allocation of
responsibility as between the Stockholder, on the one hand, and the Surviving
Corporation, on the other, for certain tax matters following the Closing Date:
(a) The Stockholder 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. The Stockholder shall pay to the Surviving
Corporation on or before the due date of such Tax Returns the amount of all
Taxes shown as due on such Tax Returns to the extent that such Taxes are not
reflected in the current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Company's books and records as of the Closing Date.
Such Returns shall be prepared and filed in accordance with applicable law and
in a manner consistent with past practices and shall be subject to review and
approval by USFloral. To the extent reasonably requested by the Stockholder or
required by law, USFloral and the Surviving Corporation shall participate in the
filing of any Tax Returns filed pursuant to this paragraph.
27
(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 Stockholder 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 6.1, 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
Stockholder on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns pursuant
to this Section 6.1 and any audit, litigation or other proceeding with respect
to Taxes; (B) make available to the other, as reasonably requested, all
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 Stockholder 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 Stockholder
shall, at its own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration, and other Taxes and fees. If required by applicable law, USFloral
and the Surviving Corporation will join in the execution of any such Tax Returns
and other documentation.
6.2 Related Party Agreements. The Company and/or the Stockholder, as the
case may be, shall terminate any Related Party Agreements which USFloral
requests the Company or Stockholder to terminate.
6.3 Cooperation.
(a) The Company, the Stockholder, the Principal and USFloral shall
each deliver or cause to be delivered to the other on the Closing Date, and at
such other times and places as shall
28
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 Stockholder 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 Stockholder and USFloral shall file all notices
and other information and documents required under the HSR Act (as defined in
Section 4.3) as promptly as practicable after the date hereof.
6.4 Conduct of Business Pending Closing. Between the date hereof and the
Closing Date, the Company will (except as requested or agreed by USFloral):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present, ordinary
wear and tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and key employees
and maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments; and
29
(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.
6.5 Access to Information. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of the Company and (ii) such additional financial and operating data
and other information as to the business and properties of the Company as
USFloral may from time to time reasonably request, including without limitation,
access upon reasonable request to the Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or knowledge
obtained in any investigation pursuant to this Section 6.6 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Stock
Purchase.
6.6 Prohibited Activities. Between the date hereof and the Closing Date,
the Company will not, without the prior written consent of USFloral:
(a) make any change in its Articles of Incorporation or Bylaws, or
authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities;
(c) declare or pay any dividend, or make any distribution (whether
in cash, stock or property) in respect of its stock whether now or hereafter
outstanding, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice, in
an amount in excess of $25,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any
officer, director, Stockholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
30
(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 Stock Purchase,
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;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of USFloral; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 6.7(a) through (o) above, or any action which
would make any of the representations and warranties of the Company and the
Stockholders contained in this Agreement untrue or result in any of the
conditions set forth in Articles 8 and 9 not being satisfied.
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6.7 Notice to Bargaining Agents. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by USFloral, and shall provide USFloral with proof that any required notice has
been sent.
6.8 Sales of USFloral Common Stock.
(a) No Stockholder will, directly or indirectly, offer, sell,
contract to sell, pledge or otherwise dispose of one-half of the shares of
USFloral Common Stock to be received by such Stockholder in the Stock Purchase
prior to the date that is, (i) with respect to one-third of the shares, eighteen
months from the Closing Date or the date of determination of the Earn-Out
Consideration, as the case may be, (ii) with respect to two-thirds of the
shares, twelve months from the Closing Date or the date of determination of the
Earn-Out Consideration, as the case may be and (iii) with respect to all of the
shares, six months from the Closing Date or the date of determination of the
Earn-Out Consideration, as the case may be.
(b) The Stockholder acknowledges and agrees that USFloral will not
provide the Stockholder with a prospectus for the Stockholder's use in selling
the shares of USFloral Common Stock to be received by the Stockholder in the
Stock Purchase, 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 6.8(b) will be satisfied as to
any sale by the Stockholder of the USFloral Common Stock the Stockholder may
acquire pursuant to the Stock Purchase 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 Stockholder in the Stock Purchase will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON ***, PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN
OF REORGANIZATION, DATED AS OF APRIL 1, 1998, AMONG THE ISSUER
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AND THE STOCKHOLDERS OF MAXIMA FARMS, INC., A FLORIDA CORPORATION. PRIOR TO
THE EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT
TO ANY ATTEMPTED SALE, TRANSFER OR ASSIGNMENT. UPON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS
RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN
THE HOLDING PERIOD HAS EXPIRED.
*** With respect to the Initial Consideration, certificates representing one-
third of the shares of USFloral Common Stock issued will read "October 3, 1998,"
one-third will read "April 3, 1999" and one-third will read "October 3, 1999."
6.9 USFloral Stock Options. As soon as practicable after the Closing,
options to purchase such number of shares of USFloral Common Stock as shall have
a fair market value as of the Closing Date equal to 4.5% of the Initial
Consideration provided for in Section 2.2 above shall be available for issuance
to the key employees of the Surviving Corporation after the Closing, as
determined by the Surviving Corporation's President (or other officer or
director designated by the Surviving Corporation and acceptable to USFloral) in
accordance with USFloral's policies, and authorized and issued under the terms
of USFloral's 1997 Long-Term Incentive Plan.
6.10 Conduct of Business of Surviving Corporation. During the period
commencing on the Closing Date and ending December 31, 1999, USFloral shall (i)
maintain the Surviving Corporation as a separate entity with a fiscal year
ending December 31 and (ii) cause the Surviving Corporation to be managed in
substantially the same manner as the Company was managed prior to the Stock
Purchase.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL
The obligation of USFloral to effect the Stock Purchase is subject to the
satisfaction or waiver, at or before the Closing Date, of the following
conditions and deliveries:
7.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Company and the Stockholders on or before the Closing Date shall have been duly
complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed on behalf of the Company and by each
of the Stockholders shall have been delivered to USFloral.
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7.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Stock Purchase shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit claim or proceeding of
any nature pending or threatened against USFloral or the Company, their
respective properties or any of their officers or directors, that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of the Company.
7.3 No 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.
7.4 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 Stock Purchase under the HSR Act shall
have expired or been terminated, and no action by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
7.5 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.
7.6 Charter Documents. USFloral shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company, and such documents shall be in form
and substance reasonably acceptable to USFloral.
7.7 Quarterly Financial Statements. USFloral shall have received from the
Company completed quarterly financial statements in a form reasonably
satisfactory to USFloral, and the Stock Purchase shall have been approved by
USFloral's lenders.
7.8 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. USFloral shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
34
7.9 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company 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 4.9(b)(i)) for the most recent
fiscal year preceding the Closing Date (the "Certified Year-End EBIT"); and
(d) a statement that all of the Company financial conditions set
forth in Section 4.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth, the Company shall not take account of any increase in
intangible assets (including without limitation goodwill, franchises and
intellectual property) accounted for after December 31, 1997.
7.10 Employment Agreements. ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have entered into an
employment agreement with the Company and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ shall have entered
into a consulting agreement with the Company, each in a form reasonably
satisfactory to USFloral.
7.11 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.
7.12 Supply Agreements. The Company shall have delivered to USFloral an
executed Flower Supply Agreement, in the form of Annex I attached hereto,
-------
between the Company and those farms listed on Schedule 7.12 attached hereto.
-------------
7.13 Repayment of Indebtedness. The Company shall have delivered to
USFloral evidence of repayment of all amounts due from the Stockholder, the
Principal and all entities in which the Stockholder or the Principal has an
interest.
7.14 Termination of Payments for Add-Backs. USFloral shall have received
a certificate, dated as of the Closing Date, signed on behalf of the Surviving
Corporation that no payments shall be made by the Surviving Corporation, from
and after the Closing Date, in respect of those items set forth on Schedule
4.9(b) hereof.
35
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER
The obligation of the Stockholder and the Company to effect the Stock
Purchase are subject to the satisfaction or waiver, at or before the Closing
Date, of the following conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral contained in this Agreement shall
be true, correct and complete on and as of the Closing Date with the same effect
as though such representations and warranties had been made as of such date; all
of the terms, covenants, agreements and conditions of this Agreement to be
complied with, performed or satisfied by USFloral on or before the Closing Date
shall have been duly complied with, performed or satisfied; and a certificate to
the foregoing effects dated the Closing Date and signed by the President or any
Vice President of USFloral shall have been delivered to the Company and the
Stockholder.
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 Stock Purchase shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending. There shall be no action, suit, claim or proceeding of
any nature pending or threatened, against USFloral or the Company, their
respective properties or any of their officers or directors, that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of the USFloral and its
subsidiaries taken as a whole.
8.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral of the transactions contemplated herein, shall have been obtained
and made. Any waiting period applicable to the consummation of the Stock
Purchase 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. INDEMNIFICATION
9.1 General Indemnification by the Stockholder. The Stockholder covenants
and agrees to indemnify, defend, protect and hold harmless USFloral 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:
36
(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
Stockholder 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
Stockholder or, prior to the Closing Date, the Company, under this Agreement; or
(iii) the business, operations or assets of the Company prior
to the Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters disclosed on Schedules 4.23 (conformity with
law; litigation), 4.24 (taxes), and 4.27 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 9.1.
9.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 9.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
$100,000 (the "Indemnification Threshold"); provided, however, that the
Indemnification Threshold shall not apply to (i) adjustments to the Purchase
Price as set forth in Sections 1.2 and 2.1; (ii) Damages arising out of any
breaches of the covenants of the Stockholder set forth in this Agreement or
representations and warranties made in Sections 4.4 (capital stock of the
Company), 4.5 (transactions in capital stock), 4.9 (Company financial
conditions), 4.18 (material contracts and commitments), 4.23 (conformity with
law; litigation), 4.24 (taxes), 4.27 (environmental matters), (iii) Damages
described in Section 9.1(a)(iv), or (iv) Damages for liability for anti-dumping
duties in excess of reserves therefor on the balance sheet of the Company as of
the Closing Date (regardless of whether or not disclosed on any schedule to this
Agreement);
(b) the Stockholder's liability under this Article 9 shall not exceed
the Purchase Price; provided, however, that the Stockholder's liability for
Damages arising out of any breaches of the representations made in Sections 4.24
(taxes) or 4.27 (environmental matters) or Damages described in Section
9.1(a)(ii) and Section 9.1(a)(iv) shall not be subject to such limitation;
37
(c) the indemnification obligations under this Article 9, or under
any certificate or writing furnished in connection herewith, shall terminate
at the date that is the later of clause (i) or (ii) of this Section 9.2(c):
(i)
(1) except as to representations, warranties, and
covenants specified in clause (i)(2) of this Section 9.2(c), the first
anniversary of the Closing Date, or
(2) with respect to representations and warranties
contained in Sections 4.22 (employee benefit plans), 4.24 (taxes), 4.27
(environmental matters), and the indemnification set forth in Section
9.1(a)(ii), (iii) or (iv), on (A) the date that is six (6) months after the
expiration of the longest applicable federal or state statute of limitation
(including extensions thereof), or (B) if there is no applicable statute of
limitation, (x) ten (10) years after the Closing Date if the Claim is related to
the cost of investigating, containing, removing, or remediating a release of
Hazardous Material into the environment, or (y) five (5) years after the Closing
Date for any other Claim covered by clause (i)(2)(B) of this Section 9.2(c); or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 9.2(c) (such claims
referred to as "Pending Claims").
9.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 9 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 9.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholder 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 Stockholder does not notify
the Indemnified Party within thirty days after the date of delivery of the Claim
Notice that the Indemnifying Party disputes such Claim, with a detailed
statement of the basis of such position, the amount of such Claim shall be
conclusively deemed a liability of the Indemnifying Party hereunder. In case an
objection is made in writing in accordance with this Section 9.3(a), the
Indemnified Party shall respond in a written statement to the objection within
thirty days and, for sixty days thereafter, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims (and,
if the parties should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties).
(b)
(i) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice to the Stockholder. The Stockholder 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
38
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 the Stockholder 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 Stockholder,
any Third Party Claim seeks material prospective relief which could have an
adverse effect on any Indemnified Party or the Surviving Corporation or any
subsidiary, the Indemnified Party shall have the right to control or assume (as
the case may be) the defense of any such Third Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third Party Claim at the sole cost and expense of the
Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 9.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 9.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the 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.
39
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 9, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
9.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the Stockholder
and USFloral in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Stockholder will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 9.2. The
representations of USFloral will survive the Closing and will remain in effect
until, and will expire upon the first anniversary of the Closing Date.
9.5 Remedies Cumulative. The remedies set forth in this Article 9 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
9.6 Right to Set Off. USFloral shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 9.3 to be owed to USFloral by the Stockholder
under Section 9.1 hereof.
10. NONCOMPETITION
10.1 Prohibited Activities. The Stockholder and the Principal agree that
for a period of three years following the Closing Date, they shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with the Surviving
Corporation or USFloral, including without limitation the importing, brokerage,
manufacture, assembly, packaging, distribution, shipping or marketing of floral
products (including, 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;
40
(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 the Stockholder or the Principal from (i) acquiring as an investment
not more than one percent of the capital stock of a competing business, whose
stock is traded on a national securities exchange or in the over-the-counter
market, (ii) engaging in any activity to which USFloral shall have provided its
prior written consent, (iii) engaging in business on behalf of those entities
listed on Schedule 7.12 hereof, to the same extent the Stockholder or the
Principal engaged in such business prior to the Closing Date.
10.2 Damages. Because of the difficulty of measuring economic losses
to USFloral and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFloral and the Surviving Corporation for which they would
have no other adequate remedy, the Stockholders agree that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporation by, without limitation, injunctions and
restraining orders.
10.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Stockholder
and the Principal in light of the activities and business of USFloral on the
date of the execution of this Agreement and the current and future plans of
USFloral and the Surviving Corporation (as successors to the businesses of the
Company).
10.4 Severability; Reformation. The covenants in this Article 10 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
10.5 Independent Covenant. All of the covenants in this Article 10 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholder
against the Company, the Surviving Corporation or USFloral, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of
three years stated above, shall be computed by excluding from such computation
any time during which the Stockholder or the Principal is in violation of any
provision of this Article 10 and any time during which there is pending in any
court of competent jurisdiction any action (including any appeal from any
judgment)
41
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 Stockholder or the Principal or in which any person contests
the validity of such agreements and covenants or their enforceability or seeks
to avoid their performance or enforcement; provided, however, that if the
Stockholder or the Principal is found not to be in violation of the agreements
or covenants in any such activity the period during which the action was pending
shall not be excluded from such computation.
10.6 Materiality. The Company, the Stockholder and the Principal hereby
agree that the covenants set forth in this Article 10 are a material and
substantial part of the transactions contemplated by this Agreement, supported
by adequate consideration.
11. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
11.1 Stockholder and Principal. The Stockholder and the Principal
recognize and acknowledge that they have in the past, currently have, and in the
future may possibly have, access to certain confidential information of the
Company, such as lists of customers, operational policies, and pricing and cost
policies that are valuable, special and unique assets of the Company and the
Company's business. The Stockholder and the Principal 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 Stockholder and the Principal
can show that such information has become known to the public generally through
no fault of the Stockholder or the Principal. In the event of a breach or
threatened breach by the Stockholders of the provisions of this Article 11,
USFloral and the Surviving Corporation shall be entitled to an injunction
restraining the Stockholder and the Principal from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting USFloral and the Surviving Corporation from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
11.2 USFloral. USFloral recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. USFloral agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the Stockholders. In the event of
a breach or threatened breach by USFloral of the provisions of this Article 11,
the Stockholder and the Principal 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 Stockholder and
the Principal from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
11.3 Damages. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would
42
be caused for which they would have no other adequate remedy, USFloral, the
Surviving Corporation, the Stockholder and the Principal agree that, in the
event of a breach by any of them of the foregoing covenant, the covenant may be
enforced against them by injunctions and restraining orders.
12. GENERAL
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the boards of directors of USFloral and the
Company; or
(b) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if the Closing shall not have occurred on or
before April 15, 1998, provided that the right to terminate this Agreement under
this Section 12.1(b) shall not be available to either party (with the
Stockholders and the Company deemed to be a single party for this purpose) whose
material misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholders and the Company deemed to be a single party for this purpose) of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Stock
Purchase; or there shall be any action taken, or any statute, rule regulation or
order enacted, promulgated or issued or deemed applicable to the Stock Purchase
by any governmental entity which would make the consummation of the Stock
Purchase illegal.
12.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 12 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
12.1(c) above, then notwithstanding the provisions of Section 12.7 below, the
breaching party (with the Stockholders and the Company deemed to be a single
party for
43
purposes of this Article 12), shall be liable to the other party to the extent
of the expenses incurred by such other party in connection with this Agreement
and the transactions contemplated hereby, as well as any damages in accordance
with applicable law.
12.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Stockholders.
12.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto, or in accordance with Section 10.4. Any
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
12.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
12.6 Brokers and Agents. USFloral on the one hand, and the Company and
the Stockholder (as a group), on the other hand, 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.
12.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and its agents, representatives, accountants and
counsel incurred in connection with the subject matter of this Agreement. The
Stockholder (and not the Company) has and will pay the fees, expenses and
disbursements of the Stockholder, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
12.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 10 and the confidentiality
obligations set forth in Article 11. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto
44
shall have the right to obtain injunctive relief to restrain a breach or
threatened breach of, or otherwise to obtain specific performance of, the other
parties, covenants and agreements contained in this Agreement.
12.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to USFloral or the Surviving Corporation to:
U.S.A. Floral Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and Chief Executive Officer
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
with a required copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
If to the Stockholder to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Loeb, Block & Partners, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
12.10 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without giving effect to any of
45
the conflicts of laws provisions thereof that would require the application of
the substantive laws of any other jurisdiction.
12.11 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 10.4.
12.12 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
12.13 Guarantee. The Principal hereby unconditionally guarantees to
USFloral and the Surviving Corporation and their successors, assigns and
affiliates, the full and timely performance of all of the obligations and
agreements of the Stockholder. The foregoing guarantee shall include the
guarantee of the payment of all damages, costs and expenses which might become
recoverable as a result of the nonperformance of any of the obligations or
agreements so guaranteed or as a result of the nonperformance of this guarantee.
Any guaranteed person may, at its option, proceed against the Principal for the
performance of any such obligation or agreement, or for damages for default in
the performance thereof, without first proceeding against any other party or
against any of its properties. The Principal further agrees that its guarantee
is an irrevocable guarantee and shall continue in effect notwithstanding any
extension or modification of any guaranteed obligation, any assumption of any
such guaranteed obligation, any assumption of any such guaranteed obligation by
any other party, or any other act or thing which might otherwise operate as a
legal or equitable discharge of a guarantor and the Principal hereby waives all
special suretyship defenses and notice requirements.
12.14 Further Representations. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
12.15 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.
46
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 and CEO
MAXIMA FARMS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
STOCKHOLDER
Maxima Farms Ltd.
By: /s/ Drake ▇▇▇▇▇▇▇▇
-----------------------------------------------
Drake ▇▇▇▇▇▇▇▇, Attorney in Fact
PRINCIPAL
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
----------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
47
SCHEDULES
SCHEDULE 2.1 [Post-Closing Audit Checklist]
SCHEDULES TO ARTICLE 4 [Schedules of exceptions to the representations and
warranties]
SCHEDULE 7.12 [List of Farms]
ANNEXES
ANNEX I [Form of Flower Supply Agreement]
The Schedules and Annexes to this Agreement will be provided to the Commission
supplementally upon request.