EXHIBIT 10.03
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
BSF ACQUISITION CORP.
(a Delaware corporation),
and
BAY STATE FLORIST SUPPLY, INC.
(a Massachusetts corporation),
Dated as of August 6, 1997
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TABLE OF CONTENTS
Page
1. THE MERGER .............................................................. 3
1.1 Delivery and Filing of Articles of Merger .......................... 3
1.2 Merger Effective Date .............................................. 3
1.3 Articles of Organization, Bylaws and Board of Directors of
Surviving Corporations ............................................. 3
1.4 Certain Information with Respect to the Capital Stock of
the Company and Newco .............................................. 4
1.5 Effect of Merger ................................................... 4
2. CONVERSION AND EXCHANGE OF STOCK ........................................ 4
2.1 Manner of Conversion ............................................... 4
2.2 Calculation of USFloral Shares ..................................... 5
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION ......................... 5
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES ............................... 6
5. CLOSING; MERGER EFFECTIVE DATE .......................................... 8
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS .......................... 8
6.1 Due Organization ................................................... 8
6.2 Authorization ...................................................... 9
6.3 Capital Stock of the Company ....................................... 9
6.4 Transactions in Capital Stock ...................................... 9
6.5 No Bonus Shares .................................................... 9
6.6 Subsidiaries ....................................................... 9
6.7 Predecessor Status; etc ............................................ 9
6.8 Spin-off by the Company ............................................ 10
6.9 Financial Statements ............................................... 10
6.10 Liabilities and Obligations ........................................ 10
6.11 Accounts and Notes Receivable ...................................... 11
6.12 Permits and Intangibles ............................................ 11
6.13 Real and Personal Property ......................................... 11
6.14 Material Contracts and Commitments ................................. 12
6.15 Title to Real Property ............................................. 12
6.16 Insurance .......................................................... 12
6.17 Officers, Directors and Employees Compensation ..................... 13
6.18 Employee Plans ..................................................... 13
6.19 Compliance with ERISA .............................................. 13
6.20 Conformity with Law ................................................ 15
6.21 Taxes .............................................................. 15
6.22 Completeness; No Violations ........................................ 16
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6.23 Government Contracts ............................................... 16
6.24 Absence of Changes ................................................. 16
6.25 Deposit Accounts; Powers of Attorney ............................... 17
6.26 Environmental Matters .............................................. 18
6.27 Underground Storage Tanks .......................................... 18
6.28 Validity of Obligations ............................................ 18
6.29 Relations with Governments ......................................... 19
6.30 Disclosure ......................................................... 19
6.31 Authority; Ownership ............................................... 19
7. REPRESENTATIONS OF USFLORAL AND NEWCO ................................... 19
7.1 Due Organization ................................................... 19
7.2 USFloral Stock ..................................................... 19
7.3 Authorization ...................................................... 20
7.4 No Conflicts ....................................................... 20
7.5 Miscellaneous ...................................................... 20
7.6 Validity of Obligations ............................................ 21
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING .................. 21
8.1 Access and Cooperation ............................................. 21
8.2 Conduct of Business ................................................ 21
8.3 Prohibited Activities .............................................. 22
8.4 Supplier Approval .................................................. 23
8.5 Notice to Bargaining Agents ........................................ 23
8.6 No Shop ............................................................ 23
8.7 Notification of Certain Matters .................................... 24
8.8 Joinder to Agreement; Information Statement ........................ 24
8.9 Amendment of Schedules ............................................. 24
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS ..................... 25
9.1 Representations and Warranties; Performance of Obligations ......... 25
9.2 No Litigation ...................................................... 25
9.3 Employment Agreements .............................................. 25
9.4 Opinion of Counsel ................................................. 25
9.5 Registration Statement ............................................. 26
9.6 Board of Directors Approval ........................................ 26
9.7 Assumption of Deferred Compensation Agreements ..................... 26
9.8 Real Property Distribution; Leases ................................. 26
9.9 Market Capitalization .............................................. 26
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO .............. 26
10.1 Representations and Warranties; Performance of Obligations ....... 26
10.2 No Litigation .................................................... 27
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10.3 Examination of Financial Statements .............................. 27
10.4 No Material Adverse Change ....................................... 27
10.5 Regulatory Review ................................................ 27
10.6 Stockholders Release ............................................. 27
10.7 Employment Agreements ............................................ 27
10.8 Opinion of Counsel ............................................... 28
10.9 Consents and Approvals ........................................... 29
10.10 Additional Liabilities and Obligations ........................... 29
10.11 Additional Contracts ............................................. 29
10.12 Good Standing Certificates ....................................... 29
10.13 Registration Statement ........................................... 30
10.14 Repayment of Indebtedness ........................................ 30
10.15 Net Income ....................................................... 30
10.16 Real Property Distribution; Leases ............................... 30
11. COVENANTS OF USFLORAL .................................................. 30
11.1 Registration Statement ........................................... 30
11.2 Release From Guarantees .......................................... 30
11.3 Leases ........................................................... 30
11.4 Compliance with the 1934 Act ..................................... 31
11.5 Certain Transactions ............................................. 31
11.6 USFloral Stock Options ........................................... 31
11.7 Piggy-Back Registrations ......................................... 31
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES ............ 32
12.1 General Indemnification by Stockholders .......................... 32
12.2 Specific Indemnification by Stockholders ......................... 33
12.3 Indemnification by USFloral and Newco ............................ 33
12.4 Third Person Claims .............................................. 33
12.5 Limitations on Indemnification ................................... 34
12.6 Survival of Representations and Warranties ....................... 35
12.7 Sole Remedies .................................................... 35
13. TERMINATION OF AGREEMENT ............................................... 35
13.1 Termination by the Parties ....................................... 35
13.2 Liquidated Damages ............................................... 36
14. NONCOMPETITION ......................................................... 36
14.1 Prohibited Activities ............................................ 36
14.2 Damages .......................................................... 37
14.3 Reasonable Restraint ............................................. 37
14.4 Severability; Reformation ........................................ 37
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14.5 Independent Covenant ............................................. 38
14.6 Materiality ...................................................... 38
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION .............................. 38
15.1 Stockholders ..................................................... 38
15.2 USFloral ......................................................... 38
15.3 Damages .......................................................... 39
16. LOCK-UP AGREEMENTS ..................................................... 39
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK .. 39
17.1 Compliance with Law .............................................. 39
17.2 Economic Risk; Sophistication .................................... 39
17.3 Registration Statement ........................................... 40
18. SECURITIES LEGENDS ..................................................... 40
19. GENERAL ................................................................ 41
19.1 Cooperation ...................................................... 41
19.2 Successors and Assigns ........................................... 41
19.3 Entire Agreement ................................................. 41
19.4 Counterparts ..................................................... 41
19.5 Brokers and Agents ............................................... 41
19.6 Expenses ......................................................... 41
19.7 Notices .......................................................... 42
19.8 Governing Law .................................................... 42
19.9 Exercise of Rights and Remedies .................................. 42
19.10 Time ............................................................. 42
19.11 Reformation and Severability ..................................... 42
19.12 Remedies Cumulative .............................................. 43
19.13 Captions ......................................................... 43
19.14 Standstill Agreement ............................................. 43
ANNEX I Form of Articles of Merger
ANNEX II Calculation and Composition of Consideration
ANNEX III Form of Employment Agreement
ANNEX IV Form of Lease
SCHEDULES
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AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement")
is made as of the 6th day of August, 1997, among U.S.A. FLORAL PRODUCTS, INC., a
Delaware corporation ("USFloral"); BSF ACQUISITION CORP., a Delaware corporation
("Newco"); and BAY STATE FLORIST SUPPLY, INC., a Massachusetts corporation (the
"Company").
WHEREAS, USFloral was incorporated on April 2, 1997 (the "Formation")
under the laws of the State of Delaware for the purpose of acquiring floral
products businesses in different locations; and
WHEREAS, USFloral intends to undertake an initial public offering of its
stock (the "IPO") on or about September 15, 1997 and in connection therewith
intends to file a Registration Statement on Form S-1 (the "Registration
Statement"), pursuant to the Securities Act of 1933, as amended (the "1933
Act") with the Securities and Exchange Commission (the "SEC") within 30 days
of the execution and delivery of this Agreement;
WHEREAS, Newco has been duly organized and is existing under the laws of
the State of Delaware, having been incorporated on July 1, 1997 solely for
the purpose of completing this transaction, and is a wholly-owned subsidiary
of USFloral; and
WHEREAS, the Company is a corporation organized and existing under the
laws of the Commonwealth of Massachusetts; and
WHEREAS, the respective Boards of Directors of USFloral, Newco and the
Company (all of which companies are hereinafter collectively 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 pursuant to this Agreement and the applicable
provisions of the laws of the respective states of incorporation of Newco and
the Company, such transaction being herein called the "Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351
of the Internal Revenue Code of 1986, as amended;
WHEREAS, the parties hereto entered into that certain Agreement and Plan
of Contribution on July 1, 1997 (the "Original Agreement") and now wish to
amend and restate the Original Agreement in its entirety as of August 6, 1977
in order to achieve conformity with similar agreements USFloral has entered
into with other floral products businesses;
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations
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will cause Articles of Merger in substantially the form of Annex I attached
hereto or with such changes therein as may be required by applicable state laws
(the "Articles of Merger") to be signed, verified and delivered to the
Secretaries of State of the appropriate states of incorporation of each of Newco
and the Company on or before the Merger Effective Date (as defined in Section
5).
1.2 Merger Effective Date. The "Merger Effective Date" shall be the date
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specified in Section 5. At the Merger Effective Date, Newco shall be merged
with and into the Company in accordance with the Articles of Merger and the
separate existence of Newco shall cease. The Company, as the party surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.3 Articles of Organization, Bylaws and Board of Directors of Surviving
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Corporations. At the Merger Effective Date:
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(i) the Articles of Organization of the Company shall become the
Articles of Organization of the Surviving Corporation; and subsequent to the
Merger Effective Date, such Articles of Organization shall be the Articles of
Organization of the Surviving Corporation until changed as provided by law;
(ii) the Bylaws of the Company shall become the Bylaws of the Surviving
Corporation; and subsequent to the Merger Effective Date, such Bylaws shall
be the Bylaws of the Surviving Corporation until they shall thereafter be
duly amended;
(iii) the name of the person who shall serve as the sole member of the
Board of Directors of the Surviving Corporation shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the state of incorporation and of the Articles of
Organization and Bylaws of the Surviving Corporation.
(iv) the officers of the Company immediately prior to the Merger
Effective Date shall continue as the officers of the Surviving Corporation in
the same capacity or capacities, each of such officers to serve, subject to
the provisions of the Articles of Organization and Bylaws of Surviving
Corporation, until his successor is elected and qualified.
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1.4 Certain Information with Respect to the Capital Stock of the Company
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and Newco. The designation and number of outstanding shares and voting rights
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of each class of outstanding capital stock of the Company and Newco as of the
date of this Agreement are as follows:
(i) the authorized capital stock of the Company consists of 500,000
shares of common stock, $0.01 par value (the "Company Stock"), of which
360,400 shares are issued and outstanding and owned, beneficially and of
record, by the persons identified on Annex II attached hereto (the
"Stockholders") in the respective amounts listed on Annex II; and
(ii) the authorized capital stock of Newco consists of 100 shares of
common stock, $0.01 par value (the "Newco Stock"), of which 100 shares are
issued and outstanding.
1.5 Effect of Merger. Except as herein specifically set forth, the
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identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of the Company shall continue unaffected and unimpaired by the
Merger, and the Surviving Corporation shall be fully vested therewith. At the
Merger Effective Date, the separate existence of Newco shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities 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 subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
the Company and Newco shall be taken and deemed to be transferred to, and vested
in, the respective Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of each of the Company and Newco; and the title to any
real estate, or interest therein, whether by deed or otherwise, under the laws
of the state of incorporation vested in the Company and Newco, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall thenceforth be responsible and liable for all the liabilities and
obligations of each of Company and Newco and any claim existing, or action or
proceeding pending, by or against the Company or Newco may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may be substituted
in its place. Neither the rights of creditors nor any liens upon the property of
Company or Newco shall be impaired by the Merger, and all debts, liabilities and
duties of each of the Company and Newco shall attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of the
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Company Stock issued and outstanding immediately prior to the Merger Effective
Date into cash and shares of common stock of USFloral, $0.01 par value
("USFloral Stock"), shall be as follows:
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As of the Merger Effective Date:
(i) all of the shares of Company Stock issued and outstanding immediately
prior to the Merger Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, automatically be converted into
that number of shares of USFloral Stock and the right to receive cash from
USFloral as determined pursuant to Section 2.2 below, all to be distributed to
Stockholders in the percentages set forth on Annex II and at the times specified
in Section 5 hereof; and
(ii) each share of Newco Stock issued and outstanding immediately prior to
the Effective Time of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of stock of the Surviving Corporation which
shall constitute all of the outstanding shares of the Surviving Corporation
immediately after the Merger Effective Date.
All USFloral Stock to be received by Stockholders as a result of the Merger
shall, except for restrictions on resale or transfer described in Section 16
hereof, have the same rights as the majority of outstanding USFloral Stock. All
voting rights are fully exercisable by Stockholders and Stockholders are neither
deprived nor restricted in exercising those rights. At the Merger Effective
Date, USFloral shall have no class of capital stock issued and outstanding which
shall have any rights or preferences senior to the shares of USFloral Stock,
including, without limitation, any rights or preferences as to dividends or as
to the assets of USFloral upon liquidation or dissolution or as to voting
rights.
2.2 Calculation of USFloral Shares. The Company Stock shall be converted,
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as a result of the Merger, into such number of shares of USFloral Stock and the
amount of cash set forth on Annex II attached hereto.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 At the Merger Effective Date:
(i) Stockholders, as the holders of all outstanding certificates
representing shares of Company Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of USFloral Stock
set forth on Annex II opposite the name of each Stockholder; and
(ii) Until the certificates representing the Company Stock have been
surrendered by Stockholders and replaced by certificates representing the
USFloral Stock, the certificates for the Company Stock shall, for all
corporate
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purposes be deemed to evidence ownership of the USFloral Stock
notwithstanding the number of shares of Company Stock such certificates
represent.
3.2 The Stockholders shall deliver at the Closing (as defined in Section 5
hereof) the certificates representing the respective shares of Company Stock,
duly endorsed in blank by the Stockholders or accompanied by blank stock powers,
with signatures guaranteed by a national bank, and with all necessary transfer
tax and other revenue stamps, acquired at the Stockholders' expense, affixed and
canceled. The Stockholders agree to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
such Company Stock or with respect to the stock powers accompanying any Company
Stock.
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES
4.1 As soon as practicable, but in any event within 30 days after the
Closing, USFloral shall engage Price Waterhouse to prepare, in accordance with
GAAP, applied on a consistent basis with the basis used by Price Waterhouse in
preparing and auditing financial statements of the Company as of December 31,
1994, 1995 and 1996, a balance sheet of the Company (the "Closing Date Balance
Sheet") as of the end of business on the day prior to the Closing Date. If the
aggregate shareholders' equity as shown on the Closing Date Balance Sheet is
less than the aggregate shareholders' equity as shown on the Balance Sheet as at
December 31, 1996 (such difference, the "Net Worth Deficiency"), within ten
business days after delivery of the Closing Date Balance Sheet to USFloral, the
Stockholders shall remit to USFloral in accordance with the provisions of
Section 4.2 hereof, an amount equal to the Net Worth Deficiency. Notwithstanding
anything in this Article 4 to the contrary, if there is any Net Worth Deficiency
and the Stockholders dispute any item contained on the Closing Date Balance
Sheet, the Stockholders shall notify USFloral in writing of each disputed item
(collectively, the "Disputed Amounts"), and specify the amount thereof in
dispute within thirty business days after the delivery of the Closing Date
Balance Sheet. If USFloral and the Stockholders cannot resolve any such dispute
which would eliminate or reduce the amount of the Net Worth Deficiency, then
such dispute shall be resolved by an independent nationally recognized
accounting firm which is reasonably acceptable to USFloral and the Stockholders
(the "Independent Accounting Firm"). The determination of the Independent
Accounting Firm shall be made as promptly as practical and shall be final and
binding on the parties, absent manifest error which error may only be corrected
by such Independent Accounting Firm. Any expenses relating to the engagement of
the Independent Accounting Firm shall be allocated between USFloral and the
Stockholders so that the Stockholders' aggregate share of such costs shall bear
the same proportion to the total costs that the Disputed Amounts unsuccessfully
contested by the Stockholders (as finally determined by the Independent
Accounting Firm) bear to the total of the Disputed Amounts so submitted to the
Independent Accounting Firm.
4.2 (a) Any indemnification obligations of the Stockholders pursuant to
Sections 12.1 and 12.2 hereof and amounts payable pursuant to Section 4.1 hereof
shall be satisfied initially through recourse to the assets pledged for such
purpose under the following paragraph (valued for
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such purposes on the date the indemnification obligation is paid pursuant to
Section 12 or ten days after USFloral notifies the Stockholders of the Net Worth
Deficiency pursuant to Section 4.1).
(b) At the Closing each Stockholder shall transfer, pledge and assign to
USFloral, for the benefit of USFloral, a security interest in the following
assets:
(i) the number of shares of USFloral Stock set forth beside such
Stockholder's name in the column entitled "Number of Shares Pledged"
(collectively with respect to all Stockholders, the "Pledged
Securities") on Annex II, the certificates and instruments representing
or evidencing such Stockholder's Pledged Securities, and all cash and
non-cash dividends and other property at any time received or otherwise
distributed in respect of or in exchange for any or all of such
Stockholder's Pledged Securities; and in the event such Stockholder
receives any such certificates or property, such Stockholder shall
immediately deliver such certificates or property to USFloral to be held
hereunder as Pledged Securities;
(ii) all securities hereafter delivered to such Stockholder in
substitution for any of the foregoing, 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 immediately deliver such property to USFloral to
be held hereunder as Pledged Securities; 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.
(c) Each certificate evidencing a Stockholder's Pledged Securities
issued in his, her or its name in the Merger, shall, at the Closing, be
delivered to USFloral, together with a stock power duly signed in blank by him,
her or it, such certificate bearing no restrictive or cautionary legend other
than those imprinted by USFloral's transfer agent at USFloral's request.
(d) The Stockholders shall be entitled to exercise any voting powers
incident to the Pledged Securities and to receive and retain all cash dividends
paid thereon.
(e) The Pledged Securities shall be available to satisfy any payment
obligations pursuant to Section 4.1 hereof and any indemnification obligations
of the Stockholders pursuant to Sections 12.1 and 12.2 until the date that is 12
months after the Merger Effective Date (the "Release Date"). Within five (5)
days following the Release Date, USFloral shall return the Pledged Securities to
the respective Stockholders (or cause them to be so returned), less Pledged
Securities having an aggregate value equal to the amount of (i) an amount due
pursuant to Section
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4.1, (ii) any pending claim for indemnification made by any Indemnified Party
(as defined in Section 12) and (iii) any indemnification obligations of the
Stockholders pursuant to Section 12.
5. CLOSING; MERGER EFFECTIVE DATE
Within two business days following the date on which the price of the shares
of USFloral Stock in the initial public offering of USFloral Stock described in
Section 9.5 shall have been determined, the parties shall take all actions
necessary to effect the Merger (other than the filing with the appropriate state
authorities of the Articles of Merger which shall be filed on the Merger
Effective Date) and to effect the conversion and delivery of shares referred to
in Section 3 hereof (hereinafter referred to as the "Closing"); provided, that
such actions shall not include the actual completion of the Merger or the
conversion and delivery of the shares referred to in Section 3 hereof, which
actions shall be taken only on the Merger Effective Date as herein provided.
The Closing shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The date on which the Closing shall
occur shall be referred to as the "Closing Date." Concurrently with the closing
in respect of the initial public offering of USFloral Stock, the Articles of
Merger shall be filed with the appropriate state authorities of the Articles of
Merger and the Merger shall become effective and all transactions contemplated
by this Agreement, including the conversion and delivery of shares and the
delivery of a check or checks in an amount equal to the cash which the
Stockholders shall be entitled to receive pursuant to the Merger referred to in
Section 3 hereof, shall occur and be deemed to be completed. The date on which
the Merger is effected shall be referred to as the "Merger Effective Date."
During the period from the Closing Date to the Merger Effective Date, this
Agreement may only be terminated by the parties if the underwriting agreement in
respect of the initial public offering of USFloral Stock is terminated pursuant
to the terms of such agreement. This Agreement shall in any event terminate if
the Merger Effective Date has not occurred within 10 business days of the
Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, (i) each Stockholder who is a Stockholder of the Company,
jointly and severally, represents and warrants as follows.
6.1 Due Organization. The Company and each subsidiary, if any, of the
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Company (collectively, the "Company Subsidiaries") indicated on Schedule 6.6 are
corporations duly organized, validly existing and in good standing under the
laws of their respective states of incorporation, and are duly authorized,
qualified and licensed 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 (i) as set forth on Schedule
6.1 or (ii) 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) (a "Material Adverse Effect") on
the Company taken as a whole. True, complete and correct copies of the Articles
of Organization (certified by the respective Secretaries of State of the states
of incorporation of the Company and the
8
Company Subsidiaries) and Bylaws (certified by the Secretary of the Company and
the Company Subsidiaries) have heretofore been delivered to USFloral. The stock
records and minute books of the Company and the Company Subsidiaries, as
heretofore made available to USFloral, are correct and complete.
6.2 Authorization. Upon the approval of this Agreement by the Stockholders,
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the Company has the full legal right, power and authority to enter into this
Agreement and have the full legal right, power and authority to enter into the
Merger. The conversion of Company Stock into Newco Stock pursuant to the
provisions of this Agreement will transfer valid title in the Company Stock to
Newco, free and clear of all liens, encumbrances and claims of every kind.
6.3 Capital Stock of the Company. The authorized capital stock of the
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Company consists solely of the shares as shown on Schedule 6.3, of which the
shares issued and outstanding are shown. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholders as set
forth on Annex II, and are free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of Company Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the Stockholders and in the amounts set forth in
Annex II and further, such shares were offered, issued, sold and delivered by
the Company in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present Stockholder.
6.4 Transactions in Capital Stock. Neither the Company nor any Company
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Subsidiary has acquired any treasury stock since the Balance Sheet Date (as
defined in Section 6.9 hereof). No option, warrant, call, conversion right or
commitment of any kind exists which obligates the Company or any Company
Subsidiary to issue any of their respective authorized but unissued capital
stock. Except as set forth on Schedule 6.4, 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.
6.5 No Bonus Shares. Except as set forth on Schedule 6.5, none of the
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shares of the Company Stock was issued pursuant to awards, grants or bonuses.
6.6 Subsidiaries. Schedule 6.6 lists the name of each of the Company
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Subsidiaries. Except as set forth in Schedule 6.6, neither the Company nor any
Company Subsidiary presently owns, of record or beneficially, or controls,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or business
entity. Except as set forth on Schedule 6.6, neither the Company nor any Company
Subsidiary is, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
6.7 Predecessor Status; etc. Set forth in Schedule 6.7 is a listing of all
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names of all predecessor companies of the Company, including the names of any
entities from whom the
9
Company previously acquired significant assets. Except as set forth on Schedule
6.7, the Company has never been a subsidiary or division of another corporation
nor been a part of an acquisition which was later rescinded.
6.8 Spin-off by the Company. Since the Balance Sheet Date there has not
-----------------------
been any sale or spin-off of significant assets of the Company or any Company
Subsidiary other than in the ordinary course of business.
6.9 Financial Statements. Attached hereto as Schedule 6.9 are copies of the
--------------------
following audited financial statements (the "Financial Statements") of the
Company: The Company's Balance Sheet as of December 31, 1996, 1995 and 1994 and
Statements of Incomes, Cash Flows and Retained Earnings for each of the years in
the three year period ended December 31, 1996, and the Company's Balance Sheet
as of each of March 31, 1997 and 1996, (March 31, 1997 being hereinafter
referred to as the "Balance Sheet Date") and Statements of Incomes, Cash Flows
and Retained Earnings for the three (3) month periods then ended. Such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted). Except as set forth on Schedule 6.9, such Balance Sheets
present fairly the financial position of the Company as of the dates indicated
thereon, and such Statements of Incomes, Cash Flows and Retained Earnings
present fairly the results of their respective operations for the periods
indicated thereon.
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
---------------------------
accurate list, as of the Balance Sheet Date, of all material liabilities of the
Company (including each Company Subsidiary), which are reflected in the most
recent available balance sheet and any significant liabilities incurred
thereafter in the ordinary course of business, or material liabilities which are
not reflected in the balance sheet, of any kind, character and description,
whether accrued, absolute, secured or unsecured, contingent or otherwise,
together with, in the case of those liabilities which are not fixed, an estimate
of the maximum amount which may be payable. For each such liability for which
the amount is not fixed or is contested, Stockholders shall provide to USFloral
the following information:
(i) a summary description of the liability together with the following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
(c) names of claimant and all other parties to the claim, suit or
proceeding.
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
10
(iii) the date such claim, suit or proceeding was instituted;
(iv) a best estimate by the Company of the maximum amount, if any, which
is likely to become payable with respect to each such liability (exclusive of
defense costs). If no estimate is provided, the Company's best estimate shall
for purposes of this Agreement be deemed to be zero.
6.11 Accounts and Notes Receivable. Attached hereto as Schedule 6.11 is an
-----------------------------
accurate list as of the Balance Sheet Date of the accounts and notes receivable
of the Company (including any Company Subsidiary), including receivables from
and advances to employees and Stockholders, including any such amounts which are
not reflected in the most recent available balance sheet. Stockholders shall
provide USFloral with an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories. Except as set forth on Schedule 6.11,
such accounts and notes are collectible in the amount shown on Schedule 6.11.
6.12 Permits and Intangibles. Attached hereto as Schedule 6.12 is an
-----------------------
accurate list and summary description, as of the Balance Sheet Date, of all
permits, titles, licenses, franchises, certificates, trademarks, trade names,
service marks, patents, patent applications and copyrights owned or held by the
Company, all of which are now valid, in good standing and in full force and
effect. Except as set forth on Schedule 6.12, such permits, licenses, orders,
approvals, franchises, etc. are adequate for the operation of the Company
business as presently constituted. Except as set forth on Schedule 6.12, the
Stockholders have delivered to USFloral a description and copies as of the date
of this Agreement, of all material records, reports, notifications, permits,
pending permit applications, engineering studies, environmental impact studies,
filed or submitted or required to be filed or submitted to governmental agencies
and of all material notifications from such governmental agencies relating to
the above or relating to the discharge or release of materials into the
environment or otherwise relating to the protection of the public health or the
environment.
6.13 Real and Personal Property. Attached hereto as Schedule 6.13 is an
--------------------------
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the personal property, which had an original cost in excess
of $25,000, owned or leased by the Company and true and correct copies of leases
for equipment and real properties on which are situated buildings, warehouses
and other structures used in the operation of the business of the Company and
including an indication as to which assets were formerly owned by the
Stockholders or affiliates (which term, as used herein, shall have the meaning
ascribed thereto in Rule 144(a)(1) under the ▇▇▇▇ ▇▇▇) of the Company. Except
as set forth on Schedule 6.13, substantially all of the trucks, machinery and
equipment of the Company are in good working order and condition, ordinary wear
and tear excepted. All leases set forth on Schedule 6.13 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the Company and, to the knowledge of the Stockholders, no other
party to any such lease is in default thereunder and such leases constitute the
legal, valid and binding obligations of such other parties. All fixed assets
used by the Company in the operation of their respective businesses are either
owned by the Company or leased under an agreement set forth on Schedule 6.13.
The Stockholders have heretofore delivered to USFloral
11
copies of all title reports and title insurance policies received or held by the
Company. The Stockholders have indicated on Schedule 6.13 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 devoted any significant effort
or expenditure in the two year period prior to the date of this Agreement, which
if pursued by the Company would require additional expenditures of significant
efforts or capital.
6.14 Material Contracts and Commitments. Attached hereto as Schedule 6.14 is
----------------------------------
an accurate list, as of the Balance Sheet Date, of all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, joint
venture or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements). Stockholders have
heretofore delivered to USFloral true copies of such agreements. Except as set
forth on Schedule 6.14, the Company has complied with all material commitments
and obligations pertaining to it and is not in material default under any such
agreement and no notice of default has been received. The Company is not a party
to any contract, agreement or other instrument or commitment which cannot be
terminated by the Company on 30 days notice without any liability to the Company
which would have a Material Adverse Effect on the Company taken as a whole.
Except as set forth on Schedule 6.14, the Company is not bound by or subject to
(and none of its assets or properties is bound by or subject to) any arrangement
with any labor union. Except as set forth on Schedule 6.14, no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement nor, to the best of Stockholders' knowledge, is any
organization campaign to establish such representation in progress. There is no
pending or, to the best of Stockholders' knowledge, threatened labor dispute
involving the Company and any group of their employees nor has the Company
experienced any labor interruptions over the past three years and the Company
considers its relationship with employees to be good.
6.15 Title to Real Property. As of the Merger Effective Date, the Company
----------------------
will own no real property. The property listed on Schedule 6.13 includes all
interests in real property necessary to conduct the business and operations of
the Company. None of the leases set forth on Schedule 6.13 requires the consent
or approval of any party thereto in connection with the consummation of the
transactions contemplated hereby, except for the consents listed on Schedule
6.15 hereto, which shall have been obtained prior to the Merger Effective Date.
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list, as of
---------
the Balance Sheet Date, of all insurance policies carried by the Company and an
accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. Stockholders have heretofore
delivered to USFloral complete copies of all policies currently in effect. The
insurance carried by the Company with respect to their respective properties,
assets and businesses is with, to the Stockholders' knowledge, financially sound
insurers. Such insurance policies are currently in full force and effect and
shall remain in full force and effect through the Merger Effective Date. The
Company's insurance has never been canceled and the Company has never been
denied coverage.
12
6.17 Officers, Directors and Employees Compensation. Attached hereto as
----------------------------------------------
Schedule 6.17 is an accurate Schedule showing all officers, directors and
employees of the Company and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date.
Stockholders have heretofore delivered to USFloral copies of the payroll lists
covering all employees of the Company as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.17, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
6.18 Employee Plans. Attached hereto as Schedule 6.18 are complete and
--------------
accurate copies, as of the Balance Sheet Date, of all employee benefit plans,
all employee welfare benefit plans, all employee pension benefit plans, all
multi-employer plans and all multi-employer welfare arrangements (as defined in
Sections 3(3), (1), (2), (37) and (40), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which are currently
maintained and/or sponsored by the Company or to which the Company currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), together
with copies of any trusts related thereto and a classification of employees
covered thereby (collectively, the "Plans"). Schedule 6.18 sets forth all of
the Plans that have been terminated within the past three years.
6.19 Compliance with ERISA. All Plans are in substantial compliance with all
---------------------
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable laws, and, in all material respects, have been
administered, operated and managed in substantial accordance with the governing
documents. All Plans that are intended to qualify (the "Qualified Plans") under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code")
have been determined by the Internal Revenue Service to be so qualified, and
copies of the current plan determination letters, most recent actuarial
valuation reports, if any, most recent Form 5500, or, as applicable, Form 5500-
C/R filed with respect to each such Qualified Plan or employee welfare benefit
plan and most recent trustee or custodian report, are included as part of
Schedule 6.18. 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. Except as set forth on Schedule 6.19, 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. Except as set
forth on Schedule 6.19, 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 currently has no (or at the Closing
Date will not have) any direct or indirect liability whatsoever (including being
subject to any statutory lien to secure payment of any such liability), to the
Pension
13
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:
(i) 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;
(ii) no Plan which is subject to the provisions of Title IV of ERISA has
been terminated;
(iii) 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;
(iv) 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;
(v) except as set forth on Schedule 6.19, 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, except as set forth on Schedule 6.19, the Company has (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 and 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;
14
(vi) 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);
(vii) except as set forth on Schedule 6.19, there is no pending litigation,
arbitration, or disputed claim, settlement or adjudication proceeding, and to
the best of each Stockholder'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;
(viii) except as set forth on Schedule 6.19, the Financial Statements as of
the Balance Sheet Date reflect the approximate total pension, medical and
other benefit expense for all Plans, and no material funding changes or
irregularities are reflected thereon which would cause such Financial
Statements to be not representative of most prior periods; and
(ix) The Company has not incurred liability under Section 4062 of ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, 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; and except as set forth on Schedule
6.20, there are no claims, actions, suits or proceedings, pending or 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 and no notice of any
claim, action, suit or proceeding, whether pending or, to the Stockholders'
knowledge, threatened, has been received. 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, taken as a whole.
6.21 Taxes. The Company has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing Date. Except as set forth on Schedule 6.21,
there are no open years, examinations in progress or claims against the Company
for federal and other taxes (including penalties and interest) for any period or
periods prior to and including the Balance Sheet Date and no notice of any
claim, whether pending or threatened, for taxes has been received. The amounts
shown as accruals for taxes on the Financial Statements, as of the Balance Sheet
Date, are sufficient for the payment of all taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on or before
that date. Two correct and complete copies of (i) all tax examinations, (ii)
extensions of statutory limitations and
15
(iii) the federal and local income tax returns and franchise tax returns of the
Company for the last three fiscal years, or such shorter period of time as any
of them shall have existed, have heretofore been delivered by Stockholders to
USFloral. The Company as set forth on Schedule 6.21 made an election to be
taxed under the provisions of Subchapter S of the Internal Revenue Code
effective July 1, 1988, with a fiscal year ending December 31 and has not been
taxed under the provisions of Subchapter C of the Internal Revenue Code for any
tax period beginning on or after January 1, 1989. The Company currently uses the
accrual method of accounting for income tax purposes and has not changed its
method of accounting in the past five years. Also set forth on Schedule 6.21
are the procedures that shall govern all tax reporting, filing and other
compliance issues affecting the Company.
6.22 Completeness; No Violations. The certified copies of the Articles of
---------------------------
Organization and Bylaws, both as amended to date, of the Company, and the copies
of all leases, instruments, agreements, licenses, permits, certificates or other
documents which are included on schedules attached hereto or have been delivered
to USFloral in connection with the transactions contemplated hereby are complete
and correct; neither the Company nor, to the knowledge of the Stockholders, any
other party thereto, is in material default thereunder; and, except as set forth
in the schedules and documents attached to this Agreement, the rights and
benefits of the Company thereunder will not be materially and adversely affected
by the transactions contemplated hereby; and the execution of this Agreement and
the performance of the obligations hereunder will not result in a material
violation or breach or constitute a material default under any of the terms or
provisions thereof. Except as set forth on Schedule 6.22, none of such leases,
instruments, agreements, contracts, licenses, permits, certificates or other
documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.23 Government Contracts. The Company is not now nor has it ever been a
--------------------
party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Absence of Changes. Since the Balance Sheet Date, there has not been:
------------------
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by insurance)
which has had a Material Adverse Effect on the Company, taken as a whole;
(iii) except as set forth in Schedule 6.24, any change in the authorized
capital of the Company or in their respective securities outstanding or any
change in their respective ownership interests or any grant of any options,
warrants, calls, conversion rights or commitments;
16
(iv) except as set forth in Schedule 6.24, 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;
(v) except as set forth in Schedule 6.24, any increase in the
compensation, bonus, sales commissions or fees arrangement payable or to
become payable by the Company to any of its officers, directors, Stockholders,
employees, consultants or agents other than ordinary salary increases
implemented on a basis consistent with past practices;
(vi) any work interruptions, labor grievances or claims filed, or any
proposed law or regulation or any event or condition of any character, which
has had a Material Adverse Effect on the Company, taken as a whole;
(vii) 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;
(viii) except as set forth on Schedule 6.24 hereto, any cancellation, or
agreement to cancel, any indebtedness or other obligation owing to the
Company, including without limitation any indebtedness or obligation of any
Stockholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any interest in any of the assets, properties or rights
of the Company or requiring consent of any party to the transfer and
assignment of any such assets, properties or rights;
(x) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any properties, rights or assets of the Company;
(xi) any waiver of any material rights or claims of the Company;
(xii) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party; or
(xiii) any transaction by the Company outside the ordinary course of their
respective businesses.
6.25 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule 6.25
------------------------------------
is an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
17
(ii) the names in which the accounts or boxes are held;
(iii) the type of account; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 6.25 also sets forth 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.
6.26 Environmental Matters. Except as set forth in Schedule 6.26, to the
---------------------
knowledge of the Stockholders, the Company has complied with and are in material
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law) except to the extent that noncompliance with any Environmental Law, either
singly or in the aggregate, would not have a Material Adverse Effect on the
Company, taken as a whole. The Company has obtained and adhered to all
necessary permits and other approvals necessary to treat, transport, store,
dispose of and otherwise handle Hazardous Wastes and Hazardous Substances and
has reported, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the Company where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled. There have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
Company except as permitted by Environmental Laws. Stockholders know of no off-
site location to which the Company has transported or disposed of Hazardous
Wastes and Hazardous Substances or arranged for the transportation of Hazardous
Wastes and Hazardous Substances, which site is the subject of any federal,
state, local or foreign enforcement action or any other investigation which
could lead to any claim against the Company, USFloral or Newco for any clean-up
cost, remedial work, damage to natural resources or personal injury, including,
but not limited to, any claim under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended. The Company has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
6.27 Underground Storage Tanks. Except as set forth on Schedule 6.27, the
-------------------------
Company has never owned or leased any real estate having any underground storage
tanks containing petroleum products or wastes or other hazardous substances
regulated by 40 CFR 280 and/or other applicable federal, state or local laws,
rules and regulations and requirements.
6.28 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by the Company and the performance of the transactions contemplated herein have
been duly and validly
18
authorized by the Board of Directors of the Company and the Stockholders of the
Company, and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
Company.
6.29 Relations with Governments. The Company has never made, offered or
--------------------------
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has the Company otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended or any law of similar effect.
6.30 Disclosure. Without limiting any exclusion, exception or other
----------
limitation contained in any of the representations and warranties made herein,
this Agreement and 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
Stockholders become aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholders shall immediately
give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve the Company or Stockholders 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 at the closing, shall be a precondition to the
consummation of this transaction.
6.31 Authority; Ownership. Each Stockholder has the full legal right, power
--------------------
and authority to enter into this Agreement. Each Stockholder owns beneficially
and of record all of the shares of Company stock identified on Annex II as being
owned by such Stockholder. The conversion of Company Stock into USFloral Stock
and cash pursuant to the provisions of this Agreement will transfer to USFloral
valid title in the shares of Company Stock owned by such Stockholder, free and
clear of all liens, encumbrances and claims of every kind.
7. REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFloral and Newco, jointly and severally, represent and as
follows.
7.1 Due Organization. USFloral and Newco are duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware, and are
duly authorized, qualified and licensed under all applicable laws, regulations,
and ordinances of public authorities to carry on their respective businesses in
the places and in the manner as now conducted except the states where the
failure to be so authorized, qualified or licensed would not have a Material
Adverse Effect on their respective businesses. Copies of the Certificates of
Incorporation (certified by the Secretary of State of the State of Delaware) and
the Bylaws, as amended, of USFloral and Newco (certified by the Secretary of
the respective corporations) have heretofore been delivered by USFloral to
Stockholders.
19
7.2 USFloral Stock. The USFloral Stock to be delivered to the Stockholders
--------------
at the Merger Effective Date, when delivered in accordance with the terms of
this Agreement, will constitute valid and legally issued shares of USFloral
capital stock, fully paid and nonassessable, and with the exception of
restrictions upon resale, will be legally equivalent in all respects to the
majority of USFloral Stock issued and outstanding as of the date hereof. The
restrictions on resale imposed on the Stockholders are no more restrictive than
those imposed on the stockholders of the other companies being acquired by
USFloral prior to the IPO ("Founding Stockholders"). Furthermore, neither the
Founding Stockholders nor ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (i) have
registration rights with respect to USFloral Stock that are superior to
registration rights that the Stockholders have, or (ii) will have the right to
include any USFloral Stock in the IPO.
7.3 Authorization. The representatives of USFloral and Newco executing this
-------------
Agreement have the corporate authority to enter into and bind USFloral and Newco
by the terms of this Agreement. USFloral and Newco have full legal right, power
and authority to enter into this Agreement and have the full legal right, power
and authority to enter into the Merger, and the conversion of Company Stock into
Newco Stock, pursuant to the provisions of this Agreement will transfer valid
title to USFloral Stock to the Stockholders, free and clear of all liens,
encumbrances and claims of every kind.
7.4 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the Certificate
of Incorporation or Bylaws of either USFloral or Newco,
(ii) materially conflict with, or result in a material default (or
constitute a default but for any 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 properties pursuant
to (A) any law or regulation to which USFloral or Newco, or any of their
property is subject, or (B) any judgment, order or decree to which USFloral or
Newco is bound or any of their property is subject; or
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(iv) require any filing or other notice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvement Act.
7.5 Miscellaneous. Prior to the consummation of the Merger, USFloral and
-------------
Newco have no material properties or assets and are not party to any contracts
other than this Agreement, the letters of intent between USFloral and certain of
the Stockholders, certain employment
20
agreements with officers of USFloral and those agreements and letters of intent
listed on Schedule 7.5 hereof.
7.6 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by USFloral and Newco and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
USFloral and the Board of Directors and the stockholder of 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 USFloral and
Newco, respectively.
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access during normal business hours to all of the
Company's sites, properties, books and records and will furnish USFloral with
such additional financial and operating data and other information as to the
business and properties of the Company (including the Company's Subsidiaries) as
USFloral may from time to time reasonably request in writing. The Company will
cooperate with the reasonable requests of USFloral, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by any governmental agency. USFloral will cause all information
obtained in connection with the negotiation and performance of this Agreement to
be treated as confidential in accordance with the provisions of Section 15
hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, Stockholders will cause the Company (including the Company's
Subsidiaries) to:
(i) 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;
(ii) maintain its properties, facilities and equipment and other assets in
as good working order and condition as at present, ordinary wear and tear
excepted;
(iii) perform all of its material obligations under debt and lease
instruments and other agreements relating to or affecting its assets,
properties, equipment and rights;
(iv) maintain present debt and lease instruments and not enter in new or
amended debt or lease instruments other than in the ordinary course of
business without the knowledge and consent of Newco;
(v) keep in full force and effect present insurance policies or other
comparable insurance coverage;
21
(vi) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships and present agreements with suppliers, customers and others
having business relations with the Company; and
(vii) not effect any change in the capital structure of the organizations,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the Company's
capital stock or the purchase or other reacquisition of any outstanding shares
for treasury stock;
(viii) not materially increase present salaries and commission levels for
any and all officers, directors, employees and agents;
(ix) prohibit expenditures outside the normal course of business, and
prohibit capital expenditures in excess of $50,000 in the aggregate without
the prior approval of Newco;
(x) maintain compliance in all material respects with all material
permits, rules, laws, and regulations, consent orders and the like, the
failure to comply with which would have a material, adverse effect on the
Company or its business or assets; and
(xi) not, without the knowledge and consent of Newco, declare any
dividends or make any distribution with respect to its stock, whether now or
hereafter outstanding, nor pay out any extraordinary bonuses, fees,
commissions or any other unusual distributions to the Stockholders, directors,
management or other personnel between the date of this Agreement and the
Closing; provided, however, Newco acknowledges that the Company may pay
dividends, bonuses, and other distributions in the ordinary course of its
business not to exceed an aggregate amount of $100,000 plus additional
aggregate distributions to the Stockholders in an amount not in excess of the
amount needed to bring total tax-related distributions to Stockholders for
1997 to 60% of the Company's projected 1997 S-corporation taxable income and
provided further that the Company shall, prior to the Merger Effective Date,
distribute to the Stockholders the real property currently owned by the
Company in Waltham and Springfield, Massachusetts (the "Real Property
Distribution").
8.3 Prohibited Activities. Between the Balance Sheet Date and the Merger
---------------------
Effective Date, neither the Company (nor any Company Subsidiary) will, without
prior written consent of USFloral:
(i) make any change in their respective Articles of Organization or
Bylaws;
(ii) issue any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind;
22
(iii) purchase, redeem or otherwise acquire or retire for value any
shares of their respective stock;
(iv) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures in excess of $25,000;
(v) increase the compensation payable or to become payable to any officer,
director, Stockholders, employee or agent other than ordinary salary increases
implemented on a basis consistent with past practices, or make any bonus or
management fee payment to any such person;
(vi) create, assume or permit to exist any mortgage, pledge or other lien
or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except as set forth in Schedule 8.3(vi);
(vii) sell, assign, lease or otherwise transfer or dispose of any property
or equipment, except in the normal course of business and except as otherwise
contemplated by Section 8.2(xi) hereof, including the Real Property
Distribution;
(viii) negotiate for the acquisition of any business or the start-up of
any new business;
(ix) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(x) waive any material rights or claims;
(xi) breach or permit a breach, amend or terminate any material agreement
or any permit, license or other right; or
(xii) enter into any other transaction outside the ordinary course of its
business or prohibited hereunder.
8.4 Supplier Approval. Prior to the Closing Date, the Company shall satisfy
-----------------
any requirement for notice and approval of the transactions contemplated by this
Agreement under applicable supplier agreements, and shall provide USFloral with
satisfactory evidence of such approvals.
8.5 Notice to Bargaining Agents. Prior to the Closing Date, the Company
---------------------------
(including the Company's Subsidiaries) shall satisfy any requirement for notice
of the transactions contemplated by this Agreement under applicable collective
bargaining agreements, and shall provide USFloral with proof that any required
notice has been sent.
23
8.6 No Shop. None of the Stockholders, the Company (including any Company
-------
Subsidiary) or any agent, officer, director or any representative of any of the
foregoing will, during the period commencing on the date of this Agreement and
ending with the earlier to occur of the Merger Effective Date or the termination
of this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than USFloral or Newco
relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company.
8.7 Notification of Certain Matters. The Stockholders and the Company shall
-------------------------------
give prompt notice to USFloral of (i) the occurrence or non-occurrence of any
event known to any Stockholder or the Company the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained in
Section 6 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of any
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. USFloral
shall give prompt notice to each Stockholder of (i) the occurrence or non-
occurrence of any event known to USFloral the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in
Section 7 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of USFloral
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 8.7 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 8.8, (ii) modify the conditions set forth in Sections 9
and 10 or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
8.8 Joinder to Agreement; Information Statement. The Company agrees that,
-------------------------------------------
prior to the filing of the Registration Statement with the SEC, it will cause
the Stockholders to become parties to this Agreement, by joinder or otherwise,
and to agree to be bound by all of the terms and conditions hereof. In
addition, the Company shall cause each Stockholder to certify that such
Stockholder has received an information statement regarding the transactions to
be described in the Registration Statement and that each Stockholder has had an
adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to their satisfaction) from the officers of
USFloral concerning the business, operations and financial condition of
USFloral.
24
8.9 Amendment of Schedules. Each party hereto agrees that, with respect to
----------------------
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Merger Effective Date
to supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided that no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to the Company may be made
unless USFloral consents to such amendment or supplement; and provided further,
however, that USFloral may not withhold consent to such amendment or supplement
if the same relates to (i) changes in facts or circumstances occurring
subsequent to the date hereof, or (ii) facts and circumstances existing as of
the date hereof that were not disclosed by the Stockholders because they did not
have knowledge of them (but, with respect to facts and circumstances described
in (ii) only to the extent that the omission thereof from the Schedules attached
hereto as of the date hereof was not the result of a lack of good faith
diligence on the part of the Stockholders). No amendment of or supplement to a
Schedule shall be made later than 48 hours prior to the anticipated
effectiveness of the Registration Statement.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of Stockholders hereunder are, at their option, subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions.
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFloral and Newco contained in Section 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by USFloral and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of USFloral shall have been delivered to
Stockholders.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of the
Company as a result of which the management of the Company deems it inadvisable
to proceed with the transactions hereunder.
9.3 Employment Agreements. The Surviving Corporation shall execute and
---------------------
deliver Employment Agreements, in the form of Annex III attached hereto, to each
of the persons listed on Schedule 9.3 hereto.
9.4 Opinion of Counsel. Stockholders shall have received an opinion from
------------------
counsel for USFloral, dated the Merger Effective Date, in form and substance
satisfactory to Stockholders, to the effect that:
25
(i) USFloral and Newco have been duly organized and are validly existing
in good standing under the laws of the State of Delaware;
(ii) this Agreement has been duly authorized, executed and delivered by
USFloral and Newco and constitutes a valid and binding agreement of USFloral
and Newco enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting
the rights of creditors and except (X) as the same may be subject to the
effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein; and
(iii) the shares of USFloral Stock to be received by the Stockholders on
the Merger Effective Date shall be duly authorized, fully paid and
nonassessable.
9.5 Registration Statement. USFloral shall have filed with the SEC the
----------------------
Registration Statement and a registration statement under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The Registration Statement
shall have been declared effective by the SEC not later than December 24, 1997
and the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the underwriting agreement, the shares of USFloral Stock
covered by such Registration Statement.
9.6 Board of Directors Approval. The Board of Directors of USFloral shall
---------------------------
have approved the terms and conditions of this Agreement and the transactions
contemplated hereby.
9.7 Assumption of Deferred Compensation Agreements. USFloral shall have
----------------------------------------------
assumed the existing insurance-funded Deferred Compensation Agreements between
the Company and certain current and former members of the Company's management.
9.8 Real Property Distribution; Leases. As of the Merger Effective Date,
----------------------------------
the Real Property Distribution shall have been completed and the Surviving
Corporation shall enter into lease arrangements with each of the persons or
entities listed in Schedule 11.2 with respect to the corresponding properties or
assets listed on Schedule 11.2 in accordance with the terms and conditions of
the form of lease agreement attached hereto as Annex IV.
9.9 Market Capitalization. The aggregate post-closing market capitalization
---------------------
of USFloral (determined by multiplying to the number of shares of USFloral Stock
to be outstanding upon consummation of the IPO by the Price to Public in the
IPO) shall be not less than $50 million.
26
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFloral and Newco hereunder are, at their option, subject
to the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions.
10.1 Representations and Warranties; Performance of Obligations. Stockholders
----------------------------------------------------------
shall have delivered to USFloral a certificate dated the Merger Effective Date
and signed by them to the effect that all the representations and warranties of
Stockholders contained in this Agreement shall be true on and as of the Closing
Date and as of the Merger Effective Date with the same effect as though such
representations and warranties had been made on and as of such dates, except for
matters expressly disclosed in the certificate or a Schedule thereto; each and
all of the agreements of Stockholders and the Company to be performed on or
before the Closing Date pursuant to the terms hereof shall have been performed.
10.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of USFloral
as a result of which the management of USFloral deems it inadvisable to proceed
with the transactions hereunder.
10.3 Examination of Financial Statements. Prior to the Closing Date,
-----------------------------------
USFloral shall have had sufficient time to review the unaudited balance sheets
of the Company as of June 30, 1997, and the unaudited statements of income, cash
flow and Stockholder's investment in the Company for the periods then ended,
disclosing no material adverse change in the financial condition of the Company
or the results of its operations from the financial statements originally
furnished by the Company as set forth in Schedule 6.9. In the opinion of
Newco's independent public accountants, the historical financial statements of
the Company must be suitable or adaptable for incorporation in the Registration
Statement and other filings of USFloral with the SEC.
10.4 No Material Adverse Change. No material adverse change in the results
--------------------------
of operations, financial position or business of the Company shall have
occurred, and the Company shall not have suffered any material loss or damages
to any of its properties or assets, whether or not covered by insurance, since
the Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and USFloral shall
have received on the Closing Date a certificate signed by Stockholders dated the
Merger Effective Date to such effect.
10.5 Regulatory Review. USFloral, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
the Company including, but not limited to, environmental and land use practices,
import and export laws, compliance with contracts and federal, state and local
laws and regulations governing the respective operations of the Company; which
review reflects compliance with all applicable laws governing the Company,
disclosing no material actual or probable violations, compliance problems,
required capital
27
expenditures or other substantive environmental, real estate and land use
related concerns and which review is otherwise satisfactory in all respects to
USFloral, in its sole discretion.
10.6 Stockholders Release. At the Closing, the Stockholders shall have
--------------------
delivered to USFloral an instrument dated the Merger Effective Date releasing
the Company from any and all claims of Stockholders against the Company.
10.7 Employment Agreements. Each of the persons listed on Schedule 9.3 shall
---------------------
execute and deliver an Employment Agreement, in the form of Annex III attached
hereto.
10.8 Opinion of Counsel. USFloral shall have received an opinion from
------------------
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, A Professional Corporation, counsel to the
Stockholders, dated the Merger Effective Date, in form and substance
satisfactory to USFloral, to the effect that with respect to the Company:
(i) the Company has been duly organized and is validly existing in good
standing under the laws of the state of its incorporation;
(ii) the authorized and outstanding capital stock of the Company is as
represented by the Stockholders in this Agreement and each share of such stock
has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
Stockholder;
(iii) the Company does not have any outstanding options, warrants, calls,
conversion rights or other commitments of any kind to issue or sell any of its
capital stock;
(iv) this Agreement has been duly authorized, executed and delivered by
the Company and the Stockholders and constitutes a valid and binding agreement
of the Company and the Stockholders enforceable in accordance with its terms
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to or
affecting the rights of creditors and except (X) as the same may be subject to
the effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein;
(v) the Company has good and marketable title to the properties, assets
and leasehold estates, real and personal, shown on the schedules to this
Agreement, except for those properties sold or otherwise disposed of in the
ordinary course of business since the date of such schedules, subject only to
those liens shown on Schedules 6.10, 6.14 and 10.11, liens for current taxes
and assessments not in default and other minor encumbrances not materially
affecting the use of such properties;
28
(vi) upon consummation of the Merger contemplated by this Agreement,
USFloral will receive good title to the Company Stock, free and clear of all
liens, encumbrances and claims of every kind;
(vii) except to the extent set forth on Schedule 6.20, the Company is not
in violation of or default under any law or regulation, or under any order of
any court, commission, board, bureau, agency or instrumentality wherever
located and there are no claims, actions, suits or proceedings pending, or
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 wherever located;
(viii) except to the extent set forth on Schedule 6.14, the Company is not
in default under any of its material contracts or agreements or has received
notice of such default;
(ix) no notice to, consent, authorization, approval or order of any court
or governmental agency or body or of any other third party is required in
connection with the execution, delivery or consummation of this Agreement by
any Stockholders or for the transfer to USFloral of the Company Stock; and
(x) the execution of this Agreement and the performance of the obligations
hereunder will not violate or result in a breach or constitute a default under
any of the terms or provisions of the Company's Articles of Organization or
the by-laws of the Company or of any lease, instrument, license, permit or any
other agreement to which the Company is a party or by which the Company or any
Stockholder is bound.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 Consents and Approvals. All necessary consents of and filings with any
----------------------
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
USFloral's acquisition of the Company Stock and no governmental agency or body
shall have taken any other action or made any request of USFloral as a result of
which USFloral deems it inadvisable to proceed with the transactions hereunder.
10.10 Additional Liabilities and Obligations. Stockholders shall have
--------------------------------------
delivered to USFloral a Schedule (Schedule 10.10), dated the Merger Effective
Date, setting forth all liabilities and obligations of the Company (including
the Company's Subsidiaries) arising since the Balance Sheet Date.
29
10.11 Additional Contracts. Stockholders shall have delivered to
--------------------
USFloral a Schedule (Schedule 10.11), dated the Merger Effective Date, showing
all material contracts and agreements, together with copies thereof, entered
into by the Company (including the Company's Subsidiaries) since the Balance
Sheet Date.
10.12 Good Standing Certificates. Stockholders shall have delivered to
--------------------------
USFloral certificates, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by USFloral, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.13 Registration Statement. The Registration Statement shall have been
----------------------
declared effective by the SEC, and the underwriters named therein shall have
agreed to acquire, subject to the conditions set forth in the underwriting
agreement, the shares of USFloral Stock covered thereby and the post-closing
market capitalization of USFloral will exceed $50 million (calculated as the
number of shares of USFloral Stock outstanding after the Closing multiplied by
the IPO price, assumed to be $10 per share).
10.14 Repayment of Indebtedness. Prior to the Closing Date, the Stockholders
-------------------------
shall have repaid the Company (including each Company's Subsidiaries) in full
all amounts owing by the Stockholders.
10.15 Net Income. The Company shall have average annual adjusted income
----------
before bonuses, profit-sharing and taxes ("Operating Income") for each of the
three years in the three-year period ended December 31, 1996 of $1.5 million in
each year and a book value as of the Closing Date, after giving effect to the
contemplated distribution to the Stockholders of real property owned by the
Company, of at least $4.5 million.
10.16 Real Property Distribution; Leases. As of the Merger Effective Date,
----------------------------------
the Real Property Distribution shall have been completed and the Surviving
Corporation shall enter into lease arrangements with each of the persons or
entities listed in Schedule 11.2 with respect to the corresponding properties or
assets listed on Schedule 11.2 in accordance with the terms and conditions on
the form of lease agreement attached hereto as Annex IV.
11. COVENANTS OF USFLORAL
11.1 Registration Statement. As soon as practicable following the execution
----------------------
of this Agreement and in any event within 45 days thereafter, USFloral shall
prepare and file with the SEC the Registration Statement.
30
11.2 Release From Guarantees. Not later than 120 days following the Merger
-----------------------
Effective Date, USFloral shall cause the Stockholders to be released from any
and all guarantees of any indebtedness set forth on Schedule 11.1 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.
11.3 Leases. At the Merger Effective Date, the Surviving Corporation shall
------
enter into lease arrangements with each of the persons or entities listed in
Schedule 11.2 with respect to the corresponding properties or assets listed on
Schedule 11.2 in accordance with the terms and conditions of the form of lease
agreement attached hereto as Annex IV.
11.4 Compliance with the 1934 Act. For a period of two years following the
----------------------------
Merger Effective Date, USFloral shall (i) make and keep public information
available, as those terms are defined in Rule 144 promulgated under the 1933 Act
or any successor rule hereafter promulgated by the SEC ("Rule 144") and (ii)
file with the SEC in a timely manner all reports and other documents required of
USFloral under the 1933 Act and the 1934 Act.
11.5 Certain Transactions. USFloral will cause its existing stockholders to
--------------------
participate, within the standards established by Revenue Procedure 77-37, in the
IPO to the extent necessary to cause the group consisting of (i) those existing
stockholders who purchase USFloral Stock from USFloral at the time of the IPO,
(ii) other persons acquiring stock in the IPO and (iii) the persons acquiring
stock as a result of the Merger and other concurrent mergers to possess at least
80% of the outstanding stock of USFloral. Each of the concurrent mergers will
be a reverse triangular merger in which not more than 60% of the consideration
being transferred to each stockholder of the target corporations shall consist
of USFloral Stock.
11.6 USFloral Stock Options. As soon as practicable after the Closing,
----------------------
options to purchase such number of shares of USFloral Stock as shall have a fair
market value on the Closing Date equal to 6.25% of the consideration delivered
to the Stockholders in the Merger 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
Amended and Restated 1997 Long-Term Incentive Plan (the "Plan").
11.7 Piggy-Back Registrations. If at any time after the expiration of the
------------------------
restrictions contained in Section 16 USFloral shall determine to register shares
of USFloral Stock for its own account or the account of others under the 1933
Act (other than on Form S-8 or Form S-4 or their then equivalents relating to
shares of USFloral Stock to be issued solely in connection with any acquisition
of any entity or business or shares of USFloral Stock issuable in connection
with stock
31
option or other employee benefit plans, and other than any "shelf" registration
statement relating to securities to be issued by USFloral), then it shall send
to each holder of shares of USFloral Stock issued in the Merger ("Registrable
Shares") (all such security holders and being referred to as "Holders") written
notice of such determination. If, within 15 days after receipt of such notice,
such Holder shall so request in writing, then USFloral shall use its best
efforts to include in such registration statement all or any part of the
Registrable Shares such Holder requests to be registered, except that if, in
connection with any offering involving an underwriting of USFloral Stock to be
issued by USFloral, the managing underwriter shall impose a limitation on the
number of shares of such USFloral Stock which may be included in the
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, then USFloral shall be obligated to
include in such registration statement only such limited portion of the
Registrable Shares with respect to which such Holder has requested inclusion
hereunder; provided, however, that USFloral shall not so exclude any Registrable
-------- -------
Shares unless it has first excluded all securities to be offered and sold by
directors, officers or other employees of USFloral or by shareholders who do not
have contractual, incidental rights to include such securities. Except as
provided in the previous sentence of this Section 11.7 any exclusion of
Registrable Shares shall be made pro rata among the Holders of Registrable
--- ----
Shares seeking to include such shares, in proportion to the number of such
shares sought to be included by such Holders. The obligations of USFloral under
this Section 11.7 may be waived at any time upon the written consent of Holders
of a majority-in-interest of the Registrable Shares and shall expire as to each
Holder immediately upon all of such Holder's Registrable Shares being capable of
sale within a three-month period in accordance with the volume and manner-of-
sale limitations of Rule 144 under the 1933 Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by Stockholders. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, the Stockholders, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
USFloral, Newco and the Surviving Corporation and their respective officers,
Stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement until the Expiration Date (as defined in Section
12.6) from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by USFloral, Newco or the Surviving Corporations as a
result of or arising from (i) any breach of the representations and warranties
made by Stockholders set forth herein or on the schedules or certificates
delivered in connection herewith, (ii) any nonfulfillment of any agreement on
the part of Stockholders or the Company under this Agreement or (iii) any
liability under the Securities Act of 1933, as amended, (the "1933 Act"), the
Exchange Act or other Federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to the Company (including the Company's
Subsidiaries) or Stockholders, and provided to USFloral or its counsel by the
Company (including any Company Subsidiary) or Stockholders, contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or
32
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to the Company (including any
Company Subsidiary) or Stockholders required to be stated therein or necessary
to make the statements therein not misleading, and not provided to USFloral or
its counsel by the Company (including the Company's Subsidiaries) or
Stockholders, provided, however, that such indemnity shall not inure to the
benefit of USFloral, Newco and the Surviving Corporation to the extent that such
untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and Stockholders
provided, in writing, corrected information to USFloral for inclusion in the
final prospectus, and such information was not so included.
12.2 Specific Indemnification by Stockholders. Subject to the limitations
----------------------------------------
contained in Section 12.5 hereof, notwithstanding any disclosure made in this
Agreement or in the Schedules or Exhibits hereto, and notwithstanding any
investigation by USFloral or Newco, the Stockholders covenant and agree that
they will indemnify, defend, protect and hold harmless USFloral, Newco and the
Surviving Corporation and their respective officers, stockholders, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, agents, employees,
successors and assigns at all times from and after the date of this Agreement,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by USFloral, Newco or the Surviving Corporation as a
result of or incident to: (a) the existence of liabilities of the Company in
excess of the liabilities set forth on Schedule 6.10, but only to the extent of
such excess, with the parties acknowledging and agreeing that (i) the existence
of liabilities (such as accounts payable) of the Company on the Merger Effective
Date that are different (but not in the aggregate greater) than the liabilities
of the Company set forth on Schedule 6.10 on the date hereof shall not give rise
to any obligations of the Stockholder under the provisions of this Section 12
and (ii) the existence of liabilities that arise in the ordinary course of
business of the Company that do not arise as a result of a breach by the
Stockholders of any of their obligations set forth in Sections 8.2 or 8.3 hereof
shall not give rise to any obligations of the Stockholders under the provisions
of this Section 12; and (b) all liability resulting from the litigation matters
listed on Schedule 6.20.
12.3 Indemnification by USFloral and Newco. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFloral and Newco, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
Stockholders at all times from and after the date of this Agreement from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by
Stockholders as a result of or arising from (i) any breach of the
representations and warranties made by USFloral and Newco set forth herein or on
the schedules or certificates attached hereto, (ii) any nonfulfillment of any
agreement on the part of USFloral under this Agreement, (iii) any liabilities
which Stockholders may incur due to USFloral's failure to be responsible for the
liabilities and obligations of the Surviving Corporation as provided in Section
1.5 hereof (except to the extent that USFloral has claims against Stockholders
by reason of such liabilities); or (iv) any liability under the 1933 Act, the
Exchange Act or other Federal or
33
state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
relating to USFloral (including any entities proposed to be acquired, directly
or indirectly, by USFloral other than the Company (the "Other Targets"))
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to USFloral (including the Other Targets)
required to be stated therein or necessary to make the statements therein not
misleading.
12.4 Third Person Claims. Promptly after any party hereto (hereinafter the
-------------------
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement (a "Third Person") or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently.
If the Indemnifying Party undertakes to defend or settle, it shall promptly
notify the Indemnified Party of its intention to do so, and the Indemnified
Party shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the Indemnifying Party that are
in the Indemnified Party's possession or control. Notwithstanding the foregoing,
the Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel); provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and out-of-
pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section 12 with respect to such Third Person claim shall be limited
to the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense,
34
the Indemnified Party may undertake such defense through counsel of its choice,
at the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
12.5 Limitations on Indemnification. No Indemnified Party shall assert any
------------------------------
claim (other than a Third Person claim) for indemnification hereunder until such
time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall exceed an amount equal to 2% of the sum of
(i) $6,044,500 and (ii) 495,550 times the price at which shares of USFloral
Stock are sold in the IPO, at which time, an Indemnified Party shall be entitled
to seek indemnification for all claims not previously asserted pursuant to this
Section. For purposes of the preceding sentence, USFloral, Newco and the
Surviving Corporation shall be considered to be a single Indemnifying and
Indemnified Party and Stockholders shall be considered to be a single
Indemnifying and Indemnified Party. Notwithstanding any other term of this
Agreement, in no event shall any Stockholder be liable under this Section 12 for
an amount which exceeds the aggregate value (determined at the Merger Effective
Date) of the consideration received by such Stockholder under this Agreement.
"Excess Net Worth" shall mean the amount, if any, by which the aggregate
shareholders' equity as shown on the Closing Date Balance Sheet is greater than
the aggregate shareholders' equity as shown on the Balance Sheet of the Company
as at December 31, 1996, adjusted to reflect the Real Property Distribution.
All indemnification obligations of the Stockholders with respect to unpaid
accounts receivable pursuant to Section 6.11 hereof shall be reduced by the
amount of any Excess Net Worth (but only to the extent such Excess Net Worth has
not previously been utilized to reduce an indemnification obligation pursuant to
this sentence).
12.6 Survival of Representations and Warranties. The parties agree that
------------------------------------------
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of twelve (12) months from the Merger Effective Date (which
date is hereinafter called the "Expiration Date"), except that (i) the
representations and warranties contained in Section 6.21 hereof shall survive
until such time as the limitations period has run for all tax periods ended
prior to the Merger Effective Date, which shall be deemed to be the Expiration
Date for purposes of this clause (i), (ii) the representations and warranties
contained in Sections 6.26 and 6.27 hereof shall survive for a period of three
years from the Merger Effective Date, which shall be deemed the Expiration Date
for purposes of this clause (ii), (iii) solely for purposes of Section 12.1(iii)
hereof, and solely to the extent that USFloral actually incurs liability under
the 1933 Act, the Exchange Act, or any other Federal or state securities laws,
the representations and warranties set forth herein shall survive for a period
of three years from the Merger Effective Date, which shall be deemed to be the
Expiration Date for purposes of this clause (iii) and (iv) any representations
and warranties which serve as a basis of the indemnity obligations of
Stockholders under Section 12.2 shall survive the Merger Effective Date without
time limitation.
35
12.7 Sole Remedies. The provisions of this Section 12 shall be the exclusive
-------------
basis for assertion of claims against, or the imposition of liability on, the
Stockholders in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the Stockholders.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFloral or Stockholders may, by notice in
--------------------------
the manner hereinafter provided on or before the Closing Date, terminate this
Agreement (i) if a material default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date and shall not reasonably be
expected to occur (ii) if the Registration Statement has not been declared
effective by December 24, 1997; (iii) if the Closing has not occurred by
December 31, 1997; or (iv) if the IPO price is determined to be less than $8.00
and USFloral does not offer to increase the number of shares of USFloral Stock
to be delivered in the Merger such that the Stockholders will receive the same
economic benefit in dollar terms as if the IPO price had been $8.00 per share.
During the period from the Closing Date to the Merger Effective Date, this
Agreement may only be terminated by the parties as provided in Section 5 hereof.
13.2 Liquidated Damages.
------------------
(a) If the Stockholders terminate this Agreement after the satisfaction of the
conditions set forth in Article 9 or if the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to USFloral at law, in equity or pursuant to this Agreement,
Stockholders shall pay to USFloral the sum of $500,000 as liquidated damages.
It is hereby agreed that USFloral's damages in the event of a termination or
default by Company hereunder are uncertain and impossible to ascertain and that
the foregoing constitutes a reasonable liquidation of such damages and is
intended not as penalty but as liquidated damages.
(b) If USFloral terminates this Agreement after the satisfaction of the
conditions set forth in Article 10 or if the Merger fails to occur because of
the default of USFloral or Newco, then, in addition to the other remedies
available to the Company and the Stockholders at law, in equity or pursuant to
this Agreement, USFloral shall pay to the Stockholders the sum of $500,000 as
liquidated damages. It is hereby agreed that the Stockholders' damages in the
event of a termination by USFloral hereunder are uncertain and impossible to
ascertain and that the foregoing constitutes a reasonable liquidation of such
damages and is intended not as penalty but as liquidated damages.
14. NONCOMPETITION
14.1 Prohibited Activities. Stockholders agree that for a period of two
---------------------
years following the Merger Effective Date, they shall not:
36
(i) 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 that involves the importing, brokerage,
shipping or marketing of floral products, or any business engaging in the
consolidation of the floral industry within the United States (the
"Territory");
(ii) 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;
(iii) 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 or the Company's Subsidiaries within the
Territory for the purpose of soliciting or selling floral products within the
Territory;
(iv) call upon any prospective acquisition candidate, on their own behalf
or on behalf of any competitor, which candidate was either called upon by any
of them or for which any of them made an acquisition analysis for themselves
or USFloral or any subsidiaries of USFloral, any Company or such Company's
Subsidiaries; or
(v) disclose customers, whether in existence or proposed, of any Company
(or such Company's Subsidiaries) 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, or (ii) engaging
in any activity to which USFloral shall have provided its prior written consent.
In addition, the foregoing covenant shall not be deemed to prohibit any
Stockholder, who, as of the date hereof, has an interest, as an owner, operator,
creditor, employee or otherwise, in a floral business independent (except as a
customer or supplier) of the Company, from continuing to maintain such interest,
provided that if such business is not, as of the date hereof, operating at more
than one level of distribution of floral products, no Stockholder shall
integrate such business during the two-year period set forth in this Section
14.1.
14.2 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, 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.
37
14.3 Reasonable Restraint. It is agreed by the parties that the foregoing
--------------------
covenants in this Section 14 impose a reasonable restraint on 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 business of the Company).
14.4 Severability; Reformation. The covenants in this Section 14 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.
14.5 Independent Covenant. All of the covenants in this Section 14 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 Stockholders against the
Company, any Company Subsidiary, the Surviving Corporation or USFloral, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
years stated above, shall be computed by excluding from such computation any
time during which any Stockholder is in violation of any provision of this
Section 14 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
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.
14.6 Materiality. Stockholders hereby agree that this covenant is a material
-----------
and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Stockholders. 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. 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 such information becomes known to
the public generally through no fault of Stockholders. In the event of a breach
or threatened breach by Stockholders of the provisions of this Section, USFloral
and the Surviving Corporation shall be entitled to an injunction restraining
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.
38
15.2 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 Section,
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 Stockholders from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 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 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.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, the
Stockholders hereby irrevocably agree that for a period of 180 days after the
date of the effectiveness of the Registration Statement, as the same may be
amended, not to (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of (except as
contemplated in Section 4.2 hereof), directly or indirectly, any shares of
USFloral Stock or any securities convertible into or exercisable or exchangeable
for shares of USFloral Stock, or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the USFloral Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of USFloral Stock or such
other securities, in cash or otherwise without the prior written consent of the
underwriters in the IPO. The Stockholders agree that the foregoing shall be
binding upon the Stockholders' transferees, successors, assigns, heirs, and
personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. In furtherance of the foregoing, USFloral and its
transfer agent are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Article 16.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The Stockholders acknowledge and agree that the shares of USFloral Stock to be
delivered to the Stockholders pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The Stockholders represent and warrant that the
USFloral Stock to be acquired by Stockholders pursuant to this Agreement is
39
being acquired solely for their own account, for investment purposes only, and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution.
17.1 Compliance with Law. The Stockholders covenant, warrant and represent
-------------------
that none of the shares of USFloral Stock issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC.
17.2 Economic Risk; Sophistication. Stockholders represent and warrant
-----------------------------
that they are able to bear the economic risk of an investment in USFloral Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. They further represent and warrant that they, either
individually or together with their purchaser representatives, (i) fully
understand the nature, scope and duration of the limitations on transfer
contained in this Agreement and (ii) have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of the proposed investment and therefore have the capacity to protect
their own interests in connection with the acquisition of the USFloral Stock.
The purchaser representatives represent and warrant that they have had an
adequate opportunity to ask questions and receive answers from the officers of
USFloral concerning any and all matters relating to the acquisition of USFloral
Stock as contemplated by this Agreement including, without limitation, the
background and experience of the officers and directors of USFloral, the plans
for the operations of the business of USFloral, and any plans for additional
acquisitions and the like. The purchaser representatives have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
17.3 Registration Statement. Each Stockholder has received the prospectus
----------------------
included in the draft Registration Statement delivered to him or her on or about
August 2, 1997 that describes, among other things, the Merger, the other
acquisitions proposed to be undertaken by USFloral and the target companies of
the other acquisitions. The purchaser representatives have had an adequate
opportunity to ask questions and receive answers to their satisfaction from the
officers of USFloral concerning the business, operations and financial condition
of USFloral.
18. SECURITIES LEGENDS
The certificates evidencing the USFloral Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as USFloral may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD,
40
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE 1933 ACT AND ANY STATE
SECURITIES OR BLUE SKY LAWS, UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM
AND SUBSTANCE SATISFACTORY TO USFLORAL) OF COUNSEL SATISFACTORY TO
USFLORAL, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear such other legends as counsel for
USFloral reasonably determines are required under the applicable laws of any
state.
19. GENERAL.
19.1 Cooperation. Stockholders and USFloral shall each deliver or cause to
-----------
be delivered to the other on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
Stockholders will cooperate and use their best 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 actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
19.2 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 Stockholders.
19.3 Entire Agreement. This Agreement (including the schedules, exhibits and
----------------
annexes attached hereto) and the documents delivered pursuant hereto constitute
the entire agreement and understanding between Stockholders, the Company,
USFloral and Newco and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement on the parties thereto enforceable in
accordance with its terms and may be modified or amended only by a written
instrument executed by Stockholders (subject to the limitations set forth
below), the Company, USFloral, and Newco acting through their respective
officers, duly authorized by their respective Boards of Directors; provided,
that the Stockholder who owns a majority of the outstanding shares of capital
stock of the Company shall have the authority to approve and execute any
amendment to this Agreement on behalf of all of the Stockholders and without the
necessity of such majority Stockholder obtaining consent or authorization from
any other Stockholder, unless such amendment relates to any representation of
warranty made by a Stockholder other than such majority Stockholder which may
only be amended by the written agreement of such person.
41
19.4 Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19.5 Brokers and Agents. Each party represents and warrants that it employed
------------------
no broker or agent in connection with this transaction and agrees to indemnify
the other against all loss, cost, damages or expense arising out of claims for
fees or commissions of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall be
--------
consummated, USFloral will pay the fees, expenses and disbursements of USFloral
and Newco and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto.
Whether or not the transactions herein contemplated shall be consummated,
Stockholders will pay the fees, expenses and disbursements of the Company, the
Stockholders and their agents, representatives, accountants and counsel incurred
in connection with the subject matter of this Agreement and any amendments
hereto and all other costs and expenses incurred in the performance and
compliance with all conditions to be performed by the Stockholders and the
Company under this Agreement.
19.7 Notices. All notices of communication required or permitted hereunder
-------
shall be in writing and shall be given by overnight courier, addressed to the
party to be notified, or by delivering the same in person to an officer or agent
of such party.
(a) If to USFloral or Newco, addressed to them at:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(b) If to Stockholders, addressed to them:
▇/▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., ▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
19.8 Governing Law. This Agreement shall be construed in accordance with the
-------------
laws of the State of Delaware.
19.9 Exercise of Rights and Remedies. Except as otherwise provided herein, no
-------------------------------
delay of or omission in the exercise of any right, power or remedy accruing to
any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
42
19.10 Time. Time is of the essence with respect to this Agreement.
----
19.11 Reformation and Severability. In case any provision of this Agreement
----------------------------
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
19.12 Remedies Cumulative. No right, remedy or election given by any term of
-------------------
this Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
19.13 Captions. The headings of this Agreement are inserted for convenience
--------
only and shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
19.14 Standstill Agreement. Unless and until this Agreement is terminated
--------------------
pursuant to Article 13 hereof without the Merger Effective Date having taken
place, Stockholders will not directly or indirectly solicit offers for any
Company Stock or the assets of the Company or a merger or consolidation
involving the Company from, or respond to inquiries from, share information
with, negotiate with or in any way facilitate inquiries or offers from, third
parties who express or who have heretofore expressed an interest in acquiring
the Company by merger or consolidation or acquiring any of its assets or any
Company Stock; nor will they permit the Company to do any of the foregoing.
43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFloral" "Stockholders"
U.S.A. FLORAL PRODUCTS, INC. ▇▇▇▇▇ ▇. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President/CEO ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
"Newco" ▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, ▇▇.
BSF ACQUISITION CORP. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President/CEO ▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
"Company" ▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
BAY STATE FLORIST SUPPLY, INC. ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
By /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Director ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
A. ▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
R. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------
By ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
under Power of Attorney
The undersigned ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., for
himself and the other purchaser
representatives, hereby confirms the
representation and warranty set forth in
Section 17.2 hereof.
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
---------------------------
ANNEXES
ANNEX I [Form of Articles of Merger]
ANNEX II [Consideration]
ANNEX III [Form of Employment Agreement]
ANNEX IV [Form of Lease Agreement]