Exhibit 2.22
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
U.S.A. Floral Products, Inc.,
PFW Acquisition Corp.,
RCF Acquisition Corp.,
Pacific Floral Wholesale, Inc.
Rose City Floral, Inc.
and
The Stockholder Named Herein
dated as of April 3, 1998
Table of Contents
Page
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1. THE MERGERS.......................................................... 1
1.1 The Mergers................................................. 1
1.2 Articles of Incorporation; Bylaws, Directors and Officers... 1
1.3 Effects of the Mergers...................................... 2
2. CONVERSION AND EXCHANGE OF STOCK..................................... 2
2.1 Manner of Conversion........................................ 2
2.2 Merger Consideration........................................ 3
2.3 Exchange of Certificates and Payment of Cash................ 4
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS.............................. 5
3.1 Post-Closing Adjustment..................................... 5
3.2 Pledged Assets.............................................. 7
4. CLOSING.............................................................. 9
4.1 Location and Date........................................... 9
4.2 Effect...................................................... 9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE STOCKHOLDER.. 9
5.1 Due Organization........................................... 9
5.2 Authorization; Validity....................................10
5.3 No Conflicts...............................................10
5.4 Capital Stock of the Companies.............................10
5.5 Transactions in Capital Stock..............................11
5.6 Subsidiaries, Stock, and Notes.............................11
5.7 Predecessor Status.........................................11
5.8 Absence of Claims Against the Companies....................11
5.9 Financial Conditions.......................................12
5.10 Financial Statements.......................................12
5.11 Liabilities and Obligations................................12
5.12 Accounts and Notes Receivable..............................13
5.13 Books and Records..........................................13
5.14 Permits....................................................13
5.15 Real Property..............................................14
5.16 Personal Property..........................................16
5.17 Intellectual Property......................................17
5.18 Material Contracts and Commitments.........................18
5.19 Government Contracts.......................................19
5.20 Insurance..................................................20
5.21 Labor and Employment Matters...............................20
5.22 Employee Benefit Plans.....................................21
5.23 Conformity with Law; Litigation............................23
5.24 Taxes.......................................................24
5.25 Absence of Changes..........................................26
5.26 Deposit Accounts; Powers of Attorney........................27
5.27 Environmental Matters.......................................28
5.28 Relations with Governments..................................29
5.29 Disclosure..................................................29
5.30 USFloral Prospectus; Securities Representations.............29
5.31 Affiliates..................................................30
5.32 Location of Chief Executive Offices.........................30
5.33 Location of Equipment and Inventory.........................30
6. REPRESENTATIONS OF USFLORAL AND THE NEWCOS............................30
6.1 Due Organization............................................30
6.2 USFloral Common Stock.......................................30
6.3 Authorization; Validity of Obligations......................31
6.4 No Conflicts................................................31
6.5 Capitalization of USFloral and Ownership of USFloral Stock..31
7. COVENANTS.............................................................32
7.1 Tax Matters.................................................32
7.2 Intentionally Omitted.......................................33
7.3 Related Party Agreements....................................33
7.4 Cooperation.................................................33
7.5 Conduct of Business Pending Closing.........................34
7.6 Access to Information.......................................34
7.7 Prohibited Activities.......................................35
7.8 Notice to Bargaining Agents.................................36
7.9 Sales of USFloral Common Stock..............................36
7.10 USFloral Stock Options......................................38
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND THE NEWCOS....38
8.1 Representations and Warranties; Performance of Obligations..38
8.2 No Litigation...............................................38
8.3 No Material Adverse Change..................................38
8.4 Consents and Approvals......................................39
8.5 Opinion of Counsel..........................................39
8.6 Charter Documents...........................................39
8.7 Quarterly Financial Statements..............................39
8.8 Due Diligence Review........................................39
8.9 Delivery of Closing Financial Certificate...................39
8.10 Intentionally Omitted.......................................40
8.11 Employment Agreements.......................................40
8.12 Stockholder's Release.......................................40
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8.13 Termination of Payments for Add-Backs.......................40
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANIES AND THE
STOCKHOLDER...........................................................40
9.1 Representations and Warranties; Performance of Obligations..40
9.2 No Litigation...............................................40
9.3 Consents and Approvals......................................41
9.4 Employment Agreements.......................................41
10. INDEMNIFICATION..................................................41
10.1 General Indemnification by the Stockholder..................41
10.2 Limitation and Expiration...................................42
10.3 Indemnification Procedures..................................43
10.4 Survival of Representations Warranties and Covenants........44
10.5 Remedies Cumulative.........................................45
10.6 Right to Set Off............................................45
11. NONCOMPETITION...................................................45
11.1 Prohibited Activities.......................................45
11.2 Damages.....................................................46
11.3 Reasonable Restraint........................................46
11.4 Severability; Reformation...................................46
11.5 Independent Covenant........................................46
11.6 Materiality.................................................46
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION........................47
12.1 The Stockholder.............................................47
12.2 USFloral....................................................47
12.3 Damages.....................................................47
13. GENERAL..........................................................47
13.1 Termination................................................47
13.2 Effect of Termination......................................48
13.3 Successors and Assigns.....................................48
13.4 Entire Agreement; Amendment; Waiver........................48
13.5 Counterparts...............................................49
13.6 Brokers and Agents.........................................49
13.7 Expenses...................................................49
13.8 Specific Performance; Remedies.............................49
13.9 Notices....................................................49
13.10 Governing Law..............................................50
13.11 Severability...............................................51
13.12 Absence of Third Party Beneficiary Rights..................51
13.13 Further Representations....................................51
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13.14 Accounting Terms...........................................51
iv
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into this 3rd day of April, 1998, by and among U.S.A. Floral Products,
Inc., a Delaware corporation ("USFloral"), PFW Acquisition Corp., a Delaware
corporation and a newly-formed, wholly-owned subsidiary of USFloral, RCF
Acquisition Corp., a Delaware corporation and a newly-formed, wholly-owned
subsidiary of USFloral (each a "Newco" and together the "Newcos"), Pacific
Floral Wholesale, Inc., an Oregon corporation ("Pacific Floral"), Rose City
Floral, Inc., an Oregon corporation ("Rose City" and each a "Company" and
together, the "Companies") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, the sole stockholder of the
Companies (the "Stockholder").
BACKGROUND
WHEREAS, the respective Boards of Directors of the Newcos and the
Companies (which together are sometimes referred to as the "Constituent
Corporations") deem it advisable and in the best interests of the Constituent
Corporations and their respective stockholders that Pacific Floral merge with
and into PFW Acquisition Corp. and that Rose City merge with and into RCF
Acquisition Corp. (each a "Merger" and together, the "Mergers") pursuant to this
Agreement, the Plans of Merger (defined below) and the applicable provisions of
the laws of the State of Oregon and the State of Delaware.
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGERS
1.1 The Mergers. At the Effective Time (as defined in Section 4.2),
Pacific Floral shall be merged with and into PFW Acquisition Corp. and Rose City
shall be merged with and into RCF Acquisition Corp. pursuant to this Agreement
and the plans of merger (the "Plans of Merger") substantially in the form
attached as Schedule 1.1 hereto, and the separate corporate existence of the
Companies shall cease. Each Newco, as it exists from and after the Effective
Time, is sometimes referred to as a "Surviving Corporation."
1.2 Articles of Incorporation; Bylaws, Directors and Officers. At the
Effective Time:
(a) The Certificate of Incorporation of each Surviving Corporation
from and after the Effective Time shall be the Certificate of Incorporation of
the respective Newco until thereafter amended in accordance with the provisions
therein and as provided by the applicable provisions of the State Corporation
Laws.
(b) The Bylaws of each Surviving Corporation from and after the
Effective Time shall be the Bylaws of the respective Newco in effect immediately
prior to the Effective Time, continuing until thereafter amended in accordance
with their terms and the Certificate of Incorporation of the Surviving
Corporation and as provided by the State Corporation Laws (as defined in Section
1.3).
(c) The initial director of each Surviving Corporation shall be ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ until his successor is elected and qualified, and the initial
officers of each Surviving Corporation shall be the officers of the respective
Company immediately prior to the Effective Time, with the addition of ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ as Vice President and Assistant Secretary of each Surviving Corporation,
in each case until their successors are duly elected and qualified.
1.3 Effects of the Mergers. The Mergers shall have the effects provided
therefor by the Oregon Business Corporation Act and the Delaware General
Corporation Law (collectively, the "State Corporation Laws"). Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time (i)
all the rights, privileges, immunities, powers and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including without limitation subscriptions to
shares, and all other choses in action, and all and every other interest of or
belonging to or due to each Company or Newco shall be taken and deemed to be
transferred to, and vested in, the respective Surviving Corporation without
further act or deed; and all property, rights and privileges, immunities, powers
and franchises and all and every other interest shall be thereafter as
effectually the property of such Surviving Corporation, as they were of the
Company and Newco, and (ii) all debts, liabilities, duties and obligations of
each Company and Newco, subject to the terms hereof, shall become the debts,
liabilities and duties of the respective Surviving Corporation and such
Surviving Corporation shall thenceforth be responsible and liable for all the
debts, liabilities, duties and obligations of the Company and Newco and neither
the rights of creditors nor any liens upon the property of the Company or Newco
shall be impaired by the Mergers, and may be enforced against the Surviving
Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. At the Effective Time, by virtue of the Mergers
and without any action on the part of USFloral, the Newcos, the Companies or the
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) Capital Stock of the Newcos. Each issued and outstanding share of
capital stock of each Newco shall continue to be issued and outstanding and
shall be converted into one share of validly issued, fully paid and non-
assessable Common Stock of the respective Surviving Corporation. Each stock
certificate of Newco evidencing ownership of any such shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
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(b) Cancellation of Certain Shares of Capital Stock of the Companies.
All shares of capital stock of either Company that are owned directly or
indirectly by such Company shall be canceled and no stock of USFloral or other
consideration shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Companies. Subject to Section
2.1(d), and Sections 2.2, 3.1 and 3.2, each issued and outstanding share of
common stock of the Companies ("Company Common Stock") (other than shares to be
canceled pursuant to Section 2.1(b)), that is issued and outstanding immediately
prior to the Effective Time shall automatically be canceled and extinguished and
converted, without any action on the part of the holder thereof, into the right
to receive (i) an amount of cash equal to the cash portion of the Merger
Consideration divided by the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time and (ii) that number of
shares of USFloral common stock, $.001 par value ("USFloral Common Stock"),
valued at the Merger Price (as defined in Section 2.2), that is equal in value
to the USFloral Common Stock portion of the Merger Consideration (as defined in
Section 2.2) divided by the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time. All such shares of Company Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the consideration therefor upon the
surrender of such certificate in accordance with Section 2.3 of this Agreement.
(d) Fractional Shares. No fractional shares of USFloral Common Stock
shall be issued, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to receive a fraction of a share of
USFloral Common Stock shall receive from USFloral an amount of cash equal to the
Merger Price, as defined in Section 2.2(a), multiplied by the fraction of a
share of USFloral Common Stock to which such holder would otherwise be entitled.
The fractional share interests of each Stockholder shall be aggregated, so that
no Stockholder shall receive cash in an amount greater than the value of one
full share of USFloral Common Stock.
2.2 Merger Consideration.
(a) For purposes of this Agreement, the "Merger Consideration" shall
include the Initial Consideration and the Earn-Out Consideration. The "Initial
Consideration" shall be $400,000, less the aggregate amount of the long-term
indebtedness of the Company, including any current portion thereof, adjusted
pursuant to this Section 2.2 and Section 3.1. Of the Initial Consideration,
$160,000 less long-term debt shall be paid in cash at Closing in immediately
available funds. The remaining $240,000 of the Initial Consideration shall be
paid in shares of USFloral Common Stock valued at $22.57 per share (the "Merger
Price"). For each $1.00 by which the Company's and the Surviving Corporation's
earnings before interest and taxes ("EBIT") for the twelve months ending
December 31, 1998 (the "1998 EBIT") exceeds $108,000, USFloral shall pay to the
Stockholder $6.00 (the "Earn-Out Consideration"). For purposes of calculating
1998 EBIT, moving costs, tenant improvements and lease buyouts incurred in 1998
shall be amortized in equal straight line deductions over five years. The Earn-
Out Consideration shall not exceed $850,000. The Earn-Out Consideration shall
be paid in USFloral Common Stock valued at the average closing price on the
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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 LLP ("USFloral's Accountant") of the
1998 EBIT. In calculating the 1998 EBIT, USFloral's Accountant shall add to EBIT
any amounts paid by the Company in respect of those items set forth on Schedule
5.9(b)(ii) hereof during the period beginning on January 1, 1998 and ending on
the Closing Date.
(b) The Merger Consideration has been calculated based upon several
factors, including the assumption that the net worth of the Company, calculated
in accordance with generally accepted accounting principles ("GAAP")
consistently applied, is equal to or greater than $125,000 (the "Net Worth
Target") as of the Closing.
(c) If, on the Closing Financial Certificate (as defined in Section
8.9), the Certified Closing Net Worth (as defined in Section 8.9) is less than
the Net Worth Target, then the Merger Consideration to be delivered to the
Stockholders may, at USFloral's election, be reduced either (i) at the Closing,
or (ii) after completion of the Post-Closing Audit (as defined in Section 3.1),
by the difference between the Net Worth Target and the Certified Closing Net
Worth set forth on the Closing Financial Certificate (which reduction shall be
pro rata in cash and in USFloral Common Stock valued at the Merger Price in the
same proportions as the cash and USFloral Common Stock components of the Merger
Consideration as provided in Section 2.2(a)).
(d) The Earn-Out Consideration has been calculated based upon several
factors, including the assumption that the Surviving Corporation's earnings
before interest and taxes for the 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) $249,667, the Stockholders 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.
2.3 Exchange of Certificates and Payment of Cash.
(a) USFloral to Provide Cash and Common Stock. In exchange for the
outstanding shares of capital stock of the Company, USFloral shall cause to be
made available to the Stockholder the Merger Consideration (including cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
1.2(d)), as adjusted pursuant to Section 2.2 and Section 3.1. The certificates
evidencing the USFloral Common Stock component of the Merger Consideration shall
bear appropriate legends pursuant to the terms of this Agreement, and USFloral
shall be entitled to issue appropriate stop transfer instructions to its
transfer agent consistent with the terms of this Agreement.
(b) Certificate Delivery Requirements. At the Effective Time, the
Stockholder shall deliver to USFloral the certificates (the "Certificates")
representing Company Common Stock, accompanied by blank stock powers duly
executed by the Stockholder and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholder's expense, affixed and canceled.
The Stockholder shall promptly cure any deficiencies with respect to the stock
powers accompanying
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such Certificates. The Certificates so delivered shall forthwith be canceled.
Until delivered as contemplated by this Section 2.3(b), each Certificate shall
be deemed at any time after the Effective Time to represent the right to receive
upon such surrender the number of shares of USFloral Common Stock and the amount
of cash as provided by this Article 2 and the applicable provisions of the State
Corporation Laws.
(c) No Further Ownership Rights in Capital Stock of the Company. All
USFloral Common Stock and cash to be delivered (including USFloral Common Stock
delivered pursuant to Section 3.2(b) but withheld) upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and following the Effective
Time the Certificates shall have no further rights to, or ownership in, shares
of capital stock of the Company. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporations of the
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to a
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 2.3.
(d) Lost, Stolen or Destroyed Certificates. If any certificates
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, then USFloral shall cause payment to be made in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, such shares of USFloral Common Stock and cash as
provided in Section 2.1; provided, however that USFloral may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
USFloral with respect to the certificates alleged to have been lost, stolen or
destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this
Section 2.3, no Surviving Corporation or any party hereto shall be liable to a
holder of shares of Company Common Stock for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 Post-Closing Adjustment.
(a) The Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 3.1.
(b) Within one hundred twenty (120) days following the Effective Time,
USFloral shall cause USFloral's Accountant to audit the Surviving Corporations'
books to determine the accuracy of the information set forth on the Closing
Financial Certificate (the "Post-Closing Audit"). The parties acknowledge and
agree that for purposes of determining the net worth of the Companies as of the
Closing Date, the value of the assets of the Companies shall, except with the
prior written
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consent of USFloral, be calculated as provided in the last paragraph of Section
8.9. The Stockholder shall cooperate and shall use their reasonable efforts to
cause the officers and employees of the Companies to cooperate with USFloral and
USFloral's Accountant after the Closing Date in furnishing information,
documents, evidence and other assistance to USFloral's Accountant to facilitate
the completion of the Post-Closing Audit within the aforementioned time period.
In the event that USFloral's Accountant determines that the actual net worth of
the Companies (the "Actual 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 Net Worth, (ii) the
amount of the Merger Consideration that would have been payable at Closing
pursuant to Section 2.2(c) had the Actual Net Worth been reflected on the
Closing Financial Certificate instead of the Certified Closing Net Worth, and
(iii) the amount by which the amount of cash and number of shares issued as the
Merger Consideration would have been reduced at Closing had the Actual Net Worth
been used in the calculations pursuant to Section 2.2(c) (the "Merger
Consideration Adjustment"). The Merger Consideration Adjustment shall take
account of the reduction, if any, to the Merger Consideration already taken
pursuant to Section 2.2(c)(i).
(c) The 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 Merger 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 an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years to review the Surviving Corporations' books,
Closing Financial Certificate and Financial Adjustment Notice (and related
information) to determine the amount, if any, of the Merger Consideration
Adjustment. Such independent accounting firm shall be confirmed by the
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 Merger Consideration Adjustment, if any, within thirty (30)
days of its selection. The determination made by the independent accounting firm
shall be final and binding on the parties hereto, and upon such determination,
USFloral shall be entitled to receive from the Stockholder (which may, at
USFloral's sole discretion, be from the Pledged Assets as defined in Section
3.2) the Merger Consideration Adjustment. The costs of the independent
accounting firm shall be borne by the party (either USFloral or the Stockholder)
whose determination of the Companies' net worth at Closing 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 the Certified Closing Net Worth and the Actual Net
Worth.
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(d) Within one hundred twenty days following December 31, 1999
USFloral shall cause USFloral's Accountant to determine the 1999 EBIT. In the
event that USFloral's Accountant determines that the 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 an independent accounting
firm that has not represented any of the parties hereto within the preceding two
(2) years to review the Surviving Corporations' books and Earn-out Adjustment
Notice (and related information) to determine the amount, if any, of the Earn-
out Consideration Adjustment. 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.
3.2 Pledged Assets.
(a) As collateral security for the payment of any post-Closing
adjustment to the Merger Consideration under Section 3.1, or any indemnification
obligations of the Stockholders pursuant to Article 10, the Stockholders shall,
and by execution hereof do hereby, transfer, pledge and assign to USFloral, for
the benefit of USFloral, a security interest in the following assets (the
"Pledged Assets"):
(i) at the Closing, that number of shares of USFloral Common
Stock with a value, based on the Merger Price, equal to ten percent (10%) of the
Initial Consideration as the same may have been adjusted pursuant to Section 2.2
or Section 3.1 hereof, and the certificates and instruments, if any,
representing or evidencing the Stockholder's Pledged Assets; upon determination
of the Earn-Out Consideration, that number of shares of USFloral Common Stock
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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 such 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"), and the certificates and instruments, if any, representing or
evidencing the Earn-Out Pledged Assets;
(iii) all securities hereafter delivered to the 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 Stockholder's Pledged
Assets issued in his name in the Merger shall be delivered to USFloral directly
by the transfer agent, such certificate bearing no restrictive or cautionary
legend other than those imprinted by the transfer agent at USFloral's request.
The Stockholder shall, at the Closing, deliver to USFloral, for each such
certificate, a stock power duly signed in blank by him. Any cash comprising the
Stockholder's 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 Merger Consideration pursuant to Section 3.1 and any
indemnification obligations of the Stockholder pursuant to Article 10 until the
date which is one year after the Effective Time (the "Release Date"). Promptly
following the Release Date, USFloral shall return or cause to be returned to the
Stockholder the Pledged Assets, less Pledged Assets having an aggregate value
equal to the amount of (i) any post-Closing adjustment to the Merger
Consideration under Section 3.1, (ii) any pending claim for indemnification made
by any Indemnified Party (as defined in Article 10), and (iii) any
indemnification obligations of the Stockholder pursuant to Article 10.
Notwithstanding the preceding two sentences the Earn-out Pledged Assets shall be
available to satisfy any adjustment to the Earn-out Consideration until the
determination by USFloral's Accountant's of the 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 3.1. For purposes of this Section 3.2(c) and Article 10, the USFloral
Common Stock held as Pledged Assets shall be valued at (x) the Merger Price with
respect to any post-Closing adjustment to the Merger Consideration under Section
3.1, (y) the Earn-out Price with respect to any adjustment to the Earn-out
Consideration and (z) the average of the closing price on the Nasdaq National
Market per share of
8
USFloral Common Stock for the five trading days prior to the satisfaction of an
indemnification obligation (the "Market Value") with respect to indemnification
obligations pursuant to Article 10.
4. CLOSING
4.1 Location and Date. The consummation of the Mergers and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, on April 3, 1998, providing that all
conditions to Closing shall have been satisfied or waived, or at such other time
and date as USFloral, the Company and the Stockholders may mutually agree, which
date shall be referred to as the "Closing Date."
4.2 Effect. On the Closing Date, the articles of merger, certificate of
merger, or other appropriate documents executed in accordance with the State
Corporation Laws (the "Merger Documents"), together with any required officers'
certificates, shall be filed with the Secretary of the State of the States of
Oregon and Delaware in accordance with the provisions of the State Corporation
Laws. The Mergers shall become effective upon such filings or at such later
time as may be specified in such filings (the "Effective Time").
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE STOCKHOLDER
To induce USFloral and the Newcos to enter into this Agreement and
consummate the transactions contemplated hereby, each Company and each
Stockholder, jointly and severally, represents and warrants to USFloral and the
Newcos 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 each Company,
including facts of which the directors and officers, in the reasonably prudent
exercise of their duties, should be aware):
5.1 Due Organization. Each Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted except where the failure to be so authorized,
qualified or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of such
Company ("Material Adverse Effect"). Schedule 5.l hereto contains a list of all
jurisdictions in which each Company is authorized or qualified to do business.
Each Company is in good standing as a foreign corporation in each jurisdiction
it which it does business. Each Company has delivered to USFloral true, complete
and correct copies of the Articles of Incorporation and Bylaws of such Company.
Such Articles of Incorporation and Bylaws are collectively referred to as the
"Charter Documents." No Company is in violation of any Charter Documents. The
minute books of each Company have been made available to USFloral (and have
9
been delivered, along with each Company's original stock ledger and corporate
seal, to USFloral) and are correct and, except as set forth in Schedule 5.1,
complete in all material respects.
5.2 Authorization; Validity. Each Company has all requisite corporate
power and authority to enter into and perform its obligations pursuant to the
terms of this Agreement. Each Company has the full legal right, corporate power
and authority to enter into this Agreement and the transactions contemplated
hereby. The Stockholder has the full legal right and authority to enter into
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by each Company and the performance by each Company
of the transactions contemplated herein have been duly and validly authorized by
the Board of Directors of such 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 each Company and the
Stockholder, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which any Company or the
Stockholder is a party or by which any Company or the Stockholder is bound, or
result in the creation or imposition of any lien, charge or encumbrance on any
Company's properties pursuant to (i) any law or regulation to which any Company
or the Stockholder or any of their respective property is subject, or (ii) any
judgment, order or decree to which any 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 any Company; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which any Company or the Stockholder is subject or by which any
Company or the Stockholder is bound including, without limitation, the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), together with
all rules and regulations promulgated thereunder.
5.4 Capital Stock of the Companies. The authorized capital stock of
Pacific Floral consists of 1,000 shares of common stock, no par value, of which
1,000 shares are issued and outstanding. The authorized capital stock of Rose
City consists of 1,000 shares of common stock, no par value, of which 1,000
shares are issued and outstanding. All of the issued and
10
outstanding shares of the capital stock of the Companies 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
5.4 free and clear of all Liens (defined below). All of the issued and
outstanding shares of the capital stock of each Company were offered, issued,
sold and delivered by such 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 any Company. For purposes of this Agreement, "Lien" means any mortgage,
security interest, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise), charge, preference, priority or
other security agreement, option, warrant, attachment, right of first refusal,
preemptive, conversion, put, call or other claim or right, restriction on
transfer (other than restrictions imposed by federal and state securities laws),
or preferential arrangement of any kind or nature whatsoever (including any
restriction on the transfer of any assets, any conditional sale or other title
retention agreement, any financing lease involving substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
5.5 Transactions in Capital Stock. 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 any Company to issue, sell or
otherwise cause to become outstanding any shares of its capital stock. No
Company has an 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 Mergers, USFloral will be the record and beneficial owner of all outstanding
capital stock of each Company and rights to acquire capital stock of each
Company.
5.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 5.6(a), no Company has any
subsidiaries.
(b) Except as set forth on Schedule 5.6(b), no Company presently owns,
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 any Company, directly or
indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
(c) Except as set forth on Schedule 5.6(c), there are no promissory
notes that have been issued to, or are held by, any Company.
5.7 Predecessor Status. Schedule 5.7 sets forth a list of all names of
all predecessor companies of each Company, including the names of any entities
from which each Company previously acquired significant assets. No Company has
ever been a subsidiary or division of another corporation, nor has it been a
part of an acquisition that was later rescinded.
5.8 Absence of Claims Against the Companies. The Stockholder has no
claims against any Company.
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5.9 Financial Conditions.
(a) The Companies' net worth (i) as of the end of the most recent
fiscal year was not less than $125,000, and (ii) as of the Closing will not be
less than the Net Worth Target. For purposes of this Section 5.9(a),
calculation of amounts as of the Closing shall be made in accordance with the
last paragraph of Section 8.9.
(b) The Companies' earnings before interest and taxes (after the
addition of "add-backs" set forth on Schedule 5.9(b)(i)) for the most recent
fiscal year was not less than $108,000.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete and
correct copies of the Companies' balance sheet as of December 31, 1997 (the end
of the most recently completed fiscal year), and income statement for the year
then ended (collectively, the "1997 Financials") and (b) true, complete and
correct copies of the Companies' unaudited balance sheet (the "Interim Balance
Sheet") as of February 28, 1998 (the "Balance Sheet Date") and income statement,
for the two-month period then ended (collectively, the "Interim Financials," and
together with the 1997 Financials, the "Company Financial Statements"). Except
as noted on the 1997 Financials, the Company Financial Statements have been
prepared in accordance with GAAP consistently applied, subject to, in the case
of the Interim Financials, (i) normal year-end audit adjustments, which
individually or in the aggregate will not be material, (ii) the exceptions
stated on Schedule 5.10, and (iii) the omission of footnote information. Each
balance sheet included in the Company Financial Statements presents fairly the
financial condition of the Company as of the date indicated thereon, and each of
the income statements included in the Company Financial Statements presents
fairly the results of its operations for the periods indicated thereon. Since
the dates of the Company Financial Statements, there have been no material
changes in the Company's accounting policies other than as requested by USFloral
to conform the Company's accounting policies to GAAP.
5.11 Liabilities and Obligations.
(a) No Company is liable for or subject to any liabilities except for:
(i) those liabilities reflected on the Interim Balance Sheet and
not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which liabilities
are not, individually or in the aggregate, material.
12
(b) Each Company has delivered to USFloral, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 5.11(c) also includes a summary description of all plans
or projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of any Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by such
Company or the respective Surviving Corporation would require additional
material expenditures of capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured. Schedule 5.11(d)
contains a complete list of all indebtedness of any Company.
5.12 Accounts and Notes Receivable. Each 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 such Company
(including without limitation receivables from and advances to employees and the
Stockholder), 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, each 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
Companies' 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.
5.13 Books and Records. Each Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of such Company. No Company has engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
5.14 Permits. Each 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 no Company has received any notice that
any governmental
13
authority intends to modify, cancel, terminate or fail to renew any Permit. No
present or former officer, manager, member or employee of any 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. Each 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 any Company by, any
Permit.
5.15 Real Property.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by any Company, together with any additions thereto or
replacements thereof.
(b) Schedule 5.15(b) contains a complete and accurate description of
all Real Property (including street address, legal description (where known),
owner, and Company's use thereof) and, to the Company's knowledge, any Liens.
Schedule 5.15(b) indicates whether the Real Property is owned or leased. The
Real Property listed on Schedule 5.15(b) includes all interests in real property
necessary to conduct the business and operations of any Company.
(c) Except as set forth in Schedule 5.15(c):
(i) Each Company has good and valid rights of ingress and egress
to and from all Real Property from and to the public street systems for all
usual street, road and utility purposes.
(ii) All structures and all structural, mechanical and other
physical systems thereof that constitute part of the Real Property, including
but not limited to the walls, roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer,
waste water, storm water, paving and parking equipment, systems and facility
included therein, and other material items at the Real Property (collectively,
the "Tangible Assets"), are free of defects and in good operating condition and
repair. For purposes of this Section, a defect shall mean a condition relating
to the structures or any structural, mechanical or physical system which
requires an expenditure of more than $1,000 to correct. No maintenance or
repair to the Real Property, Structures or any Tangible Asset has been
unreasonably deferred. There is no water, chemical or gaseous seepage,
diffusion or other intrusion into said buildings, including any subterranean
portions, that would impair beneficial use of the Real Property, Structures or
any Tangible Asset.
(iii) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any applicable law or by the use
and operation of the Real Property in
14
the conduct of the business of the Companies' respective businesses are
installed to the property lines of the Real Property, are connected pursuant to
valid permits to municipal or public utility services or proper drainage
facilities, are fully operable and are adequate to service the Real Property in
the operation of the Companies' respective businesses and to permit full
compliance with the requirements of all laws in the operation of such business.
No fact or condition exists which could result in the termination or material
reduction of the current access from the Real Property to existing roads or to
sewer or other utility services presently serving the Real Property.
(iv) The Real Property and all present uses and operations of the
Real Property 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. Each
Company has obtained all approvals of governmental authorities (including
certificates of use and occupancy, licenses and permits) required in connection
with the construction, ownership, use, occupation and operation of the Real
Property.
(v) None of the Structures, the appurtenances thereto or the equipment
therein or the operation or maintenance thereof, or the conduct of any Company's
business, violates any restrictive covenant or encroaches on any property owned
by others or any easement, right of way or other Lien or restriction affecting
such Real Property in any respect. The Real Property and its continued use,
occupancy and operation as used, occupied and operated in the conduct of any
Company's business does not constitute a nonconforming use and is not the
subject of a special use permit under any applicable Law.
(vi) 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 any Company or the
Stockholder received notice of any pending or threatened special assessment
proceedings affecting any portion of the Real Property.
(vii) No portion of the Real Property or the Structures has
suffered any damage by fire or other casualty which has not heretofore been
completely repaired and restored to its original condition.
(viii) There are no parties other than a 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.
15
(ix) There are no outstanding options or rights of first refusal
to purchase the Real Property, or any portion thereof or interest therein. No
Company has transferred any air rights or development rights relating to the
Real Property.
(x) There are no service contracts or other agreements relating
to the use or operation of the Real Property.
(xi) No portion of the Real Property is located in a wetlands
area, as defined by Laws, or in a designated or recognized flood plain, flood
plain district, flood hazard area or area of similar characterization. No
commercial use of any portion of the Real Property will violate any requirement
of the United States Corps of Engineers or Laws relating to wetlands areas.
(xii) All real property taxes and assessments that are due and
payable with respect to the Real Property have been paid or will be paid at or
prior to Closing.
(xiii) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which any 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. Each Company has provided USFloral with true and
complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
operation granted to such party under such Lease. The Leases and each Company's
interests thereunder are free of all Liens.
(xiv) None of the Leases requires the consent or approval of any
party thereto in connection with the consummation of the transactions
contemplated hereby.
5.16 Personal Property.
(a) Schedule 5.16(a) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by any Company with a current book value in excess of
$5,000 both (i) as of the Balance Sheet Date and (ii) acquired since the Balance
Sheet Date, including in each case true, complete and correct copies of leases
for material equipment and an indication as to which assets are currently owned,
or were formerly owned, by the Stockholder or business or personal affiliates of
the Stockholder or of any Company.
(b) Each Company currently owns or leases all personal property
necessary to conduct the business and operations of such Company as they are
currently being conducted.
(c) All of the trucks and other material machinery and equipment of
any Company, including those listed on Schedule 5.16(a), are in good working
order and condition,
16
ordinary wear and tear excepted. All leases set forth on Schedule 5.16(a) are in
full force and effect and constitute valid and binding agreements of the Company
that entered into such lease, and such Company is not in breach of any of their
terms. All fixed assets used by any Company that are material to the operation
of its business are either owned by such Company or leased under an agreement
listed on Schedule 5.16(a).
5.17 Intellectual Property.
(a) Each Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks listed on Schedule 5.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that such Company now owns or
uses in connection with its business. Except with respect to those Marks shown
as licensed on Schedule 5.17(a), each Company owns all of the registered and
unregistered trademarks, service marks, and trade names that it uses. The Marks
listed on Schedule 5.17(a) will not cease to be valid rights of such Company by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. For purposes of this
Section 5.17, the term "▇▇▇▇" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names now held
by any 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 any Company, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by any Company in the United States or any foreign country.
(b) Each Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on Schedule 5.17(b)(i) and in the Copyright registrations listed on
Schedule 5.17(b)(ii). Such Patents and Copyrights constitute all of the Patents
and Copyrights that the Company now owns or is licensed to use. The Company
owns or is licensed to practice under all patents and copyright registrations
that the Company now owns or uses in connection with its business. For purposes
of this Section 5.17, the term "Patent" shall mean any United States or foreign
patent to which any Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by any 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 any Company.
(c) Each Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "Other Rights") listed on
Schedule 5.17(c). Those Other Rights constitute all of the Other Rights that
such Company now owns or is licensed to use. Each Company owns or is licensed
to practice under all trade secrets, franchises or similar rights that it owns,
uses or practices under.
17
(d) The Marks, Patents, Copyrights, and Other Rights listed on
Schedules 5.17(a), 5.17(b)(i), 5.17(b)(ii), and 5.17(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by any Company is referred to herein collectively as the "Company
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third Party Intellectual Property." Except as indicated on
Schedule 5.17(d), no Company has any obligations to compensate any person for
the use of any Intellectual Property nor has any 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) No Company is, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder, in
violation of any Third Party Intellectual Property license, sublicense or
agreement described in Schedule 5.17(a), 5.17(b)(i), 5.17(b)(ii), or 5.17(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 any Company infringes on any copyright, patent, trademark, service
▇▇▇▇ or trade secret; (ii) against the use by any Company of any trademarks,
trade names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in each Company's business as
currently conducted by such Company; (iii) challenging the ownership, validity
or effectiveness of any of the Company Intellectual Property or other trade
secret material to any Company; or (iv) challenging any 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 any 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 such Company may be engaged in such
infringement or (y) has knowledge of any infringement liability with respect to,
or infringement by, any 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 any Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first
centuries, or can be made capable within 30 days and at an aggregate cost not in
excess of $10,000.
5.1 Material Contracts and Commitments.
(a) Schedule 5.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which any 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,
18
options to purchase land, liens, pledges or other security agreements) (i) to
which any Company and any affiliate of any Company or any officer, director or
stockholder of any Company are parties ("Related Party Agreements"); or (ii)
that may give rise to obligations or liabilities exceeding, during the current
term thereof, $10,000, or that may generate revenues or income exceeding, during
the current term thereof, $10,000 (collectively with the Related Party
Agreements, the "Material Contracts"). Each Company has delivered to USFloral
true, complete and correct copies of the Material Contracts. Each Company has
complied with all of its commitments and obligations and is not in default under
any of the Material Contracts, and no notice of default has been received with
respect to any thereof, and there are no Material Contracts that were not
negotiated at arm's length.
(b) Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Company that entered into such Material
Contract and is in full force and effect and is not subject to any default
thereunder by any party obligated to such Company pursuant thereto. Each
Company has obtained 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 Mergers and without giving rise
to any right to termination, cancellation or acceleration or loss of any right
or benefit ("Third Party Consents"). All Third Party Consents are listed on
Schedule 5.18(b).
(c) The outstanding balance on all loans or credit agreements either
(i) between any Company and any Person in which the Stockholder owns a material
interest, or (ii) guaranteed by the Company for the benefit of any Person in
which any Stockholder owns a material interest, are set forth in Schedule
5.18(c).
(d) The pledge, hypothecation or mortgage of all or substantially all
of any Company's assets (including, without limitation, a pledge of any
Company's contract rights under any Material Contract) will not, except as set
forth on Schedule 5.18(d), (i) result in the breach or violation of, (ii)
constitute a default under, (iii) create a right of termination under, or (iv)
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the assets of such Company (other than a lien created
pursuant to the pledge, hypothecation or mortgage described at the start of this
Section 5.18(d)) pursuant to any of the terms and provisions of, any Material
Contract to which any Company is a party or by which the property of any Company
is bound.
5.19 Government Contracts.
(a) Except as set forth on Schedule 5.19, no Company is a party to any
government contracts.
(b) No Company has 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 any Company's suspension or debarment from
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bidding on contracts or subcontracts for any agency of the United States
Government or any state or local government.
(c) Except as set forth in Schedule 5.19, no Company has been, nor is
it now being, audited, or investigated by any government agency, or the
inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened.
(d) No Company has a 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) No Company has, with respect to any government contract, received
a cure notice advising such Company that it is or was in default or would, if it
failed to take remedial action, be in default under such contract.
(f) No Company has 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
any Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to such Company's
business under circumstances where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate list of
all insurance policies carried by each Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. Each
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 each 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 each Company. The insurance carried by
each Company with respect to its properties, assets and business is, to the
Company's knowledge, with financially sound insurers. To the knowledge of the
Company, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
5.21 Labor and Employment Matters. With respect to employees of and
service providers to any Company:
(a) each 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
20
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 any 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 any 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 Companies are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against any Company or currently being negotiated by any
Company; and
(g) all persons classified by any Company as independent contractors
do satisfy and have satisfied the requirements of law to be so classified, and
each Company has fully and accurately reported their compensation on IRS Forms
1099 when required to do so.
5.22 Employee Benefit Plans. Attached hereto as Schedule 5.22 are complete
and accurate copies 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 any
Company, or to which any Company currently contributes, or has an obligation to
contribute in the future (including, without limitation, employment agreements
and any other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with copies of any trusts related thereto and
a classification of employees covered thereby (collectively, the "Plans").
Schedule 5.22 sets forth all of the Plans that have been terminated within the
past three years.
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Code have been determined by the Internal Revenue Service to be so qualified,
and copies of the current plan determination letters, most recent actuarial
valuation reports, if any, most recent Form
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5500, or, as applicable, Form 5500-C/R filed with respect to each such Qualified
Plan or employee welfare benefit plan and most recent trustee or custodian
report, are included as part of Schedule 5.22. To the extent that any Qualified
Plans have not been amended to comply with applicable law, the remedial
amendment period permitting retroactive amendment of such Qualified Plans has
not expired and will not expire within 120 days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
Stockholder; (ii) any Plan; or (iii) any 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 no Company currently
has (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"), each 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 no Company has (nor will incur) 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 any Company or the Stockholder, at any time prior to the Closing Date, to
comply with any such federal
22
or state benefit continuation requirement, which is capable of being assessed or
asserted before or after the Closing Date directly or indirectly against the
Company or the Stockholders with respect to such group health plans;
(f) no Company is 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) no Company has incurred liability under Section 4062 of ERISA.
5.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 5.23(a), no Company is 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 any Company. Each 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 such Company.
(b) The Stockholder has not, at any time: (i) committed any criminal
act (except for minor traffic violations, if any); (ii) engaged in acts of
fraud, dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy or Chapter 11 protection.
(c) Except as set forth on Schedule 5.23(c), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of the Company,
threatened against or affecting any Company at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. There are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against any Company or against any of its properties or
business.
23
5.24 Taxes.
(a)
(i) Each 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) Each 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 each Company's liability for unpaid Taxes as
of the Balance Sheet Date did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the Interim
Balance Sheet, and the amount of the Company's liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for Deferred Taxes) as such accruals are reflected on the books and
records of such Company on the Closing Date.
(iv) There are no ongoing examinations or claims against any
Company for Taxes, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received.
(v) Pacific Floral has a taxable year ended on December 31, in
each year commencing December, 1993. Rose City has a taxable year ended on
December 31, in each year commencing March, 1998.
(vi) Each Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not changed
in the past ____ years. No Company has 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) Each 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 each 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 any Company relating to or attributable to
Taxes.
24
(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 any Company or otherwise
have an adverse effect on any 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 any 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) No Company is, nor has any Company been at any time, a
party to a tax sharing, tax indemnity or tax allocation agreement, and no
Company has assumed the tax liability of any other person under contract.
(xiii) Each 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 such Company's tax books and records.
(b)
(i) Pacific Floral has, since December, 1993, been an S
corporation within the meaning of Section 1361 of the Code. Rose City has, since
March, 1998, been an S corporation within the meaning of Section 1361 of the
Code.
(ii) No Company has a net recognized built-in gain within the
meaning of Section 1374 of the Code.
(c) 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.
(d) The Mergers qualify as reorganizations pursuant to the provisions
of Section 368(a)(2)(D) of the Code.
25
5.2 Absence of Changes. Since the Balance Sheet Date, each Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on Schedule 5.25, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of any Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of any Company;
(c) any change in the authorized capital of any 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; provided,
however, the Companies may make a distribution to the Stockholder for the sole
purpose of paying income taxes attributable to the Companies' S Corporation
earnings, so long as such combined distribution to the Stockholder shall not
exceed $17,500 in the aggregate;
(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 any Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by any 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 any Company to any person, including
without limitation the Stockholder and his affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to any Company, including without limitation any
indebtedness or obligation of the Stockholders and their affiliates, provided
that any 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 any 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 any Company;
26
(k) any waiver of any material rights or claims of any Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which any Company is a party;
(m) any transaction by any Company outside the ordinary course of
business;
(n) any capital commitment by any Company, either individually or in
the aggregate, exceeding $10,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by any Company or the
revaluation by any Company of any of its assets;
(p) any creation or assumption by any 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 any Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by any Company in excess of
$10,000;
(r) any loan by any Company to any person or entity, incurring by any
Company, of any indebtedness, guaranteeing by any Company of any indebtedness,
issuance or sale of any debt securities of any 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, any Company or any of its affairs; or
(t) negotiation or agreement by any Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with USFloral and its representatives regarding the
transactions contemplated by this Agreement).
5.26 Deposit Accounts; Powers of Attorney. Schedule 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which any Company has
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
27
(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 any Company and a description of the
terms of such power.
5.27 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 5.27(a),
no underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "Hazardous Material"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that any Company has at any time owned,
operated, occupied or leased. Schedule 5.27(a) identifies all underground and
aboveground storage tanks, and the capacity, age, and contents of such tanks,
located on Real Property owned or leased by any Company.
(b) Hazardous Materials Activities. No Company has 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 any 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. Each Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of such Company's Hazardous Material
Activities and other business of such Company as such activities and business
are currently being conducted. All Environmental Permits are in full force and
effect. Each Company (A) is in compliance in all material respects with all
terms and conditions of the Environmental Permits and (B) is in compliance in
all material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the laws of all Governmental Entities relating to pollution or
protection of the environment or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. To the Company's knowledge, there are no circumstances
that may prevent or interfere with such compliance in the future. Schedule
5.27(c) includes a listing and description of all Environmental Permits
currently held by any Company.
28
(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 any Company (or any person or entity whose
liability any Company has retained or assumed, either by contract or operation
of law) in any environmental litigation, or impose upon any Company (or any
person or entity whose liability any Company has retained or assumed, either by
contract or operation of law) any environmental liability including, without
limitation, common law tort liability.
5.28 Relations with Governments. No Company has 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 any Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. Each Company has delivered to USFloral and Newco true and
complete copies of each agreement, contract, commitment or other document (or
summaries thereof) that is referred to in the Schedules or that has been
requested by USFloral. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If the
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of the Stockholder in this Agreement or any
representation made on behalf of any Company, the Stockholder shall immediately
give notice of such fact or circumstance to USFloral. However, such notification
shall not relieve any Company or the Stockholder of their respective obligations
under this Agreement, and at the sole option of USFloral, the truth and accuracy
of any and all warranties and representations of the Stockholder, at the date of
this Agreement and as of the Closing Date, shall be a precondition to the
consummation of this transaction.
5.30 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 he is 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 his
satisfaction) from the officers of USFloral concerning the business, operations
and financial condition of USFloral. The Stockholder does not have 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 Mergers. The Stockholder acknowledges and
agrees that
29
USFloral has not and will not provide the Stockholder or any other party with a
prospectus for his use in selling USFloral Common Stock.
5.31 Affiliates. The Stockholder is the only person who is, in the
reasonable judgment of each Company and the Stockholder, affiliates of any
Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the 1933 Act.
5.32 Location of Chief Executive Offices. Schedule 5.32 sets forth the
location of each Company's chief executive offices.
5.33 Location of Equipment and Inventory. All Inventory and Equipment held
on the date hereof by any Company is located at one of the locations shown on
Schedule 5.33. For purposes of this Agreement, (a) the term "Inventory" shall
mean any "inventory" as such term is defined in the Uniform Commercial Code as
in effect on October 16, 1997 in the State of New York (the "N.Y.U.C.C.") owned
by any Company as of the date hereof, and, in any event, shall include, but
shall not be limited to, all merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production, and all proceeds therefrom; and (b)
the term "Equipment" shall mean any "equipment" as such term is defined in the
N.Y.U.C.C. owned by any 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 any Company, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
6. REPRESENTATIONS OF USFLORAL AND THE NEWCOS
To induce each Company and the Stockholder to enter into this Agreement and
consummate the transactions contemplated hereby, each of USFloral and each Newco
represents and warrants to each Company and the Stockholder as follows:
6.1 Due Organization. Each of USFloral and each Newco is a corporation
duly organized, validly existing and in good standing under the laws of
jurisdiction of its 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 and
the Newcos (collectively, the "USFloral Charter Documents") have been made
available to the Companies. Neither USFloral nor any Newco is in violation of
any USFloral Charter Document.
6.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Stockholder at the Effective Time, when delivered in
accordance with the terms of this
30
Agreement, will be valid and legally issued shares of USFloral capital stock,
fully paid and nonassessable.
6.3 Authorization; Validity of Obligations. The representatives of
USFloral and the Newcos executing this Agreement have all requisite corporate
power and authority to enter into and bind USFloral and the Newcos to the terms
of this Agreement. USFloral and the Newcos have the full legal right, power and
corporate authority to enter into this Agreement and the transactions
contemplated hereby. The execution and delivery of this Agreement by USFloral
and the Newcos and the performance by each of USFloral and the Newcos of the
transactions contemplated herein have been duly and validly authorized by the
respective Boards of Directors of USFloral and the Newcos, and this Agreement
has been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of each of USFloral and each
Newco enforceable in accordance with its terms.
6.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and its
lenders, conflict with, or result in a default (or would constitute a default
but for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which either USFloral or Newco is a party, or
result in the creation or imposition of any lien, charge or encumbrance on any
of USFloral's or any Newco's properties pursuant to (i) any law or regulation to
which either USFloral or any Newco or any of their respective property is
subject, or (ii) any judgment, order or decree to which USFloral or any Newco is
bound or any of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or any
Newco; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USFloral or any Newco is subject, or by which USFloral or any
Newco is bound, (including, without limitation, the HSR Act, together with all
rules and regulations promulgated thereunder).
6.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 12,924,193 shares were outstanding on February 27, 1998. The
authorized capital stock of each Newco consists of 1,000 shares of Common Stock,
of which 100 shares are outstanding. All of the issued and outstanding shares
of each Newco are owned beneficially, and of record by USFloral. All of the
shares of USFloral Common Stock to be issued to the Stockholders in accordance
herewith will be offered, issued, sold and delivered by USFloral in compliance
with all applicable state and federal
31
laws concerning the issuance of securities and none of such shares was or will
be issued in violation of the preemptive rights of any stockholder of USFloral.
7. COVENANTS
7.1 Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Stockholder, on the one hand, and the Surviving
Corporations, on the other, for certain tax matters following the Closing Date:
(i) 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 each 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 Corporations 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 Companies' 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 Corporations shall participate in
the filing of any Tax Returns filed pursuant to this paragraph.
(ii) The Surviving Corporations 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 Corporations 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 Companies' books and records as of the Closing Date. For purposes of this
Section 7.1, in the case of any Taxes that are imposed on a periodic basis and
are payable for a taxable period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such taxable
period ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in the entire taxable period, and
(y) in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant taxable period ended
on the Closing Date. Any credits relating to a taxable period that begins before
and ends after the Closing Date shall be taken into account as though the
relevant taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Surviving Corporations.
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(iii) USFloral and the Surviving Corporations 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 7.1 and any audit, litigation or other proceeding with respect
to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to each
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating Tax matters pertinent to
each Company that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof.
(iv) 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
Stockholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
USFloral and the Surviving Corporations will join in the execution of any such
Tax Returns and other documentation.
(b) Each Company shall, prior to the Closing, maintain its status as
an S Corporation for federal and state income tax purposes.
7.2 Intentionally Omitted.
7.3 Related Party Agreements. Each Company and/or the Stockholder, as the
case may be, shall terminate any Related Party Agreements which USFloral request
such Company or the Stockholder to terminate.
7.4 Cooperation.
(a) Each Company, the Stockholder, USFloral and each Newco shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such instruments as the
other may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by USFloral's
independent public accountants (in connection with such accountants' audit of
the Company) or the Nasdaq National Market.
(b) The Stockholder and each Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of each
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
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(d) Each Company, the Stockholder and USFloral shall file all notices
and other information and documents required under the HSR Act (as defined in
Section 5.3) as promptly as practicable after the date hereof.
7.5 Conduct of Business Pending Closing. Between the date hereof and the
Effective Time, each Company will (except as requested or agreed by USFloral):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and key employees
and maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except for ordinary and customary bonuses and salary increases for employees
(other than employees who are also Stockholder) in accordance with past
practice.
7.6 Access to Information. Between the date of this Agreement and the
Closing Date, each Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of such Company and (ii) such additional financial and operating
data and other information as to the business and properties of such Company as
USFloral may from time to time reasonably request, including without limitation,
access upon reasonable request to such Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or knowledge
obtained in any investigation pursuant to this Section 7.6 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Mergers.
34
7.7 Prohibited Activities. Between the date hereof and the Effective
Time, no Company will, 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; provided,
however, the Companies may make a distribution to the Stockholder for the sole
purpose of paying income taxes attributable to the Companies' S Corporation
earnings, so long as such combined distribution to the Stockholder shall not
exceed $17,500 in the aggregate;
(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 $10,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any
officer, director, Stockholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or encumbrance
upon any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to such
Company;
(i) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
35
(j) waive any material rights or claims of any Company, provided that
each 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 any Company or any officer,
director or Stockholder of any Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of USFloral; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.7(a) through (o) above, or any action which
would make any of the representations and warranties of any Company and the
Stockholder contained in this Agreement untrue or result in any of the
conditions set forth in Articles 8 and 9 not being satisfied.
7.8 Notice to Bargaining Agents. Prior to the Closing Date, each Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by USFloral, and shall provide USFloral with proof that any required notice has
been sent.
7.9 Sales of USFloral Common Stock.
(a) The Stockholder will not, 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 the Stockholder in the Mergers prior to
the date that is (i) with respect to one-third of the shares issued in payment
of the Merger Consideration and one-third of the shares issued in payment of the
Earn-Out Consideration, twenty-four months from the Closing Date, or the payment
of the Earn-Out Consideration, as the case may be, (ii) with respect to two-
thirds of the shares, eighteen months
36
from the Closing Date, or the payment of the Earn-Out Consideration, as the case
may be and (iii) with respect to all of the shares, twelve months from the
Closing Date, or the payment 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
Mergers, and agrees to sell such shares only in accordance with the
requirements, if any, of Rule 145(d) promulgated under the 1933 Act. USFloral
acknowledges that the provisions of this Section 7.9(b) will be satisfied as to
any sale by the Stockholder of the USFloral Common Stock the Stockholder may
acquire pursuant to the Mergers 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 Mergers will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON ***, PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN
OF REORGANIZATION, DATED AS OF APRIL 3, 1998, AMONG THE ISSUER AND THE
STOCKHOLDER OF PACIFIC FLORAL WHOLESALE, INC., AN OREGON CORPORATION AND
ROSE CITY FLORAL BOUQUET, INC., AN OREGON 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.
37
*** With respect to the Initial Consideration, certificates representing one-
third of the shares of USFloral Common Stock issued will read "April 3, 1999,"
one-third will read "October 3, 1999" and one-third will read "April 3, 2000."
7.10 USFloral Stock Options. As soon as practicable after the Closing,
options to purchase such number of shares of USFloral Common Stock as shall have
a fair market value as of the Closing Date equal to 4.5% of the Merger
Consideration provided for in Section 2.2 above shall be available for issuance
to the key employees of each Surviving Corporation after the Closing, as
determined by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (or other officer or director designated by the
Surviving Corporations 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.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND THE NEWCOS
The obligation of USFloral and the Newcos to effect the Mergers is subject
to the satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Stockholder and each 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 each
Company and the Stockholder 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 each Company and by the
Stockholder shall have been delivered to USFloral.
8.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of any Company, or limiting or restricting
USFloral's conduct or operation of the business of any Company (or its own
business) following the Mergers 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, the Newcos or any 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 any Company.
8.3 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of any Company, taken as a whole, since the Balance Sheet Date;
and USFloral shall have received a certificate signed by the Stockholder dated
the Closing Date to such effect.
38
8.4 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by each Company and the Stockholder of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the Mergers under the HSR Act shall have
expired or been terminated, and no action by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
8.5 Opinion of Counsel. USFloral shall have received an opinion from
counsel to the Companies and the Stockholder, dated the Closing Date, in a form
reasonably satisfactory to USFloral.
8.6 Charter Documents. USFloral shall have received (a) a copy of the
Articles of Incorporation of each Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of each Company
certified by the Secretary of such Company, and such documents shall be in form
and substance reasonably acceptable to USFloral.
8.7 Quarterly Financial Statements. USFloral shall have received from
each Company completed quarterly financial statements in a form reasonably
satisfactory to USFloral, and the Mergers shall have been approved by USFloral's
lenders.
8.8 Due Diligence Review. Each 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 such
Company.
8.9 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of each Company and by the Stockholder, setting
forth:
(a) the net worth of the Companies as of the last day of its most
recent fiscal year (the "Certified Year-End Net Worth");
(b) that the net worth of the Companies as of the Closing Date (the
"Certified Closing Net Worth") is no less than the Certified Year-End Net Worth;
(c) the earnings of the Companies before interest and taxes (after the
addition of "add-backs" set forth on Schedule 5.9(b)(i)) for the most recent
fiscal year preceding the Closing Date (the "Certified Year-End EBIT"); and
(d) a statement that all of the financial conditions set forth in
Section 5.9 of the Agreement are satisfied as of the Closing Date.
39
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth and the Certified Closing EBIT, the Companies shall not take
account of any increase in intangible assets (including without limitation
goodwill, franchises and intellectual property) accounted for after December 31,
1997.
8.10 Intentionally Omitted. The Stockholder shall have delivered to
USFloral a properly executed statement in a form reasonably acceptable to
USFloral for purposes of satisfying USFloral's obligations under Treas. Reg. (S)
1.1445-2(b).
8.11 Employment Agreements. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall have entered into an
employment agreement with Pacific Floral in a form reasonably satisfactory to
USFloral.
8.12 Stockholder's Release. The Stockholder shall have delivered to
USFloral an instrument dated the Closing Date releasing the Company from any and
all claims of such Stockholder against the Company.
8.13 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 by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as President, that no payments shall be made
by the Surviving Corporation, from and after the Closing Date, in respect to
those items set forth on Schedule 5.9(b)(i).
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANIES AND THE
STOCKHOLDER
The obligation of the Stockholder and the Companies to effect the Mergers
is subject to the satisfaction or waiver, at or before the Effective Time, of
the following conditions and deliveries:
9.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral and the Newcos contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by USFloral and Newco on
or before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of USFloral shall have been
delivered to the Companies and the Stockholder.
9.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of any Company, or limiting or restricting
USFloral's conduct or operation of the business of any Company (or its own
business) following the Mergers 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
40
of the foregoing be pending. There shall be no action, suit, claim or proceeding
of any nature pending or threatened, against USFloral, the Newcos or any
Company, their respective properties or any of their officers or directors, that
could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the USFloral and its
subsidiaries taken as a whole.
9.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral and the Newcos of the transactions contemplated herein, shall have
been obtained and made. Any waiting period applicable to the consummation of
the Mergers under the HSR Act shall have expired or been terminated, and no
action by the Department of Justice or Federal Trade Commission challenging or
seeking to enjoin the consummation of the transactions contemplated hereby shall
be pending.
9.4 Employment Agreements. The Companies shall have afforded ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ an opportunity to enter into an employment agreement with Pacific Floral
in a form reasonably satisfactory to USFloral.
10. INDEMNIFICATION
10.1 General Indemnification by the Stockholder. The Stockholder covenants
and agrees to indemnify, defend, protect and hold harmless USFloral, the Newcos
and the Surviving Corporations and their respective officers, directors,
employees, stockholders, assigns, successors and affiliates (individually, an
"Indemnified Party" and collectively, "Indemnified Parties") from, against and
in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Stockholder or any Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of the Stockholder or any Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Stockholder or, prior to the Effective Time, any Company, under this Agreement;
or
(iii) the business, operations or assets of any Company prior to
the Closing Date or the actions or omissions of any Company's directors,
officers, shareholders, employees or
41
agents prior to the Closing Date, other than Damages arising from matters
expressly disclosed in the Company Financial Statements, this Agreement or the
Schedules to this Agreement; or
(iv) the matters disclosed on Schedules 5.23 (conformity with
law; litigation), 5.24 (taxes), and 5.27 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10. Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 10.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
$5,000 (the "Indemnification Threshold"); provided, however, that the
Indemnification Threshold shall not apply to (i) adjustments to the Merger
Consideration as set forth in Sections 2.2 and 3.1; (ii) Damages arising out of
any breaches of the covenants of the Stockholder set forth in this Agreement or
representations and warranties made in Sections 5.4 (capital stock of the
Company), 5.5 (transactions in capital stock), 5.9 (Company financial
conditions), 5.18 (material contracts and commitments), 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters), or (iii) Damages
described in Section 10.1(a)(iv);
(b) the aggregate amount of the Stockholder's liability under this
Article 10 shall not exceed the Merger Consideration; provided, however, that
the Stockholder's liability for Damages arising out of any breaches of the
representations made in Sections 5.24 (taxes) or 5.27 (environmental matters) or
Damages described in Section 10.1(a)(ii) and Section 10.1(a)(iv) shall not be
subject to such limitation;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.2(c):
(i)
(1) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 10.2(c), the first anniversary of the
Closing Date, or
(2) with respect to representations and warranties
contained in Sections 5.22 (employee benefit plans), 5.24 (taxes), 5.27
(environmental matters), and the indemnification set forth in Section
10.1(a)(ii), (iii) or (iv), on (A) the date that is six (6) months after the
expiration of the longest applicable federal or state statute of limitation
(including extensions thereof), or (B) if there is no applicable statute of
limitation, (x) ten (10) years after the Closing Date if the Claim is related to
the cost of investigating, containing, removing, or remediating a release of
Hazardous Material into the environment, or (y) five (5) years after the Closing
Date for any other Claim covered by clause (i)(2)(B) of this Section 10.2(c); or
42
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 10.2(c) (such claims
referred to as "Pending Claims").
10.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 10.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the 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 10.3(a), the
Indemnified Party shall respond in a written statement to the objection within
thirty days and, for sixty days thereafter, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims (and,
if the parties should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice to the 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 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 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
43
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 any Surviving Corporation or any
subsidiary, the Indemnified Party shall have the right to control or assume (as
the case may be) the defense of any such Third Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third Party Claim at the sole cost and expense of the
Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 10.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 10.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
10.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by any Company, the Stockholder,
USFloral and the Newcos 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 10.2. The
representations of USFloral and the Newcos will survive the Closing and will
remain in effect until, and will expire upon the first anniversary of the
Closing Date.
44
10.5 Remedies Cumulative. The remedies set forth in this Article 10 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
10.6 Right to Set Off. USFloral shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 10.3 to be owed to USFloral by the Stockholder
under Section 10.1 hereof.
11. NONCOMPETITION
11.1 Prohibited Activities. The Stockholder agrees that for a period of
two 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, any Company within the Territory for the purpose of
soliciting or selling floral products within the Territory;
(d) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon by
any of them or for which any of them made an acquisition analysis for themselves
or USFloral or any subsidiaries of USFloral, any Company; or
(e) disclose customers, whether in existence or proposed, of any
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 Stockholder from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market or (ii) engaging
in any activity to which USFloral shall have provided its prior written consent.
45
11.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and the Surviving Corporations 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 Corporations for which they would
have no other adequate remedy, the Stockholder agrees that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporations by, without limitation, injunctions and
restraining orders.
11.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Stockholder in
light of the activities and business of USFloral on the date of the execution of
this Agreement and the current and future plans of USFloral and the Surviving
Corporations (as successors to the businesses of the Companies).
11.4 Severability; Reformation. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 Independent Covenant. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholder
against any Company, any 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 is in violation of any provision of this
Article 11 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
any Surviving Corporation seeks to enforce the agreements and covenants of the
Stockholder or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if the Stockholder is found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
11.6 Materiality. Each Company and the Stockholder hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
46
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 The Stockholder. The Stockholder recognizes and acknowledges that he
has in the past, currently has, and in the future may possibly have, access to
certain confidential information of the Companies, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Companies and the Companies' businesses. The
Stockholder agrees that he will not disclose any confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of USFloral, unless the
Stockholder can show that such information has become known to the public
generally through no fault of the Stockholder. In the event of a breach or
threatened breach by the Stockholder of the provisions of this Article 12,
USFloral and the Surviving Corporations shall be entitled to an injunction
restraining the Stockholder from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
USFloral and the Surviving Corporations from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
12.2 USFloral. USFloral recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
confidential information of the Companies, such as lists of customers,
operational policies, pricing and cost policies that are valuable, special and
unique assets of the Companies and the Companies' businesses. USFloral agrees
that it will not disclose any confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever,
prior to the Closing Date without prior written consent of the Stockholder. In
the event of a breach or threatened breach by USFloral of the provisions of this
Article 12, the Stockholder shall be entitled to an injunction restraining
USFloral from disclosing, in whole or in part, such confidential information.
Nothing contained herein shall be construed as prohibiting the Stockholder from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Surviving Corporations and the Stockholder agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
13. GENERAL
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the boards of directors of USFloral and the
Companies; or
47
(b) by the Stockholder and the Companies 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 10, 1998, provided that the right to terminate this Agreement under
this Section 13.1(b) shall not be available to either party (with the
Stockholder and the Companies 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 Stockholder and the Companies 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
Stockholder and the Companies 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 Stockholder and the Companies 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 Mergers; or
there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued or deemed applicable to the Mergers by any
governmental entity which would make the consummation of the Mergers illegal.
13.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 13 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
13.1(c) above, then notwithstanding the provisions of Section 13.7 below, the
breaching party (with the Stockholder and the Companies deemed to be a single
party for purposes of this Article 13), shall be liable to the other party to
the extent of the expenses incurred by such other party in connection with this
Agreement and the transactions contemplated hereby, as well as any damages in
accordance with applicable law.
13.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Stockholder.
13.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
48
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto, or in accordance with Section 11.4. Any
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 Brokers and Agents. USFloral and the Newcos (as a group) and the
Companies and the Stockholder (as a group) each represents and warrants to the
other that it has not employed any broker or agent in connection with the
transactions contemplated by this Agreement and agrees to indemnify the other
against all losses, damages or expenses relating to or arising out of claims for
fees or commission of any broker or agent employed or alleged to have been
employed by such party.
13.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and the Newcos and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement. The Stockholder (and not the Companies) have and will pay the fees,
expenses and disbursements of the Stockholder, the Companies, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
13.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
49
If to USFloral, the Newcos or the Surviving Corporations 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:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with a required copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ 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.
13.10 Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without giving effect to any of the conflicts of laws provisions thereof that
would require the application of the substantive laws of any other jurisdiction.
50
13.11 Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application of such provision to
such person or circumstances in any other jurisdiction, shall not be affected
thereby, and to this end the provisions of this Agreement shall be severable.
The preceding sentence is in addition to and not in place of the severability
provisions in Section 11.4.
13.12 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
13.13 Further Representations. Each party to this Agreement acknowledges
and represents that it has been represented by its own legal counsel in
connection with the transactions contemplated by this Agreement, with the
opportunity to seek advice as to its legal rights from such counsel. Each party
further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
13.14 Accounting Terms. Except as otherwise expressly provided herein or in
the Schedules, all accounting terms used in this Agreement shall be interpreted,
and all financial statements, Schedules, certificates and reports as to
financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
[Execution Page Following]
51
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U.S.A. FLORAL PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and CEO
PFW ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
RCF ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
PACIFIC FLORAL WHOLESALE, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
ROSE CITY FLORAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
STOCKHOLDER:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
52
SCHEDULES
SCHEDULE 1.1 [Form of Plans of Merger]
SCHEDULES TO ARTICLE 5 [Schedules of exceptions to the representations and
warranties]
The Schedules to this Agreement will be provided to the Commission
supplementally upon request.
53
