Exhibit 2.12 - Agreement and Plan of
Reorganization by and among
U.S.A. Floral Products, Inc., LF
Acquisition Corp., H&H Flowers,
Inc. and the Stockholders named
therein made effective as of January
16, 1998.
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
U.S.A. Floral Products, Inc.,
LF Acquisition Corp.,
H & H Flowers, Inc.
and
The Stockholders Named Therein
made effective as of January 16, 1998
Table of Contents
Page
----
1. THE MERGER............................................................... 1
1.1 The Merger...................................................... 1
1.2 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
3.3 Stockholders' Representative.................................... 8
4. CLOSING.................................................................. 9
4.1 Location and Date............................................... 9
4.2 Effect.......................................................... 9
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS....... 9
5.1 Due Organization................................................ 9
5.2 Authorization; Validity ....................................... 10
5.3 No Conflicts.................................................... 10
5.4 Capital Stock of the Company.................................... 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 Company........................... 12
5.9 Company 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............................................... 14
5.14 Permits......................................................... 14
5.15 Real Property................................................... 14
5.16 Personal Property............................................... 16
5.17 Intellectual Property........................................... 16
5.18 Material Contracts and Commitments.............................. 18
5.19 Government Contracts............................................ 19
ii
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............................ 28
5.27 Environmental Matters........................................... 28
5.28 Relations with Governments...................................... 29
5.29 Disclosure...................................................... 29
5.30 USFloral Prospectus; Securities Representations................. 30
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 NEWCO................................ 31
6.1 Due Organization................................................ 31
6.2 USFloral Common Stock........................................... 31
6.3 Authorization; Validity of Obligations.......................... 31
6.4 No Conflicts.................................................... 31
6.5 Capitalization of USFloral and Ownership of
USFloral Stock.................................................. 32
7. COVENANTS................................................................ 32
7.1 Tax Matters...................................................... 32
7.2 Accounts Receivable.............................................. 34
7.3 [Intentionally Omitted].......................................... 34
7.4 Related Party Agreements......................................... 34
7.5 Cooperation...................................................... 34
7.6 Conduct of Business Pending Closing.............................. 35
7.7 Access to Information............................................ 35
7.8 Prohibited Activities............................................ 36
7.9 [Intentionally Omitted].......................................... 37
7.10 Sales of USFloral Common Stock................................... 37
7.11 USFloral Stock Options........................................... 39
7.12 Additional Stock Options......................................... 39
7.13 Release From Guarantees.......................................... 39
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO............ 39
8.1 Representations and Warranties; Performance of Obligations....... 39
8.2 No Litigation.................................................... 40
8.3 No Material Adverse Change....................................... 40
8.4 Consents and Approvals........................................... 40
ii
8.5 Opinion of Counsel................................................ 40
8.6 Charter Documents................................................. 40
8.7 [Intentionally Omitted]........................................... 41
8.8 Due Diligence Review.............................................. 41
8.9 Delivery of Closing Financial Certificate......................... 41
8.10 [Intentionally Omitted]........................................... 41
8.11 [Intentionally Omitted]........................................... 41
8.12 [Intentionally Omitted]........................................... 41
8.13 Stockholders' Release............................................. 41
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS............................................................. 42
9.1 Representations and Warranties; Performance of Obligations....... 42
9.2 No Litigation.................................................... 42
9.3 Consents and Approvals........................................... 42
9.4 Consulting Agreement............................................. 43
10. INDEMNIFICATION.......................................................... 43
10.1 General Indemnification by the Stockholders...................... 43
10.2 Limitation and Expiration........................................ 44
10.3 Indemnification Procedures....................................... 45
10.4 Survival of Representations Warranties and Covenants............. 46
10.5 Remedies Cumulative.............................................. 47
10.6 Right to Set Off................................................. 47
11. NONCOMPETITION........................................................... 47
11.1 Prohibited Activities............................................ 47
11.2 Damages.......................................................... 48
11.3 Reasonable Restraint............................................. 48
11.4 Severability; Reformation........................................ 48
11.5 Independent Covenant............................................. 48
11.6 Materiality...................................................... 49
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................ 49
12.1 Stockholders..................................................... 49
12.2 USFloral......................................................... 49
12.3 Damages.......................................................... 50
13. GENERAL.................................................................. 50
13.1 Termination...................................................... 50
13.2 Effect of Termination............................................ 50
13.3 Successors and Assigns........................................... 51
13.4 Entire Agreement; Amendment; Waiver.............................. 51
iii
13.5 Counterparts..................................................... 51
13.6 Brokers and Agents............................................... 51
13.7 Expenses......................................................... 51
13.8 Specific Performance; Remedies................................... 52
13.9 Notices.......................................................... 52
13.10 Governing Law.................................................... 53
13.11 Severability..................................................... 53
13.12 Absence of Third Party Beneficiary Rights........................ 53
13.13 Further Representations.......................................... 53
13.14 Accounting Terms................................................. 54
iv
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into this 16th day of January, 1998, by and among U.S.A. Floral
Products, Inc., a Delaware corporation ("USFloral"), LF Acquisition Corp., a
Florida corporation and a newly-formed, wholly-owned subsidiary of USFloral
("Newco"), H & H Flowers, Inc., a Florida corporation (the "Company"), ▇▇▇▇▇ ▇.
▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ (each a "Stockholder" and collectively, the
"Stockholders").
BACKGROUND
WHEREAS, the respective Boards of Directors of Newco and the Company
(which together are sometimes referred to as the "Constituent Corporations")
deem it advisable and in the best interests of the Constituent Corporations and
their respective stockholders that Newco merge with and into the Company (the
"Merger") pursuant to this Agreement, the Plan of Merger (defined below) and the
applicable provisions of the laws of the State of Florida.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 4.2), Newco
shall be merged with and into the Company pursuant to this Agreement and a plan
of merger (the "Plan of Merger") substantially in the form attached as Schedule
1.1 hereto, and the separate corporate existence of Newco shall cease. The
Company, as it exists from and after the Effective Time, is sometimes referred
to as the "Surviving Corporation."
1.2 Articles of Incorporation; Bylaws; Directors and Officers. At the
Effective Time:
(a) The Articles of Incorporation of the Surviving Corporation from
and after the Effective Time shall be the Articles of Incorporation of Newco
until thereafter amended in accordance with the provisions therein and as
provided by the applicable provisions of the Florida Business Corporation Act.
(b) The Bylaws of the Surviving Corporation from and after the
Effective Time shall be the Bylaws of Newco in effect immediately prior to the
Effective Time, continuing
1
until thereafter amended in accordance with their terms and the Articles of
Incorporation of the Surviving Corporation and as provided by the Florida
Business Corporation Act.
(c) The initial director of the Surviving Corporation shall be ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ until his successor is elected and qualified, and the initial
officers of the Surviving Corporation shall be the officers of the Company
immediately prior to the Effective Time, with the addition of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
as Assistant Secretary of the Surviving Corporation, in each case until their
successors are duly elected and qualified.
1.3 Effects of the Merger. The Merger shall have the effects provided
therefor by the Florida Business Corporation Act. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time (i) all
the rights, privileges, immunities, powers and franchises, of a public as well
as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including without limitation subscriptions to
shares, and all other choses in action, and all and every other interest of or
belonging to or due to the Company or Newco shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, immunities, powers and franchises
and all and every other interest shall be thereafter as effectually the property
of the Surviving Corporation, as they were of the Company and Newco, and (ii)
all debts, liabilities, duties and obligations of the Company and Newco, subject
to the terms hereof, shall become the debts, liabilities and duties of the
Surviving Corporation and the Surviving Corporation shall thenceforth be
responsible and liable for all the debts, liabilities, duties and obligations of
the Company and Newco and neither the rights of creditors nor any liens upon the
property of the Company or Newco shall be impaired by the Merger, and may be
enforced against the Surviving Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. At the Effective Time, by virtue of the Merger
and without any action on the part of USFloral, Newco, the Company or any
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of
capital stock of Newco shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable common
stock of the Surviving Corporation. Each stock certificate of Newco evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company.
All shares of capital stock of the Company that are owned directly or indirectly
by the Company
2
shall be canceled and no stock of USFloral or other consideration shall be
delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section
2.1(d), and Sections 2.2, 3.1 and 3.2, each issued and outstanding share of
common stock of the Company, $1.00 par value per share ("Company Common Stock")
(other than shares to be canceled pursuant to Section 2.1(b)), that is issued
and outstanding immediately prior to the Effective Time shall automatically be
canceled and extinguished and converted, without any action on the part of the
holder thereof, into the right to receive (i) an amount of cash equal to $1.6
million 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
Earn-Out Price (as defined in Section 2.2(a)), that is equal in value to the
Earn-Out Consideration (as defined in Section 2.2(a)) divided by the number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time, all to be distributed to the Stockholders at the times set forth in
Section 2.2(a) hereof. 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
Earn-Out Price, as defined in Section 2.2(a), multiplied by the fraction of a
share of USFloral Common Stock to which such holder would otherwise be entitled.
The fractional share interests of each Stockholder shall be aggregated, so that
no Stockholder shall receive cash in an amount greater than the value of one
full share of USFloral Common Stock.
2.2 Merger Consideration.
(a) For purposes of this Agreement, the "Merger Consideration" shall
be $1.6 million plus the Earn-Out Consideration, adjusted pursuant to this
Section 2.2 and Section 3.1. Of the Merger Consideration, $1.6 million shall be
paid in cash at Closing in immediately available funds. For each $1.00 by which
the Company's earnings before interest and taxes ("EBIT") for the twelve months
ending June 30, 1998 exceeds $114,000 after the addition of the "add-backs" set
forth on Schedule 5.9(b) (as determined by Price Waterhouse LLP ("USFloral's
Accountant")), USFloral shall pay to the Stockholders $6.00 (the "Earn-Out
Consideration"). The Earn-Out Consideration shall be paid in USFloral Common
Stock valued at the average of the closing price on the Nasdaq National Market
(or principal stock exchange on which USFloral Common Stock is traded) per share
of USFloral Common Stock for each trading day during the thirty calendar day
period ending June 30, 1998 (the "Earn-Out Price"). The Earn-Out
3
Consideration, if any, shall be paid within thirty days of the determination by
USFloral's Accountant of the Company's EBIT for the twelve months ended June 30,
1998, but not later than September 15, 1998. The shares of USFloral Common
Stock to be issued (subject to adjustment as provided in this Section 2.2 and
Section 3.1) shall be registered under the Securities Act of 1933, as amended
(the "1933 Act") and listed on the Nasdaq National Market.
(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 not less than negative $493,000 (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(b)), 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 to the cash portion of the Merger Consideration).
2.3 Exchange of Certificates and Payment of Cash.
(a) USFloral to Provide Cash and Common Stock. In exchange for the
outstanding shares of Company Common Stock, USFloral shall cause to be made
available to the Stockholders the Merger Consideration (including cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
1.2(d)), as adjusted pursuant to Section 2.2 and Section 3.1. The certificates
evidencing the USFloral Common Stock component of the Merger Consideration shall
bear appropriate legends pursuant to the terms of this Agreement and USFloral
shall be entitled to issue appropriate stop transfer instructions to its
transfer agent consistent with the terms of this Agreement.
(b) Certificate Delivery Requirements. At the Effective Time, the
Stockholders shall deliver to USFloral the certificates (the "Certificates")
representing Company Common Stock, accompanied by blank stock powers duly
executed by the Stockholders and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholders' expense, affixed and canceled.
The Stockholders shall promptly cure any deficiencies with respect to the stock
powers accompanying such Certificates. The Certificates so delivered shall
forthwith be canceled. Until delivered as contemplated by this Section 2.3(b),
each Certificate shall be deemed at any time after the Effective Time to
represent the right to receive upon such surrender 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 Florida Business Corporation Act.
(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
4
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 Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Section 2.3.
(d) Lost, Stolen or Destroyed Certificates. If any certificates
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, then USFloral shall cause payment to be made in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, provided, however that USFloral may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against USFloral with respect to the certificates alleged to have been lost,
stolen or destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this
Section 2.3, none of the Surviving Corporation or any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 Post-Closing Adjustment.
(a) The Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 3.1.
(b) Within one hundred twenty (120) days following the Effective Time,
USFloral shall cause USFloral's Accountant to audit the Surviving Company's
books to determine the accuracy of the information set forth on the Closing
Financial Certificate (the "Post-Closing Audit"). The parties acknowledge and
agree that for purposes of determining the net worth of the Company as of the
Closing Date, the value of the assets of the Company shall, except with the
prior written consent of USFloral, be calculated as provided in the last
paragraph of Section 8.9. The Stockholders shall cooperate and shall use their
reasonable efforts to cause the officers and employees of the Company to
cooperate with USFloral and USFloral's Accountant after the Closing Date in
furnishing information, documents, evidence and other assistance to USFloral's
Accountant to facilitate the completion of the Post-Closing Audit within the
aforementioned time period. Without limiting the generality of the foregoing,
within two
5
weeks after the Closing the Stockholders shall provide USFloral's Accountant
with the information and/or documents requested on the Post-Closing Audit
Checklist set forth as Schedule 3.1 hereto as well as any other information
requested by USFloral's Accountant related to such Post-Closing Audit. In the
event that USFloral's Accountant determines that the actual net worth of the
Company as of the Closing Date was less than the Certified Closing Net Worth,
USFloral shall deliver a written notice (the "Financial Adjustment Notice") to
the Stockholders' Representative, as defined in Section 3.3, setting forth (i)
the determination made by USFloral's Accountant of the actual net worth of the
Company (the "Actual Company Net Worth"), (ii) the amount of the Merger
Consideration that would have been payable at Closing pursuant to Section 2.2(c)
had the Actual Company Net Worth been reflected on the Closing Financial
Certificate instead of the Certified Closing Net Worth, and (iii) the amount by
which the cash delivered as the Merger Consideration would have been reduced at
Closing had the Actual Company Net Worth been used in the calculations pursuant
to Section 2.2(c) (the "Merger Consideration Adjustment"). The Merger
Consideration Adjustment shall take account of the reduction, if any, to the
Merger Consideration already taken pursuant to Section 2.2(c)(i). The Company
will not incur any liability in addition to the Merger Consideration Adjustment
if the estimated net worth on the Closing Financial Certificate is less than the
Actual Company Net Worth.
(c) The Stockholders' Representative shall have thirty (30) days from
the receipt of the Financial Adjustment Notice to notify USFloral if the
Stockholders dispute such Financial Adjustment Notice. If USFloral has not
received notice of such a dispute within such 30-day period, USFloral shall be
entitled to receive from the Stockholders (which may at USFloral's reasonable
discretion, be from the Pledged Assets, as defined in Section 3.2) the Merger
Consideration Adjustment. If, however, the Stockholders' Representative has
delivered notice of such a dispute to USFloral within such 30-day period, then
Deloitte & Touche will review the Surviving Corporation's books, the Closing
Financial Certificate and the Financial Adjustment Notice (and related
information) to determine the amount, if any, of the Merger Consideration
Adjustment. Deloitte & Touche 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. Deloitte &
Touche shall make its determination of the Merger Consideration Adjustment, if
any, within forty-five (45) days of the date on which notice of a dispute is
received from the Stockholders' Representative. The determination made by
Deloitte & Touche shall be final and binding on the parties hereto, and upon
such determination, USFloral shall be entitled to receive from the Stockholders
(which may, at USFloral's reasonable discretion, be from the Pledged Assets as
defined in Section 3.2), the Merger Consideration Adjustment, if any. The costs
of Deloitte & Touche shall be borne by the party (either USFloral or the
Stockholders as a group) whose determination of the Company's net worth at
Closing was further from the determination of Deloitte & Touche, or equally by
USFloral and the Stockholders in the event that the determination by Deloitte &
Touche is equidistant between the Certified Closing Net Worth and the Actual
Company Net Worth.
6
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, cash equal to ten percent (10%) of each
Stockholder's share of the cash portion of the Merger Consideration as the same
may have been adjusted pursuant to Section 2.2 or Section 3.1 hereof; upon
determination of the Earn-Out Consideration, that number of shares of USFloral
Common Stock, valued at the Earn-Out Price, equal to ten percent (10%) of each
Stockholder's share of the Earn-Out Consideration and the certificates and
instruments, if any, representing or evidencing each such Stockholder's Pledged
Assets (and at the election of each Stockholder, additional shares of USFloral
Common Stock, valued at the Earn-Out Price, in substitution for of their Pledged
Assets). The Stockholder shall receive interest on all cash that continues to
serve as a Pledged Asset at the time of release thereof to the Stockholder.
Such interest rate will be calculated for the entire year period at the Prime
Rate as of the Closing Date and paid at the time of release;
(ii) all securities hereafter delivered to such Stockholder with
respect to or in substitution for such Stockholder's Pledged Assets, all
certificates and instruments representing or evidencing such securities, and all
cash and non-cash dividends and other property at any time received, receivable
or otherwise distributed in respect of or in exchange for any or all thereof;
and in the event such Stockholder receives any such property, such Stockholder
shall hold such property in trust for USFloral and shall immediately deliver
such property to USFloral to be held hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(b) Each certificate, if any, evidencing a Stockholder's Pledged
Assets issued in his or her name in the Merger shall be delivered to USFloral
directly by the transfer agent, such certificate bearing no restrictive or
cautionary legend other than those imprinted by the transfer agent at USFloral's
request. Each Stockholder shall, at the Closing, deliver to USFloral, for each
such certificate, a stock power duly signed in blank by him or her. Any cash
comprising a Stockholder's Pledged Assets shall be withheld by USFloral from
distribution to such Stockholder.
(c) The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Merger Consideration pursuant to Section 3.1 and any
indemnification obligations of the Stockholders pursuant to Article 10 until the
date which is one year after the
7
Effective Time (the "Release Date"). Promptly following the Release Date,
USFloral shall return or cause to be returned to the Stockholders the Pledged
Assets, less Pledged Assets having an aggregate value equal to the amount of (i)
any post-Closing adjustment to the Merger Consideration under Section 3.1, (ii)
any pending claim for indemnification made by any Indemnified Party (as defined
in Article 10), and (iii) payment of any unpaid claim previously determined to
be due from the Stockholders pursuant to Article 10. For purposes of the
preceding sentence and Article 10, the USFloral Common Stock held as Pledged
Assets shall be valued at (x) the Merger Price with respect to any post-Closing
adjustment to the Merger Consideration under Section 3.1 and (y) the average of
the closing price on the Nasdaq National Market per share of USFloral Common
Stock for the five trading days prior to the satisfaction of an indemnification
obligation (the "Market Value") with respect to indemnification obligations
pursuant to Article 10.
(d) The Stockholders shall be entitled to exercise any voting powers
incident to the Pledged Assets and to receive and retain all cash dividends paid
thereon.
3.3 Stockholders' Representative.
(a) Each holder of Company Common Stock, by signing this Agreement,
designates ▇▇▇▇▇ ▇. ▇▇▇▇ or, in the event that ▇▇▇▇▇ ▇. ▇▇▇▇ is unable or
unwilling to serve, ▇▇▇▇▇▇ ▇▇▇▇▇▇ to be the Stockholders' Representative for
purposes of this Agreement. The Stockholders shall be bound by any and all
actions taken by the Stockholders' Representative on their behalf.
(b) USFloral and Newco shall be entitled to rely upon any
communication or writings given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 10 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of the other Stockholders hereunder and in consideration of
the mutual covenants and agreements made herein, and shall be irrevocable and
shall not be terminated by any act of any Stockholder, or by operation of law,
whether by such Stockholder's death or any other event.
8
4. CLOSING
4.1 Location and Date. The consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place in
Miami, Florida at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP, on January 16,
1998, providing that all conditions to Closing shall have been satisfied or
waived, or at such other time and date as USFloral, the Company and the
Stockholders may mutually agree, which date shall be referred to as the "Closing
Date."
4.2 Effect. On the Closing Date, the articles of merger and any other
appropriate documents executed in accordance with the Florida Business
Corporation Act (the "Merger Documents"), together with any required officers'
certificates, shall be filed with the Secretary of the State of Florida in
accordance with the provisions of the Florida Business Corporation Act. The
Merger shall become effective upon such filing or at such later time as may be
specified in such filing (the "Effective Time").
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
To induce USFloral and Newco to enter into this Agreement and consummate
the transactions contemplated hereby, each of the Company and each Stockholder,
jointly and severally, represents and warrants to USFloral and Newco as follows
(for purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
Stockholders and the directors and officers of the Company, including facts of
which the directors and officers, in the reasonably prudent exercise of their
duties, should be aware):
5.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted except where the failure to be so authorized,
qualified or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of the
Company ("Material Adverse Effect"). Schedule 5.l hereto contains a list of all
jurisdictions in which the Company is authorized or qualified to do business.
The Company is in good standing as a foreign corporation in each jurisdiction it
which it is authorized to do business. The Company has delivered to USFloral
true, complete and correct copies of the Articles of Incorporation and Bylaws of
the Company. Such Articles of Incorporation and Bylaws are collectively
referred to as the "Charter Documents." The Company is not in violation of any
Charter Documents. The minute books of the Company have been made available to
USFloral (and have been delivered, along with the Company's original stock
ledger and corporate seal, to USFloral) and are correct and, except as set forth
in Schedule 5.1, complete in all material respects.
9
5.2 Authorization; Validity. The Company has all requisite corporate
power and authority to enter into and perform its obligations pursuant to the
terms of this Agreement. The Company has the full legal right, corporate power
and authority to enter into this Agreement and the transactions contemplated
hereby. Each Stockholder has the full legal right and authority to enter into
this Agreement and the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the performance by the Company of
the transactions contemplated herein have been duly and validly authorized by
the Board of Directors of the Company and the Stockholders and this Agreement
has been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of the Company and each
Stockholder, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) except as set forth on Schedule 5.18, conflict with, or result in
a default (or an event that would constitute a default but for any requirement
of notice or lapse of time or both) under, any document, agreement or other
instrument to which the Company or any Stockholder is a party or by which the
Company or any Stockholder is bound, or result in the creation or imposition of
any lien, charge or encumbrance on any of the Company's properties pursuant to
(i) any law or regulation to which the Company or any Stockholder or any of
their respective property is subject, or (ii) any judgment, order or decree to
which the Company or any Stockholder is bound or any of their respective
property is subject;
(c) except as set forth on Schedule 5.18, result in termination or any
impairment of any permit, license, franchise, contractual right or other
authorization of the Company; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company or any Stockholder is subject or by which the
Company or any Stockholder is bound including, without limitation, the ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇"), together with
all rules and regulations promulgated thereunder.
5.4 Capital Stock of the Company. The authorized capital stock of the
Company consists of 100 shares of Company Common Stock, $1.00 par value, of
which 100 shares are issued and outstanding. All of the issued and outstanding
shares of the capital stock of the Company have been duly authorized and validly
issued, are fully paid and nonassessable and are owned of record and
beneficially by the Stockholders in the amounts set forth in Schedule 5.4 free
and clear of all Liens (defined below), except as set forth on Schedule 5.4.
All of the issued and outstanding shares of the capital stock of the Company
were offered, issued, sold and
10
delivered by the Company in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares was
issued in violation of any preemptive rights. There are no voting agreements or
voting trusts with respect to any of the outstanding shares of the capital stock
of the Company. For purposes of this Agreement, "Lien" means any mortgage,
security interest, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or otherwise), charge, preference, priority or
other security agreement, option, warrant, attachment, right of first refusal,
preemptive, conversion, put, call or other claim or right, restriction on
transfer (other than restrictions imposed by federal and state securities laws),
or preferential arrangement of any kind or nature whatsoever (including any
restriction on the transfer of any assets, any conditional sale or other title
retention agreement, any financing lease involving substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
5.5 Transactions in Capital Stock. No option, warrant, call, subscription
right, conversion right or other contract or commitment of any kind exists of
any character, written or oral, which may obligate the Company to issue, sell or
otherwise cause to become outstanding any shares of capital stock. The Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. As a result of the
Merger, USFloral will be the record and beneficial owner of all outstanding
capital stock of the Company and rights to acquire capital stock of the Company.
5.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 5.6(a), the Company has no
subsidiaries.
(b) Except as set forth on Schedule 5.6(b), the Company does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is the Company,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity.
(c) Except as set forth on Schedule 5.6(c), there are no promissory
notes that have been issued to, or are held by, the Company.
5.7 Predecessor Status. Schedule 5.7 sets forth a list of all names of
all predecessor companies of the Company, including the names of any entities
from which the Company previously acquired significant assets. The Company has
never been a subsidiary or division of another corporation, nor has it been a
part of an acquisition that was later rescinded.
11
5.8 Absence of Claims Against the Company. Except for accrued or unpaid
salary in an amount not to exceed $28,000 and reimbursement of business expenses
in an amount not to exceed for $12,000, no Stockholder has any claims against
the Company.
5.9 Company Financial Conditions.
(a) The Company's net worth (i) as of the end of its most recent
fiscal year was not less than negative $2,000, 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 Company's earnings before interest and taxes for (i) its most
recent fiscal year (after the addition of "add-backs" set forth on Schedule
5.9(b)) was not less than $272,000 and (ii) the three-month period ended
September 30, 1997, was not less than negative $187,000.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete and
correct copies of the Company's audited balance sheet as of June 30, 1997 (the
end of its most recently completed fiscal year), and income statement for the
year then ended (collectively, the "Audited Financials") and (b) true, complete
and correct copies of the Company's unaudited balance sheet (the "Interim
Balance Sheet") as of October 31, 1997 (the "Balance Sheet Date") and income
statement, for the four-month period then ended (collectively, the "Interim
Financials," and together with the Audited Financials, the "Company Financial
Statements"). Except as noted on the auditors' report accompanying the Audited
Financials, the Company Financial Statements have been prepared in accordance
with GAAP consistently applied, subject to, in the case of the Interim
Financials, (i) normal year-end audit adjustments, which individually or in the
aggregate will not be material, (ii) the exceptions stated on Schedule 5.10, and
(iii) the omission of footnote information. Each balance sheet included in the
Company Financial Statements presents fairly the financial condition of the
Company as of the date indicated thereon, and each of the income statements
included in the Company Financial Statements presents fairly the results of its
operations for the periods indicated thereon. Since the dates of the Company
Financial Statements, there have been no material changes in the Company's
accounting policies other than as requested by USFloral to conform the Company's
accounting policies to GAAP.
5.11 Liabilities and Obligations.
(a) The Company is not liable for or subject to any liabilities except
for:
(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
12
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.
(b) The Company has delivered to USFloral, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 5.11(c) also includes a summary description of all plans
or projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the Company
or the Surviving Corporation would require additional material expenditures of
capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, ▇▇▇▇▇▇ or
inchoate, liquidated or unliquidated, secured or unsecured. Schedule 5.11(d)
contains a complete list of all indebtedness of the Company in excess of
$10,000, either individually or in the aggregate.
5.12 Accounts and Notes Receivable. The Company has delivered to USFloral
a complete and accurate list, as of a date not more than ten (10) business days
prior to the date hereof, of the accounts and notes receivable of the Company
(including without limitation receivables from and advances to employees and the
Stockholders), which includes an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories (collectively, the "Accounts
Receivable"). On the Closing Date, the Company will deliver to USFloral a
complete and accurate list, as of a date not more than ten (10) business days
prior to the Closing Date, of the Accounts Receivable. All Accounts Receivable
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. The Accounts Receivable
are current and collectible net of any respective reserves shown on the
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves, each of the Accounts
Receivable will be collected in full, without any set-off, within ninety (90)
days after the day on which it first became due and payable. There is no
contest, claim, or right of set-off, other than rebates and returns in the
ordinary course of business, under any contract with any obligor of an Account
Receivable relating to the amount or validity of such Account Receivable.
13
5.13 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
5.14 Permits. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing. The
transactions contemplated by this Agreement will not result in a default under,
or a breach or violation of, or adversely affect the rights and benefits
afforded to the Company by, any Permit.
5.15 Real Property.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by the Company, together with any additions thereto or
replacements thereof.
(b) Schedule 5.15(b) contains a complete and accurate description of
all Real Property (including street address, legal description (where known),
owner, and Company's use thereof) and, to the Company's knowledge, any Liens.
Schedule 5.15(b) indicates whether the Real Property is owned or leased. The
Real Property listed on Schedule 5.15 includes all interests in real property
necessary to conduct the business and operations of the Company.
(c) Except as set forth in Schedule 5.15(c):
(i) The 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 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
14
Property in the conduct of the business of the Company's business 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 Company's business 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.
(iii) All present uses and operations of the Real Property
physically occupied by the Company comply with all applicable statutes, rules,
regulations, ordinances, orders, writs, injunctions, judgments, decrees, awards
or restrictions of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Laws") affecting the Real Property.
(iv) There are no pending or, to the Company's knowledge,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof, nor has the Company or any
of the Stockholders received notice of any pending or threatened special
assessment proceedings affecting any portion of the Real Property.
(v) 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.
(vi) Except as set forth on Schedule 5.15, there are no parties
other than the Company in possession of any of the Real Property or any portion
thereof, and there are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the Real Property or any portion thereof.
(vii) Except as set forth on Schedule 5.15 and 5.18, there
are no service contracts or other agreements relating to the use or operation of
the Real Property.
(viii) 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.
15
(ix) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which the Company
leases from any other party any real property, including all amendments,
renewals, extensions, modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively, the "Leases") are valid
and in full force and effect. The Company has provided USFloral with true and
complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
operation granted to such party under such Lease. The Leases and the Company's
interests thereunder are free of all Liens.
(x) None of the Leases requires the consent or approval of any
party thereto in connection with the consummation of the transactions
contemplated hereby.
5.16 Personal Property.
(a) Schedule 5.16(a) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by the Company since the Balance Sheet Date with a
current book value in excess of $5,000 both (i) as of the Balance Sheet Date and
(ii) acquired since the Balance Sheet Date, including in each case true,
complete and correct copies of leases for material equipment and an indication
as to which assets are currently owned, or were formerly owned, by any
Stockholder or business or personal affiliates of any Stockholder or of the
Company.
(b) The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company as they are
currently being conducted.
(c) All of the trucks and other material machinery and equipment of
the Company, including those listed on Schedule 5.16(a), are in good working
order and condition, ordinary wear and tear excepted. All leases set forth on
Schedule 5.16(a) are in full force and effect and constitute valid and binding
agreements of the Company, and the Company is not in breach of any of their
terms. All fixed assets used by the Company that are material to the operation
of its business are either owned by the Company or leased under an agreement
listed on Schedule 5.16(a).
5.17 Intellectual Property.
(a) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks listed on Schedule 5.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Company now owns or
uses in connection with its business. Except with respect to those Marks shown
as licensed on
16
Schedule 5.17(a), the Company owns all of the registered and unregistered
trademarks, service marks, and trade names that it uses. The Marks listed on
Schedule 5.17(a) will not cease to be valid rights of the Company by reason of
the execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby. For purposes of this Section 5.17, the
term "▇▇▇▇" shall mean all right, title and interest in and to any United States
or foreign trademarks, service marks and trade names now held by the Company,
including any registration or application for registration of any trademarks and
services marks in the PTO or the equivalent thereof in any state of the United
States or in any foreign country, as well as any unregistered marks used by the
Company, and any trade dress (including logos, designs, company names, business
names, fictitious names and other business identifiers) used by the Company in
the United States or any foreign country.
(b) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on Schedule 5.17(b)(i) and in the Copyright registrations listed on
Schedule 5.17(b)(ii). Such Patents and Copyrights constitute all of the Patents
and Copyrights that the Company now owns or is licensed to use. The Company owns
or is licensed to practice under all patents and copyright registrations that
the Company now owns or uses in connection with its business. For purposes of
this Section 5.17, the term "Patent" shall mean any United States or foreign
patent to which the Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by the Company;
the term "Copyright" shall mean any United States or foreign copyright owned by
the Company as of the date of this Agreement, including any registration of
copyrights, in the United States Copyright Office or the equivalent thereof in
any foreign county, as well as any application for a United States or foreign
copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "Other Rights") listed on
Schedule 5.17(c). Those Other Rights constitute all of the Other Rights that
the Company now owns or is licensed to use. The Company owns or is licensed to
practice under all trade secrets, franchises or similar rights that it owns,
uses or practices under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on
Schedules 5.17(a), 5.17(b)(i), 5.17(b)(ii), and 5.17(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by the Company is referred to herein collectively as the "Company
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third Party Intellectual Property." Except as indicated on
Schedule 5.17(d), the Company has no obligations to compensate any person for
the use of any Intellectual Property nor has the Company granted to any person
any license, option or other rights to use in any manner any Intellectual
Property, whether requiring the payment of royalties or not.
17
(e) The Company is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its obligations hereunder,
in violation of any Third Party Intellectual Property license, sublicense or
agreement described in Schedule 5.17(a), (b), or (c). No claims with respect to
the Company Intellectual Property or Third Party Intellectual Property are
currently pending or, to the knowledge of the Company, are threatened by any
person, nor, to the Company's knowledge, do any grounds for any claims exist:
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by the Company
infringes on any copyright, patent, trademark, service ▇▇▇▇ or trade secret;
(ii) against the use by the Company of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in the Company's business as currently conducted by the
Company; (iii) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property or other trade secret material to the Company;
or (iv) challenging the Company's license or legally enforceable right to use of
the Third Party Intellectual Property. To the Company's knowledge, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party. Neither the Company nor any of its
subsidiaries (x) has been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim or infringement of
trade secrets, any patents, trademarks, service marks, or copyrights and which
has not been finally terminated or been informed or notified by any third party
that the Company may be engaged in such infringement or (y) has knowledge of any
infringement liability with respect to, or infringement by, the Company or any
of its subsidiaries of any trade secret, patent, trademark, service ▇▇▇▇, or
copyright of another.
(f) All Intellectual Property in the form of computer software that is
utilized by the Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first
centuries, or can be rendered capable of processing such data by the expenditure
of no more than $10,000.
5.18 Material Contracts and Commitments.
(a) Schedule 5.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, written or oral, to
which the Company is a party or by which it or its properties are bound
(including without limitation, joint venture or partnership agreements,
contracts with any labor organizations, employment agreements, consulting
agreements, loan agreements, indemnity or guaranty agreements, bonds, mortgages,
options to purchase land, liens, pledges or other security agreements) (i) to
which the Company and any Affiliate (as defined in Section 5.31) of the Company
or any officer, director or stockholder of the Company are parties ("Related
Party Agreements"); or (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, $20,000, or that may generate
revenues or income exceeding, during the current term thereof, $20,000
(collectively with the Related Party Agreements, the "Material Contracts"). The
Company has delivered to USFloral true, complete and correct copies of the
Material Contracts. The Company has complied with all of its commitments and
obligations and is not in default under any of the
18
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, except for (i) existing lease for the Company's offices and
warehouse and (ii) the Administrative Services Agreement.
(b) Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Company and is in full force and effect
and is not subject to any default thereunder by any party obligated to the
Company pursuant thereto. The Company 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 (except for any
agreements with First Union National Bank of Florida and/or the Dade County
Industrial Development Authority (collectively the "IDB Financing") relating to
the warehouse and distribution center currently leased by the Company) after the
Merger and without giving rise to any right to termination, cancellation or
acceleration or loss of any right or benefit ("Third Party Consents"). All
Third Party Consents are listed on Schedule 5.18(b).
(c) The outstanding balance on all loans or credit agreements either
(i) between the Company and any person in which any of the Stockholders owns a
material interest, or (ii) guaranteed by the Company for the benefit of any
Person in which any of the Stockholders owns a material interest, are set forth
in Schedule 5.18(c).
(d) The pledge, hypothecation or mortgage of all or substantially all
of the Company's assets (including, without limitation, a pledge of the
Company's contract rights under any Material Contract) will not, except as set
forth on Schedule 5.18(d), (i) result in the breach or violation of, (ii)
constitute a default under, (iii) create a right of termination under, or (iv)
result in the creation or imposition of (or the obligation to create or impose)
any lien upon any of the assets of the Company (other than a lien created
pursuant to the pledge, hypothecation or mortgage described at the start of this
Section 5.18(d)) pursuant to any of the terms and provisions of, any Material
Contract to which the Company is a party or by which the property of the Company
is bound.
5.19 Government Contracts.
(a) Except as set forth on Schedule 5.19, the Company is not a party
to any government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company, has any suspension or debarment action been threatened or commenced.
There is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
19
(c) Except as set forth in Schedule 5.19, the Company has not been,
nor is it now being, audited, or investigated by any government agency, or the
inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened.
(d) The Company has no dispute pending before a contracting office of,
nor any current claim (other than the Accounts Receivable) pending against, any
agency or instrumentality of the United States Government or any state or local
government, relating to a contract.
(e) The Company has not, with respect to any government contract,
received a cure notice advising the Company that it is or was in default or
would, if it failed to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate of
the Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Company's
business under circumstances where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate list of
all insurance policies carried by the Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. The
Company has delivered to USFloral true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums due under all such policies have been paid and the Company is otherwise
in full compliance with the terms of such policies. Such policies of insurance
are of the type and in amounts customarily carried by persons conducting
businesses similar to that of the Company. The insurance carried by the Company
with respect to its properties, assets and business is, to the Company's
knowledge, with financially sound insurers. To the knowledge of the Company,
there have been no threatened terminations of, or material premium increases
with respect to, any of such policies.
5.21 Labor and Employment Matters. With respect to employees of and
service providers to the Company:
20
(a) the Company is and has been in compliance in all material respects
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including without limitation
any such laws respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control Act, and
occupational safety and health requirements, and has not and is not engaged in
any unfair labor practice;
(b) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against the Company pending or, to the
Company's knowledge, threatened, before the National Labor Relations Board or
any other comparable authority;
(c) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to the Company's
knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization
effort exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(g) all persons classified by the Company as independent contractors
do satisfy and have satisfied the requirements of law to be so classified, and
the Company has fully and accurately reported their compensation on IRS Forms
1099 when required to do so.
5.22 Employee Benefit Plans. Attached hereto as Schedule 5.22 is a list of
all employee benefit plans, all employee welfare benefit plans, all employee
pension benefit plans, all multi-employer plans and all multi-employer welfare
arrangements (as defined in Sections 3(3), (1), (2), (37) and (40),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), which are currently maintained and/or sponsored by the Company, or
to which the Company currently contributes, or has an obligation to contribute
in the future (including, without limitation, employment agreements and any
other agreements containing "golden parachute" provisions and deferred
compensation agreements), together with a list 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.
21
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), have been determined by
the Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed with respect to each
such Qualified Plan or employee welfare benefit plan and most recent trustee or
custodian report, are listed on Schedule 5.22. To the extent that any Qualified
Plans have not been amended to comply with applicable law, the remedial
amendment period permitting retroactive amendment of such Qualified Plans has
not expired and will not expire within 120 days after the Closing Date. All
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. None of: (i) the
Stockholders; (ii) any Plan; or (iii) the Company has engaged in any transaction
prohibited under the provisions of Section 4975 of the Code or Section 406 of
ERISA. No Plan has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and the Company does not
currently have (nor at the Closing Date will have) any direct or indirect
liability whatsoever (including being subject to any statutory lien to secure
payment of any such liability) to the Pension Benefit Guaranty Corporation
("PBGC") with respect to any such Plan under Title IV of ERISA or to the
Internal Revenue Service for any excise tax or penalty; and neither the Company
nor any member of a "controlled group" (as defined in ERISA Section 4001(a)(14))
currently has (or at the Closing Date will have) any obligation whatsoever to
contribute to any "multi-employer pension plan" (as defined in ERISA Section
4001(a)(14), nor has any withdrawal liability whatsoever (whether or not yet
assessed) arising under or capable of assertion under Title IV of ERISA
(including, but not limited to, Sections 4201, 4202, 4203, 4204, or 4205
thereof) been incurred by any Plan. Further:
(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 if required by applicable law;
(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;
22
(e) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the Company and the Stockholders have complied (and on the Closing
Date will have complied), in all respects with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed thereunder
as and when applicable to such plans, and the Company has no (and will incur no)
direct or indirect liability and is not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect failure
by the Company or the Stockholders, at any time prior to the Closing Date, to
comply with any such federal or state benefit continuation requirement, which is
capable of being assessed or asserted before or after the Closing Date directly
or indirectly against the Company or the Stockholders with respect to such group
health plans;
(f) except as set forth on Schedule 5.22, the Company is not now nor
has it been within the past five years a member of a "controlled group" as
defined in ERISA Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the Company's knowledge, there is
no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(h) the Company 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 Company Financial Statements to be not representative of
most prior periods; and
(i) the Company has not incurred liability under Section 4062 of
ERISA.
5.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 5.23(a), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing which might have a
Material Adverse Effect on the Company.
(b) Except as set forth on Schedule 5.23(b), no Stockholder has, at
any time: (i) committed any criminal act (except for minor traffic violations);
(ii) engaged in acts of fraud,
23
dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy or Chapter 11 protection.
(c) Except as set forth on Schedule 5.23(c), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of the Company,
threatened against or affecting the Company at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. There are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against the Company or against any of its properties or
business.
5.24 Taxes.
(a)
(i) The Company has timely filed all Tax Returns due on or before
the Closing Date and all such Tax Returns are true, correct and complete in all
respects.
(ii) The Company has paid in full on a timely basis all Taxes
owed by it, whether or not shown on any Tax Return.
(iii) The amount of the Company's liability for unpaid Taxes
as of the Balance Sheet Date did not exceed the amount of the current liability
accruals for Taxes (excluding reserves for deferred Taxes) shown on the Interim
Balance Sheet, and the amount of the Company's liability for unpaid Taxes for
all periods or portions thereof ending on or before the Closing Date will not
exceed the amount of the current liability accruals for Taxes (excluding
reserves for Deferred Taxes) as such accruals are reflected on the books and
records of the Company on the Closing Date.
(iv) Except as set forth on Schedule 5.24, there are no ongoing
examinations or claims against the Company for Taxes, and no notice of any
audit, examination or claim for Taxes, whether pending or threatened, has been
received.
(v) The Company has a taxable year ended on June 30.
(vi) The Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not changed
in the past 3 years. The Company has not agreed to, and is not and will not be
required to, make any adjustments under Code Section 481(a) as a result of a
change in accounting methods.
(vii) The Company has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied
24
with all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid to any employee, independent contractor, creditor or third party.
(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of the Company for the last five fiscal years have been delivered to
USFloral.
(ix) There are (and as of immediately following the Closing there
will be) no Liens on the assets of the Company relating to or attributable to
Taxes except Liens arising by operation of law for Taxes not yet due and
payable.
(x) To the Company's knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have an adverse effect on the Company or its business.
(xi) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or collectively,
could give rise to any payment (or portion thereof) that would not be deductible
pursuant to Sections 280G, 404 or 162 of the Code except for reimbursement of
business expenses to the extent meals and entertainment are not deductible under
the Code.
(xii) The Company is not, and has not been at any time, a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the tax liability of any other person under contract.
(xiii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(b)
(i) The Company has been an S corporation, within the meaning of
Section 1361 of the Code, since its inception.
(ii) The Company does not have 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
25
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.
5.25 Absence of Changes. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on Schedule 5.25, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect redemption, purchase or
other acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers
directors, Stockholders, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with past
practice;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation the Stockholders and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the Company, including without limitation any
indebtedness or obligation of
26
the Stockholders and their affiliates, provided that the Company may negotiate
and adjust bills in the course of good faith disputes with customers in a manner
consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of the Company or requiring consent of any party to the transfer and
assignment of any such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of
business;
(n) any capital commitment by the Company, either individually or in
the aggregate, exceeding $50,000, other than a capital commitment for
approximately $230,000 to make improvements to the production area;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than (i)
liens arising under existing lease financing arrangements which are not
material, (ii) liens related to the IDB Financing and (iii) liens for Taxes not
yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
$50,000;
(r) any loan by the Company to any person or entity, incurrence by the
Company, of any indebtedness, guarantee by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guarantee of any debt
securities of others;
(s) the commencement or notice or, to the knowledge of the Company,
threat of commencement, of any lawsuit or proceeding against, or investigation
of, the Company or any of its affairs; or
27
(t) any negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with USFloral and its representatives or at
its request 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 the Company has
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding
a general or special power of attorney from the Company and a description of the
terms of such power.
5.27 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 5.27(a),
no underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "Hazardous Material"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased. Schedule 5.27(a) identifies all underground and
aboveground storage tanks, and the capacity, age, and contents of such tanks,
located on Real Property owned or leased by the Company.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of or released, or exposed its employees or
others to, Hazardous Materials in violation of any law in effect on or before
the Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material
28
(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 Company Hazardous Materials Activity.
(c) Permits. The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. The
Company (A) is in compliance in all material respects with all terms and
conditions of the Environmental Permits and (B) is in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the laws of all Governmental Entities relating to pollution or protection of the
environment or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder. To
the Company's knowledge, there are no circumstances that may prevent or
interfere with such compliance in the future. Schedule 5.27(d) includes a
listing and description of all Environmental Permits currently held by the
Company.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of the Company, threatened concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity. There are no
past or present actions, activities, circumstances, conditions, events, or
incidents that could involve the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law) in any environmental litigation, or impose upon the Company (or any
person or entity whose liability the Company has retained or assumed, either by
contract or operation of law) any environmental liability including, without
limitation, common law tort liability.
5.28 Relations with Governments. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office, nor has it otherwise taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. The Company has delivered to USFloral and Newco true and
complete copies of each agreement, contract, commitment or other document (or
summaries thereof) that is referred to in the Schedules or that has been
requested by USFloral. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If any
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this
29
Agreement or any representation made on behalf of the Company, the Stockholder
shall immediately give notice of such fact or circumstance to USFloral.
However, such notification shall not relieve the Company or the Stockholder of
their respective obligations under this Agreement, and at the sole option of
USFloral, the truth and accuracy of any and all warranties and representations
of the Stockholders, at the date of this Agreement and as of the Closing Date,
shall be a precondition to the consummation of the Merger.
5.30 USFloral Prospectus; Securities Representations. Each Stockholder has
received and reviewed a copy of the prospectus dated November 18, 1997 including
all supplements thereto (as supplemented, the "USFloral Prospectus") contained
in USFloral's shelf registration statement on Form S-1 (File No. 333-39969).
Each Stockholder (a) has such knowledge, sophistication and experience in
business and financial matters that they are capable of evaluating the merits
and risks of an investment in the shares of USFloral Common Stock, (b) fully
understands the nature, scope, and duration of the limitations on transfer
contained herein and under applicable law, and (c) can bear the economic risk of
any investment in the shares of USFloral Common Stock and can afford a complete
loss of such investment. Each Stockholder has had an adequate opportunity to
ask questions and receive answers (and has asked such questions and received
answers to its satisfaction) from the officers of USFloral concerning the
business, operations and financial condition of USFloral. None of the
Stockholders has any contract, undertaking, agreement or arrangement, written or
oral, with any other person to sell, transfer or grant participation in any
shares of USFloral Common Stock to be acquired by such Stockholder in the
Merger. Each Stockholder acknowledges and agrees that USFloral has not and will
not provide such Stockholder or any other party with a prospectus for such
Stockholder's use in selling USFloral Common Stock.
5.31 Affiliates. The Stockholders are the only persons who are, in the
reasonable judgment of the Company and each of the Stockholders, affiliates of
the Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the 1933 Act.
5.32 Location of Chief Executive Offices. Schedule 5.32 sets forth the
location of the Company's chief executive offices.
5.33 Location of Equipment and Inventory. All Inventory and Equipment held
on the date hereof by the Company is located at one of the locations shown on
Schedule 5.33. For purposes of this Agreement, (a) the term "Inventory" shall
mean any "inventory" as such term is defined in the Uniform Commercial Code as
in effect on October 16, 1997 in the State of New York (the "N.Y.U.C.C.") owned
by the Company as of the date hereof, and, in any event, shall include, but
shall not be limited to, all merchandise, inventory and goods, and all
additions, substitutions and replacements thereof, wherever located, together
with all goods, supplies, incidentals, packaging materials, labels, materials
and any other items used or usable in manufacturing, processing, packaging or
shipping same; in all stages of production, and all proceeds therefrom; and (b)
the term "Equipment" shall mean any "equipment" as such term is defined in the
N.Y.U.C.C. owned by the Company as of October 16, 1997, and, in any event,
30
shall include, but shall not be limited to, all machinery, equipment,
furnishings, fixtures and vehicles owned by the Company, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
6. REPRESENTATIONS OF USFLORAL AND NEWCO
To induce the Company and the Stockholders to enter into this Agreement and
consummate the transactions contemplated hereby, each of USFloral and Newco
represents and warrants to the Company and the Stockholders as follows:
6.1 Due Organization. Each of USFloral and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the
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 and Articles of Incorporation and the Bylaws, each as amended, of
USFloral and Newco, respectively (collectively, the "USFloral Charter
Documents") have been made available to the Company. Neither USFloral nor Newco
is in violation of any USFloral Charter Document.
6.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Stockholders as the Earn-Out Consideration when delivered in
accordance with the terms of this Agreement, will be valid and legally issued
shares of USFloral capital stock, fully paid and nonassessable.
6.3 Authorization; Validity of Obligations. The representatives of
USFloral and Newco executing this Agreement have all requisite corporate power
and authority to enter into and bind USFloral and Newco to the terms of this
Agreement. USFloral and Newco have the full legal right, power and corporate
authority to enter into this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by USFloral and Newco and the
performance by each of USFloral and Newco of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of USFloral and Newco, and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of each of USFloral and Newco enforceable in accordance
with its terms.
6.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
31
(b) subject, until the time of Closing, to compliance with any
agreements between USFloral and its lenders, conflict with, or result in a
default (or would constitute a default but for a requirement of notice or lapse
of time or both) under any document, agreement or other instrument to which
either USFloral or Newco is a party, or result in the creation or imposition of
any lien, charge or encumbrance on any of USFloral's or Newco's properties
pursuant to (i) any law or regulation to which either USFloral or Newco or any
of their respective property is subject, or (ii) any judgment, order or decree
to which USFloral or Newco is bound or any of their respective property is
subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USFloral or Newco is subject, or by which USFloral or Newco
is bound, (including, without limitation, the HSR Act, together with all rules
and regulations promulgated thereunder).
6.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of USFloral
Common Stock, of which 9,594,050 shares were outstanding on November 19, 1997.
The authorized capital stock of Newco consists of 1,000 shares of common stock,
of which 100 shares are outstanding. All of the issued and outstanding shares
of Newco are owned beneficially, and of record by USFloral. All of the shares of
USFloral Common Stock to be issued to the Stockholders in accordance herewith
will be offered, issued, sold and delivered by USFloral in compliance with all
applicable state and federal laws concerning the issuance of securities and none
of such shares was or will be issued in violation of the preemptive rights of
any stockholder of USFloral.
7. COVENANTS
7.1 Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Stockholders, on the one hand, and the Surviving
Corporation, on the other, for certain tax matters following the Closing Date:
(i) The Stockholders shall prepare or cause to be prepared and
file or cause to be filed, within the time and in the manner provided by law,
all Tax Returns of the Company for all periods ending on or before the Closing
Date that are due after the Closing Date. Stockholders shall pay to the
Surviving Corporation on or before the due date of such Tax Returns the amount
of all Taxes shown as due on such Tax Returns to the extent that such Taxes are
not reflected in the current liability accruals for Taxes (excluding reserves
for deferred Taxes) shown on the Company's books and records as of the Closing
Date. Such Returns shall be
32
prepared and filed in accordance with applicable law and in a manner consistent
with past practices and shall be subject to review and approval by USFloral. To
the extent reasonably requested by the Stockholders or required by law, USFloral
and the Surviving Corporation shall participate in the filing of any Tax Returns
filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be
prepared and file or cause to be filed any Tax Returns for Tax periods which
begin before the Closing Date and end after the Closing Date. The Stockholders
shall pay to the Surviving Corporation within fifteen (15) days after the date
on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such taxable period ending
on the Closing Date to the extent such Taxes are not reflected in the current
liability accruals for Taxes (excluding reserves for deferred Taxes) shown on
the Company's books and records as of the Closing Date. For purposes of this
Section 7.1, in the case of any Taxes that are imposed on a periodic basis and
are payable for a taxable period that includes (but does not end on) the Closing
Date, the portion of such Tax which relates to the portion of such taxable
period ending on the Closing Date shall (x) in the case of any Taxes other than
Taxes based upon or related to income or receipts, be deemed to be the amount of
such Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in the entire taxable period, and
(y) in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant taxable period ended
on the Closing Date. Any credits relating to a taxable period that begins before
and ends after the Closing Date shall be taken into account as though the
relevant taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Surviving Corporation.
(iii) USFloral and the Surviving Corporation on one hand and
the Stockholders on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 7.1 and any audit, litigation or other proceeding with
respect to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating Tax matters pertinent to the
Company that is in their possession or under their control until the expiration
of any applicable statute of limitations or extensions thereof.
(iv) The Stockholders shall timely pay all transfer, documentary,
sales, use, stamp, registration and other Taxes and fees arising from or
relating to the transactions contemplated by this Agreement, and the
Stockholders shall, at their own expense, file all necessary Tax Returns and
other documentation with respect to all such transfer, documentary, sales, use,
stamp, registration, and other Taxes and fees. If required by applicable law,
USFloral and the Surviving Corporation will join in the execution of any such
Tax Returns and other documentation.
33
(b) The Company shall, prior to the Closing, maintain its status as an
S Corporation for federal and state income tax purposes.
7.2 Accounts Receivable. In the event that all Accounts Receivable are
not collected in full (net of reserves specified in Section 5.12) within ninety
(90) days after the Closing then, at the request of the Surviving Corporation,
the Stockholders shall pay (based on their percentage ownership of the Company
immediately prior to the Effective Time) the Surviving Corporation an amount
equal to the Accounts Receivable not so collected (but only to the extent that
the uncollected Accounts Receivable, in the aggregate together with all other
Damages (as defined in Section 10.1(a)), exceed the Indemnification Threshold
(as defined in Section 10.2(a))); and upon receipt of such payment the Surviving
Corporation shall assign to the Stockholders making the payment all of their
rights with respect to the uncollected Accounts Receivable giving rise to the
payment and shall also thereafter promptly remit any excess collections received
by it with respect to such assigned Accounts Receivable.
7.3 [Intentionally Omitted]
7.4 Related Party Agreements. The Company and/or the Stockholders, as the
case may be, shall terminate any Related Party Agreements which USFloral
requests the Company or Stockholders to terminate; provided, however, that the
Company and/or the Stockholders, as the case may be, shall not be requested to
terminate the existing lease, any reimbursement agreement with CFX, Inc., any
commitment relation to the IDB Financing or the Consulting Agreement.
7.5 Cooperation.
(a) The Company, the Stockholders, USFloral and Newco shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such instruments as the
other may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, the president or chief financial officer of
the Company shall execute any documentation reasonably required by USFloral's
independent public accountants (in connection with such accountants' audit of
the Company) or the Nasdaq National Market.
(b) The Stockholders and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with USFloral on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby
34
(d) The Company, the Stockholders and USFloral shall file all notices
and other information and documents required under the HSR Act (as defined in
Section 5.3) as promptly as practicable after the date hereof.
7.6 Conduct of Business Pending Closing. Between the date hereof and the
Effective Time, the Company will (except as requested or agreed by USFloral):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and key employees
and maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except for ordinary and customary bonuses and salary increases for employees
(other than employees who are also Stockholders) in accordance with past
practice.
7.7 Access to Information. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of the Company and (ii) such additional financial and operating data
and other information as to the business and properties of the Company as
USFloral may from time to time reasonably request, including without limitation,
access upon reasonable request to the Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or knowledge
obtained in any investigation
35
pursuant to this Section 7.7 shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the
obligations of the parties to consummate the Merger.
7.8 Prohibited Activities. Between the date hereof and the Effective
Time, the Company will not, without the prior written consent of USFloral:
(a) make any change in its Articles of Incorporation or Bylaws, or
authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance,
delivery or sale of any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind, or authorize or propose
any change in its equity capitalization, or issue or authorize the issuance of
any debt securities;
(c) declare or pay any dividend, or make any distribution (whether in
cash, stock or property) in respect of its stock whether now or hereafter
outstanding, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of $50,000, 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 or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business consistent with
past practice;
(h) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Company, except as permitted under Section 5.25(n);
36
(i) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(j) waive any material rights or claims of the Company, provided that
the Company may negotiate and adjust bills in the course of good faith disputes
with customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material agreement,
permit, license or other right;
(l) except for any transaction related to the IDB Financing, enter
into any other transaction (i) that is not negotiated at arm's length with a
third party not affiliated with the Company or any officer, director or
Stockholder of the Company or (ii) outside the ordinary course of business
consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of USFloral; or
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.8(a) through (o) above, or any action which
would make any of the representations and warranties of the Company and the
Stockholders contained in this Agreement untrue or result in any of the
conditions set forth in Articles 8 and 9 not being satisfied.
7.9 [Intentionally Omitted]
7.10 Sales of USFloral Common Stock.
(a) No Stockholder will, directly or indirectly, offer, sell, contract
to sell, pledge or otherwise dispose of the shares of USFloral Common Stock to
be received by such Stockholder in the Merger prior to a date that is four
months from the Closing Date. A Stockholder may, directly or indirectly,
offer, sell, contract to sell, pledge or otherwise dispose of (i) only up to a
total of one-third of the shares of USFloral Common Stock received in the
37
Merger beginning four months after the Closing Date, (ii) only up to a total of
two-thirds of the shares of USFloral Common Stock received in the Merger
beginning eight months after the Closing Date and (iii) all of the shares of
USFloral Common Stock received in the Merger beginning twelve months after the
Closing Date.
(b) Each Stockholder acknowledges and agrees that USFloral will not
provide such Stockholder with a prospectus for such Stockholder's use in selling
the shares of USFloral Common Stock to be received by such Stockholder in the
Merger, and agrees to sell such shares only in accordance with the requirements,
if any, of Rule 145(d) promulgated under the 1933 Act. USFloral acknowledges
that the provisions of this Section 7.10(b) will be satisfied as to any sale by
a Stockholder of the USFloral Common Stock Stockholder may acquire pursuant to
the Merger pursuant to Rule 145(d) under the Securities Act, by a broker's
letter and a letter from the Stockholder with respect to that sale stating that
the applicable requirements of Rule 145(d)(1) have been met or are inapplicable
by virtue of Rule 145(d)(2) or Rule 145(d)(3) provided, however, that USFloral
has no reasonable basis to believe that such sales were not made in compliance
with such provisions of Rule 145(d) and subject to any changes in Rule 145 after
the date of this Agreement.
(c) The certificate or certificates evidencing the shares of USFloral
Common Stock to be delivered to the Stockholders in the Merger will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON **, PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN
OF REORGANIZATION, DATED AS OF JANUARY 16, 1998, AMONG THE ISSUER AND THE
STOCKHOLDERS OF H & H FLOWERS, INC., A FLORIDA CORPORATION. PRIOR TO THE
EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OR ASSIGNMENT. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING
PERIOD HAS EXPIRED.
38
** Certificates representing one-third of the shares of USFloral Common Stock
issued will read "April 16, 1998," one-third will read "August 16, 1998 " and
one-third will read "January 16, 1999."
7.11 USFloral Stock Options. As soon as practicable after the Closing,
options to purchase such number of shares of USFloral Common Stock as shall have
a fair market value as of the Closing Date equal to 6.25% of the Merger
Consideration provided for in Section 2.2 above shall be available for issuance
to the key employees of the Surviving Corporation after the Closing, as
determined by the Surviving Corporation's President (or other officer or
director designated by the Surviving Corporation and acceptable to USFloral) in
accordance with USFloral's policies, and authorized and issued under the terms
of USFloral's 1997 Long-Term Incentive Plan.
7.12 Additional Stock Options. As soon as practicable after the
Closing, USFloral shall provide to (i) ▇▇▇▇▇ ▇. ▇▇▇▇ options to purchase 25,000
shares of USFloral Common Stock and (ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇ options to purchase
25,000 shares of USFloral Common Stock, at an exercise price equal to the fair
market value on the date of grant. Such options received pursuant to this
section shall vest pro rata, annually, over a four-year period beginning on the
first anniversary of the date of grant but are not subject to any conditions.
7.13 Release From Guarantees. Not later than 120 days following the
Effective Time, USFloral shall cause the Stockholders to be released from any
and all guarantees of any indebtedness that they personally guaranteed for the
benefit of the Company, with all such guarantees on indebtedness being assumed
by USFloral; provided, that, in the event that the beneficiary of any such
guarantee is unwilling to permit the assumption by USFloral of the obligations
under such guarantee, USFloral shall repay the indebtedness to which such
guarantee relates together with all interest and prepayment penalties, if any,
then due and owing.
7.14 Merger of the Company. Until June 30, 1998, USFloral agrees to
maintain the Company as a separate and independent entity for accounting
purposes, including for purposes of calculating EBIT and such accounting will be
consistent with past practices.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO
The obligation of USFloral and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Stockholders and the Company contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms,
39
covenants, agreements and conditions of this Agreement to be complied with,
performed or satisfied by the Company and the Stockholders on or before the
Closing Date shall have been duly complied with, performed or satisfied; and a
certificate to the foregoing effects dated the Closing Date and signed on behalf
of the Company and by each of the Stockholders shall have been delivered to
USFloral.
8.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (in a manner
adverse to the business of the Company) following the Merger shall be in effect,
nor shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending. There shall be no action, suit claim or
proceeding of any nature pending or threatened against USFloral, Newco or the
Company, their respective properties or any of their officers or directors, that
could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the Company.
8.3 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company (other than losses or expected losses disclosed by
the Stockholders prior to the execution of this Agreement), taken as a whole,
since the Balance Sheet Date; and USFloral shall have received a certificate
signed by each Stockholder dated the Closing Date to such effect.
8.4 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholders of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated, and no action by the Department of Justice or
Federal Trade Commission challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
8.5 Opinion of Counsel. USFloral shall have received an opinion from
counsel to the Company and the Stockholders, dated the Closing Date, in a form
reasonably satisfactory to USFloral.
8.6 Charter Documents. USFloral shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company, and such documents shall be in form
and substance reasonably acceptable to USFloral.
40
8.7 [Intentionally Omitted]
8.8 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. USFloral shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
8.9 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company and by each of the Stockholders,
setting forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the
"Certified Closing Net Worth");
(c) the earnings of the Company before interest and taxes (after the
addition of "add-backs" set forth on Schedule 5.9(b)) for the most recent fiscal
year preceding the Closing Date (the "Certified Year-End EBIT");
(d) the earnings of the Company before interest and taxes for the
three-month period ending on September 30, 1997 (the "Certified Closing EBIT");
and
(e) a statement that all of the Company financial conditions set forth
in Section 5.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth and the Certified Closing EBIT, the Company shall not take
account of any increase in intangible assets (including without limitation
goodwill, franchises and intellectual property) accounted for after September
30, 1997.
8.10 [Intentionally Omitted]
8.11 [Intentionally Omitted]
8.12 [Intentionally Omitted]
8.13 Stockholders' Release. The Stockholders shall each have delivered to
USFloral an instrument dated the Closing Date releasing the Company from any and
all claims of such Stockholder against the Company for periods on or before the
Closing Date except accrued
41
salary in an amount not to exceed $28,000 and reimbursed business expenses in an
amount not to exceed $12,000.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
The obligation of the Stockholders and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
9.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by USFloral and Newco on
or before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of USFloral shall have been
delivered to the Company and the Stockholders.
9.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (in a manner
adverse to the business of the Company) following the Merger shall be in effect,
nor shall any proceeding brought by an administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending. There shall be no action, suit, claim or
proceeding of any nature pending or threatened, against USFloral, Newco or the
Company, their respective properties or any of their officers or directors, that
could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the USFloral and its
subsidiaries taken as a whole.
9.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral and Newco of the transactions contemplated hereby, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action by
the Department of Justice or Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby shall be
pending.
42
9.4 Consulting Agreement. The Company shall have afforded ▇▇▇▇▇ ▇▇▇▇ an
opportunity to enter into a consulting agreement with the Company in the form
attached as Appendix A.
9.5 Charter Documents. The Company shall have received (a) a copy of the
Certificate of Incorporation of USFloral and the Articles of Incorporation of
Newco, both certified by an appropriate authority in the state of their
incorporation, and (b) a copy of the Bylaws of USFloral and Newco certified by
the secretary of the respective company, and such documents shall be in form and
substance reasonably acceptable to the Company.
10. INDEMNIFICATION
10.1 General Indemnification by the Stockholders. Subject to the
limitations set forth in Section 10.2, each Stockholder, jointly and severally,
covenants and agrees to indemnify, defend, protect and hold harmless USFloral,
Newco and the Surviving Corporation and their respective officers, directors,
employees, stockholders, assigns, successors and affiliates (individually, an
"Indemnified Party" and collectively, "Indemnified Parties") from, against and
in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the
Stockholders or the Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of any Stockholder or the Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Stockholders or, prior to the Effective Time, the Company, under this Agreement;
or
(iii) the business, operations or assets of the Company prior
to the Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than (i) Damages arising from matters reflected in the Company Financial
Statements, (ii) liabilities (as defined in Section 5.11(d)) incurred in the
ordinary course of business since the Balance Sheet Date or (iii) Damages
expressly disclosed in this Agreement or the Schedules to this Agreement; or
43
(iv) the matters disclosed on Schedules 5.23 (conformity with law;
litigation), 5.24 (taxes) and 5.27 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10.2 Limitation and Expiration. Notwithstanding the above:
(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
an amount equal to 2% of the cash portion of the Merger Consideration (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 Stockholders set forth in this Agreement or representations and
warranties made in Sections 5.4 (capital stock of the Company) without giving
effect to the limitations of such representation on Schedule 5.4, 5.5
(transactions in capital stock), 5.9 (Company financial conditions), 5.18
(material contracts and commitments), 5.23 (conformity with law; litigation)
without giving effect to the limitations of such representation on Schedule
5.23, 5.24 (taxes) without giving effect to the limitations of such
representation on Schedule 5.24 or 5.27 (environmental matters) or (iii) Damages
described in Section 10.1(a)(iv);
(b) the aggregate amount of the Stockholders' liability under this
Article 10 shall not exceed the Merger Consideration; provided, however, that
the Stockholders' liability for Damages arising out of any breaches of the
representations made in Sections 5.24 (taxes) or 5.27 (environmental matters) or
Damages described in Section 10.1(a)(ii) and Section 10.1(a)(iv) shall not be
subject to such limitation;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.2(c):
(i)
(1) except as to representations, warranties, and covenants
specified in clause (i)(2) of this Section 10.2(c), the first anniversary of the
Closing Date, or
(2) with respect to representations and warranties contained
in Sections 5.22 (employee benefit plans), 5.24 (taxes), 5.27 (environmental
matters), and the indemnification set forth in Section 10.1(a)(ii), (iii) or
(iv), on (A) the date that is six (6) months after the expiration of the longest
applicable federal or state statute of limitation (including extensions
thereof), or (B) if there is no applicable statute of limitation, (x) ten (10)
years after the Closing Date if the Claim is related to the cost of
investigating, containing, removing, or remediating a release of Hazardous
Material into the environment, or (y) five (5) years after the Closing Date for
any other Claim covered by clause (i)(2)(B) of this Section 10.2(c); or
44
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 10.2(c) (such claims
referred to as "Pending Claims").
10.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 10.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholders' Representative of such Claim,
specifying in reasonable detail the nature of such Claim and the amount or the
estimated amount thereof to the extent then feasible (the "Claim Notice"). If
the Stockholders' Representative does not notify the Indemnified Party within
thirty days after the date of delivery of the Claim Notice that the Indemnifying
Party disputes such Claim, with a detailed statement of the basis of such
position, the amount of such Claim shall be conclusively deemed a liability of
the Indemnifying Party hereunder. In case an objection is made in writing in
accordance with this Section 10.3(a), the Indemnified Party shall respond in a
written statement to the objection within thirty days and, for sixty days
thereafter, attempt in good faith to agree upon the rights of the respective
parties with respect to each of such Claims (and, if the parties should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party (a "Third Party Claim"), the Indemnified
Party shall deliver a Claim Notice to the Stockholders' Representative. The
Stockholders' Representative shall have thirty days from the date of delivery of
the Claim Notice to notify the Indemnified Party (A) whether the Indemnifying
Party disputes liability to the Indemnified Party hereunder with respect to the
Third Party Claim, and, if so, the basis for such a dispute, and (B) if such
party does not dispute liability, whether or not the Indemnifying Party desires,
at the sole cost and expense of the Indemnifying Party, to defend against the
Third Party Claim, provided that the Indemnified Party is hereby authorized (but
not obligated) to file any motion, answer or other pleading and to take any
other action which the Indemnified Party shall deem necessary or appropriate to
protect the Indemnified Party's interests.
(ii) In the event that Stockholders' Representative timely
notifies the Indemnified Party that the Indemnifying Party does not dispute the
Indemnifying Party's obligation to indemnify with respect to the Third Party
Claim, the Indemnifying Party shall defend the Indemnified Party against such
Third Party Claim by appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the Indemnifying Party may not
settle any Third Party Claim (in whole or in part) if such settlement does not
include a complete and unconditional release of the Indemnified Party. If the
Indemnified Party desires to
45
participate in, but not control, any such defense or settlement the Indemnified
Party may do so at its sole cost and expense. If the Indemnifying Party elects
not to defend the Indemnified Party against a Third Party Claim, whether by
failure of such party to give the Indemnified Party timely notice as provided
herein or otherwise, then the Indemnified Party, without waiving any rights
against such party, may settle or defend against such Third Party Claim in the
Indemnified Party's sole discretion and the Indemnified Party shall be entitled
to recover from the Indemnifying Party the amount of any settlement or judgment
and, on an ongoing basis, all indemnifiable costs and expenses of the
Indemnified Party with respect thereto, including interest from the date such
costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Stockholders'
Representative, any Third Party Claim seeks material prospective relief which
could have an adverse effect on any Indemnified Party or the Surviving
Corporation or any subsidiary, the Indemnified Party shall have the right to
control or assume (as the case may be) the defense of any such Third Party Claim
and the amount of any judgment or settlement and the reasonable costs and
expenses of defense shall be included as part of the indemnification obligations
of the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, the Indemnifying Party shall have the right to participate in, but
not control, the defense of such Third Party Claim at the sole cost and expense
of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 10.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 10.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
10.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the Stockholders,
USFloral and Newco in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a
46
Closing occurs, as of the Closing Date. The representations of the Company and
the Stockholders will survive the Closing and will remain in effect until, and
will expire upon, the termination of the indemnification obligations as provided
in Section 10.2. The representations of USFloral and Newco will survive the
Closing and will remain in effect until, and will expire upon the first
anniversary of the Closing Date.
10.5 Remedies Cumulative. The remedies set forth in this Article 10 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
10.6 Right to Set Off. USFloral shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 10.3 to be owed to USFloral by the Stockholders
under Section 10.1 hereof.
11. NONCOMPETITION
11.1 Prohibited Activities. The Stockholders agree that for a period of
two years following the Merger Effective Date, they shall not, except on behalf
of USFloral or any subsidiary of USFloral:
(a) except as otherwise provided in this Section 11, engage, as an
officer, director, shareholder, owner, partner, joint venturer, or in a
managerial capacity, whether as an employee, independent contractor, consultant
or advisor, or as a sales representative, in any business selling any products
or services in direct competition with the Surviving Corporation or USFloral,
including without limitation the importing, brokerage, manufacture, assembly,
packaging, distribution, shipping or marketing of floral products (including,
without limitation, hardgoods), or any business engaging in the consolidation of
the floral industry within the United States of America (the "Territory");
(b) call upon any person who is, at that time, within the Territory,
an employee of USFloral or any subsidiary of USFloral in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of USFloral or such subsidiary;
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of USFloral or any
subsidiaries of USFloral, the Company within the Territory for the purpose of
soliciting or selling floral products within the Territory;
(d) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon by
any of them or for which
47
any of them made an acquisition analysis for themselves or USFloral or any
subsidiaries of USFloral, the Company; or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Stockholders from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market, (ii) engaging in
any activity to which USFloral shall have provided its prior written consent or
(iii) owning or engaging in any business, acting in any capacity for, or
otherwise operating Flying High Venture, Floraltech, Inc., Day One Fresh, LLC,
Cultivitos Miramonte and its subsidiaries, C.I. Colombiana De Bouquets or
Agropecuaria Pamputik, S.A. and its subsidiaries. The Stockholders, however may
not maintain any interest in Flying High Venture, Floraltech, Inc., Day One
Fresh, LLC, if any such company is in direct competition with the Company in the
importation of flowers into the United States for distribution to supermarkets,
convenience stores and mass market retailers.
11.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFloral and the Surviving Corporation for which they would
have no other adequate remedy, the Stockholders agree that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporation by, without limitation, injunctions and
restraining orders.
11.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Stockholders
in light of the activities and business of USFloral on the date of the execution
of this Agreement and the current and future plans of USFloral and the Surviving
Corporation (as successors to the businesses of the Company).
11.4 Severability; Reformation. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 Independent Covenant. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholders
against the Company, the Surviving Corporation or USFloral, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
48
years stated above, shall be computed by excluding from such computation any
time during which any Stockholder is in violation of any provision of this
Article 11 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
the Surviving Corporation seeks to enforce the agreements and covenants of the
Stockholders or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if any Stockholder is found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
11.6 Materiality. The Company and each Stockholder hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 Stockholders. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's business. Subject to the
same limitations set forth in the last paragraph of Section 11.1, the
Stockholders agree that they will not disclose any confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of USFloral, unless the
Stockholders can show that such information has become known to the public
generally through no fault of the Stockholders. In the event of a breach or
threatened breach by the Stockholders of the provisions of this Article 12,
USFloral and the Surviving Corporation shall be entitled to an injunction
restraining the Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
USFloral and the Surviving Corporation from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
12.2 USFloral. USFloral recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. USFloral agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the Stockholders. In the event of
a breach or threatened breach by USFloral of the provisions of this Article 12,
the Stockholders shall be entitled to an injunction restraining USFloral from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting the Stockholders from
49
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Surviving Corporation and the Stockholders agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
13. GENERAL
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the boards of directors of USFloral and the
Company; or
(b) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if the Closing shall not have occurred on or
before January 15, 1998, provided that the right to terminate this Agreement
under this Section 13.1(b) shall not be available to either party (with the
Stockholders and the Company deemed to be a single party for this purpose) whose
material misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholders and the Company deemed to be a single party for this purpose) of
any of the representations and warranties contained herein or in the due and
timely performance and satisfaction of any of the covenants, agreements or
conditions contained herein, and the curing of such default shall not have been
made or shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholders and the Company as a group, on the one hand,
or by USFloral, on the other hand, if there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the Merger; or
there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
governmental entity which would make the consummation of the Merger illegal.
13.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be
50
no liability or obligation on the part of any party hereto or its officers,
directors or shareholders. Notwithstanding the foregoing sentence, (i) the
provisions of this Article 13 shall remain in full force and effect and survive
any termination of this Agreement; (ii) each party shall remain liable for any
breach of this Agreement prior to its termination; and (iii) in the event of
termination of this Agreement pursuant to Section 13.1(c) above, then
notwithstanding the provisions of Section 13.7 below, the breaching party (with
the Stockholders and the Company deemed to be a single party for purposes of
this Article 13), shall be liable to the other party to the extent of the
expenses incurred by such other party in connection with this Agreement and the
transactions contemplated hereby, as well as any damages in accordance with
applicable law.
13.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Stockholders.
13.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, shall be read in conjunction with this
Agreement; provided, however, that the terms of this Agreement shall control in
the event of any conflict between any past agreements between the parties and
this Agreement. This Agreement shall not be amended or modified except by a
written instrument duly executed by each of the parties hereto, or in accordance
with Section 11.4. Any extension or waiver by any party of any provision hereto
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 Brokers and Agents. USFloral and Newco (as a group) and the Company
and each Stockholder (as a group) each represents and warrants to the other that
it has not employed any broker or agent in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
13.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and Newco and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement. The Stockholders (and not the Company) have and will pay the fees,
expenses and disbursements of the Stockholders, the Company, and
51
their agents, representatives, financial advisers, accountants and counsel
incurred in connection with the subject matter of this Agreement, or will
reimburse the Company therefor if, and to the extent, paid by the Company.
13.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to USFloral, Newco or the Surviving Corporation to:
U.S.A. Floral Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman, President and Chief Executive Officer
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
One Oxford Centre
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
52
If to any Stockholder addressed to them at:
▇▇▇▇ ▇.▇. ▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(Telefax: (▇▇▇) ▇▇▇-▇▇▇▇)
with a required copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, ▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
(Telefax: (305) 372 - 9400)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
13.10 Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Delaware, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction.
13.11 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
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.
53
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]
54
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
LF ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
H & H FLOWERS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
---------------------------------------
STOCKHOLDERS:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇
55
APPENDICES
APPENDIX A [Consulting Agreement]
SCHEDULES
SCHEDULE 1.1 [Form of Plan of Merger]
SCHEDULE 3.1 [Stockholders Post-Closing Audit Checklist]
SCHEDULE 5.1 [Jurisdictions in which Company is Qualified to Do Business]
SCHEDULE 5.4 [Issued and Outstanding Stock of each Company free of Liens]
SCHEDULE 5.6(a) [List of Subsidiaries]
SCHEDULE 5.6(b) [List of Other Securities Owned]
SCHEDULE 5.6(c) [List of Promissory Notes]
SCHEDULE 5.7 [List of Predecessor Companies]
SCHEDULE 5.9 [Add-Backs]
SCHEDULE 5.10 [Balance Sheets and Income Statements]
SCHEDULE 5.11(c) [Description of all plans or projects involving opening new
operations]
SCHEDULE 5.11(d) [List of all Indebtedness]
SCHEDULE 5.15(b) [List of Real Property owned or leased]
SCHEDULE 5.15(c) [List of Real Property with Liens]
SCHEDULE 5.16(a) [List of all Personal Property included on Interim Balance Sheet]
SCHEDULE 5.17(a) [Registered and Unregistered Marks]
SCHEDULE 5.17(b)(i) [Patents]
SCHEDULE 5.17(b)(ii) [Copyright Registrations]
SCHEDULE 5.17(c) [Other Rights]
SCHEDULE 5.17(d) [Compensation Obligations]
SCHEDULE 5.18(a) [Contracts]
SCHEDULE 5.18(b) [Third Party Consents]
SCHEDULE 5.18(c) [Outstanding Balance on Loans and Credit Agreements]
SCHEDULE 5.18(d) [Default Pledge, Hypothecation or Mortgage]
SCHEDULE 5.19 [Government Contracts]
SCHEDULE 5.20 [Insurance Policies]
SCHEDULE 5.22 [Employee Benefit Plans]
SCHEDULE 5.23(a) [Material Adverse Effect]
SCHEDULE 5.23(c) [Litigation]
SCHEDULE 5.25 [Absence of Changes]
SCHEDULE 5.26 [Deposit Accounts; Powers of Attorney]
SCHEDULE 5.27(a) [Hazardous Material]
SCHEDULE 5.27(d) [Environmental Permits]
SCHEDULE 5.32 [Location of Chief Executive Offices]
SCHEDULE 5.33 [Location of Equipment and Inventory]
The registrant agrees to furnish a copy of each omitted appendix, schedule,
exhibit or annex to this Exhibit 2.12 to the Commission supplementally upon
request therefor.
56