EXHIBIT 10.6
-------------------------------------------------------------------------------
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
UWF ACQUISITION CORP.
(a Delaware corporation),
UWFA ACQUISITION CORP.
(a Delaware corporation)
UNITED WHOLESALE FLORISTS, INC.
(an Arkansas corporation),
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
(an Arkansas corporation)
and
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Dated as of August 4, 1997
-------------------------------------------------------------------------------
Table Of Contents
-----------------
Page
----
1. THE MERGER......................................................... 2
1.1 Delivery and Filing of Articles of Merger..................... 2
1.2 Merger Effective Date......................................... 2
1.3 Articles of Incorporation, Bylaws and Board of Directors
of Surviving Corporation...................................... 2
1.4 Certain Information with Respect to the Capital Stock of
the Company and Newco......................................... 2
1.5 Effect of Merger.............................................. 3
2. CONVERSION AND EXCHANGE OF STOCK................................... 4
2.1 Manner of Conversion.......................................... 4
2.2 Calculation of USFloral Shares................................ 4
2.3 Option for Certain Real Property.............................. 4
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION.................... 5
4. POST CLOSING ADJUSTMENTS; PLEDGE OF SHARES......................... 6
5. CLOSING; MERGER EFFECTIVE DATE..................................... 8
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.................... 9
6.1 Due Organization............................................. 9
6.2 Authorization................................................ 9
6.3 Capital Stock of Each Company................................ 9
6.4 Transactions in Capital Stock................................ 10
6.5 No Bonus Shares.............................................. 10
6.6 Subsidiaries................................................. 10
6.7 Predecessor Status; etc...................................... 10
6.8 Spin-off by Company.......................................... 10
6.9 Financial Statements......................................... 10
6.10 Liabilities and Obligations.................................. 11
6.11 Accounts and Notes Receivable................................ 11
6.12 Permits and Intangibles...................................... 11
6.13 Real and Personal Property................................... 12
6.14 Material Contracts and Commitments........................... 12
6.15 Title to Real Property....................................... 13
6.16 Insurance.................................................... 13
6.17 Officers, Directors and Employees Compensation............... 13
6.18 Employee Plans............................................... 14
i
6.19 Compliance with ERISA........................................ 14
6.20 Conformity with Law.......................................... 16
6.21 Taxes........................................................ 16
6.22 Completeness; No Violations.................................. 16
6.23 Government Contracts......................................... 17
6.24 Absence of Changes........................................... 17
6.25 Deposit Accounts; Powers of Attorney......................... 18
6.26 Environmental Matters........................................ 18
6.27 Underground Storage Tanks.................................... 19
6.28 Validity of Obligations...................................... 20
6.29 Relations with Governments................................... 20
6.30 Disclosure................................................... 20
6.31 Authority; Ownership......................................... 20
7. REPRESENTATIONS OF USFLORAL AND NEWCOS............................. 20
7.1 Due Organization.............................................. 20
7.2 USFloral Stock................................................ 21
7.3 Authorization................................................. 21
7.4 No Conflicts.................................................. 21
7.5 Validity of Obligations....................................... 22
7.6 Other Agreements.............................................. 22
8. COVENANTS OF STOCKHOLDERS AND COMPANIES PRIOR TO CLOSING............ 22
8.1 Access and Cooperation......................................... 22
8.2 Conduct of Business............................................ 22
8.3 Prohibited Activities.......................................... 23
8.4 Supplier Approval.............................................. 24
8.5 Notice to Bargaining Agents.................................... 24
8.6 No Shop........................................................ 24
8.7 Notification of Certain Matters................................ 24
8.8 Amendment of Schedules......................................... 25
8.9 Life Insurance Policies........................................ 25
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS................. 25
9.1 Representations and Warranties; Performance
of Obligations................................................. 25
9.2 No Litigation.................................................. 26
9.3 Employment Agreements.......................................... 26
9.4 Opinion of Counsel............................................. 26
9.5 Registration Statement......................................... 26
9.6 Market Capitalization.......................................... 27
9.7 Repayment of Indebtedness...................................... 27
ii
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL
AND NEWCOS.......................................................... 27
10.1 Representations and Warranties; Performance of Obligations... 27
10.2 No Litigation................................................ 27
10.3 Examination of Financial Statements.......................... 27
10.4 No Material Adverse Change................................... 27
10.5 Regulatory Review............................................ 27
10.6 Stockholders Release......................................... 28
10.7 Employment Agreements........................................ 28
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
11. COVENANTS OF USFLORAL............................................... 30
11.1 Release From Guarantees....................................... 30
11.2 USFloral Stock Options........................................ 30
11.3 Intentionally Left Blank...................................... 30
11.4 Exchange Act Reporting Requirements........................... 30
11.5 Certain Transactions.......................................... 30
11.6 Piggy-Back Registrations Transactions......................... 30
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES......... 31
12.1 General Indemnification by Stockholders....................... 31
12.2 Specific Indemnification by the Stockholders.................. 32
12.3 Indemnification by USFloral and Newco......................... 32
12.4 Third Person Claims........................................... 33
12.5 Limitations on Indemnification................................ 34
12.6 Survival of Representations and Warranties.................... 34
12.7 Sole Remedies................................................. 35
13. TERMINATION OF AGREEMENT............................................ 35
13.1 Termination by the Parties.................................... 35
13.2 Liquidated Damages to USFloral................................ 35
14. NONCOMPETITION...................................................... 35
14.1 Prohibited Activities......................................... 35
14.2 Damages....................................................... 36
iii
14.3 Reasonable Restraint......................................... 36
14.4 Severability; Reformation.................................... 37
14.5 Independent Covenant......................................... 37
14.6 Materiality.................................................. 37
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.......................... 37
15.1 Stockholders................................................. 37
15.2 USFloral..................................................... 37
15.3 Damages...................................................... 38
16. LOCK-UP AGREEMENTS................................................. 38
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
USFLORAL STOCK..................................................... 38
17.1 Compliance with Law.......................................... 39
17.2 Economic Risk; Sophistication................................ 39
18. SECURITIES LEGENDS................................................. 39
19. GENERAL............................................................ 40
19.1 Cooperation.................................................. 40
19.2 Successors and Assigns....................................... 40
19.3 Entire Agreement............................................. 40
19.4 Counterparts................................................. 40
19.5 Brokers and Agents........................................... 40
19.6 Expenses..................................................... 40
19.7 Notices...................................................... 41
19.8 Governing Law................................................ 41
19.9 Exercise of Rights and Remedies.............................. 41
19.10 Time......................................................... 42
19.11 Reformation and Severability................................. 42
19.12 Remedies Cumulative.......................................... 42
19.13 Captions..................................................... 42
iv
AGREEMENT AND PLAN OF CONTRIBUTION
THIS AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement") is made as of the
4th day of August, 1997, between U.S.A. FLORAL PRODUCTS, INC., a Delaware
corporation ("USFloral"), UWF Acquisition Corp. and UWFA Acquisition Corp., each
a Delaware corporation, formed for the sole purpose of effecting this
transaction (hereinafter referred to individually as "Newco" and collectively as
the "Newcos"), United Wholesale Florists, Inc., an Arkansas corporation and
United Wholesale Florists of America, Inc., an Arkansas corporation (hereinafter
referred to individually as a "Company" and collectively as the "Companies") and
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (collectively referred to as the
"Stockholders"), who are all of the Stockholders of the Companies.
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
common 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") with the Securities and Exchange Commission (the
"SEC") within 15 days of the execution and delivery of this Agreement;
WHEREAS, the Newcos have been duly organized and are existing under the
laws of the State of Delaware, having been incorporated on July 14, 1997,
solely for the purpose of completing this transaction, and each is a wholly-
owned subsidiary of USFloral; and
WHEREAS, the Companies are corporations organized and existing under the
laws of the State of Arkansas; and
WHEREAS, the respective Boards of Directors of USFloral, the Newcos and the
Companies (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 each Newco
merge with and into a Company pursuant to this Agreement and the applicable
provisions of the laws of the respective states of incorporation of the Newcos
and the Companies, such transactions being herein called the "Mergers"; and
WHEREAS, the Formation, the IPO and the Mergers are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351 of
the Internal Revenue Code of 1986, as amended;
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
-----------------------------------------
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 the Newcos
and the Companies 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
---------------------
specified in Section 5. At the Merger Effective Date, each Newco shall be
merged with and into the respective Company in accordance with the respective
Articles of Merger applicable to each Merger and the separate existence of each
Newco shall cease. The Companies, as the parties surviving the Mergers, are
hereinafter sometimes referred to as the "Surviving Corporations." The Mergers
will be effected simultaneously, or as nearly so as is possible.
1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
---------------------------------------------------------------------
Corporation. At the Merger Effective Date:
-----------
(i) the Articles of Incorporation of each Company shall become the
Articles of Incorporation of the respective Surviving Corporation (with such
amendments thereto as may be set forth in the Articles of Merger); and
subsequent to the Merger Effective Date, such Articles of Incorporation shall
be the Articles of Incorporation of such Surviving Corporation until changed as
provided by law;
(ii) the Bylaws of each Company shall become the Bylaws of the respective
Surviving Corporation; and subsequent to the Merger Effective Date, such Bylaws
shall be the Bylaws of such 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 each of the Surviving Corporations shall be ▇▇▇▇▇▇
▇▇▇▇▇▇▇; the Director of each Surviving Corporation shall hold office subject
to the provisions of the laws of the state of incorporation and of the Articles
of Incorporation and Bylaws of each Surviving Corporation.
(iv) the officers of each Company immediately prior to the Merger Effective
Date shall continue as the officers of each Surviving Corporation in the same
capacity or capacities, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and Bylaws of such Surviving
Corporation, until his successor is elected and qualified.
1.4 Certain Information with Respect to the Capital Stock of the Company and
------------------------------------------------------------------------
Newco. The respective designations and numbers of outstanding shares and voting
-----
rights of each
2
class of outstanding capital stock of each Company and Newcos as of the date of
this Agreement are as follows:
(i) the authorized capital stock of United Wholesale Florists, Inc.
consists of 1000 shares of Class A voting common stock, $11.00 par value of
which 200 shares are issued and outstanding, and 1000 shares of Class B voting
common stock, $9.75 par value, of which 800 shares are issued and outstanding;
(ii) the authorized capital stock of United Wholesale Florists of America,
Inc. consists of 2,000 shares of voting common stock no par value, of which 100
shares are issued and outstanding (the authorized capital stock described in
Section (i) and this Section (ii) is hereinafter collectively referred to as
the "Company Stock"); and
(iii) the authorized capital stock of each Newco consists of 1,000 shares
of common stock, $.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
----------------
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of each Company shall continue unaffected and unimpaired by the
Mergers, and the Surviving Corporation shall be fully vested therewith. At the
Merger Effective Date, the separate existence of each 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
choices in action, and all and every other interest of or belonging to or due to
each of the Companies and Newcos 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
Corporations 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 Companies and Newcos, shall not
revert or be in any way impaired by reason of the Mergers. Each Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of its constituent Company and Newco and any claim existing, or
action or proceeding pending, by or against each Company or Newco may be
prosecuted as if the Merger had not taken place, or the respective Surviving
Corporation may be substituted in its place. Neither the rights of creditors nor
any liens upon the property of each Company or Newco shall be impaired by the
Merger, and all debts, liabilities and duties of each Company and Newco shall
attach to the respective 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.
3
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of the
--------------------
Company Stock issued and outstanding immediately prior to the Merger Effective
Date into cash and shares of common stock of USFloral, $0.001 par value
("USFloral Stock"), shall be as follows:
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 Mergers 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 Merger Effective Date shall, by virtue of the Mergers 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 the Stockholders as a result of the
Mergers 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 the Stockholders and the
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,
------------------------------
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.
2.3 Option for Certain Real Property.
--------------------------------
(a) Promptly following the execution of this Agreement, and in all
events prior to the Merger Effective Date, the Stockholders shall cause United
Properties (the "Partnership"), an Arkansas general partnership of which the
Stockholders are the sole general partners, to grant to the Companies an option
(the "Purchase Option") to purchase any or all of the eight separate parcels of
real estate currently owned by the Partnership and leased to the Companies
4
pursuant to the leases identified on Schedule 6.13(c) attached hereto and made
a part hereof. Each Purchase Option shall continue in full force and effect
until June 30, 2002 and shall entitle the Companies to purchase at any time the
premises (the "Leased Premises") subject to such leases. If the Companies
decide to exercise the Purchase Option with respect to any or all of the Leased
Premises (it being acknowledged and agreed that the Purchase Option with respect
to each Leased Premises may be exercised concurrently or at separate times prior
to June 30,2002), USFloral shall engage ▇▇▇▇▇▇▇ ▇▇▇▇ Real Estate Services, Inc.
("▇▇▇▇▇▇▇ ▇▇▇▇") at its expense to cause appraisals to be made of the Leased
Premises that the Companies desire to buy, using local market experts and
considering replacement cost, sales comparisons and income value. If the
Stockholders dispute the valuation of any of the Leased Premises as so
determined by ▇▇▇▇▇▇▇ ▇▇▇▇, the Stockholders shall so notify USFloral within
five days of receipt thereof, and within thirty days of receipt thereof shall
have conducted and delivered to USFloral a second appraisal of such Leased
Premises by an appraiser of the Stockholders' choosing and at their own expense.
As to any Leased Premises, if the ▇▇▇▇▇▇▇ ▇▇▇▇ appraisal and the Stockholders'
appraisal vary by ten percent or less, the fair market value of the Leased
Premises shall be the average of the two appraisals. If the ▇▇▇▇▇▇▇ ▇▇▇▇
appraisal and the Stockholders' appraisal vary by more than ten percent and the
parties are unable to agree on the fair market value of the Leased Premises,
▇▇▇▇▇▇▇ ▇▇▇▇ and the Stockholders' appraiser shall jointly agree on a third
appraiser, who shall appraise the Leased Premises and whose determination shall
be binding on all of the parties. The costs of the third appraisal shall be
shared equally by USFloral and the Stockholders.
(b) If so requested by the Partnership, the Companies will cooperate in
structuring and completing any transaction for a Leased Premises for which a
Purchase Option has been exercised so as to effect a disposition of
"relinquished property" in connection with a multiple party deferred like-kind
exchange (an "Exchange") pursuant to Section 1031 of the Internal Revenue Code
of 1986, as amended ("Code"). In particular, the Companies consent to the
assignment by the Partnership of the Partnership's rights with respect to the
transfer of the property to a "qualified intermediary" prior to the closing for
such transfer, including the assignment by the Partnership to such "qualified
intermediary" of its rights with respect to the Purchase Option, including the
Partnership's right to receive the purchase prices for the parcel. The terms
"qualified intermediary," and "relinquished property" as used herein shall have
the meanings ascribed to them in Treasury Regulations under Code 1031.
(c) The foregoing notwithstanding, in connection with any Exchange, it
is agreed that (i) the Companies shall not assume any responsibility for the tax
consequences to any other party arising out of any Exchange, and (ii) any
assignment by the Partnership to a "qualified intermediary" shall not limit or
modify any obligations or liabilities of the Partnership to the Companies,
including the obligation to deliver title to the property.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 At the Merger Effective Date:
5
(i) The 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 the Stockholders and replaced by certificates representing the
USFloral Stock, the certificates for the Company Stock shall, for all
corporate 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.
3.3 In the event that any Stockholder shall deliver Company Stock for more
than one Company, the aggregate value of the consideration paid pursuant to
Annex II shall be allocated among such Companies as set forth on a schedule that
shall be prepared and agreed upon by the parties prior to the Closing. USFloral
and any such Stockholders agree that such allocation shall have been determined
in accordance with the fair market value of the Company Stock for each of the
Companies and in arms' length negotiations. All tax returns prepared by
USFloral and any such Stockholder shall be prepared on a basis consistent with
such schedule.
4. POST CLOSING ADJUSTMENTS; PLEDGE OF SHARES
4.1
(a) 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, a balance sheet of the Companies (the "Closing Date Balance Sheet") as
of the end of business on the day prior to the Closing Date (as defined in
Section 5 hereof), which balance shall reflect payment of all expenses to be
paid by the Companies pursuant to Section 19.6 hereof.
(b) As used herein, the term "Valuation Deficiency" shall mean the
amount by which aggregate shareholders' equity on the Closing Date Balance
Sheet is less than $2,200,000
(c) If there is any Valuation Deficiency and the Stockholders dispute
any item contained on the Closing Date Balance Sheet, the Stockholders shall
notify USFloral
6
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 the Stockholders do not notify
USFloral of any Disputed Amount within thirty business days after the delivery
of the Closing Date Balance Sheet, then within ten business days after the
expiration of the thirty business day period following the delivery of the
Closing Date Balance Sheet, the Stockholders shall pay USFloral by wire
transfer of immediately available funds, an amount equal to the Valuation
Deficiency. If USFloral and the Stockholders cannot resolve any such dispute
which would eliminate or reduce the amount of the Valuation 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 disputed amount of
the Valuation Deficiency shall be paid to USFloral by wire transfer of
immediate funds within ten business days of the resolution of such dispute.
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.
(d) The parties acknowledge and agree that (i) the aggregate
shareholder's equity on the Closing Date Balance Sheet shall be calculated
without regard to normal operating losses incurred by the Companies subsequent
to June 30, 1997 and (ii) the Closing Date Balance Sheet shall be prepared
using the same methodology and assumptions as were used in preparing the
balance sheet attached hereto as Schedule 4.1 (d).
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 such purposes on the date the
indemnification obligation is paid pursuant to Section 12 or ten days after
USFloral notifies the Stockholders of the Valuation Deficiency pursuant to
Section 4.1).
(b) At the Closing each Stockholder shall, and by execution hereof does
hereby, 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
7
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 name in the Merger, shall, at the Closing, be delivered to USFloral,
together with a stock power duly signed in blank by him, 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 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 IPO described in Section 9.5 shall have been
determined, the parties shall take all actions necessary to effect the Mergers
(other than the filing of the Articles of Merger with the appropriate state
authorities 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 Mergers or the
8
conversion and delivery of the shares referred to in Section 3 hereof, which
actions shall only be taken 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 IPO, Articles of Merger shall be filed with
the appropriate state authorities, the Mergers 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
Mergers referred to in Section 3 hereof, shall occur and be deemed to be
completed. The date on which the Mergers are 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, each Stockholder, jointly and severally, represents and warrants
as follows.
6.1 Due Organization. Each Company is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the state of Arkansas, and is
duly authorized, qualified and licensed under all applicable laws, regulations,
ordinances and orders of public authorities to carry on its business 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") of
the Company taken as a whole. True, complete and correct copies of the Articles
of Incorporation (certified by the Secretary of State of the state of
incorporation of the Company) and Bylaws (certified by the Secretary of the
Company) have heretofore been delivered to USFloral. The stock records and
minute books of each Company, as heretofore made available to USFloral, are
correct and complete.
6.2 Authorization. The Stockholders and each Company have 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 Each Company. The authorized capital stock of each
-----------------------------
Company is as set forth on Schedule 6.3 hereto. All of the issued and
outstanding shares of the capital stock of each Company are owned by the
Stockholders, 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
9
issued, are fully paid and nonassessable, are owned of record and beneficially
by the Stockholders and further, such shares were offered, issued, sold and
delivered by each 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 Company has ever acquired any
-----------------------------
treasury stock. No option, warrant, call, conversion right or commitment of any
kind exists which obligates either Company to issue any of their respective
authorized but unissued capital stock. In addition, neither Company has any
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. None of the shares of the Company Stock was issued
---------------
pursuant to awards, grants or bonuses.
6.6 Subsidiaries. Except as set forth in Schedule 6.6, neither Company
------------
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 Company 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
-----------------------
names of all predecessor companies of each Company, including the names of any
entities from whom either Company previously acquired significant assets. Except
as set forth on Schedule 6.7, neither Company has ever been a subsidiary or
division of another corporation nor has it been a part of an acquisition which
was later rescinded.
6.8 Spin-off by Company. Since the Balance Sheet Date, there has not been
-------------------
any sale or spin-off of significant assets of either Company 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
Companies: Combined Balance Sheet as of June 30, 1996, and 1995, and Combined
Statement of Operations and Cash Flows for each of the years ended June 30, 1996
and 1995 and for the nine months ended March 31, 1996 and 1997 (each of the nine
month stub periods being unaudited) and Combined Statement of Changes in
Stockholders Equity for each of the years in the two year period ended June 30,
1995 and 1994 and for the year ended June 30, 1996 (unaudited) and the nine
month period ended March 31, 1997 (unaudited), (June 30, 1997 being hereinafter
referred to as the "Balance Sheet Date"). 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 Companies as of the dates indicated thereon, and such Statements
of Incomes, Cash Flows and Retained Earnings present fairly the results of their
operations for the periods indicated thereon.
10
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
Companies, which are reflected in the June 30, 1997 Balance Sheet and any
significant liabilities incurred thereafter in the ordinary course of business,
or material liabilities which are not reflected in the June 30, 1997 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, the Stockholders have provided USFloral with 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;
(iii) the date such claim, suit or proceeding was instituted;
(iv) a best estimate by the Stockholders of the maximum amount, if any,
which is likely to become payable with respect to each such liability.
If no estimate is provided, the Stockholders' 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 Companies, including receivables from and advances to employees and the
Stockholders, including any such amounts which are not reflected in the most
recent available balance sheet. Attached hereto as Schedule 6.11 is an aging of
all accounts and notes receivable showing amounts due in 30 day aging
categories. The accounts receivable reflected on the Closing Date Balance Sheet
will be collectible in the ordinary course of business in the amounts reflected
thereon, net of any provision for bad debts set forth in the Closing Date
Balance Sheet.
6.12 Permits and Intangibles. Attached hereto as Schedule 6.12 is an
-----------------------
accurate list and summary description of all permits, titles, licenses,
franchises, certificates, trademarks, trade names, service marks, patents,
patent applications and copyrights owned or held by each 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 each Company's business as presently
constituted. Except as set forth on Schedule 6.12, the Stockholders
11
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 real and personal property (which in the case of personal
property had an original cost in excess of $10,000) owned or leased by the
Companies including true and correct copies of leases for equipment and
properties on which are situated buildings, warehouses and other structures used
in the operation of the respective businesses of the Companies 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 Securities Act of 1933, as amended) of the
Companies. Except as set forth on Schedule 6.13, substantially all of the
trucks, machinery and equipment of each 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 each 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 each Company in the operation of their
respective businesses are either owned by such Company or leased under an
agreement set forth on Schedule 6.13. The Stockholders have heretofore
delivered to USFloral copies of all title reports and title insurance policies
received or held by the Companies. 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 such Company has devoted
any significant effort or expenditure in the two year period prior to the date
of this Agreement, which if pursued by such 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 of all material contracts, commitments and similar
agreements to which the Companies are a party or by which either Company or any
of their respective 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). The Stockholders
have heretofore delivered to USFloral true copies of such agreements. Except as
set forth on Schedule 6.14, each Company has complied with all material
commitments and obligations pertaining to them, respectively, and is not in
material default under any such agreement and no notice of default has been
received. No Company is a party to any contract, agreement or other instrument
or commitment which cannot be terminated by such Company on 30 days notice
without any liability to such Company which would have a Material Adverse Effect
on such Company taken as a whole. Except as set forth on Schedule 6.14, no
Company is bound by or subject to (and none of their respective assets or
properties is bound by
12
or subject to) any arrangement with any labor union. Except as set forth on
Schedule 6.14, no employees of either Company are represented by any labor union
or covered by any collective bargaining agreement nor, to the Stockholders'
knowledge, is any organization campaign to establish such representation in
progress. There is no pending or, to the Stockholders' knowledge, threatened
labor dispute involving either Company and any group of their employees nor has
either Company experienced any labor interruptions over the past three years and
each Company considers its relationship with employees to be good.
6.15 Title to Real Property. Each Company has good and insurable title to
----------------------
the real property owned and used in their respective businesses, subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or charge,
except for:
(i) liens, if any, reflected on Schedules 6.10 and 6.13 as securing
specified liabilities (with respect to which no material default exists);
(ii) liens for current taxes and assessments not in default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the County Clerks in which the
properties, assets and leasehold estates are located, which in USFloral's
sole discretion, do not adversely affect USFloral's intended use of the
property.
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list of all
---------
insurance policies carried by the Companies and an accurate list of all
insurance loss runs or worker's compensation claims received for the past three
policy years. The Stockholders have heretofore delivered to USFloral complete
copies of all policies currently in effect. The insurance carried by each
Company with respect to their respective properties, assets and businesses is,
to the Stockholders' knowledge, with 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. No Company's insurance has ever
been canceled and no Company has ever been denied coverage.
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 Companies 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. The
Stockholders have heretofore delivered to USFloral copies of the payroll lists
covering all employees of the Companies 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.
13
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 Companies, or to which either 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. All reports and other documents required to be
filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or tax returns) have been
timely filed or distributed. None of: (i) the Stockholders; (ii) any Plan; or
(iii) any Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and no Company currently has (nor at the Closing Date
will have) any direct or indirect liability whatsoever (including being subject
to any statutory lien to secure payment of any such liability), to the Pension
Benefit Guaranty Corporation ("PBGC") with respect to any such Plan under Title
IV of ERISA or to the Internal Revenue Service for any excise tax or penalty;
and no 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;
14
(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) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), each Company and the 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 each Company has no (and
will incur no) direct or indirect liability and is not (and will not be)
subject to any loss, assessment, excise tax penalty, loss of federal income
tax deduction or other sanction, arising on account of or in respect of any
direct or indirect failure by either Company or the Stockholders, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted
before or after the Closing Date directly or indirectly against the Company or
the Stockholders with respect to such group health plans;
(vi) No Company is now nor has been within the past five years a member of
a "controlled group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the best of Stockholders'
knowledge, there is no threatened litigation, arbitration or disputed claim,
settlement or adjudication proceeding, or any governmental or other
proceeding, or investigation with respect to any Plan, or with respect to any
fiduciary, administrator, or sponsor thereof (in their capacities as such), or
any party in interest thereof;
(viii) 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
15
(ix) No Company has incurred liability under Section 4062 of ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, no Company
-------------------
is in violation of any law or regulation or under any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction which would have a
Material Adverse Effect on such Company, taken as a whole; and except as set
forth on Schedule 6.20, there are no claims, actions, suits or proceedings,
pending or, to the Stockholders' knowledge, threatened, against or affecting
either 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 threatened, has been received. Each Company has
conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing which might have a Material Adverse Effect on such Company, taken
as a whole.
6.21 Taxes. Each 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. There are no open years, examinations in
progress or claims against either 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. True, correct and complete
copies of (i) all tax examinations, (ii) extensions of statutory limitations and
(iii) the federal and local income tax returns and franchise tax returns of each
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 the Stockholders
to USFloral. Except as set forth on Schedule 6.21, each Company made an
election to be taxed under the provisions of Subchapter S of the Internal
Revenue Code within 75 days of its original organization and has at no time been
taxed under the provisions of Subchapter C of the Internal Revenue Code. Except
as set forth on Schedule 6.21, each Company has a taxable year ended December 31
and has not made an election to retain a fiscal year other than December 31
under Section 444 of the Internal Revenue Code. Each Company currently utilizes
the accrual method of accounting for income tax purposes and such method of
accounting has not changed.
6.22 Completeness; No Violations. The certified copies of the Articles of
---------------------------
Incorporation and Bylaws, both as amended to date, of each 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 Companies 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 each Company thereunder will not
16
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. No Company is now or has 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 any Company;
(ii) any damage, destruction or loss (whether or not covered by insurance)
which has had a Material Adverse Effect on such Company, taken as a whole;
(iii) any change in the authorized capital of such 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;
(iv) 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 such Company;
(v) any increase in the compensation, bonus, sales commissions or fees
arrangement payable or to become payable by such 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 any Company, taken as a whole;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of such Company to any person, including,
without limitation, the Stockholders and their affiliates;
17
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to any 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 any 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 any Company;
(xi) any waiver of any material rights or claims of any Company;
(xii) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which any Company is a party; or
(xiii) any transaction by any Company outside the ordinary course of its
business.
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 each Company has
accounts or safe deposit boxes;
(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 each Company
and a description of the terms of such power.
6.26 Environmental Matters. To the knowledge of the Stockholders, each
---------------------
Company has complied with and is 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 such
Company or any of its 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,
18
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 such
Company, taken as a whole. Each 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 each 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 any
Company except as permitted by Environmental Laws. The Stockholders know of no
off-site location to which any Company has transported or disposed of Hazardous
Wastes or Hazardous Substances or arranged for the transportation of Hazardous
Wastes or 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 either Company, USFloral or either 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. No Company has any
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, no
-------------------------
Company has ever 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. As to each such underground storage
tank ("UST") identified in Schedule 6.27, the Company has provided the following
to USFloral to the extent available:
(i) The location of the UST and whether the Company currently owns or
leases the property in which the UST is located;
(ii) copies of all of the UST's manufacturer's literature, brochures,
proposals and contract documents describing the UST system and all
manufacturer's warranties covering the UST system;
(iii) the date of installation and specific use or uses of the UST;
(iv) copies of all UST tank and piping tightness tests and cathodic
protection tests and similar studies or reports for all periods;
(v) a copy of the Company's Notification For UST;
(vi) all other records with regard to the UST including, without
limitation, the results of groundwater and soil tests; and
19
(vii) a summary description of all instances in which the UST failed to
meet applicable standards and regulations for tightness or otherwise.
6.28 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by each Company and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of such Company and
the Stockholders of such Company, and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and binding
obligation of such Company.
6.29 Relations with Governments. No Company has given, 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 such 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
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholders shall immediately
give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve the Company or the Stockholder of their
respective obligations under this Agreement, and at the sole option of USFloral,
the truth and accuracy of any and all warranties and representations of the
Stockholders, at the date of this Agreement and as of the Closing date, shall be
a precondition to the consummation of this transaction.
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 NEWCOS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFloral and each Newco, jointly and severally, represent and
warrant as follows.
7.1 Due Organization. USFloral and Newcos are duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware,
respectively, 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
20
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
Articles of Incorporation (certified by the Secretary of State of the States of
Delaware and the state shown on Schedule 7.1, respectively) and the Bylaws, as
amended, of USFloral and Newcos (certified by the Secretary of the respective
corporations) have heretofore been delivered by USFloral to the Stockholders.
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 Newcos executing
-------------
this Agreement have the corporate authority to enter into and bind USFloral and
Newcos by the terms of this Agreement. USFloral and Newcos 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 Newcos,
(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 Newcos is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any of USFloral's or Newcos' properties
pursuant to (A) any law or regulation to which USFloral or Newcos, or any of
their property is subject, or (B) any judgment, order or decree to which
USFloral or Newcos is bound or any of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
21
(iv) require any filing or other notice under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvement Act.
7.5 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by USFloral and Newcos 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.
7.6 Other Agreements. Prior to the consummation of the Merger, USFloral and
----------------
Newcos 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 agreements with officers of USFloral and
those agreements and letters of intent listed on Schedule 7.6 hereof.
8. COVENANTS OF STOCKHOLDERS AND COMPANIES PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, each Company will afford to the officers and authorized
representatives of USFloral access during normal business hours to all of such
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 such Company as USFloral may from time to time
reasonably request in writing. Each 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, the Stockholders will cause each Company 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 and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear
and tear excepted;
(iii) perform all of its material obligations under agreements relating to
or affecting its assets, properties or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
22
(v) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships with suppliers, customers and others having business relations
with each Company;
(vi) maintain compliance with all permits, laws, rules and regulations,
consent orders of any court or federal, state or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction;
(vii) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments, without the knowledge and written
consent of USFloral; and
(viii) maintain present salaries and commission levels for all officers,
directors, employees and agents.
8.3 Prohibited Activities. Between the Balance Sheet Date and the Merger
---------------------
Effective Date, no Company will, without prior written consent of USFloral:
(i) make any change in its Articles of Incorporation or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind;
(iii) declare or pay any dividend or make any distribution in respect of
its stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock except for
dividends, bonuses and other distributions to the Stockholders in the ordinary
course of business not to exceed in the aggregate, $25,000;
(iv) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures in excess of $50,000;
(v) increase the compensation payable or to become payable to any
officer, director, Stockholder, 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;
23
(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, each 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, each Company
---------------------------
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.
8.6 No Shop. None of the Stockholders, the Companies 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, either Company or a merger, consolidation or business
combination of either Company.
8.7 Notification of Certain Matters. The Stockholders and each Company
-------------------------------
shall give prompt notice to USFloral of (i) the occurrence or non-occurrence of
any event known to any Stockholder or such Company the occurrence or non-
occurrence of which would be likely to cause
24
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 such 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 of 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 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 a Company may be made
unless USFloral consents to such amendment to 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 defined in Section 9.5.
8.9 Life Insurance Policies. At the Closing the Companies shall transfer to
-----------------------
the Stockholders any individual term life insurance policies including those
described on Schedule 6.18(5) on each of the Stockholders. In addition, if
prior to the Closing Date either of the Stockholders dies, the proceeds of the
life insurance policy on his life shall be paid as directed by the Stock
Purchase Agreement dated as of June 30, 1997, described on Schedule 6.14,
otherwise to his estate rather than to the Company.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of the Stockholders hereunder are subject to the satisfaction
on or prior to the Closing Date (or such earlier date specified below) of the
following conditions.
25
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFloral and Newcos 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 Newcos 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 the
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 either
Company as a result of which the management of such 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. The Stockholders shall have received an opinion
------------------
from counsel for USFloral, dated the Merger Effective Date, in form and
substance satisfactory to the Stockholders, to the effect that:
(i) USFloral and Newcos 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 Newcos and constitutes a valid and binding agreement of USFloral
and Newcos 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. 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.
26
9.6 Market Capitalization. The aggregate post-closing market
---------------------
capitalization of USFloral (determined by multiplying 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.
9.7 Repayment of Indebtedness. Prior to or on the Merger Effective
-------------------------
Date, the Companies shall have repaid the Stockholders in full all amounts owing
by the Companies.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCOS
The obligations of USFloral and Newcos 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 the Stockholders and the Companies 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 operations,
cash flow and changes in stockholder's equity of the Companies for the periods
then ended, disclosing no material adverse change in the financial condition of
each Company or the results of their respective operations from the financial
statements originally furnished by each Company as set forth in Schedule 6.9
10.4 No Material Adverse Change. No material adverse change in the results
--------------------------
of operations, financial position or business of either Company shall have
occurred, and no Company shall 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 such Company to conduct its business; and USFloral shall have
received on the Closing Date a certificate signed by the Stockholders dated the
Merger Effective Date to such effect.
27
10.5 Regulatory Review. USFloral, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
each 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
Companies, which review reflects compliance with all applicable laws governing
each Company, disclosing no material actual or probable violations, compliance
problems, required capital 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 Date, the Stockholders shall have
--------------------
delivered to USFloral an instrument dated the Merger Effective Date releasing
each Company from any and all claims of Stockholders against such 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
------------------
Hilburn, Calhoon, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ Ltd., counsel to the Stockholders,
dated the Merger Effective Date, in form and substance satisfactory to USFloral,
to the effect that with respect to each Company:
(i) each Company has been duly organized and is validly existing in good
standing under the laws of the state of its incorporation;
(ii) to the knowledge of such counsel, the Company is duly authorized,
qualified and licensed under all applicable laws, regulations, ordinances or
orders of public authorities to carry on its business in the places and in the
manner as now conducted;
(iii) 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;
(iv) to the knowledge of such counsel, 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;
(v) 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
28
opinion need be expressed as to the enforceability of indemnification
provisions included herein;
(vi) to the knowledge of such counsel, except to the extent set forth on
Schedule 6.20, no Company is 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;
(vii) to the knowledge of such counsel, except to the extent set forth on
Schedule 6.14, no Company is in default under any of its material contracts or
agreements or has received notice of such default;
(viii) no notice to, consent, authorization, approval or order of any court
or governmental agency or body or to the knowledge of such counsel 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
(ix) 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
Incorporation or the by-laws of the Company or to the knowledge of such
counsel 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 each Company 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 each Company 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 each
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.
10.14 Repayment of Indebtedness. Prior to or on the Merger Effective Date,
-------------------------
the Stockholders shall have (i) repaid the Companies in full all amounts owing
by the Stockholders to the Companies and (ii) caused the Partnership and other
related parties to have repaid the Companies in full all amounts owing by the
Partnership and such related parties to the Companies.
11. COVENANTS OF USFLORAL
11.1 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.
11.2 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 (as such
term is defined in Annex II of this Agreement) shall be available for issuance
to the key employees of the Surviving Corporation after the Closing, as
determined by the Surviving Corporation's president (or other officer or
director designated by the Surviving Corporation and acceptable to USFloral) in
accordance with USFloral's policies, and authorized and issued under the terms
of USFloral's 1997 Long-Term Incentive Plan (the "Plan").
11.3 Intentionally Left Blank
30
11.4 Exchange Act Reporting Requirements. 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 Securities Act of 1993, as amended (the "1933 Act") by the SEC and (ii) file
with the SEC in a timely manner all reports and other documents required to be
filed by USFloral under the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
11.5 Certain Transactions. USFloral's existing stockholders will
--------------------
participate, within the standards established by Rev. Proc. 77-37, in the
transactions contemplated by this agreement 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) the persons acquiring stock in the
IPO and (iii) the persons acquiring stock as a result of the Merger and the
other concurrent mergers to possess at least 80% of the outstanding stock of
USFloral for purposes of Section 351 of the Internal Revenue Code. 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 Piggy-Back Registrations Transactions. 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 Securities Act of 1933, as amended (the "Securities Act")
(other than on Form S-8 or Form S-4 or their then equivalents relating to shares
of Common Stock to be issued solely in connection with any acquisition of any
entity or business or shares of Common Stock issuable in connection with stock
option or other employee benefit plans, and other than any "shelf" registration
statement relating to securities to be issued by the Company), 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 the Company 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 the Company or by shareholders
who do not have contractual, incidental rights to include such securities.
Except as provided in the previous sentence of this Section 11.5, 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 the Company
under this Section 11.5 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
31
being capable of sale within a three-month period in accordance with the volume
and manner-of-sale limitations of Rule 144 under the Securities Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by Stockholders. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, each Stockholder, jointly and severally,
covenants and agrees that such Stockholder will indemnify, defend, protect and
hold harmless USFloral, Newcos and the Surviving Corporations 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, Newcos or the Surviving
Corporations as a result of or arising from (i) any breach of the
representations and warranties made by the 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 either Company
under this Agreement or (iii) any liability under 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 either
Company or the Stockholders, and provided to USFloral or its counsel by either
Company or the Stockholders, 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 either
Company or the Stockholders required to be stated therein or necessary to make
the statements therein not misleading, and not provided to USFloral or its
counsel by either Company or the Stockholders, provided, however, that such
indemnity shall not inure to the benefit of USFloral, Newcos and the Surviving
Corporations 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 the 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 the Stockholders. Subject to the
--------------------------------------------
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the Schedules or Exhibits, and notwithstanding any
investigation by USFloral or Newcos, each Stockholder jointly and severally,
covenants and agrees that such Stockholder will indemnify, defend, protect and
hold harmless USFloral, Newcos and the Surviving Corporations 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, Newcos or the Surviving Corporations as a result of or incident to:
(a) the existence of liabilities of either Company in excess of the liabilities
set forth on Schedule 6.10, but only to the extent of such excess, with
32
parties acknowledging and agreeing that (i) the existence of liabilities (such
as accounts payable) of the Companies 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 Stockholders under the provisions of this Section 12 and (ii)
the existence of liabilities that arise in the ordinary course of business of
the Companies 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 Newcos, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
the 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 the
Stockholders as a result of or arising from (i) any breach of the
representations and warranties made by USFloral and Newcos 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 the Stockholders may incur due to USFloral's failure to be responsible for
the liabilities and obligations of any Surviving Corporation as provided in
Section 1.5 hereof (except to the extent that USFloral has claims against the
Stockholders by reason of such liabilities); or (iv) any liability under 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 USFloral 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 required to be stated therein or necessary to make the
statements therein not misleading.
12.4 Third Person Claims. Promptly after any party hereto (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 (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 the 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.
33
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, 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
Consideration, 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, Newcos and the Surviving
Corporations shall be considered to be a single Indemnifying and Indemnified
Party and the Stockholders shall be considered to be a single Indemnifying and
Indemnified Party. "Excess Net Worth" shall mean the amount, if any, by which
the aggregate shareholders equity as shown on the Closing Date Balance Sheet
exceeds $2,200,000. All indemnification obligations of the Stockholder with
respect to unpaid accounts receivable pursuant to Section 6.11 hereof shall be
reduced by the amount of anyExcess Net Worth (but only to the extent such Excess
Net Worth has not previously been utilized to reduce an indemnification
obligation under this sentence). 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.
34
12.6 Survival of Representations and Warranties. The parties agree that the
------------------------------------------
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.
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, intentional misrepresentation, or fraud by the Stockholders.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFloral or the Stockholders may, by notice
--------------------------
in the manner hereinafter provided on or before the Closing Date, terminate this
Agreement if (i) 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) the Registration Statement has not been declared
effective by December 24, 1997; or (iii) the Merger Effective Date has not
occurred by December 31, 1997.
13.2 Liquidated Damages to USFloral. 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 any 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 any 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.
35
13.3 Liquidated Damages to the Stockholders. 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 either Newco,
then, in addition to the other remedies available to USFloral 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 or default 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. The Stockholders agree that for a period of two
---------------------
years following the Merger Effective Date, they shall not:
(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 the
business of owning and/or operating a floral products business within the
United States of America (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 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, the Company; or
(v) disclose customers, whether in existence or proposed, of the Company to
any person, firm, partnership, corporation or business for any reason or
purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Stockholders from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market, or (ii) engaging
in any activity to which USFloral shall have provided its prior written consent.
36
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, the Stockholders agree that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporation by, without limitation, injunctions and
restraining orders.
14.3 Reasonable Restraint. It is agreed by the parties that the foregoing
--------------------
covenants in this Section 14 impose a reasonable restraint on the Stockholders
in light of the activities and business of USFloral on the date of the execution
of this Agreement and the current and future plans of USFloral and the Surviving
Corporation (as successors to the businesses of the Company).
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 the Stockholders against
either Company, the Surviving Corporations 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 Corporations seek to enforce the agreements and covenants of the
Stockholders or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if any Stockholder is found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
14.6 Materiality. The Stockholders hereby agree that this covenant is a
-----------
material and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Stockholders. The Stockholders recognize and acknowledge that they have
------------
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Companies, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Companies and the Companies' respective businesses.
37
The Stockholders agree that they will not disclose any confidential information
to any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of USFloral, unless such
information becomes known to the public generally through no fault of the
Stockholders. In the event of a breach or threatened breach by the Stockholders
of the provisions of this Section, USFloral and the Surviving Corporations shall
be entitled to an injunction restraining the Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting USFloral and the Surviving Corporations from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
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 Companies, such as lists of customers,
operational policies, pricing and cost policies that are valuable, special and
unique assets of the Companies and the Companies' respective businesses.
USFloral agrees that it will not disclose any confidential information to any
person, firm, corporation, association, or other entity for any purpose or
reason whatsoever, prior to the Closing Date without prior written consent of
the Stockholders. In the event of a breach or threatened breach by USFloral of
the provisions of this Section, the Stockholders shall be entitled to an
injunction restraining USFloral from disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting the Stockholders from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
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 Corporations and the Stockholders agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, each
Stockholder hereby irrevocably agrees, for a period of 180 days after the date
of the effectiveness (the "Effective Date") 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
representatives of the underwriters of the IPO. Each Stockholder agrees that
the
38
foregoing shall be binding upon such Stockholder's 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 1933 Act and therefore may not be resold without
compliance with the 1933 Act. The Stockholders represent and warrant that the
USFloral Stock to be acquired by the Stockholders pursuant to this Agreement is
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. Each Stockholder covenants, warrants and
-------------------
represents that none of the shares of USFloral Stock issued to such Stockholder
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. The 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. The Stockholders further represent and warrant that they (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 Stockholders 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 Stockholders have asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to their satisfaction.
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:
39
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, 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 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 the 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 the Stockholders, the Companies,
USFloral and Newcos and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon execution,
constitutes the valid and binding agreement of the parties thereto enforceable
in accordance with its terms and may be modified or amended only by a written
instrument executed by the Stockholders, the Companies, USFloral, and Newcos
acting through their respective officers, duly authorized by their respective
Boards of Directors.
40
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 Newcos 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, the
Companies will pay the fees, expenses and disbursements of the Companies and 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 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 service, 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:
U.S.A. Floral Products, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a required copy to:
▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇ ▇▇▇▇
41
(b) If to Stockholders, addressed to them at:
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with a required copy to:
▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Hilburn, Calhoon, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Ltd.
Eighth Floor - The Mercantile Bank Building
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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.
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.
42
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.
43
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
U.S.A. FLORAL PRODUCTS, INC.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President/CEO
UNITED WHOLESALE FLORISTS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
UNITED WHOLESALE FLORISTS OF
AMERICA, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
UWF ACQUISITION CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
UWFA ACQUISITION CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
/s/ G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
-------------------------------
G. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
44
ANNEXES
ANNEX I [Form of Articles of Merger to be provided]
ANNEX II [Consideration]
ANNEX III [Form of Employment Agreement]
SCHEDULES
Schedule 4.1(d) [Balance Sheet]
Schedule 6.1 [Due Organization]
Schedule 6.3 [Capitalization]
Schedule 6.6 [Subsidiaries]
Schedule 6.7 [Predecessor Status]
Schedule 6.9 [Financial Statements]
Schedule 6.10 [Liabilities and Obligations]
Schedule 6.11 [Accounts and Notes Receivable]
Schedule 6.12 [Permits and Intangibles]
Schedule 6.13 [Real and Personal Property]
Schedule 6.14 [Material Contracts and Commitments]
Schedule 6.16 [Insurance]
Schedule 6.17 [Officers, Directors and Employees Compensation]
Schedule 6.18 [Employee Plans]
Schedule 6.20 [Conformity with Law]
Schedule 6.21 [Certain Tax Matters]
Schedule 6.22 [Required Consents]
Schedule 6.25 [Deposit Accounts; Powers of Attorney]
Schedule 6.27 [Underground Storage Tanks]
Schedule 7.1 [States of Incorporation]
Schedule 7.6 [Other Agreements]
Schedule 8.3(vi) [Permitted Liens]
Schedule 9.3 [Employment Agreements]
Schedule 10.10 [Additional Liabilities and Obligations]
Schedule 10.11 [Additional Contracts]
Schedule 11.1 [Guarantees to be Released]
45
