<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1997
REGISTRATION NO. 333-33131
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
U.S.A. FLORAL PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 5193 52-2030697
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
3500 WHITEHAVEN PARKWAY
WASHINGTON, D.C. 20007
(202) 333-0800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT POIRIER
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
U.S.A. FLORAL PRODUCTS, INC.
3500 WHITEHAVEN PARKWAY
WASHINGTON, D.C. 20007
(202) 333-0800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
COPIES TO:
DAVID A. GERSON, ESQ. JEFFREY SMALL, ESQ.
MORGAN, LEWIS & BOCKIUS LLP DAVIS POLK & WARDWELL
ONE OXFORD CENTRE 450 LEXINGTON AVENUE
THIRTY-SECOND FLOOR NEW YORK, NEW YORK 10017
PITTSBURGH, PENNSYLVANIA 15219 (212) 450-4000
(412) 560-3300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value
$.001 per share....... 5,290,000 shares $12.00 $63,480,000 $19,237(3)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 690,000 shares issuable pursuant to an over-allotment option
granted to the underwriters.
(2) Estimated solely for the purpose of calculating the registration fee,
based on a bona fide estimate of the proposed maximum offering price per
share in accordance with Rule 457(a).
(3) Previously paid.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued September 18, 1997
4,600,000 Shares
U.S.A. Floral Products, Inc.
COMMON STOCK
-----------
ALL OF THE SHARES OF COMMON STOCK BEING OFFERED HEREBY ARE BEING SOLD BY THE
COMPANY. PRIOR TO THIS OFFERING, THERE HAS BEEN NO PUBLIC MARKET FOR THE
COMMON STOCK OF THE COMPANY. SIMULTANEOUSLY WITH, AND AS A CONDITION TO,
THE CONSUMMATION OF THE OFFERING, THE COMPANY WILL ACQUIRE ALL OF THE
OUTSTANDING STOCK OF THE FOUNDING COMPANIES (AS DEFINED HEREIN). SEE
"FORMATION OF THE COMPANY." IT IS CURRENTLY ESTIMATED THAT THE
INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN $10.00 AND
$12.00. SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS
CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
-----------
APPLICATION HAS BEEN MADE TO LIST THE COMMON STOCK ON THE NASDAQ NATIONAL
MARKET UNDER THE SYMBOL "ROSY."
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
-------- --------------- -----------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total (3).................................. $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at
$2,250,000.
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
690,000 additional Shares at the price to public less underwriting
discounts and commissions for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds to
Company will be $ , $ , and $ , respectively. See "Underwriters."
-----------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1997 at the office of
Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in
immediately available funds.
-----------
MORGAN STANLEY DEAN WITTER
ROBERTSON, STEPHENS & COMPANY
SMITH BARNEY INC.
, 1997
<PAGE>
[THIS PAGE CONTAINS A GRAPHIC DEPICTION OF A MAP OF THE CONTINENTAL UNITED
STATES, ON WHICH LOCATIONS IN CALIFORNIA, MONTANA, ARKANSAS, ILLINOIS, FLORIDA
AND MASSACHUSETTS ARE MARKED; THE LOGOS OF THE APPROPRIATE FOUNDING COMPANIES
ARE SHOWN IN CLOSE PROXIMITY TO THE APPLICABLE LOCATIONS. THE PAGE ALSO REFLECTS
THE REGISTRANT'S LOGO, AND PRESENTS THREE PHOTOGRAPHS: (i) A BOUQUET ASSEMBLY
AREA WITH WORKERS; (ii) A HARDGOODS DISPLAY RACK AT A WHOLESALER; AND (iii) A
FRESH CUT FLOWER DISPLAY AND STORAGE AREA AT A WHOLESALER.]
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................. 4
Risk Factors........................ 11
Formation of the Company............ 17
Use of Proceeds..................... 21
Dividend Policy..................... 21
Capitalization...................... 22
Dilution............................ 23
Selected Pro Forma Combined
Financial Data..................... 25
Management's Discussion and Analysis
of Pro Forma Combined Financial
Condition and Pro Forma Combined
Results of
Operations......................... 27
Selected Financial Data of the
Founding Companies................. 32
<CAPTION>
PAGE
----
<S> <C>
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Founding
Companies.......................... 35
Business............................ 53
Management.......................... 60
Certain Relationships and Related
Party Transactions................. 66
Principal Stockholders.............. 71
Description of Capital Stock........ 72
Shares Eligible for Future Sale..... 74
Underwriters........................ 75
Legal Matters....................... 77
Experts............................. 77
Additional Information.............. 77
Index to Financial Statements....... F-1
</TABLE>
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
3
<PAGE>
PROSPECTUS SUMMARY
Simultaneously with the closing of the offering made by this Prospectus (the
"Offering"), U.S.A. Floral Products, Inc. will acquire, in separate
transactions (the "Mergers"), a number of floral products businesses
(collectively, the "Founding Companies"). See "Formation of the Company."
Unless otherwise indicated, all references to the "Company" include the
Founding Companies after the effectiveness of the Mergers, and references to
"USA Floral" mean U.S.A. Floral Products, Inc. prior to the effectiveness of
the Mergers. The following summary is qualified in its entirety by, and should
be read in conjunction with, the more detailed information and the financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all share, per share and financial
information set forth herein (i) has been adjusted to give effect to the
Mergers and (ii) assumes no exercise of the Underwriters' over-allotment
option.
THE COMPANY
USA Floral was founded in April 1997 to create a national consolidator and
operator of floral products distribution businesses. Upon consummation of the
Mergers, the Company will engage primarily in the wholesale distribution of
perishable floral products (including fresh cut flowers, greens and potted
plants) and floral-related hardgoods (including vases and glassware, foam for
flower arranging, tools and other supplies). The Company will also import cut
flowers from growers in foreign countries, provide pre-packaged floral bouquets
and arrangements to retail florists and mass-market retailers and engage in
brokerage services for wholesalers of both foreign and domestic cut flowers.
The Company believes that, upon consummation of the Mergers, it will be one of
the largest integrated distributors of floral products in the United States.
The Company has approximately 945 employees and serves thousands of customers
nationwide from 32 facilities in 17 states. For the year ended December 31,
1996, the Company had pro forma combined revenues of $175.5 million, pro forma
combined operating income of $5.0 million and pro forma combined net income of
$2.7 million.
The floriculture industry, which includes cultivators, distributors and
sellers of floral products, extends from growers, who produce perishable floral
products, through importers, brokers, shippers and wholesalers who distribute
and market fresh cut flowers and greens, potted plants and floral-related
hardgoods, to retail florists and mass market distributors, who sell floral
products to consumers. The distribution channel in the floriculture industry is
highly fragmented and consists mainly of small, family-owned firms that operate
from a single location or from a small number of outlets in a single region.
While floral products have historically been sold at retail through a large
number of traditional florists, who continue to serve the majority of
consumers, the Company believes that changes in consumer buying habits are
causing more consumers to seek floral products from mass market retailers such
as supermarkets, discount retailers and chain stores. Industry sources estimate
that sales in the retail segment of the floriculture industry totaled
approximately $15.0 billion in 1996, and that approximately 45% of retail sales
are generated by mass market retailers. Management believes that the growing
consumer preference for more convenient floral products retailers, together
with the potential efficiencies to be achieved from operating floral products
businesses on a large scale, have well positioned the floriculture industry for
consolidation and provide an attractive opportunity for the Company to build an
integrated, nationwide floral products distributor that can serve the growing
mass market while continuing to meet the needs of the traditional florists for
high quality products and services. See "Business--Industry Overview."
STRATEGY
The Company's goal is to become the leading consolidator and operator of
floral products distribution businesses. Key elements of the Company's strategy
include the following:
Pursue Strategic Acquisitions. The Company intends to capitalize upon
consolidation opportunities in the U.S. floral products industry by pursuing
selective acquisitions in the distribution segment of the industry. To build
upon and enhance its nationwide presence, the Company will focus upon
opportunities that complement and complete its floral products offerings and in
new geographic markets with above-average population growth
4
<PAGE>
and floral products consumption. The Company intends to implement an aggressive
acquisition program utilizing a "hub and spoke" strategy for expansion into its
targeted markets. As part of this strategy, the Company plans to make
acquisitions of established, high-quality local companies in targeted
geographic areas, which can then serve as"hubs" for the acquisition of smaller,
synergistic "spokes" in that locality or in surrounding markets. The Company
believes that it can successfully integrate the operations of acquired spokes
into its hubs, in order to leverage more effectively its sales, marketing and
distribution capabilities. Robert J. Poirier, the Company's co-founder,
Chairman of the Board, President and Chief Executive Officer, has over 22 years
of experience in the floral products industry, and has extensive relationships
with wholesalers, importers, brokers and bouquet manufacturers. Mr. Poirier's
industry knowledge is complemented by the acquisition expertise of Jonathan J.
Ledecky, the Company's co-founder and Non-Executive Chairman of the Board. Mr.
Ledecky is the founder, Chairman of the Board and Chief Executive Officer of
U.S. Office Products Company, a publicly-held supplier of a broad range of
office products and business services that has been built primarily through the
acquisition and integration of over 190 companies since its inception in
October 1994. With the exception of the Mergers, the Company is not currently
involved in negotiations and has no current commitments or agreements with
respect to any acquisitions.
Operate with Decentralized Management. The Company plans to conduct its
operations with a decentralized management approach through which individual
management teams will be responsible for the day-to-day operations of the
Founding Companies as well as for helping to identify additional acquisition
candidates in their respective locales. At the same time, a company-wide team
of senior management will provide the Founding Companies with strategic
oversight and guidance with respect to acquisitions, financing, marketing and
operations. As part of this strategy, the Company intends to foster a culture
of cooperation and teamwork that emphasizes dissemination of "best practices"
among its local management teams. The Company believes that stock ownership and
incentive compensation will help to keep the objectives of local management
aligned with those of the Company, and that a decentralized management approach
will result in better customer service by allowing local management the
flexibility to implement policies and make decisions based on the needs of
local customers.
Achieve Operating Efficiencies. The Company believes that it will be able to
increase operating efficiency and achieve certain synergies among its
constituent businesses. In particular, with larger operational scale, the
Company believes that it can increase distribution efficiencies by utilizing
shipping and delivery capacity more efficiently. The Company will also seek to
combine certain administrative functions, such as accounting and finance,
insurance, employee benefits, strategic marketing and legal support, at the
corporate level, and to institute a Company-wide management information system.
The Company believes that increased scale and administrative integration will
enable it not only to operate more efficiently, but also to obtain more
favorable discounts and rebates on floral products hardgoods and, to a lesser
extent, realize savings on transportation and handling costs of fresh flowers.
Introduce New Products and Services. The Company believes that over time it
will be able to develop and market high value-added products and services, such
as "branded" flowers and bouquets specifically identified with quality and
consistency. By utilizing its contacts with growers and leveraging its
distribution efficiencies, the Company believes that it can establish
specifications for fresh flowers and control product quality at each step in
the distribution process, thereby building a brand identification that will
command a premium price. The Company also intends to service retailers by
providing pre-packaged fresh flowers and arrangements during periods of peak
demand, as well as to market floral products through corporate account
relationships and other means. See "Business--Strategy."
THE FOUNDING COMPANIES
USA Floral has entered into agreements to acquire the Founding Companies
contemporaneously with the consummation of the Offering with a portion of the
proceeds therefrom. The consummation of the Mergers is a condition to the
consummation of the Offering. USA Floral has conducted no operations and
generated no revenues to date.
5
<PAGE>
The Roy Houff Company ("Houff "). Founded in 1977, Houff is a wholesale
distributor of perishable floral products and floral-related hardgoods,
operating from seven locations in Illinois, Virginia and Arizona. Houff
purchases floral products from importers, brokers and shippers and sells them
to approximately 3,000 customers, including retail florists and mass market
retailers. Houff has approximately 270 employees. Houff's annual revenues in
1996 were approximately $39.1 million.
CFX, Inc. ("CFX"). Founded in 1974, CFX is an importer and distributor of
perishable floral products located in Miami, Florida. CFX imports flowers from
approximately 40 farms located primarily in Colombia and Ecuador, and
distributes them throughout the United States to approximately 400 wholesale
distributors as well as directly to mass market retailers. CFX has
approximately 110 employees. CFX's annual revenues in 1996 were approximately
$35.7 million.
Bay State Florist Supply, Inc. ("Bay State"). Founded in 1952, Bay State is a
wholesale distributor of perishable floral products and floral-related
hardgoods, operating from six locations in Massachusetts, New York, New
Hampshire, Connecticut and Rhode Island. Bay State purchases floral products
from domestic growers, importers, brokers and shippers and sells them to
approximately 3,000 customers, including retail florists and mass market
retailers. Bay State has approximately 190 employees. Bay State's annual
revenues in 1996 were approximately $30.6 million.
Flower Trading Corporation ("Flower Trading"). Founded in 1977, Flower
Trading is an importer and distributor of perishable floral products, located
in Miami, Florida. Flower Trading imports flowers from farms located primarily
in Colombia, Ecuador, Guatemala and Peru and distributes them throughout the
United States to approximately 350 wholesale distributors. Flower Trading has
approximately 45 employees. Flower Trading's annual revenues in 1996 were
approximately $20.3 million.
United Wholesale Florists, Inc. ("United Wholesale"). Founded in 1947, United
Wholesale is a wholesale distributor of perishable floral products and floral-
related hardgoods, operating from 13 locations in Arkansas, Alabama,
Mississippi, Oklahoma, Tennessee and Texas. United Wholesale purchases floral
products from domestic growers, importers, brokers and shippers and sells them
to approximately 3,000 customers, including retail florists and mass marketers.
United Wholesale has approximately 175 employees. United Wholesale's revenues
for the fiscal year ended June 30, 1997 were approximately $19.7 million.
American Florist Supply, Inc. ("American Florist"). Founded in 1994, American
Florist is a wholesale distributor of perishable floral products and floral-
related hardgoods, located in Woburn, Massachusetts. American Florist purchases
floral products from foreign and domestic growers, brokers and importers and
sells them to approximately 450 customers, including retail florists and mass
market retailers in Maine, Massachusetts, Vermont and New Hampshire. American
Florist also provides pre-packaged fresh cut floral bouquets to retail florists
and mass-market retailers. American Florist has approximately 70 employees.
American Florist's annual revenues in 1996 were approximately $11.7 million.
Monterey Bay Bouquet, Inc. and Bay Area Bouquets, Inc. ("Monterey
Bay"). Founded in 1993, Monterey Bay, located in Watsonville, California, is a
manufacturer of fresh cut flower bouquets, consisting primarily of specialty
California-grown flowers. Monterey Bay purchases flowers from 12 importers and
nearly 150 domestic growers and distributes them to a supermarket and a
discount retailer, each of which has numerous locations throughout the western
United States. Monterey Bay has approximately 65 employees. Monterey Bay's
annual revenues in 1996 were approximately $9.5 million.
Alpine Gem Flower Shippers, Inc. ("Alpine Gem"). Founded in 1978, Alpine Gem
is a broker of perishable floral products, operating from one location in
Montana and one in California. Alpine Gem purchases flowers from approximately
250 growers, principally located in the United States, and sells flowers on
consignment for approximately 18 growers. Alpine Gem distributes flowers to
nearly 750 customers, primarily wholesalers, located throughout the U.S. Alpine
Gem has approximately 20 employees. Alpine Gem's annual revenues in 1996 were
approximately $9.3 million.
6
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by
the Company............ 4,600,000 Shares (1)
Common Stock to be
outstanding after the
Offering............... 8,334,050 Shares (1) (2)
Use of proceeds......... To pay the cash portion of the purchase price for the
Founding Companies and to fund S Corporation
distributions. See "Use of Proceeds."
Proposed Nasdaq National
Market Symbol ......... ROSY
</TABLE>
- --------
(1) Assumes the over-allotment option is not exercised. See "Underwriters."
(2) Does not include: (i) up to 540,000 shares which may be issued to the
stockholders of two of the Founding Companies pursuant to earn-out
arrangements to be calculated with reference to the performance of those
Founding Companies through December 31, 1997; (ii) shares of Common Stock
equal to 15% of the shares of Common Stock outstanding from time to time
that are reserved for issuance under the Company's 1997 Long-Term Incentive
Plan, of which options to purchase 872,753 shares of Common Stock
(including options to purchase 200,000 shares to be granted to Jonathan J.
Ledecky, the Company's Non-Executive Chairman of the Board) will be granted
upon consummation of the Offering at an exercise price equal to the initial
public offering price per share, and options to purchase 125,000 shares of
Common Stock will be granted upon consummation of the Offering at an
exercise price equal to the greater of $8.00 or 60% of the initial public
offering price per share; (iii) 300,000 shares of Common Stock reserved for
issuance under the Company's 1997 Non-Employee Directors' Stock Plan, of
which options to purchase 63,000 shares of Common Stock will be granted
upon consummation of the Offering at an exercise price equal to the initial
public offering price per share; (iv) 1,000,000 shares of Common Stock
reserved for issuance under the Company's 1997 Employee Stock Purchase
Plan; and (v) 110,000 shares reserved for issuance pursuant to an option to
be granted to Jonathan J. Ledecky on the effective date of the registration
statement of which this Prospectus forms a part, at an exercise price equal
to the initial public offering price per share, which option is being
granted to facilitate the treatment of the issuance of shares in the
Mergers as a tax-free exchange under Section 351 of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code") and which option Mr.
Ledecky intends to exercise concurrently with the consummation of the
Offering. See "Formation of the Company--The Mergers," "Management--1997
Long-Term Incentive Plan," "--1997 Non-Employee Directors' Stock Plan" and
"--Other Plans" and "Principal Stockholders."
7
<PAGE>
THE MERGERS
Simultaneously with, and as a condition to, the closing of the Offering, the
Company will consummate the Mergers pursuant to agreements that the Company has
entered into with the Founding Companies and their stockholders (the "Merger
Agreements"). The aggregate consideration to be paid by the Company upon
consummation of the Mergers will be approximately $ 61.1 million, which
consists of: (i) $42.4 million in cash, which will be paid from the proceeds of
the Offering (before giving effect to the receipt by the Company upon
consummation of the Mergers of approximately $1.7 million of net related party
receivables); (ii) $4.0 million in S Corporation distributions to the
stockholders of CFX and Alpine Gem, which will be paid from the proceeds of the
Offering; and (iii) the $14.7 million estimated fair value of 1,334,050 shares
of Common Stock to be issued to the stockholders of the Founding Companies. In
addition, pursuant to earn-out arrangements provided for in the Merger
Agreements with American Florist and Monterey Bay, the Company may pay
additional consideration of up to $0.5 million in cash and 540,000 shares of
Common Stock (or, in the event the fair market value per share is less than
$10.00, such additional shares of Common Stock or, at the Company's option,
cash as is necessary so that the stockholders receive consideration equal to
$10.00 per share). The Company will also assume a tax liability of Flower
Trading of approximately $0.5 million. For the consideration paid to each
Founding Company, see "Formation of the Company--the Mergers" and "Use of
Proceeds." Following the consummation of the Mergers, the aggregate long-term
indebtedness of the Company will be approximately $3.5 million, which will
comprise long-term debt of the Founding Companies upon the Mergers. The
stockholders of the Founding Companies will receive certain registration rights
with respect to the shares of Common Stock to be received under the Merger
Agreements. The Merger Agreements also provide that options to purchase a
number of shares of Common Stock equal to 6.25% of the cash and Common Stock
portion of the Merger consideration, based on the initial public offering
price, will be made available to employees of the Founding Companies. The
consummation of each Merger Agreement is contingent upon the consummation of
the Offering and customary closing conditions. The Merger Agreements contain
covenants not to compete (subject to certain exceptions) and require certain of
the executive officers of each of the Founding Companies to enter into
employment agreements with their respective Founding Companies effective upon
consummation of the Mergers. One of the executives of each of the Founding
Companies will be appointed to the Board of Directors of the Company following
the consummation of the Offering. See "Formation of the Company," "Use of
Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations of the Founding Companies--Liquidity and Capital
Resources," "Management--Employment Agreements," "Certain Relationships and
Related Party Transactions," "Shares Eligible for Future Sale," and the
Unaudited Pro Forma Combined Financial Statements and the notes thereto
appearing elsewhere in this Prospectus.
8
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
USA Floral was established in April 1997 to acquire the Founding Companies
simultaneously with and as a condition to the consummation of this Offering.
For financial statement presentation purposes, USA Floral has been identified
as the "accounting acquiror." The following unaudited summary pro forma
combined financial data present data for the Company, adjusted to give effect
to (i) the consummation of the Mergers, (ii) certain pro forma adjustments to
the historical financial statements described below and (iii) the consummation
of the Offering and the application of the net proceeds therefrom. The summary
pro forma data are not necessarily indicative of operating results or financial
position that would have been achieved had the events described above been
consummated and should not be construed as representative of future operating
results or financial position. The summary pro forma combined financial data
should be read in conjunction with the Unaudited Pro Forma Combined Financial
Statements and the notes thereto and the historical financial statements of the
Founding Companies and the notes thereto included elsewhere in this Prospectus.
The Company anticipates that, subsequent to the Mergers, it will realize
savings from the following: more favorable discounts and rebates on hardgood
products than those currently obtained individually by the Founding Companies;
the combination of functions such as accounting and finance, insurance,
employee benefits, strategic marketing and legal support at the corporate
level; and, to a lesser extent, reduced transportation and handling costs on
perishable floral products. However, these savings cannot be quantified or
reasonably estimated and have not been included in the Unaudited Pro Forma
Combined Financial Statements.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ----------------------------------------
1996 1996 1997
--------------- ---------------- -----------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA (1):
Net sales............... $ 175,467 $ 97,269 $ 103,015
Gross profit (2)........ 49,247 27,146 29,378
Selling, general and ad-
ministrative expense
(3).................... 43,247 21,543 22,060
Goodwill amortization
(4).................... 1,023 511 511
-------------- ---------------- ----------------
Operating income........ 4,977 5,092 6,807
Interest and other (in-
come) expense, net
(5).................... (141) (211) (76)
-------------- ---------------- ----------------
Income before income
taxes.................. 5,118 5,303 6,883
-------------- ---------------- ----------------
Net income (6).......... $ 2,662 $ 2,978 $ 3,925
============== ================ ================
Net income per share.... $ .32 $ .36 $ .47
============== ================ ================
Shares used in computing
net income per share
(7).................... 8,355,994 8,355,994 8,355,994
============== ================ ================
<CAPTION>
AS OF JUNE 30, 1997
----------------------------------------
PRO FORMA AS
COMBINED ADJUSTED (9)
---------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (8):
Working capital......................... $(33,717) (10) $12,293
Total assets............................ 83,106 84,079
Total long term debt.................... 3,569 3,569
Stockholders' equity.................... 15,001 61,011
</TABLE>
- --------
(1) The pro forma combined statement of operations data assume that the
Mergers and the Offering were consummated on January 1, 1996.
(2) Reflects the reduction in costs of sales of $579,000 for the year ended
December 31, 1996 and $290,000 and $300,000 for the six-month periods
ended June 30, 1996 and 1997, respectively, attributable to a significant
reduction in the services provided under a contract for various services
with an affiliated entity of Flower Trading that was renegotiated pursuant
to the Flower Trading Merger Agreement.
9
<PAGE>
(3) The pro forma combined statement of operations data reflect an aggregate
of approximately (i) $3.6 million, $2.7 million and $403,000 for the year
ended December 31, 1996 and the six-month periods ended June 30, 1996 and
1997, respectively, in pro forma reductions in salaries, bonuses and
benefits to the stockholders of the Founding Companies to which they have
agreed prospectively in the employment agreements to be entered into upon
consummation of the Offering (the "Compensation Differential"), (ii) a net
reduction of lease-related expenses of $367,000 for the year ended
December 31, 1996 and $183,000 for each of the six-month periods ended
June 30, 1996 and 1997, pursuant to real estate acquired, real estate
distributed and amendment of associated lease agreements in connection
with the Mergers, (iii) an increase of $500,000 for the year ended
December 31, 1996 and $250,000 for each of the six-month periods ended
June 30, 1996 and 1997, of expenses associated with corporate management,
as well as costs associated with being a public company, and (iv) $94,000
for the year ended December 31, 1996 and $47,000 for each of the six-month
periods ended June 30, 1996 and 1997 of expense attributable to
compensation expense associated with 125,000 options granted with an
exercise price below the initial public offering price which will vest
over a four-year period.
(4) Consists of amortization of the $40.9 million of goodwill to be recorded
as a result of the Mergers over a 40-year period and computed on the basis
described in the Notes to the Unaudited Pro Forma Combined Financial
Statements.
(5) Reflects an increase in interest expense of $162,000 for the year ended
December 31, 1996 and $82,000 for each of the six-month periods ended June
30, 1996 and 1997 relating to debt assumed in connection with real estate
transferred to Houff from the stockholder of Houff as part of the
transaction.
(6) Assumes that all income is subject to a corporate income tax rate of 40%
and that all goodwill is non-deductible.
(7) Includes (i) 1,334,050 shares to be issued to stockholders of the Founding
Companies, (ii) 2,400,000 shares issued to the founders and initial
investors in USA Floral, (iii) 4,582,854 of the 4,600,000 shares sold in
the Offering to pay the cash portion of the Merger consideration, to fund
S Corporation distributions to stockholders of certain of the Founding
Companies, and to pay certain expenses of the Offering, and (iv) 39,090
shares related to the dilution attributable to options granted with an
exercise price below the initial public offering price, in accordance with
the treasury stock method.
(8) The pro forma combined balance sheet data assume that the Mergers were
consummated on June 30, 1997. Prior to the Mergers, Bay State will
distribute to its stockholders certain real estate having a net book value
of $842,000. Additionally, in conjunction with the Mergers certain real
estate will be acquired and certain associated debt assumed.
(9) Adjusted to reflect the sale of the 4,600,000 shares of Common Stock
offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." Also reflects proceeds of $1.2 million
from the exercise by Jonathan J. Ledecky of an option to purchase 110,000
shares at the initial public offering price per share.
(10) Includes $44.6 million payable to stockholders of the Founding Companies,
representing the cash portion of the Merger consideration to be paid from
a portion of the net proceeds of the Offering, plus S Corporation
distributions to be made to the stockholders of certain of the Founding
Companies, less the amount to be received by the Company upon consummation
of the Mergers in repayment of net related party receivables. See "Use of
Proceeds" and "Notes to Unaudited Pro Forma Combined Financial
Statements."
10
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, in addition to the other information contained in this
Prospectus, in evaluating an investment in the shares of Common Stock offered
hereby.
ABSENCE OF COMBINED OPERATING HISTORY
USA Floral was founded in April 1997 and has conducted no operations to
date. USA Floral has entered into agreements to acquire the Founding Companies
simultaneously with the consummation of the Offering. The Founding Companies
have been operating independently and the Company may not be able to integrate
these businesses successfully on an economic basis. The Company's management
group has been assembled only recently and the management control structure is
still in its formative stages. The pro forma combined financial results of USA
Floral and the Founding Companies cover periods when USA Floral and the
Founding Companies were not under common control or management and may not be
indicative of the Company's future financial or operating results. Management
may not be able to oversee the combined entity effectively or to implement
effectively the Company's operating strategies. Any failure by the Company to
implement its strategies or oversee effectively the combined entity could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Formation of the Company," "Business--The Founding
Companies" and "Management."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company intends to grow significantly through the acquisition of
additional floral products businesses. This strategy will entail reviewing and
potentially reorganizing acquired business operations, corporate
infrastructure and systems and financial controls. Unforeseen expenses,
difficulties, complications and delays frequently encountered in connection
with the rapid expansion of operations could inhibit the Company's growth.
In addition, in September 1997, Bankers Trust Company ("BT") committed to
provide to the Company a $100.0 million revolving credit facility (the "Credit
Facility"), subject to consummation of the Offering and to certain closing
conditions. The Credit Facility contains certain covenants which will restrict
the ability of the Company to engage in certain mergers, acquisitions and
dispositions. Among other things, the Credit Facility will provide that: (i)
the total consideration for any acquisition may not exceed $25 million unless
not more than 10% of such amount is in cash; and (ii) for a group of
acquisitions occurring within a six-month period, no less than one-third of
the aggregate purchase price therefor may be in Common Stock of the Company.
The Credit Facility will also contain various financial covenants customary
for transactions of this type, including ratios of total debt to cash flow and
cash flow to fixed charges, each of which may limit the ability of the Company
to pursue future acquisitions. See "Management's Discussion and Analysis of
Pro Forma Combined Financial Condition and Pro Forma Combined Results of
Operations--Liquidity and Capital Resources."
There can be no assurance that the Company will maintain or accelerate its
growth or anticipate all of the changing demands that expanding operations
will impose on its management personnel, operational and management
information systems, and financial systems. The Company may not be able to
identify, acquire or manage profitably additional businesses or to integrate
successfully any acquired businesses into the Company without substantial
costs, delays or other operational or financial difficulties. Any failure by
the Company to do so could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Strategy."
RISKS RELATED TO ACQUISITION FINANCING
A significant portion of the Company's resources may be used for
acquisitions. The timing, size and success of the Company's acquisition
efforts and any associated capital commitments cannot be readily predicted.
The Company currently intends to finance future acquisitions by using shares
of its Common Stock, cash or a combination of Common Stock and cash. If the
Common Stock does not maintain a sufficient market value, or if potential
acquisition candidates are otherwise unwilling to accept Common Stock as part
of the consideration for
11
<PAGE>
the sale of their businesses, the Company may be required to utilize more of
its cash resources, if available, in order to initiate and maintain its
acquisition program. If the Company does not have sufficient cash resources,
its growth could be limited unless it is able to obtain additional capital
through debt or equity financings. There can be no assurance that the Company
will be able to obtain additional financing it may need for its acquisition
program on terms that the Company deems acceptable. To the extent the Company
uses Common Stock for all or a portion of the consideration to be paid for
future acquisitions, dilution may be experienced by existing stockholders,
including the purchasers of Common Stock in the Offering. See "Dilution," "Use
of Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
RISKS RELATED TO INTERNAL GROWTH AND OPERATING STRATEGIES
Key elements of the Company's strategy are to improve the profitability and
to continue to expand the net sales of the Founding Companies and any
subsequently acquired businesses. The Company's ability to increase net sales
will be affected by various factors, including demand for, pricing and
availability of floral products, the Company's ability to expand the range of
products and services offered and the Company's ability to enter new markets
successfully. Many of these factors are beyond the control of the Company, and
the Company's strategies may not be successful or the Company may be unable to
generate cash flow adequate for its operations and to support internal growth.
A key component of the Company's strategy is to operate on a decentralized
basis, with local management retaining responsibility for day-to-day
operations, profitability and the growth of the business. If proper overall
business controls are not implemented, this decentralized operating strategy
could result in inconsistent operating and financial practices at the Founding
Companies and subsequently acquired businesses, which could materially and
adversely affect the Company's overall profitability. See "Business--
Strategy."
SEASONALITY AND CYCLICALITY; POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING
RESULTS
Unit sales of floral products have historically been seasonal, concentrated
in the first and second calendar quarters as a result of holidays such as
Valentine's Day and Mother's Day and, to a lesser extent, in the fourth
calendar quarter as a result of Thanksgiving and Christmas. In particular, a
significant portion of the Company's annual revenues is derived from sales of
floral products for Valentine's Day. Historically, Valentine's Day sales have
been relatively lower in those years when the holiday falls on a Saturday or
Sunday. In 1998 and 1999, Valentine's Day will be on Saturday and Sunday,
respectively; accordingly, the Company expects relatively lower Valentine's
Day product sales in those years.
The Company believes that the floriculture industry is influenced by general
economic conditions and particularly by the level of personal discretionary
spending, and thus that the industry tends to experience periods of decline
and recession during economic downturns. The industry may experience sustained
periods of decline in sales in the future, and any such decline may have a
material adverse effect on the Company.
The Founding Companies have in the past experienced quarterly variations in
revenues, operating income and cash flows. The Company could in the future
experience such quarterly fluctuations in operating results due to the factors
discussed above and other factors, including the loss of a major customer,
additional selling, general and administrative expenses to acquire and support
new business and the timing and magnitude of required capital expenditures.
The Company plans its operating expenditures based on revenue forecasts, and a
revenue shortfall below such forecasts in any quarter would likely adversely
affect the Company's operating results for that quarter. See "Management's
Discussion and Analysis of Pro Forma Financial Condition and Pro Forma Results
of Operations--Seasonality and Cyclicality; Potential Fluctuations in
Quarterly Operating Results."
WEATHER
The supply of perishable floral products is significantly dependent on
weather conditions where the products are grown. Severe weather, including
unexpected cold weather, may have an effect on the available supply of
12
<PAGE>
flowers at times of peak demand. For example, in order for a sufficient supply
of roses to be available for sale on Valentine's Day, rose-growing regions
must not suffer a freeze or other harsh conditions in the weeks leading up to
the holiday. Shortages or disruptions in the supply of fresh flowers or the
inability of the Company to procure such materials from alternate sources at
acceptable prices in a timely manner, could lead to the loss of customers
which in turn could result in a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION
The distribution segment of the floriculture industry is highly competitive.
The Company competes with other importers, brokers, wholesalers and bouquet
companies based upon price, credit terms, breadth of product offerings,
product quality, customer service and location. In addition, the Company
competes with other buyers and sellers of floral and floral-related products,
such as garden centers and farm stores. To the extent that the Company is
unable to compete successfully against its existing and future competitors,
its business, operating results and financial condition would be materially
adversely affected. While the Company believes that it competes effectively
within its industry, additional competitors with greater resources than the
Company may enter the industry and compete effectively against the Company.
Moreover, the Company may depend in part upon a trend toward consolidation in
the floral products industry in order to execute effectively its acquisition
and vertical integration strategy. This trend may not continue. If the
Company's customers do not receive the Company's vertical integration strategy
favorably, such customers have numerous alternative sources of supply.
VALUATIONS OF THE FOUNDING COMPANIES
Valuations of the Founding Companies have not been established by
independent appraisals, but have been determined through negotiations between
USA Floral and representatives of each of the Founding Companies. The
consideration being paid for each of the Founding Companies, including
Founding Companies whose stockholders will become affiliates of the Company
upon consummation of the Offering, is based primarily on the value of each
such Founding Company as a going concern and not on the value of the acquired
assets. Valuations of the Founding Companies determined solely by appraisals
of the acquired assets would be less than the consideration being paid by USA
Floral for the Founding Companies. The future performance of the Founding
Companies may not be commensurate with the consideration being paid to acquire
the Founding Companies or the price of the Common Stock offered hereby. See
"Formation of the Company--The Mergers."
AMORTIZATION OF INTANGIBLE ASSETS
Approximately $41.4 million, or 49.2%, of the Company's as adjusted pro
forma total assets as of June 30, 1997 consists of goodwill arising from the
acquisitions of the Founding Companies. Goodwill is an intangible asset that
represents the difference between the aggregate purchase price for the assets
acquired and the amount of such purchase price allocated to such assets for
purposes of the Company's pro forma balance sheet. The Company is required to
amortize the goodwill from the Mergers over a period of time, with the amount
amortized in a particular period constituting an expense that reduces the
Company's net income for that period. The amount amortized, however, will not
give rise to a deduction for tax purposes. In addition, the Company will be
required to amortize the goodwill, if any, from any future acquisitions. A
reduction in net income resulting from the amortization of goodwill may have
an adverse impact upon the market price of the Company's Common Stock.
The Company plans to amortize goodwill associated with the acquisitions of
the Founding Companies over a period of 40 years. The Company plans to
evaluate continually whether events or circumstances have occurred that
indicate that the remaining useful life of goodwill may warrant revision.
Additionally, in accordance with the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," The Company will evaluate
any potential goodwill impairments by reviewing the future cash flows of the
respective acquired entities' operations and comparing these amounts with the
carrying value of the associated goodwill.
13
<PAGE>
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATES
Approximately $42.4 million of the $44.8 million net proceeds of the
Offering will be used to pay the cash portion of the purchase price for the
Founding Companies (before giving effect to the receipt by the Company upon
consummation of the Mergers of approximately $1.7 million of net related party
receivables) and $4.0 million will be used to fund S Corporation distributions
to the stockholders of CFX. In addition, the Company will assume a tax
liability of one of the Founding Companies of approximately $0.5 million to be
paid. Up to an additional $0.5 million may be used to pay the cash portion of
the earn-out arrangement in connection with the Monterey Bay Merger. See
"Formation of the Company--The Mergers."
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success will depend to a significant extent
upon the efforts and abilities of Robert J. Poirier, its co-founder, Chairman
of the Board, President and Chief Executive Officer, Jonathan J. Ledecky, its
co-founder and Non-Executive Chairman of the Board, the Company's other
executive officers and, due to the Company's decentralized operating strategy,
senior management of the Founding Companies. While the Company has entered
into employment agreements with Mr. Poirier and senior management of the
Founding Companies, the Company cannot assure that such individuals will
remain with the Company throughout the terms of the agreements, or thereafter.
The Company likely will depend on the senior management of any significant
business it acquires in the future. If the Company loses the services of one
or more of these key employees before the Company is able to attract and
retain qualified replacement personnel, the Company's business could be
adversely affected. See "Management." The Company does not maintain any
policies of key person life insurance on the lives of its senior management
personnel.
RISKS ASSOCIATED WITH IMPORTED PRODUCTS; ANTI-DUMPING LIABILITY
The majority of the perishable floral products distributed by the Company
are of foreign origin. These products are imported principally from countries
in South America and Latin America, including Colombia, Ecuador, Costa Rica
and Mexico. Floral product purchases are denominated in U.S. Dollars. The
Company is subject to the import and export restrictions of various
jurisdictions and is dependent to some extent upon general economic conditions
in and political relations with a number of foreign countries. Although such
restrictions and conditions have not had a material impact on the operations
of the Founding Companies to date, there can be no assurance that such
restrictions and conditions will not have a material adverse effect on the
Company's business, financial condition and results of operations. One such
factor, among others, is the imposition of anti-dumping duties upon certain
imports of perishable floral products. "Dumping" is the practice whereby
importers sell flowers in the United States at prices below the home market
value. The U.S. Commerce Department investigates claims of dumping made by
domestic growers. If the Commerce Department determines that an importer sold
flowers for a price less than the home market value, then the Commerce
Department will impose an anti-dumping duty upon the importer. The Commerce
Department is currently conducting anti-dumping reviews, related to the sales
of certain flowers imported from Colombia. Two periods (a period is March 1
through February 28) are being reviewed currently, and the determination of
the Commerce Department with respect to three other periods is pending appeal.
CFX and Flower Trading, which are importers, impose a surcharge upon sales of
those flowers that are under review or for which reviews are pending appeal
and maintain reserves to offset any final duty that may be imposed. The
accrued reserves may not be adequate to satisfy any duty that is assessed. In
addition, the Commerce Department may initiate additional reviews at any time
and duties may be imposed on sales of flowers for which CFX and Flower Trading
have not maintained reserves.
HOLDING COMPANY STRUCTURE
The Company is a holding company, the principal assets of which are the
shares of the capital stock of its subsidiaries. As a holding company without
independent means of generating operating revenues, the Company depends on
dividends and other payments from its subsidiaries to fund its obligations and
meet its cash needs. Expenses of the Company include salaries of its executive
officers, insurance, professional fees and service of any indebtedness that
may be outstanding from time to time. The Company's subsidiaries may not make
14
<PAGE>
sufficient dividend or other payments to permit the Company to fund its
obligations or meet its cash needs, in whole or in part. See "Management--
Summary Compensation Table."
ABSENCE OF CONTRACTUAL RELATIONSHIPS WITH CUSTOMERS
Companies in the floral products industry generally do not enter into sales
contracts with their customers requiring them to make purchases over any
specific term. Instead, sales are generally evidenced by purchase orders or
similar documentation limited to specific sales. As a result of these
practices, the Company's customers generally have the right to terminate their
relationships with the Company without penalty and with little or no notice.
Accordingly, a customer from which the Company generates substantial revenue
in one period may not be a substantial source of revenue in a subsequent
period. If the Company's customers elect to reduce or cease purchases from the
Company, the Company's business, financial condition and results of operations
would be materially and adversely affected.
POTENTIAL CONFLICTS OF INTEREST
The Company is subject to risks associated with potential conflicts of
interest that may arise out of the interrelationships among certain of the
officers of the Founding Companies and related third party entities with which
the Founding Companies conduct business transactions. Dwight Haight, President
of CFX, owns a 25% interest in two farms, Miramonte and Mocari, located in
Colombia, from which CFX purchases roses. Mr. Haight also owns a 50% interest
in La Fleurette, a bouquet manufacturer with which CFX conducts business and
for which CFX provides management services. John T. Dickinson, President of
American Florist, has an ownership interest in a rose farm, Meadow Flowers,
located in Ecuador, from which American Florist purchases roses. For a more
detailed description of these and certain other related party transactions,
see "Certain Relationships and Related Party Transactions." While the Company
intends to conduct all related party transactions on terms no less favorable
than those the Company could negotiate with an unrelated third party, the
interests of officers of the Founding Companies in their capacities with
related third party entities may come into conflict with the interests of such
persons in their capacities with the Company.
POTENTIAL INFLUENCE OF EXISTING STOCKHOLDERS
After the consummation of the Offering, the Company's executive officers,
directors and five-percent stockholders will own beneficially an aggregate of
approximately 33.2% of the outstanding shares of Common Stock (approximately
30.7% if the Underwriters' over-allotment option is exercised in full). The
Company's officers, directors and five-percent stockholders if acting together
may be able to control the election of directors and matters requiring the
approval of the stockholders of the Company. This concentration of ownership
may also have the effect of delaying or preventing a change in control of the
Company. See "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 8,334,050 shares of
Common Stock outstanding, based upon the number of shares outstanding as of
September 15, 1997 and assuming consummation of the Mergers, but without
giving effect to the anticipated exercise by Mr. Ledecky of an option to
purchase 110,000 shares of Common Stock. The 4,600,000 shares sold in the
Offering will be freely tradeable without restriction or further registration
under the Securities Act, unless acquired by an "affiliate" of the Company, as
that term is defined in Rule 144 promulgated under the Securities Act ("Rule
144"); shares held by affiliates will be subject to resale limitations of Rule
144 described below. All of the 3,734,050 remaining outstanding shares of
Common Stock will be available for resale at various dates beginning 180 days
after the date of this Prospectus, upon expiration of applicable lock-up
agreements described below and subject to compliance with Rule 144 under the
Securities Act as the holding provisions of Rule 144 are satisfied. Of those
shares, 3,544,050 may be included in certain registration statements that may
be filed by the Company, in accordance with piggyback registration rights
granted pursuant to the Merger Agreements or pursuant to such rights granted
to Mr. Ledecky and Mr. Poirier. Up to 540,000 shares that may be issued to
stockholders of two of the Founding Companies pursuant to earn-out
arrangements (to be calculated with reference to the performance of those
Founding Companies) will also be subject to such piggyback registration
rights. Further, upon consummation of the Offering, 1,170,753 shares of Common
Stock will be issuable upon the exercise of stock options to be granted on the
effective date
15
<PAGE>
of the registration statement of which this Prospectus forms a part, of which
options to purchase 270,000 shares are immediately exercisable. Such options
include an option to purchase 110,000 shares to be granted to Jonathan J.
Ledecky to facilitate the treatment of the shares to be issued in the Mergers
as a tax-free exchange under the Internal Revenue Code. Mr. Ledecky intends to
exercise such option on or about the effective date of the registration
statement of which this Prospectus forms a part. The Company intends to file a
registration statement on Form S-8 as soon as practicable after the
consummation of the Offering with respect to the shares of Common Stock
issuable upon the exercise of all such options (other than the option to
purchase 110,000 shares to be granted to Mr. Ledecky).
Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices of the
Common Stock. Each of the Company and the directors, executive officers and
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will
not, subject to certain exceptions, during the period ending 180 days after
the date of this Prospectus, (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, lend, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of Common Stock or such other securities, in cash or
otherwise. See "Underwriters."
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
There is currently no established public market for securities of companies
that own and operate floral product distribution businesses and, prior to the
Offering, there has been no public market for the Company's Common Stock.
There can be no assurance that an active public market for the Common Stock
will develop or be sustained after the Offering. The initial public offering
price of the Common Stock will be determined by negotiation between the
Company and the representatives of the Underwriters based on the factors
described under "Underwriters." The price at which the Common Stock will trade
in the public market after the Offering may be less than the initial public
offering price. In addition, the trading price of the Common Stock could be
subject to significant fluctuations in response to activities of the Company's
competitors, variations in quarterly operating results, changes in market
conditions and other events or factors. Moreover, the stock market in the past
has experienced significant price and value fluctuations, which have not
necessarily been related to corporate operating performance. The volatility of
the market could adversely affect the market price of the Common Stock and the
ability of the Company to raise equity in the public markets. See
"Underwriters."
DILUTION TO NEW INVESTORS
After giving effect to the Mergers, purchasers of Common Stock in the
Offering will experience immediate and substantial dilution in the pro forma
as adjusted net tangible book value of their shares in the amount of $8.68 per
share. See "Dilution." If the Company issues additional Common Stock in the
future, including shares which may be issued pursuant to earn-out
arrangements, option grants and future acquisitions, purchasers of Common
Stock in the Offering may experience further dilution in the net tangible book
value per share of the Common Stock.
CERTAIN ANTITAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
and Delaware law may make a change in the control of the Company more
difficult to effect, even if a change in control were in the stockholders'
interest. Pursuant to the Certificate of Incorporation and Bylaws, the Board
of Directors is divided into three classes of directors elected for staggered
three-year terms. In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibit the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an "interested stockholder," unless the
business combination is approved in a prescribed manner. See "Description of
Capital Stock--Certain Provisions of Delaware Law and the Company's
Certificate of Incorporation and Bylaws."
16
<PAGE>
FORMATION OF THE COMPANY
USA FLORAL
USA Floral was incorporated in Delaware in April 1997 as a holding company
to acquire businesses in the floriculture industry. Prior to the Mergers and
the Offering, USA Floral issued 2,400,000 shares of Common Stock for cash to
its co-founders and initial investors, including 1,000,000 shares to Robert J.
Poirier and 1,100,000 shares to Jonathan J. Ledecky. Mr. Poirier is the co-
founder, Chairman of the Board, President and Chief Executive Officer of USA
Floral and Mr. Ledecky is its co-founder and Non-Executive Chairman of the
Board. Subsequent to the Mergers and the Offering, the co-founders of USA
Floral will own beneficially in the aggregate approximately 33.2% of the
outstanding Common Stock of the Company. See "Certain Relationships and
Related Party Transactions--Organization of USA Floral."
THE MERGERS
Simultaneously with and as a condition to the consummation of the Offering,
USA Floral will acquire in eight separate transactions all of the issued and
outstanding capital stock of each of the Founding Companies for an aggregate
consideration of $61.1 million, which consists of: (i) $42.4 million in cash
to be paid to the stockholders of the Founding Companies, which will be paid
from the proceeds of the Offering (before giving effect to the receipt by the
Company upon consummation of the Mergers of approximately $1.7 million of net
related party receivables); (ii) $4.0 million in cash to fund S Corporation
distributions to the stockholders of CFX and Alpine Gem, which will be paid
from the proceeds of the Offering; and (iii) the $14.7 million estimated fair
value of 1,334,050 shares of Common Stock to be issued to the stockholders of
the Founding Companies. In addition, the Company may pay additional
consideration of up to $0.5 million in cash and issue up to 540,000 shares of
Common Stock (or, in the event the fair market value per share is less than
$10.00, such additional shares of Common Stock or, at the Company's option,
cash as is necessary so that the stockholders receive consideration equal to
$10.00 per share), pursuant to earn-out arrangements with two of the Founding
Companies. The Company will also assume an estimated tax liability of one of
the Founding Companies of approximately $0.5 million. Following the
consummation of the Mergers, the aggregate long-term indebtedness of the
Company will be approximately $3.5 million, which will comprise long-term debt
of the Founding Companies upon the Mergers. The purchase price for each
Founding Company was determined based on negotiations between USA Floral and
that Founding Company. The factors considered by the parties in determining
the purchase price included, among other factors, cash flows, historical
operating results, growth rates and business prospects of the Founding
Companies. With the exception of the consideration to be paid to the
stockholders of each of the Founding Companies, the acquisition of each
Founding Company is subject to substantially the same terms and conditions as
those to which the acquisition of each other Founding Company is subject. The
following table contains information concerning the aggregate cash to be paid,
Common Stock to be issued (at an assumed initial public offering price of
$11.00 per share) and S Corporation distributions to be made in connection
with the Mergers:
<TABLE>
<CAPTION>
SHARES OF VALUE OF
S CORP. COMMON SHARES OF TOTAL
FOUNDING COMPANY CASH DISTRIBUTIONS STOCK COMMON STOCK CONSIDERATION
- ---------------- ----- ------------- --------- ------------ -------------
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Houff................... $11.0 -- -- -- $11.0
CFX..................... 5.8 $ 4.0 250,000 $ 2.8 12.6
Bay State............... 6.0 -- 495,550 5.5 11.5
Flower Trading.......... 5.9(1) -- 160,000 1.8 7.7
United Wholesale........ 4.8 -- 268,500 3.0 7.8
American Florist........ 4.8 -- -- (2) -- (2) 4.8(2)
Monterey Bay............ 2.5 -- -- (3) -- (3) 2.5(3)
Alpine Gem.............. 1.6 -- (4) 160,000 1.8 3.4
----- ----- --------- ----- -----
Total................. $42.4(5) $ 4.0 1,334,050 $14.7 $61.1
===== ===== ========= ===== =====
</TABLE>
- --------
(1) Does not include an estimated tax liability of approximately $0.5 million
payable after consummation of the Flower Trading Merger, which is to be
assumed by the Company in connection with the Flower Trading Merger.
(2) The sellers of American Florist have entered into an earn-out arrangement
pursuant to which the sellers may receive additional consideration
consisting of shares of Common Stock with an aggregate value of up
17
<PAGE>
to $2,400,000 (based on the average closing price of the Common Stock for
the ten trading days prior to December 31, 1997). The earn-out is based upon
American Florist's 1997 earnings before interest and taxes.
(3) The sellers of Monterey Bay have entered into an earn-out arrangement
pursuant to which the sellers may receive additional consideration
consisting of up to $0.5 million in cash and shares of Common Stock with
an aggregate value of up to $3,000,000 (based on the average closing price
of the Common Stock for the ten trading days prior to December 31, 1997).
The earn-out is based upon Monterey Bay's 1997 earnings before interest
and taxes.
(4) The amount of the Alpine Gem S Corporation distribution is $42,000.
(5) Does not reflect the receipt by the Company upon consummation of the
Mergers of approximately $1.7 million of net related party receivables.
See "Use of Proceeds."
The consummation of each Merger Agreement is contingent upon the
consummation of the Offering and the satisfaction of customary closing
conditions, including the absence of material adverse changes in the business,
operations and financial condition of the Founding Companies and the Company
and certification by the parties to each Merger Agreement that the
representations and warranties made by such party in the Merger Agreement are
true and correct as of the consummation of the Merger and that such party has
performed its obligations under the Merger Agreement. The Merger Agreements
provide that the stockholders of the Founding Companies will have the right,
under circumstances specified in the Merger Agreements, to register the shares
of Common Stock received by the stockholders as a portion of the Merger
consideration. The Merger Agreements provide that options to purchase a number
of shares of Common Stock, equal to 6.25% of the cash and Common Stock portion
of the Merger consideration, based on the initial public offering price, shall
be made available to employees of the Founding Companies. The options will
have an exercise price equal to the initial public offering price per share
and will vest ratably over a four-year period, beginning on the anniversary of
the date of the grant. The Merger Agreements further provide that the
stockholders of the Founding Companies will indemnify USA Floral from certain
liabilities that may arise in connection with the Mergers. A portion of the
consideration payable to the stockholders of each of the Founding Companies
will be escrowed, in the case of cash, or pledged, in the case of Common
Stock, for a period of twelve months from the consummation of the Offering, as
security for the stockholders' indemnification obligations. Each of the Merger
Agreements provides that USA Floral and certain key employees of each of the
Founding Companies will enter into employment agreements.
THE ROY HOUFF COMPANY
USA Floral will acquire all of the outstanding stock of Houff in a reverse
subsidiary merger (the "Houff Merger") for $11.0 million in cash. In
connection with the Houff Merger, Roy O. Houff, the Chief Executive Officer
and sole stockholder of Houff, will become a Director of the Company. Mr.
Houff will enter into a two-year covenant not to compete with the Company and
its affiliates and a two-year employment agreement with the subsidiary of the
Company that operates the Houff business after the Merger. Immediately prior
to the Houff Merger, Roy Houff, the sole stockholder of Houff, will transfer
the real estate to be acquired in the Houff Merger and the indebtedness
associated therewith. Pursuant to the Merger Agreement, USA Floral may elect
not to acquire two parcels of real property which are undergoing environmental
remediation. The property located in Wheeling, Illinois has undergone
remediation to remove soil contaminated by a leaking underground storage tank
("UST"). The Company plans to await receipt of a closure letter from the
Illinois Environmental Protection Agency, indicating that no further
remediation is required, prior to acquiring this property. Two USTs are being
removed and one UST is being closed in place on one of the properties located
in Chicago, Illinois. The Company intends to review the test results of the
soil samples that will be taken from the vicinity of the USTs prior to
determining whether to acquire this property. If the Company does acquire
either or both of these properties and if further environmental contamination
is discovered, or if the existing contamination is not properly remediated,
the Company could incur liability, which could be material and which could
include payments for the costs of cleanup, damages to third parties and
penalties to state and federal environmental agencies. If the Company elects
not to acquire either or both of the properties, the Merger Agreement provides
that the Company will lease such property from Roy Houff for the fair market
rental value and that the Merger consideration will be adjusted accordingly.
18
<PAGE>
CFX, INC.
USA Floral will acquire all of the outstanding stock of CFX in a reverse
subsidiary merger (the "CFX Merger") for: (i) $5.8 million in cash; (ii) $4.0
million in cash, representing the amount of CFX's accumulated adjustments
account, which will be distributed to the stockholders of CFX immediately
prior to the consummation of the CFX Merger; and (iii) 250,000 shares of
Common Stock. In connection with the CFX Merger, Dwight Haight, the President
of CFX, will become a Director of the Company. Mr. Haight will enter into a
two-year covenant not to compete with the Company and its affiliates (subject
to certain exceptions) and a two-year employment agreement with the subsidiary
of the Company that operates the CFX business after the Merger.
BAY STATE FLORIST SUPPLY, INC.
USA Floral will acquire all of the outstanding stock of Bay State in a
reverse subsidiary merger (the "Bay State Merger") for $6.0 million in cash
and 495,550 shares of Common Stock. In connection with the Bay State Merger,
William W. Rudolph, the President of Bay State, will become a Director of the
Company. Mr. Rudolph will enter into a two-year covenant not to compete with
the Company and its affiliates (subject to certain exceptions) and a two-year
employment agreement with the subsidiary of the Company that operates the Bay
State business after the Merger. Immediately prior to the consummation of the
Merger, Bay State will distribute real estate owned by Bay State to its
stockholders. Upon consummation of the Merger, Bay State will lease the
property from the stockholders, at a rate to be determined, which will not
exceed the rate that would obtain in an arm's-length negotiation.
FLOWER TRADING CORPORATION
USA Floral will acquire all of the outstanding stock of Flower Trading in a
reverse subsidiary merger (the "Flower Trading Merger") for $5.9 million in
cash and 160,000 shares of Common Stock. In addition, the Company will assume
an estimated tax liability of Flower Trading of approximately $0.5 million. In
connection with the Flower Trading Merger, Gustavo Moreno, the President of
Flower Trading, will become a Director of the Company. Mr. Moreno will enter
into a two-year covenant not to compete with the Company and its affiliates
(subject to certain exceptions) and a two-year employment agreement with the
subsidiary of the Company that operates the Flower Trading business after the
Merger.
UNITED WHOLESALE FLORISTS, INC.
USA Floral will acquire all of the outstanding stock of United Wholesale in
a reverse subsidiary merger (the "United Wholesale Merger") for $4.8 million
in cash and 268,500 shares of Common Stock. In connection with the Merger,
Raymond R. Ashmore, the President of United Wholesale, will become a Director
of the Company. Mr. Ashmore will enter into a two-year covenant not to compete
with the Company and its affiliates and a two-year employment agreement with
the subsidiary of the Company that operates the United Wholesale business
after the Merger. The Merger Agreement provides that the Company will be
granted a five-year option to purchase the real estate leased by United
Wholesale from affiliated entities. United Wholesale will lease properties
from affiliated entities at an aggregate rental rate to be determined, which
will not exceed the rate that would obtain in an arm's-length negotiation.
AMERICAN FLORIST SUPPLY, INC.
USA Floral will acquire all of the outstanding stock of American Florist in
a reverse subsidiary merger (the "American Florist Merger") for $4.8 million
in cash. In connection with the American Florist Merger, John T. Dickinson,
the President of American Florist, will become a Director of the Company. Mr.
Dickinson will enter into a two-year covenant not to compete with the Company
and its affiliates and a two-year employment agreement with the subsidiary of
the Company that operates the American Florist business after the Merger. In
addition, Mr. Dickinson may receive a contingent payment of up to $2.4
million, based on American Florist's earnings before interest and taxes for
the year ended December 31, 1997. The contingent payment is payable in Common
Stock. The number of shares to be issued in satisfaction of the contingent
payment will be calculated by reference to the average closing price of the
Common Stock for the ten trading days prior to December 31, 1997. The American
Florist Merger Agreement provides that, if the average closing price is less
than $10 per
19
<PAGE>
share, then the Company, at its sole option, may satisfy any contingent
payment obligation in excess of 240,000 shares by issuance of additional
shares of Common Stock, by payment of cash, or by a combination of cash and
Common Stock.
MONTEREY BAY BOUQUET, INC. AND BAY AREA BOUQUETS, INC.
USA Floral will acquire all of the outstanding stock of Monterey Bay in a
reverse subsidiary merger (the "Monterey Bay Merger") for $2.5 million in
cash. In connection with the Monterey Bay Merger, Jeffrey Brothers, the
President of Monterey Bay, will become a Director of the Company. Mr. Brothers
will enter into a two-year covenant not to compete and a two-year employment
agreement with the subsidiary of the Company that operates the Monterey Bay
business after the Merger. In addition, the stockholders of Monterey Bay may
receive a contingent payment of up to $3.5 million, based on Monterey Bay's
earnings before interest and taxes for the year ended December 31, 1997. Of
the contingent payment, $0.5 million is payable in cash and $3.0 million is
payable in Common Stock. The number of shares to be issued in satisfaction of
the contingent payment will be calculated by reference to the average closing
price of the common stock for the ten trading days prior to December 31, 1997.
The Monterey Bay Merger Agreement provides that, if the average closing price
is less than $10 per share, then the Company, at its sole option, may satisfy
any contingent payment obligation in excess of 300,000 shares by issuance of
additional shares of Common Stock, by payment of cash, or by a combination of
cash and Common Stock.
ALPINE GEM FLOWER SHIPPERS, INC.
USA Floral will acquire all of the outstanding stock of Alpine Gem in a
reverse subsidiary merger (the "Alpine Gem Merger") for (i) $1.6 million in
cash; (ii) $42,000 in cash representing the amount of Alpine Gem's accumulated
adjustments account, which will be distributed to the stockholders of Alpine
Gem immediately prior to the consummation of the Alpine Gem Merger and (ii)
160,000 shares of Common Stock. In connection with the Alpine Gem Merger, John
Q. Graham, Jr., the President of Alpine Gem, will become a Director of the
Company. Mr. Graham will enter into a two-year covenant not to compete with
the Company and its affiliates and a two-year employment agreement with the
subsidiary of the Company that operates the Alpine Gem business after the
Merger.
20
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting estimated underwriting discounts and other
offering expenses, all of which are payable by the Company, are estimated to be
approximately $44.8 million (approximately $51.9 million if the Underwriters'
over-allotment option is exercised in full), assuming an initial public
offering price of $11.00 per share. The principal uses of such net proceeds to
the Company are described below.
<TABLE>
<CAPTION>
USE AMOUNT
--- -------------
<S> <C>
Cash portion of Merger consideration...................... $42.4 million (1)
S Corporation distributions............................... 4.0 million
</TABLE>
- --------
(1) Before giving effect to the receipt by the Company upon consummation of the
Mergers of approximately $1.7 million of net related party receivables.
Approximately $42.4 million of the net proceeds will be used to pay the cash
portion of the aggregate purchase price for the Founding Companies at closing
of the Mergers (before giving effect to the receipt by the Company upon
consummation of the Mergers of approximately $1.7 million of net related party
receivables). Approximately $4.0 million of the net proceeds will be used to
fund S Corporation distributions to the stockholders of certain of the Founding
Companies. Pursuant to the CFX and Alpine Gem Merger Agreements, an amount
equal to the CFX and Alpine Gem accumulated adjustments accounts will be
distributed to the stockholders of CFX and Alpine Gem, respectively,
immediately prior to the consummation of the CFX and Alpine Gem Mergers. See
"Formation of the Company--The Mergers" and "Certain Relationships and Related
Party Transactions--The Mergers."
The Company may use up to $5.0 million of borrowings under the Credit
Facility in order to pay part of the cash portion of the Merger consideration,
fund all or a portion of the S Corporation distributions to be made to the
stockholders of certain of the Founding Companies, or a combination of both.
See "Management's Discussion and Analysis of Pro Forma Combined Financial
Condition and Pro Forma Combined Results of Operations--Liquidity and Capital
Resources."
In addition, the Company anticipates that, substantially contemporaneously
with the consummation of the Offering, Jonathan J. Ledecky will exercise
options to purchase 110,000 shares of Common Stock at an exercise price per
share equal to the initial public offering price. Such exercise would result in
additional proceeds to the Company of approximately $1.2 million, which the
Company intends to apply to working capital and general corporate purposes.
Pending the application of any such additional proceeds or any of the net
proceeds of the Offering as described above, the Company intends to invest any
such amounts in short-term investment grade securities.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common Stock
in the foreseeable future because it intends to retain its earnings, if any, to
finance the expansion of its business and for general corporate purposes. Any
payment of future dividends will be at the discretion of the Board of Directors
and will depend upon, among other factors, the Company's earnings, financial
condition, capital requirements, level of indebtedness, contractual
restrictions with respect to the payment of dividends and other considerations
that the Company's Board of Directors deems relevant.
21
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June 30,
1997, on a pro forma basis (i) to reflect the consummation of the Mergers and
the issuance of 1,334,050 shares of Common Stock in connection therewith, and
(ii) on such pro forma basis as adjusted to give effect to the sale of shares
of Common Stock offered hereby at an assumed initial public offering price of
$11.00 per share and the issuance of 110,000 shares expected to be issued upon
exercise of an option to be granted to Jonathan J. Ledecky on the effective
date of the registration statement of which this Prospectus forms a part, at
an exercise price equal to the initial public offering price per share, which
option is being granted to facilitate the treatment of the issuance of shares
in the Mergers as a tax-free exchange under Section 351 of the Internal
Revenue Code, and the application of the estimated net proceeds therefrom. See
"Selected Financial Data of the Founding Companies" and "Use of Proceeds."
This table should be read in conjunction with the Unaudited Pro Forma Combined
Financial Statements and the notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------
PRO FORMA
COMBINED AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt and current portion of long-term
debt............................................. $ 3,540 $ 3,540
======= =======
Long-term debt and capital lease obligations, less
current portion.................................. 3,569 3,569
Stockholders' equity:
Common stock, $.001 par value per share,
authorized, shares issued and outstanding pro
forma, shares issued and outstanding pro forma as
adjusted......................................... 4 9
Additional paid-in capital........................ 15,027 61,032
Retained deficit.................................. (30) (30)
------- -------
Total stockholders' equity...................... 15,001 61,011
------- -------
Total capitalization............................ $18,570 $64,580
======= =======
</TABLE>
- --------
(1) Does not include: (i) up to 540,000 shares which may be issued to the
stockholders of two of the Founding Companies pursuant to earn-out
arrangements; to be calculated with reference to the performance of those
Founding Companies through December 31, 1997; (ii) shares of Common Stock
equal to 15% of the shares of Common Stock outstanding from time to time
that are reserved for issuance under the Company's 1997 Long-Term
Incentive Plan, of which options to purchase 872,753 shares of Common
Stock (including options to purchase 200,000 shares to be granted to
Jonathan J. Ledecky, the Company's Non-Executive Chairman of the Board)
will be granted upon consummation of the Offering at an exercise price
equal to the initial public offering price per share, and options to
purchase 125,000 shares of Common Stock will be granted upon consummation
of the Offering at an exercise price equal to the greater of $8.00 or 60%
of the initial public offering price per share; (iii) 300,000 shares of
Common Stock reserved for issuance under the Company's 1997 Non-Employee
Directors' Stock Plan, of which options to purchase 63,000 shares of
Common Stock will be granted upon consummation of the Offering at an
exercise price equal to the initial public offering price per share; and
(iv) 1,000,000 shares of Common Stock reserved for issuance under the
Company's 1997 Employee Stock Purchase Plan. See "Formation of the
Company--The Mergers," "Management--1997 Long-Term Incentive Plan," "--
1997 Non-Employee Directors' Stock Plan" and "--Other Plans" and
"Principal Stockholders."
22
<PAGE>
DILUTION
The Company had a pro forma net tangible book value deficit at June 30,
1997, of $26.4 million, or a deficit of $7.07 per share of Common Stock. Pro
forma net tangible book value per share is determined by dividing the pro
forma net tangible book value of the Company (tangible assets less
liabilities) by the number of shares of Common Stock outstanding prior to the
Offering of 3,734,050. Adjusting for the issuance of 110,000 shares pursuant
to the anticipated exercise by Mr. Ledecky of an option to purchase shares of
Common Stock at $11.00 and the sale by the Company of 4,600,000 shares of
Common Stock offered hereby at an assumed initial public offering price of
$11.00 per share, and the application of the estimated net proceeds therefrom
as described under "Use of Proceeds," the pro forma net tangible book value of
the Company, as adjusted, at June 30, 1997 would have been $19.6 million, or
$2.32 per share. This amount represents an immediate dilution to new investors
of $8.68 per share and an immediate increase in pro forma as adjusted net
tangible book value per share to existing stockholders of $9.39 per share. The
following table illustrates this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $11.00
Pro forma net tangible book value per share at June 30,
1997..................................................... $(7.07)
Increase in pro forma net tangible book value per share
resulting from the Offering............................. 9.39
------
Pro forma as adjusted net tangible book value per share af-
ter the Mergers and the Offering........................... 2.32
------
Pro forma as adjusted dilution to new investors............. $ 8.68
======
</TABLE>
If the Underwriters' over-allotment option is exercised in full, the
increase in pro forma net tangible book value per share attributable to the
Offering, pro forma as adjusted net tangible book value per share after the
Offering, and pro forma as adjusted dilution per share to new investors would
be $9.99, $2.92 and $8.08, respectively.
The following table sets forth at June 30, 1997, after giving effect to the
Mergers and the sale of the Common Stock offered by the Company in the
Offering: (i) the number of shares of Common Stock purchased by existing
stockholders from the Company and the total consideration (including the fair
value of the shares of Common Stock issued to the Sellers) and the average
price per share paid to the Company for such shares; (ii) the number of shares
of Common Stock purchased by new investors in the Offering from the Company
and the total consideration and the price per share paid by them for such
shares; and (iii) the percentage of shares purchased from the Company by
existing stockholders and the new investors and the percentages of
consideration paid to the Company for such shares by existing stockholders and
new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders(1)........ 3,734,050 44% $15,076,550 23% $ 4.04
======
Exercise of options by
Mr. Ledecky(2)......... 110,000 1 $ 1,210,000 1 $11.00
======
New investors........... 4,600,000 55 $50,600,000 76 $11.00
--------- --- ----------- --- ======
Total................. 8,444,050 100% $66,886,550 100%
========= === =========== ===
</TABLE>
- --------
(1) Includes shares issuable upon the consummation of the Mergers. Does not
include: (i) up to 540,000 shares which may be issued to the stockholders
of two of the Founding Companies pursuant to earn-out arrangements; to be
calculated with reference to the performance of those Founding Companies
through December 31, 1997; (ii) shares of Common Stock equal to 15% of the
shares of Common Stock outstanding from time to time that are reserved for
issuance under the Company's 1997 Long-Term Incentive Plan, of which
options to purchase 872,753 shares of Common Stock (including options to
purchase 200,000 shares
23
<PAGE>
to be granted to Jonathan J. Ledecky, the Company's Non-Executive Chairman
of the Board) will be granted upon consummation of the Offering at an
exercise price equal to the initial public offering price per share, and
options to purchase 125,000 shares of Common Stock will be granted upon
consummation of the Offering at an exercise price equal to the greater of
$8.00 or 60% of the initial public offering price per share; (iii) 300,000
shares of Common Stock reserved for issuance under the Company's 1997 Non-
Employee Directors' Stock Plan, of which options to purchase 63,000 shares
of Common Stock will be granted upon consummation of the Offering at an
exercise price equal to the initial public offering price per share; and
(iv) 1,000,000 shares of Common Stock reserved for issuance under the
Company's 1997 Employee Stock Purchase Plan. See "Formation of the
Company--The Mergers," "Management--1997 Long-Term Incentive Plan," "--1997
Non-Employee Directors' Stock Plan" and "--Other Plans" and "Principal
Stockholders."
(2) Consists of 110,000 shares expected to be issued upon exercise of an
option to be granted to Jonathan J. Ledecky on the effective date of the
registration statement of which this Prospectus forms a part, at an
exercise price equal to the initial public offering price per share, which
option is being granted to facilitate the treatment of the issuance of
shares in the Mergers as a tax-free exchange under Section 351 of the
Internal Revenue Code.
24
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
USA Floral was established in April 1997 to acquire the Founding Companies
simultaneously with and as a condition to the consummation of this Offering.
For financial statement presentation purposes, USA Floral has been identified
as the "accounting acquiror." The following unaudited summary pro forma
combined financial data present data for the Company, adjusted to give effect
to (i) the consummation of the Mergers, (ii) certain pro forma adjustments to
the historical financial statements described below and (iii) the consummation
of the Offering and the application of the net proceeds therefrom. The
selected pro forma data are not necessarily indicative of operating results or
financial position that would have been achieved had the events described
above been consummated and should not be construed as representative of future
operating results or financial position. The selected pro forma combined
financial data should be read in conjunction with the Unaudited Pro Forma
Combined Financial Statements and the notes thereto and the historical
financial statements of the Founding Companies and the notes thereto included
elsewhere in this Prospectus. The Company anticipates that following the
Mergers it will realize savings from the following: more favorable discounts
and rebates on hardgood products than those currently obtained individually by
the Founding Companies; the combination of functions such as accounting and
finance, insurance, employee benefits, strategic marketing and legal support
at the corporate level; and, to a lesser extent, reduced transportation and
handling costs on perishable floral products. However, these savings cannot be
quantified or reasonably estimated and have not been included in the selected
pro forma combined financial data.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, --------------------------------
1996 1996 1997
--------------------------------- ---------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA(1):
Net sales.................. $ 175,467 $ 97,269 $ 103,015
Gross profit(2)............ 49,247 27,146 29,378
Selling, general and admin-
istrative expense(3)...... 43,247 21,543 22,060
Goodwill amortization(4)... 1,023 511 511
--------------- --------------- ---------------
Operating income........... 4,977 5,092 6,807
Interest and other (income)
expense, net(5)........... (141) (211) (76)
--------------- --------------- ---------------
Income before income tax-
es........................ 5,118 5,303 6,883
--------------- --------------- ---------------
Net income(6).............. $ 2,662 $ 2,978 $ 3,925
=============== =============== ===============
Net income per share...... $ .32 $ .36 $ .47
=============== =============== ===============
Shares used in computing
net income per share(7).. 8,355,994 8,355,994 8,355,994
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------------
PRO FORMA
COMBINED AS ADJUSTED(9)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA(8):
Working capital.................................... $(33,717)(10) $12,293
Total assets....................................... 83,106 84,079
Total long-term debt............................... 3,569 3,569
Stockholders' equity............................... 15,001 61,011
</TABLE>
- --------
(1) The pro forma combined statement of operations data assume that the
Mergers and the Offering were consummated on January 1, 1996.
(2) Reflects the reduction in costs of sales of $579,000 for the year ended
December 31, 1996 and $290,000 and $300,000 for the six-month periods
ended June 30, 1996 and 1997, respectively, attributable to a significant
reduction in the services provided under a contract for various services
with an affiliated entity of Flower Trading that was reinstated pursuant
to the Flower Trading Merger Agreement.
25
<PAGE>
(3) The pro forma combined statement of operations data reflect an aggregate
of approximately (i) $3.6 million, $2.7 million and $403,000 for the year
ended December 31, 1996 and the six-month periods ended June 30, 1996 and
1997, respectively, in pro forma reductions in salaries, bonuses and
benefits to the stockholders of the Founding Companies to which they have
agreed prospectively in the employment agreements to be entered into upon
consummation of the Offering (the "Compensation Differential"), (ii) a
net reduction of lease-related expenses of $367,000 for the year ended
December 31, 1996 and $183,000 for each of the six-month periods ended
June 30, 1996 and 1997, pursuant to real estate acquired, real estate
distributed and amendment of associated lease agreements in connection
with the Mergers, (iii) an increase of $500,000 for the year ended
December 31, 1996 and $250,000 for each of the six-month periods ended
June 30, 1996 and 1997, of expenses associated with corporate management,
as well as costs associated with being a public company, and (iv) $94,000
for the year ended December 31, 1996 and $47,000 for each of the six-
month periods ended June 30, 1996 and 1997 of expense attributable to
compensation expense associated with 125,000 options granted with an
exercise price below the initial public offering price which will vest
over a four-year period.
(4) Consists of amortization of the $40.9 million of goodwill to be recorded
as a result of the Mergers over a 40-year period and computed on the
basis described in the Notes to the Unaudited Pro Forma Combined
Financial Statements.
(5) Reflects an increase in interest expense of $162,000 for the year ended
December 31, 1996 and $82,000 for each of the six-month periods ended
June 30, 1996 and 1997 relating to debt assumed in connection with real
estate transferred to Houff from the stockholder of Houff as part of the
transaction.
(6) Assumes that all income is subject to a corporate income tax rate of 40%
and that all goodwill is non-deductible.
(7) Includes (i) 1,334,050 shares to be issued to stockholders of the
Founding Companies, (ii) 2,400,000 shares issued to the founders and
initial investors in USA Floral, (iii) 4,582,854 of the 4,600,000 shares
sold in pay the cash portion of the Merger consideration, to fund S
Corporation distributions to stockholders of certain of the Founding
Companies, and to pay certain expenses of the Offering, and (iv) 39,090
shares related to the dilution attributable to options granted with an
exercise price below the initial public offering price, in accordance
with the treasury stock method.
(8) The pro forma combined balance sheet data assume that the Mergers were
consummated on June 30, 1997. Prior to the Mergers, Bay State will
distribute to its stockholders certain real estate having a net book
value of $842,000. Additionally, in conjunction with the Mergers certain
real estate will be acquired and certain associated debt assumed.
(9) Adjusted to reflect the sale of the 4,600,000 shares of Common Stock
offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." Also reflects proceeds of $1.2 million
from the exercise by Jonathan J. Ledecky of an option to purchase 110,000
shares at the initial public offering price per share.
(10) Includes $44.6 million payable to stockholders of the Founding Companies,
representing the cash portion of the Merger consideration to be paid from
a portion of the net proceeds of the Offering, plus S Corporation
distributions to be made to the stockholders of certain of the Founding
Companies, less the amount to be received by the Company upon
consummation of the Mergers in repayment of net related party
receivables. See "Use of Proceeds" and "Notes to Unaudited Pro Forma
Combined Financial Statements."
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA COMBINED FINANCIAL
CONDITION AND PRO FORMA COMBINED RESULTS OF OPERATIONS
GENERAL
USA Floral was founded in April 1997 to create a national consolidator and
operator of floral products distribution businesses. The Company engages
primarily in the wholesale distribution of perishable floral products and
floral-related hardgoods. The Company also imports cut flowers from growers in
foreign countries, provides pre-packaged floral bouquets and arrangements to
retail florists and mass-market retailers and engages in brokerage services
for wholesalers of both foreign and domestic cut flowers.
The Company, which has conducted no operations to date, has entered into
agreements to acquire the Founding Companies simultaneously with the
consummation of the Offering. The Founding Companies have been operating
independently. The Company intends to integrate these businesses, their
operations and their administrative functions over a period of time. Such
integration may present opportunities to reduce costs through the elimination
of duplicate functions and through economies of scale, and may necessitate
additional costs and expenditures for corporate management and administration,
corporate expenses related to being a public company, systems integration,
employee relocation and severance and facilities expansion. These various
costs and possible cost-savings may make comparison of future operating
results with historical operating results difficult.
The Company derives its revenues from the sale of perishable floral products
and floral-related hardgoods. Sales of perishable products, which include cut
flowers, bouquets and potted plants, accounted for approximately 90% of the
Company's pro forma combined revenues in 1996. Sales of floral-related
hardgoods, which include vases and glassware, foam for flower arranging, tools
and other supplies accounted for approximately 10% of the pro forma combined
revenues in 1996.
Net sales are recognized upon the shipment of products to customers. Cost of
sales generally includes the cost of perishable products and floral-related
hardgoods plus the cost of in-bound freight. Although the Company generally
does not enter into long-term contracts with its suppliers, it does conduct
business on a fixed-price "standing order" basis with certain importers in
order to insure an adequate supply of flowers during periods of peak demand.
In general, the Founding Companies have been able to pass on most of their
direct price increases to customers. Selling, general and administrative costs
include warehouse and customer delivery expenses, employee salaries, telephone
expenses, advertising and promotional expenses, wages and benefits,
depreciation and occupancy costs.
The Founding Companies have operated historically as independent, privately-
owned entities, and their results of operations reflect varying tax
structures, including both S and C Corporations, which have influenced the
historical level of owners' compensation. The selling, general and
administrative expenses of the Founding Companies include compensation to
employee-stockholders totaling $3.5 million, $3.8 million and $5.0 million for
the fiscal years ended December 31, 1994, 1995 and 1996 (in the case of each
Founding Company other than United Wholesale) and June 30, 1995, 1996 and 1997
(in the case of United Wholesale), respectively. As a result of varying
practices regarding compensation to employee-stockholders among the Founding
Companies, the comparison of operating margins among the Founding Companies
and from period to period in respect of a particular Founding Company may be
difficult. Upon consummation of the Mergers, certain employee-stockholders
will enter into employment agreements and the aggregate compensation paid to
the stockholders of the Founding Companies will be reduced. See "Pro Forma
Results of Operations of the Founding Companies." This Compensation
Differential has been reflected in the Unaudited Pro Forma Combined Statement
of Operations.
27
<PAGE>
PRO FORMA COMBINED RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Unaudited
Pro Forma Financial Statements, and the related notes thereto and the
historical financial statements of the Founding Companies and the related
notes appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1996 1997
------------- --------------
<S> <C> <C> <C> <C>
Net Sales....................................... $97,269 100.0% $103,015 100.0%
Cost of Sales................................... 70,123 72.1 73,637 71.5
Selling, General and Administrative Expenses.... 21,543 22.1 22,060 21.4
Goodwill........................................ 511 .5 511 .5
------- ----- -------- -----
Operating Income................................ $ 5,092 5.2% $ 6,807 6.6%
======= ===== ======== =====
</TABLE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales increased to $103.0 million in the six months ended
June 30, 1997 from $97.3 million in the six months ended June 30, 1996, an
increase of $5.7 million, or 5.9%. This increase was primarily driven by CFX
and Flower Trading, which accounted for $4.0 million of the increase as a
result of increased sales volume, higher prices for certain products, and a
fuel surcharge fee related to airline shipments that was added to customer
invoices, and a $2.0 million increase at Monterey Bay as a result of increases
in volume primarily due to additional promotional activities. These increases
were partially offset by a decrease at Houff as a result of the closing of the
Atlanta facility.
Cost of Sales. Cost of sales increased to $73.6 million in the six months
ended June 30, 1997 from $70.1 million in the six months ended June 30, 1996,
an increase of $3.5 million, or 5.0%, primarily as a result of the increased
sales. As a percentage of net sales, cost of sales decreased to 71.5% in the
six months ended June 30, 1997 from 72.1% in the six months ended June 30,
1996. The decrease in costs of sales as a percentage of sales is primarily as
a result of the respective companies obtaining more favorable prices,
partially due to increased volume purchasing, better inventory management and
reduced freight costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $22.1 million in the six months ended June 30, 1997 from
$21.5 million in the six months ended June 30, 1996, an increase of $0.5
million, or 2.4%. The increase was primarily as a result of increased
personnel costs to support the increase in sales. As a percentage of net
sales, selling, general and administrative expenses decreased to 21.4% in the
six months ended June 30, 1997 from 22.2% in the six months ended June 30,
1996 primarily as a result of spreading fixed costs over increased sales.
Operating Income. As a result of the factors discussed above, operating
income increased to $6.8 million in the six months ended June 30, 1997 from
$5.1 million in the six months ended June 30, 1996, an increase of $1.7
million, or 33.7%. As a percentage of net sales, operating income increased to
6.6% in the six months ended June 30, 1997 from 5.2% in the six months ended
June 30, 1996.
PRO FORMA RESULTS OF OPERATIONS OF THE FOUNDING COMPANIES
The following tables provide the pro forma operating results for the year
ended December 31, 1996 and the six-month periods ended June 30, 1996 and 1997
for each of the respective founding Companies. USA Floral has preliminarily
analyzed the savings that it expects to realize from reductions in salaries
and certain benefits to the owners of the Founding Companies. To the extent
that the owners of the Founding Companies have agreed prospectively to
reductions in salary, bonuses and benefits, these reductions have been
reflected in the pro forma combined statement of operations. Additionally, pro
forma operating income has been adjusted for other items directly attributable
to the transaction and reflects the estimated amortization of goodwill
recorded in connection with the Mergers.
28
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------------------------
BAY FLOWER UNITED AMERICAN MONTEREY ALPINE
HOUFF CFX STATE TRADING WHOLESALE FLORIST BAY GEM
------- ------- ------- ------- --------- -------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $39,090 $35,684 $30,563 $20,313 $19,327 $11,679 $9,477 $9,334
Cost of sales........... 25,537 28,190 20,722 15,335 12,751 8,268 8,285 7,132
------- ------- ------- ------- ------- ------- ------ ------
Gross profit............ 13,553 7,494 9,841 4,978 6,576 3,411 1,192 2,202
Selling, general and
administrative......... 12,142 6,327 8,844 4,026 5,788 2,658 930 1,938
Goodwill amortization... 157 184 177 154 134 101 48 68
------- ------- ------- ------- ------- ------- ------ ------
Income from
operations............ $ 1,254 $ 983 $ 820 $ 798 $ 654 $ 652 $ 214 $ 196
======= ======= ======= ======= ======= ======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------------------------------------------
BAY FLOWER UNITED AMERICAN MONTEREY ALPINE
HOUFF CFX STATE TRADING WHOLESALE FLORIST BAY GEM
------- ------- ------- ------- --------- -------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $22,165 $20,585 $16,412 $11,305 $10,552 $6,444 $4,827 $4,979
Cost of sales........... 14,693 16,031 11,279 8,638 7,018 4,458 4,166 3,840
------- ------- ------- ------- ------- ------ ------ ------
Gross profit............ 7,472 4,554 5,133 2,667 3,534 1,986 661 1,139
Selling, general and
administrative......... 6,210 3,014 4,353 1,929 3,109 1,389 404 838
Goodwill amortization... 78 92 88 77 67 51 24 34
------- ------- ------- ------- ------- ------ ------ ------
Income from
operations............ $ 1,184 $ 1,448 $ 692 $ 661 $ 358 $ 546 $ 233 $ 267
======= ======= ======= ======= ======= ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
------------------------------------------------------------------
BAY FLOWER UNITED AMERICAN MONTEREY ALPINE
HOUFF CFX STATE TRADING WHOLESALE FLORIST BAY GEM
------- ------- ------- ------- --------- -------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $20,410 $22,854 $16,375 $12,997 $10,897 $7,082 $6,803 $5,597
Cost of sales........... 13,204 17,759 11,080 9,839 7,128 4,793 5,575 4,259
------- ------- ------- ------- ------- ------ ------ ------
Gross profit............ 7,206 5,095 5,295 3,158 3,769 2,289 1,228 1,338
Selling, general and
administrative......... 5,651 3,549 4,498 1,920 3,100 1,547 563 934
Goodwill amortization... 78 92 88 77 67 51 24 34
------- ------- ------- ------- ------- ------ ------ ------
Income from
operations............ $ 1,477 $ 1,454 $ 709 $ 1,161 $ 602 $ 691 $ 641 $ 370
======= ======= ======= ======= ======= ====== ====== ======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Founding Companies' principal sources of liquidity have historically
been cash flows from operating activities and, to a lesser extent, borrowings.
Approximately $42.4 million of the proceeds from the Offering will be used to
fund the cash portion of the consideration to be paid in connection with the
Mergers and $4.0 million will be used to fund S Corporation distributions to
the stockholders of CFX and Alpine Gem. As of June 30, 1997, the Company had
cash and cash equivalents (on a pro forma combined basis) of approximately
$6.0 million. Although there can be no assurance of its ability to do so, the
Company expects to fund its future cash requirements from funds generated from
operations, from borrowed funds or from other sources.
29
<PAGE>
In September 1997, the Company received the commitment of BT to provide a
$100.0 million Credit Facility, with a $75.0 million sub-limit for permitted
acquisitions and a $10.0 million sub-limit for letters of credit. Amounts
outstanding under the Credit Facility are to bear interest, at the Company's
option, at BT's base rate plus an applicable margin of up to 0.625% or a
eurodollar rate plus an applicable margin of up to 1.875%. The Company's
obligations under the Credit Facility are to be guaranteed by the direct and
indirect domestic subsidiaries of the Company and by any applicable foreign
subsidiaries. The Credit Facility is to be secured by a first priority pledge
of all of the notes and capital stock owned by the Company and such
guarantors, and a first priority security interest in all other assets of the
Company and such guarantors. Pursuant to the BT commitment, the Credit
Facility is to contain customary conditions to the initial borrowings and to
all subsequent loans, including satisfactory documentation and capital
structure, receipt of required consents, absence of material adverse effect,
absence of material litigation, solvency, accuracy of representations and
warranties and, as to the initial borrowings, satisfactory completion of due
diligence by the lenders. The Credit Facility is to contain customary
covenants, including restrictions on other indebtedness, restrictions on
mergers, acquisitions, dispositions and similar transactions within certain
parameters (including an aggregate limit upon the cash consideration to be
paid of $25.0 million, subject to certain exceptions), sale-leaseback
transactions and lease payments, dividends, voluntary prepayments and
amendments of other debt, transactions with affiliates, investments, creation
of liens, capital expenditures and material amendments of organization
documents, as well as various financial covenants customary for transactions
of this type, including ratios of total debt to cash flow and cash flow to
fixed charges. The Company will be obligated to pay a financing fee equal to
1.5% of the total amount of the Credit Facility, an annual administration fee
of $75,000, a commitment fee of 0.25% per year on BT's total commitment under
the Credit Facility in effect from time to time from the date of BT's
commitment until the Credit Facility is entered into, a commitment fee of
0.25% to 0.5% per year on the unused portion of the Credit Facility from and
after the date on which the Credit Facility is entered into, and a fee equal
to 0.75% of the total commitment under the Credit Facility in the event that
the Credit Facility is not entered into simultaneously with the consummation
of the Offering and the Mergers. See "Risk Factors--Risks Associated with
Acquisition Strategy."
With the exception of United Wholesale, the Founding Companies' capital
expenditures for the twelve months ended December 31, 1996 and the six months
ended June 30, 1996 and 1997 were approximately $1.4 million, $.4 million and
$.7 million, respectively. United Wholesale's capital expenditures were $.3
million, $.3 million and $.1 million for the three years ended June 30, 1997,
respectively. These capital expenditures were primarily for machinery, office
equipment and computers, building additions and facility upgrades. The Company
currently does not have any commitments to make significant capital
expenditures in the next twelve months. The Company believes that funds
generated from operations, together with the proceeds from the Offering and
possible future sources of borrowings will be sufficient to finance its
current operations and planned capital expenditure requirements at least
through 1998. Although the Company is not currently involved in negotiations
and has no current commitments or agreements with respect to any acquisitions
(other than the Mergers), to the extent that the Company is successful in
consummating acquisitions, it may be necessary to finance such acquisitions
through the issuance of additional equity securities, incurrence of
indebtedness or a combination of both.
SEASONALITY AND CYCLICALITY; POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING
RESULTS
Unit sales of floral products have historically been seasonal, concentrated
in the first and second calendar quarters as a result of holidays such as
Valentine's Day and Mother's Day and, to a lesser extent, the fourth calendar
quarter as a result of Thanksgiving and Christmas. In particular, a
significant portion of the Company's revenues are derived from sales of floral
products for Valentine's Day. Historically, Valentine's Day product sales have
been relatively lower in those years when the holiday falls on a Saturday or
Sunday. In 1998 and 1999, Valentine's Day will be on Saturday and Sunday,
respectively; accordingly, the Company expects relatively lower Valentine's
Day product sales in those years.
The Company believes that the floriculture industry is influenced by general
economic conditions and particularly by the level of personal discretionary
spending and that the industry tends to experience periods of decline and
recession during economic downturns. The industry may experience sustained
periods of decline in sales in the future, and any such decline may have a
material adverse effect on the Company.
30
<PAGE>
The Founding Companies have in the past experienced quarterly variations in
revenues, operating income and cash flows. The Company could in the future
experience such quarterly fluctuations in operating results due to the factors
discussed above and other factors, including the loss of a major customer,
additional selling, general and administrative expenses to acquire and support
new business and the timing and magnitude of required capital expenditures.
The Company plans its operating expenditures based on revenue forecasts, and a
revenue shortfall below such forecasts in any quarter would likely adversely
affect the Company's operating results for that quarter. See "Risk Factors--
Seasonality and Cyclicality, Potential Fluctuations in Quarterly Operating
Results."
The following table sets forth the pro forma combined total net sales of the
Company on a quarterly basis for the year ended December 31, 1996:
<TABLE>
<CAPTION>
1996 QUARTER
----------------------------------
FIRST SECOND THIRD FOURTH TOTAL
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales.................... $50,485 $46,921 $35,497 $42,564 $175,467
Percentage of annual net
sales....................... 28.8% 26.7% 20.2% 24.3% 100.0%
</TABLE>
31
<PAGE>
SELECTED FINANCIAL DATA OF THE FOUNDING COMPANIES
The selected financial data of the Founding Companies are derived in part
from the more detailed historical financial statements and notes thereto of
the Founding Companies included elsewhere in this Prospectus. The balance
sheet data as of December 31, 1995 and 1996, and the statement of operations
data for each of the three years in the period ended December 31, 1996, for
Houff, CFX, Bay State and Flower Trading have been derived from the audited
financial statements included elsewhere herein. The balance sheet data as of
December 31, 1995 and 1996 and the statement of operations data for each of
the two years in the period ended December 31, 1996 for American Florist,
Monterey Bay and Alpine Gem have been derived from the audited financial
statements included elsewhere herein. The balance sheet data as of June 30,
1996 and 1997 and the statement of operations data for each of the three years
in the period ended June 30, 1997 for United Wholesale have been derived from
the audited financial statements included elsewhere herein. The balance sheet
data as of December 31, 1992, 1993 and 1994 and the statement of operations
data for each of the two years in the period ended December 31, 1993, for
Houff, CFX, Bay State and Flower Trading have been derived from unaudited
financial statements. The balance sheet data as of December 31, 1992, 1993 and
1994 and the statement of operations data for each of the three years in the
period ended December 31, 1994 for American Florist, Monterey Bay and Alpine
Gem have been derived from unaudited financial statements. The balance sheet
data as of June 30, 1993, 1994 and 1995 and the statement of operations data
for each of the two years in the period ended June 30, 1994 for United
Wholesale have been derived from unaudited financial statements.
The selected individual financial data of the Founding Companies for the six
months ended June 30, 1996 and 1997 have been derived from the unaudited
financial statements included elsewhere herein. Such selected financial data
are not necessarily indicative of the results to be expected for the full
year.
In the opinion of the Company, the unaudited financial statements of the
Founding Companies reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
position and results of operations of the Founding Companies for those periods
in accordance with generally accepted accounting principles. The following
selected financial data of the Founding Companies should be read in
conjunction with the historical financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Founding Companies" included elsewhere in this Prospectus.
All Founding Companies have fiscal years ending December 31, with the
exception of United Wholesale, whose fiscal year end is June 30.
32
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
STATEMENT OF OPERATIONS DATA: ------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
HOUFF
Net sales............... $31,392 $32,406 $39,098 $41,531 $39,090 $ 22,165 $ 20,410
Cost of sales........... 20,754 21,707 26,683 27,899 25,537 14,693 13,204
Selling, general and
administrative
expenses............... 9,654 10,091 11,617 12,695 12,789 6,533 5,924
Operating income........ 984 608 798 937 764 939 1,282
Net income.............. 1,139 784 991 1,068 775 1,043 1,299
CFX
Net sales............... $27,317 $26,736 $30,590 $32,096 $35,684 $ 20,585 $ 22,854
Cost of sales........... 20,356 19,976 23,839 24,328 28,190 16,031 17,759
Selling, general and
administrative
expenses............... 6,313 6,137 6,266 6,773 8,956 5,249 3,657
Operating income
(loss)................. 648 623 485 995 (1,462) (695) 1,438
Net income (loss)....... 881 721 355 1,538 (1,247) (551) 1,497
BAY STATE
Net sales............... $16,063 $17,979 $19,203 $25,592 $30,563 $ 16,412 $ 16,375
Cost of sales........... 10,919 12,040 12,807 17,068 20,722 11,279 11,080
Selling, general and
administrative
expenses............... 4,599 5,126 5,529 7,579 8,976 4,429 4,556
Operating income........ 545 813 867 945 865 704 739
Net income.............. 736 938 958 1,119 1,033 701 757
FLOWER TRADING
Net sales............... $15,145 $17,246 $18,478 $20,335 $20,313 $ 11,305 $ 12,997
Cost of sales........... 11,802 13,676 14,452 15,921 15,914 8,928 10,139
Selling, general and
administrative
expenses............... 2,789 3,292 3,605 4,068 4,142 1,944 1,936
Operating income........ 553 278 421 346 257 433 922
Net income.............. 415 196 301 130 62 253 545
AMERICAN FLORIST (1)
Net sales............... -- -- $ 6,293 $10,783 $11,679 $ 6,444 $ 7,082
Cost of sales........... -- -- 4,579 7,788 8,268 4,458 4,793
Selling, general and
administrative
expenses............... -- -- 1,545 2,531 2,723 1,421 1,579
Operating income........ -- -- 169 464 688 565 710
Net income.............. -- -- 132 423 683 561 711
MONTEREY BAY (2)
Net sales............... -- $ 2,615 $ 4,253 $ 6,903 $ 9,477 $ 4,827 $ 6,803
Cost of sales........... -- 2,259 3,773 5,959 8,285 4,166 5,575
Selling, general and
administrative
expenses............... -- 301 458 910 1,113 496 563
Operating income........ -- 55 22 34 79 165 665
Net income.............. -- 38 19 20 48 100 367
ALPINE GEM
Net sales............... $ 3,476 $ 4,547 $ 7,252 $ 8,139 $ 9,334 $ 4,979 $ 5,597
Cost of sales........... 2,710 3,448 5,438 6,287 7,132 3,840 4,259
Selling, general and
administrative
expenses............... 697 813 1,320 1,526 1,868 802 902
Operating income........ 69 286 494 326 334 337 436
Net income.............. 78 315 524 224 233 356 462
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
---------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
UNITED WHOLESALE (3)
Net sales............... $16,031 $18,508 $18,541 $17,985 $19,030
Cost of sales........... 10,667 12,250 12,042 11,556 12,563
Selling, general and
administrative
expenses............... 4,731 5,401 6,162 5,926 6,101
Operating income........ 274 286 337 503 366
Net income.............. 97 6 54 187 144
</TABLE>
- --------
(1) American Florist commenced operations in April 1994; accordingly there
were no historical operating results prior to that date.
(2) Monterey Bay commenced operations in March 1993; accordingly there were no
historical operating results prior to that date.
(3) United Wholesale Florists of America, Inc., one of the two constituent
corporations that compose United Wholesale, commenced operations in July
1992.
33
<PAGE>
<TABLE>
<CAPTION>
AS OF FISCAL YEAR END DECEMBER 31,
---------------------------------- AS OF
1992 1993 1994 1995 1996 JUNE 30, 1997
BALANCE SHEET DATA: ------ ------ ------ ------ ------ -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
HOUFF
Total assets............. $5,874 $6,243 $8,169 $8,125 $7,276 $6,494
Debt..................... -- -- 76 -- 450 390
Equity................... 2,095 2,159 2,285 1,974 2,006 2,464
CFX
Total assets............. $5,903 $5,826 $7,519 $7,342 $6,474 $8,027
Debt..................... 159 81 -- -- 21 12
Equity................... 3,474 3,428 3,783 5,280 3,737 5,234
BAY STATE
Total assets............. $5,826 $6,076 $6,727 $7,657 $8,511 $9,110
Debt..................... -- -- -- 412 358 396
Equity................... 4,309 4,504 4,697 5,032 5,466 5,566
FLOWER TRADING
Total assets............. $3,232 $3,483 $3,662 $3,615 $3,651 $4,211
Debt..................... -- 126 51 8 391 339
Equity................... 1,456 1,693 1,994 2,124 1,470 2,015
AMERICAN FLORIST (1)
Total assets............. -- -- $1,878 $2,136 $2,438 $2,580
Debt..................... -- -- -- 598 598 598
Equity................... -- -- 532 650 628 1,040
MONTEREY BAY(2)
Total assets............. -- $ 547 $ 797 $1,101 $1,321 $1,791
Debt..................... -- 13 23 30 24 36
Equity................... -- 116 135 181 229 596
ALPINE GEM
Total assets............. $ 686 $ 872 $1,110 $1,269 $1,260 $1,615
Debt..................... -- -- -- -- -- --
Equity................... 420 488 668 749 609 770
<CAPTION>
AS OF FISCAL YEAR END JUNE 30,
----------------------------------
1993 1994 1995 1996 1997
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
UNITED WHOLESALE (3)
Total assets............. $6,061 $5,968 $6,076 $6,789 $7,752
Debt..................... 1,019 645 1,265 961 356
Equity................... 1,283 1,376 1,564 1,708 2,190
</TABLE>
- --------
(1) American Florist commenced operations in April 1994; accordingly there
were no historical results prior to that date.
(2) Monterey Bay commenced operations in March 1993; accordingly there were no
historical results prior to that date.
(3) United Wholesale Florists of America, Inc., one of the two constituent
corporations that compose United Wholesale, commenced operations in July
1992.
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE FOUNDING COMPANIES
The following discussion should be read in conjunction with the Selected
Financial Data of the Founding Companies and the historical financial
statements of the Founding Companies and related notes thereto appearing
elsewhere in this Prospectus.
FOUNDING COMPANIES
Each of the Founding Companies (other than Flower Trading, Monterey Bay and
one of the two corporations that compose United Wholesale) has elected to be
treated as an S Corporation. As a result, no Founding Company (other than
Flower Trading, Monterey Bay and one of the two corporations that compose
United Wholesale) was subject to federal income taxes. The selling, general
and administrative expenses of the Founding Companies include compensation to
employee-stockholders of the Founding Companies totaling $3.5 million, $3.8
million and $5.0 million for the fiscal years ended December 31, 1994, 1995
and 1996 (in the case of each Founding Company other than United Wholesale)
and June 30, 1995, 1996 and 1997 (in the case of United Wholesale),
respectively. Upon consummation of the Mergers, certain employee-stockholders
will enter into employment agreements and the aggregate compensation paid to
stockholders of the Founding Companies will be reduced. As a result of varying
practices regarding compensation to employee-stockholders among the Founding
Companies, the comparison of operating margins among the Founding Companies
and from period to period in respect of a particular Founding Company may be
difficult.
THE ROY HOUFF COMPANY
Founded in 1977, Houff is a wholesale distributor of perishable floral
products and floral-related hardgoods. Perishable floral products, which
include flowers, plants and other greenery, accounted for approximately 84% of
sales, while floral-related hardgoods, which include products such as vases,
ribbons and balloons, accounted for approximately 16% of sales in fiscal year
1996. Houff operates from seven locations in Illinois, Virginia and Arizona.
Houff has approximately 270 employees and sells its products to approximately
3,000 customers.
Houff experienced a number of facility changes during the three-year period
ended December 31, 1996. In January 1994, Houff acquired a distressed
wholesale distribution facility in Atlanta, Georgia, which Houff believed it
could return to profitability. The Atlanta facility did not adequately meet
Houff's financial performance expectations and was closed in October 1996.
Houff also began a shipping business in January 1994 to provide shipping
services for smaller wholesalers. This business was discontinued in February
1996 due to a declining customer base. In October 1995, Houff opened a new
wholesale distribution facility in Phoenix, Arizona.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $39,098 100.0% $41,531 100.0% $39,090 100.0% $22,165 100.0% $20,410 100.0%
Cost of Sales........... 26,683 68.2 27,899 67.2 25,537 65.3 14,693 66.3 13,204 64.7
Selling, General and
Administrative
Expenses............... 11,617 29.7 12,695 30.6 12,789 32.7 6,533 29.5 5,924 29.0
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating Income........ $ 798 2.0% $ 937 2.3% $ 764 2.0% $ 939 4.2% $ 1,282 6.3%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
35
<PAGE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales decreased to $20.4 million in the six months ended June
30, 1997 from $22.2 million in the six months ended June 30, 1996, a decrease
of $1.8 million, or 7.9%. This decrease resulted from the closing of Houff's
wholesale distribution facility in Atlanta, Georgia in October 1996, which
accounted for $2.0 million in net sales in the six months ended June 30, 1996,
partially offset by increases in other locations.
Cost of Sales. Cost of sales, which consists of perishable and hardgood
products and in-bound freight costs, decreased to $13.2 million in the six
months ended June 30, 1997 from $14.7 million in the six months ended June 30,
1996, a decrease of $1.5 million, or 10.1%. As a percentage of net sales,
costs of sales decreased to 64.7% in the six months ended June 30, 1997 from
66.3% in the six months ended June 30, 1996. This decrease resulted primarily
from a reduction in lower margin sales associated with the Atlanta, Georgia
facility and the shipping business and management's ability to obtain more
favorable pricing.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $5.9 million in the six months ended June 30, 1997 from
$6.5 million in the six months ended June 30, 1996, a decrease of $0.6
million, or 9.3%. As a percentage of net sales, selling general and
administrative expenses decreased to 29.0% in the six months ended June 30,
1997 from 29.5% in the six months ended June 30, 1996. This decrease resulted
from the closing of Houff's wholesale distribution facility in Atlanta,
Georgia in October 1996.
Operating Income. As a result of the factors discussed above, operating
income increased to $1.3 million in the six months ended June 30, 1997 from
$0.9 million in the six months ended June 30, 1997, an increase of $0.3
million, or 36.5%. As a percentage of net sales, operating income increased to
6.3% in the six months ended June 30, 1997 from 4.2% in the six months ended
June 30, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales decreased to $39.1 million in the year ended December
31, 1996 from $41.5 million in the year ended December 31, 1995, a decrease of
$2.4 million, or 5.9%. The decrease in net sales resulted from the
discontinuation of the shipping business in February 1996, which accounted for
a decrease of $1.8 million, the closing of Houff's wholesale facility in
Atlanta, Georgia in October 1996, which accounted for a decrease of $1.5
million, and a greater focus on higher margin, lower volume business,
partially offset by increased sales attributable to a full year of operating
results from the facility in Phoenix, Arizona, which commenced operations in
October 1995.
Cost of Sales. Cost of sales decreased to $25.5 million in the year ended
December 31, 1996, from $27.9 million in the year ended December 31, 1995, a
decrease of $2.4 million, or 8.5%, as a result of Houff's greater focus on
higher margin, lower volume business. As a percentage of net sales, cost of
sales decreased to 65.3% in the year ended December 31, 1996 from 67.2% in the
year ended December 31, 1995. This decrease resulted primarily from a
reduction in lower margin sales associated with the Atlanta, Georgia facility
and the shipping business and Houff's ability to obtain more favorable
pricing.
Selling, General and Administrative. Selling, general and administrative
expenses remained relatively flat at $12.8 million in the year ended December
31, 1996, compared to $12.7 million in the year ended December 31, 1995, an
increase of $0.1 million, or 0.7%. As a percentage of net sales, selling,
general and administrative expenses increased to 32.7% for the year ended
December 31, 1996 from 30.6% for the year ended December 31, 1995. This
increase resulted from costs associated with the closing of the Atlanta,
Georgia facility, including a loss on disposition of fixed assets, the write-
off of intangibles and the write-off of uncollectible accounts.
Operating Income. As a result of the factors discussed above, operating
income decreased to $0.8 million in the year ended December 31, 1996 from $0.9
million in the year ended December 31, 1995, a decrease of $0.2 million or
18.5%. As a percentage of net sales, operating income decreased to 2.0% in the
year ended December 31, 1996 from 2.3% in the year ended December 31, 1995.
36
<PAGE>
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased to $41.5 million in the year ended December
31, 1995 from $39.1 million in the year ended December 31, 1994, an increase
of $2.4 million, or 6.2%. The increase in net sales resulted from increased
revenues from the shipping business, increased sales for Valentine's Day in
1995, three months of revenues from the Phoenix, Arizona facility, which
opened in October 1995 and increased sales at other facilities.
Cost of Sales. Cost of sales increased to $27.9 million in the year ended
December 31, 1995 from $26.7 million in the year ended December 31, 1994, an
increase of $1.2 million, or 4.6%, primarily as a result of increased sales.
As a percentage of net sales, cost of sales decreased to 67.2% for the year
ended December 31, 1995 from 68.2% for the year ended December 31, 1994, due
to management changes and the implementation of more aggressive purchasing and
sales policies.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $12.7 million in the year ended December 31, 1995, from
$11.6 million in the year ended December 31, 1994, an increase of $1.1
million, or 9.3%. As a percentage of net sales, selling, general and
administrative expenses increased to 30.6% in the year ended December 31, 1995
from 29.7% in the year ended December 31, 1994. This increase resulted from an
increase in personnel and facilities costs attributable to the shipping
business, the Atlanta, Georgia facility and the Phoenix, Arizona facility.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.9 million in the year ended December 31, 1995 from $0.8
million in the year ended December 31, 1994, an increase of $0.1 million or
17.4%. As a percentage of net sales, operating income increased to 2.3% in the
year ended December 31, 1995 from 2.0% in the year ended December 31, 1994.
37
<PAGE>
CFX, INC.
Founded in 1974, CFX is an importer and distributor of perishable floral
products which are imported from approximately 40 farms located primarily in
Colombia and Ecuador, and distributed throughout the United States. CFX's net
sales are derived from the sale of perishable floral products and from
handling charges. Approximately 85% of CFX's sales are to approximately 400
wholesale distributors and 15% are to the mass market. For the year ended
December 31, 1996, net sales to H&H Flowers, Inc. d/b/a La Fleurette ("La
Fleurette"), a wholesale distributor owned by stockholders of CFX, totaled
$3.9 million. Approximately 43% of CFX's cost of sales in 1996 represented
purchases from two Colombian farms in which the stockholders of CFX prior to
the CFX Merger hold ownership interests. Neither the operations of La
Fleurette nor the Colombian farms are being acquired in connection with the
CFX Merger. The Company intends to renegotiate, as necessary, all arrangements
with related parties so that all continuing obligations of CFX thereunder are
no greater than those the Company would agree to with unaffiliated third
parties. See "Certain Relationships and Related Party Transactions--CFX." CFX
has approximately 110 employees.
CFX imposes a surcharge upon certain flowers that are or may become subject
to an anti-dumping duty and reserves that amount against the possibility that
a duty will be imposed. The Commerce Department is currently reviewing two
anti-dumping cases, three anti-dumping cases are pending judicial appeal and
additional cases may be initiated at any time.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- ------------------------------
1994 1995 1996 1996 1997
------------- ------------- -------------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $30,590 100.0% $32,096 100.0% $35,684 100.0% $20,585 100.0% $22,854 100.0%
Cost of Sales........... 23,839 77.9 24,328 75.8 28,190 79.0 16,031 77.9 17,759 77.7
Selling, General and
Administrative
Expenses............... 6,266 20.5 6,773 21.1 8,956 25.1 5,249 25.5 3,657 16.0
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating Income
(Loss)................. $ 485 1.6% $ 995 3.1% $(1,462) (4.1)% $ (695) (3.4)% $ 1,438 6.3%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales increased to $22.9 million in the six months ended June
30, 1997 from $20.6 million in the six months ended June 30, 1996, an increase
of $2.3 million, or 11.0%. This increase resulted primarily from obtaining
higher prices for certain products, increased volume of sales and a fuel
surcharge fee related to airline shipments that was added to customer
invoices.
Cost of Sales. Cost of sales, which consists primarily of payment for fresh
cut flowers, increased to $17.8 million in the six months ended June 30, 1997
from $16.0 million in the six months ended June 30, 1996, an increase of $1.7
million, or 10.8%, primarily as a result of the increase in sales and the
imposition of a fuel surcharge related to airline shipments that was imposed
by airlines beginning in April 1996. As a percentage of net sales, costs of
sales decreased to 77.7% in the six months ended June 30, 1997 from 77.9% in
the six months ended June 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $3.7 million in the six months ended June 30, 1997 from
$5.2 million in the six months ended June 30, 1996, a decrease of $1.6
million, or 30.3%. This decrease resulted from decreased compensation to
employee-stockholders, partially offset by increases in personnel and
occupancy costs. As a percentage of net sales, selling,
38
<PAGE>
general and administrative expenses decreased to 16.0% in the six months ended
June 30, 1997 from 25.5% in the six months ended June 30, 1996. Selling,
general and administrative expenses included compensation paid to employee-
stockholders totaling $0.3 million in the six months ended June 30, 1997 and
$2.4 million in the six months ended June 30, 1996.
Operating Income. As a result of the factors discussed above, operating
income increased to $1.4 million in the six months ended June 30, 1997 from
($0.7) million in the six months ended June 30, 1996, an increase of $2.1
million. As a percentage of net sales, operating income increased to 6.3% in
the six months ended June 30, 1997 from (3.4%) in the six months ended June
30, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales increased to $35.7 million in the year ended December
31, 1996 from $32.1 million in the year ended December 31, 1995, an increase
of $3.6 million, or 11.2%. The increase in net sales resulted primarily from
the availability and sale of higher quality flowers from a key supplier.
Cost of Sales. Cost of sales increased to $28.2 million in the year ended
December 31, 1996, from $24.3 million in the year ended December 31, 1995, an
increase of $3.9 million, or 15.9%, primarily as a result of the increase in
sales. As a percentage of net sales, cost of sales increased to 79.0% in the
year ended December 31, 1996 from 75.8% in the year ended December 31, 1995.
The increase resulted from an adjustment due to under-accrual for anti-dumping
liability in a prior period and from lower cost of sales in 1995 due to an
adjustment in that period for an over-accrual of anti-dumping liability.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $9.0 million in the year ended December 31, 1996, from
$6.8 million in the year ended December 31, 1995, an increase of $2.2 million,
or 32.2%. This increase primarily resulted from increased compensation and
increased expenses associated with CFX's customer promotion programs. As a
percentage of net sales, selling, general and administrative expenses
increased to 25.1% in the year ended December 31, 1996 from 21.1% in the year
ended December 31, 1995. Selling, general and administrative expenses include
compensation paid to employee-stockholders totaling $3.0 million in the year
ended December 31, 1996 and $1.4 million in the year ended December 31, 1995.
Operating Income. As a result of the factors discussed above, operating
income decreased to ($1.5) million in the year ended December 31, 1996 from
$1.0 million in the year ended December 31, 1995, a decrease of $2.5 million,
or 246.9% As a percentage of net sales, operating income decreased to (4.1%)
in the year ended December 31, 1996 from 3.1% in the year ended December 31,
1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased to $32.1 million in the year ended December
31, 1995 from $30.6 million in the year ended December 31, 1994, an increase
of $1.5 million, or 4.9%. This increase primarily resulted from the
availability and sale of higher quality products from a key supplier.
Cost of Sales. Cost of sales increased to $24.3 million in the year ended
December 31, 1995, from $23.8 million in the year ended December 31, 1994, an
increase of $0.5 million, or 2.1%, primarily as a result of increased sales.
As a percentage of net sales, cost of sales decreased to 75.8% in the year
ended December 31, 1995 from 77.9% in the year ended December 31, 1994,
primarily from an adjustment due to over-accrual for anti-dumping liability in
a prior period.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $6.8 million in the year ended December 31, 1995 from
$6.3 million in the year ended December 31, 1994, an
39
<PAGE>
increase of $0.5 million, or 8.1%. This increase primarily resulted from an
increase in personnel costs as well as increased contributions to CFX's profit
sharing plan. As a percentage of net sales, selling, general and
administrative expenses increased to 21.1% in the year ended December 31, 1995
from 20.5% in the year ended December 31, 1994. Selling, general and
administrative expenses include compensation paid to stockholder-employees
totaling $1.4 million in the year ended December 31, 1995 and $1.3 million in
the year ended December 31, 1994.
Operating Income. As a result of the factors discussed above, operating
income increased to $1.0 million in the year ended December 31, 1995 from $0.5
million in the year ended December 31, 1994, an increase of $0.5 million, or
105.2% As a percentage of net sales, operating income increased to 3.1% in the
year ended December 31, 1995 from 1.6% in the year ended December 31, 1994.
40
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
Founded in 1952, Bay State is a wholesale distributor of perishable floral
products and floral-related hardgoods, operating from six locations in
Massachusetts, New York, New Hampshire, Connecticut and Rhode Island. Bay
State purchases floral products from domestic growers, brokers and importers
and sells them to both retail florists and mass marketers. Perishable products
accounted for approximately 70% of sales, while hardgoods accounted for
approximately 30% of sales in 1996. Bay State has approximately 190 employees.
Bay State's results of operations have been impacted in recent years by its
acquisition of a distressed wholesale distributor in Providence, Rhode Island
in 1995 and a wholesale distributor in Clifton Park, New York in 1996.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $19,203 100.0% $25,592 100.0% $30,563 100.0% $16,412 100.0% $16,375 100.0%
Cost of Sales........... 12,807 66.7 17,068 66.7 20,722 67.8 11,279 68.7 11,080 67.7
Selling, General and
Administrative
Expenses............... 5,529 28.8 7,579 29.6 8,976 29.4 4,429 27.0 4,556 27.8
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating Income........ $ 867 4.5% $ 945 3.7% $ 865 2.8% $ 704 4.3% $ 739 4.5%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales were $16.4 million in the six months ended June 30,
1997 and the six months ended June 30, 1996. Net sales remained relatively
unchanged due to a reduction in sales to a supermarket chain in the six months
ended June 30, 1997. The supermarket chain, which accounted for $0.6 million
of net sales in the six months ended June 30, 1997 and $1.6 million of net
sales in the six months ended June 30, 1996, was acquired in late 1996 by
another supermarket chain which operates its own wholesale distribution
facility. The reduction in sales to this customer was offset by increased
sales to existing customers and sales to new customers, including new
supermarket customers.
Cost of Sales. Cost of sales, which consists of the cost of perishable and
hardgood products and in-bound freight costs, decreased to $11.1 million in
the six months ended June 30, 1997 from $11.3 million in the six months ended
June 30, 1996, a decrease of $0.2 million, or 1.8%. As a percentage of net
sales, cost of sales decreased to 67.7% in the six months ended June 30, 1997
from 68.7% in the six months ended June 30, 1996. This decrease primarily
resulted from management's ability to obtain more favorable prices and better
inventory management.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $4.6 million in the six months ended June 30, 1997 from
$4.4 million in the six months ended June 30, 1996, an increase of $0.1
million, or 2.9%. As a percentage of net sales, selling, general and
administrative expenses increased to 27.8% in the six months ended June 30,
1997 from 27.0% in the six months ended June 30, 1996. This increase primarily
resulted from increased compensation and benefit expenses.
Operating Income. As a result of the factors discussed above, operating
income was $0.7 million in the six months ended June 30, 1997 and the six
months ended June 30, 1996. As a percentage of net sales, operating income
increased to 4.5% in the six months ended June 30, 1997 from 4.3% in the six
months ended June 30, 1996.
41
<PAGE>
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales increased to $30.6 million in the year ended December
31, 1996 from $25.6 million in the year ended December 31, 1995, an increase
of $5.0 million, or 19.4%. This increase resulted primarily from the
acquisition of a wholesale distributor in Clifton Park, New York in 1996,
which accounted for $2.5 million in net sales in 1996, increased sales from
the Providence, Rhode Island facility, which accounted for $1.5 million of the
increase, and increased sales from other locations.
Cost of Sales. Cost of sales increased to $20.7 million in the year ended
December 31, 1996 from $17.1 million in the year ended December 31, 1995, an
increase of $3.7 million, or 21.4%, primarily as a result of increased sales.
As a percentage of net sales, cost of sales increased to 67.8% in the year
ended December 31, 1996 from 66.7% in the year ended December 31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $9.0 million in the year ended December 31, 1996 from
$7.6 million in the year ended December 31, 1995, an increase of $1.4 million,
or 18.4%. This increase resulted primarily from costs and expenses associated
with the new Clifton Park, New York facility and the growth of the Providence,
Rhode Island facility. As a percentage of net sales, selling, general and
administrative expenses decreased to 29.4% in the year ended December 31, 1996
from 29.6% in the year ended December 31, 1995. Selling, general and
administrative expenses include compensation paid to employee-stockholders
totaling $0.8 million in the year ended December 31, 1996 and in the year
ended December 31, 1995.
Operating Income. As a result of the factors discussed above, operating
income decreased by $80,000 in the year ended December 31, 1996 from the year
ended December 31, 1995, a decrease of 8.5%. As a percentage of net sales,
operating income decreased to 2.8% in the year ended December 31, 1996 from
3.7% in the year ended December 31, 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased to $25.6 million in the year ended December
31, 1995 from $19.2 million in the year ended December 31, 1994, an increase
of $6.4 million, or 33.3%. This increase resulted primarily from the
acquisition of a wholesale distributor in Providence, Rhode Island in 1995.
Cost of Sales. Cost of sales increased to $17.1 million in the year ended
December 31, 1995 from $12.8 million in the year ended December 31, 1994, an
increase of $4.3 million, or 33.3%, primarily as a result of increased sales.
As a percentage of net sales, cost of sales were 66.7% in the year ended
December 31, 1995 and the year ended December 31, 1994.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $7.6 million in the year ended December 31, 1995 from
$5.5 million in the year ended December 31, 1994, an increase of $2.1 million,
or 37.1%. This increase resulted primarily from costs associated with the
opening of the Providence, Rhode Island facility and increased sales efforts
at the Cromwell, Connecticut facility. As a percentage of net sales, selling
general and administrative expenses increased to 29.6% in the year ended
December 31, 1995 from 28.8% in the year ended December 31, 1994. Selling,
general and administrative expenses include compensation paid to employee-
stockholders totaling $0.8 million in the year ended December 31, 1995 and
$0.7 million in the year ended December 31, 1994.
Operating Income. As a result of the factors discussed above, operating
income decreased by $78,000 in the year ended December 31, 1995 from the year
ended December 31, 1994. As a percentage of net sales, operating income
decreased to 3.7% in the year ended December 31, 1995 from 4.5% in the year
ended December 31, 1994.
42
<PAGE>
FLOWER TRADING CORPORATION
Founded in 1977, Flower Trading is an importer and distributor of perishable
floral products which are imported from farms located primarily in Colombia
and Ecuador, and are distributed throughout the United States to approximately
350 wholesale distributors. Flower Trading has approximately 45 employees.
Flower Trading's net sales consist of sales of perishable floral products
and handling charges related to preparing products for shipment. Flower
Trading's cost of sales includes a "box fee" paid by Flower Trading on
purchases from Colombia. The box fees are paid to a broker with established
relationships in Colombia to procure flowers from various suppliers; the
broker is affiliated with a current Flower Trading stockholder. The broker's
services include arranging for a consistent, reliable, ample supply of quality
flowers and consolidating and arranging for shipments with common carriers to
provide Flower Trading with savings on shipping and handling costs.
Approximately 25% of Flower Trading's cost of sales in the year ended
December 31, 1996 was paid to affiliated entities. These entities are not
being acquired in connection with the Flower Trading Merger. Flower Trading
imposes a surcharge upon certain flowers that are or may become subject to an
anti-dumping liability and reserves that amount against the possibility that a
duty will be imposed.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $18,478 100.0% $20,335 100.0% $20,313 100.0% $11,305 100.0% $12,997 100.0%
Cost of Sales........... 14,452 78.2 15,921 78.3 15,914 78.3 8,928 79.0 10,139 78.0
Selling, General and
Administrative
Expenses............... 3,605 19.5 4,068 20.0 4,142 20.4 1,944 17.2 1,936 14.9
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating Income........ $ 421 2.3% $ 346 1.7% $ 257 1.3% $ 433 3.8% $ 922 7.1%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
Six Months Ended June 30, 1997 Compared To Six Months Ended June 30, 1996
Net Sales. Net sales increased to $13.0 million in the six months ended June
30, 1997 from $11.3 million in the six months ended June 30, 1996, an increase
of $1.7 million, or 15.0%. The increase resulted primarily from an increased
volume of sales, increased revenues at Valentine's Day and a fuel surcharge
fee that was added to customer invoices.
Cost of Sales. Cost of sales, which primarily consists of the cost of
purchasing fresh cut flowers, increased to $10.1 million in the six months
ended June 30, 1997 from $8.9 million in the six months ended June 30, 1996,
an increase of $1.2 million, or 13.6%. The increase resulted from the
imposition of a fuel surcharge related to airline shipments that was imposed
by airlines beginning in April 1996, and increases in the direct purchase
costs, commissions for consignment sales and freight costs associated with the
increased sales. As a percentage of net sales, cost of sales decreased to
78.0% in the six months ended June 30, 1997 from 79.0% in the six months ended
June 30, 1996, due to management's efforts to obtain more favorable prices.
Selling, General and Administrative. Selling, general and administrative
expenses were $1.9 million in the six months ended June 30, 1997 and the six
months ended June 30, 1996. As a percentage of net sales, selling,
43
<PAGE>
general and administrative expenses decreased to 14.9% in the six months ended
June 30, 1997 from 17.2% in the six months ended June 30, 1996. This decrease
resulted primarily from spreading fixed costs over increased sales.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.9 million in the six months ended June 30, 1997 from
$0.4 million in the six months ended June 30, 1996, an increase of $0.5
million, or 112.9%. As a percentage of net sales, operating income increased
to 7.1% in the six months ended June 30, 1997 from 3.8% in the six months
ended June 30, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales were $20.3 million in the year ended December 31, 1996
and in the year ended December 31, 1995. Net sales remained at the same level
due to an increase attributable to a fuel surcharge that was added to customer
invoices, offset by a decrease in anti-dumping duties collected.
Cost of Sales. Cost of sales remained relatively constant at $15.9 million
in the year ended December 31, 1996 and in the year ended December 31, 1995.
Cost of sales increased due to a fuel surcharge that airlines imposed
beginning in April 1996, the imposition by U.S. Customs of a higher percentage
anti-dumping duty, and a negotiated lower margin with growers, due to the
decreased volume of flowers sold, which was offset by decreased volume of
flowers sold. As a percentage of net sales, cost of sales were 78.3% in the
year ended December 31, 1996 and in the year ended December 31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses were $4.1 million in the year ended December 31, 1996 and the year
ended December 31, 1995. As a percentage of net sales, selling, general and
administrative expenses increased to 20.4% in the year ended December 31, 1996
from 20.0% in the year ended December 31, 1995.
Operating Income. As a result of the factors discussed above, operating
income decreased by $89,000 in the year ended December 31, 1996 from the year
ended December 31, 1995, a decrease of 25.7%. As a percentage of net sales,
operating income decreased to 1.3% in the year ended December 31, 1996 from
1.7% in the year ended December 31, 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased to $20.3 million in the year ended December
31, 1995 from $18.5 million in the year ended December 31, 1994, an increase
of $1.9 million, or 10.0%. The increase resulted from an increase in the
volume of flowers sold, and an increase in handling charges and anti-dumping
duties.
Cost of Sales. Cost of sales increased to $15.9 million in the year ended
December 31, 1995 from $14.5 million in the year ended December 31, 1994, an
increase of $1.5 million, or 10.2%, primarily as a result of increased sales.
As a percentage of sales, cost of sales increased to 78.3% in the year ended
December 31, 1995 from 78.2% in the year ended December 31, 1994.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $4.1 million in the year ended December 31, 1995 from
$3.6 million in the year ended December 31, 1994, an increase of $0.5 million,
or 12.8%. This increase resulted from increased compensation expense and
related benefits. As a percentage of net sales, selling, general and
administrative expenses increased to 20.0% in the year ended December 31, 1995
from 19.5% in the year ended December 31, 1994.
Operating Income. As a result of the factors discussed above, operating
income decreased to $0.3 million in the year ended December 31, 1995 from $0.4
million in the year ended December 31, 1994, a decrease of $0.1 million, or
17.8%. As a percentage of net sales, operating income decreased to 1.7% in the
year ended December 31, 1995 from 2.3% in the year ended December 31, 1994.
44
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND UNITED WHOLESALE FLORISTS OF AMERICA, INC.
Founded in 1947, United Wholesale is a wholesale distributor of perishable
floral products and floral-related hardgoods operating from 13 locations in
Arkansas, Alabama, Mississippi, Oklahoma, Tennessee and Texas. United
Wholesale purchases floral products from domestic growers, brokers and
importers and sells them to approximately 3,000 customers, including both
retail florists, and mass market retailers. Perishable products accounted for
approximately 70% of sales, while hardgoods accounted for approximately 30% of
sales in fiscal 1996. United Wholesale has approximately 175 employees. United
Wholesale has expanded to 13 locations through acquisitions of wholesale
distributors.
In 1991, United Wholesale began to operate a bouquet manufacturing business.
This business was discontinued at the end of 1994 due to operating losses.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------------------
1995 1996 1997
------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net Sales................. $17,985 100.0% $19,030 100.0% $19,673 100.0%
Cost of Sales............. 11,556 64.3 12,563 66.0 12,862 65.4
Selling, General and
Administrative Expenses.. 5,926 32.9 6,101 32.1 6,046 30.7
------- ----- ------- ----- ------- -----
Operating Income.......... $ 503 2.8% $ 366 1.9% $ 765 3.9%
======= ===== ======= ===== ======= =====
</TABLE>
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Net Sales. Net sales increased to $19.7 million in the year ended June 30,
1997 from $19.0 million in the year ended June 30, 1996, an increase of $0.6
million, or 3.4%, as a result of increased sales at United Wholesale's
Mississippi facilities due to reduced competition.
Cost of Sales. Cost of sales, which consists of the cost of perishable and
hardgood products and in-bound freight costs, increased to $12.9 million in
the year ended June 30, 1997 from $12.6 million in the year ended June 30,
1996, an increase of $0.3 million, or 2.4%, primarily as a result of increased
sales. As a percentage of net sales, cost of sales decreased to 65.4% in the
year ended June 30, 1997 from 66.0% in the year ended June 30, 1996. This
decrease resulted from savings obtained through a group buying program and
reductions in in-bound freight costs.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $6.0 million in the year ended June 30, 1997 from $6.1
million in the year ended June 30, 1996, a decrease of $0.1 million, or 0.9%.
As a percentage of net sales, selling, general and administrative expenses
decreased to 30.7% in the year ended June 30, 1997 from 32.1% in the year
ended June 30, 1996. This decrease resulted primarily from spreading fixed
costs over increased sales.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.8 million in the year ended June 30, 1997 from $0.4
million in the year ended June 30, 1996, an increase of $0.4 million, or
109.0%.
45
<PAGE>
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Net Sales. Net sales increased to $19.0 million in the year ended June 30,
1996 from $18.0 million in the year ended June 30, 1995, an increase of $1.0
million, or 5.8%. This increase resulted primarily from increased sales at
United Wholesale's Mobile, Alabama facility, which increased its emphasis on
sales of perishables, and its Tulsa, Oklahoma facility, which increased its
customer base by beginning a policy of extending credit to customers.
Cost of Sales. Cost of sales increased to $12.6 million in the year ended
June 30, 1996 from $11.6 million in the year ended June 30, 1995, an increase
of $1.0 million, or 8.7%, primarily as a result of operational difficulties at
the Memphis, Tennessee location, particularly with respect to inventory
management. As a percentage of net sales, cost of sales increased to 66.0% in
the year ended June 30, 1996 from 64.3% in the year ended June 30, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $6.1 million in the year ended June 30, 1996 from $5.9
million in the year ended June 30, 1995, an increase of $0.2 million, or 3.0%.
As a percentage of net sales, selling, general and administrative expenses
decreased to 32.1% in the year ended June 30, 1996 from 32.9% in the year
ended June 30, 1995. This decrease resulted primarily from spreading fixed
costs over increased sales.
Operating Income. As a result of the factors discussed above, operating
income decreased to $0.4 million in the year ended June 30, 1996 from $0.5
million in the year ended June 30, 1995, a decrease of $0.1 million, or 27.2%.
As a percentage of net sales, operating income decreased to 1.9% in the year
ended June 30, 1996 from 2.8% in the year ended June 30, 1995.
46
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
Founded in 1994, American Florist is a wholesale distributor of perishable
floral products and floral-related hardgoods located in Massachusetts. In
April 1994, American Florist acquired the wholesale distribution business of
Johnson's Roses, which was founded in 1927. American Florist purchases floral
products from foreign and domestic growers, brokers and importers and sells
them to both retail florists, and mass market retailers in Maine,
Massachusetts, Vermont and New Hampshire. American Florist also manufactures
floral bouquets for distribution to supermarkets. American Florist has
approximately 70 employees.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------------------------ --------------------------
1994 (1) 1995 1996 1996 1997
------------ ------------- ------------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $6,293 100.0% $10,783 100.0% $11,679 100.0% $6,444 100.0% $7,082 100.0%
Cost of Sales........... 4,579 72.8 7,788 72.2 8,268 70.8 4,458 69.2 4,793 67.7
Selling, General and
Administrative
Expenses............... 1,545 24.6 2,531 23.5 2,723 23.3 1,421 21.1 1,579 22.3
------ ----- ------- ----- ------- ----- ------ ----- ------ -----
Operating Income........ $ 169 2.7% $ 464 4.3% $ 688 5.9% $ 565 8.8% $ 710 10.0%
====== ===== ======= ===== ======= ===== ====== ===== ====== =====
</TABLE>
- --------
(1) The financial data for 1994 reflect eight months of operations.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales increased to $7.1 million in the six months ended June
30, 1997 from $6.4 million in the six months ended June 30, 1996, an increase
of $0.6 million, or 9.9%. This increase resulted from increased sales to
existing customers and sales to new customers.
Cost of Sales. Cost of sales, which consists of the cost of perishable and
hardgood products and in-bound freight costs, increased to $4.8 million in the
six months ended June 30, 1997 from $4.5 million in the six months ended June
30, 1996, an increase of $0.3 million, or 7.5%, primarily as a result of
increased sales. As a percentage of net sales, cost of sales decreased to
67.7% in the six months ended June 30, 1997 from 69.2% in the six months ended
June 30, 1996, due to management's ability to obtain more favorable prices,
improved inventory management and reduced freight costs.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.6 million in the six months ended June 30, 1997 from
$1.4 million in the six months ended June 30, 1996, an increase of $0.2
million, or 11.1%. As a percentage of net sales, selling, general and
administrative expenses increased to 22.3% in the six months ended June 30,
1997 from 22.1% in the six months ended June 30, 1996, primarily as a result
of additional personnel costs.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.7 million in the six months ended June 30, 1997 from
$0.6 million in the six months ended June 30, 1996, an increase of $0.1
million, or 25.7%. As a percentage of net sales, operating income increased to
10.0% in the six months ended June 30, 1997 from 8.8% in the six months ended
June 30, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales increased to $11.7 million in the year ended December
31, 1996 from $10.8 million in the year ended December 31, 1995, an increase
of $0.9 million, or 8.3%. This increase resulted from an
47
<PAGE>
increased focus on bouquet sales to mass market retailers, improved quality of
products and the addition of floral-related hardgoods to American Florist's
product line.
Cost of Sales. Cost of sales increased to $8.3 million in the year ended
December 31, 1996 from $7.8 million in the year ended December 31, 1995, an
increase of $0.5 million, or 6.2%, primarily as a result of increased sales.
As a percentage of net sales, cost of sales decreased to 70.8% in the year
ended December 31, 1996 from 72.2% in the year ended December 31, 1995, due to
management's efforts to obtain more favorable product prices.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.7 million in the year ended December 31, 1996 from
$2.5 million in the year ended December 31, 1995, an increase of $0.2 million,
or 7.6%. As a percentage of net sales, selling, general and administrative
expenses decreased to 23.3% in the year ended December 31, 1996 from 23.5% in
the year ended December 31, 1995, primarily as a result of additional
personnel.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.7 million in the year ended December 31, 1996 from $0.5
million in the year ended December 31, 1995, an increase of $0.2 million or
48.3%. As a percentage of net sales, operating income increased to 5.9% in the
year ended December 31, 1996 from 4.3% in the year ended December 31, 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased to $10.8 million in the year ended December
31, 1995 from $6.3 million in the year ended December 31, 1994, an increase of
$4.5 million, or 71.3%. This increase primarily resulted from a full year of
operations in 1995 compared to eight months of operations in 1994.
Cost of Sales. Cost of sales increased to $7.8 million in the year ended
December 31, 1995 from $4.6 million in the year ended December 31, 1994, an
increase of $3.2 million, or 70.1%, primarily as a result of increased sales.
As a percentage of net sales, cost of sales decreased to 72.2% in the year
ended December 31, 1995 from 72.8% in the year ended December 31, 1994, due to
management's efforts to obtain more favorable prices.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.5 million in the year ended December 31, 1995 from
$1.5 million in the year ended December 31, 1994, an increase of $1.0 million,
or 63.8%. This increase primarily resulted from a full year of operations in
1995 compared to eight months of operations in 1994. As a percentage of net
sales, selling, general and administrative expenses decreased to 23.5% in the
year ended December 31, 1995 from 24.6% in the year ended December 31, 1994.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.5 million in the year ended December 31, 1995 from $0.2
million in the year ended December 31, 1994, an increase of $0.3 million or
174.6%. As a percentage of net sales, operating income increased to 4.3% in
the year ended December 31, 1995 from 2.7% in the year ended December 31,
1994.
48
<PAGE>
MONTEREY BAY BOUQUET, INC. AND BAY AREA BOUQUETS, INC.
Founded in 1993, Monterey Bay, located in Watsonville, California, is a
manufacturer and wholesale distributor of fresh cut flower bouquets,
consisting primarily of specialty California grown flowers. Monterey Bay
purchases flowers from nearly 150 growers and 12 importers. Monterey Bay has
two customers which account for nearly all of its sales: a supermarket and a
discount retailer. Each of these customers has numerous locations throughout
the western United States. In February 1995, Monterey Bay acquired a bouquet
manufacturer that distributed bouquets to the discount retailer, and Monterey
Bay began producing bouquets for that discount retailer. Monterey Bay has
approximately 65 employees.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $4,253 100.0% $6,903 100.0% $9,477 100.0% $4,827 100.0% $6,803 100.0%
Cost of Sales........... 3,773 88.7 5,959 86.3 8,285 87.4 4,166 86.3 5,575 81.9
Selling, General and
Administrative
Expenses............... 458 10.8 910 13.2 1,113 11.7 496 10.3 563 8.3
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Operating Income........ $ 22 0.5% $ 34 0.5% $ 79 0.8% $ 165 3.4% $ 665 9.8%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales increased to $6.8 million in the six months ended June
30, 1997 from $4.8 million in the six months ended June 30, 1996, an increase
of $2.0 million, or 40.9%. The increase reflected an increased volume of
sales.
Cost of Sales. Cost of sales, which primarily consists of fresh cut flowers,
production, labor and distribution costs, increased to $5.6 million in the six
months ended June 30, 1997 from $4.2 million in the six months ended June 30,
1996, an increase of $1.4 million, or 33.8%, primarily as a result of the
increased sales. As a percentage of net sales, cost of sales decreased to
81.9% in the six months ended June 30, 1997 from 86.3% in the six months ended
June 30, 1996. This decrease resulted primarily from better prices obtained
through higher volume purchases of both perishable products and packaging
materials.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $0.6 million in the six months ended June 30, 1997 from
$0.5 million in the six months ended June 30, 1996, an increase of $0.1
million, or 13.5%. The increase was attributable to increased sales. As a
percentage of net sales, selling, general and administrative expenses
decreased to 8.3% in the six months ended June 30, 1997 from 10.3% in the six
months ended June 30, 1996.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.7 million in the six months ended June 30, 1997 from
$0.2 million in the six months ended June 30, 1996, an increase of $0.5
million or 303.0%. As a percentage of net sales, operating income increased to
9.8% in the six months ended June 30, 1997 from 3.4% in the six months ended
June 30, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales increased to $9.5 million in the year ended December
31, 1996 from $6.9 million in the year ended December 31, 1995, an increase of
$2.6 million, or 37.3%. This increase resulted primarily from increased
purchases from existing stores of both of Monterey Bay's customers due to
Monterey Bay's focus on service and quality, and expansion into new stores.
49
<PAGE>
Cost of Sales. Cost of sales increased to $8.3 million in the year ended
December 31, 1996 from $6.0 million in the year ended December 31, 1995, an
increase of $2.3 million, or 39.0%, primarily as a result of increased sales.
As a percentage of net sales, cost of sales increased to 87.4% in the year
ended December 31, 1996 from 86.3% in the year ended December 31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.1 million in the year ended December 31, 1996 from
$0.9 million in the year ended December 31, 1995, an increase of $0.2 million,
or 22.3%. As a percentage of net sales, selling, general and administrative
expenses decreased to 11.7% for the year ended December 31, 1996 from 13.2%
for the year ended December 31, 1995. This decrease resulted primarily from
spreading fixed costs over increased net sales. Selling, general and
administrative expenses include compensation paid to employee-stockholders
totaling $0.3 million in both the year ended December 31, 1996 and the year
ended December 31, 1995.
Operating Income. As a result of the factors discussed above, operating
income increased by $45,000 in the year ended December 31, 1996 from the year
ended December 31, 1995, an increase of 132.4%. As a percentage of net sales,
operating income increased to 0.8% in the year ended December 31, 1996 from
0.5% in the year ended December 31, 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased to $6.9 million in the year ended December
31, 1995 from $4.3 million in the year ended December 31, 1994, an increase of
$2.7 million, or 62.3%. This increase resulted primarily from the acquisition
of a bouquet manufacturer that produced bouquets for a discount retailer in
February 1995 and Monterey Bay's focus on improving quality and service.
Cost of Sales. Cost of sales increased to $6.0 million in the year ended
December 31, 1995 from $3.8 million in the year ended December 31, 1994, an
increase of $2.2 million, or 57.9%, primarily as a result of the increase in
sales. As a percentage of sales, cost of sales decreased to 86.3% in the year
ended December 31, 1995 from 88.7% in the year ended December 31, 1994. This
decrease resulted primarily from favorable prices obtained through volume
purchasing.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $0.9 million in the year ended December 31, 1995 from
$0.5 million in the year ended December 31, 1994, an increase of $0.4 million,
or 98.7%. This increase primarily resulted from the addition of personnel. As
a percentage of net sales, selling general and administrative expenses
increased to 13.2% in the year ended December 31, 1995 from 10.8% in the year
ended December 31, 1994. Selling, general and administrative expenses include
compensation paid to employee-stockholders totaling $0.3 million in the year
ended December 31, 1995 and $0.2 million in the year ended December 31, 1994.
Operating Income. As a result of the factors discussed above, operating
income increased to $34,000 in the year ended December 31, 1995 from $22,000
in the year ended December 31, 1994, an increase of $12,000, or 54.5%. As a
percentage of net sales, operating income was 0.5% in the year ended December
31, 1995 and the year ended December 31, 1994.
50
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
Founded in 1978, Alpine Gem is a broker and shipper of perishable floral
products. Alpine Gem purchases flowers from approximately 250 growers and
sells flowers on consignment for approximately 18 growers. Alpine Gem
distributes flowers to nearly 750 customers, primarily wholesalers, located
throughout the United States. Alpine Gem has approximately 20 employees.
Alpine Gem has one location in Montana and one in California.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of net sales for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------- --------------------------
1994 1995 1996 1996 1997
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales............... $7,252 100.0% $8,139 100.0% $9,334 100.0% $4,979 100.0% $5,597 100.0%
Cost of Sales........... 5,438 75.0 6,287 77.2 7,132 76.4 3,840 77.1 4,259 76.1
Selling, General and
Administrative
Expenses............... 1,320 18.2 1,526 18.7 1,868 20.0 802 16.1 902 16.1
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Operating Income........ $ 494 6.8% $ 326 4.0% $ 334 3.6% $ 337 6.8% $ 436 7.8%
====== ===== ====== ===== ====== ===== ====== ===== ====== =====
</TABLE>
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Net Sales. Net sales increased to $5.6 million in the six months ended June
30, 1997 from $5.0 million in the six months ended June 30, 1996, an increase
of $0.6 million, or 12.4%, primarily from sales resulting from improved
promotion of goods and marketing of additional varieties of products.
Cost of Sales. Cost of sales, which primarily consists of the cost of fresh
cut flowers costs, increased to $4.3 million in the six months ended June 30,
1997 from $3.8 million in the six months ended June 30, 1996, an increase of
$0.4 million, or 10.9%, primarily as a result of increased sales. As a
percentage of net sales, cost of sales decreased to 76.1% in the six months
ended June 30, 1997 from 77.1% in the six months ended June 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $0.9 million in the six months ended June 30, 1997 from
$0.8 million in the six months ended June 30, 1996, an increase of $0.1
million, or 12.5%, primarily as a result of increased sales, marketing and
lease expenses. As a percentage of net sales, selling general and
administrative expenses were 16.1% in the six months ended June 30, 1997 and
the six months ended June 30, 1996.
Operating Income. As a result of the factors discussed above, operating
income increased to $0.4 million in the six months ended June 30, 1997 from
$0.3 million in the six months ended June 30, 1996, an increase of $0.1
million, or 29.4%. As a percentage of net sales, operating income increased to
7.8% in the six months ended June 30, 1997 from 6.8% in the six months ended
June 30, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Net Sales. Net sales increased to $9.3 million in the year ended December
31, 1996 from $8.1 million in the year ended December 31, 1995, an increase of
$1.2 million, or 14.7%. This increase resulted primarily from increased
marketing efforts directed at increasing the variety of available products.
Cost of Sales. Cost of sales increased to $7.1 million in the year ended
December 31, 1996 from $6.3 million in the year ended December 31, 1995, an
increase of $0.8 million, or 13.4%. This increase resulted primarily from
increased sales. As a percentage of net sales, cost of sales decreased to
76.4% in the year ended
51
<PAGE>
December 31, 1996 from 77.2% in the year ended December 31, 1995, as a result
of increased sales of products with a higher value to purchasers, for which
Alpine Gem was able to charge a premium.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.9 million in the year ended December 31, 1996 from
$1.5 million in the year ended December 31, 1995, an increase of $0.3 million,
or 22.4%. As a percentage of net sales, selling, general and administrative
expenses increased to 20.0% in the year ended December 31, 1996 from 18.7% in
the year ended December 31, 1995.
Operating Income. Operating income was $0.3 million in the year ended
December 31, 1996 and the year ended December 31, 1995. As a percentage of net
sales, operating income decreased to 3.6% in the year ended December 31, 1996
from 4.0% in the year ended December 31, 1995.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
Net Sales. Net sales increased to $8.1 million in the year ended December
31, 1995 from $7.3 million in the year ended December 31, 1994, an increase of
$0.9 million, or 12.2%. This increase resulted primarily from the use of
independent sales representatives to sell products, as well as entry into the
Florida market. Alpine Gem subsequently discontinued its Florida operations.
Cost of Sales. Cost of sales increased to $6.3 million in the year ended
December 31, 1995 from $5.4 million in the year ended December 31, 1994, an
increase of $0.8 million, or 15.6%. This increase resulted primarily from
Alpine Gem's entry into the Florida market. As a percentage of net sales, cost
of sales increased to 77.2% in the year ended December 31, 1995 from 75.0% in
the year ended December 31, 1994.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.5 million in the year ended December 31, 1995 from
$1.3 million in the year ended December 31, 1994, an increase of $0.2 million,
or 15.6%. As a percentage of net sales, selling general and administrative
expenses increased to 18.7% in the year ended December 31, 1995 from 18.2% in
the year ended December 31, 1994.
Operating Income. As a result of the factors discussed above, operating
income decreased to $0.3 million in the year ended December 31, 1995 from $0.5
million in the year ended December 31, 1994, a decrease of $0.2 million, or
34.0%. As a percentage of net sales, operating income decreased to 4.0% in the
year ended December 31, 1995 from 6.8% in the year ended December 31, 1994.
52
<PAGE>
BUSINESS
OVERVIEW
USA Floral was founded in April 1997 to create a national consolidator and
operator of floral products distribution businesses. The Company engages
primarily in the wholesale distribution of perishable floral products and
floral-related hardgoods. The Company also imports cut flowers from growers in
foreign countries, provides pre-packaged floral bouquets and arrangements to
retail florists and mass-market retailers and engages in brokerage and
shipping services for wholesalers of both foreign and domestic cut flowers.
The Company believes that it is one of the largest integrated distributors of
floral products in the United States. The Company has approximately 945
employees and serves thousands of customers nationwide from 32 facilities in
17 states. For the year ended December 31, 1996, the Company had pro forma
combined revenues of $175.5 million, pro forma combined operating income of
$5.0 million and pro forma combined net income of $2.7 million.
INDUSTRY OVERVIEW
The floriculture industry produces, distributes and markets fresh cut
flowers and greens, potted plants and floral-related hardgoods such as vases
and glassware, foam for flower arranging, and tools and supplies. Through a
network of importers, brokers, shippers and wholesalers, flowers are brought
from growing regions throughout the United States and in countries around the
world to consumers who purchase from retail florists and mass market
distributors such as supermarkets and discount stores.
Fresh flowers are grown commercially at farms around the world. Principal
sources of supply for the United States market are growers in Colombia and
Ecuador in South America, Costa Rica and Mexico in Latin America, Holland in
Europe, and to a lesser extent Australia and New Zealand in the Pacific Rim.
Latin America and South America are the predominant sources of supply for
flowers imported into the United States. Domestic sources of supply include
farms in California and the Pacific Northwest, as well as Hawaii for tropical
varieties and the Northeast for greens that are particularly in demand during
the winter holidays. While a limited number of growers operate large,
integrated farms, both foreign and domestic growers are typically small
businesses operating in a highly fragmented environment.
Flowers grown abroad arrive at United States ports of entry, principally
Miami, Florida, by air each day. Flowers imported into the United States
primarily consist of roses, carnations, mums and alstromeria, each of which
are imported in a number of varieties. Importers of floral products receive
these flowers, generally on consignment, and facilitate their passage through
U.S. customs inspection and clearance procedures. Once the flowers have
cleared customs, the importers often pre-cool the flowers at their own
facilities to help preserve them as they move through the distribution
channel. Typically, flowers spend only one or two days in customs clearance
and pre-cooling.
Importers, for foreign flowers, and brokers for both foreign and domestic
flowers, match the available flower supply with demand from wholesalers and
bouquet companies. The flowers are shipped to shippers and wholesalers from
importers' facilities at ports of entry or from domestic growers on
refrigerated trucks, usually arriving at the wholesaler within one to three
days. Shippers break large shipments of perishable floral products down into
lots sized to meet customer requirements, and then send them to wholesalers,
bouquet companies and mass-market retailers. Wholesalers then market and
supply fresh flowers and floral products hardgoods to traditional retail
florists and mass-market retailers, as well as to bouquet manufacturers.
Bouquet companies, which have emerged over the past decade to provide pre-
packaged products to mass-market retailers, obtain flowers from importers, as
well as directly from growers, and, to a lesser extent, from wholesalers and
shippers. Bouquet companies employ mass-production techniques in order to
replicate cost-effectively a particular floral product design for widespread
distribution. They wrap cut flowers in plastic sleeves and produce floral
arrangements, which are packaged in shipping containers, for sale through mass
market retailers such as the floral departments of grocery stores and discount
merchandisers.
At each stage of the distribution chain, the pricing of cut flowers varies
with quality and freshness. As days pass from the time of first cutting, fresh
products that remain unsold decline in price, until they are ultimately
53
<PAGE>
sold or discarded. Since the freshest, highest-quality flowers command the
highest prices, the distribution system effectively rewards the growers that
produce the best flowers, the importers and brokers that clear and match
flowers with buyers most efficiently, and the wholesalers and bouquet
companies that store and preserve flowers most effectively and bring the best
products to market most quickly.
The distribution channel in the floriculture industry is highly fragmented,
and consists mainly of small, family-owned firms that operate from a single
location or from a small number of outlets in a single region. While floral
products have historically been sold at retail through a large number of
traditional florists, who continue to serve the majority of consumers, the
Company believes that changes in consumer buying habits are causing more
consumers to seek floral products from mass-market retailers such as
supermarkets, discount retailers and chain stores. Industry sources estimate
that, sales in the retail segment of the floriculture industry totaled
approximately $15.0 billion in 1996, and that approximately 45% of retail
sales are generated by mass market retailers. Management believes that the
growing consumer preference for more convenient floral products retailers,
together with the potential efficiencies to be achieved from operating floral
products businesses on a large scale, have well positioned the floriculture
industry for consolidation and provide an attractive opportunity for the
Company to build an integrated, nationwide floral products distributor that
can serve the growing mass market while continuing to meet the needs of the
traditional florists for high quality products and services.
STRATEGY
The Company believes that, as a leading consolidator in the highly
fragmented floral products industry, it is uniquely positioned to create a new
industry operating model that streamlines distribution, improves product
quality and provides better service to retailers, particularly in the mass
market. To attain its goals, the Company's strategy is to (i) acquire
profitable floral products businesses in each segment of the distribution
channel, (ii) empower decentralized local management to stay close to
customers and generate new ideas for Company-wide dissemination, (iii) achieve
operating efficiencies by combining certain functions at the corporate level,
and (iv) introduce new products and services to the traditional retail
florist, the mass market supplier and the consumer, including "brand-name"
flowers and express services for certain pre-packaged products.
Pursue Strategic Acquisitions. The Company intends to capitalize upon
consolidation opportunities in the U.S. floral products industry by pursuing
selective acquisitions in all components of the distribution segment of the
industry. To build upon and enhance its nationwide presence, the Company will
focus upon opportunities that complement and complete its floral products
offerings and in new geographic markets with above-average population growth
and floral products consumption. The Company intends to implement an
aggressive acquisition program utilizing a "hub and spoke" strategy for
expansion into its targeted markets. As part of this strategy, the Company
plans to make acquisitions of established, high-quality local companies in
targeted geographic areas, which can then serve as "hubs" for the acquisition
of smaller, synergistic "spokes" in that locality or in surrounding markets.
The Company believes that it can successfully integrate the operations of
acquired spokes into its hubs, in order to leverage more effectively its
sales, marketing and distribution capabilities. Robert J. Poirier, the
Company's co-founder, Chairman of the Board, President and Chief Executive
Officer, has over 22 years of experience in the floral products industry, with
extensive relationships with wholesalers, importers, brokers and bouquet
manufacturers. Mr. Poirier's industry knowledge is complemented by the
acquisition expertise of Jonathan J. Ledecky, the Company's co-founder and
Non-Executive Chairman of the Board. Mr. Ledecky is the founder, Chairman of
the Board and Chief Executive Officer of U.S. Office Products Company, a
publicly-held supplier of a broad range of office products and business
services that has been built primarily through the acquisition and integration
of over 190 companies since its inception in October 1994.
Operate with Decentralized Management. The Company plans to conduct its
operations with a decentralized management approach through which individual
management teams will be responsible for the day-to-day operations of the
Founding Companies as well as for helping to identify additional acquisition
candidates in their respective locales. At the same time, a company-wide team
of senior management will provide the Founding Companies with strategic
oversight and guidance with respect to acquisitions, financing, marketing and
operations. As part of this strategy, the Company intends to foster a culture
of cooperation and teamwork
54
<PAGE>
that emphasizes dissemination of "best practices" among its local management
teams. The Company believes that stock ownership and incentive compensation
will help to keep the objectives of local management aligned with those of the
Company, and that a decentralized management approach will result in better
customer service by allowing local management the flexibility to implement
policies and make decisions based on the needs of local customers.
Achieve Operating Efficiencies. The Company believes that it will be able to
increase operating efficiency and achieve certain synergies among its
constituent businesses. In particular, with larger operational scale, the
Company believes that it can increase distribution efficiencies by utilizing
shipping and delivery capacity more efficiently. The Company will also seek to
combine certain administrative functions, such as accounting and finance,
insurance, employee benefits, strategic marketing and legal support, at the
corporate level, and to institute a Company-wide management information
system. The Company believes that increased scale and administrative
integration will enable it not only to operate more efficiently, but also to
obtain more favorable discounts and rebates on floral products hardgoods and,
to a lesser extent, realize savings on transportation and handling costs of
fresh flowers.
Introduce New Products and Services. The Company believes that over time it
will be able to develop and market high-value added products and services,
such as "branded" flowers and bouquets specifically identified with quality
and consistency. By utilizing its contacts with growers and leveraging its
distribution, the Company believes that it can establish specifications for
fresh flowers and control product quality at each step in the distribution
process, thereby building a brand identification that will command a premium
price. The Company also intends to service retailers by providing pre-packaged
fresh flowers and arrangements during periods of peak demand, as well as to
market floral products through corporate account relationships and other
means.
THE FOUNDING COMPANIES
USA Floral has entered into agreements to acquire the Founding Companies
contemporaneously with the consummation of the Offering with a portion of the
proceeds therefrom. The consummation of the Mergers is a condition to the
consummation of the Offering. USA Floral has conducted no operations and
generated no revenues to date.
The Roy Houff Company. Founded in 1977, Houff is a wholesale distributor of
perishable floral products and floral-related hardgoods, operating from seven
locations in Illinois, Virginia and Arizona. Houff purchases floral products
from importers, brokers and shippers and sells them to approximately 3,000
customers, including retail florists and mass market retailers. Houff has
approximately 270 employees. Houff's annual revenues in 1996 were
approximately $39.1 million.
CFX, Inc. Founded in 1974, CFX is an importer and distributor of perishable
floral products located in Miami, Florida. CFX imports flowers from
approximately 40 farms located primarily in Colombia and Ecuador, and
distributes them throughout the United States to approximately 400 wholesale
distributors as well as directly to mass market retailers. CFX has
approximately 110 employees. CFX's annual revenues in 1996 were approximately
$35.7 million.
Bay State Florist Supply, Inc. Founded in 1952, Bay State is a wholesale
distributor of perishable floral products and floral-related hardgoods,
operating from six locations in Massachusetts, New York, New Hampshire,
Connecticut and Rhode Island. Bay State purchases floral products from
domestic growers, importers, brokers and shippers and sells them to
approximately 3,000 customers, including retail florists and mass market
retailers. Bay State has approximately 190 employees. Bay State's annual
revenues in 1996 were approximately $30.6 million.
Flower Trading Corporation. Founded in 1977, Flower Trading is an importer
and distributor of perishable floral products, located in Miami, Florida.
Flower Trading imports flowers from farms located
55
<PAGE>
primarily in Colombia, Ecuador, Guatemala and Peru and distributes them
throughout the United States to approximately 350 wholesale distributors.
Flower Trading has approximately 45 employees. Flower Trading's annual
revenues in 1996 were approximately $20.3 million.
United Wholesale Florists, Inc. Founded in 1947, United Wholesale is a
wholesale distributor of perishable floral products and floral-related
hardgoods, operating from 13 locations in Arkansas, Alabama, Mississippi,
Oklahoma, Tennessee and Texas. United Wholesale purchases floral products from
domestic growers, importers, brokers and shippers and sells them to
approximately 3,000 customers, including retail florists and mass marketers.
United Wholesale has approximately 175 employees. United Wholesale's revenues
for the fiscal year ended June 30, 1997 were approximately $19.7 million.
American Florist Supply, Inc. Founded in 1994, American Florist is a
wholesale distributor of perishable floral products and floral-related
hardgoods, located in Woburn, Massachusetts. American Florist purchases floral
products from foreign and domestic growers, brokers and importers and sells
them to approximately 450 customers, including retail florists and mass market
retailers in Maine, Massachusetts, Vermont and New Hampshire. American Florist
also provides pre-packaged fresh cut floral bouquets to retail florists and
mass-market retailers. American Florist has approximately 70 employees.
American Florist's annual revenues in 1996 were approximately $11.7 million.
Monterey Bay Bouquet, Inc. and Bay Area Bouquets, Inc. Founded in 1993,
Monterey Bay, located in Watsonville, California, is a manufacturer of fresh
cut flower bouquets, consisting primarily of specialty California-grown
flowers. Monterey Bay purchases flowers from 12 importers and nearly 150
domestic growers and distributes them to a supermarket and a discount
retailer, each of which has numerous locations throughout the western United
States. Monterey Bay has approximately 65 employees. Monterey Bay's annual
revenues in 1996 were approximately $9.5 million.
Alpine Gem Flower Shippers, Inc. Founded in 1978, Alpine Gem is a broker of
perishable floral products, operating from one location in Montana and one in
California. Alpine Gem purchases flowers from approximately 250 growers,
principally located in the United States, and sells flowers on consignment for
approximately 18 growers. Alpine Gem distributes flowers to nearly 750
customers, primarily wholesalers, located throughout the U.S. Alpine Gem has
approximately 20 employees. Alpine Gem's annual revenues in 1996 were
approximately $9.3 million.
COMPANY PRODUCTS AND SERVICES
Through the Founding Companies, the Company provides a full range of
interrelated floral products and services, including importing, brokerage,
wholesaling and bouquet manufacturing.
Importing. Through CFX and Flower Trading, the Company imports fresh
flowers, including roses, carnations, mums and alstromeria, from abroad,
principally from Colombia and Ecuador. The Company imports flowers daily
through the U.S. port of entry in Miami, Florida. CFX and Flower Trading
assist in clearing each shipment through U.S. customs and then transfer the
flowers to their own facilities for pre-cooling. CFX and Flower Trading then
act as intermediaries to link their available stocks of flowers with
wholesalers throughout the country. To a limited extent, Alpine Gem also
imports flowers grown in the Pacific Rim.
Brokerage. Through Alpine Gem, the Company serves as a broker for domestic
flowers, linking flowers grown primarily in California with wholesalers
throughout the United States. Alpine Gem obtains information about maturing
fresh flowers in California fields from a network of nearly 100 growers. At
the same time, Alpine Gem gauges wholesaler demand for domestic flowers
through contacts with wholesale distributors across the country. When matches
are made, Alpine Gem obtains the flowers from the growers, breaks them down
and repackages them to suit customer requirements and arranges delivery from
the grower or from Alpine Gem to the wholesaler or bouquet company by
refrigerated trucks operated by third-party shippers. To a lesser extent, CFX
and Flower Trading also serve as brokers, arranging for drop shipments of
flowers directly to wholesalers and bouquet companies.
56
<PAGE>
Wholesaling. Wholesalers sell imported and domestic perishable floral
products and floral-related hardgoods directly to thousands of retail florists
as well as to mass market retailers. The Company operates in Illinois,
Virginia and Arizona through Houff; in Massachusetts, Connecticut, New York,
New Hampshire and Rhode Island, through Bay State; in Arkansas, Alabama,
Mississippi, Oklahoma, Tennessee and Texas through United Wholesale; and in
Massachusetts, Vermont, New Hampshire and Maine through American Florist.
Houff, Bay State and United Wholesale each have multiple branches within a
region in order to provide customers with timely and complete service.
Upon receipt of shipments of flowers from suppliers, the Company's
wholesalers process incoming flowers (i.e., break bulk, hydrate, re-cut stems
and repackage to suit customer demand) to facilitate further distribution to
retailers. In some cases, these wholesalers will also prepare specific
arrangements to meet customer needs. Most of the Company's wholesale
facilities are able to make deliveries to each of their retail customers once
per day, and in some cases twice per day.
Bouquet Manufacturing. Through Monterey Bay and American Florist, the
Company takes fresh flowers obtained from growers or importers and creates
pre-packaged bunches or arrangements for distribution to retail florists and
mass market retailers, and primarily to a large supermarket chain and a large
chain discount retailer.
SALES AND MARKETING
The Founding Companies each employ a dedicated sales force to market floral
products directly to entities at the next level of the distribution chain.
Sales and marketing is done primarily on a one-to-one basis by telephone calls
to established accounts. The Founding Companies employ an aggregate of 275
salespersons. Most of these employees are compensated on a commission basis or
through other incentive-based compensation programs that encourage employees
to build existing business as well as generate new customer relationships.
In addition, the Company's wholesalers typically maintain limited "showroom"
space for walk-in business from trade customers, in which hardgoods such as
vases and ribbons are displayed for sale. Trade customers can also examine and
select fresh flowers from the wholesalers' on-site coolers.
The Company believes that the nationwide scope and significant scale that it
can attain through its acquisition strategy will create opportunities, over
time, to promote high-quality, brand-name products, principally through direct
sales techniques and retail promotions. In addition, the Company intends to
seek corporate account opportunities to market products to selected audiences
of employees and corporate purchasing personnel.
SOURCES OF SUPPLY
Approximately 75% of the fresh flowers sold by the Company are imported from
abroad, principally from Colombia and Ecuador; the remaining 25% are grown in
the United States, principally in California. Although the Company does not
generally enter into contracts with its suppliers, it actively manages
relationships with a large number of growers, importers and brokers to obtain
high-quality flowers in amounts and at times needed. In addition, when
appropriate the Company enters into standing order arrangements with certain
importers, which provide for fixed quantity purchases on a fixed price basis
throughout the year with higher quantities at that price during peak demand
periods, to ensure an adequate supply of flowers during periods of peak
demand. The Company believes that it has good relationships with its suppliers
and that the large number of current and potential suppliers should continue
to make perishable floral products available to the Company as needed. The
Company sources its hardgood products from a number of suppliers. The Company
believes that it has good relationships with its suppliers, and that
alternative sources of supply are readily available if necessary.
CUSTOMERS
The Founding Companies have thousands of customers, consisting of other
wholesalers and bouquet companies, traditional florists and mass market
retailers. Certain other participants in the floriculture industry,
57
<PAGE>
including wire services such as Florists' Transworld Delivery Association
("FTD") and order aggregators such as 1-800-FLOWERS (both of which rely upon
traditional retail florists such as those supplied by the Company to fulfill
their orders), are also indirect customers for the Company's products through
the demand tha t their orders generate at retail florists. The Company
generally does not enter into long-term sales contracts with its
customers. The Company's sales are generally evidenced by a purchase order or
other sales documentation limited to a specific sale. No single customer
accounted for more than 5% of the Company's pro forma combined 1996 revenues.
To a limited extent, the Founding Companies have historically been suppliers
to and customers of each other; the Company expects that these relationships
will continue following the Mergers, and that the Company's strategy of
fostering cooperation and teamwork may yield new opportunities for the
Founding Companies and any subsequently acquired companies to pursue business
together.
COMPETITION
The distribution segment of the floriculture industry is highly competitive,
with numerous distributors in each market. The Company competes with other
importers, brokers, wholesalers and bouquet companies based upon price, credit
terms, breadth of product offerings, product quality, customer service and
location. In addition, the Company competes with other buyers and sellers of
floral and floral-related products, such as garden centers and farm stores. To
the extent that the Company is unable to compete successfully against its
existing and future competitors, its business, operating results and financial
condition would be materially adversely affected. While the Company believes
that it competes effectively within its industry, additional competitors with
greater resources than the Company may enter the industry and compete
effectively against the Company. Moreover, the Company may depend in part upon
a trend toward consolidation in the floral products industry in order to
execute effectively its acquisition and vertical integration strategy. This
trend may not continue. If the Company's customers do not receive the
Company's vertical integration strategy favorably, such customers have
numerous alternative sources of supply.
FACILITIES
The Company's corporate offices are located in leased space in Washington,
D.C. at 3500 Whitehaven Parkway, Washington, D.C. 20007. The telephone number
of its principal executive offices is (202) 333-0800. To accommodate its
planned growth, the Company is in the process of seeking a larger headquarters
facility in the Washington area, which it intends to lease.
In addition to its corporate offices, upon consummation of the Mergers the
Company will maintain the following facilities:
<TABLE>
<CAPTION>
OWNED OR
FOUNDING COMPANY LOCATION PRINCIPAL USE LEASED
---------------- -------- ------------- --------
<S> <C> <C> <C>
Houff................... Chicago, IL Headquarters and Distribution Owned
Facility
Chicago, IL Distribution Facility Owned
Normal, IL Distribution Facility Owned
Wheeling, IL Distribution Facility Owned
Phoenix, AZ Distribution Facility Owned
Norfolk, VA Distribution Facility Owned
Richmond, VA Distribution Facility Leased
CFX..................... Miami, FL Headquarters, Sales Office, Leased
Distribution Facility
Bay State............... Waltham, MA Headquarters and Distribution Leased
Facility
Springfield, MA Distribution Facility Leased
Cromwell, CT Distribution Facility Leased
Manchester, NH Distribution Facility Leased
Clifton Park, NY Distribution Facility Leased
Providence, RI Distribution Facility Leased
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
OWNED OR
FOUNDING COMPANY LOCATION PRINCIPAL USE LEASED
---------------- -------- ------------- --------
<S> <C> <C> <C>
Flower Trading.......... Miami, FL Headquarters, Sales Office, Leased
Distribution Facility
United Wholesale........ Little Rock, AR Headquarters Leased
Little Rock, AR Distribution Facility Leased
Fort Smith, AR Distribution Facility Leased
Mobile, AL Distribution Facility Leased
Jackson, MS Distribution Facility Owned
Tupelo, MS Distribution Facility Leased
Oklahoma City, OK Distribution Facility Owned
Tulsa, OK Distribution Facility Leased
Jackson, TN Distribution Facility Owned
Memphis, TN Distribution Facility Owned
Amarillo, TX Distribution Facility Leased
Longview, TX Distribution Facility Leased
Texarkana, TX Distribution Facility Leased
Tyler, TX Distribution Facility Leased
American Florist........ Woburn, MA Headquarters and Distribution Leased
Facility
Monterey Bay............ Watsonville, CA Headquarters and Bouquet Leased
Manufacturing Facility
Alpine Gem.............. Thompson Falls, MT Headquarters and Sales Office Leased
Watsonville, CA Sales Office and Distribution Leased
Facility
</TABLE>
The Company believes that all of the facilities of the Founding Companies
are adequate for their respective current and anticipated operations.
EMPLOYEES
On a pro forma combined basis as of June 30, 1997, the Company employed
approximately 945 people, of whom approximately 845 were full-time employees
and approximately 100 were part-time employees. Approximately 475 employees
were engaged in operations, 275 were engaged in sales, and 195 were engaged in
a variety of administrative and managerial functions. Approximately 15
delivery personnel employed by Houff are members of Illinois Local 703 of the
International Brotherhood of Teamsters, and are employed pursuant to a
collective bargaining agreement that expires on September 30, 1997. Houff and
the union are currently negotiating a new agreement. The Company believes that
its relations with all of its employees are good.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
59
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning each of the
executive officers and directors of the Company following the consummation of
this Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<C> <C> <S>
Robert J. Poirier 45 Chairman of the Board, President and Chief Executive
Officer
Jonathan J. Ledecky 39 Non-Executive Chairman of the Board
Raymond C. Anderson 32 Chief Financial Officer
Raymond R. Ashmore 53 President of United Wholesale and Person Named to
Become a Director
Jeffrey Brothers 38 President of Monterey Bay and Person Named to Become a
Director
John T. Dickinson 36 President of American Florist and Person Named to
Become a Director
John Q. Graham, Jr. 49 President of Alpine Gem and Person Named to Become a
Director
Dwight Haight 49 President of CFX and Person Named to Become a Director
Roy O. Houff 56 Chief Executive Officer of Houff and Person Named to
Become a Director
Gustavo Moreno 43 President of Flower Trading Corporation and Person
Named to be Director
William W. Rudolph 64 President of Bay State and Person Named to Become a
Director
Vincent W. Eades 38 Director
Edward J. Mathias 55 Director
John A. Quelch 46 Director
</TABLE>
Robert J. Poirier co-founded USA Floral in April 1997 and has since served
as its Chairman of the Board, President and Chief Executive Officer. Mr.
Poirier served as Vice President of 1-800-FLOWERS from 1993 until March 1997,
and was most recently responsible for that company's florist network
operations, consisting of 2,500 independent retail florists. From 1989 to
1993, Mr. Poirier served as Group Director of FTD. Mr. Poirier has been
employed in the floral products industry for 22 years, and has extensive
experience at all levels of the floral distribution channel.
Jonathan J. Ledecky co-founded USA Floral in April 1997 and has since served
as its Non-Executive Chairman of the Board. Mr. Ledecky founded U.S. Office
Products Company, a publicly-held supplier of a broad range of office products
and business services, in October 1994 and has served since then as its
Chairman of the Board and Chief Executive Officer. Since its inception, U.S.
Office Products Company has acquired and integrated over 190 companies. From
1991 until September 1994 Mr. Ledecky served as President and Chief Executive
Officer of Legacy Dealer Capital Fund, Inc.
Raymond C. Anderson has been the Chief Financial Officer of USA Floral since
July 1997. From May 1997 until September 1, 1997, Mr. Anderson served as the
President and Chief Operating Officer of Houff. From April 1995 until May
1997, Mr. Anderson served as the Vice President-Finance of Houff. From 1991
until April 1995, Mr. Anderson was associated with the Tax Division of Arthur
Andersen & Co.
Raymond R. Ashmore will serve as President of United Wholesale after the
United Wholesale Merger and as a Director of USA Floral upon consummation of
the Offering. Mr. Ashmore has served as President of United Wholesale since
1983.
60
<PAGE>
Jeffrey Brothers will serve as President of Monterey Bay after the Monterey
Bay Merger and as a Director of USA Floral upon consummation of the Offering.
Mr. Brothers has served as President of Monterey Bay since February 1993. From
1985 until January 1993, Mr. Brothers was President of Brothers Brothers,
Inc., a wholesale flower distributor.
John T. Dickinson will serve as President of American Florist after the
American Florist Merger and as a Director of USA Floral upon consummation of
the Offering. Mr. Dickinson has served as President of American Florist since
1994. Prior to 1994, Mr. Dickinson served in a number of sales and marketing
positions for General Electric Company, most recently as an area sales
manager.
John Q. Graham, Jr. will serve as President of Alpine Gem after the Alpine
Gem Merger and as a Director of USA Floral upon consummation of the Offering.
Mr. Graham has served as President of Alpine Gem since 1978.
Dwight Haight will serve as President of CFX after the CFX Merger and as a
Director of USA Floral upon consummation of the Offering. Mr. Haight has
served as President of CFX, Inc. since 1974.
Roy O. Houff will serve as Chief Executive Officer of Houff after the Houff
Merger and as a Director of USA Floral upon consummation of the Offering. Mr.
Houff has served as Chief Executive Officer of Houff since May 1997, and
served as President of Houff from 1977 until May 1997.
Gustavo Moreno will serve as President of Flower Trading after the Flower
Trading Merger and as a Director of the Company upon consummation of the
Offering. Mr. Moreno has served as President of Flower Trading since 1977.
William W. Rudolph will serve as President of Bay State after the Bay State
Merger and as a Director of USA Floral upon consummation of the Offering. Mr.
Rudolph has served in an executive capacity with Bay State since 1962, most
recently serving as President of Bay State since 1990.
Vincent W. Eades has been a Director of USA Floral since July 1997. From
April 1995 to the present, Mr. Eades has served as the Senior Vice President
of Sales and Marketing for Starbucks Coffee Co. Inc. For more than five years
prior to April 1995, Mr. Eades was associated with Hallmark Cards Inc., most
recently as a General Manager.
Edward J. Mathias has been a Director of USA Floral since July 1997. Mr.
Mathias served as a Director of U.S. Office Products Company since February
1995. Mr. Mathias has served as Managing Director of the Carlyle Group, a
Washington, D.C. based merchant bank since 1993. From 1971 to 1993, Mr.
Mathias was with T. Rowe Price Associates, Inc., an investment management
organization, most recently as a Managing Director.
John A. Quelch has been a Director of USA Floral since July 1997. Dr. Quelch
has been a Director of U.S. Office Products Company since February 1995. Dr.
Quelch is the Sebastian S. Kresge Professor of Marketing at the Harvard
Business School. Dr. Quelch serves on the board of directors of WPP Group plc,
a marketing services company that includes Ogilvy & Mather, J. Walter Thompson
and Hill & Knowlton.
The Company does not currently intend to increase the size of the Board of
Directors beyond 13 members.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee.
The responsibilities of the Audit Committee include recommending to the
Board of Directors the independent public accountants to be selected to
conduct the annual audit of the books and records of the Company, reviewing
the proposed scope of such audit and approving the audit fees to be paid,
reviewing accounting and financial controls of the Company with the
independent public accountants and the Company's financial and accounting
staff and reviewing and approving transactions between the Company and its
directors, officers and affiliates. Messrs. Mathias and Quelch are the members
of the Audit Committee.
61
<PAGE>
The Compensation Committee provides a general review of the Company's
compensation plans and policies to ensure that they meet corporate objectives.
As described below, the Company's existing plans with respect to executive
compensation are largely based upon contractual commitments set forth in
employment agreements that are either in effect or are to be entered into upon
consummation of the Mergers. See "--Executive Compensation." The
responsibilities of the Compensation Committee also include administering the
1997 Long-Term Incentive Plan, including selecting the officers and salaried
employees to whom awards will be granted. Messrs. Ledecky and Mathias are the
members of the Compensation Committee.
DIRECTOR COMPENSATION
Directors who are not currently receiving compensation as officers,
employees or consultants of the Company are entitled to receive an annual
retainer fee of $25,000, plus reimbursement of expenses for each meeting of
the Board of Directors and each committee meeting that they attend in person.
In addition, non-employee directors receive certain formula grants of non-
qualified stock options under the 1997 Non-Employee Directors' Stock Plan. See
"--1997 Non-Employee Directors' Stock Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee following the consummation of the
Offering are to be Messrs. Ledecky and Mathias.
EXECUTIVE COMPENSATION
USA Floral was incorporated in April 1997. Effective upon consummation of
the Mergers and for the balance of 1997, the Company anticipates that it will,
pursuant to employment agreements, pay compensation based on the following
annual salaries to its Chief Executive Officer and Chief Financial Officer
named below who are to be executive officers of the Company and whom the
Company believes will be its only executive officers in 1997 (together, the
"Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------- ---------------------
SECURITIES UNDERLYING
NAME POSITION SALARY BONUS OPTIONS
---- -------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Robert J. Poirier....... Chairman of the Board, $ 160,000 -- (1) 110,000 (2)
President and Chief
Executive Officer
Raymond C. Anderson..... Chief Financial Officer $ 150,000 -- (3) 50,000 (4)
</TABLE>
- --------
(1) Mr. Poirier will be entitled to an annual bonus based upon the operating
performance of the Company. The terms and amount of the annual bonus will
be determined by the Board of Directors.
(2) Consists of options to be granted under the 1997 Long-Term Incentive Plan
as of the effective date of the registration statement of which this
Prospectus forms a part, at an exercise price equal to the initial public
offering price per share. Options to purchase 60,000 shares will be
immediately exercisable, and options to purchase the remaining 50,000
shares will vest in 25% annual installments over four years commencing on
the first anniversary of the date of grant.
(3) Will consist of a performance bonus, if any, to be awarded based in part
upon the individual's performance and in part upon the operating
performance of the Company, on terms to be determined by the Board of
Directors.
(4) Consists of options to be granted under the 1997 Long-Term Incentive Plan
as of the effective date of the registration statement of which this
Prospectus forms a part, at an exercise price equal to the greater of
$8.00 or 60% of the initial public offering price per share. The options
will vest in 25% annual installments over four years commencing on the
first anniversary of the date of grant.
1997 LONG-TERM INCENTIVE PLAN
The Company's Board of Directors has adopted, and the Company's stockholders
have approved, the Company's 1997 Long-Term Incentive Plan (the "Incentive
Plan"). The maximum number of shares of
62
<PAGE>
Common Stock that may be subject to outstanding awards may not be greater than
that number of shares equal to 15% of the number of shares of Common Stock
outstanding from time to time. Awards may be settled in cash, shares, other
awards or other property, as determined by the Committee. The number of shares
reserved or deliverable under the Incentive Plan and the annual per-
participant limit on the number of shares as to or with reference to which
awards may be granted are subject to adjustment in the event of stock splits,
stock dividends and certain other corporate events.
The purpose of the Incentive Plan is to provide executive officers
(including directors who also serve as executive officers), key employees,
consultants and other service providers with additional incentives by enabling
such persons to increase their ownership interests in the Company. Individual
awards under the Incentive Plan may take the form of one or more of: (i)
either incentive stock options ("ISOs") or non-qualified stock options
("NQSOs", and together with ISOs, "Options"); (ii) stock appreciation rights
("SARs"); (iii) restricted or deferred stock; (iv) dividend equivalents; (v)
bonus shares and awards in lieu of Company obligations to pay cash
compensation; and (vi) other awards the value of which is based in whole or in
part upon the value of the Common Stock. Upon a change of control of the
Company (as defined in the Incentive Plan), certain conditions and
restrictions relating to an award with respect to the exercisability or
settlement of such award will lapse.
The Compensation Committee will administer the Incentive Plan and generally
select the individuals who will receive awards. In addition, the Compensation
Committee will determine the type and number of awards and the terms and
conditions of those awards (including exercise prices, vesting and forfeiture
conditions, performance conditions and periods during which awards will remain
outstanding). The Incentive Plan also provides that no participant may be
granted in any calendar year awards which may be settled by delivery of more
than 750,000 shares and limits payments under cash-settled awards in any
calendar year to an amount equal to the fair market value of that number of
shares.
The Company generally will be entitled to a tax deduction equal to the
amount of compensation realized by a participant through awards under the
Incentive Plan, except that (i) no deduction is permitted in connection with
ISOs if the participant holds the shares acquired upon exercise for the
required holding periods, and (ii) deductions for some awards could be limited
under the $1 million deductibility cap of Section 162(m) of the Internal
Revenue Code. This limitation, however, should not apply to awards granted
under a plan during a grace period of up to three years following the
Offering, and should not apply to certain options, SARs and performance-based
awards granted thereafter if the Company complies with certain requirements
under Section 162(m).
The Incentive Plan will remain in effect until terminated by the Board. The
Incentive Plan may be amended by the Board without the consent of the
stockholders of the Company, except that any amendment, although effective
when made, will be subject to stockholder approval if required by any federal
or state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Company's Board of Directors has adopted, and the Company's stockholders
have approved, the 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which provides for the automatic grant to each non-employee director
of (i) an option (an "Initial Grant") to purchase 21,000 shares on the later
of the date on which the non-employee director is elected to the Board of
Directors or the effective date of the registration statement of which this
Prospectus forms a part, and (ii) an option to purchase 6,000 shares on the
day after each annual meeting of the Company's stockholders. A total of
300,000 shares are reserved for issuance under the Directors' Plan. The number
of shares reserved, as well as the number to be subject to automatically
granted options, will be adjusted in the event of stock splits, stock
dividends and certain other corporate events.
Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant (in the
case of Initial Grants upon the effective date of the registration
63
<PAGE>
statement of which this Prospectus forms a part, the initial public offering
price per share). Options will expire at the earlier of 10 years from the date
of grant or one year after termination of service as a director. Options will
vest and become exercisable ratably, 50% six months after the date of initial
grant and 50% one year after the date of initial grant. In the event of a
change in control of the Company (as defined in the Directors' Plan) prior to
normal vesting, all options not already exercisable would become fully vested
and exercisable under the Directors' Plan. A non-employee director's death
would also cause immediate vesting of his or her non-vested options. In
addition, the Directors' Plan permits non-employee directors to elect to
receive, in lieu of cash directors' fees, nonforfeitable shares or
nonforfeitable credits representing "deferred shares" settleable at future
dates, as elected by the director. The number of shares or "deferred shares"
received will be equal to the number of shares which, at the date the fees
would otherwise be payable, will have an aggregate fair market value equal to
the amount of such fees. Each "deferred share" will be settled by delivery of
a share of Common Stock at such time as may have been elected by the director
prior to the deferral.
The Directors' Plan will remain in effect until terminated by the Board or
until no shares of Common Stock are available for issuance under the
Directors' Plan. The Directors' Plan may be amended by the Board without the
consent of the stockholders of the Company, except that any amendment,
although effective when made, will be subject to stockholder approval if
required by any federal or state law or regulation or by the rules of any
stock exchange or automated quotation system on which the Common Stock may
then be listed or quoted.
1997 EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors has adopted, and the Company's stockholders
have approved, the 1997 Employee Stock Purchase Plan (the "Purchase Plan").
The Purchase Plan will permit eligible employees of the Company and its
subsidiaries (generally all full-time employees who have completed one year of
service) to purchase shares of Common Stock at a discount. Employees who elect
to participate will have amounts withheld through payroll deduction during
purchase periods. At the end of each purchase period, accumulated payroll
deductions will be used to purchase stock at a price equal to 85% of the
market price at the beginning of the period or the end of the period,
whichever is lower. Stock purchased under the Purchase Plan will be subject to
a one-year holding period. The Company has reserved 1,000,000 shares of Common
Stock for issuance under the Purchase Plan.
The Purchase Plan will remain in effect until terminated by the Board or
until no shares of Common Stock are available for issuance under the Purchase
Plan. The Purchase Plan may be amended by the Board without the consent of the
stockholders of the Company, except that any amendment, although effective
when made, will be subject to stockholder approval if required by any federal
or state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.
NEW PLAN BENEFITS
Upon the effective date of the registration statement of which this
Prospectus forms a part, it is contemplated that the Company will grant
Options to purchase an aggregate of 872,753 shares of Common Stock under the
Incentive Plan at an exercise price equal to the initial public offering price
per share. These Options include: (i) Options to purchase an aggregate of
150,000 shares that will be granted to executive officers of the Founding
Companies, who will become directors of the Company after consummation of the
Mergers; (ii) Options to purchase an aggregate of 50,000 shares to be granted
to a non-executive employee; (iii) Options to purchase an aggregate of 362,753
shares to be granted to employees of the Founding Companies in accordance with
the Merger Agreements, which provide that options to purchase a number of
shares of Common Stock equal to 6.25% of the cash and Common Stock portion of
the Merger consideration, based on the initial public offering price, shall be
made available to such employees; (iv) Options to purchase an aggregate of
110,000 shares to be granted to the Chief Executive Officer of the Company;
and (v) Options to purchase an aggregate of 200,000 shares that will be
granted to the Company's Non-Executive Chairman. In addition, pursuant to
employment agreements the Company will grant Options under the Incentive Plan
to certain employees, including Mr. Anderson, to purchase an aggregate of
100,000 shares of Common Stock at an exercise price equal to the greater of
$8.00 or 60% of the initial public offering price per share. See "--Employment
Agreements." The Board of Directors has also determined to grant Options to
purchase 25,000 shares to a non-executive employee
64
<PAGE>
at such price. Of the Options granted under the Incentive Plan, Options to
purchase 160,000 shares will be immediately exercisable. All of the remaining
Options will vest 25% each on the first four anniversaries of the date of
grant. All Options granted under the Incentive Plan expire on the tenth
anniversary of the date of grant. In addition, it is contemplated that Initial
Grants will be made under the Directors' Plan upon the effective date of the
registration statement of which this Prospectus forms a part. The following
table sets forth certain information with respect to all of the option grants
contemplated under the Incentive Plan and the Directors' Plan.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE (1) NUMBER OF UNITS (2)
----------------- ---------------- -------------------
<S> <C> <C>
Robert J. Poirier......................... Not determinable 110,000
Chairman of the Board, President and
Chief Executive Officer
Raymond C. Anderson....................... Not determinable 50,000
Chief Financial Officer
All current executive officers as a
group.................................... Not determinable 160,000
All current directors who are not
executive officers as a group............ Not determinable 263,000
All employees, including all current
officers who are not executive officers,
as a group............................... Not determinable 235,000
</TABLE>
- --------
(1) The dollar values of the awards under the Incentive Plan and the
Directors' Plan are not determinable at this time, since the options are
expected to be granted at an exercise price equal to, or calculated with
reference to, the initial public offering price of the Common Stock.
(2) The number of units represents the number of shares of Common Stock
underlying the options expected to be granted.
EMPLOYMENT AGREEMENTS
Effective as of April 22, 1997 and as amended August 6, 1997, USA Floral
entered into a two-year Employment Agreement with Robert J. Poirier, pursuant
to which USA Floral agreed to employ Mr. Poirier as Chairman of the Board,
President and Chief Executive Officer for a term of two years at an annual
base salary of $160,000. In addition, the agreement provides that Mr. Poirier
will be granted: (i) an option on the effective date of the registration
statement of which this Prospectus forms a part to purchase 110,000 shares of
Common Stock at an exercise price equal to the initial public offering price
per share, which shall be fully vested and immediately exercisable as to
60,000 shares, and which shall vest and become exercisable with respect to
12,500 additional shares on each of the first four anniversaries of the date
of the grant; and (ii) an immediately exercisable option on the first
anniversary of the effective date of the registration statement of which this
Prospectus forms a part to purchase an additional 60,000 shares at an exercise
price equal to the then-current fair market value per share. The agreement
also includes a two-year post-employment non-competition provision. The
agreement provides that Mr. Poirier will be eligible to participate in an
incentive bonus program, which is to be established. If Mr. Poirier is
terminated without cause, he is entitled to receive his base salary, plus
benefits, for the two year period following the termination, and all unvested
options become fully vested.
Upon consummation of the Offering, the Company will enter into a two-year
employment agreement with Raymond C. Anderson, the Company's Chief Financial
Officer, providing for a base salary of $150,000 for a term of two years, plus
a bonus based upon the performance of the Company. The agreement also includes
a two-year post-employment non-competition provision. In addition, Mr.
Anderson will be granted options to purchase 50,000 shares of Common Stock
with an exercise price equal to the greater of $8.00 per share or 60% of the
initial public offering price per share. If Mr. Anderson is terminated without
cause, he is entitled to receive his base salary plus benefits for the lesser
of (i) the remainder of the term or (ii) three months.
The Merger Agreements provide that the Company, through its wholly-owned
subsidiaries, will enter into employment agreements with certain of the
individuals principally responsible for management of the Founding Companies.
Each such employment agreement provides for a base salary, plus a bonus based
in part upon the performance of the applicable Founding Company and in part
upon the performance of the Company. Each such agreement also includes a two-
year post-employment non-competition provision.
65
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth below is a description of certain transactions and relationships
between USA Floral and certain persons who will become officers, directors and
principal stockholders of the Company following the Mergers and the Offering.
In addition, set forth below is certain information regarding transactions and
relationships prior to the Mergers between certain of the Founding Companies
and their respective officers, directors and principal stockholders.
ORGANIZATION OF USA FLORAL
USA Floral was founded as a holding company to acquire businesses in the
floral products distribution industry. Prior to the Mergers and the Offering,
USA Floral issued 2,400,000 shares of Common Stock for cash to its co-founders
and initial investors, including 1,000,000 shares to Robert J. Poirier and
1,100,000 shares to Jonathan J. Ledecky. Mr. Poirier is the co-founder,
Chairman of the Board, President and Chief Executive Officer of USA Floral and
Mr. Ledecky is its co-founder and Non-Executive Chairman of the Board. For
information regarding certain employment arrangements between the Company and
certain directors, officers and key employees, see "Management--Employment
Agreements."
THE MERGERS
Simultaneously with and as a condition to the consummation of the Offering,
USA Floral will acquire in eight separate transactions all of the issued and
outstanding capital stock of each of the Founding Companies for an aggregate
consideration of $61.1 million, which consists of: (i) $42.4 million in cash
to be paid to the stockholders of the Founding Companies, which will be paid
from the proceeds of the Offering (before giving effect to the receipt by the
Company upon consummation of the Mergers of approximately $1.7 million of net
related party receivables); (ii) $4.0 million in cash to fund S Corporation
distributions to the stockholders of CFX and Alpine Gem, which will be paid
from the proceeds of the Offering; and (iii) the $14.7 million estimated fair
value of 1,334,050 shares of Common Stock to be issued to the stockholders of
the Founding Companies. In addition, the Company may pay additional
consideration of up to $0.5 million in cash and issue up to 540,000 shares of
Common Stock (or, in the event the fair market value per share is less than
$10.00, such additional shares of Common Stock or, at the Company's option,
cash as is necessary so that the stockholders receive consideration equal to
$10.00 per share), pursuant to earn-out arrangements with two of the Founding
Companies. The Company will also assume a tax liability of one of the Founding
Companies of approximately $0.5 million. Following the consummation of the
Mergers, the aggregate long-term indebtedness of the Company will be
approximately $3.5 million, which will comprise long-term debt of the Founding
Companies upon the Merger. The purchase price for each Founding Company was
determined based on negotiations between USA Floral and that Founding Company.
The factors considered by the parties in determining the purchase price
included, among other factors, cash flows, historical operating results,
growth rates and business prospects of the Founding Companies. With the
exception of the consideration to be paid to the stockholders of each of the
Founding Companies, the acquisition of each Founding Company is subject to
substantially the same terms and conditions as those to which the acquisition
of each other Founding Company is subject. The following table contains
information concerning the aggregate cash to be paid, Common Stock to be
issued and S Corporation distributions to be made in connection with the
Mergers:
<TABLE>
<CAPTION>
S CORP. SHARES OF VALUE OF SHARES OF TOTAL
FOUNDING COMPANY CASH DISTRIBUTIONS COMMON STOCK COMMON STOCK CONSIDERATION
- ---------------- ----- ------------- ------------ ------------------ -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Houff................... $11.0 -- -- -- $11.0
CFX..................... 5.8 $ 4.0 250,000 $ 2.8 12.6
Bay State............... 6.0 -- 495,550 5.5 11.5
Flower Trading.......... 5.9(1) -- 160,000 1.8 7.7
United Wholesale........ 4.8 -- 268,500 3.0 7.8
American Florist........ 4.8 -- -- (2) -- (2) 4.8(2)
Monterey Bay............ 2.5 -- -- (3) -- (3) 2.5(3)
Alpine Gem.............. 1.6 -- (4) 160,000 1.8 3.4
----- ----- --------- ----- -----
Total................. $42.4(5) $ 4.0 1,334,050 $14.7 $61.1
===== ===== ========= ===== =====
</TABLE>
66
<PAGE>
- --------
(1) Does not include an estimated tax liability of approximately $0.5 million
payable after consummation of the Flower Trading Merger, which is to be
assumed by the Company in connection with the Flower Trading Merger.
(2) The sellers of American Florist have entered into an earn-out arrangement
pursuant to which the sellers may receive additional consideration
consisting of shares of Common Stock with an aggregate value of up to
$2,400,000 (based on the average closing price of the Common Stock for the
ten trading days prior to December 31, 1997). The earn-out is based upon
American Florist's 1997 earnings before interest and taxes.
(3) The sellers of Monterey Bay have entered into an earn-out arrangement
pursuant to which the sellers may receive additional consideration
consisting of up to $0.5 million in cash and shares of Common Stock with
an aggregate value of up to $3,000,000 (based on the average closing price
of the Common Stock for the ten trading days prior to December 31, 1997).
The earn-out is based upon Monterey Bay's 1997 earnings before interest
and taxes.
(4) The amount of the Alpine Gem S Corporation distribution is $42,000.
(5) Does not reflect the receipt by the Company upon consummation of the
Mergers of approximately $1.7 million of net related party receivables.
See "Use of Proceeds."
THE ROY HOUFF COMPANY
USA Floral will acquire all of the outstanding stock of Houff in a reverse
subsidiary merger for $11.0 million in cash. In connection with the Houff
Merger, Roy O. Houff, the Chief Executive Officer and sole stockholder of
Houff, will become a Director of the Company. Mr. Houff will enter a two-year
covenant not to compete with the Company and its subsidiaries and a two-year
employment agreement with the subsidiary of the Company that operates the
Houff business after the Houff Merger.
Mr. Houff is the sole stockholder of RHI Industries, Inc. ("RHI
Industries"). Houff pays management fees, vehicle lease payments and health
insurance premiums to RHI Industries, which payments totaled $1.0 million in
the year ended December 31, 1996. All payments to RHI Industries will be
terminated upon consummation of the Merger. Houff leases six of its seven
facilities from Mr. Houff. Lease payments totaled $0.5 million for the year
ended December 31, 1996. The properties owned by Mr. Houff will be acquired by
Houff prior to the Houff Merger and the lease arrangement will thereupon be
terminated. From time to time, Houff loaned funds to Mr. Houff. As of December
31, 1996 Mr. Houff owed approximately $0.1 million to Houff. All amounts due
from Mr. Houff will be repaid to Houff upon consummation of the Houff Merger.
CFX, INC.
USA Floral will acquire all of the outstanding stock of CFX in a reverse
subsidiary merger for: (i) $5.8 million in cash; (ii) $4.0 million in cash,
representing the amount of CFX's accumulated adjustments account, which will
be distributed to the stockholders of CFX immediately prior to the
consummation of the CFX Merger (which amount is estimated to be approximately
$4.0 million); and (iii) 250,000 shares of Common Stock. In connection with
the CFX Merger, Dwight Haight, the President of CFX, will become a Director of
the Company. Mr. Haight will receive approximately $2.8 million in cash and
118,750 shares of Common Stock for his shares of capital stock of CFX. Mr.
Haight will enter into a two-year covenant not to compete with the Company and
its affiliates (subject to certain exceptions) and a two-year employment
agreement with the subsidiary of the Company that operates the CFX business
after the CFX Merger.
Dwight Haight, who will be named a Director of the Company upon consummation
of the Offering, owns 25% of two farms, Miramonte and Mocari, both of which
are located in Colombia (of the other 75% interest, 25% is held by a current
stockholder of CFX). CFX purchases roses from these farms on a consignment
basis, which purchases totaled $12.0 million in the year ended December 31,
1996. Mr. Haight owns 50% of La Fleurette, a bouquet manufacturer with which
CFX conducts business (the other 50% interest is held by a current
stockholder of CFX). Sales to and purchases from La Fleurette in the year
ended December 31, 1996 totaled $3.9 million and $0.3 million, respectively.
CFX provides management services to La Fleurette, for which
67
<PAGE>
services La Fleurette paid fees totaling $0.6 million in the year ended
December 31, 1996. The Company intends to renegotiate, as necessary, all
arrangements with related parties so that all continuing obligations of CFX
thereunder are no greater than those the Company would agree to with
unaffiliated third parties. Mr. Haight owns 50% of Floraltech, Inc., an entity
that manages CFX's Colombian business activities (the other 50% interest is
held by a current stockholder of CFX). CFX paid $0.3 million to Floraltech,
Inc. in the year ended December 31, 1996. The CFX Merger Agreement provides
that, upon consummation of the Merger, CFX will acquire the stock of
Floraltech, Inc. for $10.00. Mr. Haight owns 50% of Flying High Venture, from
which entity CFX leases its facility in Miami, Florida (the other 50% interest
is held by a current stockholder of CFX). Lease payments to Flying High
Venture in the year ended December 31, 1996 totaled $0.2 million. In
connection with Flying High Venture's financing of the acquisition of the real
property, CFX guaranteed an industrial revenue bond and a term loan to Flying
High Venture. CFX's guaranty obligation under the industrial revenue bond is
secured by a pledge of all of the assets of CFX. As of December 31, 1996, the
outstanding principal balance of the industrial revenue bond and the term loan
in the aggregate was $4.9 million. Interest on the industrial revenue bond and
the term loan accrues at an effective annual rate of 7.48% and 9.44%,
respectively. While the Company is not assuming the guaranty obligation, CFX's
guaranty obligation will not terminate upon consummation of the Merger. From
time to time, CFX has advanced funds to Mr. Haight. As of June 30, 1997, the
total amount owed to CFX by Mr. Haight was approximately $0.2 million. All
amounts due to CFX from Mr. Haight will be repaid to CFX upon consummation of
the CFX Merger.
BAY STATE FLORIST SUPPLY, INC.
USA Floral will acquire all of the outstanding stock of Bay State in a
reverse subsidiary merger for $6.0 million in cash and 495,550 shares of
Common Stock. In connection with the Bay State Merger, William W. Rudolph, the
President of Bay State, will become a Director of the Company. Mr. Rudolph
will receive approximately $0.5 million in cash and 43,000 shares of Common
Stock for his shares of capital stock of Bay State. Mr. Rudolph will enter
into a two-year covenant not to compete with the Company and its affiliates
(subject to certain exceptions) and a two-year employment agreement with the
subsidiary of the Company that operates the Bay State business after the Bay
State Merger.
Mr. Rudolph owns 8.7% of Cromwell Floral Properties LLC ("Cromwell"), which
is the owner of a building in Cromwell, Connecticut from which Bay State
operates a wholesale distribution facility. Bay State made rental payments to
Cromwell in the amount of $0.1 million for the year ended December 31, 1996.
The Company intends to renegotiate, if necessary, the lease so that its terms
are no less favorable than those the Company could obtain from an unaffiliated
third party.
Pursuant to a deferred compensation arrangement entered into between Bay
State and Mr. Rudolph in July 1976 and amended in August 1984 and March 1997,
Mr. Rudolph is to receive deferred compensation of $35,000 per year for the 10
years following the termination of his employment with Bay State.
FLOWER TRADING CORPORATION
USA Floral will acquire all of the outstanding stock of Flower Trading in a
reverse subsidiary merger for $5.9 million in cash and 160,000 shares of
Common Stock. In addition, the Company will assume an estimated tax liability
of Flower Trading of approximately $0.5 million. In connection with the Flower
Trading Merger, Gustavo Moreno, the President of Flower Trading, will become a
Director of the Company. Mr. Moreno will receive approximately $0.8 million in
cash and 22,400 shares of Common Stock for his shares of capital stock of
Flower Trading. Mr. Moreno will enter into a two-year covenant not to compete
with the Company and its affiliates (subject to certain exceptions) and a two-
year employment agreement with the subsidiary of the Company that operates the
Flower Trading business after the Merger.
Flower Trading owns a 75% interest in UltraFlora Corporation Limited
("UltraFlora"). Flower Trading provides handling services to UltraFlora. In
the year ended December 31, 1996, UltraFlora paid Flower Trading $0.2 million
for such services. Prior to the Flower Trading Merger, Flower Trading will
distribute its ownership interest in UltraFlora directly to the stockholders
of Flower Trading.
68
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND UNITED WHOLESALE FLORISTS OF AMERICA, INC.
USA Floral will acquire all of the outstanding stock of United Wholesale in
a reverse subsidiary merger for $4.8 million in cash and 268,500 shares of
Common Stock. In connection with the United Wholesale Merger, R. Raymond
Ashmore, the President of United Wholesale, will become a Director of the
Company. Mr. Ashmore will receive approximately $1.0 million in cash and
98,625 shares of Common Stock for his shares of capital stock of United
Wholesale. Mr. Ashmore will enter into a two-year covenant not to compete with
the Company and its affiliates and a two-year employment agreement with the
subsidiary of the Company that operates the United Wholesale business after
the United Wholesale Merger.
Mr. Ashmore owns 33% of United Properties, an entity from which United
Wholesale leases eight of its facilities. Lease payments made by United
Wholesale to United Properties in the year ended December 31, 1996 totaled
$0.3 million. United Wholesale leases its corporate headquarters from a
partnership in which United Properties has a 50% interest. Lease payments to
the affiliate in the year ended December 31, 1996 totaled $0.1 million. The
Company will be granted a five-year option to purchase the property leased
from these affiliated entities.
United Wholesale has made advances to Mr. Ashmore totaling $34,000 in the
year ended December 31, 1996 and to United Properties totaling $1.1 million as
of March 31, 1997. Upon consummation of the United Wholesale Merger, Mr.
Ashmore and United Properties will pay to United Wholesale the balance of
these advances.
AMERICAN FLORIST SUPPLY, INC.
USA Floral will acquire all of the outstanding stock of American Florist in
a reverse subsidiary merger for $4.8 million in cash. In connection with the
American Florist Merger, John T. Dickinson, the President of American Florist,
will become a Director of the Company. Mr. Dickinson is the sole stockholder
of American Florist. Mr. Dickinson will enter into a two-year covenant not to
compete with the Company and its affiliates and a two-year employment
agreement with the subsidiary of the Company that operates the American
Florist business after the American Florist Merger. Mr. Dickinson will receive
options to purchase 50,000 shares of Common Stock at an exercise price per
share equal to the initial public offering price. In addition, Mr. Dickinson
may receive a contingent payment of up to $2.4 million, based on American
Florist's earnings before interest and taxes for the year ended December 31,
1997. The contingent payment is payable in Common Stock. The number of shares
to be issued in satisfaction of the contingent payment will be calculated by
reference to the average closing price of the Common Stock for the ten trading
days prior to December 31, 1997. The American Florist Merger Agreement
provides that if the average closing price is less than $10 per share, then
the Company, at its sole option, may satisfy the contingent payment
obligation, if any over 240,000 shares, by issuance of additional shares of
Common Stock, or payment of cash, or a combination of cash and Common Stock.
Mr. Dickinson has an ownership interest in a rose farm in Ecuador ("Meadow
Flowers"). Mr. Dickinson's spouse is the sole stockholder of Farm Direct
Flowers, Inc., which has a 13.5% interest in Meadow Flowers. American Florist
purchases roses, as well as other types of flowers, from Meadow Flowers; for
the year ended December 31, 1996, purchases from Meadow Flowers totaled $0.1
million. Upon consummation of the American Florist Merger, the Company intends
to evaluate the terms of purchases made from Meadow Flowers to ensure that the
terms are no less favorable than those the Company could obtain from an
unaffiliated third party.
MONTEREY BAY BOUQUET, INC. AND BAY AREA BOUQUETS, INC.
USA Floral will acquire all of the outstanding stock of Monterey Bay in a
reverse subsidiary merger for $2.5 million in cash. In connection with the
Monterey Bay Merger, Jeffrey Brothers, the President of Monterey Bay, will
become a Director of the Company. Mr. Brothers will receive $1.0 million in
cash for his shares of capital stock of Monterey Bay. Mr. Brothers will enter
into a two-year covenant not to compete with the Company and its affiliates
and a two-year employment agreement with the subsidiary of the Company that
69
<PAGE>
operates the Monterey Bay business after the Monterey Bay Merger. Mr. Brothers
will receive options to purchase 50,000 shares of Common Stock at an exercise
price per share equal to the initial public offering price. The stockholders
of Monterey Bay, including Mr. Brothers, may receive a contingent payment of
up to $3.5 million, based on Monterey Bay's earnings before interest and taxes
for the year ended December 31, 1997. Of the contingent payment, $0.5 million
is payable in cash and $3.0 million is payable in Common Stock. The number of
shares to be issued in satisfaction of the contingent payment will be
calculated by reference to the average closing price of the Common Stock for
the ten trading days prior to December 31, 1997. The Monterey Bay Merger
Agreement provides that if the average closing price is less than $10 per
share, then the Company, at its sole option may satisfy the contingent payment
obligation, if any, over 300,000 shares by issuance of additional shares of
Common Stock, or payment of cash, or a combination of cash and Common Stock.
Jeffrey Brothers has a 40% interest in the entity that owns the property
which Monterey Bay leases. Monterey Bay's lease payments totaled $0.1 million
in the year ended December 31, 1996. Upon consummation of the Merger, the
Company intends to retain the lease, which terminates December 31, 1999 and
provides for monthly rental payments of $12,000.
ALPINE GEM FLOWER SHIPPERS, INC.
USA Floral will acquire all of the outstanding stock of Alpine Gem for (i)
$1.6 million in cash; (ii) S Corporation distributions of approximately
$42,000; and (iii) 160,000 shares of Common Stock. In connection with the
Alpine Gem Merger, John Q. Graham, Jr., will become a Director of the Company.
Mr. Graham will receive $0.8 million in cash and 80,000 shares of Common Stock
for his shares of capital stock of Alpine Gem. Mr. Graham will enter into a
two-year covenant not to compete with the Company and its affiliates and a
two-year employment agreement with the subsidiary of the Company that operates
the business after the Alpine Gem Merger. Mr. Graham will receive options to
purchase 50,000 shares of Common Stock at an exercise price per share equal to
the initial public offering price.
70
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of September 15, 1997, assuming completion of
the Mergers, and as adjusted to reflect the sale of the Common Stock being
offered hereby, by: (i) each person (or group of affiliated persons) known by
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock; (ii) each Named Executive Officer of the Company;
(iii) each director of the Company and each person named to become a director;
and (iv) all of the Company's directors, persons named to become directors and
executive officers as a group. Each stockholder possesses sole voting and
investment power with respect to the shares listed, unless otherwise noted.
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK OWNED
--------------------
NUMBER OF SHARES BEFORE THE AFTER THE
BENEFICIAL OWNER OF COMMON STOCK OFFERING OFFERING
---------------- ---------------- ---------- ---------
<S> <C> <C> <C>
Jonathan J. Ledecky (1).................. 1,310,000 33.2 15.3
c/o U.S.A. Floral Products, Inc.
3500 Whitehaven Parkway
Washington, D.C. 20007
Robert J. Poirier (2).................... 1,060,000 27.9 12.6
c/o U.S.A. Floral Products, Inc.
3500 Whitehaven Parkway
Washington, D.C. 20007
Raymond C. Anderson...................... -- * *
Vincent W. Eades......................... -- * *
Edward J. Mathias (3).................... 100,000 2.7 1.2
John A. Quelch........................... 25,000 * *
Raymond R. Ashmore....................... 98,625 2.6 1.2
Jeffrey Brothers......................... -- * *
John T. Dickinson........................ -- * *
John Q. Graham, Jr. ..................... 80,000 2.1 1.0
Dwight Haight............................ 118,750 3.2 1.4
Roy O. Houff............................. -- * *
Gustavo Moreno........................... 22,400 * *
William W. Rudolph....................... 42,955 1.2 *
All directors, persons named to become
directors, and executive officers, as
a group (4)............................. 2,857,730 71.4 33.2
</TABLE>
- --------
*Less than one percent.
(1) Includes 210,000 shares issuable upon the exercise of options to be
granted to Mr. Ledecky on the effective date of the registration statement
of which this Prospectus forms a part, which options will be immediately
exercisable. Mr. Ledecky intends to exercise options to purchase 110,000
of such shares, which were granted in order to facilitate the treatment of
the issuance of the shares in the Mergers as a tax-free exchange under
Section 351 of the Internal Revenue Code.
(2) Includes 60,000 shares issuable upon the exercise of an option to be
granted to Mr. Poirier on the effective date of the registration statement
of which this Prospectus forms a part, which option will be immediately
exercisable. Also includes 100,000 shares held by a trust for the benefit
of Mr. Poirier's spouse and children. Mr. Poirier disclaims beneficial
ownership of all such shares.
(3) Includes 50,000 shares owned by Mr. Mathias' daughter. Mr. Mathias
disclaims beneficial ownership of all such shares.
(4) Includes 270,000 shares issuable upon the exercise of immediately
exercisable options. See Notes (1) and (2).
71
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.001 per share. The following summary description
of the capital stock of the Company does not purport to be complete and is
subject to the detailed provisions of, and qualified in its entirety by
reference to, the Company's Certificate of Incorporation and Bylaws, copies of
which have been filed as exhibits to the registration statement of which this
Prospectus forms a part, and to the applicable provisions of the General
Corporation Law of the State of Delaware (the "DGCL").
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to the
rights of any holders of Preferred Stock, holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in the distribution of all assets
remaining after payment of liabilities, subject to the rights of any holders
of preferred stock of the Company. The holders of Common Stock have no
preemptive rights to subscribe for additional shares of the Company and no
right to convert their Common Stock into any other securities. In addition,
there are no redemption or sinking fund provisions applicable to the Common
Stock. All of the outstanding shares of Common Stock are, and the shares of
Common Stock offered hereby will be, fully paid and nonassessable.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION
The Company is subject to the provisions of Section 203 of the DGCL. Section
203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes a merger, asset sale or
other transaction resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years prior to the proposed business combination has owned 15% or more of the
corporation's voting stock.
The Company's Certificate of Incorporation and Bylaws divide the Board of
Directors of the Company into three classes, each class to be as nearly equal
in number of directors as possible. At each annual meeting of stockholders,
directors in each class will be elected for three-year terms to succeed the
directors of that class whose terms are expiring. Messrs. Ashmore, Haight,
Houff and Rudolph will be Class I directors whose terms will expire in 1998.
Messrs. Brothers, Dickinson, Graham and Moreno will be Class II directors
whose terms will expire in 1999. Messrs. Poirier, Ledecky, Eades, Mathias and
Quelch are Class III directors whose terms will expire in 2000. In accordance
with the Delaware General Corporation Law, directors serving on classified
boards of directors may only be removed from office for cause. These
provisions could, under certain circumstances, operate to delay, defer or
prevent a change in control of the Company.
The Company's Certificate of Incorporation provides that liability of
directors of the Company is eliminated to the fullest extent permitted under
Section 102(b)(7) of the DGCL. As a result, no director of the Company will be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability: (i) for any breach of the
director's duty of loyalty to the Company or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for any wilful or negligent payment of an
unlawful dividend, stock purchase or redemption; or (iv) for any transaction
from which the director derived an improper personal benefit.
72
<PAGE>
REGISTRATION RIGHTS
Pursuant to the Merger Agreements, the Company granted to the recipients of
Common Stock in the Mergers the right to include all or a portion of the shares
of Common Stock held by them in any registration by the Company under the
Securities Act of shares of Common Stock, other than a registration on Form S-4
or Form S-8 or their then equivalents, and other than a "shelf" registration of
securities for sale by the Company. Such a registration will be at the expense
of the Company, other than underwriting discounts and commissions, which will
be borne by the sellers of the shares. The Company has also granted such
registration rights to Messrs. Poirier and Ledecky on substantially the same
terms.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
73
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 8,334,050 shares of
Common Stock outstanding, based upon the number of shares outstanding as of
September 15, 1997 and assuming consummation of the Mergers, but without
giving effect to the anticipated exercise by Mr. Ledecky of an option to
purchase 110,000 shares of Common Stock. The 4,600,000 shares sold in the
Offering will be freely tradeable without restriction or further registration
under the Securities Act, unless acquired by an "affiliate" of the Company, as
that term is defined in Rule 144; shares held by affiliates will be subject to
resale limitations of Rule 144 described below. All of the remaining 3,734,050
outstanding shares of Common Stock will be available for resale at various
dates beginning 180 days after the date of this Prospectus, upon expiration of
applicable lock-up agreements described below and subject to compliance with
Rule 144 under the Securities Act as the holding provisions of Rule 144 are
satisfied. Of those shares, 3,438,000 may be included in certain registration
statements that may be filed by the Company, in accordance with piggyback
registration rights granted pursuant to the Merger Agreements or pursuant to
such rights granted to Mr. Ledecky and Mr. Poirier. Up to 540,000 shares that
may be issued to stockholders of two of the Founding Companies pursuant to
earn-out arrangements (to be calculated with reference to the performance of
those Founding Companies) will also be subject to such piggyback registration
rights. Further, upon consummation of the Offering, 1,170,753 shares of Common
Stock will be issuable upon the exercise of stock options to be granted on the
effective date of the registration statement of which this Prospectus forms a
part, of which options to purchase 270,000 shares are immediately exercisable.
Such options include options to purchase 110,000 shares to be granted to
Jonathan J. Ledecky to facilitate the treatment of the shares to be issued in
the Mergers as a tax-free exchange under the Internal Revenue Code. Mr.
Ledecky has indicated his intention to exercise such option on or about the
effective date of the registration statement of which this Prospectus forms a
part. The Company intends to file a registration statement on Form S-8 as soon
as practicable after the consummation of the Offering with respect to the
shares of Common Stock issuable upon exercise of all such options. (other than
the option to purchase 110,000 shares to be granted to Mr. Ledecky).
In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned for at least one year shares privately acquired directly or
indirectly from the Company or from an affiliate of the Company, and persons
who are affiliates of the Company who have acquired the shares in registered
transactions, will be entitled to sell within any three-month period a number
of shares that does not exceed the greater of: (i) one percent of the
outstanding shares of Common Stock (approximately 83,000 shares immediately
after completion of the Offering); or (ii) the average weekly trading volume
in the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain requirements relating to the manner
and notice of sale and the availability of current public information about
the Company.
The Company, each of its directors and officers and stockholders have agreed
with the Underwriters, subject to certain exceptions, not to offer, sell or
otherwise dispose of any shares of Common Stock or securities convertible into
or exercisable or exchangeable for such shares for a period of 180 days after
the date of this Prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated. The holders of the shares of Common Stock issued
or to be issued in the Mergers and certain related persons have agreed with
the Underwriters not to offer, sell or otherwise dispose of any shares of
Common Stock or securities convertible into or exercisable or exchangeable for
such shares for a period of 180 days after the date of this Prospectus without
the prior written consent of Morgan Stanley & Co. Incorporated.
Prior to this Offering, there has been no market for the Common Stock. No
predictions can be made with respect to the effect, if any, that public sales
of shares of the Common Stock or the availability of shares for sale will have
on the market price of the Common Stock after the completion of the Offering.
Sales of substantial amounts of Common Stock in the public market following
the Offering, or the perception that such sales may occur, could adversely
affect the market price of the Common Stock or the ability of the Company to
raise capital through sales of its equity securities. See "Risk Factors--No
Prior Market for Common Stock; Possible Volatility of Stock Price."
74
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"),
the Underwriters named below, for whom Morgan Stanley & Co. Incorporated,
Robertson Stephens & Company LLC and Smith Barney Inc. are acting as
Representatives, have severally agreed to purchase, and the Company has agreed
to sell to them, severally, the respective number of shares of Common Stock
set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated...............................
Robertson, Stephens & Company LLC...............................
Smith Barney Inc................................................
---------
Total......................................................... 4,600,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to
take and pay for all of the shares of Common Stock offered hereby (other than
those covered by the Underwriters' over-allotment option described below) if
any such shares are taken.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other Underwriters or to certain other dealers. After
the initial offering of the shares of Common Stock, the offering price and
other selling terms may from time to time be varied by the Representatives.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the public offering price set forth on
the cover page hereof, less underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering over-
allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such Underwriter's name in the preceding table
bears to the total number of shares of Common Stock offered by the
Underwriters hereby.
The Company has applied for listing of the Common Stock on The Nasdaq
National Market under the symbol "ROSY."
At the request of the Company, the Underwriters have reserved up to 230,000
shares of Common Stock offered hereby for sale at the initial public offering
price to certain employees of the Company and to certain other persons. The
number of shares available for sale to the general public will be reduced to
the extent that such persons purchase such reserved shares. Any reserved
shares not so purchased will be offered by the Underwriters to the general
public on the same basis as the other shares of Common Stock offered hereby.
Each of the Company and the directors, executive officers and stockholders
of the Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 180 days after the date of this Prospectus, with certain
limited exceptions, (i) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contact to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for
75
<PAGE>
Common Stock or (ii) enter into any swap or other arrangement that transfers
to another, in whole or in part, any of the economic consequences of ownership
of the Common Stock, whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The restrictions described in this paragraph
do not apply to (w) the sale of the Shares to the Underwriters, (x) the
issuance by the Company of the shares of Common Stock upon the exercise of any
option or a warrant or the conversion of a security outstanding on the date of
this Prospectus of which the Underwriters have been advised in writing, (y)
the issuance of shares to be used as consideration for future acquisitions or
(z) the grant of options under the Company's stock option plans, provided such
options do not vest prior to the 180-day period referenced herein, and
provided further that, in the case of subclauses (x) and (y), the recipient of
any such shares agrees to be bound by the transfer restrictions set forth
herein.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
From time to time, each of the Underwriters and their respective affiliates
may provide investment banking services to the Company.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the Common Stock, the Underwriters may bid for, and purchase,
shares of Common Stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an Underwriter or a dealer for
distributing the Common Stock in the Offering, if the syndicate repurchases
previously distributed Common Stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriters are not required to engage in
these activities, and may end any of these activities at any time.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
between the Company and the Representatives. Among the factors to be
considered in determining the initial public offering price will be the future
prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies
engaged in activities similar to those of the Company. The estimated initial
public offering price range set forth on the cover page of this Preliminary
Prospectus is subject to change as a result of market conditions and other
factors.
76
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Morgan, Lewis & Bockius LLP, Pittsburgh, Pennsylvania.
Certain legal matters relating to the shares of Common Stock offered hereby
will be passed upon for the Underwriters by Davis Polk & Wardwell, New York,
New York.
EXPERTS
The financial statements of USA Floral as of June 30, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The financial statements of Houff, Bay State, and Flower Trading, as of
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The financial statements of American Florists Monterey Bay and Alpine Gem as
of December 31, 1995 and 1996 and for the years then ended included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The financial statements of United Wholesale as of June 30, 1996 and 1997
and for each of the three years in the period ended June 30, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
The financial statements of CFX as of December 31, 1996 and for the year
then ended have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The financial statements of CFX as of December 31, 1994 and 1995 and for the
years then ended included in this Prospectus have been so included in reliance
on the report of Madsen, Sapp, Mena, Rodriguez & Co., P.A. independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, covering the Common Stock offered hereby. This Prospectus omits
certain information contained in the Registration Statement, and reference is
made to the Registration Statement, and the exhibits and schedules thereto for
further information with respect to the Company and the Common Stock offered
hereby. Statements contained in this Prospectus as to the contents of any
contract, agreement or other document filed as an exhibit to the Registration
Statement are not necessarily complete, and in each instance, reference is
made to the exhibit for a more complete description of the matter involved,
each such statement being qualified in its entirety by such reference. The
Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the Commission
maintained at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, registration statements and certain other
filings made with the Commission through its Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system are publicly available through the
Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
77
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE #
------
<S> <C>
U.S.A. FLORAL PRODUCTS, INC. UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS
Introduction to Unaudited Pro Forma Combined Financial Statements.... F-3
Unaudited Pro Forma Combined Balance Sheet........................... F-4
Unaudited Pro Forma Combined Statement of Operations................. F-5
Notes to Unaudited Pro Forma Combined Financial Statements........... F-8
U.S.A. FLORAL PRODUCTS, INC.
Report of Independent Accountants.................................... F-14
Balance Sheet........................................................ F-15
Notes to Financial Statements........................................ F-16
THE ROY HOUFF COMPANY
Report of Independent Accountants.................................... F-19
Balance Sheet........................................................ F-20
Statement of Operations.............................................. F-21
Statement of Stockholder's Equity.................................... F-22
Statement of Cash Flows.............................................. F-23
Notes to Financial Statements........................................ F-24
CFX, INC.
Report of Independent Accountants.................................... F-29
Independent Auditors' Report......................................... F-30
Balance Sheet........................................................ F-31
Statement of Operations.............................................. F-32
Statement of Stockholders' Equity.................................... F-33
Statement of Cash Flows.............................................. F-34
Notes to Financial Statements........................................ F-35
BAY STATE FLORIST SUPPLY, INC.
Report of Independent Accountants.................................... F-41
Balance Sheet........................................................ F-42
Statement of Operations.............................................. F-43
Statement of Stockholders' Equity.................................... F-44
Statement of Cash Flows.............................................. F-45
Notes to Financial Statements........................................ F-46
FLOWER TRADING CORPORATION
Report of Independent Accountants.................................... F-52
Balance Sheet........................................................ F-53
Consolidated Statement of Operations................................. F-54
Consolidated Statement of Stockholders' Equity....................... F-55
Consolidated Statement of Cash Flows................................. F-56
Notes to Consolidated Financial Statements........................... F-57
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE #
------
<S> <C>
UNITED WHOLESALE FLORISTS, INC.
Report of Independent Accountants...................................... F-63
Balance Sheet.......................................................... F-64
Combined Statement of Operations....................................... F-65
Combined Statement of Stockholders' Equity............................. F-66
Combined Statement of Cash Flows....................................... F-67
Notes to Combined Financial Statements................................. F-68
AMERICAN FLORIST SUPPLY, INC.
Report of Independent Accountants...................................... F-75
Balance Sheet.......................................................... F-76
Statement of Operations................................................ F-77
Statement of Stockholder's Equity...................................... F-78
Statement of Cash Flows................................................ F-79
Notes to Financial Statements.......................................... F-80
MONTEREY BAY BOUQUET
Report of Independent Accountants...................................... F-85
Combined Balance Sheet................................................. F-86
Combined Statement of Operations....................................... F-87
Combined Statement of Stockholders' Equity............................. F-88
Combined Statement of Cash Flows....................................... F-89
Notes to Combined Financial Statements................................. F-90
ALPINE GEM FLOWER SHIPPERS, INC.
Report of Independent Accountants...................................... F-95
Balance Sheet.......................................................... F-96
Statement of Operations................................................ F-97
Statement of Stockholders' Equity...................................... F-98
Statement of Cash Flows................................................ F-99
Notes to Financial Statements.......................................... F-100
</TABLE>
F-2
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect
to the acquisitions by U.S.A. Floral Products, Inc. ("USA Floral") of the
outstanding capital stock of The Roy Houff Company, CFX, Inc., Flower Trading
Corporation, Bay State Florist Supply, Inc., United Wholesale Florists, Inc.,
American Florist Supply, Inc., Monterey Bay Bouquet and Alpine Gem Flower
Shippers, Inc. (together, the "Founding Companies"). These acquisitions (the
"Mergers") will occur simultaneously with the closing of USA Floral's initial
public offering (the "Offering") and will be accounted for using the purchase
method of accounting. USA Floral is deemed to be the accounting acquiror.
The unaudited pro forma combined balance sheet gives effect to the Mergers
and the Offering as if they had occurred on June 30, 1997. The unaudited pro
forma combined statements of operations give effect to these transactions as
if they had occurred on January 1, 1996. The pro forma combined statements of
operations reflect the operating results of each of the Founding Companies for
their fiscal year ending December 31, 1996 and the interim six month periods
ending June 30, 1996 and 1997. Each of the Founding Companies have fiscal
years ending December 31, with the exception of United Wholesale, whose fiscal
year end is June 30. Specifically, for purposes of the December 31, 1996 pro
forma income statement, United Wholesale's operating results for the year
ended June 30, 1996 were adjusted by adding subsequent interim period July 1,
1996 to December 31, 1996 and subtracting the six months ended July 1, 1995 to
December 31, 1995. The pro forma income statements for the six months ended
June 30, 1996 and 1997 represent United Wholesale's operating results for
these respective interim periods.
USA Floral has preliminarily analyzed the savings that it expects to realize
from reductions in salaries and certain benefits to the owners. To the extent
the owners of the Founding Companies have agreed prospectively to reductions
in salary, bonuses, and benefits in connection with the merger transactions,
these reductions have been reflected in the pro forma combined statement of
operations. With respect to other potential cost savings, USA Floral has not
and cannot quantify these savings until completion of the combination of the
Founding Companies. Additionally, the pro forma combined statement of
operations gives effect to anticipated compensation of USA Floral's new
corporate management and associated costs of being a public company.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what USA
Floral's financial position or results of operations would actually have been
if such transactions in fact had occurred on those dates and are not
necessarily representative of USA Floral's financial position or results of
operations for any future period. Since the Founding Companies were not under
common control or management, historical combined results may not be
comparable to, or indicative of, future performance. The unaudited pro forma
combined financial statements should be read in conjunction with the other
financial statements and notes thereto included elsewhere in this Prospectus.
See "Risk Factors" included elsewhere herein.
F-3
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
MERGER
ADJUST-
USA ROY CFX, BAY FLOWER UNITED AMERICAN MONTEREY ALPINE MENTS PRO FORMA
FLORAL HOUFF INC. STATE TRADING WHOLESALE FLORIST BAY GEM (SEE NOTE 3) COMBINED
------ ------- ------- ------- ------- --------- -------- -------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents........ $ 317 $ 61 $ 2,284 $ 1,714 $ 862 $ 625 $ 421 $ 319 $ 131 $ (800) $ 5,934
Accounts receivable,
net................ 3,210 3,916 3,076 2,526 1,186 1,379 912 1,441 17,646
Inventories......... 1,144 1,751 47 1,963 91 181 5,177
Due from related
parties............ 210 380 40 1,240 (1,620) 250
Due from
stockholders....... 389 (389)
Prepaid expenses and
other.............. 455 172 187 106 169 127 25 28 20 1,289
----- ------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total current
assets......... 772 4,587 6,597 7,027 3,644 5,530 1,916 1,440 1,592 (2,809) 30,296
Property and
equipment, net..... 1,907 352 1,605 332 1,886 289 175 23 3,131 9,700
Due from related
parties............ 8 8
Due from
stockholders....... 602 52 (654)
Deferred taxes...... 90 188 278
Goodwill, net....... 222 287 40,898 41,407
Other assets........ 468 478 145 114 88 124 1,417
----- ------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total assets.... $ 772 $ 6,494 $ 8,027 $ 9,110 $ 4,211 $ 7,752 $ 2,580 $ 1,791 $ 1,615 $ 40,754 $ 83,106
===== ======= ======= ======= ======= ======= ======= ======= ======= ======== ========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Short-term debt..... $ $ 220 $ 19 $ 281 $ 104 $ 1,987 $ $ 84 $ 845 $ $ 3,540
Notes payable to
stockholders....... 21 558 (579)
Accounts payable and
accrued expenses... 400 3,399 2,480 2,467 922 2,390 885 784 13,727
Due to related
parties............ 282 581 863
Income taxes
payable............ 250 210 32 254 500 1,246
Payable to
stockholders....... 44,637 44,637
----- ------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total current
liabilities.... 400 3,640 2,781 2,748 1,857 5,145 917 1,122 845 44,558 64,013
Long-term debt...... 390 12 396 339 356 598 36 1,442 3,569
Other............... 400 61 25 37 523
----- ------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total
liabilities.... 400 4,030 2,793 3,544 2,196 5,562 1,540 1,195 845 46,000 68,105
Stockholders'
equity:
Common stock...... 2 250 3 5 150 11 400 78 727 (1,622) 4
Additional paid-in
capital.......... 400 175 57 376 328 25 13,666 15,027
Retained
earnings......... (30) 2,039 5,174 5,661 1,537 2,179 640 493 43 (17,766) (30)
Less: Treasury
stock (476) 476
----- ------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total
stockholders'
equity......... 372 2,464 5,234 5,566 2,015 2,190 1,040 596 770 (5,246) 15,001
----- ------- ------- ------- ------- ------- ------- ------- ------- -------- --------
Total
liabilities and
stockholders'
equity......... $ 772 $ 6,494 $ 8,027 $ 9,110 $ 4,211 $ 7,752 $ 2,580 $ 1,791 $ 1,615 $ 40,754 $ 83,106
===== ======= ======= ======= ======= ======= ======= ======= ======= ======== ========
<CAPTION>
PRO FORMA
OFFERING
ADJUST-
MENTS AS
(SEE NOTE 3) ADJUSTED
------------ ---------
<S> <C> <C>
ASSETS
Cash and cash
equivalents........ $ 1,428 $ 7,362
Accounts receivable,
net................ 17,646
Inventories......... 5,177
Due from related
parties............ 250
Due from
stockholders.......
Prepaid expenses and
other.............. (455) 834
-------- --------
Total current
assets......... 973 31,269
Property and
equipment, net..... 9,700
Due from related
parties............ 8
Due from
stockholders.......
Deferred taxes...... 278
Goodwill, net....... 41,407
Other assets........ 1,417
------- --------
Total assets.... $ 973 $ 84,079
======= ========
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Short-term debt..... $ $ 3,540
Notes payable to
stockholders.......
Accounts payable and
accrued expenses... (400) 13,327
Due to related
parties............ 863
Income taxes
payable............ 1,246
Payable to
stockholders....... (44,637)
-------- --------
Total current
liabilities.... (45,037) 18,976
Long-term debt...... 3,569
Other............... 523
-------- --------
Total
liabilities.... (45,037) 23,068
Stockholders'
equity:
Common stock...... 5 9
Additional paid-in
capital.......... 46,005 61,032
Retained
earnings......... (30)
Less: Treasury
stock
-------- --------
Total
stockholders'
equity......... 46,010 61,011
-------- --------
Total
liabilities and
stockholders'
equity......... $ 973 $ 84,079
======= ========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-4
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUST- PRO
ROY CFX, BAY FLOWER UNITED AMERICAN MONTEREY ALPINE MENTS FORMA
HOUFF INC. STATE TRADING WHOLESALE FLORIST BAY GEM (SEE NOTE 4) COMBINED
-------- -------- -------- -------- --------- -------- -------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............. $ 39,090 $ 35,684 $ 30,563 $ 20,313 $ 19,327 $ 11,679 $ 9,477 $ 9,334 $ -- $ 175,467
Cost of sales......... 25,537 28,190 20,722 15,914 12,751 8,268 8,285 7,132 (579) 126,220
-------- -------- -------- -------- -------- -------- ------- ------- ------- ---------
Gross profit......... 13,553 7,494 9,841 4,399 6,576 3,411 1,192 2,202 579 49,247
Selling, general and
administrative....... 12,789 8,956 8,976 4,142 6,056 2,723 1,113 1,868 (3,376) 43,247
Goodwill
amortization......... 1,023 1,023
-------- -------- -------- -------- -------- -------- ------- ------- ------- ---------
Income from
operations.......... 764 (1,462) 865 257 520 688 79 334 2,932 4,977
Other (income)
expense:
Interest expense..... 110 33 32 226 43 15 162 621
Interest income...... (39) (115) (35) (5) (119) (11) (41) (365)
Other, net........... (95) (100) (247) 120 10 (64) (8) (13) (397)
-------- -------- -------- -------- -------- -------- ------- ------- ------- ---------
Income before income
taxes................ 788 (1,247) 1,114 110 403 720 72 388 2,770 5,118
Provision for income
taxes................ 13 81 48 126 37 24 2,127 2,456
-------- -------- -------- -------- -------- -------- ------- ------- ------- ---------
Net income............ $ 775 $ (1,247) $ 1,033 $ 62 $ 277 $ 683 $ 48 $ 388 $ 643 $ 2,662
======== ======== ======== ======== ======== ======== ======= ======= ======= =========
Net income per share.. $ .32
=========
Shares used in
computing pro forma
net income per
share(1)............. 8,355,994
=========
</TABLE>
- --------
(1) Includes (i) 2,400,000 shares issued upon formation of USA Floral, (ii)
1,334,050 shares issued to owners of the Founding Companies, (iii)
4,582,854 of the 4,600,000 shares sold in the Offering necessary to pay the
cash portion of the Merger consideration, to fund the S Corporation
distributions and to pay expenses of this Offering and (iv) 39,090 shares
related to the dilution attributable to options granted at below the
offering price in accordance with the treasury stock method.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-5
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO
FORMA
ADJUST- PRO
ROY CFX, BAY FLOWER UNITED AMERICAN MONTEREY ALPINE MENTS FORMA
HOUFF INC. STATE TRADING WHOLESALE FLORIST BAY GEM (SEE NOTE 4) COMBINED
------- -------- ------- ------- --------- -------- -------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................. $22,165 $ 20,585 $16,412 $11,305 $10,552 $6,444 $4,827 $4,979 $ -- $ 97,269
Cost of sales............. 14,693 16,031 11,279 8,928 7,018 4,458 4,166 3,840 (290) 70,123
------- -------- ------- ------- ------- ------ ------ ------ ------- ---------
Gross profit............. 7,472 4,554 5,133 2,377 3,534 1,986 661 1,139 290 27,146
Selling, general and
administrative........... 6,533 5,249 4,429 1,944 3,241 1,421 496 802 (2,572) 21,543
Goodwill amortization..... 511 511
------- -------- ------- ------- ------- ------ ------ ------ ------- ---------
Income from operations... 939 (695) 704 433 293 565 165 337 2,351 5,092
Other (income) expense:
Interest expense......... 58 17 5 121 20 5 82 308
Interest income.......... (12) (51) (20) (2) (53) (3) (20) (161)
Other, net............... (150) (93) (55) (6) (3) (43) (9) 1 (358)
------- -------- ------- ------- ------- ------ ------ ------ ------- ---------
Income before income
taxes.................... 1,043 (551) 762 436 228 591 169 356 2,269 5,303
Provision for income
taxes.................... 61 183 84 30 69 1,898 2,325
------- -------- ------- ------- ------- ------ ------ ------ ------- ---------
Net income................ $ 1,043 $ (551) $ 701 $ 253 $ 144 $ 561 $ 100 $ 356 $ 371 $ 2,978
======= ======== ======= ======= ======= ====== ====== ====== ======= =========
Net income per share $ .36
=========
Shares used in computing
pro forma net income per
share(1).................... 8,355,994
=========
</TABLE>
- --------
(1) Includes (i) 2,400,000 shares issued upon formation of USA Floral, (ii)
1,334,050 shares issued to owners of the Founding Companies, (iii)
4,582,854 of the 4,600,000 shares sold in the Offering necessary to pay the
cash portion of the Merger consideration, to fund the S Corporation
distributions and to pay expenses of this Offering and (iv) 39,090 shares
related to the dilution attributable to options granted at below the
offering price in accordance with the treasury stock method.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-6
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO
FORMA
ADJUST- PRO
ROY CFX, BAY FLOWER UNITED AMERICAN MONTEREY ALPINE MENTS FORMA
HOUFF INC. STATE TRADING WHOLESALE FLORIST BAY GEM (SEE NOTE 4) COMBINED
------- ------- ------- ------- --------- -------- -------- ------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $20,410 $22,854 $16,375 $12,997 $10,897 $7,082 $6,803 $5,597 $ -- $ 103,015
Cost of sales........... 13,204 17,759 11,080 10,139 7,128 4,793 5,575 4,259 (300) 73,637
------- ------- ------- ------- ------- ------ ------ ------ ------- ---------
Gross profit........... 7,206 5,095 5,295 2,858 3,769 2,289 1,228 1,338 300 29,378
Selling, general and
administrative......... 5,924 3,657 4,556 1,936 3,232 1,579 563 902 (289) 22,060
Goodwill amortization... 511 511
------- ------- ------- ------- ------- ------ ------ ------ ------- ---------
Income from
operations............ 1,282 1,438 739 922 537 710 665 436 78 6,807
Other (income) expense:
Interest expense....... 40 25 35 126 25 8 82 341
Interest income........ (10) (32) (23) (4) (68) (8) (17) (162)
Other, net............. (47) (27) (90) 7 (31) (54) (4) (9) (255)
------- ------- ------- ------- ------- ------ ------ ------ ------- ---------
Income before income
taxes.................. 1,299 1,497 827 884 510 747 661 462 (4) 6,883
Provision for income
taxes.................. 70 339 163 36 294 2,056 2,958
------- ------- ------- ------- ------- ------ ------ ------ ------- ---------
Net income.............. $ 1,299 $ 1,497 $ 757 $ 545 $ 347 $ 711 $ 367 $ 462 $(2,060) $ 3,925
======= ======= ======= ======= ======= ====== ====== ====== ======= =========
Net income per share.... $ .47
=========
Shares used in computing
pro forma net income
per share(1)........... 8,355,994
=========
</TABLE>
- --------
(1) Includes (i) 2,400,000 shares issued upon formation of USA Floral, (ii)
1,334,050 shares issued to owners of the Founding Companies, (iii)
4,582,854 of the 4,600,000 shares sold in the Offering necessary to pay
the cash portion of the Merger consideration, to fund the S Corporation
distributions and to pay expenses of this Offering and (iv) 39,090 shares
related to the dilution attributable to options granted at below the
offering price in accordance with the treasury stock method.
See Notes to Unaudited Pro Forma Combined Financial Statements.
F-7
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTE 1--GENERAL
USA Floral Products, Inc. ("USA Floral") was founded in April 1997 to create
a national consolidator and operator of floral products distribution
businesses. USA Floral has conducted no operations to date and will acquire
the Founding Companies concurrently with and as a condition to the closing of
this Offering.
The historical financial statements reflect the financial position and
results of operations of the Founding Companies and were derived from the
respective Founding Companies' financial statements where indicated. The
periods included in these financial statements for all of the individual
Founding Companies are as of and for the year ended December 31, 1996 and for
the six months ended June 30, 1996 and 1997. The audited historical financial
statements included elsewhere herein have been included in accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 80.
NOTE 2--ACQUISITION OF FOUNDING COMPANIES
Concurrently with and as a condition to with the closing of this Offering,
USA Floral will acquire all of the outstanding capital stock of the Founding
Companies. The acquisitions will be accounted for using the purchase method of
accounting with USA Floral being treated as the accounting acquiror.
The following table sets forth the consideration to be paid (a) in cash and
(b) in shares of Common Stock to the common stockholders of each of the
Founding Companies, the allocation of the Consideration to net assets acquired
and resulting goodwill. For purposes of computing the estimated purchase price
for accounting purposes, the value of shares is based upon the assumed initial
public offering price of $11. The total Purchase Consideration does not
reflect the S Corporation distributions totaling $4,800 constituting
substantially all of the undistributed earnings of the Founding Companies that
are S Corporations previously taxed to their stockholders and tax payments on
current earnings of such Founding Companies ("S Corporation Distributions"),
the assumption of an estimated tax liability of approximately $0.5 million of
one of the Founding Companies or contingent consideration related to earn out
arrangements included in the definitive agreements for American Florist and
Monterey Bay. These arrangements provide for the Company to pay additional
Consideration of up to $.5 million in cash and 540,000 shares of common stock
or $5.9 million assuming an $11.00 offering price, based on 1997 earnings
before interest and taxes.
The purchase price has been allocated to the Company's historical assets and
liabilities based on their respective carrying values, with the exception of
acquired property at certain of the entities, as these carrying values are
deemed to represent fair market value of these assets and liabilities. The
fair market value of the properties acquired was determined via an independent
valuation by a third party. Additionally, adjustments have been made for S
Corporation distributions subsequent to the June 30, 1997, debt assumed as
part of property purchased and the establishment of deferred income tax
liabilities and assets assumed in the transactions for purposes of determining
the excess of the purchase price over the net assets acquired. The allocation
of the purchase price is considered preliminary until such time as the closing
of the transaction and consummation of the Mergers. The Company does not
anticipate that the final allocation of purchase price will differ
significantly from that presented.
F-8
<PAGE>
USA FLORAL PRODUCTS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
SHARES OF VALUE NET
COMMON OF TOTAL ASSETS
CASH STOCK SHARES CONSIDERATION ACQUIRED GOODWILL
------- --------- ------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Roy Houff............... $11,000 -- $11,000 $ 4,727 $ 6,273
CFX, Inc................ 5,790 250,000 $ 2,750 8,540 1,194 7,346
Bay State............... 6,000 495,550 5,451 11,451 4,374 7,077
Flower Trading.......... 5,900 160,000 1,760 7,660 1,515 6,145
United Wholesale
Florists, Inc.......... 4,773 268,500 2,954 7,727 2,363 5,364
American Florist Supply,
Inc.................... 4,800 -- 4,800 743 4,057
Monterey Bay............ 2,500 -- 2,500 596 1,904
Alpine Gem.............. 1,600 160,000 1,760 3,360 628 2,732
------- --------- ------- ------- ------- -------
Total................. $42,363 1,334,050 $14,675 $57,038 $16,140 $40,898
======= ========= ======= ======= ======= =======
</TABLE>
F-9
<PAGE>
U.S.A. FLORAL PRODUCTS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTE 3--UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
The following table summarizes unaudited pro forma combined balance sheet
adjustments:
<TABLE>
<CAPTION>
MERGER OFFERING POST-
ADJUSTMENTS PRO FORMA ADJUSTMENTS MERGER
------------------------------------------------ ADJUST- ------------------------ ADJUST-
(A) (B) (C) (D) (E) (F) MENTS (G) (H) (I) MENTS
------- ------- ------ ---- ------- ------- --------- ------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents.......... $ (800) $ (800) $44,855 $1,210 $(44,637) $ 1,428
Due from related
parties.............. $(1,620) (1,620)
Due from
stockholders......... (389) (389)
Prepaid expenses and
other................ (455) (455)
------- ------- ------ ---- ------- ------- -------- ------- ------ -------- -------
Total current
assets.............. (800) (2,009) (2,809) 44,400 1,210 (44,637) 973
Property and
equipment............ $ (842) $ 3,973 3,131
Due from
stockholders......... (654) (654)
Deferred taxes........ $188 188
Goodwill, net......... (188) 41,086 40,898
------- ------- ------ ---- ------- ------- -------- ------- ------ -------- -------
Total assets......... $ (800) $ (842) $ -- $45,059 $(2,663) $ 40,754 $44,400 $1,210 $(44,637) $ 973
======= ======= ====== ==== ======= ======= ======== ======= ====== ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Notes payable to
stockholders......... $ (579) $ (579)
Accounts payable and
accrued expenses..... $ (400) $ (400)
Income taxes payable.. $ 500 $ 500
Payable to
stockholders......... $42,363 $ 4,000 (1,726) 44,637 (44,637) (44,637)
------- ------- ------ ---- ------- ------- -------- ------- ------ -------- -------
Total current
liabilities......... 42,363 4,000 500 (2,305) 44,558 (400) (44,637) (45,037)
Long-term debt........ 1,800 (358) 1,442
------- ------- ------ ---- ------- ------- -------- ------- ------ -------- -------
Total liabilities.... 42,363 4,000 2,300 (2,663) 46,000 (400) (44,637) (45,037)
Stockholders' equity:
Common stock......... (1,622) (1,622) 5 5
Additional paid-in
capital............. (42,363) 56,029 13,666 44,795 1,210 46,005
Retained earnings.... (4,800) (842) (12,124) (17,766)
Treasury stock....... 476 476
------- ------- ------ ---- ------- ------- -------- ------- ------ -------- -------
Total stockholders'
equity.............. (42,363) (4,800) (842) 42,759 (5,246) 44,800 1,210 46,010
------- ------- ------ ---- ------- ------- -------- ------- ------ -------- -------
Total liabilities and
stockholders'
equity.............. $ -- $ (800) $ (842) $45,059 $(2,663) $ 40,754 $44,400 $1,210 $(44,637) $ 973
======= ======= ====== ==== ======= ======= ======== ======= ====== ======== =======
</TABLE>
F-10
<PAGE>
U.S.A. FLORAL PRODUCTS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(a) Records the liability for the cash portion of the consideration to be paid
to the stockholders of the Founding Companies in connection with the
Mergers.
(b) Establishment of liability for S Corporation distributions to be paid in
connection with the Merger of $4,000 with respect to CFX and to reflect
normal S Corporation distributions which occurred subsequent to June 30,
1997 of $800 with respect to various Founding Companies.
(c) Records the distribution by Bay State of certain real estate totaling $842
prior to the Merger.
(d) Records the net deferred income tax liability attributable to the
temporary differences between the financial reporting and tax basis of
assets and liabilities held in S Corporations consisting of a net deferred
tax asset of $288 at Roy Houff and a deferred tax liability at Alpine Gem
of $100.
(e) Records the purchase of the Founding Companies by USA Floral, including
consideration of $42,363 in cash and 1,334,050 shares of common stock
valued at $11 per share (or $14,675) for a total estimated purchase price
of $57,038. The purchase price has been allocated to reflect the estimated
fair market value of real estate acquired from the stockholder of Houff of
$3,973 including $1,800 of debt assumed in connection with the acquisition
of the real estate, and the establishment of a $500 tax liability
resulting from the sale of the UltraFlora subsidiary of Flower Trading
prior to the Merger. The excess of the purchase price over the fair value
of assets acquired is $40,898.
(f) Represents the settlement of certain related party and shareholder
receivables and payables as required by the Merger agreements. The net
cash to be received by the Company from the settlement of these amounts of
$1,726 has been recorded as a reduction of the amounts payable to the
shareholders at closing.
(g) Records the cash proceeds from the issuance of shares of USA Floral Common
Stock net of estimated offering costs (based on an assumed initial public
offering of $11 per share). Offering costs primarily consist of
underwriting discounts and commissions, accounting fees, legal fees and
printing expenses.
(h) Records the net proceeds of the issuance of 110,000 shares at an assumed
offering price of $11 from the expected exercise of a stock option to be
granted to Jonathan J. Ledecky on the effective date of the registration
statement.
(i) Records the use of Offering proceeds to i) pay the cash portion of the
consideration due to the stockholders of the Founding Companies in
connection with the Mergers ($42,363) and ii) fund the $4,000 S
Corporation distributions to stockholders of certain of the Founding
Companies.
F-11
<PAGE>
U.S.A. FLORAL PRODUCTS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
NOTE 4--UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS ADJUSTMENTS
The following table summarizes unaudited pro forma combined statements of
operations adjustments:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------
PRO FORMA
(A) (B) (C) (D) (E) (F) (G) ADJUSTMENTS
------- ------- ----- ------ ----- ----- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Costs of sales.......... $(579) $ (579)
Selling, general and
administrative......... $(3,603) $ (367) $ 594 (3,376)
Goodwill amortization... $ 1,023 1,023
------- ------- ----- ------ ----- ----- ------- --------
Income from
operations............ 3,603 (1,023) 367 (594) 579 2,932
Other (income) expense:
Interest expense....... $ 162 162
------- ------- ----- ------ ----- ----- ------- --------
Income before income
taxes.................. 3,603 (1,023) (162) 367 (594) 579 2,770
Provision for income
taxes.................. $ 2,127 2,127
------- ------- ----- ------ ----- ----- ------- --------
Net income.............. $ 3,603 $(1,023) $(162) $ 367 $(594) $ 579 $(2,127) $ 643
======= ======= ===== ====== ===== ===== ======= ========
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-------------------------------------------------------------------
PRO FORMA
(A) (B) (C) (D) (E) (F) (G) ADJUSTMENTS
------- ------- ----- ------ ----- ----- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Costs of sales.......... $(290) $ (290)
Selling, general and
administrative......... $(2,686) $ (183) $ 297 (2,572)
Goodwill amortization... $ 511 511
------- ------- ----- ------ ----- ----- ------- --------
Income from
operations............ 2,686 (511) 183 (297) 290 2,351
Other (income) expense:
Interest expense....... $ 82 82
------- ------- ----- ------ ----- ----- ------- --------
Income before income
taxes.................. 2,686 (511) (82) 183 (297) 290 2,269
Provision for income
taxes.................. $ 1,898 1,898
------- ------- ----- ------ ----- ----- ------- --------
Net income.............. $ 2,686 $ (511) $ (82) $ 183 $(297) $ 290 $(1,898) $ 371
======= ======= ===== ====== ===== ===== ======= ========
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
-------------------------------------------------------------------
PRO FORMA
(A) (B) (C) (D) (E) (F) (G) ADJUSTMENTS
------- ------- ----- ------ ----- ----- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Costs of sales.......... $(300) $ (300)
Selling, general and
administrative......... $ (403) $ (183) $ 297 (289)
Goodwill amortization... $ 511 511
------- ------- ----- ------ ----- ----- ------- --------
Income from
operations............ 403 (511) 183 (297) 300 78
Other (income) expense:
Interest expense....... $ 82 82
------- ------- ----- ------ ----- ----- ------- --------
Income before income
taxes.................. 403 (511) (82) 183 (297) 300 (4)
Provision for income
taxes.................. $ 2,056 2,056
------- ------- ----- ------ ----- ----- ------- --------
Net income.............. $ 403 $ (511) $ (82) $ 183 $(297) $ 300 $(2,056) $ (2,060)
======= ======= ===== ====== ===== ===== ======= ========
</TABLE>
F-12
<PAGE>
U.S.A. FLORAL PRODUCTS, INC. AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(a) Reflects the reduction in salaries, bonuses and benefits to the owners of
the Founding Companies to which they have agreed prospectively. The year
ended December 31, 1996 and the six months ended June 30, 1996 reflect
$2,629 and $2,235 in excess bonus compensation to certain stockholders of
CFX.
(b) Reflects the amortization of goodwill to be recorded as a result of these
Mergers over 40-year estimated life.
(c) Reflects the interest expense at a rate of 9% on $1,800 of debt assumed on
certain real estate purchased from a stockholder of one of the Founding
Companies.
(d) Reflects adjustment for the following (i) elimination of rental lease
expense ($561 for December 31, 1996 and $280 for each of the six month
periods ended June 30, 1996 and 1997) associated with the purchase of
$3,800 of real estate and a related increase in depreciation expense and
real estate taxes associated with this real estate totaling $130 for the
year ended December 31, 1996 and $65 for each of the six month periods
ended June 30, 1996 and 1997, and (ii) increase in rental expense as a
result of distribution of $842 real estate prior to the Mergers ($186 for
the year ended December 31, 1996 and $94 for each of the six month periods
ended June 30, 1996 and 1997) and a related decrease in depreciation
expense and real estate taxes of $122 for the year ended December 31, 1996
and $62 for each of the six month periods ended June 30, 1996 and 1997.
(e) Reflects (i) an increase in expenses associated with USA Floral management
of $310 and the costs of being a public entity of $190 ($500 for the year
ended December 31, 1996 and $250 for the six months ended June 30, 1996
and 1997), and (ii) compensation expense associated with the issuance of
125,000 stock options with an exercise price below the initial public
offering which vest over four years ($94 for the year ended December 31,
1996 and $47 for each of the six month periods ended June 30, 1996 and
1997).
(f) Reflects the reduction in costs of sales attributable to a significant
reduction in the services provided under a contract for various services
performed by an affiliated entity of Flower Trading, to which the Company
and the affiliated entity have agreed to prospectively as a condition to
the Merger.
(g) Reflects the incremental provision for federal and state income taxes
assuming all entities were subject to federal and state income tax and
relating to the other statements of operations' adjustments and for income
taxes on S Corporation income, assuming a corporate income tax rate of 40%
and the non-deductibility of goodwill.
F-13
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
U.S.A. Floral Products, Inc.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of U.S.A. Floral Products, Inc. at
June 30, 1997, in conformity with generally accepted accounting principles.
This financial statement is the responsibility of the Company's management;
our responsibility is to express an opinion on this financial statement based
on our audit. We conducted our audit of this statement in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
July 30, 1997
F-14
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
JUNE 30,
1997
--------
<S> <C>
ASSETS
Cash and cash equivalents............................................. $ 317
Deferred offering costs............................................... 455
-----
Total assets...................................................... $ 772
=====
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued liabilities................................................... $ 400
Stockholders' equity:
Common stock, $.001 par, 100,000,000 shares authorized, 2,400,000
shares issued and outstanding...................................... 2
Additional paid-in capital.......................................... 400
Accumulated deficit................................................. (30)
-----
Total stockholders' equity........................................ 372
-----
Total liabilities and stockholders' equity........................ $ 772
=====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-15
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS AND ORGANIZATION
U.S.A. Floral Products, Inc., a Delaware corporation, ("USA Floral" or the
"Company") was founded in April 1997 to create a nationwide distributor of
floral products. USA Floral intends to acquire eight U.S. businesses (the
"Mergers"), upon consummation of an initial public offering (the "Offering")
of its common stock and, subsequent to the Offering, continue to acquire
through merger or purchase, similar companies to expand its national
operations.
USA Floral has not conducted any operations, and all activities to date have
related to the Offering and the Mergers. The Company's cash balances were
generated from the initial capitalization of the Company. Accordingly,
statements of operations and cash flows for this period would not provide
meaningful information and have been omitted. Operating expenses subsequent to
inception consist primarily of the salary of the Company's one employee which
has been expensed. As of June 30, 1997 approximately $455 has been incurred in
connection with the Offering and the Company has capitalized these costs as
Deferred Offering costs. These costs include legal and accounting fees which
will be offset against the proceeds of the Offering at closing. USA Floral is
dependent upon the Offering to execute the pending Mergers. There is no
assurance that the pending Mergers discussed will be completed or that USA
Floral will be able to generate future operating revenues.
NOTE 2--STOCKHOLDERS' EQUITY
Common Stock
In connection with the organization and initial capitalization of USA
Floral, the Company on April 22, 1997 issued 2,000,000 shares of common stock
at $.001 per share. Subsequently, the Company issued on April 23, 1997 300,000
shares for $1.00 per share, on May 8, 1997 issued 25,000 shares for $1.00 per
share, on May 10, 1997 issued 25,000 shares for $1.00 and on May 25, 1997
issued 50,000 shares at $1.00 per share.
1997 Long-Term Incentive Plan
The Company's Board of Directors has adopted and the Company's stockholders
have approved the Company's 1997 Long-Term Incentive Plan (the "Incentive
Plan"). The maximum number of shares of Common Stock that may be subject to
outstanding awards may not be greater than that number of shares equal to
fifteen percent (15%) of the outstanding shares. Awards may be settled in
cash, shares, other awards or other property, as determined by the
Compensation Committee of the Company's Board of Directors (the "Committee").
The terms of the option awards will be established by the Committee. The
Company intends to file a registration statement on Form S-8 under the
Securities Act registering the issuance of shares upon exercise of options
granted under this Plan. The Company expects to grant stock options to
purchase approximately 875,000 shares of Common Stock to key employees of the
Company at the initial public offering price upon consummation of the Offering
and options to purchase 125,000 shares of Common Stock to other key employees
at the greater of $8.00 per share or 60% of the initial public offering price.
Compensation expense will be recorded in the future over the four year vesting
period for the options issued at a discount.
1997 Non-Employee Directors' Stock Plan
The Company's Board of Directors has adopted and the Company's stockholders
have approved the 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which provides for the automatic grant to each nonemployee director of
an option to purchase 21,000 shares on the date elected or on the effective
date of the Offering. Thereafter nonemployee directors will receive an option
to purchase 6,000 shares on the day after each
F-16
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
annual meeting of the Company's stockholders. A total of 300,000 shares are
reserved for issuance under the Directors' Plan, and options to purchase
63,000 options are to be issued on the date of the Offering.
Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant. Options
will expire at the earlier of 10 years from the date of grant or 90 days after
termination of service as a director. Options will vest and become exercisable
ratably, 20% per year, over the five-year period following the date of grant
of the options, subject to acceleration by the Board. In the event of a change
in control of the Company prior to normal vesting, all options not already
exercisable would become fully vested and exercisable.
NOTE 3--STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," allows entities to choose between a new fair
value based method of accounting for employee stock options or similar equity
instruments and the current intrinsic, value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25").
Entities electing to remain with the accounting in APB Opinion No. 25 must
make pro forma disclosures of net income and earnings per share as if the fair
value method of accounting has been applied. The Company will provide pro
forma disclosure of net income and earnings per share, as applicable, in the
notes to future consolidated financial statements.
NOTE 4--NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 128, Earnings per Share ("SFAS No. 128"). For the
Company, SFAS No. 128 will be effective for the year ended December 31, 1997.
SFAS No. 128 simplifies the standards required under current accounting rules
for computing earnings per share and replaces the presentation of primary
earnings per share and fully diluted earnings per share with a presentation of
basic earnings per share ("basic EPS") and diluted earnings per share
("diluted EPS"). Basic EPS excludes dilution and is determined by dividing
income available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted EPS reflects the
potential dilution that could occur if securities and other contracts to issue
common stock were exercised or converted into common stock. Diluted EPS is
computed similarly to fully diluted earnings per share under current
accounting rules. The implementation of SFAS No. 128 is not expected to have a
material effect on the Company's earnings per share as determined under
current accounting rules.
NOTE 5--UNAUDITED SUBSEQUENT EVENTS
Wholly-owned subsidiaries of USA Floral have signed definitive agreements to
acquire by merger eight companies ("Founding Companies") to be effective
contemporaneously with the Offering. The companies to be acquired are The Roy
Houff Company, CFX, Inc., Flower Trading, Inc., Bay State Florist Supply,
Inc., United Wholesale Florists, Inc., American Florist Supply, Inc., Monterey
Bay Bouquet, Inc. and Bay Area Bouquets, Inc. and Alpine Gem Flower Shippers,
Inc. The aggregate consideration that will be paid by USA Floral to acquire
the Founding Companies is approximately $42,363 million in cash and 1,334,050
shares of Common Stock.
F-17
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The following table reflects the consideration to be paid in cash and shares
of Common Stock, the allocation of the consideration to net assets acquired
and resulting goodwill.
<TABLE>
<CAPTION>
SHARES OF VALUE NET
COMMON OF TOTAL ASSETS
CASH STOCK SHARES CONSIDERATION ACQUIRED GOODWILL
------- --------- ------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Roy Houff............... $11,000 -- $11,000 $ 4,727 $ 6,273
CFX, Inc................ 5,790 250,000 $ 2,750 8,540 1,194 7,346
Bay State............... 6,000 495,550 5,451 11,451 4,374 7,077
Flower Trading.......... 5,900 160,000 1,760 7,660 1,515 6,145
United Wholesale
Florists, Inc.......... 4,773 268,500 2,954 7,727 2,363 5,364
American Florist Supply,
Inc.................... 4,800 -- 4,800 743 4,057
Monterey Bay............ 2,500 -- 2,500 596 1,904
Alpine Gem.............. 1,600 160,000 1,760 3,360 628 2,732
------- --------- ------- ------- ------- -------
Total................. $42,363 1,334,050 $14,675 $57,038 $16,140 $40,898
======= ========= ======= ======= ======= =======
</TABLE>
The total consideration does not reflect contingent consideration which may
be issued pursuant to earn out arrangements included in the definitive
agreements for American Florist and Monterey Bay. Theses arrangements provide
for the Company to pay additional consideration of up to $.5 million in cash
and 540,000 shares of Common Stock or $5.9 million assuming and $11.00
offering price, based on 1997 earnings before interest and taxes.
The purchase price has been allocated to the Company's historical assets and
liabilities based on their respective carrying values, with the exception of
acquired property at certain of the entities, as these carrying values are
deemed to represent fair market value of these assets and liabilities. The
fair market value of the properties acquired was determined via an independent
valuation by a third party. Additionally, adjustments have been made for the S
Corporation distributions subsequent to the June 30, 1997, debt assumed as
part of property purchased and establishment of deferred income tax
liabilities and assets assumed in the transactions for purposes of determining
the excess of the purchase price over the net assets acquired. The allocation
of the purchase price is considered preliminary until such time as the closing
of the transaction and consummation of the Mergers. The Company does not
anticipate that the final allocation of purchase price will differ
significantly from that presented.
On August 7, 1997 USA Floral filed a registration statement on Form S-1 for
the initial public offering of its common stock.
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder of
The Roy Houff Company
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholder's equity and of cash flows present fairly, in all
material respects, the financial position of The Roy Houff Company at December
31, 1995 and 1996 and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
June 25, 1997
F-19
<PAGE>
THE ROY HOUFF COMPANY
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 67 $ 210 $ 61
Accounts receivable, net......................... 4,101 3,604 3,210
Inventory........................................ 1,202 1,118 1,144
Prepaid expenses and other current assets........ 178 211 172
Advances to stockholder.......................... 88
------- ------- -------
Total current assets........................... 5,548 5,231 4,587
Property and equipment, net........................ 2,187 2,045 1,907
Advances to stockholder............................ 312
Intangible assets.................................. 78
------- ------- -------
Total assets................................... $ 8,125 $ 7,276 $ 6,494
======= ======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Bank line of credit.............................. $ 1,500 $ 400 $ 100
Notes payable--current........................... 120 120
Accounts payable................................. 3,827 3,519 2,799
Accrued expenses................................. 601 657 600
Due to related parties........................... 223 124 21
------- ------- -------
Total current liabilities...................... 6,151 4,820 3,640
Notes payable, net of current maturities........... 450 390
Commitments and contingencies
Stockholder's equity:
Common stock, no par value; 10,000 shares
authorized; 50 shares issued and outstanding.... 425 425 425
Retained earnings................................ 1,549 1,581 2,039
------- ------- -------
Total stockholder's equity..................... 1,974 2,006 2,464
------- ------- -------
Total liabilities and stockholder's equity..... $ 8,125 $ 7,276 $ 6,494
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
THE ROY HOUFF COMPANY
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales....................... $39,098 $41,531 $39,090 $ 22,165 $ 20,410
Cost of sales................... 26,683 27,899 25,537 14,693 13,204
------- ------- ------- -------- --------
Gross margin................ 12,415 13,632 13,553 7,472 7,206
Selling, general and
administrative expenses........ 11,617 12,695 12,789 6,533 5,924
------- ------- ------- -------- --------
Operating income............ 798 937 764 939 1,282
Other (income) expense:
Interest expense.............. 58 84 110 58 40
Interest income............... (34) (76) (39) (12) (10)
Other, net.................... (227) (151) (95) (150) (47)
------- ------- ------- -------- --------
Income before provision for
income taxes................... 1,001 1,080 788 1,043 1,299
Provision for income taxes...... 10 12 13
------- ------- ------- -------- --------
Net income...................... $ 991 $ 1,068 $ 775 $ 1,043 $ 1,299
======= ======= ======= ======== ========
Unaudited pro forma information:
Pro forma net income before
provision for income taxes... $ 1,001 $ 1,080 $ 788 $ 1,043 $ 1,299
Provision for income taxes.... 400 432 315 417 520
------- ------- ------- -------- --------
Pro forma income (see Note 2)... $ 601 $ 648 $ 473 $ 626 $ 779
======= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
THE ROY HOUFF COMPANY
STATEMENT OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------- RETAINED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1993............. 50 $425 $ 1,654 $ 2,079
Net income............................. 991 991
Dividends paid......................... (785) (785)
--- ---- ------- -------
Balance at December 31, 1994............. 50 425 1,860 2,285
Net income............................. 1,068 1,068
Dividends paid......................... (1,379) (1,379)
--- ---- ------- -------
Balance at December 31, 1995............. 50 425 1,549 1,974
Net income............................. 775 775
Dividends paid......................... (743) (743)
--- ---- ------- -------
Balance at December 31, 1996............. 50 425 1,581 2,006
Net income (unaudited)................. 1,299 1,299
Dividends paid (unaudited)............. (841) (841)
--- ---- ------- -------
Balance at June 30, 1997 (unaudited)..... 50 $425 $ 2,039 $ 2,464
=== ==== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
THE ROY HOUFF COMPANY
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ----------------
1994 1995 1996 1996 1997
------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income....................... $ 991 $ 1,068 $ 775 $ 1,043 $ 1,299
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization... 460 546 687 316 435
Loss on disposal of fixed
assets......................... 3 123 144 (6)
Change in operating assets and
liabilities:
Accounts receivable............ (478) (147) 497 (22) 394
Inventory...................... (304) (295) 84 (99) (25)
Prepaid expenses and other
current assets................ (68) (46) (33) (83) 39
Due to affiliate............... (64) 17
Accounts payable and accrued
expenses...................... 494 344 (254) 136 (777)
------ -------- ------- ------- -------
Net cash provided by operating
activities................... 1,098 1,593 1,900 1,227 1,376
Cash flows from investing
activities:
Purchases of property and
equipment....................... (591) (1,043) (640) (184) (298)
Proceeds from disposal of
property and equipment.......... 30 6
------ -------- ------- ------- -------
Net cash used in investing
activities................... (591) (1,043) (610) (184) (292)
Cash flows from financing
activities:
Advances to stockholder.......... (787) (365) (13)
Repayments to stockholder........ 840 237 312 88
Due from/to related parties...... 77 (226) (4)
Borrowings (repayments) under
line of credit agreement, net... 1,200 322 (530) (967) (480)
Proceeds from notes payable...... 56 75 23
Payments of notes payable........ (26) (249) (117)
Stockholder dividends............ (785) (1,379) (743) (360) (841)
------ -------- ------- ------- -------
Net cash used in financing
activities................... (265) (982) (1,147) (1,015) (1,233)
Net increase (decrease) in cash
and cash equivalents............. 242 (432) 143 28 (149)
Cash and cash equivalents--
beginning of period.............. 257 499 67 67 210
------ -------- ------- ------- -------
Cash and cash equivalents--end of
period........................... $ 499 $ 67 $ 210 $ 95 $ 61
====== ======== ======= ======= =======
Supplemental disclosure of cash
flow information:
Cash paid during the period for
interest........................ $ 58 $ 84 $ 93 $ 58 $ 40
Cash paid during the period for
income taxes.................... $ 10 $ 12 $ 13
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
THE ROY HOUFF COMPANY
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1977, The Roy Houff Company (the "Company") is a distributor of
perishable floral products and floral-related hardgoods, operating from seven
locations in Illinois, Virginia and Arizona. The Company purchases floral
products from importers, brokers and shippers and sells them to retail
florists and mass marketers.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized upon shipment of product.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less at date of purchase to be cash equivalents.
Inventory
Inventory is stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis (FIFO).
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided using
straight-line and accelerated methods over the estimated useful lives of the
related assets (five years). Leasehold improvements are amortized over the
shorter of their lease term or estimated useful life.
Intangible Assets
Intangible assets consisted of goodwill acquired in the purchase of new
branches and was amortized ratably over a period of five to fifteen years. In
1996, the remaining goodwill balance was written off in connection with the
disposition of the Atlanta operation as discussed in Note 10.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable, insurance receivable, accrued
expenses and short-term debt approximates fair value because of the short
maturity of these instruments. The estimated fair value of long-term debt and
other long-term liabilities approximates its carrying value. Additionally,
interest rates on outstanding debt are at rates which approximate market rates
for debt with similar terms and average maturities.
F-24
<PAGE>
THE ROY HOUFF COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collateralized and accordingly, the Company performs ongoing credit
evaluations of its customers to reduce the risk of loss.
Income Taxes
The Company has elected to be treated as an S Corporation for federal and
state income taxes and, accordingly, any liabilities for income taxes are the
direct responsibility of the stockholders. The Company is liable only for
Illinois state replacement tax.
There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. At December 31, 1996, the
tax basis of the Company's net assets exceeds the financial reporting bases by
approximately $535.
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal and state income taxes for the entire periods presented.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company as of June 30, 1997 and
of the results of operations and cash flows for the six months ended June 30,
1996 and 1997 as presented in the accompanying unaudited interim financial
statements.
NOTE 3--ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND WRITE- AT END
OF PERIOD EXPENSES OFFS OF PERIOD
---------- ---------- ------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994....... $ 216 $ 108 $ (91) $ 233
Year ended December 31, 1995....... $ 233 $ 163 $ (135) $ 261
Year ended December 31, 1996....... $ 261 $ 280 $ (275) $ 266
</TABLE>
NOTE 4--INVENTORY
Inventory consists of the following finished goods:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Perishables.................................................... $ 142 $ 147
Hardgoods...................................................... 1,060 971
------ ------
$1,202 $1,118
====== ======
</TABLE>
F-25
<PAGE>
THE ROY HOUFF COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Leasehold improvements..................................... $ 1,179 $ 1,420
Computer equipment......................................... 852 650
Furniture, fixtures and equipment.......................... 2,466 2,436
Vehicles................................................... 17 17
------- -------
4,514 4,523
Accumulated depreciation and amortization.................. (2,327) (2,478)
------- -------
$ 2,187 $ 2,045
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $450, $526 and $609, respectively.
NOTE 6--CREDIT FACILITIES
Line of Credit
At December 31, 1995 and 1996, the Company had a $2,000 and $1,450 revolving
line of credit with a bank, respectively. Advances on the credit line are
payable on demand and bear interest at prime (8.50% and 8.25% as of December
31, 1995 and 1996, respectively). The credit line is unsecured. Outstanding
balances on the line were $1,500 and $400 as of December 31, 1995 and 1996,
respectively.
Bank Term Note
During 1996, the Company borrowed $600 under a term note that requires
payments of $120 per year through 2000 and $90 in 2001. The note bears
interest at the bank's prime rate (8.25% at December 31, 1996) and is secured
by certain equipment.
Notes Payable to Related Parties
Included in amounts shown as Due to Related Parties is an unsecured demand
note which bears interest at the higher of 10% or prime. The balance of this
note was $215 and $120 as of December 31, 1995 and 1996, respectively. This
note was paid in May, 1997.
Principal maturities on notes payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
1997............................................................ $ 240
1998............................................................ 120
1999............................................................ 120
2000............................................................ 120
2001............................................................ 90
-----
Total......................................................... $ 690
=====
</TABLE>
F-26
<PAGE>
THE ROY HOUFF COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--EMPLOYEE BENEFIT PLAN
The Company has established an employee savings plan under the provisions of
section 401(k) of the Internal Revenue Code. Virtually all employees are
eligible to participate in the plan. Employees can contribute up to 15% of
their gross salary to the plan. The Company is liable for matching
contributions of 50% of participants' contributions up to a certain amount per
participant. For the years ended December 31, 1994, 1995 and 1996, Company
contributions to the plan were approximately $17, $22 and $23, respectively.
NOTE 8--RELATED PARTY TRANSACTIONS
Salaries for several officers of the Company are paid through an entity
owned by the Company's stockholder. In turn, the related entity charges the
Company a management fee based on net sales. Management fees paid to the
related entity were approximately $584, $563 and $567 for 1994, 1995 and 1996,
respectively.
The Company also leases vehicles from the related entity. Total lease
payments were approximately $322, $208 and $71 for 1994, 1995 and 1996,
respectively.
The Company also purchases its health insurance through the related entity.
Premiums paid by the Company were approximately $322, $323 and $293 for 1994,
1995 and 1996, respectively.
The Company leases its corporate and six branch facilities under operating
leases with its sole stockholder. Rent expense under these operating leases
for 1994, 1995 and 1996 were approximately $320, $364 and $481, respectively.
The leases expire in years 1997 through 2001.
At December 31, 1995 and 1996, the Company had receivables of $312 and $88,
respectively, of advances to the stockholder of the Company. Interest income
related to this receivable was $15 for the years ended December 31, 1995 and
1996.
NOTE 9--COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its warehouse and office facilities and all delivery
vehicles under noncancelable operating leases. Some of the facilities are
leased directly from the Company's stockholder, and certain vehicles are
leased from an entity owned by the Company's stockholder (see Note 8). The
aggregate future minimum rentals (exclusive of real estate taxes and expenses)
are as follows:
<TABLE>
<S> <C>
1997.................................................................. $ 998
1998.................................................................. 826
1999.................................................................. 511
2000.................................................................. 310
2001.................................................................. 106
------
$2,751
======
</TABLE>
Legal Matters
The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations or cash flows of the Company.
F-27
<PAGE>
THE ROY HOUFF COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--CLOSING OF THE ATLANTA BRANCH
During October 1996, the Company closed its branch in Atlanta, Georgia. To
the extent possible, remaining inventories and certain equipment were
transferred to other branches. The operations of the Atlanta branch, which are
reflected in the accompanying statement of income for 1996, follow:
<TABLE>
<S> <C>
Net sales.......................................................... $ 2,690
Cost of sales...................................................... (1,997)
-------
Gross margin................................................... 693
Selling, general and administrative expenses:
Operating expenses............................................... (960)
Write-off of intangibles......................................... (78)
Loss on disposition of fixed assets.............................. (127)
-------
Net loss........................................................... $ (472)
=======
</TABLE>
NOTE 11--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholder have entered into a definitive agreement
with U.S.A. Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash concurrent with the consummation of the initial public
offering of the common stock of USA Floral.
The management fees, leasing payments and health insurance premiums paid to
a related party as described in Note 8 will be terminated upon consummation of
the merger. Additionally the properties owned by Roy Houff will be acquired by
the Company prior to the merger and the lease arrangement described in Note 8
will thereupon be terminated. All amounts due from Roy Houff will be repaid to
Houff upon consummation of the Houff merger.
F-28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
CFX, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of CFX, Inc. at December 31, 1996,
and the results of its operations and its cash flows for the year then ended,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for the
opinion expressed above. The financial statements of CFX, Inc. for the years
ended December 31, 1994 and 1995 were audited by other independent accountants
whose report dated March 8, 1996, expressed an unqualified opinion on those
statements.
Price Waterhouse LLP
Minneapolis, Minnesota
June 20, 1997
F-29
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
CFX, Inc.
Miami, Florida
We have audited the accompanying balance sheets of CFX, Inc., as of December
31, 1995 and 1994, and the related statements of income and retained earnings
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CFX, Inc., as of December
31, 1995 and 1994, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
Madsen, Sapp, Mena, Rodriguez & Co. P.A.
Plantation, Florida
March 8, 1996
F-30
<PAGE>
CFX, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 105 $1,385 $2,284
Marketable trading securities...................... 877
Accounts receivable, net........................... 3,143 3,242 3,916
Due from related parties........................... 96 397 210
Prepaid expenses and other current assets.......... 112 78 68
Advances to growers................................ 61 145 119
------ ------ ------
Total current assets............................. 4,394 5,247 6,597
Property and equipment, net.......................... 450 402 352
Other assets:
Due from related parties........................... 1,535 8
Cash surrender value--life insurance............... 247 207 207
Deposits........................................... 37 13 39
Advances to stockholders........................... 673 428 602
Advances to growers................................ 175 128
Other.............................................. 6 2 94
------ ------ ------
Total assets..................................... $7,342 $6,474 $8,027
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit..................................... $ 1 $ 1 $ 1
Current maturities of notes payable................ 16 18
Accounts payable................................... 403 548 558
Accrued expenses................................... 733 1,835 1,922
Due to related party growers....................... 925 316 282
------ ------ ------
Total current liabilities........................ 2,062 2,716 2,781
Notes payable, net of current maturities............. 21 12
Commitments and contingencies
Stockholders' equity:
Common stock $5.00 par value; 1,000 shares
authorized; 600 shares issued and outstanding..... 3 3 3
Additional paid-in capital......................... 57 57 57
Retained earnings.................................. 5,220 3,677 5,174
------ ------ ------
Total stockholders' equity....................... 5,280 3,737 5,234
------ ------ ------
Total liabilities and stockholders' equity....... $7,342 $6,474 $8,027
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE>
CFX, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales (includes sales to
related parties of $2,420,
$3,121 and $3,859)............. $30,590 $32,096 $35,684 $ 20,585 $ 22,854
Cost of sales (includes
purchases from related parties
of $9,081, $9,644 and
$12,263)....................... 23,839 24,328 28,190 16,031 17,759
------- ------- ------- -------- --------
Gross margin................ 6,751 7,768 7,494 4,554 5,095
Selling, general and
administrative expenses........ 6,266 6,773 8,956 5,249 3,657
------- ------- ------- -------- --------
Operating income (loss)..... 485 995 (1,462) (695) 1,438
Other (income) expense:
Interest income............... (117) (173) (115) (51) (32)
Other, net.................... 247 (370) (100) (93) (27)
------- ------- ------- -------- --------
Net income (loss)........... $ 355 $ 1,538 $(1,247) $ (551) $ 1,497
======= ======= ======= ======== ========
Unaudited pro forma information:
Pro forma net income (loss)
before provision (benefit)
for income taxes............. $ 355 $ 1,538 $(1,247) $ (551) $ 1,497
Provision (benefit) for income
taxes........................ 202 615 (499) (220) 599
------- ------- ------- -------- --------
Pro forma income (loss) (see
Note 2)...................... $ 153 $ 923 $ (748) $ (331) $ 898
======= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
CFX, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993........................ 600 $ 3 $57 $ 3,367 $ 3,427
Net income................. 355 355
--- --- --- ------- -------
Balance at December 31,
1994........................ 600 3 57 3,722 3,782
Net income................. 1,538 1,538
Dividends paid............. (40) (40)
--- --- --- ------- -------
Balance at December 31,
1995........................ 600 3 57 5,220 5,280
Net loss................... (1,247) (1,247)
Dividends paid............. (296) (296)
--- --- --- ------- -------
Balance at December 31,
1996........................ 600 3 57 3,677 3,737
Net income (unaudited)..... 1,497 1,497
--- --- --- ------- -------
Balance at June 30, 1997
(unaudited)................. 600 $ 3 $57 $ 5,174 $ 5,234
=== === === ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
CFX, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- --------------
1994 1995 1996 1996 1997
------- -------- -------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................. $ 355 $ 1,538 $ (1,247) $ (551) $1,497
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation and amortization..... 244 265 264 110 115
Unrealized/realized loss (gain)
on marketable trading
securities....................... 118 (336) (92) (92)
Gain on disposal of property,
plant and equipment.............. (8) (1) (3)
Purchase of marketable trading
securities....................... (765) (14)
Proceeds on sale of marketable
trading securities............... 603 966 966
Changes in operating assets and
liabilities:
Accounts receivable.............. (504) (50) (99) (450) (674)
Prepaid expenses and other
current assets.................. (24) (13) 34 55 10
Long-term receivables............ 17 12 4
Other assets..................... 130 (42) 67 (3) (118)
Accounts payable and accrued
expenses........................ 402 (231) 1,231 2,810 98
Due from/to related parties...... 28 (383) (518) 251 (34)
------ -------- -------- ------ ------
Net cash provided by operating
activities..................... 1 1,341 609 3,093 894
Cash flows from investing
activities:
Advances to growers............... (33) 72 (243) 30 72
Decrease in certificate of
deposit.......................... 16 180
Purchases of property and
equipment........................ (166) (287) (179) (68) (65)
Proceeds from sale of equipment... 8 1 3
Advances to related parties....... (299) (450) (126) (51) (8)
Repayments from related parties... 253 24 1,269 1,524 187
Advances to stockholders.......... (255) (258) (1,557) (548) (174)
Repayments from stockholders...... 1,802
------ -------- -------- ------ ------
Net cash provided by (used in)
investing activities........... (484) (711) 967 890 12
Cash flows from financing
activities:
Borrowings/payments on bank line
of credit........................ 810 (810)
Repayments of long-term debt...... (77) (81) (1) (7)
Repayments of stockholders notes
payable.......................... (100)
Repayments of life insurance
loan............................. (254)
Stockholder dividends............. (40) (296) (296)
------ -------- -------- ------ ------
Net cash provided by (used in)
financing activities........... 479 (1,031) (296) (297) (7)
Net increase (decrease) in cash and
cash equivalents.................. (4) (401) 1,280 3,686 899
Cash and cash equivalents--
beginning of period............... 510 506 105 105 1,385
------ -------- -------- ------ ------
Cash and cash equivalents--end of
period............................ $ 506 $ 105 $ 1,385 $3,791 $2,284
====== ======== ======== ====== ======
Supplemental disclosure of cash
flow information:
Cash paid during the period for
interest......................... $ 46 $ 21 $ 2 $ 1 $ 12
Supplemental disclosure of noncash
investing and financing
activities:
Debt incurred for the acquisition
of equipment..................... $ 37
Acquired grower advance asset by
assuming directly related
liability........................ $ 16
Reclassification from accounts
payable to due to related
parties.......................... $ 816
Reclassification from advances to
growers to advances to
stockholders..................... $ 160
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
CFX, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1974, CFX, Inc. (the "Company") is an importer and distributor of
perishable floral products operating from one location in Florida. The Company
imports flowers from farms located primarily in Columbia and Ecuador, and
distributes them throughout the United States to wholesale distributors and
mass markets.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates used in preparing these financial statements include
those assumed in computing the antidumping duty liability.
Revenue Recognition
Revenue is recognized upon shipment of product.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of approximately
three months or less at date of purchase to be cash equivalents.
Advances to Growers
Advances to growers consist of cash advances to unrelated growers for
working capital purposes. The advances are usually to be repaid by sales of
flowers by the Company, on behalf of the growers.
Financial Instruments
Investments in debt and equity securities are categorized as trading
securities. Unrealized holding gains and losses are included in earnings. Cost
of investments are determined on a specific identification basis.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided using
straight-line and accelerated methods over the estimated useful lives of the
related assets (three to seven years). Leasehold improvements are amortized
over the shorter of the lease term or the estimated useful life.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable, insurance receivable, accrued
expenses and short-term debt approximates fair value because of the short
maturity of these instruments. The estimated fair value of long-term debt and
other long-term liabilities approximates its carrying value. Additionally,
interest rates on outstanding debt are at rates which approximate market rates
for debt with similar terms and average maturities.
F-35
<PAGE>
CFX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents, marketable
trading securities, trade accounts receivable and amounts due from related
parties and related and unrelated growers. The Company extends unsecured
credit to wholesale florists primarily throughout the United States. The
Company, from time to time, advances funds to related parties and related and
unrelated growers on an unsecured basis. Receivables are not collateralized
and accordingly, the Company performs ongoing credit evaluations of its
customers to reduce the risk of loss.
The Company receives a significant portion of their fresh-cut flowers from
the South American country of Columbia.
Income Taxes
The Company has elected to be treated as an S Corporation for federal and
state income taxes and, accordingly, any liability for income taxes are the
direct responsibility of the stockholders.
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to applicable federal and state income taxes for the entire periods
presented.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company at June 30, 1997, and
the results of its operations and its cash flows for the six months ended June
30, 1996 and 1997, as presented in the accompanying unaudited interim
financial statements.
NOTE 3--ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES WRITE-OFFS OF PERIOD
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994.... $145 $(43) $(12) $90
Year ended December 31, 1995.... $ 90 $ 15 $(15) $90
Year ended December 31, 1996.... $ 90 $ 32 $(32) $90
</TABLE>
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Leasehold improvements..................................... $ 729 $ 729
Equipment.................................................. 1,446 1,547
Vehicles................................................... 417 491
Furniture and fixtures..................................... 162 138
------- -------
2,754 2,905
Accumulated depreciation and amortization.................. (2,304) (2,503)
------- -------
$ 450 $ 402
======= =======
</TABLE>
F-36
<PAGE>
CFX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $244, $265 and $264, respectively.
NOTE 5--CREDIT FACILITIES
Bank Lines of Credit
The Company maintains a line of credit and an overline facility which
provide for borrowings of up to $2,000 and $500, respectively, and bear
interest at prime plus 1/2% (9.5% and 8.75% at December 31, 1995 and 1996,
respectively). These facilities expired on May 31, 1997; however, any amount
drawn upon the overline may be converted to a promissory note. The borrowings
are collateralized by all of the Company's personal property and place
restrictions on indebtedness, capital expenditures, the payment of dividends,
the sale of assets, and mergers and acquisitions. In addition, the loan
agreement requires certain ratios and other financial statistics and
restrictions. The Company was in compliance with these restrictions as of
December 31, 1996 with the exception of the covenants relating to tangible net
worth, indebtedness and payment of dividends. Appropriate waivers were
obtained for those covenants that were in default.
Note Payable to Bank
The Company's $37 note payable with a bank requires monthly installments of
approximately $2 due through January 1999 plus interest at prime (8.25% at
December 31, 1996). This note is collateralized by automotive equipment, with
a carrying value of approximately $37.
Principal maturities on the note payable over the next five years are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
1997............................................................ $16
1998............................................................ 19
1999............................................................ 2
Thereafter......................................................
---
Total......................................................... $37
===
</TABLE>
NOTE 6--PROFIT SHARING PLAN
The Company has a contributory profit sharing plan covering substantially
all employees. Participant contributions may not exceed 15% of eligible
compensation. Employer contributions, if any, are determined annually by the
Board of Directors and may not exceed the amount deductible for Federal income
tax purposes. The Company's contributions to this plan were $0, $100 and $100
for the years ended December 31, 1994, 1995 and 1996, respectively.
NOTE 7--RELATED PARTY TRANSACTIONS
The Company receives flowers from farms partially owned by the Company's
majority stockholders. Total purchases from these related party farms were
$9,081, $9,644 and $11,993 in cost of sales for the years ended December 31,
1994, 1995 and 1996, respectively.
The Company sells flowers to, and purchases flowers from, a bouquet
manufacturer affiliate owned by its majority stockholders. Sales were
approximately $2,420, $3,121 and $3,859 to this affiliate for the years ended
F-37
<PAGE>
CFX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
December 31, 1994, 1995 and 1996, respectively. Related accounts receivable
balances were $224 and $0 at December 31, 1995 and 1996, respectively. The
financial statements include cost of sales of $0, $0 and $270 for the years
ended December 31, 1994, 1995 and 1996, respectively.
The Company also provides services to and receives services from the bouquet
manufacturer affiliate. Net management fee income for such services were
approximately $605, $518 and $570 for the years ended December 31, 1994, 1995
and 1996, respectively. At December 31, 1995 and 1996, the outstanding
receivable balance resulting from such transactions was approximately $1,623
and $388, respectively. In 1995, $96 of the outstanding balance is included in
due from related parties--current and $1,527 is in due from related parties--
noncurrent. The entire 1996 balance is included in due from related parties--
current.
The Company uses a related party agent corporation to handle certain
business activities in Colombia. Administrative expenses paid to the agent
corporation were approximately $212 and $308 for the years ended December 31,
1995 and 1996, respectively. At December 31, 1996, the outstanding balance
resulting from such transactions was approximately $11 and is included in
accounts payable. In addition, a long-term receivable exists from the related
party agent of approximately $8 as of December 31, 1995 and 1996 and is
included in due from related parties--noncurrent at December 31, 1995 and due
from related parties--current at December 31, 1996.
The Company loans cash to the bouquet manufacturer affiliate on a daily
basis. The accompanying financial statements include interest income from
related parties of approximately $62, $112 and $61 for the years ended
December 31, 1994, 1995 and 1996, respectively.
Advances to stockholders represent noninterest bearing funds advanced to the
Company's majority stockholders for the purpose of acquiring an interest in a
farm in Central America and initial capitalization of an agent corporation
located in South America. Official terms of the advances have not been
determined.
NOTE 8--COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company and its bouquet manufacturer affiliate jointly lease office and
warehouse space from partnership owned by the Company's majority shareholders.
Lease payments in 1996 were divided 33% to the Company and 67% to the
affiliate based on square footage of lease space utilized.
The lease expires December 31, 2006 and requires basic rent of an amount
equal to principal and interest payments on the bond and second mortgage and
other expenses of the partnership.
As of December 31, 1996, CFX's allocable share of the future minimum rent
under the current terms of the above office and warehouse lease are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
1997............................................................ $ 274
1998............................................................ 274
1999............................................................ 274
2000............................................................ 274
2001............................................................ 274
Thereafter...................................................... 1,369
------
Total......................................................... $2,739
======
</TABLE>
F-38
<PAGE>
CFX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Rent expense was $228, $203 and $213 for the years ended December 31, 1994,
1995 and 1996, respectively.
Guarantees
During 1996, an affiliated partnership owned by the Company's majority
stockholders extended the terms of an Industrial Development Bond and entered
into an interest rate swap as a hedge. The bond has an outstanding balance of
approximately $4,000 and $3,760 at December 31, 1995 and 1996, respectively,
and matures in January 2002. The affiliated partnership also entered into a
variable rate second mortgage during 1996. The mortgage has an outstanding
balance of approximately $1,180 at December 31, 1996 and matures in October
2006. The bond and mortgage are collateralized by land and building which are
leased by the Company and its wholesale affiliate. The Company has pledged all
of its assets as collateral and guaranteed the bond and mortgage. The bond
agreement places restrictions on indebtedness and liens, the payment of
dividends, the sale of assets, mergers and acquisitions and other
restrictions. In addition, the bond agreement requires the Company and its
wholesale affiliate to maintain certain combined ratios and other financial
statistics.
During 1995, a related party farm obtained a loan to purchase a vehicle
which the Company has guaranteed. The loan matures in August 1998 and had an
outstanding balance at December 31, 1995 and 1996 of approximately $45 and
$29, respectively.
At December 31, 1995 and 1996, the Company had three outstanding
uncollateralized letters of credit totaling approximately $403 and $318,
respectively, which were used for the borrowings of related farms. The letters
of credit reduce the borrowings allowed under the line of credit discussed in
Note 5.
Legal Matters
The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of the Company.
Antidumping Duty
In 1986, the U.S. Department of Commerce ("DOC") imposed an antidumping duty
deposit ("ADD") on the importation of certain flowers, pending the imposition
of a final duty rate based on annual reviews of the flower growers' margins.
Since that time, the DOC has undertaken ten reviews, the last one for the
period ending February 28, 1997. As a result of those reviews, the Company's
importation of flowers from its suppliers has been subject to antidumping
duties. The ADDs from the second and fourth reviews are awaiting final
liquidation from the DOC. Final rate determinations have been published for
the fifth through seventh reviews but judicial appeals are pending. The eighth
review was liquidated at the cash-deposit rate. The ninth review is pending
final rate determination. The tenth review is in process. All other reviews
have been resolved.
Included in accrued expenses is approximately $184 and $1,248 as of December
31, 1995 and 1996, respectively, of estimated antidumping duty imposed by the
Department of Commerce. The duty is based on rates imposed on certain products
from certain growers in Columbia and Ecuador. The antidumping duty is subject
to change upon the Department of Commerce's final review of all open
antidumping periods as well as various legal appeals.
F-39
<PAGE>
CFX, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9--OTHER INCOME
Significant components of other income (expense) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995 1996
----- ---- ----
<S> <C> <C> <C>
Realized gains on trading securities ...................... $ $ 14 $ 92
Unrealized gains (losses) on trading securities............ (119) 265
Gain on sale of property and equipment..................... 65
Other...................................................... (128) 26 8
----- ---- ----
$(247) $370 $100
===== ==== ====
</TABLE>
NOTE 10--SIGNIFICANT CUSTOMERS
Sales to the Company's bouquet manufacturing affiliate approximated 7%, 10%
and 11% of revenues for 1994, 1995 and 1996, respectively.
Additionally, this customer represented 7% and 0% of accounts receivable at
December 31, 1995 and 1996, respectively. This customer is 100% owned by the
two majority stockholders.
NOTE 11--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholders have entered into a definitive agreement
with U.S.A. Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash and shares of USA Floral common stock concurrent with the
consummation of the initial public offering of the common stock of USA Floral.
All related party agreements, understandings and arrangements as outlined in
Note 7 will be amended upon consummation of the merger described above so that
all continuing obligations thereunder are no greater than they would be under
agreements with unaffiliated third parties. In addition, all advances to
stockholders balances will be paid to the Company with the consummation of the
initial public offering.
F-40
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Bay State Florist Supply, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Bay State Florist Supply, Inc. at
December 31, 1995 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
June 27, 1997
F-41
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 795 $ 791 $1,714
Accounts receivable, net......................... 3,090 3,413 3,076
Inventory........................................ 1,397 1,701 1,751
Due from related parties......................... 486 559 380
Prepaid expenses and other current assets........ 199 165 106
------ ------ ------
Total current assets........................... 5,967 6,629 7,027
Property and equipment, net........................ 1,339 1,505 1,605
Cash surrender value--life insurance............... 338 364 365
Other assets....................................... 13 13 113
------ ------ ------
Total assets................................... $7,657 $8,511 $9,110
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank............................. $ 200 $ 212
Current maturities of long-term debt............. $ 50 50 69
Accounts payable................................. 1,441 1,701 2,060
Accrued expenses................................. 322 336 407
------ ------ ------
Total current liabilities...................... 1,813 2,287 2,748
Note payable, net of current maturities............ 412 358 396
Commitments and contingencies (Note 6)
Other long term liabilities........................ 400 400 400
Stockholders' equity:
Common stock $0.01 par value; 500,000 shares
authorized; 461,840 shares issued and
outstanding..................................... 5 5 5
Additional paid-in capital....................... 376 376 376
Retained earnings................................ 5,127 5,561 5,661
Less: Treasury stock............................. (476) (476) (476)
------ ------ ------
Total stockholders' equity..................... 5,032 5,466 5,566
------ ------ ------
Total liabilities and stockholders' equity..... $7,657 $8,511 $9,110
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales......................... $19,203 $25,592 $30,563 $16,412 $16,375
Cost of sales..................... 12,807 17,068 20,722 11,279 11,080
------- ------- ------- ------- -------
Gross margin.................. 6,396 8,524 9,841 5,133 5,295
Selling, general and
administrative expenses.......... 5,529 7,579 8,976 4,429 4,556
------- ------- ------- ------- -------
Operating income.............. 867 945 865 704 739
Other (income) expense:
Interest expense................ 9 16 33 17 25
Interest income................. (26) (48) (35) (20) (23)
Other, net...................... (199) (229) (247) (55) (90)
------- ------- ------- ------- -------
Income before income taxes........ 1,083 1,206 1,114 762 827
Provision for income taxes........ 125 87 81 61 70
------- ------- ------- ------- -------
Net income........................ $ 958 $ 1,119 $ 1,033 $ 701 $ 757
======= ======= ======= ======= =======
Unaudited pro forma information:
Pro forma net income before
provision for income taxes..... $ 1,083 $ 1,206 $ 1,114 $ 762 $ 827
Provision for income taxes...... 433 482 446 305 331
------- ------- ------- ------- -------
Pro forma income (see Note 2)... $ 650 $ 724 $ 668 $ 457 $ 496
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-43
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------- PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------- ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 461,040 $ 5 $372 $4,549 $(422) $4,504
Net income............ 958 958
Dividends paid........ (769) (769)
Stock issued.......... 800 4 4
------- --- ---- ------ ----- ------
Balance at December 31,
1994................... 461,840 5 376 4,738 (422) 4,697
Net income............ 1,119 1,119
Dividends paid........ (730) (730)
Repurchase of stock... (54) (54)
------- --- ---- ------ ----- ------
Balance at December 31,
1995................... 461,840 5 376 5,127 (476) 5,032
Net income............ 1,033 1,033
Dividends paid........ (599) (599)
------- --- ---- ------ ----- ------
Balance at December 31,
1996................... 461,840 5 376 5,561 (476) 5,466
Net income
(unaudited).......... 757 757
Dividends paid
(unaudited).......... (657) (657)
------- --- ---- ------ ----- ------
Balance at June 30, 1997
(unaudited)............ 461,840 $ 5 $376 $5,661 $(476) $5,566
======= === ==== ====== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-44
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income........................ $ 958 $ 1,119 $ 1,033 $ 701 $ 757
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation..................... 144 149 154 111 73
Change in operating assets and
liabilities:
Accounts receivable............ (51) (919) (323) (200) 337
Inventory...................... 87 (116) (304) (271) (51)
Prepaid expenses and other
current assets................ 18 (54) 34 (10) (40)
Accounts payable and accrued
expenses...................... (12) 681 274 (66) 430
Due from/to related parties.... (533) 47 (73)
------- ------- ------- ------ -------
Net cash provided by (used
in) operating activities.... 611 907 795 265 1,506
Cash flows from investing
activities:
Purchases of property and
equipment....................... (148) (219) (320) (95) (173)
Repayments from related parties.. 8 179
Cash surrender value of life
insurance....................... (16) (49) (26)
------- ------- ------- ------ -------
Net cash used in investing
activities.................. (164) (268) (346) (87) 6
Cash flows from financing
activities:
Proceeds from issuance of long-
term debt....................... 550 200 200 68
Payments of long-term debt....... (87) (54) (25)
Issuance of common stock......... 4
Purchase of treasury stock....... (54)
Stockholder dividends............ (769) (730) (599) (294) (657)
------- ------- ------- ------ -------
Net cash used in financing
activities.................. (215) (871) (453) (119) (589)
Net increase (decrease) in cash and
cash equivalents.................. 232 (232) (4) 59 923
Cash and cash equivalents--
beginning of period............... 795 1,027 795 795 791
------- ------- ------- ------ -------
Cash and cash equivalents--end of
period............................ $ 1,027 $ 795 $ 791 $ 854 $ 1,714
======= ======= ======= ====== =======
Supplemental disclosure of cash
flow information:
Cash paid during the period for
interest........................ $ 9 $ 16 $ 33 $ 17 $ 25
Note payable issued for
acquisition..................... $ 100
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-45
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1952, Bay State Florist Supply, Inc. (the "Company") is a
wholesale distributor of perishable floral products and floral-related
hardgoods, operating from six locations in Massachusetts, New York, New
Hampshire, Connecticut and Rhode Island. The Company purchases floral products
from domestic growers, importers, brokers and shippers and sells them to
retail florists and mass marketer retailers throughout the United States.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.
Revenue Recognition
The Company recognizes revenue upon shipment of product.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid short-term investments with maturities of less than three months
at date of purchase to be cash equivalents.
Inventory
Inventory is valued at the lower of average cost or market, cost being
determined on a first-in first-out (FIFO) basis.
Property and Equipment
Property and equipment are stated at cost. Replacements and improvements are
capitalized, while repairs and maintenance costs are charged to expense as
incurred. Depreciation is provided using an accelerated method for federal
income tax reporting purposes and the straight line method for financial
statement reporting purposes over the estimated useful lives of the related
assets (3 to 40 years). Leasehold improvements are amortized over the shorter
of the lease term or the estimated useful life.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable, insurance receivable, accrued
expenses and short-term debt approximates fair value because of the short
maturity of these instruments. The estimated fair value of long-term debt and
other long-term liabilities approximates its carrying value. Additionally,
interest rates on outstanding debt are at rates which approximate market rates
for debt with similar terms and average maturities.
F-46
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collateralized and accordingly, the Company performs on going credit
evaluations of its customers to reduce the risk of loss. The Company, from
time to time, advances funds to related parties on an unsecured basis.
Accounts Payable
Accounts payable includes certain amounts which represent checks written but
not yet cleared by the bank.
Income Taxes
The Company has elected to be treated as an S Corporation for federal and
state income taxes and, accordingly, any liabilities for income taxes are the
direct responsibility of the stockholders. No provision for federal income tax
is required. The Commonwealth of Massachusetts, which is the Company's
principal place of business, imposes a corporate level state income tax on
certain S Corporations which has been provided for.
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal income taxes for the entire periods presented.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company as of June 30, 1997 and
the results of operations and cash flows for the six months ended June 30,
1996 and 1997 as presented in the accompanying unaudited interim financial
statements.
NOTE 3--ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES WRITE-OFFS OF PERIOD
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994
allowance for doubtful
accounts..................... $ 0 $86 $(26) $60
Year ended December 31, 1995
allowance for doubtful
accounts..................... $60 $71 $(71) $60
Year ended December 31, 1996
allowance for doubtful
accounts..................... $60 $57 $(57) $60
</TABLE>
NOTE 4--INVENTORY
Inventory consists of the following finished goods:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Perishable..................................................... $ 88 $ 165
Non-perishable, net............................................ 1,309 1,536
------ ------
Total........................................................ $1,397 $1,701
====== ======
</TABLE>
F-47
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Perishable goods consist of assorted flowers and green plants. Non-
perishable goods consist of assorted silk flowers, vases, baskets and
accessories.
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Land....................................................... $ 393 $ 393
Buildings.................................................. 939 939
Building improvements...................................... 693 911
Furniture, fixtures and equipment.......................... 896 919
Motor vehicles............................................. 185 184
------- -------
3,106 3,346
Accumulated depreciation................................... (1,767) (1,841)
------- -------
$ 1,339 $ 1,505
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $144, $149 and $154, respectively.
NOTE 6--COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases office space, vehicles and equipment under operating
leases. Future minimum lease payments under such leases at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
1997............................................................ $196
1998............................................................ 196
1999............................................................ 60
2000............................................................ 60
----
Total future minimum payments................................. $512
====
</TABLE>
Rental expense under operating leases during 1994, 1995 and 1996 was $154,
$298 and $365, respectively.
Legal Matters
The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations or cash flows of the Company.
F-48
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--CREDIT FACILITIES
Short-Term Debt
Short-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Revolving line of credit; due May 31, 1998; interest on
outstanding balance at the bank's prime rate per annum;
$1,000,000 borrowing maximum; limited to eligible accounts
receivable and inventory, as defined....................... $ 0 $ 200
----- ------
$ 0 $ 200
===== ======
</TABLE>
Long-Term Debt
Long-term debt consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Note payable, due March 31, 1998; interest on outstanding
balance at the bank's prime rate plus 0.5% per annum......... $ 462 $ 408
Less: Current maturities 50 50
------ ------
$ 412 $ 358
====== ======
</TABLE>
As further discussed in Note 9, Related Party Transactions, this note
payable represents an unsecured note, the proceeds of which were provided to a
separate affiliated entity, Cromwell Properties LLC (the "LLC"), to purchase a
building in Cromwell, Connecticut. The Company has a corresponding receivable
classified as Due from Related Parties in the financial statements.
Principal maturities on notes payable over the next three years are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------
<S> <C>
1997............................................................ $ 50
1998............................................................ 50
1999............................................................ 308
----
Total......................................................... $408
====
</TABLE>
Interest expense incurred for the years ended December 31, 1994, 1995 and
1996 was $9, $16 and $33, respectively.
In March 1997, the Company entered into a Note Payable in conjunction with
the purchase of a facility in Clifton Park, which requires annual principal
and interest payments of $19 for a period of eight years. The outstanding
balance was $100 at March 31, 1997.
NOTE 8--EMPLOYEE BENEFIT PLAN
The Company has a 401(k) savings plan covering substantially all employees.
Under the plan, the Company matches 50% of employee contributions up to the
first 6% of an employee's compensation contributed to the
F-49
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
plan. The Company's contributions to the 401(k) savings plan were
approximately $33, $41 and $56 for 1994, 1995 and 1996, respectively.
Additionally, the Company, at its discretion, may make additional
contributions (considered profit sharing contributions). The Company's goal is
to contribute 4% of net income to the Plan through the 401(k) match or the
discretionary contribution. In 1994, the Company made a discretionary
contribution of approximately $11. No discretionary contributions were made in
1995 or 1996.
NOTE 9--RELATED PARTY TRANSACTIONS
At December 31, 1995 and 1996, the Company held a note payable to Bank
Boston, the proceeds of which were provided to the affiliate LLC and used to
purchase a building in Cromwell, Connecticut. The Company leases this building
from the LLC on a month-to-month basis. Rental expense to the LLC under this
lease was $24, $108 and $108 for 1994, 1995 and 1996, respectively. Included
in Due from Related Parties is a corresponding receivable from the LLC for
amounts provided.
Additionally, the Company is acting as Guarantor for a $75 loan from
BayBank, N.A. to a Director of the Company. The loan arrangement, executed on
June 5, 1996, is payable in 60 monthly installments of $1 at the bank's prime
rate plus 1.5% per annum. Additionally, the Director has pledged his share in
the Company (approximately 13%) as consideration for this guaranty.
NOTE 10--OTHER INCOME/OTHER EXPENSE
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Finance charges........................................ $(100) $(139) $(176)
Real estate rental income, net......................... (33) (35) (23)
Other (income) expense, net............................ (66) (55) (48)
----- ----- -----
Total other (income)................................. $(199) $(229) $(247)
===== ===== =====
</TABLE>
NOTE 11--STOCK SPLIT
In March 1997, the Company approved (i) a 40-for-1 stock split; (ii) an
increase in number of authorized shares from 200,000 to 500,000; and (iii) a
decrease in par value from $10.00 to $0.01.
Accordingly, all share data presented in these financial statements has been
restated to give retroactive effect to the stock split and amendment.
NOTE 12--DEFERRED COMPENSATION ARRANGEMENTS
The Company has entered into deferred compensation arrangements with three
officers which call for monthly payments to the officer or a designated
beneficiary for a period of ten years following retirement. The Company has
recorded the present value of these future payments as a long term liability
and has purchased life insurance policies on these individuals to provide a
funding mechanism for these liabilities.
NOTE 13--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholders have entered into a definitive agreement
with U.S.A Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash and shares of USA Floral common stock concurrent with the
consummation of the initial public offering of the common stock of USA Floral.
F-50
<PAGE>
BAY STATE FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In conjunction with the merger the amounts Due From Related Parties will be
repaid and the proceeds will be used to pay the outstanding balance of the
Note Payable described in Note 7.
Additionally, the terms of the lease described in Note 9 will be evaluated
and renegotiated, if necessary, to ensure such terms are no less favorable to
the Company than those that Bay State could obtain with unaffiliated third
parties.
F-51
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Flowtrad Corporation, N.V. d/b/a Flower Trading Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Flowtrad
Corporation, N.V. (d/b/a "Flower Trading Corporation" or the "Company") at
December 31, 1995 and 1996 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
August 1, 1997
F-52
<PAGE>
FLOWER TRADING CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 126 $ 70 $ 862
Accounts receivable, net........................... 2,612 2,747 2,526
Officers, employees and related party receivables.. 21 38 40
Other receivables.................................. 109 10 18
Inventory.......................................... 23 52 47
Prepaid expenses and other current assets.......... 36 171 151
------ ------ ------
Total current assets........................... 2,927 3,088 3,644
Property and equipment, net.......................... 489 330 332
Cash surrender value--life insurance................. 39 44 44
Deferred income taxes................................ 91 79 90
Other assets......................................... 69 110 101
------ ------ ------
Total assets......................................... $3,615 $3,651 $4,211
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit................................ $ 200
Notes payable--current............................. $ 43 112 $ 104
Trade accounts payable............................. 862 669 667
Trade accounts payable due to affiliates........... 483 532 581
Other accounts payable and accrued expenses........ 86 277 255
Income taxes payable............................... 9 250
------ ------ ------
Total current liabilities........................ 1,483 1,790 1,857
Notes payable, net of current maturities............. 8 391 339
------ ------ ------
Total liabilities................................ 1,491 2,181 2,196
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value; 150,000 shares
authorized, issued and outstanding................ 150 150 150
Additional paid-in capital......................... 328 328 328
Retained earnings.................................. 1,646 992 1,537
------ ------ ------
Total stockholders' equity....................... 2,124 1,470 2,015
------ ------ ------
Total liabilities and stockholders' equity....... $3,615 $3,651 $4,211
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-53
<PAGE>
FLOWER TRADING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1994 1995 1996 1996 1997
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................ $18,478 $20,335 $20,313 $ 11,305 $ 12,997
Cost of sales (including
purchases from affiliated farms
of $2,612, $4,451, $3,921 for
the years ended December 31,
1994, 1995 and 1996 and $1,779
and $2,259 for the six months
ended June 30, 1996 and 1997,
respectively)................... 14,452 15,921 15,914 8,928 10,139
------- ------- ------- -------- --------
Gross profit................. 4,026 4,414 4,399 2,377 2,858
Selling, general and
administrative expenses......... 3,605 4,068 4,142 1,944 1,936
------- ------- ------- -------- --------
Operating income............. 421 346 257 433 922
Other (income) expense:
Interest expense............... 17 9 32 5 35
Interest income................ (11) (18) (5) (2) (4)
Write off of investment........ 181 129
Other, net..................... (87) (51) (9) (6) 7
------- ------- ------- -------- --------
Income before provision for
income taxes.................... 502 225 110 436 884
Provision for income taxes....... 201 95 48 183 339
------- ------- ------- -------- --------
Net income....................... $ 301 $ 130 $ 62 $ 253 $ 545
======= ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-54
<PAGE>
FLOWER TRADING CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
-------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------- ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993.. 160,000 $ 150 $ 328 $ 1,215 $ 1,693
Net income.................. 301 301
------- ----- ----- ------- -------
Balance at December 31, 1994.. 160,000 150 328 1,516 1,994
Net income.................. 130 130
------- ----- ----- ------- -------
Balance at December 31, 1995.. 160,000 150 328 1,646 2,124
Net income.................. 62 62
Distribution to shareholders
for investment in
subsidiary................. (716) (716)
------- ----- ----- ------- -------
Balance at December 31, 1996.. 160,000 150 328 992 1,470
Net income (unaudited)...... 545 545
------- ----- ----- ------- -------
Balance at June 30, 1997
(unaudited).................. 160,000 $ 150 $ 328 $ 1,537 $ 2,015
======= ===== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-55
<PAGE>
FLOWER TRADING CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -------------
1994 1995 1996 1996 1997
------- ------- -------- ----- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................... $ 301 $ 130 $ 62 $ 253 $ 545
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization...... 196 216 202 93 80
Loss on investment................. 181 129
Loss on disposal of fixed assets... 40
Change in operating assets and
liabilities:
Accounts receivable............... 99 63 (53) (141) 211
Inventory......................... 19 (7) (29) 7 5
Prepaid expenses and other current
assets........................... 195 (15) (176) 5 20
Accounts payable.................. 43 (27) (144) (164) 47
Accrued expenses.................. (235) 59 191 (43) (22)
Income taxes payable.............. 78 (69) (9) 88 250
Deferred taxes asset and other
assets........................... 3 (91) 41 (2)
------- ------ -------- ----- ------
Net cash (used) provided by
operating activities............ 699 440 254 98 1,134
Cash flows from investing activities:
Purchase of investment.............. (181) (129)
Purchases of property and
equipment.......................... (83) (32) (82)
Proceeds from disposal of property
and equipment...................... (288) (162)
Cash surrender value of life
insurance.......................... 4 (5)
Advances to related parties......... (67) 28
------- ------ -------- ----- ------
Net cash used in investing
activities...................... (355) (311) (217) (32) (82)
Cash flows from financing activities:
Proceeds from issuance of long-term
debt............................... 1,100
Repayments of long-term debt........ (74) (74) (648) (37) (52)
Distribution to stockholders for
investment in subsidiary........... (745)
Borrowings (repayments) under line
of credit agreement, net........... (200) 200 (208)
------- ------ -------- ----- ------
Net cash (used) provided by in
financing activities............ (274) (74) (93) (37) (260)
Net increase (decrease) in cash and
cash equivalents.................... 70 55 (56) 29 792
Cash and cash equivalents--beginning
of period........................... 1 71 126 126 70
------- ------ -------- ----- ------
Cash and cash equivalents--end of
period.............................. $ 71 $ 126 $ 70 $ 155 $ 862
======= ====== ======== ===== ======
Supplemental disclosure of cash flow
information:
Cash paid during the period for
interest........................... $ 17 $ 9 $ 32 $ 4 $ 34
Cash paid during the period for
income taxes....................... $ 201 $ 189 $ 189 $ 73 $ 52
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-56
<PAGE>
FLOWER TRADING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1977, Flower Trading Corporation is an importer and distributor
of perishable floral products which are imported from farms located primarily
in Colombia and Ecuador and distributed to wholesale florists throughout the
United States.
Basis of Presentation
These consolidated financial statements represent the financial position,
results of operations and net cash flows of Flowtrad Corporation N.V. and its
wholly owned subsidiary, Flower Trading Corporation ("Flower Trading" or the
"Company"). All significant intercompany accounts have been eliminated in
consolidation.
The Company and its stockholders plan to enter into a definitive agreement
with USA Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with a subsidiary of USA Floral. All outstanding shares of the
Company will be exchanged for cash and shares of USA Floral common stock
concurrent with the consummation of an initial public offering of the common
stock of USA Floral.
Flower Trading also holds a 75 percent interest in a subsidiary, UltraFlora
Corporation, which owns a 99.62 percent interest in UltraFlora Corporation
Limited, a subsidiary in Colombia. The stockholders of the Company do not plan
to include UltraFlora Corporation and its subsidiary in the merger, and will
divest of this interest prior to the merger. Accordingly, these financial
statements do not reflect the financial position, results of operations or net
cash flows of UltraFlora Corporation and its subsidiary.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimate
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized upon shipment of product.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less at date of purchase to be cash equivalents.
Inventory
Inventory is stated at the lower of cost or market. A significant portion of
inventory is purchased on a consignment basis. Cost is determined by the
specific identification method.
F-57
<PAGE>
FLOWER TRADING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation is provided using accelerated methods over the estimated useful
lives of the related assets (three to seven years).
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable, insurance receivable, accrued
expenses and short-term debt approximates fair value because of the short
maturity of these instruments. The estimated fair value of long-term debt and
other long-term liabilities approximates its carrying value. Additionally,
interest rates on outstanding debt are at rates which approximate market rates
for debt with similar terms and average maturities.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collateralized and accordingly, the Company performs ongoing credit
evaluations of its customers to reduce the risk of loss.
Income Taxes
The Company is a C Corporation for federal and state income tax purposes.
The Company accounts for income taxes using the liability method under the
provisions on the Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes."
Other Income
In 1995 and 1996 the Company loaned a start-up company $181 and $129,
respectively. As the collectibility of these loans was considered uncertain,
these loans were written off in each of the respective years.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company as of June 30, 1997 and
of the results of operations and cash flows for the six months ended June 30,
1996 and 1997 as presented in the accompanying unaudited interim financial
statements.
NOTE 3--ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
OF PERIOD EXPENSES WRITE-OFFS OF PERIOD
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994.... $ 0 $ 4 $ 4 $ 0
Year ended December 31, 1995.... $ 0 $96 $18 $78
Year ended December 31, 1996.... $78 $21 $21 $78
</TABLE>
F-58
<PAGE>
FLOWER TRADING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Machinery and equipment.................................... $ 584 $ 596
Computer equipment and software............................ 634 408
Furniture, fixtures and equipment.......................... 241 245
Vehicles................................................... 81 81
------- -------
1,540 1,330
Accumulated depreciation and amortization.................. (1,051) (1,000)
------- -------
$ 489 $ 330
======= =======
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996
was $196, $216 and $202, respectively.
NOTE 5--CREDIT FACILITIES
Line of Credit
At December 31, 1995 and 1996, the Company had a $750 revolving line of
credit with a bank which is due on demand and expired on June 30, 1997. This
line of credit was renewed through June 30, 1998 and increased to $1,500.
Advances on the credit line are payable on demand and bear interest at 1
percent above the prime rate with interest payable monthly (9.25% at December
31, 1995 and 1996). The credit line is secured by all of the Company's
personal property, including but not limited to the Company's accounts,
inventory and fixed assets. Outstanding balances on the line were $0 and $200
as of December 31, 1995 and 1996, respectively.
Long-Term Debt
Long-term debt consists of the following at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Note payable to bank, due in monthly installments of $9,
bearing interest at bank's prime rate plus 1% (9.25% at
December 31, 1995 and 1996), due September 6, 2001;
secured by assets of the Company and real property owned
by affiliate.............................................. $ 495
Note payable to bank, due in monthly installments of $5,
bearing interest at bank's prime rate plus 1.5% (9.75% at
December 31, 1995 and 1996), due June 30, 1996; secured by
receivables, property and equipment, and certain assets of
the Company............................................... $ 31
Note payable to financial corporation, due in monthly
installments of $1, including interest, through March 1997
and one final payment of $5; secured by a vehicle with a
net book value of $12 and $10 in 1995 and 1996,
respectively.............................................. 20 8
----- ------
51 503
Less: Current maturities................................... (43) (112)
----- ------
Long-term debt, excluding current maturities............... $ 8 $ 391
===== ======
</TABLE>
F-59
<PAGE>
FLOWER TRADING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Principal maturities on notes payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
1997............................................................ $112
1998............................................................ 104
1999............................................................ 104
2000............................................................ 104
2001............................................................ 79
----
Total....................................................... $503
====
</TABLE>
NOTE 6--INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Current expense:
State...................................................... $ 20 $ 19 $ 4
Federal.................................................... 179 166 32
---- ---- ---
Total income tax provision............................... $199 $185 $36
==== ==== ===
Deferred expense:
State........................................................ $ 2 $ (9) $ 1
Federal...................................................... (81) 11
---- ---- ---
Total income tax provision............................... $ 2 $(90) $12
==== ==== ===
</TABLE>
The provision for income taxes differs from the U.S. Statutory federal income
tax rate for the following reasons:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate................................. 34.0% 34.0% 34.0%
State taxes, net of federal benefit........................ 3.7 3.7 3.7
Meals and entertainment.................................... 1.3 3.1 4.5
Other...................................................... 1.0 1.4 1.4
---- ---- ----
40.0% 42.2% 43.6%
==== ==== ====
</TABLE>
Deferred tax assets were comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Allowance for doubtful accounts.............................. $ 91 $ 23
Accruals..................................................... 56
------ ------
$ 91 $ 79
====== ======
</TABLE>
F-60
<PAGE>
FLOWER TRADING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--EMPLOYEE BENEFIT PLAN
In 1995 the Company has established an employee savings plan under the
provisions of section 401(k) of the Internal Revenue Code. Virtually all
employees are eligible to participate in the plan. Employees can contribute up
to 5% of their gross salary to the plan. The Company is liable for matching
contributions of 30% of participants' contributions up to a certain amount per
participant. Company contributions to the plan were approximately $19 and $22
for the year ended December 31, 1995 and 1996, respectively.
NOTE 8--RELATED PARTY TRANSACTIONS
The Company pays a representative fee to a related entity for flowers
shipped from Colombia. This related entity ensures that the Company has a
reliable source of fresh cut flowers in Colombia. This entity also provides
each of the Company's suppliers with technical expertise to improve and
maintain the yield, quality and durability of the fresh cut flowers. In
addition, due to the large number of suppliers in Colombia, the Company
requires the service of this entity to consolidate the shipments of flowers
with a common carrier, and generate the paperwork necessary to complete the
shipment of flowers. Representative fees paid for the years ended December 31,
1994, 1995 and 1996 were $658, $793 and $675, respectively.
The Company purchases flowers from a related entity. Total purchases were
approximately $1,954, $3,658 and $3,246 for 1994, 1995 and 1996, respectively.
The Company leases office and warehouse space from a related entity. Total
lease payments were approximately $201, $223 and $230 for 1994, 1995 and 1996,
respectively.
The Company charges a related entity a monthly fee for the handling of
floral products. Total handling fees were $172, $279 and $225 for 1994, 1995
and 1996, respectively. Also included in other income at December 31, 1994,
1995 and 1996 is $79, $66 and $54, respectively, representing administrative
fees received by the Company from this related party. At December 31, 1995 and
1996, the Company had receivables from this entity of $52 and $41,
respectively.
The Company guarantees two lines of credit a related entity maintains with a
bank up to a total of $750. These lines expire on May 31, 1998.
NOTE 9--COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its warehouse and office facilities from a related party
under a noncancelable operating lease expiring in 1999. Rental payments
include minimum rentals adjusted annually for changes in the consumer price
index. The aggregate future minimum rentals are as follows:
<TABLE>
<S> <C>
1997.................................................................... $230
1998.................................................................... 230
1999.................................................................... 230
----
$690
====
</TABLE>
Antidumping Duty
In 1986, the U.S. Department of Commerce ("DOC") imposed an antidumping duty
deposit ("ADD") on the importation of certain flowers, pending the imposition
of a final duty rate based on annual reviews of the
F-61
<PAGE>
FLOWER TRADING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
flower growers' margins. Since that time, the DOC has undertaken ten reviews.
As a result of those reviews, the Company's importation of flowers from its
suppliers has been subject to antidumping duties. The ADDs from the second and
fourth reviews are awaiting final liquidation from the DOC. Final
determinations have been published for the fifth through seventh reviews but
judicial appeals are pending. The eighth review was liquidated at the cash-
deposit rate. The ninth review is pending final determination. The tenth
review is in process. All other reviews have been resolved.
Included in accrued expenses is approximately $0 and $150 as of December 31,
1995 and 1996, respectively, of estimated antidumping duty imposed by the
Department of Commerce. The duty is based on rates imposed on certain products
from certain growers in Columbia and Ecuador. The antidumping duty is subject
to change upon the Department of Commerce's final review of all open
antidumping periods as well as various legal appeals.
Legal Matters
The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations or cash flows of the Company.
NOTE 10--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholders have entered into a definitive agreement
with U.S.A Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash and shares of USA Floral common stock concurrent with the
consummation of the initial public offering of the common stock of USA Floral.
Upon consummation of the merger described above, a portion of the Company's
related party agreements as outlined in Note 8 will be amended. The Company
will continue to pay a representative fee in connection with flowers shipped
from Colombia, however, the fee will be reduced from $3.50 per box to $0.50
per box due to a significant reduction in the services provided. In addition,
the Company's guarantee of the two lines of credit of a related entity will be
discontinued as will the guarantee of the Company's debt by such related
party.
The Company will continue to lease office and warehouse space under the
current lease agreement, and will also continue to provide handling and
administrative services to a related entity for a monthly fee. Additionally,
the Company will continue to purchase flowers from a related entity.
F-62
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
United Wholesale Florists, Inc. and
United Wholesale Florists of America, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of United
Wholesale Florists, Inc. and United Wholesale Florists of America, Inc. (the
"Company") at June 30, 1996 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended June 30, 1997
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
July 31, 1997
F-63
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30,
-------------
1996 1997
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 434 $ 625
Accounts receivable, net....................................... 1,062 1,186
Inventory...................................................... 1,799 1,963
Advances to affiliates......................................... 1,240
Advances to stockholders....................................... 389
Prepaid expenses and other current assets...................... 41 127
------ ------
Total current assets......................................... 3,336 5,530
Property and equipment, net...................................... 1,802 1,886
Advances to affiliates........................................... 1,059
Advances to stockholders......................................... 221
Goodwill......................................................... 233 222
Deferred income taxes............................................ 6
Other assets..................................................... 132 114
------ ------
Total assets................................................. $6,789 $7,752
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit................................................. $1,283 $1,683
Current maturities of long-term debt........................... 96 104
Current maturities of notes payable to stockholders............ 222 558
Current obligations under capital leases....................... 145 200
Accounts payable............................................... 2,127 2,179
Accrued expenses and other current liabilities................. 163 211
Income taxes payable........................................... 210
------ ------
Total current liabilities.................................... 4,036 5,145
Long-term debt................................................... 194 62
Obligations under capital leases................................. 195 294
Notes payable to stockholders.................................... 572
Other liabilities................................................ 84 61
Commitments and contingencies
Stockholders' equity:
Common stock................................................... 11 11
Retained earnings.............................................. 1,697 2,179
------ ------
Total stockholders' equity................................... 1,708 2,190
------ ------
Total liabilities and stockholders' equity................... $6,789 $7,752
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Net sales........................................... $17,985 $19,030 $19,673
Cost of sales....................................... 11,556 12,563 12,862
------- ------- -------
Gross margin.................................... 6,429 6,467 6,811
Selling, general and administrative expenses........ 5,926 6,101 6,046
------- ------- -------
Operating income................................ 503 366 765
Other (income) expense:
Interest expense.................................. 227 236 231
Interest income................................... (91) (95) (133)
Other, net........................................ 9 (14) (20)
------- ------- -------
Income before income taxes.......................... 358 239 687
Provision for income taxes.......................... 171 95 205
------- ------- -------
Net income.......................................... $ 187 $ 144 $ 482
======= ======= =======
Unaudited pro forma information:
Pro forma net income before provision for income
taxes............................................ $ 358 $ 239 $ 687
Provision for income taxes........................ 143 96 275
------- ------- -------
Pro forma income (see Note 2)....................... $ 215 $ 143 $ 412
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at June 30, 1994.................. 2,000 $ 11 $ 1,366 $1,377
Net income.............................. 187 187
----- ---- ------- ------
Balance at June 30, 1995.................. 2,000 11 1,553 1,564
Net income.............................. 144 144
----- ---- ------- ------
Balance at June 30, 1996.................. 2,000 11 1,697 1,708
Net income.............................. 482 482
----- ---- ------- ------
Balance at June 30, 1997.................. 2,000 $ 11 $ 2,179 $2,190
===== ==== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
1995 1996 1997
------ ------ -----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 187 $ 144 $ 482
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization......................... 341 410 442
Deferred income taxes................................. 17 26 6
Loss on disposal of fixed assets...................... 18
Provision for doubtful accounts....................... 26 16 25
Change in operating assets and liabilities:
Accounts receivable.................................. (30) (149) (149)
Inventory............................................ 74 (99) (164)
Prepaid expenses and other current assets............ (6) (18) (86)
Accounts payable and accrued expenses................ (266) 881 100
Income taxes payable................................. 66 (153) 210
Changes in other assets............................... (6) (12) (12)
Changes in other liabilities.......................... (19) (21) (23)
------ ------ -----
Net cash provided by operating activities........... 402 1,025 831
Cash flows from investing activities:
Purchases of property and equipment.................... (304) (295) (107)
Proceeds from disposal of property and equipment....... 8 1
Advances to stockholders............................... (30) (155) (168)
Advances to affiliates................................. (151) (19) (181)
------ ------ -----
Net cash used in investing activities............... (477) (469) (455)
Cash flows from financing activities:
Net borrowings on line of credit....................... 300 383 400
Principal payments on capital lease obligations........ (207) (202) (225)
Proceeds from long-term debt........................... 470 57 18
Repayments on long-term debt........................... (990) (323) (142)
Proceeds from notes payable to stockholders............ 1,192 2
Repayments of notes payable to stockholders............ (849) (274) (236)
------ ------ -----
Net cash used in financing activities.................. (84) (357) (185)
------ ------ -----
Net increase (decrease) in cash and cash equivalents... (159) 199 191
Cash and cash equivalents--beginning of period......... 394 235 434
------ ------ -----
Cash and cash equivalents--end of period................ $ 235 $ 434 $ 625
====== ====== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............... $ 216 $ 231 $ 246
Cash paid during the period for income taxes........... $ 84 $ 242 $ 57
Supplemental disclosure of non-cash transactions:
Acquisition of vehicles under capital leases........... $ 174 $ 219 $ 379
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-67
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1947, United Wholesale Florists, Inc. and United Wholesale
Florists of America, Inc. (together the "Company") is a wholesale distributor
of perishable floral products and floral-related hardgoods, operating from 13
locations in Arkansas, Alabama, Mississippi, Oklahoma, Tennessee and Texas.
The Company purchases floral products from domestic growers, importers,
brokers and shippers and sells them to retail florists and mass marketers.
The accompanying combined financial statements include the accounts of
United Wholesale Florists, Inc. ("UWF") and United Wholesale Florists of
America, Inc. ("UWFA") which are affiliated through common ownership and
management. All intercompany transactions have been eliminated in these
financial statements.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Income is recognized upon shipment of goods to the customer.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of approximately
three months or less at date of purchase to be cash equivalents.
Inventories
Inventories consist of fresh-cut flowers and floral supplies and are valued
at the lower of cost or market. Cost is determined using the first-in, first-
out ("FIFO") method.
Property and Equipment
Property and equipment are stated at cost including the cost of additions
and improvements which materially increase the useful lives or values of the
assets. Depreciation is provided using straight-line and accelerated methods
over the estimated useful lives of the respective assets. Leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful life. Average useful lives are as follows: buildings and improvements--
8 to 30 years; and furniture and equipment--5 to 7 years. Amortization on
vehicles under capital leases is computed on a straight-line basis over the
estimated useful life of the vehicles (5 years).
Goodwill
Goodwill is being amortized by the straight-line basis over a 40 year
period. Accumulated amortization was $213 and $224 at June 30, 1996 and 1997,
respectively.
F-68
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
At each balance sheet date, the Company assesses whether there has been an
impairment in the value of long-lived assets by determining whether projected
undiscounted future cash flows from operations of each facility (as defined in
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
exceeds its net book value as of the assessment date. At June 30, 1996, there
were no impairments of the Company's assets.
Other Assets
Other assets is comprised of organizational costs with a net value of $5 and
$0 at June 30, 1996 and 1997 and a non-compete agreement with a net value of
$57 and $31 as of June 30, 1996 and 1997, respectively. These amounts are
being amortized on a straight-line basis over a five and six year period,
respectively. Amortization expense was $31 for each of the years ended June
30, 1995, 1996 and 1997.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable, insurance receivable, accrued
expenses and short-term debt approximates fair value because of the short
maturity of these instruments. The estimated fair value of long-term debt and
other long-term liabilities approximates its carrying value. Additionally,
interest rates on outstanding debt are at rates which approximate market rates
for debt with similar terms and average maturities.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents, trade
accounts receivable and amounts due from related parties. The Company limits
the amounts of cash that is deposited in any one bank to ensure balances do
not exceed amounts insured by the Federal Deposit Insurance Corporation. Trade
receivables are not collateralized and accordingly, the Company performs
ongoing credit evaluations of its customers to minimize the risk of loss.
Stockholders' Equity
UWF has 200 shares of Class A, voting, $11 par value, common stock
authorized, issued and outstanding. There are also 800 shares of Class B,
nonvoting, $9.75 par value, common stock authorized, issued and outstanding.
UWFA has 1,000 shares of voting common stock, no par value, issued and
outstanding (2,000 shares authorized).
Income Taxes
UWF accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Deferred income
taxes are provided for the tax effects of temporary differences between the
financial reporting basis and income tax basis of the Company's assets and
liabilities.
UWFA has elected to be treated as an S Corporation for federal and state
income taxes and, accordingly, any liabilities for income taxes are the direct
responsibility of the stockholders. UWFA reports earnings for tax purposes
with a fiscal year ending on December 31. UWF is organized as a C Corporation
and maintains it's financial records on a fiscal year ending on June 30.
F-69
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The unaudited pro forma income tax information included in the Combined
Statement of Operations is presented in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," as if the Company
had been subject to federal income taxes for the entire periods presented.
NOTE 3--ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE CHARGED TO BALANCES AT
AT BEGINNING COSTS AND WRITE- END OF
OF PERIOD EXPENSES OFFS PERIOD
------------ ---------- ------ -----------
<S> <C> <C> <C> <C>
Year-ended June 30, 1995
allowance for doubtful
accounts..................... $21 $26 $(10) $37
Year-ended June 30, 1996
allowance for doubtful
accounts..................... $37 $16 $(37) $16
Year-ended June 30, 1997
allowance for doubtful
accounts..................... $16 $25 $(11) $30
</TABLE>
NOTE 4--INVENTORY
Inventory consists of the following finished goods:
<TABLE>
<CAPTION>
JUNE 30,
-------------
1996 1997
------ ------
<S> <C> <C>
Perishables.................................................... $ 138 $ 143
Hardgoods...................................................... 1,661 1,820
------ ------
$1,799 $1,963
====== ======
</TABLE>
NOTE 5--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
----------------
1996 1997
------- -------
<S> <C> <C>
Land....................................................... $ 157 $ 157
Buildings and leasehold improvements....................... 1,414 1,426
Automobiles and delivery vehicles.......................... 1,253 1,321
Furniture, fixtures and equipment.......................... 1,349 1,438
------- -------
4,173 4,342
Accumulated depreciation and amortization.................. (2,371) (2,456)
------- -------
$ 1,802 $ 1,886
======= =======
</TABLE>
Depreciation and amortization expense for the years ended June 30, 1995,
1996 and 1997 was $299, $368 and $401, respectively.
F-70
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--CREDIT FACILITIES
Short-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
-----------------
1996 1997
------ ------
<S> <C> <C> <C>
Line of credit arrangement collateralized by accounts
receivable and inventory, due May 1998, including
interest at a variable rate (8.25% at June 30, 1996).... $1,283 $1,683
====== ======
</TABLE>
In connection with the line of credit arrangement, the Company must maintain
a minimum net worth of $1,500,000, working capital of $500,000 and a ratio of
earnings before interest, taxes and depreciation to interest expense of 2 to
1. Additionally, if the Company is not in compliance with the restrictive
covenants or any other requirements contained in this debt instrument, the
Company is prohibited from making payments on obligations to its stockholders.
The Company was in compliance with its covenants, with the exception of the
working capital minimum, for which an appropriate was obtained.
Long-Term Debt
Long-term debt consists of:
<TABLE>
<CAPTION>
JUNE 30,
----------------
1996 1997
---- -----
<S> <C> <C> <C>
Various secured fixed payment notes payable to banks at
interest rates ranging from 7.5% to 12%, payments ranging
from $1 to $5 monthly; maturing from May 1996 to November
1999...................................................... $100 $ 33
Various secured notes payable to banks; interest payable
monthly at rates ranging from 9.25% to 10%; principal due
at maturity; maturing from June 1996 to November 1997..... 124 96
Unsecured notes payable to individuals arising from non-
compete agreements, due 1998.............................. 66 37
Less: Current maturities................................... (96) (104)
---- -----
$194 $ 62
==== =====
</TABLE>
Long-term principal maturities on notes payable over the next three years
are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30, 1997
-------------
<S> <C>
1998........................................................... $104
1999........................................................... 40
2000........................................................... 22
----
Total........................................................ $166
====
</TABLE>
F-71
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Notes payable to stockholders of $794 and $558 at June 30, 1996 and 1997,
respectively, are discussed in Note 8.
NOTE 7--INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------------------
1995 1996 1997
------------------- ------------------- -------------------
FEDERAL STATE TOTAL FEDERAL STATE TOTAL FEDERAL STATE TOTAL
------- ----- ----- ------- ----- ----- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current......... $130 $24 $154 $59 $11 $70 $168 $31 $199
Deferred........ 14 3 17 21 4 25 5 1 6
---- --- ---- --- --- --- ---- --- ----
$144 $27 $171 $80 $15 $95 $173 $32 $205
==== === ==== === === === ==== === ====
</TABLE>
Net deferred tax asset (liability) is comprised of the following:
<TABLE>
<CAPTION>
JUNE 30,
----------
1996 1997
---- ----
<S> <C> <C>
Allowance for doubtful accounts.................................. $ 6 $11
Inventory reserves............................................... 8 8
---- ---
Current deferred tax assets.................................... 14 19
Deferred compensation............................................ 32 23
Depreciation..................................................... (40) (42)
---- ---
Noncurrent deferred tax asset (liability)...................... (8) (19)
---- ---
Net deferred tax assets........................................ $ 6 $--
==== ===
</TABLE>
A reconciliation of the federal statutory tax rate to the effective tax rate
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------
1995 1996 1997
-------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income taxes of the statutory rate............... $125 35% $84 35% $240 35%
(Income) loss of S Corporation................... 22 6 (7) (3) (58) (8)
State income tax, net of federal benefit......... 18 5 10 4 21 3
Non-deductible goodwill amortization............. 4 1 4 2 4 1
Other............................................ 2 1 4 2 (2) (1)
---- --- --- --- ---- ---
$171 48% $95 40% $205 30%
==== === === === ==== ===
</TABLE>
NOTE 8--RELATED PARTY TRANSACTIONS
The Company makes advances to affiliates in the ordinary course of business.
Receivables from affiliates totaled $1,059 and $1,240 at June 30, 1996 and
1997, respectively. The advances bear interest at a rate of 8.5% per annum;
although no formal repayment terms exist. Interest income related to this
receivable for the years ended June 30, 1995, 1996 and 1997, was $87, $89 and
$80, respectively.
The Company makes advances to the stockholders. Receivables from
stockholders totaled $221 and $389 at June 30, 1996 and 1997, respectively.
The advances bear interest at a rate of 8.5% per annum although no formal
F-72
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
repayment terms exist. Interest income related to this receivable for the
years ended June 30, 1995, 1996 and 1997 was $5, $12 and $24, respectively.
The Company leases eight of its thirteen facilities from an affiliated
partnership, United Properties. Total rent expense related to these leases was
$206 in 1995 and $221 in 1996 and 1997, respectively.
During 1995, the Company entered into a lease for its corporate headquarters
from a partnership which is 50% owned by United Properties. Total lease
payments were $27 in 1995 and $81 in 1996 and 1997.
At June 30, 1995, 1996 and 1997, the Company has $1,066, $794 and $558,
respectively, payable to the stockholders of the Company. These obligations
bear interest at rates from 8% to 9.25%. Included in interest expense for the
years ended June 30, 1995, 1996 and 1997 was $102, $106 and $54, respectively,
of interest related to this obligation.
Principal maturities on these notes payable as of June 30, 1996 are as
follows:
<TABLE>
<S> <C>
1998.................................................................... $ 36
1999.................................................................... 40
2000.................................................................... 43
2001.................................................................... 47
Thereafter.............................................................. 392
----
$558
====
</TABLE>
NOTE 9--COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its land sites and buildings for most of its stores and
office space for corporate operations under operating leases. These leases are
primarily with related party lessors (Note 8). Rent expense under all
operating leases was $245 for the year ended June 30, 1995 and $334 for both
of the years ended June 30, 1996 and 1997.
The Company leases its vehicle fleet under capital leases. The leases
generally include renewal options at varying terms. The book value and
corresponding accumulated depreciation for the vehicles under capital lease as
of June 30, 1996 are $1,186 and $768, and $1,252 and $675 as of June 30, 1997,
respectively. Depreciation expense of vehicles under capital lease for the
years ending June 30, 1995 1996 and 1997 was approximately $184, $218 and
$220, respectively.
F-73
<PAGE>
UNITED WHOLESALE FLORISTS, INC. AND
UNITED WHOLESALE FLORISTS OF AMERICA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Minimum lease payments under the noncancelable portion of capital and
operating leases at June 30, 1997 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
FISCAL YEAR LEASES LEASES
----------- --------- -------
<S> <C> <C>
1998....................................................... $ 340 $ 255
1999....................................................... 340 206
2000....................................................... 313 116
2001....................................................... 259 14
Thereafter................................................. 259 --
------ -----
Future minimum lease payments.............................. $1,511 591
======
Imputed interest........................................... (97)
-----
Present value of minimum lease payments.................... 494
Current portion............................................ (200)
-----
Long-term portion.......................................... $ 294
=====
</TABLE>
Subsequent to the balance sheet date, the Company renewed its lease
agreements with a related party in six of its thirteen store locations. Terms
of the new leases are substantially the same to those which were in effect at
the balance sheet date.
Litigation
The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations or cash flows of the Company.
NOTE 9--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholder have entered into a definitive agreement
with USA Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash and shares of USA Floral common stock concurrent with the
consummation of the initial public offering of the common stock of USA Floral.
In conjunction with the merger all amounts Due from related parties and Due
from stockholders will be repaid to the Company. Additionally, amounts Due to
stockholders will be repaid by the Company.
F-74
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholder of
American Florist Supply, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholder's equity and of cash flows present fairly, in all
material respects, the financial position of American Florist Supply, Inc. at
December 31, 1995 and 1996 and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
July 11, 1997
F-75
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 3 $ 4 $ 421
Accounts receivable, net........................... 1,339 1,460 1,379
Inventory.......................................... 39 65 91
Notes receivable--stockholder...................... 21 231
Prepaid expenses and other current assets.......... 28 30 25
------ ------ ------
Total current assets............................. 1,430 1,790 1,916
Property and equipment, net.......................... 311 278 289
Goodwill and intangibles, net........................ 327 298 287
Restricted investments............................... 25 26 27
Other assets......................................... 43 46 61
------ ------ ------
Total assets..................................... $2,136 $2,438 $2,580
====== ====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Line of credit..................................... $ 80 $ 302
Accounts payable................................... 687 709 $ 727
Accrued expenses................................... 75 147 158
Income taxes payable............................... 21 29 32
------ ------ ------
Total current liabilities........................ 863 1,187 917
Long-term debt....................................... 598 598 598
Other long-term liabilities.......................... 25 25 25
Commitments and contingencies (Note 11)
Stockholder's equity:
Common stock, no par value; 5,000 shares
authorized; 1,000 shares issued and outstanding... 400 400 400
Retained earnings.................................. 250 228 640
------ ------ ------
Total stockholder's equity....................... 650 628 1,040
------ ------ ------
Total liabilities and stockholder's equity....... $2,136 $2,438 $2,580
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------- ------------------
1995 1996 1996 1997
------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................ $10,783 $11,679 $ 6,444 $ 7,082
Cost of sales............................ 7,788 8,268 4,458 4,793
------- ------- -------- --------
Gross margin......................... 2,995 3,411 1,986 2,289
Selling, general and administrative
expenses................................ 2,531 2,723 1,421 1,579
------- ------- -------- --------
Operating income..................... 464 688 565 710
Other (income) expense:
Interest expense....................... 42 43 20 25
Interest income........................ (4) (11) (3) (8)
Other, net............................. (14) (64) (43) (54)
------- ------- -------- --------
Income before income taxes............... 440 720 591 747
Provision for income taxes............... 17 37 30 36
------- ------- -------- --------
Net income............................... $ 423 $ 683 $ 561 $ 711
======= ======= ======== ========
Unaudited pro forma information:
Pro forma net income before provision
for income taxes...................... $ 440 $ 720 $ 591 $ 747
Provision for income taxes............. 176 288 236 299
------- ------- -------- --------
Pro forma income (see Note 2).......... $ 264 $ 432 $ 355 $ 448
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-77
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
STATEMENT OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------- RETAINED STOCKHOLDER'S
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994.............. 1,000 $400 $ 92 $ 492
Net income.............................. 423 423
Dividends paid.......................... (265) (265)
----- ---- ----- ------
Balance at December 31, 1995.............. 1,000 400 250 650
Net income.............................. 683 683
Dividends paid.......................... (705) (705)
----- ---- ----- ------
Balance at December 31, 1996.............. 1,000 400 228 628
Net income (unaudited).................. 711 711
Dividends paid (unaudited).............. (299) (299)
----- ---- ----- ------
Balance at June 30, 1997 (unaudited)...... 1,000 $400 $ 640 $1,040
===== ==== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------- ------------------
1995 1996 1996 1997
------- ------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 423 $ 683 $ 561 $ 711
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization.......... 89 91 52 40
Loss on disposal of fixed assets....... 32 8 6
Changes in operating assets and
liabilities:
Accounts receivable................... (126) (121) 95 81
Inventory............................. (39) (26) (18) (26)
Prepaid expenses and other assets..... (1) (2) (11) (10)
Due from related parties.............. (16) (210) (20) 231
Accounts payable and accrued
expenses............................. (85) 94 43 29
Income taxes payable.................. 16 8 34 3
------- ------- ------- ---------
Net cash provided by operating
activities.......................... 293 525 736 1,065
Cash flows from investing activities:
Purchases of property and equipment..... (7) (45) (13) (50)
Equipment sale proceeds................. 2
Purchases of investments................ (2) (1) (1)
------- ------- ------- ---------
Net cash used in investing
activities.......................... (9) (44) (13) (51)
Cash flows from financing activities:
Proceeds from issuance of long-term
debt................................... 1,576 1,861 589 1,773
Repayments on note payable.............. (1,595) (1,636) (669) (2,071)
Stockholder dividends................... (265) (705) (276) (299)
------- ------- ------- ---------
Net cash used in financing
activities.......................... (284) (480) (356) (597)
Net increase in cash and cash
equivalents............................. 1 367 417
Cash and cash equivalents--beginning of
period.................................. 3 3 3 4
------- ------- ------- ---------
Cash and cash equivalents--end of
period.................................. $ 3 $ 4 $ 370 $ 421
======= ======= ======= =========
Supplemental disclosure of cash flow
information:
Cash paid during the period for
interest............................... $ 42 $ 43 $ 20 $ 20
Cash paid during the period for taxes... $ 15 $ 17 $ 11 $ 21
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-79
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
American Florist Supply, Inc. (the "Company") is a wholesale distributor of
perishable floral products and floral-related hardgoods, operating from one
location in Massachusetts. The Company purchases floral products from domestic
growers, brokers and importers and sells them to retail florists and mass
marketers in Maine, Massachusetts, Vermont and New Hampshire. The Company also
manufactures fresh cut floral bouquets and distributes them to supermarkets.
The Company was incorporated on April 11, 1994, as a result of the acquisition
of certain assets and liabilities of the distribution business of Johnson's
Roses, Inc.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from these estimates.
Revenue Recognition
The Company recognizes revenue upon shipment of product.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid short-term investments with maturities of three months or less
at date of purchase to be cash equivalents.
Inventory
Inventory consists of plants and supplies to be sold and is stated at the
lower of cost or market. Cost is determined on a first-in, first-out (FIFO)
basis.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the related assets
(five to seven years). Leasehold improvements are amortized over the shorter
of the lease term or the estimated useful life.
F-80
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Intangible Assets
Goodwill and other intangible assets and related amortization are as
follows:
<TABLE>
<CAPTION>
OTHER
GOODWILL INTANGIBLES TOTAL
-------- ----------- -----
<S> <C> <C> <C>
Balance, December 31, 1994....................... $330 $26 $356
Additions......................................
Amortization................................... (21) (8) (29)
---- --- ----
Balance, December 31, 1995....................... 309 18 327
Additions......................................
Amortization................................... (21) (8) (29)
---- --- ----
Balance, December 31, 1996....................... $288 $10 $298
==== === ====
</TABLE>
Goodwill represents the excess of the cost of the acquired business over the
fair market value of the net tangible assets. Goodwill is being amortized on
the straight-line method over a period of 15 years. Other intangibles are
stated at cost and amortized on the straight-line method over a period of five
years. Management periodically evaluates the recoverability of goodwill, which
would be adjusted for a permanent decline in value, if any, by comparing
anticipated undiscounted future cash flows from operations to net book value.
Restricted Investments
The Company has set aside certain equity investments in an educational fund
for one of their key employees. The principal investment and all earnings on
this investment will be used to fund the Company's recorded obligation to pay
educational expenses for the employee's children in the future. The Company
has classified these investments as available-for-sale. The amounts presented
at December 31, 1995 and 1996 are at cost which approximates fair value of the
underlying investments.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable, insurance receivable, accrued
expenses and short-term debt approximates fair value because of the short
maturity of these instruments. The estimated fair value of long-term debt and
other long-term liabilities approximates its carrying value. Additionally,
interest rates on outstanding debt are at rates which approximate market rates
for debt with similar terms and average maturities.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collateralized and accordingly, the Company performs ongoing credit
evaluations of its customers to reduce the risk of loss.
Income Taxes
The Company has elected to be treated as an S Corporation for federal and
state income taxes and, accordingly, any liabilities for income taxes are the
direct responsibility of the stockholder. No provision for federal income tax
is required. The Commonwealth of Massachusetts, which is the Company's
principal place of business, imposes a corporate level state income tax on
certain S Corporations which has been provided for.
There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. At December 31, 1996, the
financial reporting bases of the Company's net assets exceeds the tax basis by
approximately $50.
F-81
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to applicable federal and state income taxes for the entire periods
presented.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company as of June 30, 1997 and
the results of operations and cash flows for the six months ended June 30,
1996 and 1997 as presented in the accompanying unaudited interim financial
statements.
NOTE 3--ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND WRITE- AT END
OF PERIOD EXPENSES OFFS OF PERIOD
---------- ---------- ------ ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1995......... $48 $58 $(58) $48
Year ended December 31, 1996......... $48 $48
</TABLE>
NOTE 4--ACQUISITION
The Company acquired certain assets and liabilities of the distribution
business of Johnson's Roses, Inc. on April 11, 1994 under the terms defined in
an Asset Purchase Agreement (the "Agreement"). The final purchase price,
payable to Johnson's Roses, Inc. was $1,284 and consisted of $686.5 in cash
and a subordinated promissory note for principal of $597.5. The acquisition
was accounted for under the purchase method of accounting and the results of
operations have been included from the date of acquisition.
As part of the Agreement with Johnson's Roses, Inc. (the Seller), the
Company has the exclusive right and obligation to buy the Seller's
domestically graded roses at fixed prices through December 1998. See
commitments footnote (Note 11).
NOTE 5--INVENTORY
Inventory consists of the following finished goods:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Perishables........................................................ $12 $19
Hardgoods.......................................................... 27 46
--- ---
$39 $65
=== ===
</TABLE>
NOTE 6--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Machinery and equipment...................................... $ 243 $ 255
Office equipment............................................. 122 127
Furniture, fixtures and equipment............................ 38 38
------ ------
403 420
Accumulated depreciation and amortization.................... (92) (142)
------ ------
$ 311 $ 278
====== ======
</TABLE>
Depreciation expense for the years ended December 31, 1995 and 1996 was $65
and $67, respectively.
F-82
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--RELATED PARTIES
Notes receivable--stockholder consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Unsecured note, due on demand, with interest at 8.5%.............. $186
Unsecured note, due on demand, with no state interest rate........ $17 42
--- ----
$17 $228
=== ====
</TABLE>
Related Party Purchases
The Company's stockholder's spouse is the sole stockholder of Farm Direct
Flowers, Inc. Farm Direct Flowers, Inc. has a direct interest in Meadow
Flower-Meflor C. LTDA (Meadow Flowers), a rose farm in Ecuador. The Company's
stockholder is also a Director of Meadow Flowers. The Company purchased $2 and
$135 of merchandise from Meadow Flowers during 1995 and 1996, respectively.
These transactions were at arms-length prices. This relationship provides the
Company with the opportunity for access to roses as well as other various
types of flowers.
NOTE 8--CREDIT FACILITIES
Line of Credit
The Company has a revolving line of credit with a commercial bank for
borrowings up to $600. Interest accrues at 1/4% over the bank's base rate
(9.5% and 9% at December 31, 1995 and 1996, respectively) and is payable
quarterly in arrears. The note matures on April 30, 1998 and provides for a
commitment fee payable quarterly, computed as 1/4% of the average unused
facility during the quarter. The note is secured by a first priority perfected
security interest in all assets of the Company. Outstanding balances on the
line were $80 and $302 as of December 31, 1995 and 1996, respectively.
The Company's current credit facility contains financial and operating
covenants which, among other things, requires the Company to maintain
prescribed levels of tangible net worth and ratios of liabilities to net
worth. As of December 31, 1995 and 1996, the Company was in compliance in the
performance of its obligations with respect to the covenants.
Long-Term Debt
The Company has a promissory note payable to Johnson's Roses, Inc. due May
2, 1999 in the amount of $597.5, on which interest accrues at 6% and is
payable quarterly in arrears. The note is secured by a subordinated security
interest in all of the assets of the Company. Under the terms of the
Agreement, beginning in 1996, the Company is required to make mandatory pre-
payments of principal equal to 50% of the excess cash flow of the Company for
the year then ended subject to the approval of the commercial bank described
above. No such pre-payments have been made through December 31, 1996.
NOTE 9--EMPLOYEE BENEFIT PLAN
The Company has established an employee savings plan under the provisions of
section 401(k) of the Internal Revenue Code. All employees are eligible to
participate in the plan subject to certain requirements. Employees can
contribute up to 15% of their gross salary to the plan. In addition, the plan
provides for discretionary Company contributions. Company contributions to the
plan for the year ended December 31, 1996 were $76.
F-83
<PAGE>
AMERICAN FLORIST SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--LEASES
The Company leases office space, computers and trucks used in the delivery
of orders to customers under various agreements classified as operating
leases. Rent expense under these operating leases for 1995 and 1996 were
approximately $230 and $267, respectively. The leases expire in years 1997
through 2001.
The aggregate future minimum rentals under these operating leases are as
follows:
<TABLE>
<S> <C>
1997.................................................................... $235
1998.................................................................... 196
1999.................................................................... 73
2000.................................................................... 37
2001.................................................................... 9
----
$550
====
</TABLE>
NOTE 11--COMMITMENTS AND CONTINGENCIES
Purchase Commitment
The Company is committed to pay the actual costs of Johnson's Roses, Inc.
rose growing operations in return for the exclusive rights to their roses. The
term of the contract is from November 1, 1995 to December 31, 1998; however,
the Company may cancel the contract earlier, provided that six months prior
written notification is given to Johnson Roses. Costs paid to Johnson's Roses
were approximately $1 million for each of the years ended 1995 and 1996.
Prices paid under this contract may be higher than those obtainable from other
suppliers.
Deferred Compensation Plan
The Company has a deferred compensation plan for one of the key executives.
The deferred compensation plan stipulates that if the executive remains in
continuous employment of the Company until age 65, then upon retirement the
Company shall pay the executive the full proceeds from a life insurance
policy. Payments of the sum specified shall be made in 120 equal monthly
payments. The cash surrender value of the life insurance policy is
approximately $40 as of December 31, and 1996 and is reflected on the
Company's balance sheet within other assets.
NOTE 12--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholder have entered into a definitive agreement
with USA Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash concurrent with the consummation of the initial public
offering of the common stock of USA Floral. Pursuant to the definitive
agreement, the Company's shareholders may receive additional consideration in
the form of shares of USA Floral's common stock based upon 1997 earnings.
In conjunction with the merger the amounts outstanding under Notes
Receivable from stockholders will be paid to the Company.
F-84
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Monterey Bay Bouquet, Inc. and
Bay Area Bouquets, Inc.
In our opinion, the accompanying combined balance sheet and the related
combined statements of operations, stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Monterey
Bay Bouquet, Inc. and Bay Area Bouquet, Inc. (the Company) at December 31,
1995 and 1996, and the results of their operations and their cash flows for
the years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
June 20, 1997
F-85
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 34 $ 19 $ 319
Accounts receivable................................ 673 909 912
Inventory.......................................... 138 126 181
Prepaid expenses and other current assets.......... 8 9 28
------ ------ ------
Total current assets............................. 853 1,063 1,440
Property and equipment, net.......................... 158 144 175
Other assets:
Cash surrender value--life insurance............... 43 73 88
Intangibles........................................ 47 41
Advances to stockholders........................... 52
Other.............................................. 36
------ ------ ------
Total assets..................................... $1,101 $1,321 $1,791
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Credit line payable................................ $ 100 $ 49 $ 50
Current maturities of long-term debt............... 20 6 34
Accounts payable................................... 591 783 737
Accrued expenses................................... 81 167 47
Notes payable to officers and stockholders......... 47 10
Income taxes payable............................... 3 12 254
------ ------ ------
Total current liabilities........................ 842 1,027 1,122
Long-term debt, net of current maturities............ 30 24 36
Growers contract--related party...................... 48 41
Other long-term liabilities.......................... 37
------ ------ ------
Total liabilities................................ 920 1,092 1,195
Commitments and contingencies
Stockholders' equity:
Common stock, Monterey Bay Bouquet, Inc., no par
value; 1,000,000 shares authorized; 102,502 shares
issued and outstanding............................ 78 78 78
Common stock, Bay Area Bouquet, Inc., no par value;
1,000 shares authorized; 100 shares issued and
outstanding....................................... 25 25 25
Retained earnings.................................. 78 126 493
------ ------ ------
Total stockholders' equity....................... 181 229 596
------ ------ ------
Total liabilities and stockholders' equity....... $1,101 $1,321 $1,791
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-86
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------- ------------------
1995 1996 1996 1997
------ ------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales................................. $6,903 $9,477 $ 4,827 $ 6,803
Cost of sales............................. 5,959 8,285 4,166 5,575
------ ------ -------- --------
Gross margin.......................... 944 1,192 661 1,228
Selling, general and administrative
expenses................................. 910 1,113 496 563
------ ------ -------- --------
Operating income...................... 34 79 165 665
Other (income) expense:
Interest expense........................ 13 15 5 8
Other, net.............................. (9) (8) (9) (4)
------ ------ -------- --------
Income before provision for income taxes.. 30 72 169 661
Provision for income taxes................ 10 24 69 294
------ ------ -------- --------
Net income................................ $ 20 $ 48 $ 100 $ 367
====== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-87
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------- ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994............. 102,502 $ 78 $ 58 $136
Net income............................. 20 20
Issuance of common stock, Bay Area
Bouquet, Inc.......................... 100 25 25
------- ---- ---- ----
Balance at December 31, 1995............. 102,602 103 78 181
Net income............................. 48 48
------- ---- ---- ----
Balance at December 31, 1996............. 102,602 103 126 229
Net income (unaudited)................. 367 367
------- ---- ---- ----
Balance at June 30, 1997 (unaudited)..... 102,602 $103 $493 $596
======= ==== ==== ====
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-88
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------- ------------
1995 1996 1996 1997
------ ------ ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 20 $ 48 $ 100 $ 367
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 64 87 2 41
Change in deferred income taxes................ 1 (3) 69
Change in operating assets and liabilities:
Accounts receivable........................... (157) (236) 95 (3)
Inventory..................................... (51) 12 84 (55)
Prepaid expenses and other current assets..... (6) (1) (16) (19)
Income taxes payable.......................... 6 12 1 243
Accounts payable and accrued expenses......... 180 278 (193) (171)
Grower contract............................... (8) (2)
------ ------ ----- -----
Net cash provided by operating activities.... 57 189 140 403
Cash flows from investing activities:
Purchases of property and equipment............. (97) (63) (32) (67)
Cash surrender value of life insurance.......... (15) (15)
Increase in officer receivable.................. (30) (30) (70)
Increase in intangibles......................... (12) (3)
------ ------ ----- -----
Net cash used in investing activities........ (139) (96) (117) (82)
Cash flows from financing activities:
Advances to stockholder......................... (28) (37) (52)
Proceeds from issuance of common stock.......... 25
Net borrowings (repayments) on line of credit... 19 (51) (30) 1
Repayments from related parties................. 14
Proceeds from issuance of long-term debt........ 40 3
Repayments of long-term debt.................... (29) (20) (10)
Proceeds from stockholder loans................. 75 5 27
------ ------ ----- -----
Net cash (used in) provided by financing
activities.................................. 116 (108) (35) (21)
Net increase (decrease) in cash and cash
equivalents..................................... 34 (15) (12) 300
Cash and cash equivalents--beginning of period... 34 34 19
------ ------ ----- -----
Cash and cash equivalents--end of period......... $ 34 $ 19 $ 22 $ 319
====== ====== ===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for interest........ $ 13 $ 15 $ 4 $ 8
Cash paid during the period for income taxes.... $ 4 $ 14 $ 3
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-89
<PAGE>
MONTEREY BAY BOUQUET, INC. AND BAY AREA BOUQUET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1993, Monterey Bay Bouquet, Inc. and Bay Area Bouquet, Inc.
(together the "Company") is a manufacturer of fresh cut flower bouquets
operating from one location in California. The Company purchases flowers from
importers and domestic growers and distributes them to a supermarket and a
discount retailer, each of which has locations throughout the southwestern
United States. The flower bouquets produced by the Company consist primarily
of specialty California-grown flowers.
The balance sheets and operating results for Monterey Bay Bouquet, Inc. and
Bay Area Bouquet, Inc. have been combined, as both companies have common
ownership and management. All intercompany sales and balances between the two
companies have been eliminated from these financial statements.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Income is recognized when flower bouquets are delivered to the customer.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of approximately
three months or less at date of purchase to be cash equivalents.
Inventory
Inventory is stated at the lower of cost or market, with costs determined on
a first-in, first-out (FIFO) basis. Inventory consists of fresh flowers and
miscellaneous bouquet supplies.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided using
the double declining balance method over the estimated useful lives of the
related assets (five to seven years). Leasehold improvements are amortized
over the shorter of the lease term or the estimated useful life.
Intangibles
Intangible assets include the costs incurred for the start up and
incorporation of both Monterey Bay Bouquet, Inc. and Bay Area Bouquet, Inc.
and are being amortized over five years. Accumulated amortization of
intangible assets at December 31, 1995 and 1996 was $16 and $25, respectively.
F-90
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable, insurance receivable, accrued
expenses and short-term debt approximates fair value because of the short
maturity of these instruments. The estimated fair value of long-term debt and
other long-term liabilities approximates its carrying value. Additionally,
interest rates on outstanding debt are at rates which approximate market rates
for debt with similar terms and average maturities.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collaterialized and accordingly, the Company performs ongoing credit
evaluations of its customers to reduce the risk of loss.
Income Taxes
The Company is a C Corporation for federal and state income tax purposes.
The Company accounts for income taxes using the liability method under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes."
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments. necessary for a fair
presentation of the financial position of the Company as of June 30, 1997 and
of the results of operations and cash flows for the six months ended June 30,
1996 and 1997 as presented in the accompanying unaudited interim financial
statements.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Leasehold improvements....................................... $ 41 $ 59
Equipment.................................................... 80 127
Vehicles..................................................... 127 130
------ ------
248 316
Accumulated depreciation and amortization.................... (90) (172)
------ ------
$ 158 $ 144
====== ======
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1995
and 1996 was $58 and $78, respectively.
NOTE 4--CREDIT FACILITIES
Short-Term Debt
The Company's unsecured revolving line of credit, which expires in July
1997, provides for direct borrowings of up to $100 and $50 in 1995 and 1996,
respectively, and bears interest at the prime rate plus 1 3/4%
F-91
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(8.5% and 8.25% at December 31, 1995 and 1996, respectively). The prime rate
was 8.50% and 8.25% as of December 31, 1995 and 1996, respectively. Monthly
payment of interest only is required. The outstanding balance on this line of
credit was $100 and $49 at December 31, 1995 and 1996, respectively.
Long-Term Debt
Outstanding long-term debt consists of the following capital leases:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Car lease; monthly principal and interest payments of $.5
through July 1997, interest at 7.9%........................ $ 8 $ 3
Car lease; monthly principal and interest payments of $.4
through February 1999, interest at 8.5%.................... 13 8
Car lease; monthly principal and interest payments of $1
through June 1999, interest at 12.5%....................... 27 19
Equipment lease; monthly principal and interest payments of
$.6 through April 1996, interest at 10%.................... 2 0
------ -----
50 30
Less: Current maturities ................................... (20) (6)
------ -----
$ 30 $ 24
====== =====
</TABLE>
Principal maturities on notes payable over the next five years are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------
<S> <C>
1997............................................................ $13
1998............................................................ 12
1999............................................................ 5
---
Total......................................................... $30
===
</TABLE>
NOTE 5--INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Current expense:
State...................................................... $ 3 $ 7
Federal.................................................... 7 17
------ ------
Total income tax provision............................... $ 10 $ 24
====== ======
</TABLE>
F-92
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes differs from the U.S. statutory federal
income tax rate for the following reasons:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Statutory federal tax rate................................... 34.0% 34.0%
State taxes, net of federal benefit.......................... 1.4 1.4
Rate differentials........................................... (2.0) (2.2)
------ ------
33.4% 33.2%
====== ======
</TABLE>
Composition of deferred taxes has not been presented as amounts are
insignificant.
NOTE 6--RELATED PARTY TRANSACTIONS
The Company has leased its operating premises from the three stockholders of
the Company since April 1996. Rent paid to these stockholders was $70 for the
year ended December 31, 1996.
There is a net loan payable to the three stockholders in the amount of $47
and $10 for the years ended December 31, 1995 and 1996, respectively. Interest
is at a rate of 10% per annum and is due upon demand.
Consulting fees were paid to the stockholders in the amounts of $92 and $182
for the years ended December 31, 1995 and 1996, respectively.
NOTE 7--COMMITMENTS AND CONTINGENCIES
Minimum lease payments under capital and noncancellable operating leases at
December 31, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1997....................................................... $16 $135
1998....................................................... 14 144
1999....................................................... 5 144
2000....................................................... --
2001....................................................... --
Thereafter................................................. --
--- ----
Total minimum lease payments........................... 35 $423
====
Less: Amounts representing interest.................... (5)
---
Present value of net minimum lease payments............ $30
===
</TABLE>
The Company entered into a new non-cancelable operating lease on April 1,
1997 with the owners of the Company's operating premises, the stockholders.
Under the terms of the lease, monthly rental of $12 is payable until the
leases expire in December 31, 1999.
In June 1997, the Company entered into capital leases for the purchase of
three delivery trucks. Under the terms of these capital leases monthly lease
payments of $6 are payable between June 1997 and until the leases expire in
June 2000.
F-93
<PAGE>
MONTEREY BAY BOUQUET, INC. AND
BAY AREA BOUQUET, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Legal Matters
The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations or cash flows of the Company.
Grower Contract
The Company has entered into a contract with a grower who is also a
stockholder in the Company. The stockholder gave the Company cash up front in
exchange for a commitment from the Company to purchase product from the
stockholder. The contract, although due to expire in 2005, will be terminated
in 1997. Income realized for the years ended December 31, 1995 and 1996 was $8
and $8, respectively.
NOTE 8--SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
Sales to customers that exceeded 10% of total revenues were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Customer A.................................................... 65% 58%
Customer B.................................................... 33% 39%
</TABLE>
Additionally, these customers represented 95% and 97% of accounts receivable
at December 31, 1995 and 1996, respectively. Both customers are national
publicly traded companies with multiple purchase divisions.
NOTE 9--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholders have entered into a definitive agreement
with U.S.A. Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash concurrent with the consummation of the initial public
offering of the common stock of USA Floral. Pursuant to the definitive
agreement, the Company's shareholders may receive additional consideration of
$500 in cash and additional shares of USA Floral's common stock based upon
1997 earnings.
In conjunction with the merger, all amounts due from related parties and all
amounts due from stockholders will be repaid to the Company.
The Company's line of credit was renewed in July 1997.
F-94
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
Alpine Gem Flower Shippers, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations, stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Alpine Gem Flower Shippers, Inc.
at December 31, 1995 and 1996, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Minneapolis, Minnesota
June 20, 1997
F-95
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 162 $ 1 $ 131
Accounts receivable....................... 1,070 1,215 1,441
Prepaid expenses and other current
assets................................... 19 18 20
------ ------ ------
Total current assets.................... 1,251 1,234 1,592
Property and equipment, net................. 18 26 23
------ ------ ------
Total assets............................ $1,269 $1,260 $1,615
====== ====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 357 $ 469 $ 632
Commissions payable....................... 147 168 198
Accrued expenses.......................... 16 14 15
------ ------ ------
Total liabilities....................... 520 651 845
Commitments and contingencies
Stockholders' equity:
Common stock, no par value; 50,000 shares
authorized; 20,000 shares issued and
outstanding.............................. 727 727 727
Retained earnings (deficit)............... 22 (118) 43
------ ------ ------
Total stockholders' equity.............. 749 609 770
------ ------ ------
Total liabilities and stockholders'
equity................................. $1,269 $1,260 $1,615
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-96
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
-------------- ------------------
1995 1996 1996 1997
------ ------ -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales.................................. $8,139 $9,334 $ 4,979 $ 5,597
Cost of sales.............................. 6,287 7,132 3,840 4,259
------ ------ -------- --------
Gross margin........................... 1,852 2,202 1,139 1,338
Selling, general and administrative
expenses.................................. 1,526 1,868 802 902
------ ------ -------- --------
Operating income....................... 326 334 337 436
Other (income) expense:
Interest income.......................... (35) (41) (20) (17)
Other, net............................... (12) (13) 1 (9)
------ ------ -------- --------
Net income................................. $ 373 $ 388 $ 356 $ 462
====== ====== ======== ========
Unaudited pro forma information:
Pro forma net income before provision for
income taxes............................ $ 373 $ 388 $ 356 $ 462
Provision for income taxes............... 149 155 142 185
------ ------ -------- --------
Pro forma income (see Note 2)............ $ 224 $ 233 $ 214 $ 277
====== ====== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-97
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
------------- RETAINED STOCKHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------ -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994.............. 20,000 $727 $ (59) $ 668
Net income.............................. 373 373
Dividends paid.......................... (292) (292)
------ ---- ----- -----
Balance at December 31, 1995.............. 20,000 727 22 749
Net income.............................. 388 388
Dividends paid.......................... (528) (528)
------ ---- ----- -----
Balance at December 31, 1996.............. 20,000 727 (118) 609
Net income (unaudited).................. 462 462
Dividends paid (unaudited).............. (301) (301)
------ ---- ----- -----
Balance at June 30, 1997 (unaudited)...... 20,000 $727 $ 43 $ 770
====== ==== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-98
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
-------------- ------------
1995 1996 1996 1997
------ ------ ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 373 $ 388 $ 356 $ 462
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 13 27 13 4
Change in operating assets and liabilities:
Accounts receivable........................... (266) (145) (201) (226)
Prepaid expenses and other current assets..... (5) 1 (10) (2)
Accounts payable and accrued expenses......... 79 131 164 194
------ ------ ----- -----
Net cash provided by operating activities.... 194 402 322 432
Cash flows from investing activities:
Purchases of property and equipment............. (3) (40) (31) (1)
Proceeds from disposal of property and
equipment...................................... 5
------ ------ ----- -----
Net cash used in investing activities........ (3) (35) (31) (1)
Cash flows from financing activities:
Proceeds from short-term loan from
stockholders...................................
Stockholder dividends........................... (292) (528) (67) (301)
------ ------ ----- -----
Net cash (used in) provided by financing
activities.................................. (292) (528) (67) (301)
Net increase (decrease) in cash and cash
equivalents..................................... (101) (161) 224 130
Cash and cash equivalents--beginning of period... 263 162 162 1
------ ------ ----- -----
Cash and cash equivalents--end of period......... $ 162 $ 1 $ 386 $ 131
====== ====== ===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-99
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--BUSINESS ORGANIZATION
Founded in 1972, Alpine Gem Flower Shippers, Inc. (the "Company") is a
broker and shipper of perishable floral products, operating from two locations
in Montana and California. The Company distributes primarily to wholesalers
throughout the United States.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue from product sales when the goods are shipped
to its customers.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of approximately
three months or less at date of purchase to be cash equivalents.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided using
accelerated methods over the estimated useful lives of the related assets
(five to seven years).
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts
receivable/payable, notes receivable/payable and accrued expenses approximates
fair value because of the short maturity of these instruments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collateralized and accordingly, the Company performs ongoing credit
evaluations of its customers to reduce the risk of loss.
Income Taxes
The Company has elected to be treated as a cash basis S Corporation for
federal and state income taxes and, accordingly, any liabilities for income
taxes are the direct responsibility of the stockholders.
There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities primarily related to accounts
receivable and accounts payable. At December 31, 1996, the Company's net
assets for financial reporting purposes exceeds the tax basis by approximately
$745. In conjunction with the proposed merger with USA Floral, the Company's S
Corporation election will terminate
F-100
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
and the net difference between the book and tax bases of assets at that date
will be immediately recognized in the financial statements.
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal and state income taxes for the entire periods presented.
Unaudited Interim Financial Statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position of the Company as of June 30, 1997 and
of the results of operations and cash flows for the six months ended June 30,
1996 and 1997 as presented in the accompanying unaudited interim financial
statements.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Equipment.................................................... $ 136 $ 163
Accumulated depreciation..................................... (117) (137)
------ ------
$ 19 $ 26
====== ======
</TABLE>
Depreciation expense for the years ended December 31, 1995 and 1996 was $13
and $27, respectively.
NOTE 4--RELATED PARTY TRANSACTIONS
The Company rents office space from the stockholders of Alpine Gem for the
years ended 1995 and 1996, total rent payments made were $18.
In March 1997, the Company borrowed $100 from the stockholders which was
repaid in full in May 1997.
NOTE 5--COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company occupies premises under one noncancelable operating lease which
expires on December 31, 1998. At December 31, 1996, future minimum rental
payments under this lease arrangement are as follows:
<TABLE>
<S> <C>
1997................................................................... $114
1998................................................................... 111
----
Total minimum lease payments......................................... $225
====
</TABLE>
Rent expense for the years ended December 31, 1995 and 1996 was $82 and
$179, respectively.
F-101
<PAGE>
ALPINE GEM FLOWER SHIPPERS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Legal Matters
The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations or cash flows of the Company.
NOTE 6--UNAUDITED SUBSEQUENT EVENTS
The Company and its stockholders have entered into a definitive agreement
with U.S.A. Floral Products, Inc. ("USA Floral") pursuant to which the Company
will merge with USA Floral. All outstanding shares of the Company will be
exchanged for cash and shares of USA Floral common stock concurrent with the
consummation of initial public offering of the common stock of USA Floral.
F-102
<PAGE>
[THIS INSIDE BACK COVER PAGE DEPICTS THE CORPORATE LOGOS OF THE REGISTRANT AND
THE OTHER FOUNDING COMPANIES.]
<PAGE>
[THE OUTSIDE BACK COVER PAGE DEPICTS THE REGISTRANT'S CORPORATE LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and other
estimated expenses expected to be incurred in connection with issuance and
distribution of securities being registered. All such fees and expenses shall
be paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee .......... $ 19,237
NASD Fee...................................................... 8,780
Nasdaq National Market Listing Fee............................ 44,095
Printing and Engraving Expenses............................... 400,000
Accounting Fees and Expenses.................................. 1,000,000
Legal Fees and Expenses....................................... 650,000
Directors and Officers Insurance.............................. 110,000
Transfer Agent Fees and Expenses.............................. 2,500
Miscellaneous................................................. 15,388
----------
Total....................................................... $2,250,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of
directors to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty, except for liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.
Article 10 of the registrant's Certificate of Incorporation provides that the
personal liability of directors of the registrant is eliminated to the fullest
extent permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in
accordance with the applicable standard of conduct set forth in such statutory
provision. Article 7 of the registrant's Bylaws provides that the registrant
will indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the registrant, or is or was serving at the request of the registrant as a
director, officer, employee or agent of another entity, against certain
liabilities, costs and expenses. Article 7 further permits the registrant to
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the registrant, or is or was serving at the request of
the registrant as a director, officer, employee or agent of another entity,
against any liability asserted against such person and incurred by such person
in any such capacity or arising out of his status as such, whether or not the
registrant would have the power to indemnify such person against such
liability under the DGCL. The registrant expects to maintain directors' and
officers' liability insurance.
Under Section 7 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the registrant against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made
to the form of Underwriting Agreement filed as Exhibit 1.01 hereto.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On April 22, 1997 the registrant sold 1,000,000 shares of its common stock
to Robert J. Poirier in an organizational subscription for aggregate cash
consideration of $1,000. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
On April 22, 1997 the registrant sold 1,000,000 shares of its common stock
to Jonathan Ledecky in an organizational subscription for aggregate cash
consideration of $1,000. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
On April 23, 1997, the registrant sold 100,000 shares of its common stock to
Jonathan Ledecky in an organizational subscription for aggregate cash
consideration of $100,000. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
On April 23, 1997, the registrant sold 100,000 shares of its common stock to
Dewey K. Shay in an organizational subscription for aggregate cash
consideration of $100,000. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
On April 23, 1997, the registrant sold 100,000 shares of its common stock to
Edward J. Mathias in an organizational subscription for aggregate cash
consideration of $100,000. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
On May 8, 1997, the registrant sold 25,000 shares of its common stock to
Mark Ein in an organizational subscription for aggregate cash consideration of
$25,000. The transaction was intended to be exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof.
On May 10, 1997, the registrant sold 25,000 shares of its common stock to
John A. Quelch in an organizational subscription for aggregate cash
consideration of $25,000. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
On May 25, 1997, the registrant sold 50,000 shares of its common stock to
Joanne C. McClure in an organizational subscription for aggregate cash
consideration of $50,000. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
As of August 5, 1997, the registrant entered into an Amended and Restated
Agreement and Plan of Contribution with CFX, Inc. ("CFX"), Floral Acquisition
Corporation and Dwight Haight, James A. Hill and Michael Grover, pursuant to
which the registrant has agreed to issue 250,000 shares of its Common Stock,
as partial consideration for the merger of a wholly-owned subsidiary of the
registrant with and into CFX. Pursuant to the Agreement and Plan of
Contribution, the Company has agreed to grant options to purchase that number
of shares of Common Stock equal to 6.25% of the Consideration (as defined in
the Agreement and Plan of Contribution) to certain employees of CFX following
consummation of the merger. The transaction was intended to be exempt from the
registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
As of August 6, 1997, the registrant entered into an Amended and Restated
Agreement and Plan of Contribution with Bay State Florist Supply ("Bay
State"), and BSF Acquisition Corp., pursuant to which the registrant has
agreed to issue 495,550 shares of its Common Stock, as partial consideration
for the merger of a wholly-owned subsidiary of the registrant with and into
Bay State. Pursuant to the Agreement and Plan of Contribution, the Company has
agreed to grant options to purchase that number of shares of Common Stock
equal to 6.25% of the Consideration (as defined in the Agreement and Plan of
Contribution) to certain employees of Bay State following consummation of the
merger. The transaction was intended to be exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof.
As of August 5, 1997, the registrant entered into an Amended and Restated
Agreement and Plan of Contribution with Alpine Gem Flower Shippers, Inc.
("Alpine Gem"), AGFS Acquisition Corp. and John Q. Graham, Jr. and Diane
Lizotte-Graham, pursuant to which the registrant has agreed to issue 160,000
shares of its
II-2
<PAGE>
Common Stock, as partial consideration for the merger of a wholly-owned
subsidiary of the registrant with and into Alpine Gem. Pursuant to the
Agreement and Plan of Contribution, the Company has agreed to grant options to
purchase that number of shares of Common Stock equal to 6.25% of the
Consideration (as defined in the Agreement and Plan of Contribution) to
certain employees of Alpine Gem following consummation of the merger. The
transaction was intended to be exempt from the registration requirements of
the Securities Act by virtue of Section 4(2) thereof.
As of August 4, 1997, the registrant entered into an Agreement and Plan of
Contribution with United Wholesale Florists, Inc., United Wholesale Florists
of America, Inc., UWF Acquisition Corp., UWFA Acquisition Corp. and G. Warren
Stephenson and Raymond R. Ashmore, pursuant to which the registrant has agreed
to issue 268,500 shares of its Common Stock as partial consideration for the
merger of wholly-owned subsidiaries of the registrant with and into "United
Wholesale" (as defined in the Prospectus). Pursuant to the Agreement and Plan
of Contribution, the Company has agreed to grant options to purchase that
number of shares of Common Stock equal to 6.25% of the Consideration (as
defined in the Agreement and Plan of Contribution) to certain employees of
United Wholesale following consummation of the merger. The transaction was
intended to be exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof.
As of August 5, 1997, the registrant entered into an Amended and Restated
Agreement and Plan of Contribution with The Roy Houff Company ("Houff"), RHI
Acquisition Corp. and Roy O. Houff, pursuant to which the registrant has
agreed to grant options to purchase that number of shares of Common Stock
equal to 6.25% of the Consideration (as defined in the Agreement and Plan of
Contribution) to certain employees of Houff following consummation of the
merger. The transaction was intended to be exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof.
As of August 5, 1997, the registrant entered into an Agreement and Plan of
Contribution with American Florist Supply, Inc., AFS Acquisition Corp. and
John T. Dickinson, pursuant to which the registrant has agreed (i) to grant
options to purchase that number of shares of Common Stock equal to 6.25% of
the Consideration (as defined in the Agreement and Plan of Contribution) and
(ii) to issue up to that number of shares of Common Stock with an aggregate
value of up to $2,400,000 pursuant to an earn-out arrangement. The transaction
was intended to be exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof.
As of August 5, 1997, the registrant entered into an Amended and Restated
Agreement and Plan of Contribution with Monterey Bay Bouquet, Inc., Bay Area
Bouquets, Inc., USA Floral Acquisition Co. and Jeffrey Brothers, Philip Buran
and Douglas Anderson, pursuant to which the registrant has agreed to (i) grant
options to purchase that number of shares of Common Stock equal to 6.25% of
the Consideration (as defined in the Agreement and Plan of Contribution) to
certain employees of Monterey Bay following consummation of the merger and
(ii) to issue up to that number of shares of Common Stock with an aggregate
value of up to $3,000,000 pursuant to an earn-out arrangement. The transaction
was intended to be exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof.
As of August 4, 1997, the registrant entered into an Agreement and Plan of
Contribution with Flower Trading Corporation, Flowtrad Corporation N.V., FT
Acquisition Corp., Gustavo Moreno, Seacross Trading, Inc. and Alvaro
McAllister, pursuant to which the registrant has agreed to issue 160,000
shares of its Common Stock as partial consideration for the merger of a
wholly-owned subsidiary of the registrant with and into "Flower Trading" (as
defined in the Prospectus). Pursuant to the Agreement and Plan of
Contribution, the Company has agreed to grant options to purchase that number
of shares of Common Stock equal to 6.25% of the Consideration (as defined in
the Agreement and Plan of Contribution) to certain employees of Flower Trading
following consummation of the merger. The transaction was intended to be
exempt from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof.
On August 6, 1997, the registrant granted Jonathan Ledecky an option to
purchase 110,000 shares of Common Stock at an exercise price equal to the
initial public offering price. The transaction was intended to be exempt from
the registration requirements of the Securities Act by virtue of Section 4(2)
thereof.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.01 Form of Underwriting Agreement.*
3.01 Certificate of Incorporation of U.S.A. Floral Products, Inc., as
amended.*
3.02 Amended and Restated Bylaws of U.S.A. Floral Products, Inc.*
5.01 Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
securities being registered.*
10.01 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., RHI Acquisition Corp., The Roy Houff
Company and Roy O. Houff, dated as of August 5, 1997.*
10.02 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., Floral Acquisition Corp., CFX, Inc.
and Dwight Haight, James A. Hill and Michael Grover, dated as of
August 5, 1997.*
10.03 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., BSF Acquisition Corp. and Bay State
Florist Supply, dated as of August 6, 1997.*
10.04 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., USA Floral Acquisition Co., Monterey
Bay Bouquet, Inc. and Bay Area Bouquets, Inc., and Jeffrey
Brothers, Philip Buran and Douglas Anderson, dated as August 5,
1997.*
10.05 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., AGFS Acquisition Corp., Alpine Gem
Flower Shippers, Inc., John Q. Graham, Jr. and Diane Lizotte-
Graham, dated as of August 5, 1997.*
10.06 Agreement and Plan of Contribution by and among U.S.A. Floral
Products, Inc., United Wholesale Florists, Inc., United Wholesale
Florists of America, Inc., UWF Acquisition Corp., UWFA Acquisition
Corp. and G. Warren Stephenson and Raymond R. Ashmore, dated as of
August 4, 1997.*
10.07 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., American Florist Supply, Inc., AFS
Acquisition Corp. and John T. Dickinson, dated as of August 5,
1997.*
10.08 Agreement and Plan of Contribution by and among U.S.A. Floral
Products, Inc., FT Acquisition Corporation, Flower Trading
Corporation, Flowtrad Corporation N.V. and the stockholders of
Flowtrad Corporation N.V., dated as of August 4, 1997.*
10.09(a) Employment Agreement between U.S.A. Floral Products, Inc. and Robert
Poirier, dated as of April 22, 1997.*
10.09(b) Amendment No. 1 to Employment Agreement between U.S.A. Floral
Products, Inc. and Robert Poirier, dated August 6, 1997.
10.10 U.S.A. Floral Products, Inc. 1997 Long-Term Incentive Plan.*
10.11 U.S.A. Floral Products, Inc. 1997 Non-Employee Directors' Stock
Plan.*
10.12 U.S.A. Floral Products, Inc. 1997 Employee Stock Purchase Plan.*
10.13 Form of Employment Agreement between U.S.A. Floral Products, Inc.
and Raymond C. Anderson.*
10.14 Form of Employment Agreement to be entered into between The Roy
Houff Company and Roy O. Houff.*
10.15 Form of Employment Agreement to be entered into between CFX, Inc.
and Dwight Haight.*
</TABLE>
- --------
* Filed herewith.
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.16 Form of Employment Agreement to be entered into between Bay State
Florist Supply, Inc. and William W. Rudolph.*
10.17 Form of Employment Agreement to be entered into between Monterey Bay
Bouquet, Inc. and Jeffrey Brothers.*
10.18 Form of Employment Agreement to be entered into between Alpine Gem
Flower Shippers, Inc. and John Q. Graham, Jr.*
10.19 Form of Employment Agreement to be entered into between United
Wholesale Florists, Inc. and Raymond R. Ashmore.*
10.20 Form of Employment Agreement to be entered into between American
Florist Supply, Inc. and John T. Dickinson.*
10.21 Form of Employment Agreement to be entered into between Flower Trading
Corporation and Gustavo Moreno.*
10.22 Registration Rights Agreement, dated as of July 25, 1997, among U.S.A.
Floral Products, Inc. and certain stockholders named therein.*
23.01 Consent of Price Waterhouse LLP.*
23.02 Consent of Madsen, Sapp, Mena, Rodriguez & Co., P.A.*
23.03 Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as
Exhibit 5.1).*
24.01 Power of Attorney.**
27.01 Financial Data Schedule.**
99.01 Consent of Roy O. Houff as a person named to become a director.**
99.02 Consent of Dwight Haight as a person named to become a director.**
99.03 Consent of William W. Rudolph as a person named to become a
director.**
99.04 Consent of Jeffrey Brothers as a person named to become a director.**
99.05 Consent of John Q. Graham, Jr. as a person named to become a
director.**
99.06 Consent of Raymond R. Ashmore as a person named to become a
director.**
99.07 Consent of John T. Dickinson as a person named to become a director.**
99.08 Consent of Gustavo Moreno as a person named to become a director.**
</TABLE>
- --------
* Filed herewith.
** Previously filed.
(b) Financial statement schedules have been omitted because they are
inapplicable, are not required under applicable provisions of Regulation S-X,
or the information that would otherwise be included in such schedules is
contained in the registrant's financial statements or accompanying notes.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
II-5
<PAGE>
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Washington, District of
Columbia, on September 17, 1997.
U.S.A. Floral Products, Inc.
By: /s/ Robert J. Poirier
----------------------------------
Robert J. Poirier
Chairman of the Board,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/ Robert J. Poirier
- ------------------------------------- Chairman of the September 17, 1997
Robert J. Poirier Board, President
and Chief Executive
Officer and a
Director (Principal
Executive Officer)
/s/ Raymond C. Anderson Chief Financial
- ------------------------------------- Officer (Principal September 17, 1997
Raymond C. Anderson Financial and
Accounting Officer)
Director
* September 17, 1997
- -------------------------------------
Jonathan J. Ledecky
Director
* September 17, 1997
- -------------------------------------
Vincent W. Eades
Director
* September 17, 1997
- -------------------------------------
Edward J. Mathias
Director
* September 17, 1997
- -------------------------------------
John A. Quelch
*By /s/ Robert J. Poirier September 17, 1997
----------------------------------
Robert J. Poirier, attorney-in-fact,
pursuant to powers of attorney
previously filed with this
registration statement.
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.01 Form of Underwriting Agreement.*
3.01 Certificate of Incorporation of U.S.A. Floral Products, Inc., as
amended.*
3.02 Amended and Restated Bylaws of U.S.A. Floral Products, Inc.*
5.01 Opinion of Morgan, Lewis & Bockius LLP as to the legality of the
securities being registered.*
10.01 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., RHI Acquisition Corp., The Roy Houff
Company and Roy O. Houff, dated as of August 5, 1997.*
10.02 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., Floral Acquisition Corp., CFX, Inc.
and Dwight Haight, James A. Hill and Michael Grover, dated as of
August 5, 1997.*
10.03 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., BSF Acquisition Corp. and Bay State
Florist Supply, dated as of August 6, 1997.*
10.04 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., USA Floral Acquisition Co., Monterey
Bay Bouquet, Inc. and Bay Area Bouquets, Inc., and Jeffrey Brothers,
Philip Buran and Douglas Anderson, dated as of August 5, 1997.*
10.05 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., AGFS Acquisition Corp., Alpine Gem
Flower Shippers, Inc., John Q. Graham, Jr. and Diane Lizotte-Graham,
dated as of August 5, 1997.*
10.06 Agreement and Plan of Contribution by and among U.S.A. Floral
Products, Inc., United Wholesale Florists, Inc., United Wholesale
Florists of America, Inc., UWF Acquisition Corp. UWFA Acquisition
Corp. and G. Warren Stephenson and Raymond R. Ashmore, dated as of
August 4, 1997.*
10.07 Amended and Restated Agreement and Plan of Contribution by and among
U.S.A. Floral Products, Inc., American Florist Supply, Inc., AFS
Acquisition Corp. and John T. Dickinson, dated as of August 5,
1997.*
10.08 Agreement and Plan of Contribution by and among U.S.A. Floral
Products, Inc., FT Acquisition Corporation, Flower Trading
Corporation, Flowtrad Corporation N.V. and the stockholders of
Flowtrad Corporation N.V., dated as of August 4, 1997.*
10.09(a) Employment Agreement between U.S.A. Floral Products, Inc. and Robert
Poirier, dated as of April 22, 1997.*
10.09(b) Amendment No. 1 to Employment Agreement between U.S.A. Floral
Products, Inc. and Robert Poirier, dated August 6, 1997.
10.10 U.S.A. Floral Products, Inc. 1997 Long-Term Incentive Plan.*
10.11 U.S.A. Floral Products, Inc. 1997 Non-Employee Directors' Stock
Plan.*
10.12 U.S.A. Floral Products, Inc. 1997 Employee Stock Purchase Plan.*
10.13 Form of Employment Agreement between U.S.A. Floral Products, Inc. and
Raymond C. Anderson.*
10.14 Form of Employment Agreement to be entered into between The Roy Houff
Company and Roy O. Houff.*
10.15 Form of Employment Agreement to be entered into between CFX, Inc. and
Dwight Haight.*
</TABLE>
- --------
* Filed herewith.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.16 Form of Employment Agreement to be entered into between Bay State
Florist Supply, Inc. and William W. Rudolph.*
10.17 Form of Employment Agreement to be entered into between Monterey Bay
Bouquet, Inc. and Jeffrey Brothers.*
10.18 Form of Employment Agreement to be entered into between Alpine Gem
Flower Shippers, Inc. and John Q. Graham, Jr.*
10.19 Form of Employment Agreement to be entered into between United
Wholesale Florists, Inc. and Raymond R. Ashmore.*
10.20 Form of Employment Agreement to be entered into between American
Florist Supply, Inc. and John T. Dickinson.*
10.21 Form of Employment Agreement to be entered into between Flower Trading
Corporation and Gustavo Moreno.*
10.22 Registration Rights Agreement, dated as of July 25, 1997, among U.S.A.
Floral Products, Inc. and certain stockholders named therein.*
23.01 Consent of Price Waterhouse LLP.*
23.02 Consent of Madsen, Sapp, Mena, Rodriguez & Co., P.A.*
23.03 Consent of Morgan, Lewis & Bockius LLP (included in opinion filed as
Exhibit 5.1).*
24.01 Power of Attorney.**
27.01 Financial Data Schedule.**
99.01 Consent of Roy O. Houff as a person named to become a director.**
99.02 Consent of Dwight Haight as a person named to become a director.**
99.03 Consent of William W. Rudolph as a person named to become a
director.**
99.04 Consent of Jeffrey Brothers as a person named to become a director.**
99.05 Consent of John Q. Graham, Jr. as a person named to become a
director.**
99.06 Consent of Raymond R. Ashmore as a person named to become a
director.**
99.07 Consent of John T. Dickinson as a person named to become a director.**
99.08 Consent of Gustavo Moreno as a person named to become a director.**
</TABLE>
- --------
* Filed herewith.
** Previously filed.
<PAGE>
EXHIBIT 1.01
____ Shares
U.S.A. FLORAL PRODUCTS, INC.
COMMON STOCK (par value $.001 per share)
UNDERWRITING AGREEMENT
, 1997
<PAGE>
, 1997
Morgan Stanley & Co. Incorporated
Robertson, Stephens & Company LLC
Smith Barney Inc.
c/o Morgan Stanley & Co.
Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
U.S.A. FLORAL PRODUCTS, INC., a Delaware corporation (the "Company"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "Underwriters") _________ shares of its common stock (par value
$.001 per share) (the "Firm Shares"). The Company also proposes to issue and
sell to the several Underwriters not more than an additional ______________
shares of its common stock (par value $.001 per share) (the "Additional Shares")
if and to the extent that you, as Managers of the offering, shall have
determined to exercise, on behalf of the Underwriters, the right to purchase
such shares of common stock granted to the Underwriters in Section hereof. The
Firm Shares and the Additional Shares are hereinafter collectively referred to
as the "Shares." The shares of common stock (par value $.001 per share) of the
Company to be outstanding after giving effect to the sales contemplated hereby
are hereinafter referred to as the "Common Stock."
As part of the offering contemplated by this Agreement, the Underwriters
have agreed to reserve out of the Shares, up to _______ shares, for sale to the
Company's employees, officers, and directors and other parties associated with
the Company (collectively, "Participants"), as set forth in the Prospectus under
the heading "Underwriters" (the "Directed Share Program"). The Shares to be sold
by the Underwriters pursuant to the Directed Share Program (the "Directed
Shares") will be sold by the Underwriters pursuant to this Agreement at the
public offering price. Any Directed Shares not orally confirmed for purchase by
any Participants by the end of the first business day after the date on which
this Agreement is executed will be offered to the public by the Underwriters as
set forth in the Prospectus.
It is understood that the Company and its subsidiaries set forth on
Schedule II hereto (the "Merger Subsidiaries") have entered into the Agreements
2
<PAGE>
and Plans of Contribution identified on Exhibit A attached hereto (the "Merger
Agreements") with each of The Roy Houff Company, CFX, Inc., Bay State Florist
Supply, Inc., United Wholesale Florists, Inc., United Wholesale Florists of
America, Inc., American Florist Supply, Inc., Monterey Bay Bouquet, Inc., Bay
Area Bouquets, Inc. ("BAB"), Alpine Gem Flower Shippers, Inc. and Flowtrad
Corporation N.V. (each a "Founding Company" and together, the "Founding
Companies") in which each Merger Subsidiary will be merged with and into one or
more Founding Companies (each such transaction, a "Merger" and collectively, the
"Mergers") simultaneously with the closing of the sale of the Shares. The
Founding Companies will be the surviving corporations following the Mergers
(other than BAB, which will be merged with and into Monterey Bay Bouquet, Inc.
prior to the consummation of the Merger with Monterey Bay Bouquet, Inc.), and
will become wholly owned subsidiaries of the Company simultaneously with the
closing of the sale of the Shares (other than BAB as aforesaid). For the
purposes of this Agreement, unless the context expressly otherwise requires,
references to "the Company and its subsidiaries, taken as a whole" shall be
deemed to include the Founding Companies as if the Mergers had already been
completed.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement"; the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "Prospectus."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "Rule 462 Registration Statement"), then any reference herein to the
term "Registration Statement" shall be deemed to include such Rule 462
Registration Statement.
1. Representations and Warranties. The Company represents and warrants to
and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or, to the best
knowledge of the Company, threatened by the Commission.
(b) (i) the Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
3
<PAGE>
therein not misleading, (ii) the Registration Statement and the
Prospectus comply, and, as amended or supplemented, if applicable,
will comply, in all material respects with the Securities Act and the
applicable rules and regulations of the Commission thereunder and
(iii) the Prospectus does not contain and, as amended or supplemented,
if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, except that the representations and warranties set
forth in this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through you expressly for use therein.
(c) The information contained in the Prospectus with respect
to each of the Founding Companies does not contain, and as amended or
supplemented, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein with respect to each Founding Company, not
misleading.
(d) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of Delaware,
has, and after giving effect to the Mergers will have, the corporate
power and authority to own its property and to conduct its business as
described in the Prospectus and is, and after giving effect to the
Mergers will be, duly qualified to transact business and in good
standing in each jurisdiction in which the conduct of its business or
its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(e) The Merger Subsidiaries are the only subsidiaries of the
Company; each of the Merger Subsidiaries has been duly incorporated,
is validly existing as a corporation in good standing under the laws
of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus, and none of such Merger Subsidiaries qualifies as a
"significant subsidiary" within the meaning of Rule 1-02 of Regulation
S-X promulgated by the Commission; all of the issued shares of capital
stock of each Merger Subsidiary have been duly and validly authorized
and issued, are fully paid and non-assessable and are owned directly
by the Company, free and clear of all liens, encumbrances, equities or
claims; pursuant to the Merger Agreements, each of the Merger
Subsidiaries will
4
<PAGE>
merge with and into a respective Founding Company (except as aforesaid
with respect to BAB) and, upon consummation of the Mergers, each of
the Merger Subsidiaries will cease to exist as a separate entity and
the Founding Companies (except as aforesaid with respect to BAB) will
be the only subsidiaries of the Company.
(f) Each of the Founding Companies has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of the jurisdiction of its incorporation, has, and
after giving effect to the Mergers will have, the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is, and after giving effect to the Mergers will
be, duly qualified to transact business and in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole; all of the issued shares of capital stock of each
Founding Company prior to its Merger have been duly and validly
authorized and issued, are fully paid and non-assessable; and, upon
consummation of the Mergers, all of the shares of capital stock of
each Founding Company will be duly and validly authorized and issued,
fully paid and non-assessable and owned directly by the Company, free
and clear of all liens, encumbrances, equities or claims.
(g) Each of the Merger Agreements has been duly authorized,
executed and delivered by each of the parties thereto, and constitutes
a valid and binding obligation of each such party and is enforceable
against each such party in accordance with its terms; the Merger
Agreements are in full force and effect on the date hereof, and
neither the Company nor any of the Merger Subsidiaries, nor, to the
knowledge of the Company, any of the Founding Companies, is in breach
of its obligations thereunder; and, when all of the conditions to each
Merger contained in the applicable Merger Agreement have been
fulfilled and the articles of merger relating to the applicable Merger
have been filed with and accepted for record by the relevant state
entity in accordance with the Merger Agreement, the applicable Merger
will be effective in accordance with the laws of the relevant state;
(h) This Agreement has been duly authorized, executed and
delivered by the Company.
(i) The authorized capital stock of the Company conforms as
to legal matters to the description thereof contained in the
Prospectus.
5
<PAGE>
(j) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
(k) The shares of capital stock of the Company to be issued
pursuant to the Mergers have been duly authorized and, when issued
pursuant to the terms of the Merger Agreements, will be validly
issued, fully-paid and non-assessable and will not be subject to any
preemptive or similar rights.
(l) The Shares have been duly authorized and, when issued
and delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of
such Shares will not be subject to any preemptive or similar rights.
(m) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of (i) the certificate of
incorporation or by-laws of the Company, (ii) any applicable law or
any agreement or other instrument binding upon the Company, the Merger
Subsidiaries or the Founding Companies that is material to the Company
and its subsidiaries, taken as a whole, except for such contraventions
that would not, individually or in the aggregate, have a material
adverse effect upon the Company and its subsidiaries taken as a whole
and except for such contraventions that would not materially and
adversely affect the consummation by the Company of the transactions
contemplated by this Agreement, or (iii) any judgment, order or decree
of any governmental body, agency or court having jurisdiction over the
Company or any Merger Subsidiary or Founding Company, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares.
(n) The execution and delivery by the Company, the Merger
Subsidiaries and the Founding Companies of, and the performance by the
Company, the Merger Subsidiaries and the Founding Companies, as
applicable, of their respective obligations under the Merger
Agreements and the Registration Rights Agreement and the consummation
of the Mergers will not contravene any provision of (i) the
certificate of incorporation or by-laws of the Company, the Merger
Subsidiaries or the Founding Companies, (ii) any applicable law or any
agreement or other instrument binding upon the Company, the Merger
Subsidiaries or the
6
<PAGE>
Founding Companies, except for such contraventions that would not,
individually or in the aggregate, have a material adverse effect upon
the Company and its subsidiaries taken as a whole and except for such
contraventions that would not materially and adversely affect the
consummation by the Company, the Founding Companies or the Merger
Subsidiaries of the transactions contemplated by the Merger Agreements
or the Registration Rights Agreement, as applicable, or (iii) any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any Merger Subsidiary or
Founding Company, and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is required for
the performance by the Company, the Merger Subsidiaries or the
Founding Companies, as applicable, of their respective obligations
under the Merger Agreements or the Registration Rights Agreement other
than the filing with applicable state authorities of certificates of
merger or similar documents required under relevant state laws to
effect the consummation of the Mergers.
(o) There has not occurred any material adverse change, or
any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company or any of the Founding Companies, from that
set forth in the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement).
(p) There are no legal or governmental proceedings
(including investigations and reviews of anti-dumping issues by the
U.S. Commerce Department) pending or to the Company's best knowledge,
threatened to which the Company or any of the Founding Companies is a
party or to which any of the properties of the Company or any of the
Founding Companies is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or
any statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(q) Each preliminary prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities
Act and the applicable rules and regulations of the Commission
thereunder.
(r) The Company is not and, after giving effect to the
Mergers and the offering and sale of the Shares and the application of
the proceeds
7
<PAGE>
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended.
(s) The Company and the Founding Companies are and will be,
as of the Closing Date, after giving effect to the Mergers (i) in
compliance with any and all applicable foreign, federal, state and
local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), (ii) in
receipt of all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole; there are no costs or liabilities
associated with Environmental Laws (including, without limitation, any
capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit,
license or approval, any related constraints on operating activities
and any potential liabilities to third parties) which would, singly or
in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(t) All outstanding options, warrants and other rights to
purchase, sell or otherwise transfer shares of Common Stock and all
employee benefit plans, stock option plans and other employee
compensation plans or arrangements pursuant to which such options,
warrants and other rights may be granted have been described in the
Prospectus to the extent required therein; there are not, and upon
consummation of the Mergers, there will not be, any contracts,
agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company other than as described in the Registration
Statement, or to require the Company to include such securities with
the Shares registered pursuant to the Registration Statement.
(u) The pro forma combined financial statements of the
Company and the historical financial statements of each of the Company
and the Founding Companies, and the related notes thereto, included in
the Registration Statements and the Prospectus present fairly in all
material
8
<PAGE>
respects the pro forma combined or historical financial position of
the Company and each of the Founding Companies, as the case may be, as
of the dates indicated and the results of their operations and changes
in their consolidated cash flows for the periods specified; said
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis, and the
supporting schedules included in the Registration Statement present
fairly in all material respects the information required to be stated
therein; and the pro forma combined financial information, and the
related notes thereto, included in the Registration Statement and the
Prospectus has been prepared in accordance with the applicable
requirements of the Securities Act and is based upon good faith
estimates and assumptions believed by the Company to be reasonable.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
and through the Closing Date, (i) none of the Company, the Merger
Subsidiaries or the Founding Companies have incurred or will incur, as
the case may be, any material liability or obligation, direct or
contingent, nor entered or will enter, as the case may be, into any
material transaction, not in the ordinary course of business; (ii)
none of the Company, the Merger Subsidiaries or the Founding Companies
has purchased or will purchase, as the case may be, any of its
outstanding capital stock; (iii) the Company, the Merger Subsidiaries
and the Founding Companies have not, and will not, declare, pay or
otherwise make any dividend or distribution of any kind on its capital
stock; and (iv) there has not been any material change in the capital
stock, short-term debt or long-term debt of the Company or any of the
Founding Companies, except in each case as described in or
contemplated by the Registration Statement (exclusive of any
amendments or supplements thereto subsequent to the date of this
Agreement) and except for the merger of BAB with and into Monterey Bay
Bouquet, Inc. to be effected prior to the Monterey Bay Bouquet, Inc.
Merger.
(w) The Company and the Founding Companies own or possess,
or can acquire on reasonable terms, and, after giving effect to the
Mergers, will own or possess or have the capacity to acquire, all
material patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them,
and neither the Company nor any of the Founding Companies has received
any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision,
9
<PAGE>
ruling or finding, would result in any material adverse change in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole.
(x) No material labor dispute with the employees of the
Company or any of the Founding Companies exists, except as described
in or contemplated by the Prospectus, or, to the knowledge of the
Company, is imminent; and the Company is not currently aware of any
existing, overtly threatened or imminent labor disturbance by the
employees of any of the principal suppliers, manufacturers or
contractors of the Founding Companies that could result in any
material adverse change in the condition, financial or otherwise, or
in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole.
(y) The Company and each of the Founding Companies are and,
after giving effect to the Mergers will be, insured by insurers of
recognized financial responsibility against such losses and risks and
in such amounts as the Company and such Founding Companies believe to
be prudent and customary in the businesses in which they are engaged;
(z) The Company and the Founding Companies are, and after
giving effect to the Mergers will be, in possession of all material
certificates, authorizations and permits issued by the appropriate
federal, state or local regulatory authorities necessary to conduct
their respective businesses, and neither the Company nor any Founding
Company has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material
adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries,
taken as a whole.
(aa) The Company and each of the Founding Companies maintain
a system of internal accounting controls sufficient to provide
reasonable assurance that: (i) transactions are executed in accordance
with management's general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
10
<PAGE>
(bb) Except as described in the Prospectus, the Company has
not sold, issued or distributed any shares of Common Stock.
(cc) Price Waterhouse LLP who has certified certain
financial statements of the Company and the Founding Companies, and
Madsen, Sapp, Rodriguez & Co., P.A., who has certified certain
financial statements of CFX, Inc., are and, during the periods covered
by their reports, were, independent public accountants as required by
the Securities Act.
(dd) The Company has not and, to the Company's knowledge,
none of the Founding Companies have, taken nor will take, directly or
indirectly, any action designed to, or that might be reasonably
expected to, cause or result in stabilization or manipulation of the
price of the Common Stock in contravention of the provisions of
Regulation M.
(ee) The directors and officers and shareholders of the
Company and those persons who are expected to become directors,
officers and shareholders of the Company, pursuant to the consummation
of the Mergers, have each entered into a written agreement with the
Company in the form of Exhibit B attached hereto (each such agreement,
a "Lock-up Agreement"), and executed originals of each Lock-up
Agreement have been delivered to you.
(ff) None of the Shares distributed in connection with the
Directed Share Program will be offered or sold outside of the United
States.
2. Agreements to Sell and Purchase. The Company hereby agrees
to sell to the several Underwriters, and each Underwriter, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to
purchase from the Company the respective numbers of Firm Shares set forth
in Schedule I hereto opposite its name at $______ a share (the "Purchase
Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to
sell to the Underwriters the Additional Shares, and the Underwriters shall
have a one-time right to purchase, severally and not jointly, up to
_______________ Additional Shares at the Purchase Price. If you, on behalf
of the Underwriters, elect to exercise such option, you shall so notify the
Company in writing not later than 30 days after the date of this Agreement,
which notice shall specify the number of Additional Shares to be purchased
by the Underwriters and the date on which such shares are to be purchased.
Such date may be the same as the Closing
11
<PAGE>
Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may
be purchased as provided in Section 4 hereof solely for the purpose of
covering over-allotments made in connection with the offering of the Firm
Shares. If any Additional Shares are to be purchased, each Underwriter
agrees, severally and not jointly, to purchase the number of Additional
Shares (subject to such adjustments to eliminate fractional shares as you
may determine) that bears the same proportion to the total number of
Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will
not, during the period ending 180 days after the date of the Prospectus,
(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, lend, or otherwise transfer or dispose of, directly
or indirectly, or file or cause to be filed a registration statement in
respect of, any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock or (ii) enter into any swap
or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of the Common Stock, whether any
such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise.
The foregoing sentence shall not apply to (A) the Shares to be sold
hereunder, (B) the issuance by the Company of shares of Common Stock upon
the exercise of an option or warrant or the conversion of a security
outstanding on the date hereof of which the Underwriters have been advised
in writing, (C) the issuance of shares of Common Stock to be used as
consideration in connection with future acquisitions, or (D) the grant of
options to purchase shares of Common Stock under the Company's 1997 Long-
Term Incentive Plan or 1997 Non-Employee Directors' Stock Plan provided
such options do not vest prior to the expiration of the 180-day period
referenced herein, and provided further, that in the case of subclauses (B)
and (C) of this paragraph, the recipient of any such shares agrees to
execute a lock-up agreement in the form of Exhibit B hereof.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement
have become effective as in your judgment is advisable. The Company is
further advised by you that the Shares are to be offered to the public
initially at $_____________ a share (the "Public Offering Price") and to
certain dealers selected by you at a price that represents a concession not
in excess of $______ a share under the Public Offering Price, and that any
Underwriter may allow, and such dealers may
12
<PAGE>
reallow, a concession, not in excess of $_____ a share, to any Underwriter
or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made
to the Company in Federal or other funds immediately available in New York
City against delivery of such Firm Shares for the respective accounts of
the several Underwriters at 10:00 a.m., New York City time, on
____________, 1997, or at such other time on the same or such other date,
not later than _________, 1997, as shall be designated in writing by you.
The time and date of such payment are hereinafter referred to as the
"Closing Date."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against
delivery of such Additional Shares for the respective accounts of the
several Underwriters at 10:00 a.m., New York City time, on the date
specified in the notice described in Section 2 or at such other time on the
same or on such other date, in any event not later than _______, 1997, as
shall be designated in writing by you. The time and date of such payment
are hereinafter referred to as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as
you shall request in writing not later than one full business day prior to
the Closing Date or the Option Closing Date, as the case may be. The
certificates evidencing the Firm Shares and Additional Shares shall be
delivered to you on the Closing Date or the Option Closing Date, as the
case may be, for the respective accounts of the several Underwriters, with
any transfer taxes payable in connection with the transfer of the Shares to
the Underwriters duly paid, against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Shares on the
Closing Date are subject to the condition that the Registration Statement
shall have become effective not later than 5:30 p.m. (New York City time)
on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date there shall not have occurred
any change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company or any of the Founding Companies, from that
set forth in the Prospectus (exclusive of any amendments or
supplements thereto
13
<PAGE>
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date
a certificate, dated the Closing Date and signed by Robert J. Poirier,
the chief executive officer of the Company and Raymond C. Anderson,
the chief financial officer of the Company, to the effect set forth in
Section 5(a) above and to the effect that the representations and
warranties of the Company contained in this Agreement are true and
correct as of the Closing Date and that the Company has complied with
all of the agreements and satisfied all of the conditions on its part
to be performed or satisfied hereunder on or before the Closing Date.
The officers signing and delivering such certificate may
rely upon the best of their knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date
an opinion of Morgan, Lewis & Bockius, LLP, outside counsel for the
Company, dated the Closing Date, confirming the consummation of the
Mergers, and to the effect that:
(i) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact
business in each jurisdiction in which it is required to do so by
reason of its ownership or leasing of real property located in
such jurisdiction or maintaining an office in such jurisdiction
and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires
it to be so, except to the extent that the failure to be in good
standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company (which shall be
deemed to include the Founding Companies, the "Subsidiaries") has
been duly incorporated, is validly existing as a corporation in
good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its
property and to conduct its business as described in the
Prospectus and is duly qualified to transact business in each
jurisdiction in
14
<PAGE>
which it is required to do so by reason of its ownership or
leasing of real property located in such jurisdiction or
maintaining an office in such jurisdiction and is in good
standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires it to
be so, except to the extent that the failure be in good standing
would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole;
(iii) the authorized capital stock of the Company
conforms in all material respects as to legal matters to the
description thereof contained in the Prospectus under the caption
"Description of Capital Stock;";
(iv) the shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable;
(v) the shares of capital stock issued and sold by the
Company pursuant to the Mergers have been duly authorized and are
validly issued, fully paid and non-assessable and are not subject
to any preemptive or similar rights arising by statutes or, to
such counsel's knowledge (after due inquiry), under any contract;
(vi) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly authorized
and issued, are fully paid and non-assessable and are owned
directly by the Company, free and clear of all liens,
encumbrances, equities or claims [other than the pledge of such
shares pursuant to the Company's credit facility];
(vii) the Shares have been duly authorized and,
when issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable,
and the issuance of such Shares will not be subject to any
preemptive or similar rights arising by statutes or, to such
counsel's knowledge (after due inquiry), under any contract;
(viii) this Agreement has been duly authorized,
executed and delivered by the Company;
(ix) each of the Merger Agreements has been duly
authorized, executed and delivered by each of the parties
thereto, and constitutes a legally valid and binding obligation
of each such party and is enforceable against each such party in
accordance with
15
<PAGE>
its terms, subject to (A) the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws
affecting the rights and remedies of creditors generally and (B) the
effect of general principles of equity, whether applied by a court of
law or equity; and, each Merger has been duly consummated and is
effective in accordance with all applicable law and with the terms of
the applicable Merger Agreement;
(x) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, each of the
Merger Agreements, the Registration Rights Agreement and this
Agreement will not contravene any provision of applicable law or the
certificate of incorporation or by-laws of the Company or, to the best
of such counsel's knowledge, result in a breach or default under any
agreement or other instrument binding upon the Company or any of its
Subsidiaries that is material to the Company and its Subsidiaries,
taken as a whole, or, to the best of such counsel's knowledge, violate
any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any Subsidiary, and no
consent, approval, authorization or order of, or qualification with,
any governmental body or agency of the United States of America or the
State of New York is required for the performance by the Company of
its obligations under this Agreement, the Merger Agreements or the
Registration Rights Agreement or the transactions contemplated
therein, except such as may be required by the securities or Blue Sky
laws of the various states in connection with the offer and sale of
the Shares;
(xi) the statements (A) in the Prospectus under the captions
"Prospectus Summary--The Mergers," "Formation of the Company,"
"Certain Relationships and Related Party Transactions" and
"Description of Capital Stock" and (B) in the Registration Statement
in Items 14 and 15, in each case solely insofar as such statements
constitute summaries of the legal matters, documents or proceedings
referred to therein, fairly summarize the information called for with
respect to such legal matters, documents and proceedings;
(xii) after due inquiry, such counsel does not know of any legal
or governmental proceedings pending or (based solely upon inquiry by
such counsel of officers of the Company) threatened to which the
Company or any of its Subsidiaries is a party or to which any of the
properties of the Company or any of its Subsidiaries is
16
<PAGE>
subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or of any
statutes, regulations or contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required;
(xiii) the Company is not and, after giving effect to the
offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of
1940, as amended;
(xiv) such counsel is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical data included therein as
to which such counsel need not express any opinion) comply as to form
in all material respects with the Securities Act and the applicable
rules and regulations of the Commission thereunder;
(xv) the offer and sale of the shares of capital stock in the
Mergers, and all other offers and sales of securities of the Company
on or prior to the Closing Date, are exempt from the registration
requirements of Section 5 of the Securities Act and are exempt from
registration under all applicable securities or Blue Sky laws of the
various states.
In addition, such counsel shall state that, during the course of
preparation of the Registration Statement and the Prospectus, such counsel
has participated in conferences with you, officers and representatives of
the Company and representatives of the independent certified public
accountants of the Company, at which conferences the contents of the
Registration Statement and the Prospectus and related matters were
discussed, and, although such counsel does not pass upon and does not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus, on
the basis of the foregoing, no facts have come to such counsel's attention
which cause such counsel to believe that the Registration Statement at the
effective date of the Registration Statement and at the Closing Date
contained or contains an untrue statement of a material fact or omitted or
omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading or that the Prospectus, as
amended or supplemented, if applicable, on the date of this Agreement and
on the Closing Date, included or includes any untrue statement of a
17
<PAGE>
material fact or omitted or omits to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that such counsel need
express no comment with respect to the financial statements, the notes
thereto, or any other financial or statistical information contained in the
Registration Statement or the Prospectus or incorporated by reference
therein.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States
and the States of Pennsylvania and Delaware, to the extent such counsel
deems proper and to the extent specified in such opinion, if at all, upon
an opinion or opinions (in form and substance reasonably satisfactory to
Underwriters' counsel) of other counsel reasonably acceptable to the
Underwriters' counsel, familiar with the applicable laws; (B) as to matters
of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and certificates or other written
statements of officials of jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company. The
opinion of such counsel for the Company shall state that the opinion of any
such other counsel upon which they relied is in form satisfactory to such
counsel and, in such counsel's opinion, the Underwriters and they are
justified in relying thereon.
The opinion of Morgan, Lewis & Bockius LLP shall be rendered to the
Underwriters at the request of the Company and shall so state therein.
(d) The Underwriters shall have received on the Closing Date an
opinion of Davis Polk & Wardwell, counsel for the Underwriters, dated the
Closing Date, in form and substance satisfactory to the Underwriters.
(e) The Underwriters shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date,
as the case may be, in form and substance satisfactory to the Underwriters,
from each of Price Waterhouse LLP, independent public accountants, and
Madsen, Sapp, Rodriguez & Co., P.A. containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
provided that the letter delivered on the Closing Date shall use a "cut-off
date" not earlier than the date hereof.
(f) The "lock-up" agreements, each substantially in the form of
Exhibit B hereto, between you and the shareholders, officers and directors
of the Company relating to sales and certain other dispositions of shares
of
18
<PAGE>
Common Stock or certain other securities, delivered to you on or before the
date hereof, shall be in full force and effect on the Closing Date.
(g) The Shares to be delivered on the Closing Date, or the Option
Closing Date, as the case may be, shall have been approved for listing on
the Nasdaq National Market, subject to official notice of issuance.
(h) Each of the conditions to the closing of the Mergers shall have
been satisfied by the applicable party and not waived by the Company
(except with the Underwriters' reasonable consent) as of the Closing Date,
and, none of the Merger Agreements shall have been amended as of the
Closing Date; the articles of merger (or similar documents required under
relevant state laws relating to each Merger shall have been filed with and
accepted for record by the relevant state entities in accordance with each
Merger Agreement, and each of the Mergers shall be effective in accordance
with all applicable law and the terms of the applicable Merger Agreement;
(i) [The closing of the credit facility shall have been consummated.]
The several obligations of the Underwriters to purchase Additional Shares
hereunder are subject to the delivery to you on the Option Closing Date of such
documents as you may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Additional Shares and other
matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, four signed copies of the
Registration Statement (including exhibits thereto) and for delivery to
each other Underwriter a conformed copy of the Registration Statement
(without exhibits thereto) and to furnish to you in New York City, without
charge, prior to 5:00 p.m. New York City time on the business day next
succeeding the date of this Agreement and during the period mentioned in
Section 6(c) below, as many copies of the Prospectus and any supplements
and amendments thereto or to the Registration Statement as you may
reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed
19
<PAGE>
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to
a purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the
Company) to which Shares may have been sold by you on behalf of the
Underwriters and to any other dealers upon request, either amendments
or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus, as amended or supplemented, will
comply with law.
(d) To cooperate with the Underwriters to qualify the Shares
for offer and sale under the securities or Blue Sky laws of such
jurisdictions as you shall reasonably request, provided that the
Company shall not be required to file a general consent to service of
process or be required to qualify as a foreign corporation in any
jurisdiction.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement
covering the twelve-month period beginning with the first fiscal
quarter of the Company occurring after the effective date of the
Registration Statement that satisfies the provisions of Section 11(a)
of the Securities Act and the rules and regulations of the Commission
thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing
20
<PAGE>
of the Registration Statement, any preliminary prospectus, the
Prospectus and amendments and supplements to any of the foregoing,
including all printing costs associated therewith, and the mailing and
delivering of copies thereof to the Underwriters and dealers, in the
quantities herein above specified, (ii) all costs and expenses related
to the transfer and delivery of the Shares to the Underwriters,
including any transfer or other taxes payable thereon, (iii) the cost
of printing or producing any Blue Sky or Legal Investment memorandum
in connection with the offer and sale of the Shares under state
securities laws and all expenses in connection with the qualification
of the Shares for offer and sale under state securities laws as
provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky
or Legal Investment memorandum, (iv) all filing fees and the
reasonable fees and disbursements of counsel to the Underwriters
incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities
Dealers, Inc., (v) all fees and expenses in connection with the
preparation and filing of the registration statement on Form 8-A
relating to the Common Stock and all costs and expenses incident to
listing the Shares on the Nasdaq National Market, (vi) the cost of
printing certificates representing the Shares, (vii) the costs and
charges of any transfer agent, registrar or depositary, (viii) the
costs and expenses of the Company relating to investor presentations
on any "road show" undertaken in connection with the marketing of the
offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road
show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company
and any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (ix) all other costs and expenses
incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section.
(g) In connection with the Directed Share Program, the
Company will ensure that the Directed Shares will be restricted to the
extent required by the National Association of Securities Dealers,
Inc. or the rules of such association from sale, transfer, assignment,
pledge or hypothecation for a period of three months following the
date of the effectiveness of the Registration Statement, and Morgan
Stanley & Co. Incorporated will notify the Company as to which
Participants will need to be so restricted. At the request of Morgan
Stanley & Co. Incorporated, the Company will direct the transfer agent
to place stop transfer restrictions upon such securities for such
period of time; the Company will pay all fees and
21
<PAGE>
disbursements of counsel incurred by the Underwriters in connection
with the Directed Share Program and stamp duties, similar taxes or
duties or other taxes, if any, incurred by the Underwriters in
connection with the Directed Share Program.
7. Indemnity and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein; provided, however, that
the foregoing indemnity agreement with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
Shares, or any person controlling such Underwriter, if a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to
have been delivered, at or prior to the written confirmation of the sale of
the Shares to such person, and if the Prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability.
(b) The Company agrees to indemnify and hold harmless Morgan Stanley & Co.
Incorporated and each person, if any, who controls Morgan Stanley & Co.
Incorporated within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act ("Morgan Stanley Entities"), from the
against any and all losses, claims, damages and liabilities (including,
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) (i)
caused by the failure of any Participant to pay for and accept delivery of
the shares sold pursuant to the Directed Share Program which, immediately
following the effectiveness of the Registration Statement, were subject to
a properly confirmed agreement to purchase or (ii) related to, arising out
of, or in connection with the Directed Share Program, provided that, the
Company shall not be responsible under this subparagraph (ii)
22
<PAGE>
for any losses, claim, damages or liabilities (or expenses relating
thereto) that are finally judicially determined to have resulted from the
bad faith or gross negligence of Morgan Stanley Entities.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Underwriter, but only with reference to
information relating to such Underwriter furnished to the Company in
writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.
(d) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 7(a) or 7(c), such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impeded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would in the reasonable opinion of counsel to
the indemnified party be inappropriate due to actual or potential differing
interests between them. It is understood that the indemnifying party shall
not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for all such indemnified parties
and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Morgan Stanley & Co.
Incorporated, in the case of parties indemnified pursuant to Section 7(a),
and by the Company, in the case of parties indemnified pursuant to Section
7(c). Notwithstanding anything contained herein to the contrary, if
indemnity may be sought pursuant to Section 7(b) hereof in respect of such
action or proceeding, then in addition to such separate firm for the
indemnified parties, the indemnifying party shall be liable for the
reasonable fees and expenses of not more than one separate firm (in
addition to any local counsel) for Morgan Stanley for the defense of any
losses, claims, damages and
23
<PAGE>
liabilities arising out of the Directed Share Program, and all persons, if
any, who control Morgan Stanley within the meaning of either Section 15 of
the Act or Section 20 of the Exchange Act. The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(e) To the extent the indemnification provided for in Section
7(a) or 7(c) is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then each indemnifying party under such paragraph, in lieu of indemnifying
such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause 7(e)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause 7(e)i above but also the
relative fault of the Company on the one hand and of the Underwriters on
the other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the
same respective proportions as the net proceeds from the offering of the
Shares (before deducting expenses) received by the Company and the total
underwriting discounts and commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Shares. The relative fault of
the Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Underwriters' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the respective
number of Shares they have purchased hereunder, and not joint.
24
<PAGE>
(f) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 7(e). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which
the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages
that such Underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter or by or on behalf of the Company, its officers
or directors or any person controlling the Company and (iii) acceptance of
and payment for any of the Shares.
8. Termination. This Agreement shall be subject to termination
by notice given by you to the Company, if (a) after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange, the American Stock
Exchange, the National Association of Securities Dealers, Inc., the Chicago
Board of Options Exchange, the Chicago Mercantile Exchange or the Chicago
Board of Trade, (ii) trading of any securities of the Company shall have
been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have
been declared by either Federal or New York State authorities or (iv) there
shall have occurred any outbreak or escalation of hostilities or any change
in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses 8(a)(i) through 8(a)(iv), such event, singly or together with any
other
25
<PAGE>
such event, makes it, in your judgment, impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus.
9. Effectiveness; Defaulting Underwriters. This Agreement shall
become effective upon the execution and delivery hereof by the parties
hereto.
If, on the Closing Date or the Option Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares that it has or they have agreed to purchase hereunder on
such date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters agreed but failed or refused to purchase is not
more than one-tenth of the aggregate number of the Shares to be purchased
on such date, the other Underwriters shall be obligated severally in the
proportions that the number of Firm Shares set forth opposite their
respective names in Schedule I bears to the aggregate number of Firm Shares
set forth opposite the names of all such non-defaulting Underwriters, or in
such other proportions as you may specify, to purchase the Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase on such date; provided that in no event shall the number of Shares
that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 9 by an amount in excess of one-ninth of
such number of Shares without the written consent of such Underwriter. If,
on the Closing Date, any Underwriter or Underwriters shall fail or refuse
to purchase Firm Shares and the aggregate number of Firm Shares with
respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares to be purchased, and arrangements
satisfactory to you and the Company for the purchase of such Firm Shares
are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter
or the Company. In any such case either you or the Company shall have the
right to postpone the Closing Date, but in no event for longer than seven
days, in order that the required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents or arrangements
may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Additional Shares
to be purchased, the non-defaulting Underwriters shall have the option to
(i) terminate their obligation hereunder to purchase Additional Shares or
(ii) purchase not less than the number of Additional Shares that such non-
defaulting Underwriters would have been obligated to purchase in the
absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default
of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Company to
comply with the
26
<PAGE>
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally,
for all out-of-pocket expenses (including the reasonable fees and
disbursements of their counsel) reasonably incurred by such Underwriters in
connection with this Agreement or the offering contemplated hereunder.
10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
11. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
12. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be
deemed a part of this Agreement.
Very truly yours,
U.S.A. FLORAL PRODUCTS, INC.
By: __________________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Robertson, Stephens & Company LLC
Smith Barney Inc.
Acting severally on behalf of themselves
and the several Underwriters named in
Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: _________________________________
Name:
Title:
27
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
<S> <C>
Underwriter Number of Firm Shares
To Be Purchased
- ----------------------------------------- ---------------------
Morgan Stanley & Co. Incorporated.......
Robertson, Stephens & Company LLC.......
Smith Barney Inc........................
[NAMES OF OTHER UNDERWRITERS].
---------------------
Total:............................... =====================
</TABLE>
28
<PAGE>
SCHEDULE II
1. BSF Acquisition Corp.
2. RHI Acquisition Corp.
3. AFS Acquisition Corp.
4. USA Floral Acquisition Co.
5. AGFS Acquisition Corp.
6. Floral Acquisition Corporation
7. UWF Acquisition Corp.
8. UWFA Acquisition Corp.
9. FT Acquisition Corp.
29
<PAGE>
EXHIBIT A
Agreements and Plans of Contribution
------------------------------------
1. Amended and Restated Agreement and Plan of Contribution by and
among U.S.A. Floral Products, Inc., BSF Acquisition Corp. and Bay State
Florist Supply, Inc. dated as of August 6, 1997.
2. Amended and Restated Agreement and Plan of Contribution by and
among U.S.A. Floral Products, Inc., RHI Acquisition Corp., The Roy Houff
Company and Roy Houff, dated as of August 5, 1997.
3. Amended and Restated Agreement and Plan of Contribution by and
among U.S.A. Floral Products, Inc., AFS Acquisition Corp., American Florist
Supply, Inc., and John T. Dickinson, dated as of August 5, 1997.
4. Amended and Restated Agreement and Plan of Contribution by and
among U.S.A. Floral Products, Inc., USA Floral Acquisition Co., Monterey
Bay Bouquet, Inc., Bay Area Bouquets, Inc., Jeffrey Brothers, Phillip Buran
and Douglas Anderson, dated as of August 5, 1997.
5. Amended and Restated Agreement and Plan of Contribution by and
among U.S.A. Floral Products, Inc., AGFS Acquisition Corp., Alpine Gem
Flower Shippers, Inc., John Q. Graham, Jr. and Diane Lizotte-Graham, dated
as of August 5, 1997.
6. Amended and Restated Agreement and Plan of Contribution by and
among U.S.A. Floral Products, Inc., Floral Acquisition Corporation, CFX,
Inc., Dwight Haight, James A. Hill and Michael Grover, dated as of August
5, 1997.
7. Agreement and Plan of Contribution by and among U.S.A. Floral
Products, Inc., UWF Acquisition Corp., United Wholesale Florists, Inc.,
United Wholesale Florists of America, Inc., and UWFA Acquisition Corp.,
dated as of August 5, 1997.
8. Agreement and Plan of Contribution by and among U.S.A. Floral
Products, Inc., FT Acquisition Corp., Flowtrad Corporation N.V. and Flower
Trading Corporation, dated as of August 5, 1997.
<PAGE>
EXHIBIT B
[FORM OF LOCK-UP LETTER]
_____________, 1997
Morgan Stanley & Co. Incorporated
Robertson, Stephens & Company LLC
Smith Barney Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated
("Morgan Stanley") proposes to enter into an Underwriting Agreement (the
"Underwriting Agreement") with U.S.A. Floral Products, Inc., a Delaware
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the several Underwriters, including Morgan Stanley (the
"Underwriters"), of ___ shares (the "Shares") of the common stock (par
value $.001 per share) of the Company (the "Common Stock").
To induce the Underwriters that may participate in the Public Offering
to continue their efforts in connection with the Public Offering, the
undersigned hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending 180 days after the date of the
final prospectus relating to the Public Offering (the "Prospectus"), (1)
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, lend, or otherwise transfer or dispose of, directly
or indirectly, any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or (2) enter into any
swap or other arrangement that transfers to another, in whole or in part,
any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (1) or (2) above is to be settled
by delivery of Common Stock or such other securities, in cash or otherwise.
In addition, the undersigned agrees that, without the prior written consent
of Morgan Stanley on behalf of the Underwriters, it will not, during the
period commencing on the date hereof and ending 180 days after the date of
the Prospectus, make any demand for or exercise any right with respect to,
the registration of any shares of Common
<PAGE>
Stock or any security convertible into or exercisable or exchangeable for
Common Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
___________________________________
(Name)
___________________________________
(Address)
2
<PAGE>
CROSS-REFERENCE TARGET LIST
===========================
NOTE: Due to the number of targets some target names may not appear in the
target pull-down list.
(This list is for the use of the wordprocessor only, is not a part of this
document and may be discarded.)
<TABLE>
<CAPTION>
ARTICLE/SECTION TARGET NAME
===========================
<S> <C>
1................................represents warrants
1(a).......................................regst.eff
1(b).................................regstmnt untrue
1(d)...................................valid company
1(e)................................valid subsidiary
1(h)........................................agt auth
1(i)..............................auth capital stock
1(i).............................. auth common stock
1(l).................................... auth shares
1(m).......................... nonviolation cert inc
1(o)..................................adverse change
1(p)............................ no pending proceed
1(q)..................................prosp complies
1(r)..............................co. not investment
1(s).................................... co. and sub
1(s)(i)...................................compliance
1(s)(ii)................................ all permits
1(s)(iii).......................compliance all terms
1(t)....................................no contracts
2............................. agt to sell and purch
3...................................public off terms
4...............................payment and delivery
5.............................obligations underwrtrs
5(a)............................ subsequent to execu
5(b)............................cert of exec officer
5(c)................................ counsel opinion
5(c)(i)............................... company valid
5(c)(ii)................................subsid valid
5(c)(iii).....................capital stock conforms
5(c)(iv)................................ stock valid
5(c)(vi)........................ issued shares valid
5(c)(vii)............................... shares auth
5(c)(viii)................................ agt execu
5(c)(x)....................... contra applicable law
5(c)(xi)..................................statements
5(c)(xi)(A)...............................prospectus
5(c)(xi)(B)........................... reg statement
5(c)(xii)............................... due inquiry
5(c)(xiii)........................ not investment co
5(c)(xiv)...............................such counsel
5(c)(xiv)(A)........................regstmnt opinion
5(c)(xiv)(B)............................believe that
5(c)(xiv)(C)............................no reason to
5(d).................................... dpw opinion
5(e)..............................underwrtr received
5(f).................................... lock-up agt
6.......................................co covenants
6(a).............................. furnish signed cc
6(b)................................ cc before amend
6(c)................................ after pub offer
6(d)............................ endeavor to qualify
6(e)..................................make available
6(f)....................................pay expenses
7................................. indem and contrib
7(a).............................. company indemnify
7(b)............................ underwrtr indemnify
7(d)................................ promptly notify
7(d)................................ each contribute
7(e)(i)...................................proportion
7(f).............................. just or equitable
7(g)................................remain operative
8....................................... termination
8(a)................................ after execution
8(a)(ii)..........................tradign securities
8(a)(iii).................................moratorium
8(a)(iv)....................................outbreak
9.................................default underwrtrs
ARTICLE/SECTION TARGET NAME
===========================
10......................................counterparts
11....................................applicable law
12..........................................headings
ARTICLE/SECTION TARGET NAME
===========================
ARTICLE/SECTION TARGET NAME
===========================
</TABLE>
<PAGE>
EXHIBIT 3.01
CERTIFICATE OF INCORPORATION
----------------------------
U.S. FLORAL PRODUCTS, INC.
--------------------------
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is: U.S. Floral Products, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle 19805. The name of its registered agent at such address is Corporation
Service Company.
THIRD: The purposes of the Corporation are:
A. To acquire, own, develop, manage, manufacture, market, promote,
distribute and, if and when necessary and/or appropriate, sell or otherwise
dispose of the Corporation's assets, or any portion thereof, for the production
of a profit, including, without limitation, in connection with the operation of
a wholesale and/or retail flower business; to do every act and thing Incidental
to or connected with the aforesaid; and
B. To engage in, promote, conduct and carry on any lawful acts or
activities for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of authorized shares of capital stock of the
Corporation is one hundred thousand (100,000) shares of a par value of One Cent
($0.01) per share.
No holder of shares of the Corporation, now or hereafter authorized, shall
have any preferential or preemptive right to subscribe for, purchase or receive
(i) any shares of stock of the Corporation, now or hereafter authorized, (ii)
any options or warrants for such shares, (iii) any rights to subscribe to or
purchase such shares, or (iv) any securities convertible into or exchangeable
for such shares which may at any time or from time to time be issued, sold or
offered for sale by the Corporation.
FIFTH: The name and mailing address of the sole incorporator are: Marian
T. Lobl, 1615 L Street, N.W., Suite 400, Washington, D.C. 20036.
<PAGE>
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The Private property or assets of the stockholders of the
Corporation shall not to any extent whatsoever be subject to the payment of the
debts of the Corporation.
EIGHTH: Elections of directors need not be by written ballot unless
otherwise provided in the Bylaws of the Corporation.
NINTH: The directors of the corporation shall be divided into three
classes, designated Class I, Class II and Class III. Each Class shall consist of
one-third of the directors or as close an approximation thereto as possible.
The initial term of office of the directors of Class I shall expire at the
annual meeting of stockholders of the Corporation to be held during calendar
year 1998. The Class 11 directors shall stand for election at the 1999 annual
meeting of stockholders and shall be elected for a two-year term. The Class III
directors shall stand for election at the 2000 annual meeting of stockholders
and shall be elected for a three-year term. At each annual meeting of the
Stockholders commencing with the annual meeting to be held during calendar year
1998, each of the successors to the directors of the class whose term shall have
expired at such annual meeting shall be elected for a term running until the
third annual meeting next succeeding his or her election and until his or her
successor shall have been duly elected and qualified. The number of directors
of each Class shall be fixed by, or in the manner provided in, the Bylaws of the
Corporation, other than the initial directors, who shall be chosen by the Sole
Incorporator. In the event that fewer than three (3) directors are elected, then
Class I will be eliminated and at least two (2) directors shall be elected, one
(1) of whom shall be designated a Class II director and one (1) of whom shall be
designated a Class III director. None of the directors need be a stockholder or
a resident of the State of Delaware.
TENTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of
-2-
<PAGE>
the director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No amendment to or repeal of this Article TENTH
shall apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment.
ELEVENTH: In furtherance and not in limitation of the rights, powers,
privileges and discretionary authority granted or conferred by the General
Corporation Law of the State of Delaware or other statutes or laws of the State
of Delaware, the Board of Directors is expressly authorized:
A. To make, amend, alter or repeal the Bylaws of the Corporation;
B. To authorize and cause to be executed mortgages and liens upon the real
and personal property of the Corporation;
C. To set apart out of any funds of the Corporation available for
dividends, a reserve or reserves for any proper purpose and to reduce any such
reserve in the manner in which it was created; and
D. To adopt from time to time Bylaw provisions with respect to
indemnification of directors, officers, employees, agents and other persons as
it shall deem expedient and in the best interests of the Corporation and to the
extent permitted by law.
TWELFTH: The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provisions herein contained, in the manner now or hereafter
prescribed by statute, and all rights,
-3-
<PAGE>
powers, privileges and discretionary authority granted or conferred herein upon
stockholders or directors are granted subject to this reservation.
The undersigned, being the sole incorporator herein before named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this Certificate of Incorporation, hereby
declaring, affirming, acknowledging and certifying, under penalties of perjury,
that this is the act and deed of the undersigned and that the facts stated
herein are true, and accordingly has hereunto set her hand this 2nd day of
April, 1997.
SOLE INCORPORATOR
/s/ Marian T. Lobl
------------------
Marian T. Lobl
-4-
<PAGE>
CERTIFICATE OF AMENDMENT
------------------------
(BEFORE RECEIPT OF PAYMENT FOR ANY STOCK)
OF
--
CERTIFICATE OF INCORPORATION
----------------------------
OF
--
U.S. FLORAL PRODUCTS, INC.
--------------------------
The undersigned, being the Sole Incorporator of U.S. Floral Products, Inc.
(hereinafter referred to as the "Corporation"), a corporation organized under
the General Corporation Law of the State of Delaware, hereby certifies that:
I. The certificate of Incorporation of the Corporation is hereby amended
to change the corporate name by deleting therefrom ARTICLE FIRST, in its
entirety, and substituting in lieu thereof the following:
FIRST: The name of the corporation (herein referred to as the
"Corporation") is: U.S.A. Floral Products, Inc.
II. The Certificate of Incorporation of the Corporation is also hereby
amended to increase the capitalization by deleting therefrom ARTICLE FOURTH, in
its entirety, and substituting in lieu thereof the following:
FOURTH: The total number of authorized shares of capital
stock of the Corporation is one hundred million (100,000,000) shares of a par
value of One Tenth of One Cent ($0.001) per share.
No holder of shares of the Corporation, now or hereafter
authorized, shall have any preferential or preemptive right to subscribe for,
purchase or receive (i) any shares of stock of the Corporation, now or
-5-
<PAGE>
hereafter authorized, (ii) any options or warrants for such shares, (iii) any
rights to subscribe to or purchase such shares, or (iv) any securities
convertible into or exchangeable for such shares, which may at any time or from
time to time be issued, sold or offered for sale by the Corporation.
III. No directors of the Corporation have as yet been elected or named in
the original Certificate of Incorporation of the Corporation.
IV. The Corporation has no outstanding shares of stock and has not
received any payment for any of its stock.
V. The above amendments have been duly adopted in accordance with the
provisions of Section 241 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, I have signed this Certificate of Amendment on this
22nd day of April, 1997.
SOLE INCORPORATOR
/s/ Marian T. Lobl
------------------
Marian T. Lobl
-6-
<PAGE>
EXHIBIT 3.02
U.S.A. FLORAL PRODUCTS. INC.
(a Delaware corporation)
---------------------------
AMENDED AND RESTATED BYLAWS
---------------------------
As adopted by the Board of Directors as of April 23, 1997.
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
U.S.A. FLORAL PRODUCTS, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the Corporation
shall be at Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle, State of Delaware 19805.
Section 2. ADDITIONAL OFFICES. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE. A meeting of stockholders for any purpose may
be held at such time and place, within or without the State of Delaware, as the
Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. Annual meetings of stockholders, commencing
with the year 1998, shall be held on April 15, if not a legal holiday, or, if a
legal holiday, then on the next secular day following, at 2 P.M., or at such
other date and time as shall, from time to time, be designated by the Board of
Directors and stated in the notice of the meeting. At such annual meeting, the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting, stating the place, date and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than 10 (unless a longer
period is required by law) nor more than 60 days prior to the meeting.
Section 4. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of the stockholders owning a majority of the shares of capital stock of
the Corporation issued and
<PAGE>
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 5. NOTICE OF SPECIAL MEETING. Written notice of a special
meeting, stating the place, date and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than 10 (unless a longer period is required by
law) nor more than 60 days prior to the meeting.
Section 6. LIST OF STOCKHOLDERS. The officer in charge of the stock
ledger of the Corporation or the transfer agent shall prepare and make, at least
10 days before every meeting of stock holders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the ad dress of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, at a
place within the city where the meeting is to be held, which place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present in person thereat.
Section 7. PRESIDING OFFICER; ORDER OF BUSINESS.
(a) Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or, if he is not present (or, if there is none), by the
President, or, if he is not present, by a Vice President, or, if he is not
present, by such person who may have been chosen by the Board of Directors, or,
if none of such persons is present, by a chairman to be chosen by the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting and who are present
in person or represented by proxy. The Secretary of the Corporation, or, if he
is not present, an Assistant Secretary, or, if he is not present, such person as
may be chosen by the Board of Directors, shall act as secretary of meetings of
stockholders, or, if none of such persons is present, the stockholders owning a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy shall choose any person present to act as secretary of the
meeting.
(b) The following order of business, unless otherwise ordered at the
meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the notice of the meeting and,
if the meeting is a special meeting, the call thereof.
3. Presentation of proxies.
2
<PAGE>
4. Announcement that a quorum is present.
5. Reading and approval of the minutes of the previous meeting.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting or a
meeting called for that purpose.
8. Consideration of the specific purpose or purposes for which the
meeting has been called (other than the election of directors), if
the meeting is a special meeting.
9. Transaction of such other business as may properly come before the
meeting.
10. Adjournment.
Section 8. QUORUM; ADJOURNMENTS. The holders of a majority of the shares
of capital stock of the Corporation issued and out standing and entitled to vote
thereat, present in person or represented by proxy, shall be necessary to, and
shall constitute a quorum for, the transaction of business at all meetings of
the stockholders, except as otherwise provided by statute or by the Certificate
of Incorporation. If, however, a quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken, until a quorum shall be present or represented. Even if a quorum shall
be present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time for good cause, without
notice of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken, until a date which is not more
than 30 days after the date of the original meeting. At any such adjourned
meeting, at which a quorum shall be present in person or represented by proxy,
any business may be transacted which might have been transacted at the meeting
as originally called. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote thereat.
Section 9. VOTING.
(a) At any meeting of stockholders, every stockholder having the right to
vote shall be entitled to vote in person or by proxy. Except as otherwise
provided by law or the Certificate of Incorporation, each stockholder of record
shall be entitled to one vote for each share of capital stock registered in his
name on the books of the Corporation.
3
<PAGE>
(b) All elections shall be determined by a plurality vote, and, except as
otherwise provided by law or the Certificate of Incorporation, all other matters
shall be determined by a vote of a majority of the shares present in person or
represented by proxy and voting on such other matters.
Section 10. ACTION BY CONSENT. Any action required or permitted by law
or the Certificate of Incorporation to be taken at any meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if a
written consent, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present or represented by proxy and
voted. Such written consent shall be filed with the minutes of meetings of
stockholders. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not so consented in writing thereto.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS; NUMBER; TENURE. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and perform all lawful acts and things which are not
by law, the Certificate of Incorporation or these Bylaws directed or required
to be exercised or performed by the stockholders. Within the limits specified in
this Section 1, the number of directors within each Class (as defined in the
Certificate of Incorporation) shall be determined by the Board of Directors,
except that if no such determination is made, the number of directors in each
Class shall, subject to Section 2(b) of this Article, be one (1), but the total
number of directors in all Classes taken together may never be less than the
number otherwise permitted by law. The directors shall be elected at the annual
meeting of the stockholders in accordance with the provisions of the Certificate
of Incorporation, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and shall
qualify or as provided in the Certificate of Incorporation. Directors need not
be stockholders.
Section 2. VACANCIES.
(a) If any vacancies occur in the Board of Directors, or if any new
directorships are created, they may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next annual
meeting of stockholders, or as provided in the Certificate of Incorporation and
until his successor is duly elected and shall qualify. If there are no
directors in office, any officer or stockholder may call a special meeting of
stockholders in accordance with the provisions of the Certificate of
Incorporation or these Bylaws, at which meeting such vacancies shall be filled.
4
<PAGE>
(b) In the event that fewer than three (3) directors are elected, then
Class I will be eliminated and at least two (2) directors shall be elected, one
(1) of whom shall be designated a Class II director and one (1) of whom shall be
designated a Class III director.
Section 3. REMOVAL; RESIGNATION.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director, directors or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
(b) Any director may resign at any time by giving written notice to the
Board of Directors, the Chairman of the Board, the President or the Secretary of
the Corporation. Unless otherwise specified in such written notice, a
resignation shall take effect upon delivery thereof to the Board of Directors or
the designated officer. It shall not be necessary for a resignation to be
accepted before it becomes effective.
Section 4. PLACE OF MEETINGS. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. ANNUAL MEETING. The annual meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. REGULAR MEETINGS. Additional regular meetings of the Board of
Directors may be held without notice, at such time and place as may from time to
time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President or by 2 or more
directors on at least 2 days' notice to each director, if such notice is
delivered personally or sent by telegram, or on at least 3 days' notice if sent
by mail. Special meetings shall be called by the Chairman of the Board,
President, Secretary or 2 or more directors in like manner and on like notice on
the written request of one-half or more of the number of directors then in
office. Any such notice need not state the purpose or purposes of such meeting
except as provided in Article XI.
Section 8. QUORUM; ADJOURNMENTS. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
5
<PAGE>
Section 9. COMPENSATION. Directors shall be entitled to such compensation
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
a written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of its proceedings.
Section 11. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. The Board of
Directors may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person by such director at such meeting.
ARTICLE IV
COMMITTEES
Section 1. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of not more than 5 directors, one of whom shall be designated as
Chairman of the Executive Committee. Each member of the Executive Committee
shall continue as a member thereof until the expiration of his term as a
director, or his earlier resignation, unless sooner removed as a member or as a
director.
Section 2. POWERS. Unless circumscribed by resolution of the Board
appointing the Executive Committee or except as otherwise provided by law, the
Executive Committee shall have and may exercise all of the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation including, without limitation, the power and authority to declare a
dividend in cash, property or its own shares and to authorize the issuance of
any shares of capital stock of the Corporation of any class now or hereafter
authorized, and any options or warrants for, and rights to subscribe to, such
shares, and any securities convertible into or exchangeable for such shares.
Section 3. PROCEDURE; MEETINGS. The Executive Committee shall fix its own
rules of procedure and shall meet at such times and at such place or places as
may be provided by such rules or as the members of the Executive Committee shall
provide. The Executive Committee shall keep regular minutes of its meetings and
deliver such minutes to the Board of Directors.
6
<PAGE>
The Chairman of the Executive Committee, or, in his absence, a member of
the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as secretary of the Executive
Committee.
Section 4. QUORUM. A majority of the Executive Committee shall constitute
a quorum for the transaction of business, and the affirmative vote of a majority
of the members of the Executive Committee shall be required for any action of
the Executive Committee; provided, however, that when an Executive Committee of
one member is authorized under the provisions of Section 1 of this Article, such
one member shall constitute a quorum.
Section 5. OTHER COMMITTEES. The Board of Directors, by resolutions
adopted by a majority of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such functions and duties as the
Board of Directors shall prescribe.
Section 6. VACANCIES; CHANGES; DISCHARGE. The Board of Directors shall
have the power at any time to fill vacancies in, to change the membership of,
and to discharge any committee.
Section 7. COMPENSATION. Members of any committee shall be entitled to
such compensation for their services as members of any such committee and to
such reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any
member may waive compensation for any meeting. Any committee member receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
Section 8. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
Section 9. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. The members of
any committee designated by the Board of Directors may participate in a meeting
of such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in such meeting can hear
each other and participation in such meeting shall constitute presence in person
at such meeting.
ARTICLE V
NOTICES
7
<PAGE>
Section 1. FORM; DELIVERY. Whenever, under the provisions of law, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid. Such notices
shall be deemed to be given at the time they are deposited in the United States
mail. Notice to a director may also be given personally or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. WAIVER. Whenever any notice is required to be given under the
provisions of law, the Certificate of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person, or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting, at the
commencement of the meeting, such lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
ARTICLE VI
OFFICERS
Section 1. DESIGNATIONS. The officers of the Corporation shall be chosen
by the Board of Directors. The Board of Directors may choose a Chairman of the
Board, a Chief Executive Officer, a President, a Chief Operating Officer, a
Chief Financial Officer, a Vice President or Vice Presidents, a Secretary, a
Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers and
other officers and agents as it shall deem necessary or appropriate. All
officers of the Corporation shall exercise such powers and perform such duties
as shall from time to time be determined by the Board of Directors. Any number
of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide.
Section 2. TERM OF OFFICE; REMOVAL. The Board of Directors at its annual
meeting after each annual meeting of stockholders shall choose a President, a
Secretary and a Treasurer. The Board of Directors may also choose a Chairman of
the Board, a Chief Executive Officer, a Chief Operating Officer, a Chief
Financial Officer, a Vice President or Vice Presidents, one or more Assistant
Secretaries and/or Assistant Treasurers, and such other officers and agents as
it shall deem necessary or appropriate. Each officer of the Corporation shall
hold office until his successor is chosen and shall qualify. Any officer elected
or appointed by the Board of Directors may be removed, with or without cause, at
any time by the affirmative vote of a majority of the directors then in office.
Such removal shall not prejudice the contract rights, if any, of the person so
removed. Any vacancy occurring in any office of the Corporation may be filled
for the unexpired portion of the term by the Board of Directors.
8
<PAGE>
Section 3. COMPENSATION. The salaries of all officers of the Corporation
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
Section 4. THE CHAIRMAN OF THE BOARD; NON-EXECUTIVE CHAIRMAN OF THE BOARD
(a) The Chairman of the Board, if any, shall be an officer of the
Corporation and, subject to the direction of the Board of Directors, shall
perform such executive, supervisory and management functions and duties as may
be assigned to him or her from time to time by the Board of Directors. The
Chairman of the Board shall, if present and if no Non-Executive Chairman of the
Board is present, preside at all meetings of stockholders and of the Board of
Directors.
(b) The Board of Directors may, but need not, designate a Non-Executive
Chairman of the Board, who may serve in addition to, or in lieu of, the Chairman
of the Board, as the Board of Directors may determine in its discretion. The
Non-Executive Chairman of the Board, if any, shall not be an officer of the
Corporation, and shall not by virtue of his or her title as such be entitled or
authorized to perform any executive, supervisory or management functions or
duties separate and apart from his or her role as a director of the Corporation.
The Non-Executive Chairman of the Board shall, if present, preside at all
meetings of stockholders and of the Board of Directors.
Section 5. THE PRESIDENT.
(a) The President shall be the chief executive officer of the Corporation
and, subject to the direction of the Board of Directors, shall have general
charge of the business, affairs and property of the Corporation and general
supervision over its other officers and agents. In general, he shall perform all
duties incident to the office of President and shall see that all orders and
resolutions of the Board of Directors are carried into effect. In addition to
and not in limitation of the foregoing, the President shall be empowered to
authorize any change of the registered office or registered agent (or both) of
the Corporation in the State of Delaware.
(b) Unless otherwise prescribed by the Board of Directors, the President
shall have full power and authority on behalf of the Corporation to attend, act
and vote at any meeting of security holders of other corporations in which the
Corporation may hold securities. At such meeting the President shall possess
and may exercise any and all rights and powers incident to the ownership of such
securities which the Corporation might have possessed and exercised if it had
been present. The Board of Directors may from time to time confer like powers
upon any other person or persons.
Section 6. THE VICE PRESIDENTS. The Vice President, if any (or in the
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election), shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President
9
<PAGE>
and perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 7. THE SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix the same to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 8. THE ASSISTANT SECRETARY. The Assistant Secretary, if any (or
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 9. THE TREASURER. The Treasurer shall have the custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board,
the President and the Board of Directors, at regular meetings of the Board, or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Corporation.
Section 10. THE ASSISTANT TREASURER. The Assistant Treasurer, if any (or
in the event there shall be more than one, the Assistant Treasurers in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
ARTICLE VII
INDEMNIFICATION OF
DIRECTORS AND OFFICERS
10
<PAGE>
Section 1. NATURE OF INDEMNITY. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a Director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (a) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (b) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. SUCCESSFUL DEFENSE. To the extent that a Director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
of this Article VII or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a Director or officer of the Corporation under Section 1 of
this Article VII (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the Director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the Corporation under Section 1 (unless ordered by a court) may be
made by the Corporation upon
11
<PAGE>
a determination that indemnification of the employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1. Any such determination shall be made (a) by the Board of Directors by
a majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested Directors so directs, by independent
legal counsel in a written opinion, or (c) by the stockholders.
Section 4. ADVANCE PAYMENT OF EXPENSES. Unless the Board of Directors
otherwise determines in a specific case, expenses incurred by a Director or
officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article VII.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the corporation is a party to such action, suit or proceeding.
Section 5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a contract right may not be
modified retroactively without the consent of such Director, officer, employee
or agent.
The indemnification provided by this Article VII shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys' fees, that my change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article VII.
Section 6. SEVERABILITY. If this Article VII or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or
12
<PAGE>
investigative, including an action by or in the right of the Corporation, to the
fullest extent permitted by any applicable portion of this Article VII that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
Section 7. SUBROGATION. In the event of payment of indemnification to a
person described in Section 1 of this Article VII, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the Corporation
may deem necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
Section 8. NO DUPLICATION OF PAYMENTS. The Corporation shall not be
liable under this Article VII to make any payment in connection with any claim
made against a person described in Section 1 of this Article VII to the extent
such person has otherwise received payment (under any insurance policy, bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.
ARTICLE VIII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 1. AFFILIATED TRANSACTIONS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(a) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the con tract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders.
13
<PAGE>
Section 2. DETERMINING QUORUM. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
ARTICLE IX
STOCK CERTIFICATES
Section 1. FORM; SIGNATURES.
(a) Every holder of stock in the Corporation shall be entitled to have a
certificate, signed by the Chairman of the Board or the President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation, exhibiting the number and class (and series, if any) of
shares owned by him. Such signatures may be facsimile. A certificate may be
manually signed by a transfer agent or registrar other than the Corporation or
its employee but may be a facsimile. In case any officer who has signed, or
whose facsimile signature was placed on, a certificate shall have ceased to be
such officer before such certificate is issued, it may nevertheless be issued by
the Corporation with the same effect as if he were such officer at the date of
its issue.
(b) All stock certificates representing shares of capital stock which are
subject to restrictions on transfer or to other restrictions may have imprinted
thereon such notation to such effect as may be determined by the Board of
Directors.
Section 2. REGISTRATION OF TRANSFER. Upon surrender to the Corporation or
any transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or its transfer agent to issue
a new certificate to the person entitled thereto, to cancel the old certificate
and to record the transaction upon its books.
Section 3. REGISTERED STOCKHOLDERS.
(a) Except as otherwise provided by law, the Corporation shall be entitled
to recognize the exclusive right of a person who is registered on its books as
the owner of shares of its capital stock to receive dividends or other
distributions, to vote as such owner, and to hold liable for calls and
assessments any person who is registered on its books as the owner of shares of
its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such shares on the part of any other
person.
(b) If a stockholder desires that notices and/or dividends shall be sent to
a name or address other than the name or address appearing on the stock ledger
maintained by the Corporation (or by the transfer agent or registrar, if any),
such stockholder shall have the duty to
14
<PAGE>
notify the Corporation (or the transfer agent or registrar, if any) in writing,
of such desire. Such written notice shall specify the alternate name or address
to be used.
Section 4. RECORD DATE. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution, or to make a determination of the
stockholders of record for any other proper purpose, the Board of Directors may,
in advance, fix a date as the record date for any such determination. Such date
shall not be more than 60 nor less than 10 days before the date of such meeting,
nor more than 60 days prior to the date of any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting taken pursuant to
Section 8 of Article II; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
Section 5. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors
may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
ARTICLE X
GENERAL PROVISIONS
Section 1. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. RESERVES. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole
discretion, may fix a sum which may be set aside or reserved over and above the
paid-in capital of the Corporation for working capital or as a reserve for any
proper purpose, and may, from time to time, increase, diminish or vary such fund
or funds.
15
<PAGE>
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 4. SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its incorporation and the words "Corporate Seal"
and "Delaware".
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power to make, alter and repeal these
Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of the
whole Board, provided that notice of the proposal to make, alter or repeal these
Bylaws, or to adopt new bylaws, must be included in the notice of the meeting of
the Board of Directors at which such action takes place.
16
<PAGE>
EXHIBIT 5.01
One Oxford Centre MORGAN, LEWIS
Thirty-Second Floor & BOCKIUS LLP
Pittsburgh, PA 15219-6401 COUNSELORS AT LAW
412-560-3300
Fax: 412-560-3399
September 16, 1997
U.S.A. Floral Products, Inc.
3500 Whitehaven Parkway
Washington, D.C. 20007
Re: Registration Statement on Form S-1
File No. 333-33131
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to U.S.A Floral Products, Inc., a Delaware corporation
(the "Company"), in connection with the Registration Statement on Form S-1, File
No. 333-33131 (the "Registration Statement"), filed by the Company with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, relating to the public offering of an aggregate of 5,290,000 shares
(the "Company Shares") of the Company's Common Stock, par value $.001 per share
("Common Stock"), to be sold by the Company to the underwriters for whom Morgan
Stanley & Co. Incorporated, Robertson, Stephens & Company LLC and Smith Barney
Inc. are acting as representatives (the "Underwriters"), of which up to
690,000 shares are shares of Common Stock which the Underwriters will have
an option to purchase from the Company solely for the purpose of covering over-
allotments.
We are familiar with the Registration Statement. We have reviewed the Company's
Certificate of Incorporation and Bylaws, each as amended to date. We have also
examined such other public and corporate documents, certificates, instruments
and corporate records, and such questions of law, as we have deemed necessary
for purposes of expressing an opinion on the matters hereinafter set forth. In
all examinations of documents, instruments and other papers, we have assumed the
genuineness of all signatures on original and certified documents and the
conformity to original and certified documents of all copies submitted to us as
conformed, photostatic or other copies.
<PAGE>
U.S.A. Floral Products, Inc.
September 16, 1997
Page 2
On the basis of the foregoing, we are of the opinion that the Company Shares,
when issued and sold in accordance with the plan of distribution set forth in
the Registration Statement, will be validly issued, fully paid and non-
assessable.
We consent to the filing of this opinion as Exhibit 5.01 to the Registration
Statement and to the use of our name in the Prospectus forming a part thereof
under the caption "Legal Matters."
Yours truly,
/s/ MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
EXHIBIT 10.01
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
RHI ACQUISITION CORP.
(a Delaware corporation),
THE ROY HOUFF COMPANY
(an Illinois corporation),
and
ROY HOUFF
Dated as of August 5, 1997
<PAGE>
Table of Contents
-----------------
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....................................................3
1.5 Effect of Merger.....................................................3
2 CONVERSION OF STOCK AND CALCULATION OF NET REAL PROPERTY
EQUITY.....................................................................4
2.1 Manner of Conversion.................................................4
2.2 Net Real Property Equity.............................................4
3 DELIVERY OF COMPANY STOCK..................................................5
4 POST CLOSING ADJUSTMENT; ESCROW............................................5
5 CLOSING; MERGER EFFECTIVE DATE.............................................6
6 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER..........................7
6.1 Due Organization.....................................................7
6.2 Authorization........................................................7
6.3 Capital Stock of the Company.........................................7
6.4 Transactions in Capital Stock........................................7
6.5 No Bonus Shares......................................................7
6.6 Subsidiaries.........................................................8
6.7 Predecessor Status; etc..............................................8
6.8 Spin-off by the COMPANY..............................................8
6.9 Financial Statements.................................................8
6.10 Liabilities and Obligations..........................................8
6.11 Accounts and Notes Receivable........................................9
6.12 Permits and Intangibles..............................................9
6.13 Real and Personal Property...........................................9
6.14 Material Contracts and Commitments..................................10
6.15 Title to and Condition of Real Property.............................11
6.16 Insurance...........................................................11
6.17 Officers, Directors and Employees Compensation......................12
6.18 Employee Plans......................................................12
6.19 Compliance with ERISA...............................................12
6.20 Conformity with Law.................................................14
i
<PAGE>
6.21 Taxes...............................................................14
6.22 Completeness; No Violations.........................................15
6.23 Government Contracts................................................15
6.24 Inventory...........................................................15
6.25 Absence of Changes..................................................15
6.26 Deposit Accounts; Powers of Attorney................................17
6.27 Environmental Matters...............................................17
6.28 Underground Storage Tanks...........................................18
6.29 Validity of Obligations.............................................18
6.30 Relations with Governments..........................................18
6.31 Disclosure..........................................................19
6.32 Authority; Ownership................................................19
6.33 Registration Statement..............................................19
7 REPRESENTATIONS OF USFLORAL AND NEWCO.....................................19
7.1 Due Organization.....................................................19
7.2 Authorization........................................................20
7.3 No Conflicts.........................................................20
7.4 Validity of Obligations..............................................20
7.5 Other Agreements.....................................................20
8 COVENANTS OF THE STOCKHOLDER AND COMPANY PRIOR TO CLOSING.................21
8.1 Access and Cooperation...............................................21
8.2 Conduct of Business..................................................21
8.3 Prohibited Activities................................................22
8.4 Supplier Approval....................................................23
8.5 Notice to Bargaining Agents..........................................23
8.6 No Shop..............................................................23
8.7 Notification of Certain Matters......................................23
8.8 Amendment of Schedules...............................................24
8.9 Environmental Matters................................................24
9 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER AND
THE COMPANY...............................................................24
9.1 Representations and Warranties; Performance of Obligations...........24
9.2 No Litigation........................................................25
9.3 Employment Agreements................................................25
9.4 Opinion of Counsel...................................................25
9.5 Registration Statement...............................................25
10 CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND
NEWCO 25
10.1 Representations and Warranties; Performance of Obligations..........26
ii
<PAGE>
10.2 No Litigation......................................................26
10.3 Examination of Financial Statements................................26
10.4 No Material Adverse Change.........................................26
10.5 Regulatory Review..................................................26
10.6 STOCKHOLDER's Release..............................................27
10.7 Employment Agreements..............................................27
10.8 Opinion of Counsel.................................................27
10.9 Consents and Approvals.............................................28
10.10 Additional Liabilities and Obligations.............................28
10.11 Additional Contracts...............................................28
10.12 Good Standing Certificates.........................................28
10.13 Registration Statement.............................................29
10.14 Repayment of Indebtedness..........................................29
11 COVENANTS OF USFLORAL.....................................................29
11.1 Mortgage Debt......................................................29
11.2 USFLORAL Stock Options.............................................29
11.3 Notification of Certain Matters....................................29
12 INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES................................................................29
12.1 General Indemnification by the STOCKHOLDER.........................29
12.2 Specific Indemnification by the STOCKHOLDER........................30
12.3 Indemnification by USFLORAL and NEWCO..............................30
12.4 Third Person Claims................................................31
12.5 Limitations on Indemnification.....................................32
12.6 Survival of Representations and Warranties.........................32
12.7 Sole Remedies......................................................33
13 TERMINATION OF AGREEMENT..................................................33
13.1 Termination by the Parties.........................................33
13.2 Termination by USFLORAL............................................33
13.3 Liquidated Damages to USFLORAL.....................................33
13.4 Liquidated Damages to the STOCKHOLDER..............................33
14 NONCOMPETITION............................................................34
14.1 Prohibited Activities..............................................34
14.2 Damages............................................................35
14.3 Reasonable Restraint...............................................35
14.4 Severability; Reformation..........................................35
14.5 Independent Covenant...............................................35
14.6 Materiality........................................................35
iii
<PAGE>
15 NONDISCLOSURE OF CONFIDENTIAL INFORMATION.................................36
15.1 The STOCKHOLDER....................................................36
15.2 USFLORAL...........................................................36
15.3 Damages............................................................36
16 REAL ESTATE MATTERS.......................................................36
16.1 Wheeling Property..................................................36
16.2 Clybourn Property..................................................37
17 GENERAL 37
17.1 Cooperation........................................................37
17.2 Successors and Assigns.............................................38
17.3 Entire Agreement...................................................38
17.4 Counterparts.......................................................38
17.5 Brokers and Agents.................................................38
17.6 Expenses...........................................................38
17.7 Notices............................................................38
17.8 Governing Law......................................................39
17.9 Exercise of Rights and Remedies....................................39
17.10 Time...............................................................39
17.11 Reformation and Severability.......................................39
17.12 Remedies Cumulative................................................39
17.13 Captions...........................................................39
17.14 Standstill Agreement...............................................40
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the
"Agreement") is made as of the 5th day of August, 1997, between USA FLORAL
PRODUCTS, INC., a Delaware corporation ("USFLORAL"); RHI ACQUISITION CORP., a
Delaware corporation formed for the sole purpose of effecting this transaction
(hereinafter referred to as "NEWCO"), THE ROY HOUFF COMPANY, an Illinois
corporation to be acquired pursuant to this Agreement (hereinafter referred to
as the "COMPANY") and ROY HOUFF (hereinafter referred to as the "STOCKHOLDER"),
who is the sole stockholder of the COMPANY.
WHEREAS, USFLORAL was incorporated on April 2, 1997 (the "Formation")
under the laws of the State of Delaware for the purpose of acquiring floral
products businesses in different locations; and
WHEREAS, USFLORAL intends to undertake an initial public offering of
its common stock (the "IPO") on or about September 15, 1997 and in
connection therewith intends to file a Registration Statement on Form S-1
with the Securities and Exchange Commission within 15 days of execution of
this Agreement; and
WHEREAS, NEWCO has been duly organized and is existing under the laws
of the State of Delaware, having been incorporated on July 1, 1997 solely
for the purpose of completing this transaction, and is a wholly-owned
subsidiary of USFLORAL; and
WHEREAS, the COMPANY is a corporation organized and existing under the
laws of the State of Illinois; and
WHEREAS, the respective Boards of Directors of USFLORAL, NEWCO and the
COMPANY (all of which companies are hereinafter collectively referred to as
the "Constituent Corporations") deem it advisable and in the best interests
of the Constituent Corporations and their respective stockholders that
NEWCO merge with and into the COMPANY pursuant to this Agreement and the
applicable provisions of the laws of the respective states of incorporation
of NEWCO and the COMPANY, such transaction being herein called the
"Merger;" and
WHEREAS, the Formation, the IPO and the Merger are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351
of the Internal Revenue Code of 1986, as amended;
WHEREAS, the parties hereto entered into that certain Agreement and
Plan of Contribution on July 2, 1997 (the "Original Agreement") and now
wish to amend and restate the Original Agreement in its entirety as of
August 5, 1997 in order to achieve conformity with similar agreements
USFLORAL has entered into with other floral products businesses;
<PAGE>
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 conforming to the provisions of this
Agreement (the "Articles of Merger") to be signed, verified and delivered to the
Secretaries of State of the respective states of incorporation of NEWCO and the
COMPANY on 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, NEWCO shall be
merged with and into the COMPANY in accordance with the Articles of Merger and
the separate existence of NEWCO shall cease. The COMPANY, as the party
surviving the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
1.3 Articles of Incorporation, Bylaws and Board of Directors of
-----------------------------------------------------------
Surviving Corporation. At the Merger Effective Date:
- ---------------------
(i) the Articles of Incorporation of the COMPANY shall become the
Articles of Incorporation of the 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 the Surviving Corporation until changed as provided by law;
(ii) the Bylaws of the COMPANY shall become the Bylaws of the
Surviving Corporation; and subsequent to the Merger Effective Date, such Bylaws
shall be the Bylaws of the Surviving Corporation until they shall thereafter be
duly amended;
(iii) the name of the persons who shall serve as the sole member of
the Board of Directors of the Surviving Corporation shall be Robert Poirier; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the state of incorporation and of the Articles of
Incorporation and Bylaws of the Surviving Corporation.
(iv) the officers of the Company immediately prior to the Merger
Effective Date shall continue as the officers of the Surviving Corporation in
the same capacity or capacities, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and Bylaws of the Surviving
Corporation, until his successor is elected and qualified.
2
<PAGE>
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 class of outstanding capital stock of the
COMPANY and NEWCO as of the date of this Agreement are as follows:
(i) the authorized capital stock of the COMPANY consists of 10,000
shares of common stock, no par value (the "COMPANY Stock"), of which 50 shares
are issued and outstanding and 1,000 shares of preferred stock, $250 par value,
of which no shares are issued and outstanding; and
(ii) the authorized capital stock of NEWCO consists of 1,000 shares of
common stock, $.01 par value (the "NEWCO Stock"), of which 1,000 shares are
issued and outstanding and owned of record by USFLORAL.
1.5 Effect of Merger. Except as herein specifically set forth, the
----------------
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of the COMPANY shall continue unaffected and unimpaired by the
Merger, and the Surviving Corporation shall be fully vested therewith. At the
Merger Effective Date, the separate existence of NEWCO shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
each of the COMPANY and NEWCO shall be taken and deemed to be transferred to,
and vested in, the Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of each of the COMPANY and NEWCO; and the title to any
real estate, or interest therein, whether by deed or otherwise, under the laws
of the state of incorporation vested in the COMPANY and NEWCO, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall thenceforth be responsible and liable for all the liabilities and
obligations of each of the COMPANY and NEWCO and any claim existing, or action
or proceeding pending, by or against the COMPANY or NEWCO may be prosecuted as
if the Merger had not taken place, or the Surviving Corporation may be
substituted in its place. Neither the rights of creditors nor any liens upon
the property of the COMPANY or NEWCO shall be impaired by the Merger, and all
debts, liabilities and duties of each of the COMPANY and NEWCO shall attach to
the Surviving Corporation, and may be enforced against it to the same extent as
if said debts, liabilities and duties had been incurred or contracted by it.
3
<PAGE>
2 CONVERSION OF STOCK AND CALCULATION OF NET REAL PROPERTY EQUITY
2.1 Manner of Conversion. The manner of converting the shares of
--------------------
the stock of the Constituent Corporations issued and outstanding immediately
prior to the Merger Effective Date 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 Merger
and without any action on the part of the holder thereof, automatically be
converted into the right to receive cash from USFLORAL in the amount of
$9,000,000 plus the Net Real Property Equity (as determined in accordance with
Section 2.2 below and collectively with the $9,000,000, the "Merger
Consideration"), to be distributed to the STOCKHOLDER at the time specified in
Section 5 hereof, subject to the provisions of Sections 4.2 and 16 hereof; and
(ii) each share of NEWCO Stock issued and outstanding immediately
prior to the Merger Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, automatically be converted into
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.
2.2 Net Real Property Equity. The parties hereto acknowledge and
------------------------
agree that the Net Real Property Equity of all of the STOCKHOLDER Real Property
to be covered to the COMPANY shall total Three Million Eight Hundred Thousand
Dollars ($3,800,000), less the amounts necessary to pay off, as of the Merger
Effective Date, all outstanding mortgages secured by the STOCKHOLDER Real
Property conveyed to the COMPANY; provided, however, that the COMPANY reserves
-------- -------
the right to decline conveyance of the Clybourn Avenue property the completion
of the related Phase II study. If the Clybourn Avenue property is not conveyed
to the COMPANY, the Net Real Property Equity shall be adjusted accordingly. The
breakdown of the Net Real Property Equity among the various properties is as
follows:
Oak Park Avenue, Chicago $897,300
Clybourn Avenue, Chicago $756,450
Wheeling, Illinois $584,300
Normal, Illinois $350,575
Phoenix, Arizona $601,000
Norfolk, Virginia $610,375
4
<PAGE>
3 DELIVERY OF COMPANY STOCK
3.1 At the Merger Effective Date, the STOCKHOLDER, as the holder of
all outstanding certificates representing shares of COMPANY Stock, shall, upon
surrender of such certificates, be entitled to receive the Merger Consideration.
3.2 The STOCKHOLDER shall deliver at the Closing (as defined in
Section 5 hereof) the certificates representing the shares of COMPANY Stock,
duly endorsed in blank by the STOCKHOLDER 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 STOCKHOLDER's expense, affixed and
canceled. The STOCKHOLDER agrees to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
such COMPANY Stock or with respect to the stock powers accompanying any COMPANY
Stock.
4 POST CLOSING ADJUSTMENT; ESCROW
4.1 As soon as practicable, but in any event within 30 days after
the Closing, USFLORAL shall engage Price Waterhouse, LLP to prepare, in
accordance with GAAP, a balance sheet of the COMPANY (the "Closing Date Balance
Sheet") as of the end of business on the day prior to the Closing Date and a
balance sheet as of the end of business on December 31, 1996 (the "December 31
Balance Sheet"). If the aggregate shareholders' equity as shown on the Closing
Date Balance Sheet is less than (a) the aggregate shareholders' equity as shown
on the December 31 Balance Sheet minus (b) $100,000 (such difference, the "Net
Worth Deficiency"), after delivery of the Closing Date Balance Sheet to
USFLORAL, the STOCKHOLDER shall pay the Net Worth Deficiency to USFLORAL as
provided below. Notwithstanding anything in this Section 4 to the contrary, if
there is any Net Worth Deficiency and the STOCKHOLDER disputes any item
contained on the Closing Date Balance Sheet, the STOCKHOLDER shall notify
USFLORAL in writing of each disputed item (collectively, the "Disputed
Amounts"), and specify the amount thereof in dispute within thirty business days
after the delivery of the Closing Date Balance Sheet to the STOCKHOLDER. If
USFLORAL and the STOCKHOLDER cannot resolve any such dispute which would
eliminate or reduce the amount of the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to USFLORAL and the STOCKHOLDER (the "Independent
Accounting Firm"). The determination of the Independent Accounting Firm shall
be made as promptly as practical and shall be final and binding on the parties,
absent manifest error which error may only be corrected by such Independent
Accounting Firm. Any expenses relating to the engagement of the Independent
Accounting Firm shall be allocated between USFLORAL and the STOCKHOLDER so that
the STOCKHOLDER's aggregate share of such costs shall bear the same proportion
to the total costs that the Disputed Amounts unsuccessfully contested by the
STOCKHOLDER (as finally determined by the Independent Accounting Firm) bear to
the total of the Disputed Amounts so submitted to the Independent Accounting
Firm. In the absence of notification by the STOCKHOLDER to USFLORAL of Disputed
Amounts within
5
<PAGE>
the thirty business day period provided for above, any Net Worth Deficiency
shall be paid by the STOCKHOLDER to USFLORAL by wire transfer of immediately
available funds within ten business days after the expiration of such thirty
business day period. If the STOCKHOLDER gives USFLORAL timely notice of
Disputed Amounts, any Net Worth Deficiency shall be paid by the STOCKHOLDER to
USFLORAL by wire transfer of immediately available funds within ten business
days after resolution of the Disputed Amounts pursuant to the procedures above
set forth.
4.2 (a) Any indemnification obligations of the STOCKHOLDER pursuant
to Sections 12.1 and 12.2 hereof and amounts payable pursuant to Section 4.1
hereof, shall be satisfied initially by application of the amounts escrowed for
such purpose under the following paragraph.
(b) At the Closing, $500,000 shall be withheld from the Merger
Consideration and shall be deposited with a financial institution mutually
agreed to by the parties (the "Escrow Agent") for a period of twelve months, to
be administered in accordance with the terms and conditions of an Escrow
Agreement in substantially the form of Annex I hereto.
5 CLOSING; MERGER EFFECTIVE DATE
Within two business days following the date on which the price of the
shares of USFLORAL Stock in the initial public offering of USFLORAL Stock
described in Section 9.5 shall have been determined, the parties shall take all
actions necessary to effect the Merger (excluding the filing with the
appropriate state authorities of the Articles of Merger which shall become
effective on the Merger Effective Date) and to effect the conversion and
delivery of shares and funds referred to in Sections 2 and 3 hereof (hereinafter
referred to as the "Closing"); provided, that such actions shall not include the
actual completion of the Merger or the conversion and delivery of the shares or
payment of the Merger Consideration, which actions shall only be taken on the
Merger Effective Date as herein provided. The Closing shall take place at the
offices of Fitzsimmons, Roberts & Paine, Suite 3850, 20 North Wacker Drive,
Chicago, Illinois, or at such other location as the parties may agree. The date
on which the Closing shall occur shall be referred to as the "Closing Date."
Concurrently with the closing in respect of the initial public offering of
USFLORAL Stock, the Merger shall become effective and all transactions
contemplated by this Agreement, including the conversion and delivery of shares
and the delivery of the Merger Consideration (subject to the provisions of
Sections 4.2 and 16 hereof) shall occur and be deemed to be completed. The date
on which the Merger is effected shall be referred to as the "Merger Effective
Date." During the period from the Closing Date to the Merger Effective Date,
this Agreement may only be terminated by the parties if the underwriting
agreement in respect of the initial public offering of USFLORAL Stock is
terminated pursuant to the terms of such agreement. This Agreement shall in any
event terminate if the Merger Effective Date has not occurred within 10 business
days of the Closing Date.
6
<PAGE>
6 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
As of the date hereof and as of each of the Closing Date and the
Merger Effective Date, the STOCKHOLDER represents and warrants to USFLORAL and
NEWCO as follows.
6.1 Due Organization. The COMPANY is a corporation duly organized,
----------------
validly existing and in good standing under the laws of its state of
incorporation, and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities
necessary 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) of the COMPANY taken as a whole (a "Material Adverse Effect"). 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 the COMPANY, as heretofore made
available to USFLORAL, are correct and complete.
6.2 Authorization. The STOCKHOLDER and the COMPANY 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.
6.3 Capital Stock of the Company. The authorized capital stock of the
----------------------------
COMPANY consists solely of 10,000 shares of common stock, of which 50 shares are
issued and outstanding, and 1,000 shares of preferred stock, no shares of which
are issued and outstanding. All of the issued and outstanding shares of the
capital stock of the COMPANY are owned by the STOCKHOLDER, and are free and
clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of COMPANY Stock have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the STOCKHOLDER, and further, such shares were offered, issued, sold and
delivered by the COMPANY in compliance with all applicable state and federal
laws concerning the issuance of securities. Further, none of such shares were
issued in violation of the preemptive rights of any past or present stockholder.
6.4 Transactions in Capital Stock. The COMPANY has not acquired any
-----------------------------
treasury stock since January 1, 1995. No option, warrant, call, conversion
right or commitment of any kind exists which obligates the COMPANY to issue any
of its authorized but unissued capital stock. In addition, the COMPANY has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof.
6.5 No Bonus Shares. None of the shares of the COMPANY Stock was issued
---------------
pursuant to awards, grants or bonuses.
7
<PAGE>
6.6 Subsidiaries. The COMPANY has no subsidiaries, and does not own, of
------------
record or beneficially, or control, directly or indirectly, any capital stock,
securities convertible into capital stock or any other equity interest in any
corporation, association or business entity. The COMPANY is not, 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 the COMPANY, including the names of
any entities from whom the COMPANY previously acquired significant assets. The
COMPANY has never been a subsidiary or division of another corporation nor been
a part of an acquisition which was later rescinded.
6.8 Spin-off by the COMPANY. Since January 1, 1996, there has not been
-----------------------
any sale or spin-off of significant assets of the COMPANY other than in the
ordinary course of business.
6.9 Financial Statements. Copies of the following financial statements
--------------------
(the "Financial Statements") of the COMPANY (audited with the exception that the
December 31, 1996 Financial Statements are tentative and subject to review) have
previously been delivered to USFLORAL: the COMPANY's Balance Sheet as of each
of December 31, 1996, 1995 and 1994 and Statements of Income, Cash Flows and
Retained Earnings for each of the years in the three year period ended December
31, 1996. Attached hereto as Schedule 6.9 are copies of the COMPANY's unaudited
Balance Sheets as of each of April 30, 1997 and 1996 (April 30, 1997 being
hereinafter referred to as the "Balance Sheet Date") and Statements of Income,
Cash Flows and Retained Earnings for the four (4) month periods then ended.
Such Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods indicated (except as noted). Except as set forth on Schedule 6.9,
such Balance Sheets are correct and complete, present fairly the assets,
liabilities and financial position of the COMPANY as of the dates indicated
thereon, and such Statements of Income, Cash Flows and Retained Earnings are
correct and complete and present fairly the results of its operations for the
periods indicated thereon.
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
---------------------------
accurate list of all material liabilities of the COMPANY, which are reflected in
the April 30, 1997 Balance Sheet and any significant liabilities incurred
thereafter (through the date of certification of Schedule 6.10) in the ordinary
course of business, or material liabilities which are not reflected in the April
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 STOCKHOLDER has provided USFLORAL with the following
information:
(i) a summary description of the liability together with the
following:
8
<PAGE>
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(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; and
(iv) a reasonable best estimate by the STOCKHOLDER of the maximum
amount, if any, which is likely to become payable with respect to each such
liability. If no estimate is provided, the STOCKHOLDER's best estimate shall for
purposes of this Agreement be deemed to be zero.
6.11 Accounts and Notes Receivable. Attached hereto as Schedule 6.11 is an
-----------------------------
accurate list as of the Balance Sheet Date of the accounts and notes receivable
of the COMPANY, including receivables from and advances to employees and the
STOCKHOLDER, including any such amounts which are not reflected in the April 30,
1997 Balance Sheet. The STOCKHOLDER has provided USFLORAL with an aging of all
accounts and notes receivable as of June 30, 1997 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, as of the Balance Sheet Date, of all
permits, titles, licenses, franchises, certificates, trademarks, trade names,
service marks, patents, patent applications and copyrights owned or held by the
COMPANY, all of which are now valid, in good standing and in full force and
effect. Except as set forth on Schedule 6.12, such permits, licenses, orders,
approvals, franchises, etc. are adequate for the operation of the COMPANY's
business as presently constituted. Except as set forth on Schedule 6.12, the
STOCKHOLDER has 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. The personal property owned and leased by
--------------------------
the COMPANY and the real property leased by the COMPANY include all assets and
properties
9
<PAGE>
necessary for the COMPANY to conduct its business as currently conducted.
Attached hereto as Schedule 6.13 is an accurate list, including substantially
complete descriptions as of the Balance Sheet Date, of all leases for real and
personal property to which the COMPANY is a party and a description of the real
and personal property leased by the COMPANY thereunder, and including an
indication as to which assets are now or were formerly owned by the STOCKHOLDER
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
COMPANY. The STOCKHOLDER has heretofore delivered to USFLORAL true and correct
copies of all leases for equipment and properties on which are situated
buildings, warehouses and other structures used in the operation of the business
of the COMPANY. Except as set forth on Schedule 6.13, substantially all of the
trucks, machinery and equipment of the COMPANY are in good working order and
condition, ordinary wear and tear excepted, and the COMPANY has good and
marketable title thereto and to all other personal property owned by it, free
and clear of liens, encumbrances and claims of any kind. All leases described
on Schedule 6.13 have been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the COMPANY and, to the
knowledge of the STOCKHOLDER, no other party to any such lease is in default
thereunder and such leases constitute the legal, valid and binding obligations
of such other parties. All fixed assets used by the COMPANY in the operation of
its business are either owned by the COMPANY or leased under an agreement set
forth on Schedule 6.13. The STOCKHOLDER has heretofore delivered to USFLORAL
copies of all title reports and title insurance policies received or held by him
or the COMPANY. The STOCKHOLDER has indicated on Schedule 6.13 a summary
description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real property or
existing business, to which management of the COMPANY has devoted any
significant effort or expenditure in the two year period prior to the date of
this Agreement, which if pursued by the COMPANY would require additional
expenditures of significant efforts or capital.
6.14 Material Contracts and Commitments. Attached hereto as Schedule 6.14
----------------------------------
is an accurate list, as of the Balance Sheet Date, of all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, joint
venture or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements). The STOCKHOLDER
has heretofore delivered to USFLORAL true copies of such agreements. Except as
set forth on Schedule 6.14, the COMPANY has complied with all material
commitments and obligations pertaining to them, respectively, and are not in
material default under any such agreement and no notice of default has been
received. Except as set forth in Schedule 6.14, the COMPANY is not a party to
any contract, agreement or other instrument or commitment which cannot be
terminated by the COMPANY on no more than 30 days notice without any liability
to the COMPANY which would have a Material Adverse Effect on the COMPANY taken
as a whole. Except as set forth on Schedule 6.14, the COMPANY is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union. Except as set forth on Schedule 6.14, no
employees of the COMPANY are represented by any labor
10
<PAGE>
union or covered by any collective bargaining agreement nor, to the knowledge of
the STOCKHOLDER, is any organization campaign to establish such representation
in progress. There is no pending or, to the knowledge of the STOCKHOLDER,
threatened labor dispute involving the COMPANY and any group of its employees
nor has the COMPANY experienced any labor interruptions over the past three
years and the COMPANY considers its relationship with employees to be good. The
COMPANY has never had a plant closing or mass lay-off (as those terms are
defined in the Worker Adjustment and Retraining Notification Act of 1988)
affecting in whole or in part any facility, operating unit or employee of the
COMPANY.
6.15 Title to and Condition of Real Property. The STOCKHOLDER has good and
---------------------------------------
insurable title to the real property owned by him and leased to the COMPANY as
indicated in Schedule 6.13 (the "STOCKHOLDER Real Property"), subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or charge,
except for those set forth in Schedule 6.15 ("Permitted Encumbrances"). On the
Merger Effective Date, or thereafter as provided in Section 16 below, the
STOCKHOLDER will convey to the COMPANY, and on the Merger Effective Date (or
such later date as any STOCKHOLDER Real Property may be conveyed to the COMPANY
pursuant to Section 16 below) the COMPANY will own, the STOCKHOLDER Real
Property, subject to no mortgage, pledge, lien, conditional sales agreement,
encumbrance or charge, except for Permitted Encumbrances. There are no
violations of any federal, state, county or local statute, law, code, rule,
regulation, zoning or building ordinance or health or safety ordinance
(collectively, the "Real Property Laws") relating to the STOCKHOLDER Real
Property or other real property occupied by the COMPANY. The continued use,
occupancy and operation by the COMPANY of real property as currently used,
occupied and operated complies in all material respects with all Real Property
Laws, and all permits required so to do have been issued and are in full force
and effect. No insurer has suspended, revoked, modified, annulled or refused to
issue any policy of casualty or liability insurance to the COMPANY with respect
to the real property occupied by it. To the STOCKHOLDER's knowledge, there is
no existing, pending or contemplated condemnation of any part of such real
property or change in any of its zoning classification. All components of all
buildings, structures and other improvements situated on such real property,
including, but not limited to, the roofs and structural elements and the
heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer,
systems and facilities, are in good operating condition and repair, ordinary
wear and tear excepted.
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list, as
---------
of the Balance Sheet Date, of all insurance policies carried by the COMPANY and
an accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. The STOCKHOLDER has heretofore
delivered to USFLORAL complete copies of all policies currently in effect. The
insurance carried by the COMPANY with respect to its properties, assets and
business is, to the STOCKHOLDER's 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. The COMPANY's
insurance has never been canceled and the COMPANY has never been denied
coverage. The COMPANY has not failed to give any notice or present any claim
thereunder in due and timely fashion.
11
<PAGE>
6.17 Officers, Directors and Employees Compensation. Attached hereto as
----------------------------------------------
Schedule 6.17 is an accurate schedule showing all officers, directors and
employees of the COMPANY and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date. The
STOCKHOLDER has heretofore delivered to USFLORAL copies of the payroll lists
covering all employees of the COMPANY as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.17, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
6.18 Employee Plans. Listed in Schedule 6.18 are all employee benefit
--------------
plans, all employee welfare benefit plans, all employee pension benefit plans,
all multi-employer plans and all multi-employer welfare arrangements (as defined
in Sections 3(3), (1), (2), (37) and (40), respectively, of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), which are
currently maintained and/or sponsored by the COMPANY, or to which the COMPANY
currently contributes, or has an obligation to contribute in the future
(including, without limitation, employment agreements and any other agreements
containing "golden parachute" provisions and deferred compensation agreements),
together with a classification of employees covered thereby (collectively, the
"Plans"). Complete and accurate copies of the Plans and any trusts related
thereto have heretofore been delivered by the STOCKHOLDER to USFLORAL. Schedule
6.18 identifies 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 on or
prior to January 1, 1998. All reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or tax returns) have been
timely filed or distributed. None of: (i) the STOCKHOLDER; (ii) any Plan; or
(iii) the COMPANY has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA except for transactions for
which an individual, class or statutory exemption exists under Section 4975 of
the Code or Section 408 of ERISA. No Plan has
12
<PAGE>
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the COMPANY does not currently have (nor
at the Closing Date will have) any direct or indirect liability whatsoever
(including being subject to any statutory lien to secure payment of any such
liability), to the Pension Benefit Guaranty Corporation ("PBGC") with respect to
any such Plan under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty; and neither the COMPANY nor any member of a "controlled
group" (as defined in ERISA Section 4001(a)(14)) currently has (or at the
Closing Date will have) any obligation whatsoever to contribute to any "multi-
employer pension plan" (as defined in ERISA Section 4001(a)(14), nor has any
withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan;
(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"), the COMPANY and the STOCKHOLDER have complied (and on the Closing Date
will have complied), in all respects with all reporting, disclosure, notice,
election and other benefit continuation requirements imposed thereunder as and
when applicable to such plans, and the COMPANY will not have (and will incur no)
direct or indirect liability and is not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect failure
by the COMPANY or the STOCKHOLDER, at any time prior to the Closing Date, to
comply with any such federal or state benefit continuation requirement, which is
capable of being assessed or asserted before or after the Closing Date directly
or indirectly against the COMPANY or the STOCKHOLDER with respect to such group
health plans;
(vi) the COMPANY is not now nor has it been within the past five
years a member of a "controlled group" as defined in ERISA Section 4001(a)(14);
13
<PAGE>
(vii) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the STOCKHOLDER's knowledge, there
is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(viii) the Financial Statements as of the Balance Sheet Date reflect
the approximate total pension, medical and other benefit expense for all Plans,
and no material funding changes or irregularities are reflected thereon which
would cause such Financial Statements to be not representative of most prior
periods; and
(ix) the COMPANY has not incurred liability under Section 4062 of
ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, the
-------------------
COMPANY is not in violation of any law or regulation or under any order of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction which would have a
Material Adverse Effect on the COMPANY 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 STOCKHOLDER's knowledge, threatened, against or affecting the COMPANY, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction and no notice of any claim, action, suit or proceeding,
whether pending or threatened, has been received. The COMPANY has conducted and
is conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
might have a Material Adverse Effect on the COMPANY taken as a whole.
6.21 Taxes. The COMPANY has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing Date. There are no open years, examinations in
progress or claims against the COMPANY for federal and other taxes (including
penalties and interest) for any period or periods prior to and including the
Balance Sheet Date and no notice of any claim, whether pending or threatened,
for taxes has been received. The amounts shown as accruals for taxes on the
Financial Statements, as of the Balance Sheet Date, are sufficient for the
payment of all taxes of the kinds indicated (including penalties and interest)
for all fiscal periods ended on or before that date. 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 the
COMPANY for the last three fiscal years have heretofore been delivered by the
STOCKHOLDER to USFLORAL. The COMPANY made an election to be taxed under the
provisions of Subchapter S of the Internal Revenue Code effective January 1,
1987 and at no time thereafter has been taxed under the
14
<PAGE>
provisions of Subchapter C of the Internal Revenue Code. The 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. The
COMPANY currently utilizes the accrual method of accounting for income tax
purposes and has not changed its method of accounting in the past five years.
6.22 Completeness; No Violations. The certified copies of the Articles of
---------------------------
Incorporation and Bylaws, both as amended to date, of the COMPANY, and the
copies of all leases, instruments, agreements, licenses, permits, certificates
or other documents which are included on schedules attached hereto or have been
delivered to USFLORAL in connection with the transactions contemplated hereby
are complete and correct; neither the COMPANY nor, to the knowledge of the
STOCKHOLDER, any other party thereto, is in material default thereunder; and,
except as set forth in the schedules and documents attached to this Agreement,
the rights and benefits of the COMPANY thereunder will not be materially and
adversely affected by the transactions contemplated hereby; and the execution of
this Agreement and the performance of the obligations hereunder will not result
in a material violation or breach or constitute a material default under any of
the terms or provisions thereof. Except as set forth on Schedule 6.22, none of
such leases, instruments, agreements, contracts, licenses, permits, certificates
or other documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions contemplated
hereby to remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.23 Government Contracts. The COMPANY is not now nor has it ever been a
--------------------
party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Inventory. The hard goods inventory of the COMPANY reflected in the
---------
April 30,1997 Balance Sheet, and the hard goods inventory acquired by the
COMPANY since the date thereof, net, in each case, of provisions for shrinkage
and obsolescence, if any, reflected on the balance sheet and the COMPANY's books
and records, are and will at the Closing Date be usable and salable in the
ordinary course of the COMPANY's business consistent with past practice.
6.25 Absence of Changes. Since the Balance Sheet Date, there has not been:
------------------
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) which has had a Material Adverse Effect on the COMPANY, taken as a
whole;
15
<PAGE>
(iii) any change in the authorized capital of the COMPANY or in its
securities outstanding or any change in its 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 the COMPANY in an aggregate
amount greater than $25,000, except for dividends and distributions to the
STOCKHOLDER in amounts not in excess of those necessary to cover the payment of
income taxes by the STOCKHOLDER attributable to the COMPANY's Subchapter S
income;
(v) any increase in the compensation, bonus, sales commissions or
fees arrangement payable or to become payable by the COMPANY to any of its
officers, directors, employees, consultants or agents other than ordinary salary
increases implemented on a basis consistent with past practices;
(vi) any work interruptions, labor grievances or claims filed, or
any proposed law or regulation or any event or condition of any character, which
has had a Material Adverse Effect on the COMPANY, taken as a whole;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person, including,
without limitation, the STOCKHOLDER and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of the STOCKHOLDER or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, properties or
rights of the COMPANY or requiring consent of any party to the transfer and
assignment of any such assets, properties or rights;
(x) any purchase or acquisition, or agreement, plan or arrangement
to purchase or acquire, any properties, rights or assets of the COMPANY;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the COMPANY is a party; or
(xiii) any transaction by the COMPANY outside the ordinary course of
its business.
16
<PAGE>
6.26 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule
------------------------------------
6.26 is an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(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 6.26 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY and
a description of the terms of such power.
6.27 Environmental Matters. To the knowledge of the STOCKHOLDER, the
---------------------
COMPANY and the STOCKHOLDER have complied with and are in material compliance
with all federal, state, local and foreign statutes (civil and criminal), laws,
ordinances, regulations, rules, notices, permits, judgments, orders and decrees
applicable to the COMPANY or any of its properties, assets, operations and
businesses or to the STOCKHOLDER Real Property relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law) except (i) as set forth on Schedule 6.27 and (ii) to the extent that
noncompliance with any Environmental Law, either singly or in the aggregate,
would not have a Material Adverse Effect on the COMPANY, taken as a whole. The
COMPANY has obtained and adhered to all necessary permits and other approvals
necessary to treat, transport, store, dispose of and otherwise handle Hazardous
Wastes and Hazardous Substances and have reported, to the extent required by all
Environmental Laws, all past and present sites owned or operated by the COMPANY
where Hazardous Wastes or Hazardous Substances have been treated, stored,
disposed of or otherwise handled. Except as set forth on Schedule 6.27, there
have been no releases or threats of releases (as defined in Environmental Laws)
at, from, in or on any property owned or operated by the COMPANY except as
permitted by Environmental Laws. The STOCKHOLDER knows of no on-site location
to which the COMPANY has transported or disposed of Hazardous Wastes and
Hazardous Substances or arranged for the transportation of Hazardous Wastes and
Hazardous Substances, which site is the subject of any federal, state, local or
foreign enforcement action or any other investigation which could lead to any
claim against the COMPANY, USFLORAL, NEWCO or the Surviving Corporation for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. The COMPANY has
no
17
<PAGE>
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
6.28 Underground Storage Tanks. Except as set forth on Schedule 6.28, the
-------------------------
COMPANY has never owned or leased any real estate having any underground storage
tanks containing petroleum products or wastes or other hazardous substances
regulated by 40 CFR 280 and/or other applicable federal, state or local laws,
rules and regulations and requirements. As to each such underground storage
tank ("UST") identified in Schedule 6.28, the COMPANY has heretofore provided to
USFLORAL all documents and information pertaining to each UST that the COMPANY
has, including without limitation, to the extent such documents and information
exist, the following:
(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 such as the results of
groundwater or soil tests; and
(vii) a summary description of all instances in which the UST failed
to meet applicable standards and regulations for tightness or otherwise.
6.29 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by the COMPANY and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the COMPANY and
the STOCKHOLDER, and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
COMPANY and the STOCKHOLDER.
6.30 Relations with Governments. The COMPANY has not made, offered or
--------------------------
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has the COMPANY otherwise taken any
action which would cause the COMPANY to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended or any law of similar effect.
18
<PAGE>
6.31 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 the
STOCKHOLDER becomes aware of any fact or circumstance which would change a
representation or warranty of the STOCKHOLDER in this Agreement or any
representation made on behalf of the COMPANY, the STOCKHOLDER shall immediately
give notice of such fact or circumstance to USFLORAL. However, such
notification shall not relieve the COMPANY or the STOCKHOLDER of their
respective obligations under this Agreement, and at the sole option of USFLORAL,
the truth and accuracy of any and all warranties and representations of the
STOCKHOLDER, at the date of this Agreement and at the Closing Date and the
Merger Effective Date, shall be a precondition to the consummation of this
transaction.
6.32 Authority; Ownership. The STOCKHOLDER has the full legal right, power
--------------------
and authority to enter into this Agreement. The STOCKHOLDER owns beneficially
and of record all of the issued and outstanding shares of COMPANY Stock.
6.33 Registration Statement. The STOCKHOLDER has received the prospectus
----------------------
included in the draft Registration Statement delivered to him on or about August
2, 1997 that describes, among other things, the Merger, the other acquisitions
proposed to be undertaken by USFLORAL and the target companies of the other
acquisitions. The STOCKHOLDER has reviewed the Registration Statement and has
had an adequate opportunity to ask questions and receive answers to his
satisfaction from the officers of USFLORAL concerning the business, operations
and financial condition of USFLORAL.
7 REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFLORAL and NEWCO, jointly and severally, represent and warrant
to the STOCKHOLDER and the COMPANY as follows.
7.1 Due Organization. USFLORAL and NEWCO are corporations duly organized,
----------------
validly existing and in good standing under the laws of the State of Delaware,
and are duly authorized, qualified and licensed under all applicable laws,
regulations, and ordinances of public authorities to carry on their respective
businesses in the places and in the manner as now conducted except the states
where the failure to be so authorized, qualified or licensed would not have a
Material Adverse Effect on their respective businesses. True, complete and
correct copies of the Articles of Incorporation (certified by the Secretary of
State of the State of Delaware) and the Bylaws, as amended, of USFLORAL and
NEWCO (certified by the Secretary of the respective corporations) have
heretofore been delivered by USFLORAL to the STOCKHOLDER.
19
<PAGE>
7.2 Authorization. The representatives of USFLORAL and NEWCO executing
-------------
this Agreement have the corporate authority to enter into and bind USFLORAL and
NEWCO by the terms of this Agreement. USFLORAL and NEWCO have full legal right,
power and authority to enter into this Agreement and have the full legal right,
power and authority to enter into the Merger. The execution and delivery of
this Agreement by USFLORAL and NEWCO and the performance of the transactions
contemplated herein have been duly and validly authorized by the Boards of
Directors of USFLORAL and NEWCO, and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and binding
obligation of USFLORAL and NEWCO.
7.3 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of either USFLORAL or NEWCO;
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which either USFLORAL or
NEWCO is a party, or result in the creation or imposition of any lien, charge or
encumbrance on any of USFLORAL's or NEWCO's properties pursuant to (A) any law
or regulation to which USFLORAL or NEWCO, or any of their property is subject,
or (B) any judgment, order or decree to which USFLORAL or NEWCO is bound or any
of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFLORAL or
NEWCO; or
(iv) require any filing or other notice under the Hart-Scott-Rodino
Antitrust Improvement Act.
7.4 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by USFLORAL and NEWCO and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
USFLORAL and the Board of Directors and the stockholder of NEWCO, and this
Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of USFLORAL and
NEWCO, respectively.
7.5 Other Agreements. Prior to the consummation of the Merger, USFLORAL
----------------
and NEWCO have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent between USFLORAL and
the STOCKHOLDER, certain employment agreements with officers of USFLORAL and
those agreements and letters of intent listed on Schedule 7.5 hereof.
20
<PAGE>
8 COVENANTS OF THE STOCKHOLDER AND COMPANY PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the COMPANY will afford to the officers and authorized
representatives of USFLORAL access, during normal business hours and upon
reasonable notice, to all of the COMPANY's sites, properties, books and records
and will furnish USFLORAL with such additional financial and operating data and
other information as to the business and properties of the COMPANY as USFLORAL
may from time to time reasonably request in writing. The COMPANY will cooperate
with the reasonable requests of USFLORAL, its representatives, engineers,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by any
governmental agency. USFLORAL will cause all information obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 15 hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, the STOCKHOLDER will cause the 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 respective 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;
(v) use its best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with the COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, etc.;
(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
21
<PAGE>
(viii) maintain present salaries and commission levels for all
officers, directors, employees and agents, except ordinary salary increases
implemented on a basis consistent with past practice.
8.3 Prohibited Activities. Between the Balance Sheet Date and the
---------------------
Merger Effective Date, the COMPANY will not, 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 in an aggregate
amount which together with all such payments made since December 31, 1996 does
not exceed $25,000, except for dividends and distributions to the STOCKHOLDER to
cover the payment of income taxes by the STOCKHOLDER attributable to the
COMPANY's Subchapter S income;
(iv) enter into any contract or commitment or incur or agree to
incur any liability other than in the ordinary course of business consistent
with past practice or make any capital expenditures in excess of $250,000 in the
aggregate;
(v) increase the compensation payable or to become payable to any
officer, director, the 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 Schedules 6.13 and 6.15;
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment, except in the normal course of business;
(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;
22
<PAGE>
(xi) breach or permit a breach, amend or terminate any material
agreement or any permit, license or other right; or
(xii) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
8.4 Supplier Approval. Prior to the Closing Date, the COMPANY shall
-----------------
satisfy any requirement for notice and approval of the transactions contemplated
by this Agreement under applicable supplier agreements, and shall provide
USFLORAL with satisfactory evidence of such approvals.
8.5 Notice to Bargaining Agents. Prior to the Closing Date, the COMPANY
---------------------------
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 STOCKHOLDER, the COMPANY or any agent, officer,
-------
director or any representative of any of the foregoing will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Merger Effective Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from
any person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than USFLORAL or
NEWCO relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
8.7 Notification of Certain Matters. The STOCKHOLDER and the COMPANY
-------------------------------
shall give prompt notice to USFLORAL of (i) the occurrence or non-occurrence of
any event known to the STOCKHOLDER or the COMPANY the occurrence or non-
occurrence of which would be likely to cause any representation or warranty
contained in Section 6 to be or become untrue or inaccurate in any material
respect at or prior to the Closing Date or Merger Effective Date and (ii) any
material failure of the STOCKHOLDER or the COMPANY to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
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.
23
<PAGE>
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 the COMPANY may be made
unless USFLORAL consents to such amendment or supplement; and provided further,
however, that USFLORAL may not withhold consent to such amendment or supplement
if the same relates to (i) changes in facts or circumstances occurring
subsequent to the date hereof, or (ii) facts and circumstances existing as of
the date hereof that were not disclosed by the STOCKHOLDER because he 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 STOCKHOLDER). No amendment of a 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 Environmental Matters. The COMPANY has ordered and will cause to be
---------------------
delivered to USFLORAL as promptly as is practicable, at its expense, a Phase II
Environmental Site Assessment (the "Assessment") of the property located at 2626
N. Clybourn, Chicago, Illinois (the "Clybourn Property"). The COMPANY will
timely and fully remediate the Clybourn Property to the reasonable satisfaction
of USFLORAL. In the event remediation is not completed prior to the Merger
Effective Date and USFLORAL elects to have title to the Clybourn Property
transferred prior to Closing, such sum as is reasonably necessary to complete
the remediation shall be withheld from the Merger Consideration and deposited
with the Escrow Agent to secure the full and timely completion of the
remediation. The escrowed sum shall be administered in accordance with the
terms and conditions of an escrow agreement as mutually agreed to by the
parties.
9 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER AND THE COMPANY
The obligations of the STOCKHOLDER and the COMPANY hereunder are subject to
the satisfaction on or prior to the Closing Date (or such earlier date specified
below) of the following conditions:
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFLORAL and NEWCO contained in Section 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by USFLORAL and NEWCO on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly
24
<PAGE>
authorized agent, the President or any Vice President of USFLORAL shall have
been delivered to the STOCKHOLDER.
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 Merger or any of the other transactions contemplated hereby and
no governmental agency or body shall have taken any other action or made any
request of the COMPANY as a result of which the management of the COMPANY deems
it inadvisable to proceed with the transactions hereunder.
9.3 Employment Agreements. The Surviving Corporation shall execute and
---------------------
deliver Employment Agreements, in the form of Annex II attached hereto, to each
of the persons listed on Schedule 9.3 hereto, calling for the payment of the
compensation identified for each such person, respectively, on Schedule 9.3.
9.4 Opinion of Counsel. The STOCKHOLDER shall have received an opinion
------------------
from counsel for USFLORAL, dated the Merger Effective Date, in form and
substance satisfactory to the STOCKHOLDER, to the effect that:
(i) USFLORAL and NEWCO have been duly organized and are validly
existing in good standing under the laws of the States of Delaware; and
(ii) this Agreement has been duly authorized, executed and delivered
by USFLORAL and NEWCO and constitutes a valid and binding agreement of USFLORAL
and NEWCO enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors and except (X) as the same may be subject to the effect of
general principles of equity and (Y) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein.
9.5 Registration Statement. USFLORAL shall have filed with the Securities
----------------------
and Exchange Commission ("SEC") a registration statement on Form S-1 covering
the offer and sale of shares of USFLORAL Stock (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.
10 CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFLORAL and NEWCO hereunder are, at their option,
subject to the satisfaction, on or prior to the Closing Date (or such earlier
date specified below), of the following conditions:
25
<PAGE>
10.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
STOCKHOLDER shall have delivered to USFLORAL a certificate dated the Merger
Effective Date and signed by him to the effect that all the representations and
warranties of the STOCKHOLDER 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 STOCKHOLDER and the COMPANY to be
performed on or before the Closing Date pursuant to the terms hereof shall have
been performed.
10.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the Merger or any of the other transactions contemplated hereby and
no governmental agency or body shall have taken any other action or made any
request of USFLORAL as a result of which the management of USFLORAL deems it
inadvisable to proceed with the transactions hereunder.
10.3 Examination of Financial Statements. Prior to the Closing Date,
-----------------------------------
USFLORAL shall have had sufficient time to review the unaudited balance sheets
of the COMPANY as of June 30, 1997, and the unaudited statements of income, cash
flow and stockholder's investment of the COMPANY for the periods then ended,
disclosing no material adverse change in the financial condition of the COMPANY
or the results of its operations from the financial statements originally
furnished by the COMPANY as set forth in Schedule 6.9.
10.4 No Material Adverse Change. No material adverse change in the results
--------------------------
of operations, financial position or business of the COMPANY shall have
occurred, and the COMPANY shall not have suffered any material loss or damages
to any of its properties or assets, whether or not covered by insurance, since
the Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the COMPANY to conduct its business; and USFLORAL shall
have received on the Closing Date a certificate signed by the STOCKHOLDER dated
the Merger Effective Date to such effect.
10.5 Regulatory Review. USFLORAL, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
the COMPANY including, but not limited to, environmental and land use practices,
import and export laws, compliance with contracts and federal, state and local
laws and regulations governing the operations of the COMPANY; which review
reflects compliance with all applicable laws governing the COMPANY, disclosing
no material actual or probable violations, compliance problems, required capital
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.
26
<PAGE>
10.6 STOCKHOLDER's Release. At the Closing Date, the STOCKHOLDER shall
---------------------
have delivered to USFLORAL an instrument dated the Merger Effective Date
releasing the COMPANY from any and all claims of the STOCKHOLDER against the
COMPANY.
10.7 Employment Agreements. Each of the persons listed on Schedule 9.3
---------------------
shall execute and deliver an Employment Agreement, in the form of Annex II
attached hereto, calling for the payment of the compensation identified for each
such person, respectively, on Schedule 9.3.
10.8 Opinion of Counsel. USFLORAL shall have received an opinion from
------------------
Holleb & Coff, counsel to the STOCKHOLDER, dated the Merger Effective Date, in
form and substance satisfactory to USFLORAL, to the effect that with respect to
the COMPANY:
(i) the COMPANY has been duly organized and is validly existing in
good standing under the laws of the state of its incorporation;
(ii) 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 STOCKHOLDER 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 STOCKHOLDER and constitutes a valid and binding agreement
of the COMPANY and the STOCKHOLDER 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;
(vi) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.20, the COMPANY is not in violation of or default under any
law or regulation, or under any order of any court, commission, board, bureau,
agency or instrumentality wherever located and there are no claims, actions,
suits or proceedings pending, or threatened against or affecting the COMPANY, at
law or in equity, or before or by any
27
<PAGE>
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, the COMPANY is not 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 the STOCKHOLDER or for the Merger; 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 or, to the knowledge of such counsel, of any lease,
instrument, license, permit or any other agreement to which any COMPANY is a
party or by which the COMPANY or the 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
the Merger 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. The STOCKHOLDER shall have
--------------------------------------
delivered to USFLORAL a schedule (Schedule 10.10), dated the Merger Effective
Date, setting forth all liabilities and obligations of the COMPANY arising since
the Balance Sheet Date.
10.11 Additional Contracts. The STOCKHOLDER shall have delivered to
--------------------
USFLORAL a schedule (Schedule 10.11), dated the Merger Effective Date, showing
all material contracts and agreements, together with copies thereof, entered
into by the COMPANY since the Balance Sheet Date.
10.12 Good Standing Certificates. The STOCKHOLDER shall have delivered to
--------------------------
USFLORAL certificates, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by USFLORAL, in each state
in which the COMPANY is authorized to do business, showing that the COMPANY is
in good standing and authorized to do business and
28
<PAGE>
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 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.
10.14 Repayment of Indebtedness. Prior to the Closing Date, the
-------------------------
STOCKHOLDER shall have repaid the COMPANY in full all amounts owing by the
STOCKHOLDER.
11 COVENANTS OF USFLORAL
11.1 Mortgage Debt. On the Merger Effective Date, USFLORAL shall have,
-------------
subject to the provisions of Section 16 hereof, the option of either (i) paying
the Mortgage Debt, or (ii) assuming the Mortgage Debt (if the holder of the
Mortgage Debt consents).
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 Merger Consideration
provided for in Section 2.1 above shall be available for issuance to the key
employees of the Surviving Corporation after the Closing, as determined by the
Surviving Corporation's President (or other officer or director designated by
the Surviving Corporation and acceptable to USFLORAL) in accordance with
USFLORAL's policies, and authorized and issued under the terms of USFLORAL's
Amended and Restated 1997 Long-Term Incentive Plan.
11.3 Notification of Certain Matters. USFLORAL shall give prompt notice to
-------------------------------
the 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 or become 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.
12 INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by the STOCKHOLDER. Subject to the
------------------------------------------
limitations contained in Section 12.5 hereof, the STOCKHOLDER covenants and
agrees that he will indemnify, defend, protect and hold harmless USFLORAL, NEWCO
and the Surviving Corporation and their respective officers, stockholders,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement until the Expiration Date (as defined in Section 12.6) from and
29
<PAGE>
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by USFLORAL,
NEWCO or the Surviving Corporation as a result of or arising from: (i) any
breach of the representations and warranties made by the STOCKHOLDER set forth
herein or on the schedules or certificates delivered in connection herewith;
(ii) any nonfulfillment of any agreement on the part of the STOCKHOLDER or the
COMPANY under this Agreement; or (iii) any liability under the Securities Act of
1933, as amended (the "1933 Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or other Federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to the COMPANY or the
STOCKHOLDER, and provided to USFLORAL or its counsel by the COMPANY or the
STOCKHOLDER, 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 the COMPANY or the STOCKHOLDER
required to be stated therein or necessary to make the statements therein not
misleading, and not provided to USFLORAL or its counsel by the COMPANY or the
STOCKHOLDER, provided, however, that such indemnity shall not inure to the
benefit of USFLORAL, NEWCO and the Surviving Corporation to the extent that such
untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDER
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 STOCKHOLDER. 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 NEWCO, the STOCKHOLDER covenants and agrees that he
will indemnify, defend, protect and hold harmless USFLORAL, NEWCO and the
Surviving Corporation and their respective officers, stockholders, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, agents, employees,
successors and assigns at all times from and after the date of this Agreement,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by USFLORAL, NEWCO or the Surviving Corporation as a
result of or incident to: (a) the existence of liabilities of the COMPANY in
excess of the liabilities set forth on Schedule 6.10, to the extent of such
excess; (b) all liability resulting from the litigation matters listed on
Schedule 6.20; and (c) all liability resulting from the environmental matters
listed on Schedule 6.27.
12.3 Indemnification by USFLORAL and NEWCO. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFLORAL and NEWCO, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
the STOCKHOLDER 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
30
<PAGE>
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by the STOCKHOLDER as a result of or arising from: (i)
any breach of the representations and warranties made by USFLORAL and NEWCO set
forth herein or on the schedules or certificates attached hereto; (ii) any
nonfulfillment of any agreement on the part of USFLORAL under this Agreement;
(iii) any liabilities which the STOCKHOLDER may incur due to USFLORAL's failure
to be responsible for the liabilities and obligations of the Surviving
Corporation as provided in Section 1.5 hereof (except to the extent that
USFLORAL has claims against the STOCKHOLDER 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 (hereinafter the
-------------------
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement (a "Third Person") or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently.
If the Indemnifying Party undertakes to defend or settle, it shall promptly
notify the Indemnified Party of its intention to do so, and the Indemnified
Party shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the Indemnifying Party that are
in the Indemnified Party's possession or control. Notwithstanding the
foregoing, the Indemnified Party shall have the right to participate in any
matter through counsel of its own choosing at its own expense (unless there is a
conflict of interest that prevents counsel for the Indemnifying Party from
representing the Indemnified Party, in which case the Indemnifying Party will
reimburse the Indemnified Party for the expenses of its counsel); provided that
the Indemnifying Party's counsel shall always be lead counsel and shall
determine all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed
31
<PAGE>
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 two percent of the
Merger Consideration, at which time, an Indemnified Party shall be entitled to
seek indemnification for all claims not previously asserted pursuant to this
Section 12. For purposes of the preceding sentence, USFLORAL, NEWCO and the
Surviving Corporation shall be considered to be a single Indemnifying and
Indemnified Party and the STOCKHOLDER shall be considered to be a single
Indemnifying and Indemnified Party. "Excess Net Worth" shall mean the amount,
if any, by which the aggregate shareholder's equity as shown on the Closing Date
Balance Sheet is greater than the (a) the aggregate shareholders' equity as
shown on the December 31 Balance Sheet minus (b) $100,000. 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 any Excess 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 the
STOCKHOLDER be liable under this Section 12 for an amount which exceeds the
Merger Consideration.
12.6 Survival of Representations and Warranties. The parties agree that
------------------------------------------
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of twelve (12) months from the Merger Effective Date (which
date is hereinafter called the "Expiration Date"), except that: (i) the
representations and warranties contained in Subsection 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 6.27 and 6.28 hereof shall survive for a period of three
years from the Merger Effective Date, which shall be deemed the
32
<PAGE>
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 the STOCKHOLDER 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 STOCKHOLDER in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the STOCKHOLDER.
13 TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFLORAL or the STOCKHOLDER 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 of 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 Termination by USFLORAL. To the extent that any Schedules required to
-----------------------
be provided by the COMPANY or the STOCKHOLDER as of the date of execution of
this Agreement have not been so provided, they will be delivered to USFLORAL
within 14 days of the date of this Agreement. USFLORAL may terminate this
Agreement by written notice thereof given to the STOCKHOLDER within 10 days
after its receipt of all of such Schedules.
13.3 Liquidated Damages to USFLORAL. If the STOCKHOLDER terminates this
------------------------------
Agreement after the satisfaction of the conditions set forth in Section 9 or if
the Merger fails to occur because of the default of the COMPANY or the
STOCKHOLDER, then, in addition to the other remedies available to USFLORAL at
law, in equity or pursuant to this Agreement, the STOCKHOLDER 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 the 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.
13.4 Liquidated Damages to the STOCKHOLDER. If USFLORAL or NEWCO
-------------------------------------
terminates this Agreement after the satisfaction of the conditions set forth in
Section 10 or if the
33
<PAGE>
Merger fails to occur because of the default of USFLORAL or NEWCO, then, in
addition to the other remedies available to the STOCKHOLDER at law, in equity or
pursuant to this Agreement, USFLORAL shall pay to the STOCKHOLDER the sum of
$500,000 as liquidated damages. It is hereby agreed that the STOCKHOLDER's
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 STOCKHOLDER agrees that for a period of
---------------------
two years following the Merger Effective Date, he 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
(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 or of 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 his 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 or 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 the STOCKHOLDER from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market, or (ii) engaging
in any activity to which USFLORAL shall have provided its prior written consent.
34
<PAGE>
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 STOCKHOLDER agrees that, in the event of a
breach by him 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 STOCKHOLDER in
light of the activities and business of USFLORAL on the date of the execution of
this Agreement and the current and future plans of USFLORAL and the Surviving
Corporation (as successor to the business of the COMPANY).
14.4 Severability; Reformation. The covenants in this Section 14 are
-------------------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
14.5 Independent Covenant. All of the covenants in this Section 14 shall
--------------------
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the STOCKHOLDER
against the COMPANY, Surviving Corporation or USFLORAL, whether predicated on
this Agreement or otherwise, shall not constitute a defense to the enforcement
of such covenants. It is specifically agreed that the period of two years
stated above, shall be computed by excluding from such computation any time
during which the STOCKHOLDER is in violation of any provision of this Section 14
and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFLORAL or
the Surviving Corporation seek to enforce the agreements and covenants of the
STOCKHOLDER or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if the STOCKHOLDER is found not to be in
violation of his agreements or covenants in any such action the period during
which the action was pending shall not be excluded from such computation.
14.6 Materiality. The STOCKHOLDER hereby agrees that this covenant is a
-----------
material and substantial part of this transaction.
35
<PAGE>
15 NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 The STOCKHOLDER. The STOCKHOLDER recognizes and acknowledges that he
---------------
has in the past, currently has, and in the future may possibly have, access to
certain confidential information of the COMPANY, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the COMPANY and the COMPANY's business. The STOCKHOLDER
agrees that he will not disclose any confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of USFLORAL, unless such
information becomes known to the public generally through no fault of the
STOCKHOLDER. In the event of a breach or threatened breach by the STOCKHOLDER
of the provisions of this Section, USFLORAL and the Surviving Corporation shall
be entitled to an injunction restraining the STOCKHOLDER from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting USFLORAL and the Surviving Corporation 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 COMPANY, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the COMPANY and the COMPANY's business. USFLORAL agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the STOCKHOLDER. In the event of
a breach or threatened breach by USFLORAL of the provisions of this Section, the
STOCKHOLDER shall be entitled to an injunction restraining USFLORAL from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting the STOCKHOLDER from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 Damages. Because of the difficulty of measuring economic losses as a
-------
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFLORAL, the Surviving Corporation and the STOCKHOLDER agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
16 REAL ESTATE MATTERS
16.1 Wheeling Property. Notwithstanding anything to the contrary herein
-----------------
contained, unless sooner requested to do so by USFLORAL, the STOCKHOLDER shall
not convey title to the property located at 250 Alderman Lane, Wheeling,
Illinois (the "Wheeling Property") to the COMPANY until the Illinois
Environmental Protection Agency has issued a
36
<PAGE>
"No Further Remediation" determination (the "Determination") pursuant to the
request therefor submitted on behalf of the STOCKHOLDER by Schrack Environmental
Consulting, Inc. on May 13, 1997. If the Determination has not been issued by
the Merger Effective Date, that portion of the Merger Consideration attributable
to the Wheeling Property together with that portion of the Mortgage Debt secured
by the Wheeling Property shall be deposited with the Escrow Agent. The escrowed
funds shall be administered in accordance with the terms and conditions of an
escrow agreement as mutually agreed to by the parties. At such time as the
Determination is issued the Wheeling Property shall be conveyed to the COMPANY
and the Escrow Agent shall distribute to the holder of the Mortgage Debt the
amount necessary to satisfy in full the Mortgage Debt, and the balance of such
escrowed amount shall be distributed to the STOCKHOLDER, provided that income
earned thereon shall be distributed to USFLORAL. Pending conveyance of the
Wheeling Property to the COMPANY, the lease therefor between the COMPANY and the
STOCKHOLDER shall remain in effect, provided that the monthly rental payable by
the COMPANY thereunder shall be $2,333.33, prorated for any portion of a month,
and further provided that the STOCKHOLDER, as lessor, shall indemnify, defend,
protect and hold harmless the COMPANY, as lessee, 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 COMPANY as the
result of or arising out of any violation of any Environmental Laws existing as
of the Merger Effective Date. In the event that the Determination has not been
issued by the date which is six months from the Merger Effective Date, at any
time thereafter USFLORAL may elect, by written notice thereof given to the
STOCKHOLDER, not to cause the COMPANY to acquire the Wheeling Property,
whereupon the funds escrowed therefor and interest thereon shall be distributed
to USFLORAL and the parties shall negotiate in good faith a triple net lease of
the Wheeling Property at fair market rental value.
16.2 Clybourn Property. Notwithstanding any provision to the contrary
-----------------
contained in this Agreement, upon receipt of the Assessment USFLORAL, in its
discretion, may elect not to have title to the Clybourn Property conveyed to the
COMPANY, in which event: (a) the Merger Consideration shall be reduced by the
Net Real Property Equity attributable to the Clybourn Property; and (b) the
COMPANY and the STOCKHOLDER shall enter into a net lease for the Clybourn
Property at fair market rental value, which in no event shall exceed the rental
provided for in the current lease between the COMPANY and the STOCKHOLDER
pertaining to the Clybourn Property.
17 GENERAL
17.1 Cooperation. The STOCKHOLDER 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.
The STOCKHOLDER will cooperate and use his best efforts to have the present
officers, directors and employees of the COMPANY cooperate with USFLORAL on and
after the Closing Date in furnishing information, evidence, testimony and
37
<PAGE>
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.
17.2 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 STOCKHOLDER.
17.3 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 STOCKHOLDER, the
COMPANY, USFLORAL and NEWCO and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDER, COMPANY, USFLORAL, and NEWCO
acting through their respective officers, duly authorized by their respective
Boards of Directors.
17.4 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.
17.5 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.
17.6 Expenses. Whether or not the transactions herein contemplated shall
--------
be consummated, USFLORAL will pay the fees, expenses and disbursements of
USFLORAL and NEWCO and their 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 COMPANY will pay the fees, expenses and disbursements of the
COMPANY and the STOCKHOLDER and his 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 STOCKHOLDER and
COMPANY under this Agreement.
17.7 Notices. All notices of communication required or permitted hereunder
-------
shall be in writing and may be given by depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person to
an officer or agent of such party.
38
<PAGE>
(a) If to USFLORAL or NEWCO, addressed to them at:
U.S.A. Floral Products, Inc.
3500 Whitehaven Parkway
Washington, D.C. 20007
Attention: Mr. Robert Poirier
(b) If to the STOCKHOLDER, addressed to him at:
Roy Houff
c/o The Roy Houff Company
6200 South Oak Park Avenue
Chicago, Illinois 60638
17.8 Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of Delaware.
17.9 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.
17.10 Time. Time is of the essence with respect to this Agreement.
----
17.11 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.
17.12 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.
17.13 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.
39
<PAGE>
17.14 Standstill Agreement. Unless and until this Agreement is terminated
--------------------
pursuant to Section 13 hereof without the Merger Effective Date having taken
place, the STOCKHOLDER will not directly or indirectly solicit offers for any
COMPANY Stock or the assets of the COMPANY or a merger or consolidation
involving the COMPANY from, or respond to inquiries from, share information
with, negotiate with or in any way facilitate inquiries or offers from, third
parties who express or who have heretofore expressed an interest in acquiring
the COMPANY by merger or consolidation or acquiring any of its assets or any
COMPANY Stock; nor will he permit the COMPANY to do any of the foregoing.
40
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"USFLORAL"
U.S.A. FLORAL PRODUCTS, INC.
By /s/ Robert J. Poirier
--------------------------------------
Name: Robert J. Poirier
Title: President/CEO
"NEWCO"
RHI ACQUISITION CORP.
By /s/ Robert J. Poirier
--------------------------------------
Name: Robert J. Poirier
Title: President
"COMPANY"
THE ROY HOUFF COMPANY
By /s/ Roy Houff
--------------------------------------
Name: Roy Houff
Title: CEO/Chairman
"STOCKHOLDER"
/s/ Roy Houff
-----------------------------------------
Roy Houff
41
<PAGE>
SCHEDULES
Schedule 6.1 [Due Organization]
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 6.15 [Title to and Condition of Real Property]
Schedule 6.16 [Insurance]
Schedule 6.17 [Officers, Directors and Employees Compensation]
Schedule 6.18 [Employee Plans]
Schedule 6.20 [Conformity with Law]
Schedule 6.22 [Required Consents]
Schedule 6.26 [Deposit Accounts; Powers of Attorney]
Schedule 6.27 [Environmental Matters]
Schedule 6.28 [Underground Storage Tanks]
Schedule 7.5 [Other Agreements]
Schedule 9.3 [Employment Agreements]
Schedule 10.10 [Additional Liabilities and Obligations]
Schedule 10.11 [Additional Contracts]
42
<PAGE>
EXHIBIT 10.02
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
USA FLORAL PRODUCTS, INC.
(a Delaware corporation),
FLORAL ACQUISITION CORPORATION
(a Florida corporation),
CFX, INC.
(a Florida corporation),
and
THE STOCKHOLDERS OF CFX, INC.
Dated as of August 5, 1997,
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
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,
NEWCO and USFLORAL................................................................ 2
1.5 AAA Distribution.................................................................. 3
2. CONVERSION AND EXCHANGE OF STOCK........................................................ 3
2.1 Manner of Conversion.............................................................. 3
2.2 Calculation of USFLORAL Shares.................................................... 4
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION......................................... 4
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES............................................... 4
5. CLOSING; MERGER EFFECTIVE DATE.......................................................... 6
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.......................................... 7
6.1 Due Organization.................................................................. 7
6.2 Authorization..................................................................... 7
6.3 Capital Stock..................................................................... 7
6.4 Transactions in Capital Stock..................................................... 8
6.5 No Bonus Shares................................................................... 8
6.6 Subsidiaries...................................................................... 8
6.7 Predecessor Status................................................................ 8
6.8 Spin-off by the COMPANY........................................................... 8
6.9 Financial Statements.............................................................. 8
6.10 Liabilities and Obligations....................................................... 8
6.11 Accounts and Notes Receivable..................................................... 9
6.12 Permits and Intangibles........................................................... 9
6.13 Real and Personal Property........................................................ 9
6.14 Material Contracts and Commitments................................................10
6.15 Title to Real Property............................................................10
6.16 Insurance.........................................................................10
6.17 Officers, Directors and Employees Compensation....................................11
6.18 Employee Plans....................................................................11
6.19 Compliance with ERISA.............................................................11
-i-
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
6.20 Conformity with Law...............................................................13
6.21 Taxes.............................................................................13
6.22 Completeness; No Violations.......................................................14
6.23 Government Contracts..............................................................14
6.24 Absence of Changes................................................................14
6.25 Deposit Accounts; Powers of Attorney..............................................15
6.26 Environmental Matters.............................................................16
6.27 Underground Storage Tanks.........................................................16
6.28 Validity of Obligations...........................................................16
6.29 Relations with Governments........................................................16
6.30 Disclosure........................................................................17
6.31 Ownership.........................................................................17
7. REPRESENTATIONS OF USFLORAL AND NEWCO...................................................17
7.1 Due Organization..................................................................17
7.2 USFLORAL Stock....................................................................17
7.3 Authorization.....................................................................18
7.4 Validity of Obligations...........................................................18
7.5 No Conflicts......................................................................18
7.6 Other Agreements..................................................................18
7.7 Reasonable and Adequate Capital...................................................19
8. COVENANTS PRIOR TO CLOSING..............................................................19
8.1 Access and Cooperation............................................................19
8.2 Conduct of Business...............................................................19
8.3 Prohibited Activities.............................................................20
8.4 Supplier Approval.................................................................21
8.5 [intentionally omitted]...........................................................21
8.6 No Shop...........................................................................21
8.7 Notification of Certain Matters...................................................21
8.8 Amendment of Schedules............................................................22
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS.....................................22
9.1 Representations and Warranties; Performance of Obligations........................22
9.2 No Litigation.....................................................................22
9.3 Employment Agreements.............................................................22
9.4 Opinion of Counsel................................................................22
9.5 Registration Statement............................................................23
9.6 Market Capitalization.............................................................23
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO...............................23
10.1 Representations and Warranties; Performance of Obligations........................23
</TABLE>
-ii-
<PAGE>
<TABLE>
<C> <S> <C>
10.2 No Litigation.....................................................................24
10.3 Examination of Financial Statements...............................................24
10.4 No Material Adverse Change........................................................24
10.5 Regulatory Review.................................................................24
10.6 STOCKHOLDERS Release..............................................................24
10.7 Employment Agreements.............................................................24
10.8 Opinion of Counsel................................................................24
10.9 Consents and Approvals............................................................25
10.10 Additional Liabilities and Obligations............................................26
10.11 Additional Contracts..............................................................26
10.12 Good Standing Certificates........................................................26
10.13 Registration Statement............................................................26
10.14 Repayment of Indebtedness.........................................................26
10.15 Pretax Income.....................................................................26
11. COVENANTS OF USFLORAL...................................................................26
11.1 Release From Guarantees...........................................................26
11.2 USFLORAL Stock Options............................................................27
11.3 34 Act Obligations................................................................27
11.4 Certain Transactions..............................................................27
11.5 Piggy-Back Registrations..........................................................27
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................28
12.1 General Indemnification by STOCKHOLDERS...........................................28
12.2 Specific Indemnification by the STOCKHOLDERS......................................29
12.3 Indemnification by USFLORAL and NEWCO.............................................29
12.4 Third-Person Claims...............................................................30
12.5 Limitations on Indemnification....................................................31
12.6 Survival of Representations and Warranties........................................31
12.7 Sole Remedies.....................................................................32
13. TERMINATION OF AGREEMENT................................................................32
13.1 Termination by the Parties........................................................32
13.2 Liquidated Damages................................................................32
14. NONCOMPETITION..........................................................................32
14.1 Prohibited Activities.............................................................32
14.2 Damages...........................................................................33
14.3 Reasonable Restraint..............................................................33
14.4 Severability; Reformation.........................................................34
14.5 Independent Covenant..............................................................34
14.6 Materiality.......................................................................34
-iii-
<PAGE>
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................34
15.1 STOCKHOLDERS......................................................................34
15.2 USFLORAL..........................................................................34
15.3 Damages...........................................................................35
16. LOCK-UP AGREEMENTS......................................................................35
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK...................35
17.1 Compliance with Law...............................................................36
17.2 Economic Risk; Sophistication.....................................................36
17.3 Registration Statement............................................................36
18. SECURITIES LEGENDS......................................................................36
19. GENERAL.................................................................................37
19.1 Cooperation.......................................................................37
19.2 Successors and Assigns............................................................37
19.3 Entire Agreement..................................................................37
19.4 Counterparts......................................................................37
19.5 Brokers and Agents................................................................38
19.6 Expenses..........................................................................38
19.7 Notices...........................................................................38
19.8 Governing Law.....................................................................39
19.9 Exercise of Rights and Remedies...................................................39
19.10 Time..............................................................................39
19.11 Reformation and Severability......................................................39
19.12 Remedies Cumulative...............................................................39
19.13 Captions..........................................................................39
</TABLE>
ANNEX I Form of Articles of Merger
ANNEX II Calculation and Composition of Consideration
ANNEX III Form of Employment Agreement
SCHEDULES
-iv-
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement")
is made as of the 5th day of August, 1997, between USA FLORAL PRODUCTS, INC., a
Delaware corporation ("USFLORAL"), FLORAL ACQUISITION CORPORATION, a Florida
corporation ("NEWCO"), CFX, INC., a Florida corporation (the "COMPANY"), and
DWIGHT HAIGHT, JAMES A. HILL and MICHAEL GROVER (collectively referred to as the
"STOCKHOLDERS"), who are all of the stockholders of the COMPANY.
WHEREAS, USFLORAL was incorporated on April 2, 1997 (the "Formation") under
the laws of the State of Delaware for the purpose of acquiring floral products
businesses in different locations; and
WHEREAS, USFLORAL intends to undertake an initial public offering of its stock
(the "IPO") and in connection therewith intends to file a Registration Statement
on Form S-1 with the Securities and Exchange Commission within 30 days of the
execution and delivery of this Agreement; and
WHEREAS, NEWCO has been duly organized and is existing under the laws of the
State of Florida solely for the purpose of completing this transaction, and is a
wholly owned subsidiary of USFLORAL; and
WHEREAS, the COMPANY is a corporation organized and existing under the laws of
the State of Florida; and
WHEREAS, the respective Boards of Directors of USFLORAL, NEWCO and the COMPANY
(all of which companies are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of the
Constituent Corporations and their respective stockholders that NEWCO merge with
and into the COMPANY pursuant to this Agreement and the applicable provisions of
the laws of the State of Florida, such transaction being herein called the
"Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken pursuant
to an integrated transaction intended to qualify under Section 351 of the
Internal Revenue Code of 1986, as amended;
WHEREAS, the parties hereto entered into that certain Agreement and Plan of
Contribution on July 8, 1997 (the "Original Agreement") and now wish to amend
and restate the Original Agreement in its entirety as of August 5, 1997 in order
to achieve conformity with similar agreements USFLORAL has entered into with
other floral products businesses;
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
<PAGE>
1.1 Delivery and Filing of Articles of Merger. The Constituent Corporation
-----------------------------------------
will cause Articles of Merger in substantially the form of Annex I attached
hereto (the "Articles of Merger") to be signed and delivered to the Secretary of
State of Florida 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, NEWCO shall be merged
with and into the COMPANY in accordance with the Articles of Merger and the
separate existence of NEWCO shall cease. The COMPANY, as the party surviving
the Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
---------------------------------------------------------------------
Corporation. At the Merger Effective Date:
- -----------
(i) the Articles of Incorporation of NEWCO shall become the Articles of
Incorporation of the Surviving Corporation; and, subsequent to the Merger
Effective Date, such Articles of Incorporation shall be the Articles of
Incorporation of the Surviving Corporation until changed as provided by law;
(ii) the Bylaws of NEWCO shall become the Bylaws of the Surviving
Corporation; and, subsequent to the Merger Effective Date, such Bylaws shall be
the Bylaws of the Surviving Corporation until they shall thereafter be duly
amended;
(iii) the name of the person who shall serve as the sole member of the
Board of Directors of the Surviving Corporation shall be Robert Poirier; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the State of Florida and of the Articles of
Incorporation and Bylaws of the Surviving Corporation.
(iv) the officers of COMPANY immediately prior to the Merger Effective
Date shall continue as the officers of the Surviving Corporation in the same
capacity or capacities, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and Bylaws of the Surviving
Corporation, until his successor is elected and qualified.
1.4 Certain Information with Respect to the Capital Stock of the COMPANY,
---------------------------------------------------------------------
NEWCO and USFLORAL. The respective designations and numbers of outstanding
- ------------------
shares and voting rights of each class of outstanding capital stock of COMPANY,
NEWCO and USFLORAL as of the date of this Agreement are as follows:
(i) the authorized capital stock of the COMPANY consists of 1,000
shares of common stock, $5.00 par value (the "COMPANY Stock"), of which 600
shares are issued and outstanding;
-2-
<PAGE>
(ii) the authorized capital stock of NEWCO consists of 1,000 shares of
common stock, $1.00 par value (the "NEWCO Stock"), of which 1,000 shares are
issued and outstanding; and
(iii) the authorized capital stock of USFLORAL consists of 100,000,000
shares of common stock, $0.01 par value (the "USFLORAL Stock").
1.5 AAA Distribution. The parties agree that, immediately prior to the
----------------
Closing, the COMPANY shall distribute to its stockholders the amount of the
COMPANY's accumulated adjustments account (the "AAA Distribution"). The AAA
Distribution may be paid in whole or in part in cash, to the extent the COMPANY
has cash on hand or available to it under lines of credit, and/or by delivery of
the COMPANY's promissory note (which shall not bear interest), which note shall
be due and payable on the Merger Effective Date. On the Merger Effective Date,
USFLORAL agrees to provide sufficient cash to the COMPANY to enable it to pay
said note. Notwithstanding any provision of this Agreement to the contrary,
payment of the AAA Distribution and the resulting decrease in the COMPANY's net
worth and adverse change in the COMPANY's financial position are expressly
consented to and shall not constitute a default by the COMPANY or the
STOCKHOLDERS hereunder or excuse performance by USFLORAL or NEWCO of their
respective obligations.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of COMPANY
--------------------
Stock issued and outstanding immediately prior to the Merger Effective Date into
cash and shares of common stock of USFLORAL, $0.01 par value ("USFLORAL Stock"),
shall be as follows:
As of the Merger Effective Date:
(i) all of the shares of COMPANY Stock issued and outstanding
immediately prior to the Merger Effective Date shall, by virtue of the Merger
and without any action on the part of the holder thereof, automatically be
converted into that number of shares of USFLORAL Stock and the right to receive
cash from USFLORAL as determined pursuant to Section 2.2 below, all to be
distributed to STOCKHOLDERS in the percentages set forth on Annex II and at the
times specified in Section 5 hereof; and
(ii) each share of NEWCO Stock issued and outstanding immediately prior
to the Effective Time of the Merger Effective Date shall, by virtue of the
Merger and without any action on the part of the holder thereof, automatically
be converted into one fully paid and non-assessable share of stock of the
Surviving Corporation which shall constitute all of the outstanding shares of
said Surviving Corporation immediately after the Merger Effective Date.
-3-
<PAGE>
All USFLORAL Stock to be received by STOCKHOLDERS as a result of the Merger
shall, except for restrictions on resale or transfer described in Section 16
hereof, have the same rights as the majority of outstanding USFLORAL Stock. All
voting rights are fully exercisable by STOCKHOLDERS and STOCKHOLDERS are neither
deprived nor restricted in exercising those rights. At the Merger Effective
Date, USFLORAL shall have no class of capital stock issued and outstanding which
shall have any rights or preferences senior to the shares of USFLORAL Stock,
including, without limitation, any rights or preferences as to dividends or as
to the assets of USFLORAL upon liquidation or dissolution or as to voting
rights.
2.2 Calculation of USFLORAL Shares. The COMPANY Stock shall be converted, as
------------------------------
a result of the Merger, into such number of shares of USFLORAL Stock and the
amount of cash set forth on Annex II attached hereto.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 At the Merger Effective Date:
(i) STOCKHOLDERS, as the holders of all outstanding certificates
representing shares of COMPANY Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of USFLORAL Stock set
forth on Annex II opposite the name of each STOCKHOLDER; and
(ii) until the certificates representing the COMPANY Stock have been
surrendered by STOCKHOLDERS and replaced by certificates representing the
USFLORAL Stock, the certificates for the COMPANY Stock shall, for all corporate
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. The STOCKHOLDERS agree to cure
any deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES
4.1 As soon as practicable, but in any event within 30 days after the Closing,
USFLORAL shall engage Price Waterhouse to prepare, in accordance with GAAP, a
balance sheet of the COMPANY (the "Closing Date Balance Sheet") as of the end of
business on the day prior to the Closing Date, adding back to shareholders'
equity for purposes of the Closing Date Balance Sheet the amount of the AAA
Distribution. If the aggregate shareholders' equity as shown on the Closing Date
Balance Sheet is less than the aggregate shareholders' equity as shown on the
-4-
<PAGE>
COMPANY's Balance Sheet as at December 31, 1996, within 30 business days after
delivery of the Closing Date Balance Sheet to USFLORAL and the STOCKHOLDERS, the
STOCKHOLDERS shall pay USFLORAL by wire transfer of immediately available funds
an amount equal to the net worth deficiency. Notwithstanding anything in this
Article 4 to the contrary, if there is any net worth deficiency and the
STOCKHOLDERS dispute any item contained on the Closing Date Balance Sheet, the
STOCKHOLDERS shall notify USFLORAL in writing of each disputed item
(collectively, the "Disputed Amounts"), and specify the amount thereof in
dispute within thirty business days after the delivery of the Closing Date
Balance Sheet. If USFLORAL and the STOCKHOLDERS cannot resolve any such dispute
which would eliminate or reduce the amount of the net worth deficiency, then
such dispute shall be resolved by an independent nationally recognized
accounting firm which is reasonably acceptable to USFLORAL and the STOCKHOLDERS
(the "Independent Accounting Firm"). The determination of the Independent
Accounting Firm shall be made as promptly as practical and shall be final and
binding on the parties, absent manifest error which error may only be corrected
by such Independent Accounting Firm. Any expenses relating to the engagement of
the Independent Accounting Firm shall be allocated between USFLORAL and the
STOCKHOLDERS so that the STOCKHOLDERS' aggregate share of such costs shall bear
the same proportion to the total costs that the Disputed Amounts unsuccessfully
contested by the STOCKHOLDERS (as finally determined by the Independent
Accounting Firm) bear to the total of the Disputed Amounts so submitted to the
Independent Accounting Firm.
4.2 (a) As collateral security for the payment of any indemnification
obligations of the STOCKHOLDERS pursuant to Sections 12.1 and 12.2 hereof and
for the payment of amounts pursuant to Section 4.1 hereof, 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 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
-5-
<PAGE>
(iii) all cash and non-cash proceeds of all of the foregoing property
and all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property.
(b) Each certificate evidencing a Stockholder's Pledged Securities
issued in his, her or its name in the Merger, shall, at the Closing, be
delivered to USFLORAL, together with a stock power duly signed in blank by him,
her or it, such certificate bearing no restrictive or cautionary legend other
than those imprinted by USFLORAL's transfer agent at USFLORAL's request.
(c) 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.
(d) In the event that STOCKHOLDERS fail to timely pay USFLORAL any
amount which it is due pursuant to Sections 12.1 or 12.2 hereof, USFLORAL shall
have all the rights of a secured party under the Uniform Commercial Code as in
effect in Florida with respect to the unpaid amount; provided, however, that
prior to exercising such remedies USFLORAL shall give STOCKHOLDERS 10 days'
prior notice of the unpaid amount and a description of the determination
thereof. During such 10-day period, STOCKHOLDERS shall have the right to object
to such unpaid amount. If STOCKHOLDERS do not object by delivering written
notice to USFLORAL within such 10-day period, STOCKHOLDERS shall be deemed to
have irrevocably agreed to the validity of such unpaid amount. If STOCKHOLDERS
do so object, USFLORAL shall review the objections and respond to the
STOCKHOLDERS. If the parties do not resolve the dispute within 30 days of the
date of the STOCKHOLDERS' objection, the parties agree to submit the dispute for
binding arbitration with a panel of three arbitrators appointed by the American
Arbitration Association under the Commercial Arbitration Rules of such
Association then in effect using the Federal Rules of Civil Procedure.
(e) The remaining Pledged Securities shall be returned to the holders
thereof on the one-year anniversary of the Merger Effective Date.
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 Merger
(including the filing of the Articles of Merger which shall become effective on
the Merger Effective Date) and to effect the conversion and delivery of shares
referred to in Section 3 hereof (hereinafter referred to as the "Closing");
provided, that such actions shall not include the actual completion of the
Merger or the conversion and delivery of the shares referred to in Section 3
hereof, which actions shall only be taken on the Merger Effective Date as herein
provided. The Closing shall take place at the offices of Morgan, Lewis &
Bockius LLP, 5300 First Union Financial Center, 200 South Biscayne Boulevard,
Miami, Florida. The date on which the Closing shall occur shall be referred to
as the "Closing Date." Concurrently with the closing in
-6-
<PAGE>
respect of the IPO, the Merger shall become effective and all transactions
contemplated by this Agreement, including the conversion and delivery of shares
and the delivery of a check or checks in an amount equal to the cash which the
STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in
Section 3 hereof, shall occur and be deemed to be completed. The date on which
the Merger is effected shall be referred to as the "Merger Effective Date."
During the period from the Closing Date to the Merger Effective Date, this
Agreement may only be terminated by the parties if the underwriting agreement in
respect of the initial public offering of USFLORAL Stock is terminated pursuant
to the terms of such agreement. This Agreement shall in any event terminate if
the Merger Effective Date has not occurred within 10 business days of the
Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each STOCKHOLDER, jointly and severally, represents and
warrants, as follows:
6.1 Due Organization. The COMPANY is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of Florida, 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. True, complete and correct copies of the Articles of Incorporation
(certified by the Secretary of State of Florida) and Bylaws (certified by the
Secretary of the COMPANY) of the COMPANY have heretofore been delivered to
USFLORAL. The stock records and minute books of the COMPANY, as heretofore made
available to USFLORAL, are correct and complete.
6.2 Authorization. STOCKHOLDERS and the COMPANY 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.
6.3 Capital Stock. The authorized capital stock of the COMPANY consists
-------------
solely of the shares as shown on Schedule 6.3, of which the shares issued and
outstanding are shown. Except as set forth on Schedule 6.3, all of the issued
and outstanding shares of the capital stock of the COMPANY are owned by the
STOCKHOLDERS free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of COMPANY Stock have been duly authorized and
validly issued, are fully paid and nonassessable, are owned of record and
beneficially by the STOCKHOLDERS and in the amounts set forth in Annex II and
further, such shares were offered, issued, sold and delivered by the COMPANY in
compliance with all applicable state and federal laws concerning the issuance of
securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder.
-7-
<PAGE>
6.4 Transactions in Capital Stock. The COMPANY has never acquired
-----------------------------
any treasury stock. No option, warrant, call, conversion right or commitment of
any kind exists which obligates the COMPANY to issue any of its authorized but
unissued capital stock. In addition, the COMPANY has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any of its equity
securities or any interests therein or, except as set forth in Section 1.5
hereof, 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 on Schedule 6.6, the COMPANY presently
------------
owns, of record or beneficially, or controls, directly or indirectly, no capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity. The COMPANY is not, directly
or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
6.7 Predecessor Status. Set forth in Schedule 6.7 is a listing of all names
------------------
of all predecessor companies of the COMPANY, including the names of any entities
from whom the COMPANY previously acquired significant assets. The COMPANY has
never been a subsidiary or division of another corporation nor been a part of an
acquisition which was later rescinded.
6.8 Spin-off by the COMPANY. The COMPANY has never effected any sale or spin-
-----------------------
off of significant assets other than in the ordinary course of business.
6.9 Financial Statements. Attached hereto as Schedule 6.9 are copies of the
--------------------
following audited financial statements (the "Financial Statements") of the
COMPANY: Statement of Financial Condition as of December 31, 1996, 1995 and
1994 and Statements of Incomes, Cash Flows and Shareholders Equity for each of
the years in the three-year period ended December 31, 1996, and the COMPANY's
unaudited Statement of Financial Condition as of March 31, 1997 and March 31,
1996 (March 31, 1997 being hereinafter referred to as the "Balance Sheet Date"),
and Statements of Incomes, Cash Flows and Shareholders Equity for the five-month
periods then ended. Such Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted). Except as set forth on
Schedule 6.9, such Statements of Financial Condition present fairly the
financial position of the COMPANY as of the dates indicated thereon, and such
Statements of Incomes, Cash Flows and Shareholders Equity present fairly the
results of its operations for the periods indicated thereon.
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is
---------------------------
an accurate list, as of the Balance Sheet Date, of all material liabilities of
the COMPANY, which are reflected in the Statement of Financial Condition as of
March 31, 1997 and any material liabilities incurred thereafter in the ordinary
course of business, or material liabilities which are not reflected in the
balance sheet or the notes thereof, of any kind, character and description,
whether accrued, absolute,
-8-
<PAGE>
secured or unsecured, contingent or otherwise, together with, in the case of
those liabilities which are not fixed, an estimate of the maximum amount which
may be payable. For each such liability for which the amount is not fixed or is
contested, STOCKHOLDERS shall provide to USFLORAL the following information:
(i) a summary description of the liability together with the following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
(c) names of claimant and all other parties to the claim, suit or
proceeding.
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
(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 (exclusive
of the costs of defense thereof). 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 COMPANY, including receivables from and advances to employees
and STOCKHOLDERS. STOCKHOLDERS shall provide USFLORAL with an aging of all
accounts and notes receivable showing amounts due in 30 day aging categories.
Except as set forth on Schedule 6.11, such accounts and notes are collectible in
the amount shown on Schedule 6.11 net of the allowance for doubtful accounts as
shown on such balance sheet.
6.12 Permits and Intangibles. Attached hereto as Schedule 6.12 is an
-----------------------
accurate list and summary description, as of the Balance Sheet Date, of all
permits, licenses, franchises, certificates, trademarks, trade names, service
marks, patents, patent applications and copyrights owned or held by the COMPANY
all of which are now valid, in good standing and in full force and effect.
Except as set forth on Schedule 6.12, such permits, licenses, orders, approvals,
franchises, etc. are adequate for the operation of the COMPANY's business as
presently constituted.
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 $50,000 or in the case of leased
property requires annual rental payments in excess of $5,000) owned or
-9-
<PAGE>
leased by the COMPANY, 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 busi ness of the COMPANY and including an
indication as to which assets were formerly owned by the STOCKHOLDERS or
affiliates (which term, as used herein, shall have the meaning ascribed thereto
in Rule 144(a)(1) under the Securities Act of 1933, as amended) of the COMPANY.
Except as set forth on Schedule 6.13, substantially all of the trucks, machinery
and equipment of the COMPANY are in good working order and condition, ordinary
wear and tear excepted. All leases set forth on Schedule 6.13 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the COMPANY and, except as set forth on Schedule 6.13, to the
knowledge of the STOCKHOLDERS, no other party to any such lease is in default
thereunder and such leases constitute the legal, valid and binding obligations
of such other parties. All fixed assets used by the COMPANY in the operation of
its business are either owned by the COMPANY or leased.
6.14 Material Contracts and Commitments. Attached hereto as Schedule
----------------------------------
6.14 is an accurate list, as of the Balance Sheet Date, of all material
contracts, commitments and similar agreements to which the COMPANY is a party or
by which it or any of its properties are bound (including, but not limited to,
joint venture or partnership agreements, contracts with any labor organizations,
loan agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements). STOCKHOLDERS have
heretofore delivered to USFLORAL true copies of such agreements. Except as set
forth on Schedule 6.14, the COMPANY has complied with all material commitments
and obligations pertaining to it and is not in material default under any such
agreement and no notice of default has been received. Except as set forth on
Schedule 6.14, the COMPANY is not a party to any contract, agreement or other
instrument or commitment which cannot be terminated by the COMPANY on 30 days'
notice without any liability to the COMPANY which would have a Material Adverse
Effect on the COMPANY taken as a whole. Except as set forth on Schedule 6.14,
the COMPANY is not bound by or subject to (and none of its assets or properties
is bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 6.14, no employees of the COMPANY are represented by any labor
union or covered by any collective bargaining agreement nor, to the best of
STOCKHOLDERS' knowledge, is any organization campaign to establish such
representation in progress. There is no pending or, to the best of
STOCKHOLDERS' knowledge, threatened labor dispute involving the COMPANY and any
group of its employees nor has the COMPANY experienced any labor interruptions
over the past three years and the COMPANY considers its relationship with
employees to be good.
6.15 Title to Real Property. The COMPANY does not own any real property.
----------------------
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list, as
---------
of the Balance Sheet Date, of all insurance policies carried by the COMPANY and
an accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. STOCKHOLDERS have heretofore delivered
to USFLORAL complete copies of all policies currently in effect. The insurance
carried by the COMPANY with respect to its properties, assets and business is
with financially sound insurers. Such insurance policies are currently in full
force
-10-
<PAGE>
and effect and shall remain in full force and effect, or comparable policies
substituted therefor, through the Merger Effective Date. The COMPANY's
insurance has never been canceled nor has the COMPANY 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 COMPANY. The COMPANY has delivered to USFLORAL a true and
complete schedule of the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date.
STOCKHOLDERS have heretofore delivered to USFLORAL copies of the payroll lists
covering all employees of the COMPANY as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.17, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases and tax payment distributions implemented on a
basis consistent with past practices.
6.18 Employee Plans. Attached hereto as Schedule 6.18 is a list, as of
--------------
the Balance Sheet Date, of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multi-employer plans and
all multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), which are currently maintained and/or sponsored by
the COMPANY or to which the COMPANY currently contributes, or has an obligation
to contribute in the future (including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions and
deferred compensation agreements), including 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, have been delivered to
USFLORAL. To the extent that any Qualified Plans have not been amended to comply
with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within 120
days after the Closing Date. All reports and other documents required to be
filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or tax returns) have been
timely filed or distributed. None of: (i) the STOCKHOLDERS; (ii) any Plan; or
(iii) the COMPANY has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA, except for transactions
-11-
<PAGE>
for which an individual class exemption exists under Section 4975 of the Code or
Section 408 of ERISA. No Plan has incurred an accumulated funding deficiency,
as defined in Section 412(a) of the Code and Section 302(1) of ERISA; and the
COMPANY currently has no (and at the Closing Date will not have) direct or
indirect liability whatsoever (including being subject to any statutory lien to
secure payment of any such liability), to the Pension Benefit Guaranty
Corporation ("PBGC") with respect to any such Plan under Title IV of ERISA or to
the Internal Revenue Service for any excise tax or penalty; and neither the
COMPANY nor any member of a "controlled group" (as defined in ERISA Section
4001(a)(14)) currently have (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 or partial terminations of any
Qualified Plan without notice to and approval by the Internal Revenue Service;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(iii) there have been no "reportable events" (as that phrase is defined
in Section 4043 of ERISA) with respect to any Plan which were required to be
reported and 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"), the COMPANY has complied (and on the Closing Date will have complied),
in all respects with all reporting, disclosure, notice, election and other
benefit continuation requirements imposed thereunder as and when applicable to
such plans, and the COMPANY has (and will incur) no direct or indirect liability
and is not (and will not be) subject to any loss, assessment, excise tax
penalty, loss of federal income tax deduction or other sanction, arising on
account of or in respect of any direct or indirect failure by the COMPANY 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 with
respect to such group health plans;
(vi) the COMPANY is a member of a "controlled group" as defined in
ERISA Section 4001(a)(14) which is described on Schedule 6.19 attached hereto;
-12-
<PAGE>
(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, except routine claims for benefits;
(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 not to be representative of the expense of
such Plans as of the Balance Sheet Date; and
(ix) the COMPANY has never incurred liability under Section 4062 of
ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, the
-------------------
COMPANY is not in violation of any law or regulation or under any order of any
court or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction which would have a
Material Adverse Effect on the COMPANY; and except as set forth on Schedule
6.20, there are no claims, actions, suits or proceedings, pending or threatened,
against or affecting the COMPANY at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction and no notice of any
claim, action, suit or proceeding, whether pending or threatened, has been
received. The COMPANY has conducted and is conducting its business in
substantial compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations and is not in
violation of any of the foregoing which would have a Material Adverse Effect on
the COMPANY.
6.21 Taxes. The COMPANY has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all tax years ended on
or before the Closing Date. To the best of STOCKHOLDERS' knowledge, there are
no examinations in progress or claims asserted against the COMPANY for federal
and other taxes (including penalties and interest) for any period or periods
prior to and including the Balance Sheet Date and no notice of any claim,
whether pend ing 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.
Correct and complete copies of (i) all revenue agent reports which have been
delivered to the COMPANY, (ii) extensions of statutory limitations and (iii) the
federal and local income tax returns and franchise tax returns of the COMPANY
for the last three fiscal years, or such shorter period of time as any of them
shall have existed, have heretofore been delivered by STOCKHOLDERS to USFLORAL.
The COMPANY made an election to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. The amount of the accumulated adjustments account as
of March 31,
-13-
<PAGE>
1997 was $3,709,099. The 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. The COMPANY currently utilizes the
accrual method of accounting for income tax purposes and has not changed its
method of accounting in the past five years.
6.22 Completeness; No Violations. The certified copies of the Articles
---------------------------
of Incorporation and Bylaws, both as amended to date, of the COMPANY, and the
copies of all leases, instruments, agreements, licenses, permits, certificates
or other documents which are included on schedules attached hereto or have been
delivered to USFLORAL in connection with the transactions contemplated hereby
are complete and correct; neither the COMPANY nor, to the knowledge of the
STOCKHOLDERS, any other party thereto, is in material default thereunder; and,
except as set forth in the schedules and documents attached to this Agreement,
(i) the rights and benefits of the COMPANY thereunder will not be materially and
adversely affected by the transactions contemplated hereby; and (ii) 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. Except
as set forth on Schedule 6.22, the consummation of the transactions contemplated
hereby will not give rise to any right of termination, cancellation or
acceleration or result in the loss of any right or benefit thereunder.
6.23 Government Contracts. The COMPANY is not now nor has it ever been a
--------------------
party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Absence of Changes. Since the Balance Sheet Date, except for
------------------
transactions contemplated by this Agreement, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) which has had a Material Adverse Effect on the COMPANY, taken as a
whole;
(iii) any change in the authorized capital of the COMPANY or in its
securities outstanding or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(iv) subject to Section 1.5 and except for tax payment distributions,
any declaration or payment of any dividend or distribution in respect of the
capital stock or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the COMPANY;
-14-
<PAGE>
(v) any work interruptions, labor grievances or claims filed, or any
proposed law or regulation or any event or condition of any character, which has
had a Material Adverse Effect on the COMPANY, taken as a whole;
(vi) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person, including,
without limitation, the STOCKHOLDERS and their affiliates, other than in the
ordinary course of business;
(vii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of any STOCKHOLDER or any affiliate thereof;
(viii) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, properties or
rights of the COMPANY or requiring consent of any party to the transfer and
assignment of any such assets, properties or rights;
(ix) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any properties, rights or assets of the COMPANY other than
in the ordinary course of business;
(x) any waiver of any material rights or claims of the COMPANY;
(xi) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the COMPANY is a party; or
(xii) any transaction by the COMPANY outside the ordinary course of its
business, except in connection with this Agreement and the transactions
contemplated hereby.
6.25 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule
------------------------------------
6.25 is an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(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.
-15-
<PAGE>
Schedule 6.25 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the COMPANY and
a description of the terms of such power.
6.26 Environmental Matters. To the knowledge of the STOCKHOLDERS, the
---------------------
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 it 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, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law) except to the extent that noncompliance with any Environmental Law, either
singly or in the aggregate, would not have a Material Adverse Effect on the
COMPANY. The COMPANY has obtained and adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes and Hazardous Substances and has reported, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. There have been no releases
or threats of releases (as defined in Environmental Laws) at, from, in or on any
property owned or operated by the COMPANY except as permitted by Environmental
Laws. STOCKHOLDERS know of no on-site location to which the COMPANY has
transported or disposed of Hazardous Wastes and Hazardous Substances or arranged
for the transportation of Hazardous Wastes and Hazardous Substances, which site
is the subject of any federal, state, local or foreign enforcement action or any
other investigation which could lead to any claim against the COMPANY, USFLORAL
or NEWCO for any clean-up cost, remedial work, damage to natural resources or
personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended. The COMPANY has no contingent liability in connection with any release
of any Hazardous Waste or Hazardous Substance into the environment.
6.27 Underground Storage Tanks. The COMPANY has never owned or leased
-------------------------
any real estate having any underground storage tanks containing petroleum
products or wastes or other hazardous substances regulated by 40 CFR 280 and/or
other applicable federal, state or local laws, rules and regulations and
requirements.
6.28 Validity of Obligations. The execution and delivery of this
-----------------------
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
COMPANY and the STOCKHOLDERS of the COMPANY, and this Agreement has been duly
and validly authorized by all necessary corporate action and is a legal, valid
and binding obligation of the COMPANY.
6.29 Relations with Governments. The COMPANY has not made, offered or
--------------------------
agreed to offer anything of value to any governmental official, political party
or candidate for government
-16-
<PAGE>
office nor has the COMPANY otherwise taken any action which would cause the
COMPANY to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended or any law of similar effect.
6.30 Disclosure. Without limiting any exclusion, exception or other
----------
limitation contained in any of the representations and warranties made herein,
this Agreement and the schedules hereto and all other documents and information
furnished to USFLORAL and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If any
STOCKHOLDERS become aware of any fact or circumstance which would change a
representation or warranty of any STOCKHOLDER in this Agreement or any
representation made on behalf of the COMPANY, the STOCKHOLDERS shall promptly
give notice of such fact or circumstance to USFLORAL. However, such notification
shall not relieve the COMPANY or STOCKHOLDERS of their respective obligations
under this Agreement, and, at the sole option of USFLORAL, the truth and
accuracy of any and all warranties and representations of the STOCKHOLDERS, at
the date of this Agreement and at the closing, shall be a precondition to the
consummation of this transaction.
6.31 Ownership. Each STOCKHOLDER owns beneficially and of record all of
---------
the shares of COMPANY Stock identified on Annex II as being owned by such
STOCKHOLDER.
7. REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFLORAL and NEWCO, jointly and severally, represent to the
STOCKHOLDERS as follows:
7.1 Due Organization. USFLORAL and NEWCO are corporations duly organized,
----------------
validly existing and in good standing under the laws of the States of Delaware
and Florida, 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 states where the failure to be so authorized, qualified or licensed
would not have a Material Adverse Effect on their respective businesses. True,
complete and correct copies of the Certificates of Incorporation (certified by
the Secretary of State of the States of Delaware and Florida, respectively) and
the Bylaws, as amended, of USFLORAL and NEWCO (certified by the Secretary of the
respective corporations) have heretofore been delivered by USFLORAL to
STOCKHOLDERS.
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
Robert Poirier or
-17-
<PAGE>
Jonathan Ledecky (i) have registration rights with respect to USFLORAL Stock
that are superior to registration rights that the STOCKHOLDERS have, or (ii)
will have the right to include any USFLORAL Stock in the IPO.
7.3 Authorization. The representatives of USFLORAL and NEWCO executing this
-------------
Agreement have the corporate authority to enter into and bind USFLORAL and NEWCO
by the terms of this Agreement. USFLORAL and NEWCO have full legal right, power
and authority to enter into this Agreement and have the full legal right, power
and authority to enter into the Merger.
7.4 Validity of Obligations. The execution and delivery of this Agreement by
-----------------------
USFLORAL and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of USFLORAL and
by the Board of Directors and the stockholder of NEWCO, and this Agreement has
been duly and validly authorized by all necessary corporate action and is a
legal, valid and binding obligation of USFLORAL and NEWCO, respectively.
7.5 No Conflicts. The execution, delivery and performance of this Agreement,
------------
the consummation of any transactions herein referred to or contemplated by and
the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of either USFLORAL or NEWCO,
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which either USFLORAL or
NEWCO is a party, or result in the creation or imposition of any lien, charge or
encumbrance on any of USFLORAL's or NEWCO's properties pursuant to (A) any law
or regulation to which USFLORAL or NEWCO, or any of their property is subject,
or (B) any judgment, order or decree to which USFLORAL or NEWCO is bound or any
of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFLORAL or
NEWCO; or
(iv) require any filing or other notice under the Hart-Scott-Rodino
Antitrust Improvement Act.
7.6 Other Agreements. Prior to the consummation of the Merger, USFLORAL and
----------------
NEWCO have no material properties or assets and are not party to any contracts
other than this Agreement, the letter 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 7.5 hereof.
-18-
<PAGE>
7.7 Reasonable and Adequate Capital. On the Merger Effective Date, the
-------------------------------
Surviving Corporation will have an amount of capital which is reasonable in
light of the business purposes of the Surviving Corporation and adequate to
enable the Surviving Corporation to achieve its business purposes.
8. COVENANTS PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the COMPANY will afford to the officers and authorized
representatives of USFLORAL access during normal business hours to all of the
COMPANY's sites, properties, books and records and will furnish USFLORAL with
such additional financial and operating data and other information as to the
business and properties of the COMPANY as USFLORAL may from time to time
reasonably request in writing. The COMPANY will cooperate with the reasonable
requests of USFLORAL, its representatives, engineers, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by any governmental agency.
USFLORAL will cause all information obtained in connection with the negotiation
and performance of this Agreement to be treated as confidential in accordance
with the provisions of Section 15 hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, STOCKHOLDERS will cause the COMPANY 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;
(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 the COMPANY;
(vi) maintain compliance with all material permits, laws, rules and
regulations and any consent orders of any court or federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction; and
-19-
<PAGE>
(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 (USFLORAL specifically consents to the COMPANY renewing its
line of credit with First Union).
8.3 Prohibited Activities. Between the Balance Sheet Date and the Merger
---------------------
Effective Date, the COMPANY will not, 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, except for the AAA
Distribution, or purchase, redeem or otherwise acquire or retire for value any
shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures in excess of $200,000;
(v) increase the compensation payable or to become payable to any
officer, director, STOCKHOLDERS, employee or agent other than ordinary salary
increases (and tax payment distribution) 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;
(viii) negotiate for the acquisition of any business other than
Floraltech, Inc. 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
-20-
<PAGE>
(xii) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
8.4 Supplier Approval. Prior to the Closing Date, the COMPANY shall satisfy
-----------------
any requirement for notice and approval of the transactions contemplated by this
Agreement under applicable supplier agreements, and shall provide USFLORAL with
satisfactory evidence of such approvals.
8.5 [intentionally omitted]
8.6 No Shop. None of the STOCKHOLDERS, the COMPANY nor any agent, officer,
-------
director or any representative of any of the foregoing will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Merger Effective Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person other than USFLORAL or
NEWCO relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the COMPANY or a merger, consolidation or business
combination of the COMPANY.
8.7 Notification of Certain Matters. STOCKHOLDERS and the COMPANY shall give
-------------------------------
prompt notice to USFLORAL of (i) the occurrence or non-occurrence of any event
known to any STOCKHOLDER or the COMPANY the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in
Section 6 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of any
STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. USFLORAL
shall give prompt notice to each STOCKHOLDER of (i) the occurrence or non-
occurrence of any event known to USFLORAL the occurrence 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.
-21-
<PAGE>
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 the COMPANY may be made
unless USFLORAL consents to such amendment or supplement; and provided further,
however, that USFLORAL may not withhold consent to such amendment or supplement
if the same relates to (i) changes in facts or circumstances occurring
subsequent to the date hereof, or (ii) facts and circumstances existing as of
the date hereof that were not disclosed by the STOCKHOLDERS because they did not
have knowledge of them (but, with respect to facts and circumstances described
in (ii) only to the extent that the omission thereof from the Schedules attached
hereto as of the date hereof was not the result of a lack of good faith
diligence on the part of the STOCKHOLDERS). No amendment of or supplement to a
Schedule shall be made later than 48 hours prior to the anticipated
effectiveness of the Registration Statement defined in Section 9.5.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of STOCKHOLDERS hereunder are subject to the satisfaction on
or prior to the Closing Date (or such earlier date specified below) of the
following conditions:
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFLORAL and NEWCO contained in Section 7
shall be accurate as of the Closing Date as though such representations and
warranties had been made as of such times; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by USFLORAL and
NEWCO on or before the Closing Date shall have been duly complied with and
performed; and a certificate to the foregoing effect dated the Merger Effective
Date and signed by the President or any Vice President of USFLORAL shall have
been delivered to STOCKHOLDERS.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFLORAL of the COMPANY Stock and no governmental
agency or body shall have taken any other action or made any request of the
COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
9.3 Employment Agreements. The COMPANY shall have executed and delivered an
---------------------
Employment Agreement with Dwight Haight in the form of Annex III attached
hereto.
9.4 Opinion of Counsel. STOCKHOLDERS shall have received an opinion from
------------------
Morgan, Lewis & Bockius LLP, counsel for USFLORAL, dated the Closing Date, in
form and substance satisfactory to STOCKHOLDERS, to the effect that:
-22-
<PAGE>
(i) USFLORAL and NEWCO have been duly organized and are validly
existing in good standing under the laws of the States of Delaware and Florida,
respectively;
(ii) this Agreement has been duly authorized, executed and delivered by
USFLORAL and NEWCO and constitutes a valid and binding agreement of USFLORAL and
NEWCO enforceable in accordance with its terms, except as such enforceability
may be subject to bankruptcy, moratorium, insolvency, reorganization,
arrangement and other similar laws relating to or affecting the rights of
creditors and except (X) as the same may be subject to the effect of general
principles of equity and (Y) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein; and
(iii) the shares of USFLORAL Stock to be received by the STOCKHOLDERS
on the Merger Effective Date shall be duly authorized, fully paid and
nonassessable.
9.5 Registration Statement. USFLORAL shall have filed with the Securities and
----------------------
Exchange Commission ("SEC") a registration statement on Form S-1 covering the
offer and sale of shares of USFLORAL Stock (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. Prior to
effectiveness, STOCKHOLDERS shall have the right to review and comment upon the
Registration Statement for accuracy with respect to disclosures concerning the
COMPANY and the STOCKHOLDERS.
9.6 Market Capitalization. The aggregate post closing market capitalization
---------------------
of USFLORAL (determined by multiplying the number of shares of USFLORAL Stock
outstanding immediately subsequent to the Merger Effective Date by the initial
price to the public in the IPO) shall be not less than $50 million.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFLORAL and NEWCO hereunder are, at their option, subject
to the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions:
10.1 Representations and Warranties; Performance of Obligations.
----------------------------------------------------------
STOCKHOLDERS shall have delivered to USFLORAL a certificate dated the Closing
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 with the same effect as though such representations and
warranties had been made on and as of such dates, except for matters expressly
disclosed in the certificate or a schedule thereto; each and all of the
agreements of STOCKHOLDERS and the COMPANY to be performed on or before the
Closing Date pursuant to the terms hereof shall have been performed.
-23-
<PAGE>
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 the month ended immediately prior to the Closing Date and
the unaudited statements of income, cash flow and stockholder's equity of the
COMPANY for the periods then ended, disclosing no material adverse change in the
financial condition of the COMPANY or the results of its operations from the
financial statements originally furnished by the COMPANY as set forth in
Schedule 6.9
10.4 No Material Adverse Change. No material adverse change in the
--------------------------
results of operations, financial position or business of the COMPANY shall have
occurred, other than the AAA Distribution, and the COMPANY shall not have
suffered any material loss or damages to any of its properties or assets,
whether or not covered by insurance, since the Balance Sheet Date, which change,
loss or damage materially affects or impairs the ability of the COMPANY to
conduct its business; and USFLORAL shall have received on the Closing Date a
certificate signed by STOCKHOLDERS to such effect.
10.5 Regulatory Review. USFLORAL, through its authorized
-----------------
representatives, shall have completed a satisfactory review of the practices and
procedures of the COMPANY including, but not limited to, environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the operations of the COMPANY;
which review reflects compliance with all applicable laws governing the COMPANY,
disclosing no material actual or probable violations, compliance problems,
required capital 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 the COMPANY from any and all claims of STOCKHOLDERS against the
COMPANY, exclusive of continuing indemnification rights which STOCKHOLDERS may
have for third-party claims against them (other than claims in connection with
which STOCKHOLDERS are obligated to indemnify USFLORAL or the Surviving
Corporation pursuant to Article 12 hereof).
10.7 Employment Agreements. Dwight Haight shall have executed and
---------------------
delivered an Employment Agreement in the form of Annex III attached hereto.
10.8 Opinion of Counsel. USFLORAL shall have received an opinion from
------------------
Eckert Seamans Cherin & Mellott, LC, counsel to the STOCKHOLDERS, dated the
Closing Date, in form and substance satisfactory to USFLORAL, to the effect that
with respect to the COMPANY:
-24-
<PAGE>
(i) the COMPANY has been duly organized and is validly subsisting in
good standing under the laws of the State of Florida;
(ii) the authorized and outstanding capital stock of the COMPANY is as
represented by the STOCKHOLDERS in this Agreement and each share of such stock
has been duly and validly authorized and issued, is fully paid and nonassessable
and was not issued in violation of the preemptive rights of any stockholder;
(iii) 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;
(iv) this Agreement has been duly authorized, executed and delivered by
the COMPANY and the STOCKHOLDERS and constitutes a valid and binding agreement
of the COMPANY and the STOCKHOLDERS enforceable against them in accordance with
its terms except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and except (X) as the same may
be subject to the effect of general principles of equity and (Y) that no opinion
need be expressed as to the enforceability of indemnification provisions
included herein;
(v) except to the extent set forth on Schedules 6.10 and 6.20, to the
knowledge of such counsel, 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;
(vi) to the knowledge of such counsel, no notice to, consent,
authorization, approval or order of any court or governmental agency or body or
of any other third party is required in connection with the execution, delivery
or consummation of this Agreement by any STOCKHOLDERS or for the transfer to
USFLORAL of the COMPANY Stock; and
(vii) 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 Bylaws of the COMPANY or of any lease, instrument, license,
permit or any other agreement to which the COMPANY is a party or by which the
COMPANY or any STOCKHOLDER is bound.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 Consents and Approvals. All necessary consents of and filings with
----------------------
any governmental authority or agency relating to the consummation of the
transactions contemplated
-25-
<PAGE>
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 Closing Date,
setting forth all liabilities and obligations of the COMPANY arising since the
Balance Sheet Date.
10.11 Additional Contracts. STOCKHOLDERS shall have delivered to USFLORAL
--------------------
a schedule (Schedule 10.11), dated the Closing Date, showing all material
contracts and agreements, together with copies thereof, entered into by the
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 Secretary of State of Florida 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
acquired the shares of USFLORAL Stock covered thereby.
10.14 Repayment of Indebtedness. Prior to the Closing Date, the
-------------------------
STOCKHOLDERS shall have repaid the COMPANY in full all amounts owing by the
STOCKHOLDERS.
10.15 Pretax Income. The COMPANY shall have had auditable adjusted
-------------
average yearly pretax income of $1,500,000 for the three fiscal years ending
December 31, 1994, 1995 and 1996, and the pretax income of the COMPANY for the
year ending December 31, 1997 shall be projected to be at least $1,500,000 based
on annualization of the pretax income of the COMPANY for the year to date as of
the month ended immediately prior to the Closing Date. For purposes of this
Section 10.15, the amount of bonuses paid in excess of base salaries shall be
added back to pretax net income.
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
-26-
<PAGE>
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 sum of the Consideration
(as such term is defined in Annex II of this Agreement), including the AAA
Distribution, shall be available for issuance to the key employees of the
Surviving Corporation after the Closing, as determined by the Surviving
Corporation's President (or other officer or director designated by the
Surviving Corporation and acceptable to USFLORAL) in accordance with USFLORAL's
policies, and authorized and issued under the terms of USFLORAL's Amended and
Restated 1997 Long-Term Incentive Plan.
11.3 34 Act Obligations. For at least two years subsequent to the Merger
------------------
Effective Date, USFLORAL agrees to timely file all documents required to be
filed with the Securities and Exchange Commission pursuant to Sections 13 and 14
of the Securities Exchange Act of 1934.
11.4 Certain Transactions. USFLORAL will cause its existing stockholders
--------------------
to participate, within the standards established by Rev. Pro. 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) other persons acquiring stock in the
IPO and (iii) the persons acquiring stock as a result of the Merger and other
concurrent mergers to possess at least 80% of the outstanding stock of USFLORAL.
Each of the concurrent mergers will be a reverse triangular merger in which not
more than 60% of the consideration being transferred to each stockholder of the
target corporations shall consist of USFLORAL Stock.
11.5 Piggy-Back Registrations. If at any time after the expiration of
------------------------
the restrictions contained in Section 16 USFLORAL shall determine to register
shares of USFLORAL Stock for its own account or the account of others under the
1933 Act (other than on Form S-8 or Form S-4 or their then equivalents relating
to shares of USFLORAL Stock to be issued solely in connection with any
acquisition of any entity or business or shares of USFLORAL Stock issuable in
connection with stock option or other employee benefit plans, and other than any
"shelf" registration statement relating to securities to be issued by USFLORAL),
then it shall send to each holder of shares of USFLORAL Stock issued in the
Merger ("Registrable Shares") (all such security holders and being referred to
as "Holders") written notice of such determination. If, within 15 days after
receipt of such notice, such Holder shall so request in writing, then USFLORAL
shall use its best efforts to include in such registration statement all or any
part of the Registrable Shares such Holder requests to be registered, except
that if, in connection with any offering involving an underwriting of USFLORAL
Stock to be issued by USFLORAL, the managing underwriter shall impose a
limitation on the number of shares of such USFLORAL Stock which may be included
in the registration statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution, then USFLORAL shall be
obligated to include in such registration statement only such limited portion of
the Registrable Shares with respect to which such Holder has requested inclusion
-27-
<PAGE>
hereunder; provided, however, that USFLORAL shall not so exclude any Registrable
-------- -------
Shares unless it has first excluded all securities to be offered and sold by
directors, officers or other employees of USFLORAL who are not Holders 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
USFLORAL 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 being capable of sale within a three-month period in accordance with the
volume and manner-of-sale limitations of Rule 144 under the 1933 Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by STOCKHOLDERS. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, each STOCKHOLDER, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
USFLORAL, NEWCO and the Surviving Corporation and their respective officers,
stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement until the Expiration Date (as defined in Section
12.6) from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by USFLORAL, NEWCO or the Surviving Corporation as a
result of or arising from (i) any breach of the representations and warranties
made by STOCKHOLDERS set forth herein or on the schedules or certificates
delivered in connection herewith, (ii) any nonfulfillment of any agreement on
the part of STOCKHOLDERS or the COMPANY under this Agreement or (iii) any
liability under the Securities Act of 1933, as amended (the "1933 Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to the COMPANY or STOCKHOLDERS, and provided to USFLORAL or its
counsel by the COMPANY or 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 the
COMPANY or STOCKHOLDERS required to be stated therein or necessary to make the
statements therein not misleading, and not provided to USFLORAL or its counsel
by the COMPANY or STOCKHOLDERS, provided, however, that such indemnity shall not
inure to the benefit of USFLORAL, NEWCO or the Surviving Corporation to the
extent that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and
STOCKHOLDERS provided, in writing, corrected information to USFLORAL for
inclusion in the final prospectus, and such information was not so included.
-28-
<PAGE>
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 hereto, and
notwithstanding any investigation by USFLORAL or NEWCO, the STOCKHOLDERS
covenant and agree that they will indemnify, defend, protect and hold harmless
USFLORAL, NEWCO and the Surviving Corporation and their respective officers,
stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, costs and
expenses whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by USFLORAL, NEWCO or
the Surviving Corporation as a result of or incident to: (a) the existence of
liabilities of the COMPANY in excess of the liabilities set forth on Schedule
6.10, but only to the extent of such excess, with the parties acknowledging and
agreeing that (i) the existence of liabilities (such as accounts payable) of the
COMPANY on the Merger Effective Date that are different (but not in the
aggregate greater) than the liabilities of the COMPANY set forth on Schedule
6.10 on the date hereof shall not give rise to any obligations of the
STOCKHOLDERS under the provisions of this Section 12 and (ii) the existence of
liabilities that arise in the ordinary course of business of the COMPANY that do
not arise as a result of a breach by the STOCKHOLDERS of any of their
obligations set forth in Sections 8.2 or 8.3 hereof shall not give rise to any
obligations of the STOCKHOLDERS under the provisions of this Section 12; (b) all
liability resulting from the litigation matters listed on Schedule 6.20 (except
for item 2 on Schedule 6.20); and (c) amounts due and payable for anti-dumping
duties for periods prior to March 1, 1997 in amounts in excess of the amount
shown on Schedule 6.10.
12.3 Indemnification by USFLORAL and NEWCO. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFLORAL and NEWCO, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
STOCKHOLDERS and their respective heirs, executors, personal representatives 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, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by
STOCKHOLDERS and their respective heirs, executors, personal representatives and
assigns as a result of or arising from (i) any breach of the representations and
warranties made by USFLORAL and NEWCO set forth herein or on the schedules or
certificates attached hereto, (ii) any nonfulfillment of any agreement on the
part of USFLORAL or NEWCO under this Agreement, (iii) any liabilities which
STOCKHOLDERS may incur due to USFLORAL's failure to be responsible for the
liabilities and obligations of the Surviving Corporation (except to the extent
that USFLORAL has claims against STOCKHOLDERS by reason of such liabilities); or
(iv) any liability under the 1933 Act, the Exchange Act or other federal or
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 (other
than those referred to in clause (iii) of Section 12.1) 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
(other than those
-29-
<PAGE>
referred to in clause (iii) of Section 12.1) required to be stated therein or
necessary to make the statements therein not misleading.
12.4 Third-Person Claims. Promptly after any party hereto (hereinafter
-------------------
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement (a "Third Person") or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently.
If the Indemnifying Party undertakes to defend or settle, it shall promptly
notify the Indemnified Party of its intention to do so, and the Indemnified
Party shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the Indemnifying Party that are
in the Indemnified Party's possession or control. Notwithstanding the foregoing,
the Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel); provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and out-of-
pocket expenses and except as provided in the immediately preceding sentence.
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
-30-
<PAGE>
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 the amount equal to 2% of the market
value of the Consideration described on Annex II hereto (USFLORAL Stock being
valued for this purpose at the Price to Public of such shares in the IPO), at
which time an Indemnified Party shall be entitled to seek indemnification for
all claims not previously asserted pursuant to this Section. For purposes of
the preceding sentence, USFLORAL, NEWCO and the Surviving Corporation shall be
considered to be a single Indemnifying and Indemnified Party and STOCKHOLDERS
shall be considered to be a single Indemnifying and Indemnified Party.
Notwithstanding any other term of this Agreement, in no event shall any
STOCKHOLDER be liable under this Section 12 for an amount which exceeds the
aggregate value (determined at the Merger Effective Date) of the consideration
received by such STOCKHOLDER under this Agreement. "Excess Net Worth" shall
mean the amount, if any, by which the sum of (i) aggregate shareholders' equity
as shown on the Closing Date Balance Sheet and (ii) the AAA Distribution is
greater than the aggregate shareholders' equity as shown on the Balance Sheet of
the COMPANY as at December 31, 1996. All indemnification obligations of the
STOCKHOLDERS with respect to unpaid accounts receivable pursuant to Section 6.11
hereof shall be reduced by the amount of any Excess Net Worth (but only to the
extent such Excess Net Worth has not previously been utilized to reduce an
indemnification obligation pursuant to this sentence).
12.6 Survival of Representations and Warranties. The parties agree that
------------------------------------------
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of 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 the 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); (iv) the representations and
warranties which serve as a basis for the indemnity obligations of STOCKHOLDERS
under Sections 12.2(a) and (b) shall survive the Merger Effective Date, without
limitation; (v) the indemnity obligations of the STOCKHOLDERS under Section
12.2(c) shall survive for a period of three years from the Merger Effective
Date; and (vi) solely for the purposes of Section 12.3(iv) hereof, and solely to
the extent that STOCKHOLDERS actually incur 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
-31-
<PAGE>
Merger Effective Date, which shall be deemed to be the Expiration Date for
purposes of this clause (vi).
12.7 Sole Remedies. The provisions of this Section 12 shall be the
-------------
exclusive basis for assertion of claims against, or the imposition of liability
on, the STOCKHOLDERS in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the STOCKHOLDERS.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFLORAL or STOCKHOLDERS may, by notice
--------------------------
in the manner hereinafter provided on or before the Closing Date, terminate this
Agreement 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 has not been consummated on
or prior to December 31, 1997. During the period from the Closing Date to the
Merger Effective Date, this Agreement may only be terminated by the parties as
provided in Section 5 hereof.
13.2 Liquidated Damages. If (i) the STOCKHOLDERS terminate this
------------------
Agreement after the satisfaction of the conditions set forth in Article 9, (ii)
USFLORAL terminates this Agreement after the satisfaction of the conditions set
forth in Article 10, (iii) the Merger fails to occur because of the default of
the COMPANY or the STOCKHOLDERS or (iv) the Merger fails to occur because of the
default of USFLORAL, then, in the event of (i) or (iii), in addition to the
other remedies available to USFLORAL in equity or pursuant to this Agreement,
STOCKHOLDERS shall pay to USFLORAL the sum of $500,000 as liquidated damages;
or, in the event of (ii) or (iv), in addition to the other remedies available to
the STOCKHOLDERS in equity or pursuant to this Agreement, USFLORAL shall pay to
the STOCKHOLDERS the aggregate sum of $500,000 as liquidated damages. It is
hereby agreed that the damaged party's damages in the event of a termination or
default by the other party hereunder are uncertain and impossible to ascertain
and that the foregoing constitutes a reasonable liquidation of such damages and
is intended not as a penalty but as liquidated damages.
14. NONCOMPETITION
14.1 Prohibited Activities. STOCKHOLDERS agree that for a period of two
---------------------
years following the Merger Effective Date, they shall not in the United States:
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct
-32-
<PAGE>
competition with the Surviving Corporation or USFLORAL that involves the
importing, brokerage, shipping or marketing of floral products, or any business
engaging in the consolidation of the floral industry with the United States;
(ii) call upon any person who is, at that time, 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 for the purpose of soliciting or selling
floral products;
(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 or 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, (ii) engaging in
any activity to which USFLORAL shall have provided its prior written consent or
(iii) owning or engaging in any business, acting in any capacity for, or
otherwise operating H&H Flowers, Inc., d/b/a LaFleurette, Flying High Venture,
Floraltech, Inc., Day One Fresh, LLC, Cultivitos Miramonte and its subsidiaries,
C.I. Colombiana De Bouquets or Agropecuaria Pamputik, S.A. and its subsidiaries.
14.2 Damages. Because of the difficulty of measuring economic losses to
-------
USFLORAL and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFLORAL and the Surviving Corporation for which they would
have no other adequate remedy, STOCKHOLDERS agree that, in the event of a breach
by them of the foregoing covenant, the covenant may be enforced by USFLORAL or
the Surviving Corporation by, without limitation, injunctions and restraining
orders.
14.3 Reasonable Restraint. It is agreed by the parties that the
--------------------
foregoing covenants in this Section 14 impose a reasonable restraint on
STOCKHOLDERS in light of the activities and business of USFLORAL on the date of
the execution of this Agreement and the current and future plans of USFLORAL and
the Surviving Corporation (as successor to the business of the COMPANY).
-33-
<PAGE>
14.4 Severability; Reformation. The covenants in this Section 14 are
-------------------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
14.5 Independent Covenant. All of the covenants in this Section 14 shall
--------------------
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of STOCKHOLDERS
against the COMPANY or USFLORAL, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement of such covenants.
It is specifically agreed that the period of two years stated above shall be
computed by excluding from such computation any time during which any
STOCKHOLDER is in violation of any provision of this Section 14 and any time
during which there is pending in any court of competent jurisdiction any action
(including any appeal from any judgment) brought by any person, whether or not a
party to this Agreement, in which action USFLORAL or the Surviving Corporation
seek to enforce the agreements and covenants of STOCKHOLDERS or in which any
person contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement.
14.6 Materiality. STOCKHOLDERS hereby agree that this covenant is a
-----------
material and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. STOCKHOLDERS recognize and acknowledge that they have
------------
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the COMPANY and the COMPANY's business. Subject to the
last sentence of Section 14.1, STOCKHOLDERS agree that they will not disclose
any confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except to authorized
representatives of USFLORAL, unless such information becomes known to the public
generally through no fault of STOCKHOLDERS. In the event of a breach or
threatened breach by STOCKHOLDERS of the provisions of this Section 15, USFLORAL
and the Surviving Corporation shall be entitled to an injunction restraining
STOCKHOLDERS from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting USFLORAL and the
Surviving Corporation from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
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 COMPANY, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the COMPANY and the COMPANY's business. USFLORAL
-34-
<PAGE>
agrees that it will not disclose any confidential information to any person,
firm, corporation, association, or other entity for any purpose or reason
whatsoever, prior to the Closing Date without prior written consent of the
STOCKHOLDERS. In the event of a breach or threatened breach by USFLORAL of the
provisions of this Section, STOCKHOLDERS shall be entitled to an injunction
restraining USFLORAL from disclosing, in whole or in part, such confidential
information. Nothing contained herein shall be construed as prohibiting
STOCKHOLDERS from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
15.3 Damages. Because of the difficulty of measuring economic losses as
-------
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFLORAL, the Surviving Corporation and STOCKHOLDERS agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, the
STOCKHOLDERS hereby irrevocably agree that for a period of 180 days after the
date of the effectiveness of the Registration Statement, as the same may be
amended, not to (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of (except as
contemplated in Section 4.2 hereof), directly or indirectly, any shares of
USFLORAL Stock or any securities convertible into or exercisable or exchangeable
for shares of USFLORAL Stock, or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the USFLORAL Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of USFLORAL Stock or such
other securities, in cash or otherwise without the prior written consent of the
managing underwriters in the IPO. The STOCKHOLDERS agree that the foregoing
shall be binding upon the STOCKHOLDERS' transferees, successors, assigns, heirs,
and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. In furtherance of the foregoing, USFLORAL and its
transfer agent are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Article 16.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The STOCKHOLDERS acknowledge and agree that the shares of USFLORAL Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The STOCKHOLDERS represent and warrant that the
USFLORAL Stock to be acquired by STOCKHOLDERS pursuant to this Agreement is
being acquired solely for their own account, for
-35-
<PAGE>
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
17.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and
-------------------
represent that none of the shares of USFLORAL Stock issued to such STOCKHOLDERS
will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC.
17.2 Economic Risk; Sophistication. STOCKHOLDERS represent and warrant
-----------------------------
that they are able to bear the economic risk of an investment in USFLORAL Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. They further represent and warrant that they (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.
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.
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
17.3 Registration Statement. Each STOCKHOLDER has received the
----------------------
prospectus included in the draft Registration Statement delivered to him on or
about August 2, 1997 that describes, among other things, the Merger, the other
acquisitions proposed to be undertaken by USFLORAL and the target companies of
the other acquisitions. Each STOCKHOLDER has had an adequate opportunity to ask
questions and receive answers to his satisfaction from the officers of USFLORAL
concerning the business, operations and financial condition of USFLORAL.
18. SECURITIES LEGENDS
The certificates evidencing the USFLORAL Stock to be received by the
STOCKHOLDERS hereunder will bear a legend substantially in the form set forth
below and containing such other information as USFLORAL may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES
-36-
<PAGE>
UNDER THE 1933 ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS, UNLESS, IN
THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE SATISFACTORY TO USFLORAL)
OF COUNSEL SATISFACTORY TO USFLORAL, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear such other legends as counsel for
USFLORAL reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 Cooperation. STOCKHOLDERS and USFLORAL shall each deliver or cause
-----------
to be delivered to the other on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
STOCKHOLDERS will cooperate and use their best efforts to have the present
officers, directors and employees of the COMPANY cooperate with USFLORAL on and
after the Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
19.2 Successors and Assigns. This Agreement and the rights of the parties
----------------------
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFLORAL, and the heirs and legal representatives of STOCKHOLDERS.
19.3 Entire Agreement. This Agreement (including the schedules, exhibits
----------------
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding between STOCKHOLDERS, the
COMPANY, USFLORAL and NEWCO and supersede any prior agreement and understanding
relating to the subject matter of this Agreement (other than that certain letter
agreement among USFLORAL and the STOCKHOLDERS dated July 3, 1997 which remains
in full force and effect). This Agreement, upon execution, constitutes a valid
and binding agreement on the parties thereto enforceable in accordance with its
terms and may be modified or amended only by a written instrument executed by
STOCKHOLDERS (subject to the limitations set forth below), the COMPANY, USFLORAL
and NEWCO acting through their respective officers, duly authorized by their
respective Boards of Directors; provided, that the STOCKHOLDER who owns a
majority of the outstanding shares of capital stock of the COMPANY shall have
the authority to approve and execute any amendment to this Agreement on behalf
of all of the STOCKHOLDERS and without the necessity of such majority
STOCKHOLDER obtaining consent or authorization from any other STOCKHOLDER,
unless such amendment relates to any representation of warranty made by a
STOCKHOLDER other than such majority STOCKHOLDER which may only be amended by
the written agreement of such person.
-37-
<PAGE>
19.4 Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19.5 Brokers and Agents. Each party represents and warrants that it
------------------
employed no broker or agent in connection with this transaction and agrees to
indemnify the other against all loss, cost, damages or expense arising out of
claims for fees or commissions of brokers employed or alleged to have been
employed by such indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall
--------
be consummated, USFLORAL will pay the fees, expenses and disbursements of
USFLORAL and NEWCO and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto. Whether or not the transactions herein contemplated shall
be consummated, the COMPANY will pay the fees, expenses and disbursements of
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 STOCKHOLDERS and the COMPANY
under this Agreement.
19.7 Notices. All notices of communication required or permitted
-------
hereunder shall be in writing and shall be given by overnight courier 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:
3500 Whitehaven Parkway
Washington, D.C.
Attention: Robert Poirier
with a required copy to:
John S. Fletcher, Esq.
Morgan, Lewis & Bockius LLP
5300 First Union Financial Center
200 South Biscayne Boulevard
Miami, Florida 33131-2339
(b) If to STOCKHOLDERS, addressed to them at:
1500 N.W. 95 Avenue
Miami, Florida 33172
-38-
<PAGE>
with a required copy to:
William R. Nuernberg, Esq.
Eckert Seamans Cherin & Mellott, LC
701 Brickell Avenue, Suite 1850
Miami, Florida 33131
19.8 Governing Law. This Agreement shall be construed in accordance with the
-------------
laws of the State of Florida.
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.
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.
-39-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFLORAL"
USA FLORAL PRODUCTS, INC.
By /s/ Robert J. Poirier
---------------------
Name: Robert J. Poirier
Title: President/CEO
"NEWCO"
FLORAL ACQUISITION CORPORATION
By /s/ Robert J. Poirier
-----------------------------
Name: Robert J. Poirier
Title: President
"COMPANY"
CFX, INC.
By /s/ Dwight Haight
-----------------------------
Name: Dwight Haight
Title: President
"STOCKHOLDERS"
/s/ Dwight Haight
--------------------------------
Dwight Haight
/s/ James A. Hill
--------------------------------
James A. Hill
/s/ Michael Grover
--------------------------------
Michael Grover
-40-
<PAGE>
ANNEXES
ANNEX I [Form of Articles of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Employment Agreement]
SCHEDULES
Schedule 6.1 [Due Organization]
Schedule 6.3 [Capital Stock]
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 6.19 [ERISA]
Schedule 6.20 [Conformity with Law]
Schedule 6.22 [Required Consents]
Schedule 6.25 [Deposit Accounts; Powers of Attorney]
Schedule 6.27 [Environmental Matters]
Schedule 6.28 [Underground Storage Tanks]
Schedule 7.5 [Other Agreements]
Schedule 8.3(vi) [Permitted Liens]
Schedule 10.10 [Additional Liabilities and Obligations]
Schedule 10.11 [Additional Contracts]
Schedule 11.1 [Guarantees]
<PAGE>
EXHIBIT 10.03
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
BSF ACQUISITION CORP.
(a Delaware corporation),
and
BAY STATE FLORIST SUPPLY, INC.
(a Massachusetts corporation),
Dated as of August 6, 1997
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
1. THE MERGER .............................................................. 3
1.1 Delivery and Filing of Articles of Merger .......................... 3
1.2 Merger Effective Date .............................................. 3
1.3 Articles of Organization, Bylaws and Board of Directors of
Surviving Corporations ............................................. 3
1.4 Certain Information with Respect to the Capital Stock of
the Company and Newco .............................................. 4
1.5 Effect of Merger ................................................... 4
2. CONVERSION AND EXCHANGE OF STOCK ........................................ 4
2.1 Manner of Conversion ............................................... 4
2.2 Calculation of USFloral Shares ..................................... 5
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION ......................... 5
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES ............................... 6
5. CLOSING; MERGER EFFECTIVE DATE .......................................... 8
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS .......................... 8
6.1 Due Organization ................................................... 8
6.2 Authorization ...................................................... 9
6.3 Capital Stock of the Company ....................................... 9
6.4 Transactions in Capital Stock ...................................... 9
6.5 No Bonus Shares .................................................... 9
6.6 Subsidiaries ....................................................... 9
6.7 Predecessor Status; etc ............................................ 9
6.8 Spin-off by the Company ............................................ 10
6.9 Financial Statements ............................................... 10
6.10 Liabilities and Obligations ........................................ 10
6.11 Accounts and Notes Receivable ...................................... 11
6.12 Permits and Intangibles ............................................ 11
6.13 Real and Personal Property ......................................... 11
6.14 Material Contracts and Commitments ................................. 12
6.15 Title to Real Property ............................................. 12
6.16 Insurance .......................................................... 12
6.17 Officers, Directors and Employees Compensation ..................... 13
6.18 Employee Plans ..................................................... 13
6.19 Compliance with ERISA .............................................. 13
6.20 Conformity with Law ................................................ 15
6.21 Taxes .............................................................. 15
6.22 Completeness; No Violations ........................................ 16
i
<PAGE>
6.23 Government Contracts ............................................... 16
6.24 Absence of Changes ................................................. 16
6.25 Deposit Accounts; Powers of Attorney ............................... 17
6.26 Environmental Matters .............................................. 18
6.27 Underground Storage Tanks .......................................... 18
6.28 Validity of Obligations ............................................ 18
6.29 Relations with Governments ......................................... 19
6.30 Disclosure ......................................................... 19
6.31 Authority; Ownership ............................................... 19
7. REPRESENTATIONS OF USFLORAL AND NEWCO ................................... 19
7.1 Due Organization ................................................... 19
7.2 USFloral Stock ..................................................... 19
7.3 Authorization ...................................................... 20
7.4 No Conflicts ....................................................... 20
7.5 Miscellaneous ...................................................... 20
7.6 Validity of Obligations ............................................ 21
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING .................. 21
8.1 Access and Cooperation ............................................. 21
8.2 Conduct of Business ................................................ 21
8.3 Prohibited Activities .............................................. 22
8.4 Supplier Approval .................................................. 23
8.5 Notice to Bargaining Agents ........................................ 23
8.6 No Shop ............................................................ 23
8.7 Notification of Certain Matters .................................... 24
8.8 Joinder to Agreement; Information Statement ........................ 24
8.9 Amendment of Schedules ............................................. 24
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS ..................... 25
9.1 Representations and Warranties; Performance of Obligations ......... 25
9.2 No Litigation ...................................................... 25
9.3 Employment Agreements .............................................. 25
9.4 Opinion of Counsel ................................................. 25
9.5 Registration Statement ............................................. 26
9.6 Board of Directors Approval ........................................ 26
9.7 Assumption of Deferred Compensation Agreements ..................... 26
9.8 Real Property Distribution; Leases ................................. 26
9.9 Market Capitalization .............................................. 26
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO .............. 26
10.1 Representations and Warranties; Performance of Obligations ....... 26
10.2 No Litigation .................................................... 27
ii
<PAGE>
10.3 Examination of Financial Statements .............................. 27
10.4 No Material Adverse Change ....................................... 27
10.5 Regulatory Review ................................................ 27
10.6 Stockholders Release ............................................. 27
10.7 Employment Agreements ............................................ 27
10.8 Opinion of Counsel ............................................... 28
10.9 Consents and Approvals ........................................... 29
10.10 Additional Liabilities and Obligations ........................... 29
10.11 Additional Contracts ............................................. 29
10.12 Good Standing Certificates ....................................... 29
10.13 Registration Statement ........................................... 30
10.14 Repayment of Indebtedness ........................................ 30
10.15 Net Income ....................................................... 30
10.16 Real Property Distribution; Leases ............................... 30
11. COVENANTS OF USFLORAL .................................................. 30
11.1 Registration Statement ........................................... 30
11.2 Release From Guarantees .......................................... 30
11.3 Leases ........................................................... 30
11.4 Compliance with the 1934 Act ..................................... 31
11.5 Certain Transactions ............................................. 31
11.6 USFloral Stock Options ........................................... 31
11.7 Piggy-Back Registrations ......................................... 31
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES ............ 32
12.1 General Indemnification by Stockholders .......................... 32
12.2 Specific Indemnification by Stockholders ......................... 33
12.3 Indemnification by USFloral and Newco ............................ 33
12.4 Third Person Claims .............................................. 33
12.5 Limitations on Indemnification ................................... 34
12.6 Survival of Representations and Warranties ....................... 35
12.7 Sole Remedies .................................................... 35
13. TERMINATION OF AGREEMENT ............................................... 35
13.1 Termination by the Parties ....................................... 35
13.2 Liquidated Damages ............................................... 36
14. NONCOMPETITION ......................................................... 36
14.1 Prohibited Activities ............................................ 36
14.2 Damages .......................................................... 37
14.3 Reasonable Restraint ............................................. 37
14.4 Severability; Reformation ........................................ 37
iii
<PAGE>
14.5 Independent Covenant ............................................. 38
14.6 Materiality ...................................................... 38
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION .............................. 38
15.1 Stockholders ..................................................... 38
15.2 USFloral ......................................................... 38
15.3 Damages .......................................................... 39
16. LOCK-UP AGREEMENTS ..................................................... 39
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK .. 39
17.1 Compliance with Law .............................................. 39
17.2 Economic Risk; Sophistication .................................... 39
17.3 Registration Statement ........................................... 40
18. SECURITIES LEGENDS ..................................................... 40
19. GENERAL ................................................................ 41
19.1 Cooperation ...................................................... 41
19.2 Successors and Assigns ........................................... 41
19.3 Entire Agreement ................................................. 41
19.4 Counterparts ..................................................... 41
19.5 Brokers and Agents ............................................... 41
19.6 Expenses ......................................................... 41
19.7 Notices .......................................................... 42
19.8 Governing Law .................................................... 42
19.9 Exercise of Rights and Remedies .................................. 42
19.10 Time ............................................................. 42
19.11 Reformation and Severability ..................................... 42
19.12 Remedies Cumulative .............................................. 43
19.13 Captions ......................................................... 43
19.14 Standstill Agreement ............................................. 43
ANNEX I Form of Articles of Merger
ANNEX II Calculation and Composition of Consideration
ANNEX III Form of Employment Agreement
ANNEX IV Form of Lease
SCHEDULES
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement")
is made as of the 6th day of August, 1997, among U.S.A. FLORAL PRODUCTS, INC., a
Delaware corporation ("USFloral"); BSF ACQUISITION CORP., a Delaware corporation
("Newco"); and BAY STATE FLORIST SUPPLY, INC., a Massachusetts corporation (the
"Company").
WHEREAS, USFloral was incorporated on April 2, 1997 (the "Formation")
under the laws of the State of Delaware for the purpose of acquiring floral
products businesses in different locations; and
WHEREAS, USFloral intends to undertake an initial public offering of its
stock (the "IPO") on or about September 15, 1997 and in connection therewith
intends to file a Registration Statement on Form S-1 (the "Registration
Statement"), pursuant to the Securities Act of 1933, as amended (the "1933
Act") with the Securities and Exchange Commission (the "SEC") within 30 days
of the execution and delivery of this Agreement;
WHEREAS, Newco has been duly organized and is existing under the laws of
the State of Delaware, having been incorporated on July 1, 1997 solely for
the purpose of completing this transaction, and is a wholly-owned subsidiary
of USFloral; and
WHEREAS, the Company is a corporation organized and existing under the
laws of the Commonwealth of Massachusetts; and
WHEREAS, the respective Boards of Directors of USFloral, Newco and the
Company (all of which companies are hereinafter collectively referred to as
the "Constituent Corporations") deem it advisable and in the best interests
of the Constituent Corporations and their respective Stockholders that Newco
merge with and into the Company pursuant to this Agreement and the applicable
provisions of the laws of the respective states of incorporation of Newco and
the Company, such transaction being herein called the "Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351
of the Internal Revenue Code of 1986, as amended;
WHEREAS, the parties hereto entered into that certain Agreement and Plan
of Contribution on July 1, 1997 (the "Original Agreement") and now wish to
amend and restate the Original Agreement in its entirety as of August 6, 1977
in order to achieve conformity with similar agreements USFloral has entered
into with other floral products businesses;
2
<PAGE>
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 each of Newco
and the Company on or before the Merger Effective Date (as defined in Section
5).
1.2 Merger Effective Date. The "Merger Effective Date" shall be the date
---------------------
specified in Section 5. At the Merger Effective Date, Newco shall be merged
with and into the Company in accordance with the Articles of Merger and the
separate existence of Newco shall cease. The Company, as the party surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.3 Articles of Organization, Bylaws and Board of Directors of Surviving
--------------------------------------------------------------------
Corporations. At the Merger Effective Date:
- ------------
(i) the Articles of Organization of the Company shall become the
Articles of Organization of the Surviving Corporation; and subsequent to the
Merger Effective Date, such Articles of Organization shall be the Articles of
Organization of the Surviving Corporation until changed as provided by law;
(ii) the Bylaws of the Company shall become the Bylaws of the Surviving
Corporation; and subsequent to the Merger Effective Date, such Bylaws shall
be the Bylaws of the Surviving Corporation until they shall thereafter be
duly amended;
(iii) the name of the person who shall serve as the sole member of the
Board of Directors of the Surviving Corporation shall be Robert Poirier; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the state of incorporation and of the Articles of
Organization and Bylaws of the Surviving Corporation.
(iv) the officers of the Company immediately prior to the Merger
Effective Date shall continue as the officers of the Surviving Corporation in
the same capacity or capacities, each of such officers to serve, subject to
the provisions of the Articles of Organization and Bylaws of Surviving
Corporation, until his successor is elected and qualified.
3
<PAGE>
1.4 Certain Information with Respect to the Capital Stock of the Company
--------------------------------------------------------------------
and Newco. The designation and number of outstanding shares and voting rights
- ---------
of each class of outstanding capital stock of the Company and Newco as of the
date of this Agreement are as follows:
(i) the authorized capital stock of the Company consists of 500,000
shares of common stock, $0.01 par value (the "Company Stock"), of which
360,400 shares are issued and outstanding and owned, beneficially and of
record, by the persons identified on Annex II attached hereto (the
"Stockholders") in the respective amounts listed on Annex II; and
(ii) the authorized capital stock of Newco consists of 100 shares of
common stock, $0.01 par value (the "Newco Stock"), of which 100 shares are
issued and outstanding.
1.5 Effect of Merger. Except as herein specifically set forth, the
----------------
identity, existence, purposes, powers, objects, franchises, privileges, rights
and immunities of the Company shall continue unaffected and unimpaired by the
Merger, and the Surviving Corporation shall be fully vested therewith. At the
Merger Effective Date, the separate existence of Newco shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
the Company and Newco shall be taken and deemed to be transferred to, and vested
in, the respective Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of each of the Company and Newco; and the title to any
real estate, or interest therein, whether by deed or otherwise, under the laws
of the state of incorporation vested in the Company and Newco, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall thenceforth be responsible and liable for all the liabilities and
obligations of each of Company and Newco and any claim existing, or action or
proceeding pending, by or against the Company or Newco may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may be substituted
in its place. Neither the rights of creditors nor any liens upon the property of
Company or Newco shall be impaired by the Merger, and all debts, liabilities and
duties of each of the Company and Newco shall attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of the
--------------------
Company Stock issued and outstanding immediately prior to the Merger Effective
Date into cash and shares of common stock of USFloral, $0.01 par value
("USFloral Stock"), shall be as follows:
4
<PAGE>
As of the Merger Effective Date:
(i) all of the shares of Company Stock issued and outstanding immediately
prior to the Merger Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, automatically be converted into
that number of shares of USFloral Stock and the right to receive cash from
USFloral as determined pursuant to Section 2.2 below, all to be distributed to
Stockholders in the percentages set forth on Annex II and at the times specified
in Section 5 hereof; and
(ii) each share of Newco Stock issued and outstanding immediately prior to
the Effective Time of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of stock of the Surviving Corporation which
shall constitute all of the outstanding shares of the Surviving Corporation
immediately after the Merger Effective Date.
All USFloral Stock to be received by Stockholders as a result of the Merger
shall, except for restrictions on resale or transfer described in Section 16
hereof, have the same rights as the majority of outstanding USFloral Stock. All
voting rights are fully exercisable by Stockholders and Stockholders are neither
deprived nor restricted in exercising those rights. At the Merger Effective
Date, USFloral shall have no class of capital stock issued and outstanding which
shall have any rights or preferences senior to the shares of USFloral Stock,
including, without limitation, any rights or preferences as to dividends or as
to the assets of USFloral upon liquidation or dissolution or as to voting
rights.
2.2 Calculation of USFloral Shares. The Company Stock shall be converted,
------------------------------
as a result of the Merger, into such number of shares of USFloral Stock and the
amount of cash set forth on Annex II attached hereto.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 At the Merger Effective Date:
(i) Stockholders, as the holders of all outstanding certificates
representing shares of Company Stock, shall, upon surrender of such
certificates, be entitled to receive the number of shares of USFloral Stock
set forth on Annex II opposite the name of each Stockholder; and
(ii) Until the certificates representing the Company Stock have been
surrendered by Stockholders and replaced by certificates representing the
USFloral Stock, the certificates for the Company Stock shall, for all
corporate
5
<PAGE>
purposes be deemed to evidence ownership of the USFloral Stock
notwithstanding the number of shares of Company Stock such certificates
represent.
3.2 The Stockholders shall deliver at the Closing (as defined in Section 5
hereof) the certificates representing the respective shares of Company Stock,
duly endorsed in blank by the Stockholders or accompanied by blank stock powers,
with signatures guaranteed by a national bank, and with all necessary transfer
tax and other revenue stamps, acquired at the Stockholders' expense, affixed and
canceled. The Stockholders agree to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
such Company Stock or with respect to the stock powers accompanying any Company
Stock.
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES
4.1 As soon as practicable, but in any event within 30 days after the
Closing, USFloral shall engage Price Waterhouse to prepare, in accordance with
GAAP, applied on a consistent basis with the basis used by Price Waterhouse in
preparing and auditing financial statements of the Company as of December 31,
1994, 1995 and 1996, a balance sheet of the Company (the "Closing Date Balance
Sheet") as of the end of business on the day prior to the Closing Date. If the
aggregate shareholders' equity as shown on the Closing Date Balance Sheet is
less than the aggregate shareholders' equity as shown on the Balance Sheet as at
December 31, 1996 (such difference, the "Net Worth Deficiency"), within ten
business days after delivery of the Closing Date Balance Sheet to USFloral, the
Stockholders shall remit to USFloral in accordance with the provisions of
Section 4.2 hereof, an amount equal to the Net Worth Deficiency. Notwithstanding
anything in this Article 4 to the contrary, if there is any Net Worth Deficiency
and the Stockholders dispute any item contained on the Closing Date Balance
Sheet, the Stockholders shall notify USFloral in writing of each disputed item
(collectively, the "Disputed Amounts"), and specify the amount thereof in
dispute within thirty business days after the delivery of the Closing Date
Balance Sheet. If USFloral and the Stockholders cannot resolve any such dispute
which would eliminate or reduce the amount of the Net Worth Deficiency, then
such dispute shall be resolved by an independent nationally recognized
accounting firm which is reasonably acceptable to USFloral and the Stockholders
(the "Independent Accounting Firm"). The determination of the Independent
Accounting Firm shall be made as promptly as practical and shall be final and
binding on the parties, absent manifest error which error may only be corrected
by such Independent Accounting Firm. Any expenses relating to the engagement of
the Independent Accounting Firm shall be allocated between USFloral and the
Stockholders so that the Stockholders' aggregate share of such costs shall bear
the same proportion to the total costs that the Disputed Amounts unsuccessfully
contested by the Stockholders (as finally determined by the Independent
Accounting Firm) bear to the total of the Disputed Amounts so submitted to the
Independent Accounting Firm.
4.2 (a) Any indemnification obligations of the Stockholders pursuant to
Sections 12.1 and 12.2 hereof and amounts payable pursuant to Section 4.1 hereof
shall be satisfied initially through recourse to the assets pledged for such
purpose under the following paragraph (valued for
6
<PAGE>
such purposes on the date the indemnification obligation is paid pursuant to
Section 12 or ten days after USFloral notifies the Stockholders of the Net Worth
Deficiency pursuant to Section 4.1).
(b) At the Closing each Stockholder shall transfer, pledge and assign to
USFloral, for the benefit of USFloral, a security interest in the following
assets:
(i) the number of shares of USFloral Stock set forth beside such
Stockholder's name in the column entitled "Number of Shares Pledged"
(collectively with respect to all Stockholders, the "Pledged
Securities") on Annex II, the certificates and instruments representing
or evidencing such Stockholder's Pledged Securities, and all cash and
non-cash dividends and other property at any time received or otherwise
distributed in respect of or in exchange for any or all of such
Stockholder's Pledged Securities; and in the event such Stockholder
receives any such certificates or property, such Stockholder shall
immediately deliver such certificates or property to USFloral to be held
hereunder as Pledged Securities;
(ii) all securities hereafter delivered to such Stockholder in
substitution for any of the foregoing, all certificates and instruments
representing or evidencing such securities, and all cash and non-cash
dividends and other property at any time received, receivable or
otherwise distributed in respect of or in exchange for any or all
thereof; and in the event such Stockholder receives any such property,
such Stockholder shall immediately deliver such property to USFloral to
be held hereunder as Pledged Securities; and
(iii) all cash and non-cash proceeds of all of the foregoing
property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property.
(c) Each certificate evidencing a Stockholder's Pledged Securities
issued in his, her or its name in the Merger, shall, at the Closing, be
delivered to USFloral, together with a stock power duly signed in blank by him,
her or it, such certificate bearing no restrictive or cautionary legend other
than those imprinted by USFloral's transfer agent at USFloral's request.
(d) The Stockholders shall be entitled to exercise any voting powers
incident to the Pledged Securities and to receive and retain all cash dividends
paid thereon.
(e) The Pledged Securities shall be available to satisfy any payment
obligations pursuant to Section 4.1 hereof and any indemnification obligations
of the Stockholders pursuant to Sections 12.1 and 12.2 until the date that is 12
months after the Merger Effective Date (the "Release Date"). Within five (5)
days following the Release Date, USFloral shall return the Pledged Securities to
the respective Stockholders (or cause them to be so returned), less Pledged
Securities having an aggregate value equal to the amount of (i) an amount due
pursuant to Section
7
<PAGE>
4.1, (ii) any pending claim for indemnification made by any Indemnified Party
(as defined in Section 12) and (iii) any indemnification obligations of the
Stockholders pursuant to Section 12.
5. CLOSING; MERGER EFFECTIVE DATE
Within two business days following the date on which the price of the shares
of USFloral Stock in the initial public offering of USFloral Stock described in
Section 9.5 shall have been determined, the parties shall take all actions
necessary to effect the Merger (other than the filing with the appropriate state
authorities of the Articles of Merger which shall be filed on the Merger
Effective Date) and to effect the conversion and delivery of shares referred to
in Section 3 hereof (hereinafter referred to as the "Closing"); provided, that
such actions shall not include the actual completion of the Merger or the
conversion and delivery of the shares referred to in Section 3 hereof, which
actions shall be taken only on the Merger Effective Date as herein provided.
The Closing shall take place at the offices of Morgan, Lewis & Bockius LLP, One
Logan Square, Philadelphia, PA 19103. The date on which the Closing shall
occur shall be referred to as the "Closing Date." Concurrently with the closing
in respect of the initial public offering of USFloral Stock, the Articles of
Merger shall be filed with the appropriate state authorities of the Articles of
Merger and the Merger shall become effective and all transactions contemplated
by this Agreement, including the conversion and delivery of shares and the
delivery of a check or checks in an amount equal to the cash which the
Stockholders shall be entitled to receive pursuant to the Merger referred to in
Section 3 hereof, shall occur and be deemed to be completed. The date on which
the Merger is effected shall be referred to as the "Merger Effective Date."
During the period from the Closing Date to the Merger Effective Date, this
Agreement may only be terminated by the parties if the underwriting agreement in
respect of the initial public offering of USFloral Stock is terminated pursuant
to the terms of such agreement. This Agreement shall in any event terminate if
the Merger Effective Date has not occurred within 10 business days of the
Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, (i) each Stockholder who is a Stockholder of the Company,
jointly and severally, represents and warrants as follows.
6.1 Due Organization. The Company and each subsidiary, if any, of the
----------------
Company (collectively, the "Company Subsidiaries") indicated on Schedule 6.6 are
corporations duly organized, validly existing and in good standing under the
laws of their respective states of incorporation, and are duly authorized,
qualified and licensed under all applicable laws, regulations, ordinances and
orders of public authorities to carry on their respective businesses in the
places and in the manner as now conducted except (i) as set forth on Schedule
6.1 or (ii) where the failure to be so authorized, qualified or licensed would
not have a material adverse effect on the business, operations, properties,
assets or condition, (financial or otherwise) (a "Material Adverse Effect") on
the Company taken as a whole. True, complete and correct copies of the Articles
of Organization (certified by the respective Secretaries of State of the states
of incorporation of the Company and the
8
<PAGE>
Company Subsidiaries) and Bylaws (certified by the Secretary of the Company and
the Company Subsidiaries) have heretofore been delivered to USFloral. The stock
records and minute books of the Company and the Company Subsidiaries, as
heretofore made available to USFloral, are correct and complete.
6.2 Authorization. Upon the approval of this Agreement by the Stockholders,
-------------
the Company has the full legal right, power and authority to enter into this
Agreement and have the full legal right, power and authority to enter into the
Merger. The conversion of Company Stock into Newco Stock pursuant to the
provisions of this Agreement will transfer valid title in the Company Stock to
Newco, free and clear of all liens, encumbrances and claims of every kind.
6.3 Capital Stock of the Company. The authorized capital stock of the
----------------------------
Company consists solely of the shares as shown on Schedule 6.3, of which the
shares issued and outstanding are shown. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholders as set
forth on Annex II, and are free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of Company Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the Stockholders and in the amounts set forth in
Annex II and further, such shares were offered, issued, sold and delivered by
the Company in compliance with all applicable state and federal laws concerning
the issuance of securities. Further, none of such shares were issued in
violation of the preemptive rights of any past or present Stockholder.
6.4 Transactions in Capital Stock. Neither the Company nor any Company
-----------------------------
Subsidiary has acquired any treasury stock since the Balance Sheet Date (as
defined in Section 6.9 hereof). No option, warrant, call, conversion right or
commitment of any kind exists which obligates the Company or any Company
Subsidiary to issue any of their respective authorized but unissued capital
stock. Except as set forth on Schedule 6.4, the Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
6.5 No Bonus Shares. Except as set forth on Schedule 6.5, none of the
---------------
shares of the Company Stock was issued pursuant to awards, grants or bonuses.
6.6 Subsidiaries. Schedule 6.6 lists the name of each of the Company
------------
Subsidiaries. Except as set forth in Schedule 6.6, neither the Company nor any
Company Subsidiary presently owns, of record or beneficially, or controls,
directly or indirectly, any capital stock, securities convertible into capital
stock or any other equity interest in any corporation, association or business
entity. Except as set forth on Schedule 6.6, neither the Company nor any Company
Subsidiary is, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
6.7 Predecessor Status; etc. Set forth in Schedule 6.7 is a listing of all
-----------------------
names of all predecessor companies of the Company, including the names of any
entities from whom the
9
<PAGE>
Company previously acquired significant assets. Except as set forth on Schedule
6.7, the Company has never been a subsidiary or division of another corporation
nor been a part of an acquisition which was later rescinded.
6.8 Spin-off by the Company. Since the Balance Sheet Date there has not
-----------------------
been any sale or spin-off of significant assets of the Company or any Company
Subsidiary other than in the ordinary course of business.
6.9 Financial Statements. Attached hereto as Schedule 6.9 are copies of the
--------------------
following audited financial statements (the "Financial Statements") of the
Company: The Company's Balance Sheet as of December 31, 1996, 1995 and 1994 and
Statements of Incomes, Cash Flows and Retained Earnings for each of the years in
the three year period ended December 31, 1996, and the Company's Balance Sheet
as of each of March 31, 1997 and 1996, (March 31, 1997 being hereinafter
referred to as the "Balance Sheet Date") and Statements of Incomes, Cash Flows
and Retained Earnings for the three (3) month periods then ended. Such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted). Except as set forth on Schedule 6.9, such Balance Sheets
present fairly the financial position of the Company as of the dates indicated
thereon, and such Statements of Incomes, Cash Flows and Retained Earnings
present fairly the results of their respective operations for the periods
indicated thereon.
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
---------------------------
accurate list, as of the Balance Sheet Date, of all material liabilities of the
Company (including each Company Subsidiary), which are reflected in the most
recent available balance sheet and any significant liabilities incurred
thereafter in the ordinary course of business, or material liabilities which are
not reflected in the balance sheet, of any kind, character and description,
whether accrued, absolute, secured or unsecured, contingent or otherwise,
together with, in the case of those liabilities which are not fixed, an estimate
of the maximum amount which may be payable. For each such liability for which
the amount is not fixed or is contested, Stockholders shall provide to USFloral
the following information:
(i) a summary description of the liability together with the following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
(c) names of claimant and all other parties to the claim, suit or
proceeding.
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
10
<PAGE>
(iii) the date such claim, suit or proceeding was instituted;
(iv) a best estimate by the Company of the maximum amount, if any, which
is likely to become payable with respect to each such liability (exclusive of
defense costs). If no estimate is provided, the Company's best estimate shall
for purposes of this Agreement be deemed to be zero.
6.11 Accounts and Notes Receivable. Attached hereto as Schedule 6.11 is an
-----------------------------
accurate list as of the Balance Sheet Date of the accounts and notes receivable
of the Company (including any Company Subsidiary), including receivables from
and advances to employees and Stockholders, including any such amounts which are
not reflected in the most recent available balance sheet. Stockholders shall
provide USFloral with an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories. Except as set forth on Schedule 6.11,
such accounts and notes are collectible in the amount shown on Schedule 6.11.
6.12 Permits and Intangibles. Attached hereto as Schedule 6.12 is an
-----------------------
accurate list and summary description, as of the Balance Sheet Date, of all
permits, titles, licenses, franchises, certificates, trademarks, trade names,
service marks, patents, patent applications and copyrights owned or held by the
Company, all of which are now valid, in good standing and in full force and
effect. Except as set forth on Schedule 6.12, such permits, licenses, orders,
approvals, franchises, etc. are adequate for the operation of the Company
business as presently constituted. Except as set forth on Schedule 6.12, the
Stockholders have delivered to USFloral a description and copies as of the date
of this Agreement, of all material records, reports, notifications, permits,
pending permit applications, engineering studies, environmental impact studies,
filed or submitted or required to be filed or submitted to governmental agencies
and of all material notifications from such governmental agencies relating to
the above or relating to the discharge or release of materials into the
environment or otherwise relating to the protection of the public health or the
environment.
6.13 Real and Personal Property. Attached hereto as Schedule 6.13 is an
--------------------------
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the personal property, which had an original cost in excess
of $25,000, owned or leased by the Company and true and correct copies of leases
for equipment and real properties on which are situated buildings, warehouses
and other structures used in the operation of the business of the Company and
including an indication as to which assets were formerly owned by the
Stockholders or affiliates (which term, as used herein, shall have the meaning
ascribed thereto in Rule 144(a)(1) under the 1933 Act) of the Company. Except
as set forth on Schedule 6.13, substantially all of the trucks, machinery and
equipment of the Company are in good working order and condition, ordinary wear
and tear excepted. All leases set forth on Schedule 6.13 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the Company and, to the knowledge of the Stockholders, no other
party to any such lease is in default thereunder and such leases constitute the
legal, valid and binding obligations of such other parties. All fixed assets
used by the Company in the operation of their respective businesses are either
owned by the Company or leased under an agreement set forth on Schedule 6.13.
The Stockholders have heretofore delivered to USFloral
11
<PAGE>
copies of all title reports and title insurance policies received or held by the
Company. The Stockholders have indicated on Schedule 6.13 a summary description
of all plans or projects involving the opening of new operations, expansion of
any existing operations or the acquisition of any real property or existing
business, to which management of the Company has devoted any significant effort
or expenditure in the two year period prior to the date of this Agreement, which
if pursued by the Company would require additional expenditures of significant
efforts or capital.
6.14 Material Contracts and Commitments. Attached hereto as Schedule 6.14 is
----------------------------------
an accurate list, as of the Balance Sheet Date, of all material contracts,
commitments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, joint
venture or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements). Stockholders have
heretofore delivered to USFloral true copies of such agreements. Except as set
forth on Schedule 6.14, the Company has complied with all material commitments
and obligations pertaining to it and is not in material default under any such
agreement and no notice of default has been received. The Company is not a party
to any contract, agreement or other instrument or commitment which cannot be
terminated by the Company on 30 days notice without any liability to the Company
which would have a Material Adverse Effect on the Company taken as a whole.
Except as set forth on Schedule 6.14, the Company is not bound by or subject to
(and none of its assets or properties is bound by or subject to) any arrangement
with any labor union. Except as set forth on Schedule 6.14, no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement nor, to the best of Stockholders' knowledge, is any
organization campaign to establish such representation in progress. There is no
pending or, to the best of Stockholders' knowledge, threatened labor dispute
involving the Company and any group of their employees nor has the Company
experienced any labor interruptions over the past three years and the Company
considers its relationship with employees to be good.
6.15 Title to Real Property. As of the Merger Effective Date, the Company
----------------------
will own no real property. The property listed on Schedule 6.13 includes all
interests in real property necessary to conduct the business and operations of
the Company. None of the leases set forth on Schedule 6.13 requires the consent
or approval of any party thereto in connection with the consummation of the
transactions contemplated hereby, except for the consents listed on Schedule
6.15 hereto, which shall have been obtained prior to the Merger Effective Date.
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list, as of
---------
the Balance Sheet Date, of all insurance policies carried by the Company and an
accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. Stockholders have heretofore
delivered to USFloral complete copies of all policies currently in effect. The
insurance carried by the Company with respect to their respective properties,
assets and businesses is with, to the Stockholders' knowledge, financially sound
insurers. Such insurance policies are currently in full force and effect and
shall remain in full force and effect through the Merger Effective Date. The
Company's insurance has never been canceled and the Company has never been
denied coverage.
12
<PAGE>
6.17 Officers, Directors and Employees Compensation. Attached hereto as
----------------------------------------------
Schedule 6.17 is an accurate Schedule showing all officers, directors and
employees of the Company and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date.
Stockholders have heretofore delivered to USFloral copies of the payroll lists
covering all employees of the Company as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.17, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
6.18 Employee Plans. Attached hereto as Schedule 6.18 are complete and
--------------
accurate copies, as of the Balance Sheet Date, of all employee benefit plans,
all employee welfare benefit plans, all employee pension benefit plans, all
multi-employer plans and all multi-employer welfare arrangements (as defined in
Sections 3(3), (1), (2), (37) and (40), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which are currently
maintained and/or sponsored by the Company or to which the Company currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), together
with copies of any trusts related thereto and a classification of employees
covered thereby (collectively, the "Plans"). Schedule 6.18 sets forth all of
the Plans that have been terminated within the past three years.
6.19 Compliance with ERISA. All Plans are in substantial compliance with all
---------------------
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable laws, and, in all material respects, have been
administered, operated and managed in substantial accordance with the governing
documents. All Plans that are intended to qualify (the "Qualified Plans") under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code")
have been determined by the Internal Revenue Service to be so qualified, and
copies of the current plan determination letters, most recent actuarial
valuation reports, if any, most recent Form 5500, or, as applicable, Form 5500-
C/R filed with respect to each such Qualified Plan or employee welfare benefit
plan and most recent trustee or custodian report, are included as part of
Schedule 6.18. To the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within 120
days after the Closing Date. Except as set forth on Schedule 6.19, all reports
and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Forms,
audits or tax returns) have been timely filed or distributed. Except as set
forth on Schedule 6.19, none of: (i) the Stockholders; (ii) any Plan; or (iii)
the Company has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company currently has no (or at the Closing
Date will not have) any direct or indirect liability whatsoever (including being
subject to any statutory lien to secure payment of any such liability), to the
Pension
13
<PAGE>
Benefit Guaranty Corporation ("PBGC") with respect to any such Plan under Title
IV of ERISA or to the Internal Revenue Service for any excise tax or penalty;
and neither the Company nor any member of a "controlled group" (as defined in
ERISA Section 4001(a)(14)) currently has (or at the Closing Date will have) any
obligation whatsoever to contribute to any "multi-employer pension plan" (as
defined in ERISA Section 4001(a)(14), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further:
(i) there have been no terminations, partial terminations or discontinuance
of contributions to any Qualified Plan without notice to and approval by the
Internal Revenue Service;
(ii) no Plan which is subject to the provisions of Title IV of ERISA has
been terminated;
(iii) there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(iv) the valuation of assets of any Qualified Plan, as of the Closing Date,
shall exceed the actuarial present value of all accrued pension benefits under
any such Qualified Plan in accordance with the assumptions contained in the
Regulations of the PBGC governing the funding of terminated defined benefit
plans;
(v) except as set forth on Schedule 6.19, with respect to Plans which
qualify as "group health plans" under Section 4980B of the Internal Revenue
Code and Section 607(1) of ERISA and related regulations (relating to the
benefit continuation rights imposed by "COBRA"), the Company and the
Stockholders have complied (and on the Closing Date will have complied), in
all respects with all reporting, disclosure, notice, election and other
benefit continuation requirements imposed thereunder as and when applicable to
such plans, and, except as set forth on Schedule 6.19, the Company has (and
will incur) no direct or indirect liability and is not (and will not be)
subject to any loss, assessment, excise tax penalty, loss of federal income
tax deduction or other sanction, arising on account of or in respect of any
direct or indirect failure by the Company and the Stockholders, at any time
prior to the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted
before or after the Closing Date directly or indirectly against the Company or
the Stockholders with respect to such group health plans;
14
<PAGE>
(vi) The Company is not now nor has it been within the past five years a
member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(vii) except as set forth on Schedule 6.19, there is no pending litigation,
arbitration, or disputed claim, settlement or adjudication proceeding, and to
the best of each Stockholder's knowledge, there is no threatened litigation,
arbitration or disputed claim, settlement or adjudication proceeding, or any
governmental or other proceeding, or investigation with respect to any Plan,
or with respect to any fiduciary, administrator, or sponsor thereof (in their
capacities as such), or any party in interest thereof;
(viii) except as set forth on Schedule 6.19, the Financial Statements as of
the Balance Sheet Date reflect the approximate total pension, medical and
other benefit expense for all Plans, and no material funding changes or
irregularities are reflected thereon which would cause such Financial
Statements to be not representative of most prior periods; and
(ix) The Company has not incurred liability under Section 4062 of ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, the Company
-------------------
is not in violation of any law or regulation or under any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction which would have a
Material Adverse Effect on the Company; and except as set forth on Schedule
6.20, there are no claims, actions, suits or proceedings, pending or threatened,
against or affecting the Company, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction and no notice of any
claim, action, suit or proceeding, whether pending or, to the Stockholders'
knowledge, threatened, has been received. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
might have a Material Adverse Effect on the Company, taken as a whole.
6.21 Taxes. The Company has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing Date. Except as set forth on Schedule 6.21,
there are no open years, examinations in progress or claims against the Company
for federal and other taxes (including penalties and interest) for any period or
periods prior to and including the Balance Sheet Date and no notice of any
claim, whether pending or threatened, for taxes has been received. The amounts
shown as accruals for taxes on the Financial Statements, as of the Balance Sheet
Date, are sufficient for the payment of all taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on or before
that date. Two correct and complete copies of (i) all tax examinations, (ii)
extensions of statutory limitations and
15
<PAGE>
(iii) the federal and local income tax returns and franchise tax returns of the
Company for the last three fiscal years, or such shorter period of time as any
of them shall have existed, have heretofore been delivered by Stockholders to
USFloral. The Company as set forth on Schedule 6.21 made an election to be
taxed under the provisions of Subchapter S of the Internal Revenue Code
effective July 1, 1988, with a fiscal year ending December 31 and has not been
taxed under the provisions of Subchapter C of the Internal Revenue Code for any
tax period beginning on or after January 1, 1989. The Company currently uses the
accrual method of accounting for income tax purposes and has not changed its
method of accounting in the past five years. Also set forth on Schedule 6.21
are the procedures that shall govern all tax reporting, filing and other
compliance issues affecting the Company.
6.22 Completeness; No Violations. The certified copies of the Articles of
---------------------------
Organization and Bylaws, both as amended to date, of the Company, and the copies
of all leases, instruments, agreements, licenses, permits, certificates or other
documents which are included on schedules attached hereto or have been delivered
to USFloral in connection with the transactions contemplated hereby are complete
and correct; neither the Company nor, to the knowledge of the Stockholders, any
other party thereto, is in material default thereunder; and, except as set forth
in the schedules and documents attached to this Agreement, the rights and
benefits of the Company thereunder will not be materially and adversely affected
by the transactions contemplated hereby; and the execution of this Agreement and
the performance of the obligations hereunder will not result in a material
violation or breach or constitute a material default under any of the terms or
provisions thereof. Except as set forth on Schedule 6.22, none of such leases,
instruments, agreements, contracts, licenses, permits, certificates or other
documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.23 Government Contracts. The Company is not now nor has it ever been a
--------------------
party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Absence of Changes. Since the Balance Sheet Date, there has not been:
------------------
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by insurance)
which has had a Material Adverse Effect on the Company, taken as a whole;
(iii) except as set forth in Schedule 6.24, any change in the authorized
capital of the Company or in their respective securities outstanding or any
change in their respective ownership interests or any grant of any options,
warrants, calls, conversion rights or commitments;
16
<PAGE>
(iv) except as set forth in Schedule 6.24, any declaration or payment of
any dividend or distribution in respect of the capital stock or any direct or
indirect redemption, purchase or other acquisition of any of the capital stock
of the Company;
(v) except as set forth in Schedule 6.24, any increase in the
compensation, bonus, sales commissions or fees arrangement payable or to
become payable by the Company to any of its officers, directors, Stockholders,
employees, consultants or agents other than ordinary salary increases
implemented on a basis consistent with past practices;
(vi) any work interruptions, labor grievances or claims filed, or any
proposed law or regulation or any event or condition of any character, which
has had a Material Adverse Effect on the Company, taken as a whole;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Company to any person, including,
without limitation, the Stockholders and their affiliates;
(viii) except as set forth on Schedule 6.24 hereto, any cancellation, or
agreement to cancel, any indebtedness or other obligation owing to the
Company, including without limitation any indebtedness or obligation of any
Stockholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any interest in any of the assets, properties or rights
of the Company or requiring consent of any party to the transfer and
assignment of any such assets, properties or rights;
(x) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any properties, rights or assets of the Company;
(xi) any waiver of any material rights or claims of the Company;
(xii) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party; or
(xiii) any transaction by the Company outside the ordinary course of their
respective businesses.
6.25 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule 6.25
------------------------------------
is an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
17
<PAGE>
(ii) the names in which the accounts or boxes are held;
(iii) the type of account; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 6.25 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
6.26 Environmental Matters. Except as set forth in Schedule 6.26, to the
---------------------
knowledge of the Stockholders, the Company has complied with and are in material
compliance with all federal, state, local and foreign statutes (civil and
criminal), laws, ordinances, regulations, rules, notices, permits, judgments,
orders and decrees applicable to any of them or any of their respective
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law) except to the extent that noncompliance with any Environmental Law, either
singly or in the aggregate, would not have a Material Adverse Effect on the
Company, taken as a whole. The Company has obtained and adhered to all
necessary permits and other approvals necessary to treat, transport, store,
dispose of and otherwise handle Hazardous Wastes and Hazardous Substances and
has reported, to the extent required by all Environmental Laws, all past and
present sites owned and operated by the Company where Hazardous Wastes or
Hazardous Substances have been treated, stored, disposed of or otherwise
handled. There have been no releases or threats of releases (as defined in
Environmental Laws) at, from, in or on any property owned or operated by the
Company except as permitted by Environmental Laws. Stockholders know of no off-
site location to which the Company has transported or disposed of Hazardous
Wastes and Hazardous Substances or arranged for the transportation of Hazardous
Wastes and Hazardous Substances, which site is the subject of any federal,
state, local or foreign enforcement action or any other investigation which
could lead to any claim against the Company, USFloral or Newco for any clean-up
cost, remedial work, damage to natural resources or personal injury, including,
but not limited to, any claim under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended. The Company has no
contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
6.27 Underground Storage Tanks. Except as set forth on Schedule 6.27, the
-------------------------
Company has never owned or leased any real estate having any underground storage
tanks containing petroleum products or wastes or other hazardous substances
regulated by 40 CFR 280 and/or other applicable federal, state or local laws,
rules and regulations and requirements.
6.28 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by the Company and the performance of the transactions contemplated herein have
been duly and validly
18
<PAGE>
authorized by the Board of Directors of the Company and the Stockholders of the
Company, and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
Company.
6.29 Relations with Governments. The Company has never made, offered or
--------------------------
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has the Company otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended or any law of similar effect.
6.30 Disclosure. Without limiting any exclusion, exception or other
----------
limitation contained in any of the representations and warranties made herein,
this Agreement and the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If any
Stockholders become aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholders shall immediately
give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve the Company or Stockholders of their respective
obligations under this Agreement, and at the sole option of USFloral, the truth
and accuracy of any and all warranties and representations of the Stockholders,
at the date of this Agreement and at the closing, shall be a precondition to the
consummation of this transaction.
6.31 Authority; Ownership. Each Stockholder has the full legal right, power
--------------------
and authority to enter into this Agreement. Each Stockholder owns beneficially
and of record all of the shares of Company stock identified on Annex II as being
owned by such Stockholder. The conversion of Company Stock into USFloral Stock
and cash pursuant to the provisions of this Agreement will transfer to USFloral
valid title in the shares of Company Stock owned by such Stockholder, free and
clear of all liens, encumbrances and claims of every kind.
7. REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFloral and Newco, jointly and severally, represent and as
follows.
7.1 Due Organization. USFloral and Newco are duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware, and are
duly authorized, qualified and licensed under all applicable laws, regulations,
and ordinances of public authorities to carry on their respective businesses in
the places and in the manner as now conducted except the states where the
failure to be so authorized, qualified or licensed would not have a Material
Adverse Effect on their respective businesses. Copies of the Certificates of
Incorporation (certified by the Secretary of State of the State of Delaware) and
the Bylaws, as amended, of USFloral and Newco (certified by the Secretary of
the respective corporations) have heretofore been delivered by USFloral to
Stockholders.
19
<PAGE>
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 Robert Poirier or Jonathan Ledecky (i) have
registration rights with respect to USFloral Stock that are superior to
registration rights that the Stockholders have, or (ii) will have the right to
include any USFloral Stock in the IPO.
7.3 Authorization. The representatives of USFloral and Newco executing this
-------------
Agreement have the corporate authority to enter into and bind USFloral and Newco
by the terms of this Agreement. USFloral and Newco have full legal right, power
and authority to enter into this Agreement and have the full legal right, power
and authority to enter into the Merger, and the conversion of Company Stock into
Newco Stock, pursuant to the provisions of this Agreement will transfer valid
title to USFloral Stock to the Stockholders, free and clear of all liens,
encumbrances and claims of every kind.
7.4 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the Certificate
of Incorporation or Bylaws of either USFloral or Newco,
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which either
USFloral or Newco is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any of USFloral's or Newco properties pursuant
to (A) any law or regulation to which USFloral or Newco, or any of their
property is subject, or (B) any judgment, order or decree to which USFloral or
Newco is bound or any of their property is subject; or
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(iv) require any filing or other notice under the Hart-Scott-Rodino
Antitrust Improvement Act.
7.5 Miscellaneous. Prior to the consummation of the Merger, USFloral and
-------------
Newco have no material properties or assets and are not party to any contracts
other than this Agreement, the letters of intent between USFloral and certain of
the Stockholders, certain employment
20
<PAGE>
agreements with officers of USFloral and those agreements and letters of intent
listed on Schedule 7.5 hereof.
7.6 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by USFloral and Newco and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
USFloral and the Board of Directors and the stockholder of Newco, and this
Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of USFloral and
Newco, respectively.
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access during normal business hours to all of the
Company's sites, properties, books and records and will furnish USFloral with
such additional financial and operating data and other information as to the
business and properties of the Company (including the Company's Subsidiaries) as
USFloral may from time to time reasonably request in writing. The Company will
cooperate with the reasonable requests of USFloral, its representatives,
engineers, auditors and counsel in the preparation of any documents or other
material which may be required in connection with any documents or materials
required by any governmental agency. USFloral will cause all information
obtained in connection with the negotiation and performance of this Agreement to
be treated as confidential in accordance with the provisions of Section 15
hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, Stockholders will cause the Company (including the Company's
Subsidiaries) to:
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation
or accounting;
(ii) maintain its properties, facilities and equipment and other assets in
as good working order and condition as at present, ordinary wear and tear
excepted;
(iii) perform all of its material obligations under debt and lease
instruments and other agreements relating to or affecting its assets,
properties, equipment and rights;
(iv) maintain present debt and lease instruments and not enter in new or
amended debt or lease instruments other than in the ordinary course of
business without the knowledge and consent of Newco;
(v) keep in full force and effect present insurance policies or other
comparable insurance coverage;
21
<PAGE>
(vi) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships and present agreements with suppliers, customers and others
having business relations with the Company; and
(vii) not effect any change in the capital structure of the organizations,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the Company's
capital stock or the purchase or other reacquisition of any outstanding shares
for treasury stock;
(viii) not materially increase present salaries and commission levels for
any and all officers, directors, employees and agents;
(ix) prohibit expenditures outside the normal course of business, and
prohibit capital expenditures in excess of $50,000 in the aggregate without
the prior approval of Newco;
(x) maintain compliance in all material respects with all material
permits, rules, laws, and regulations, consent orders and the like, the
failure to comply with which would have a material, adverse effect on the
Company or its business or assets; and
(xi) not, without the knowledge and consent of Newco, declare any
dividends or make any distribution with respect to its stock, whether now or
hereafter outstanding, nor pay out any extraordinary bonuses, fees,
commissions or any other unusual distributions to the Stockholders, directors,
management or other personnel between the date of this Agreement and the
Closing; provided, however, Newco acknowledges that the Company may pay
dividends, bonuses, and other distributions in the ordinary course of its
business not to exceed an aggregate amount of $100,000 plus additional
aggregate distributions to the Stockholders in an amount not in excess of the
amount needed to bring total tax-related distributions to Stockholders for
1997 to 60% of the Company's projected 1997 S-corporation taxable income and
provided further that the Company shall, prior to the Merger Effective Date,
distribute to the Stockholders the real property currently owned by the
Company in Waltham and Springfield, Massachusetts (the "Real Property
Distribution").
8.3 Prohibited Activities. Between the Balance Sheet Date and the Merger
---------------------
Effective Date, neither the Company (nor any Company Subsidiary) will, without
prior written consent of USFloral:
(i) make any change in their respective Articles of Organization or
Bylaws;
(ii) issue any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind;
22
<PAGE>
(iii) purchase, redeem or otherwise acquire or retire for value any
shares of their respective stock;
(iv) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures in excess of $25,000;
(v) increase the compensation payable or to become payable to any officer,
director, Stockholders, employee or agent other than ordinary salary increases
implemented on a basis consistent with past practices, or make any bonus or
management fee payment to any such person;
(vi) create, assume or permit to exist any mortgage, pledge or other lien
or encumbrance upon any assets or properties whether now owned or hereafter
acquired, except as set forth in Schedule 8.3(vi);
(vii) sell, assign, lease or otherwise transfer or dispose of any property
or equipment, except in the normal course of business and except as otherwise
contemplated by Section 8.2(xi) hereof, including the Real Property
Distribution;
(viii) negotiate for the acquisition of any business or the start-up of
any new business;
(ix) merge or consolidate or agree to merge or consolidate with or into
any other corporation;
(x) waive any material rights or claims;
(xi) breach or permit a breach, amend or terminate any material agreement
or any permit, license or other right; or
(xii) enter into any other transaction outside the ordinary course of its
business or prohibited hereunder.
8.4 Supplier Approval. Prior to the Closing Date, the Company shall satisfy
-----------------
any requirement for notice and approval of the transactions contemplated by this
Agreement under applicable supplier agreements, and shall provide USFloral with
satisfactory evidence of such approvals.
8.5 Notice to Bargaining Agents. Prior to the Closing Date, the Company
---------------------------
(including the Company's Subsidiaries) shall satisfy any requirement for notice
of the transactions contemplated by this Agreement under applicable collective
bargaining agreements, and shall provide USFloral with proof that any required
notice has been sent.
23
<PAGE>
8.6 No Shop. None of the Stockholders, the Company (including any Company
-------
Subsidiary) or any agent, officer, director or any representative of any of the
foregoing will, during the period commencing on the date of this Agreement and
ending with the earlier to occur of the Merger Effective Date or the termination
of this Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than USFloral or Newco
relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company.
8.7 Notification of Certain Matters. The Stockholders and the Company shall
-------------------------------
give prompt notice to USFloral of (i) the occurrence or non-occurrence of any
event known to any Stockholder or the Company the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained in
Section 6 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of any
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. USFloral
shall give prompt notice to each Stockholder of (i) the occurrence or non-
occurrence of any event known to USFloral the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in
Section 7 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of USFloral
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder. The delivery of any notice pursuant to this
Section 8.7 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 8.8, (ii) modify the conditions set forth in Sections 9
and 10 or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
8.8 Joinder to Agreement; Information Statement. The Company agrees that,
-------------------------------------------
prior to the filing of the Registration Statement with the SEC, it will cause
the Stockholders to become parties to this Agreement, by joinder or otherwise,
and to agree to be bound by all of the terms and conditions hereof. In
addition, the Company shall cause each Stockholder to certify that such
Stockholder has received an information statement regarding the transactions to
be described in the Registration Statement and that each Stockholder has had an
adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to their satisfaction) from the officers of
USFloral concerning the business, operations and financial condition of
USFloral.
24
<PAGE>
8.9 Amendment of Schedules. Each party hereto agrees that, with respect to
----------------------
the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Merger Effective Date
to supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided that no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to the Company may be made
unless USFloral consents to such amendment or supplement; and provided further,
however, that USFloral may not withhold consent to such amendment or supplement
if the same relates to (i) changes in facts or circumstances occurring
subsequent to the date hereof, or (ii) facts and circumstances existing as of
the date hereof that were not disclosed by the Stockholders because they did not
have knowledge of them (but, with respect to facts and circumstances described
in (ii) only to the extent that the omission thereof from the Schedules attached
hereto as of the date hereof was not the result of a lack of good faith
diligence on the part of the Stockholders). No amendment of or supplement to a
Schedule shall be made later than 48 hours prior to the anticipated
effectiveness of the Registration Statement.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of Stockholders hereunder are, at their option, subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions.
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFloral and Newco contained in Section 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by USFloral and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of USFloral shall have been delivered to
Stockholders.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of the
Company as a result of which the management of the Company deems it inadvisable
to proceed with the transactions hereunder.
9.3 Employment Agreements. The Surviving Corporation shall execute and
---------------------
deliver Employment Agreements, in the form of Annex III attached hereto, to each
of the persons listed on Schedule 9.3 hereto.
9.4 Opinion of Counsel. Stockholders shall have received an opinion from
------------------
counsel for USFloral, dated the Merger Effective Date, in form and substance
satisfactory to Stockholders, to the effect that:
25
<PAGE>
(i) USFloral and Newco have been duly organized and are validly existing
in good standing under the laws of the State of Delaware;
(ii) this Agreement has been duly authorized, executed and delivered by
USFloral and Newco and constitutes a valid and binding agreement of USFloral
and Newco enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting
the rights of creditors and except (X) as the same may be subject to the
effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein; and
(iii) the shares of USFloral Stock to be received by the Stockholders on
the Merger Effective Date shall be duly authorized, fully paid and
nonassessable.
9.5 Registration Statement. USFloral shall have filed with the SEC the
----------------------
Registration Statement and a registration statement under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The Registration Statement
shall have been declared effective by the SEC not later than December 24, 1997
and the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the underwriting agreement, the shares of USFloral Stock
covered by such Registration Statement.
9.6 Board of Directors Approval. The Board of Directors of USFloral shall
---------------------------
have approved the terms and conditions of this Agreement and the transactions
contemplated hereby.
9.7 Assumption of Deferred Compensation Agreements. USFloral shall have
----------------------------------------------
assumed the existing insurance-funded Deferred Compensation Agreements between
the Company and certain current and former members of the Company's management.
9.8 Real Property Distribution; Leases. As of the Merger Effective Date,
----------------------------------
the Real Property Distribution shall have been completed and the Surviving
Corporation shall enter into lease arrangements with each of the persons or
entities listed in Schedule 11.2 with respect to the corresponding properties or
assets listed on Schedule 11.2 in accordance with the terms and conditions of
the form of lease agreement attached hereto as Annex IV.
9.9 Market Capitalization. The aggregate post-closing market capitalization
---------------------
of USFloral (determined by multiplying to the number of shares of USFloral Stock
to be outstanding upon consummation of the IPO by the Price to Public in the
IPO) shall be not less than $50 million.
26
<PAGE>
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFloral and Newco hereunder are, at their option, subject
to the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions.
10.1 Representations and Warranties; Performance of Obligations. Stockholders
----------------------------------------------------------
shall have delivered to USFloral a certificate dated the Merger Effective Date
and signed by them to the effect that all the representations and warranties of
Stockholders contained in this Agreement shall be true on and as of the Closing
Date and as of the Merger Effective Date with the same effect as though such
representations and warranties had been made on and as of such dates, except for
matters expressly disclosed in the certificate or a Schedule thereto; each and
all of the agreements of Stockholders and the Company to be performed on or
before the Closing Date pursuant to the terms hereof shall have been performed.
10.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of USFloral
as a result of which the management of USFloral deems it inadvisable to proceed
with the transactions hereunder.
10.3 Examination of Financial Statements. Prior to the Closing Date,
-----------------------------------
USFloral shall have had sufficient time to review the unaudited balance sheets
of the Company as of June 30, 1997, and the unaudited statements of income, cash
flow and Stockholder's investment in the Company for the periods then ended,
disclosing no material adverse change in the financial condition of the Company
or the results of its operations from the financial statements originally
furnished by the Company as set forth in Schedule 6.9. In the opinion of
Newco's independent public accountants, the historical financial statements of
the Company must be suitable or adaptable for incorporation in the Registration
Statement and other filings of USFloral with the SEC.
10.4 No Material Adverse Change. No material adverse change in the results
--------------------------
of operations, financial position or business of the Company shall have
occurred, and the Company shall not have suffered any material loss or damages
to any of its properties or assets, whether or not covered by insurance, since
the Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and USFloral shall
have received on the Closing Date a certificate signed by Stockholders dated the
Merger Effective Date to such effect.
10.5 Regulatory Review. USFloral, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
the Company including, but not limited to, environmental and land use practices,
import and export laws, compliance with contracts and federal, state and local
laws and regulations governing the respective operations of the Company; which
review reflects compliance with all applicable laws governing the Company,
disclosing no material actual or probable violations, compliance problems,
required capital
27
<PAGE>
expenditures or other substantive environmental, real estate and land use
related concerns and which review is otherwise satisfactory in all respects to
USFloral, in its sole discretion.
10.6 Stockholders Release. At the Closing, the Stockholders shall have
--------------------
delivered to USFloral an instrument dated the Merger Effective Date releasing
the Company from any and all claims of Stockholders against the Company.
10.7 Employment Agreements. Each of the persons listed on Schedule 9.3 shall
---------------------
execute and deliver an Employment Agreement, in the form of Annex III attached
hereto.
10.8 Opinion of Counsel. USFloral shall have received an opinion from
------------------
Hutchins, Wheeler & Dittmar, A Professional Corporation, counsel to the
Stockholders, dated the Merger Effective Date, in form and substance
satisfactory to USFloral, to the effect that with respect to the Company:
(i) the Company has been duly organized and is validly existing in good
standing under the laws of the state of its incorporation;
(ii) the authorized and outstanding capital stock of the Company is as
represented by the Stockholders in this Agreement and each share of such stock
has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
Stockholder;
(iii) the Company does not have any outstanding options, warrants, calls,
conversion rights or other commitments of any kind to issue or sell any of its
capital stock;
(iv) this Agreement has been duly authorized, executed and delivered by
the Company and the Stockholders and constitutes a valid and binding agreement
of the Company and the Stockholders enforceable in accordance with its terms
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to or
affecting the rights of creditors and except (X) as the same may be subject to
the effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein;
(v) the Company has good and marketable title to the properties, assets
and leasehold estates, real and personal, shown on the schedules to this
Agreement, except for those properties sold or otherwise disposed of in the
ordinary course of business since the date of such schedules, subject only to
those liens shown on Schedules 6.10, 6.14 and 10.11, liens for current taxes
and assessments not in default and other minor encumbrances not materially
affecting the use of such properties;
28
<PAGE>
(vi) upon consummation of the Merger contemplated by this Agreement,
USFloral will receive good title to the Company Stock, free and clear of all
liens, encumbrances and claims of every kind;
(vii) except to the extent set forth on Schedule 6.20, the Company is not
in violation of or default under any law or regulation, or under any order of
any court, commission, board, bureau, agency or instrumentality wherever
located and there are no claims, actions, suits or proceedings pending, or
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality wherever located;
(viii) except to the extent set forth on Schedule 6.14, the Company is not
in default under any of its material contracts or agreements or has received
notice of such default;
(ix) no notice to, consent, authorization, approval or order of any court
or governmental agency or body or of any other third party is required in
connection with the execution, delivery or consummation of this Agreement by
any Stockholders or for the transfer to USFloral of the Company Stock; and
(x) the execution of this Agreement and the performance of the obligations
hereunder will not violate or result in a breach or constitute a default under
any of the terms or provisions of the Company's Articles of Organization or
the by-laws of the Company or of any lease, instrument, license, permit or any
other agreement to which the Company is a party or by which the Company or any
Stockholder is bound.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 Consents and Approvals. All necessary consents of and filings with any
----------------------
governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and no action
or proceeding shall have been instituted or threatened to restrain or prohibit
USFloral's acquisition of the Company Stock and no governmental agency or body
shall have taken any other action or made any request of USFloral as a result of
which USFloral deems it inadvisable to proceed with the transactions hereunder.
10.10 Additional Liabilities and Obligations. Stockholders shall have
--------------------------------------
delivered to USFloral a Schedule (Schedule 10.10), dated the Merger Effective
Date, setting forth all liabilities and obligations of the Company (including
the Company's Subsidiaries) arising since the Balance Sheet Date.
29
<PAGE>
10.11 Additional Contracts. Stockholders shall have delivered to
--------------------
USFloral a Schedule (Schedule 10.11), dated the Merger Effective Date, showing
all material contracts and agreements, together with copies thereof, entered
into by the Company (including the Company's Subsidiaries) since the Balance
Sheet Date.
10.12 Good Standing Certificates. Stockholders shall have delivered to
--------------------------
USFloral certificates, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by USFloral, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.13 Registration Statement. The Registration Statement shall have been
----------------------
declared effective by the SEC, and the underwriters named therein shall have
agreed to acquire, subject to the conditions set forth in the underwriting
agreement, the shares of USFloral Stock covered thereby and the post-closing
market capitalization of USFloral will exceed $50 million (calculated as the
number of shares of USFloral Stock outstanding after the Closing multiplied by
the IPO price, assumed to be $10 per share).
10.14 Repayment of Indebtedness. Prior to the Closing Date, the Stockholders
-------------------------
shall have repaid the Company (including each Company's Subsidiaries) in full
all amounts owing by the Stockholders.
10.15 Net Income. The Company shall have average annual adjusted income
----------
before bonuses, profit-sharing and taxes ("Operating Income") for each of the
three years in the three-year period ended December 31, 1996 of $1.5 million in
each year and a book value as of the Closing Date, after giving effect to the
contemplated distribution to the Stockholders of real property owned by the
Company, of at least $4.5 million.
10.16 Real Property Distribution; Leases. As of the Merger Effective Date,
----------------------------------
the Real Property Distribution shall have been completed and the Surviving
Corporation shall enter into lease arrangements with each of the persons or
entities listed in Schedule 11.2 with respect to the corresponding properties or
assets listed on Schedule 11.2 in accordance with the terms and conditions on
the form of lease agreement attached hereto as Annex IV.
11. COVENANTS OF USFLORAL
11.1 Registration Statement. As soon as practicable following the execution
----------------------
of this Agreement and in any event within 45 days thereafter, USFloral shall
prepare and file with the SEC the Registration Statement.
30
<PAGE>
11.2 Release From Guarantees. Not later than 120 days following the Merger
-----------------------
Effective Date, USFloral shall cause the Stockholders to be released from any
and all guarantees of any indebtedness set forth on Schedule 11.1 that they
personally guaranteed for the benefit of the Company, with all such guarantees
on indebtedness being assumed by USFloral; provided, that, in the event that the
beneficiary of any such guarantee is unwilling to permit the assumption by
USFloral of the obligations under such guarantee, USFloral shall repay the
indebtedness to which such guarantee relates together with all interest and
prepayment penalties, if any, then due and owing.
11.3 Leases. At the Merger Effective Date, the Surviving Corporation shall
------
enter into lease arrangements with each of the persons or entities listed in
Schedule 11.2 with respect to the corresponding properties or assets listed on
Schedule 11.2 in accordance with the terms and conditions of the form of lease
agreement attached hereto as Annex IV.
11.4 Compliance with the 1934 Act. For a period of two years following the
----------------------------
Merger Effective Date, USFloral shall (i) make and keep public information
available, as those terms are defined in Rule 144 promulgated under the 1933 Act
or any successor rule hereafter promulgated by the SEC ("Rule 144") and (ii)
file with the SEC in a timely manner all reports and other documents required of
USFloral under the 1933 Act and the 1934 Act.
11.5 Certain Transactions. USFloral will cause its existing stockholders to
--------------------
participate, within the standards established by Revenue Procedure 77-37, in the
IPO to the extent necessary to cause the group consisting of (i) those existing
stockholders who purchase USFloral Stock from USFloral at the time of the IPO,
(ii) other persons acquiring stock in the IPO and (iii) the persons acquiring
stock as a result of the Merger and other concurrent mergers to possess at least
80% of the outstanding stock of USFloral. Each of the concurrent mergers will
be a reverse triangular merger in which not more than 60% of the consideration
being transferred to each stockholder of the target corporations shall consist
of USFloral Stock.
11.6 USFloral Stock Options. As soon as practicable after the Closing,
----------------------
options to purchase such number of shares of USFloral Stock as shall have a fair
market value on the Closing Date equal to 6.25% of the consideration delivered
to the Stockholders in the Merger shall be available for issuance to the key
employees of the Surviving Corporation after the Closing, as determined by the
Surviving Corporation's President (or other officer or director designated by
the Surviving Corporation and acceptable to USFloral) in accordance with
USFloral's policies, and authorized and issued under the terms of USFloral's
Amended and Restated 1997 Long-Term Incentive Plan (the "Plan").
11.7 Piggy-Back Registrations. If at any time after the expiration of the
------------------------
restrictions contained in Section 16 USFloral shall determine to register shares
of USFloral Stock for its own account or the account of others under the 1933
Act (other than on Form S-8 or Form S-4 or their then equivalents relating to
shares of USFloral Stock to be issued solely in connection with any acquisition
of any entity or business or shares of USFloral Stock issuable in connection
with stock
31
<PAGE>
option or other employee benefit plans, and other than any "shelf" registration
statement relating to securities to be issued by USFloral), then it shall send
to each holder of shares of USFloral Stock issued in the Merger ("Registrable
Shares") (all such security holders and being referred to as "Holders") written
notice of such determination. If, within 15 days after receipt of such notice,
such Holder shall so request in writing, then USFloral shall use its best
efforts to include in such registration statement all or any part of the
Registrable Shares such Holder requests to be registered, except that if, in
connection with any offering involving an underwriting of USFloral Stock to be
issued by USFloral, the managing underwriter shall impose a limitation on the
number of shares of such USFloral Stock which may be included in the
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, then USFloral shall be obligated to
include in such registration statement only such limited portion of the
Registrable Shares with respect to which such Holder has requested inclusion
hereunder; provided, however, that USFloral shall not so exclude any Registrable
-------- -------
Shares unless it has first excluded all securities to be offered and sold by
directors, officers or other employees of USFloral or by shareholders who do not
have contractual, incidental rights to include such securities. Except as
provided in the previous sentence of this Section 11.7 any exclusion of
Registrable Shares shall be made pro rata among the Holders of Registrable
--- ----
Shares seeking to include such shares, in proportion to the number of such
shares sought to be included by such Holders. The obligations of USFloral under
this Section 11.7 may be waived at any time upon the written consent of Holders
of a majority-in-interest of the Registrable Shares and shall expire as to each
Holder immediately upon all of such Holder's Registrable Shares being capable of
sale within a three-month period in accordance with the volume and manner-of-
sale limitations of Rule 144 under the 1933 Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by Stockholders. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, the Stockholders, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
USFloral, Newco and the Surviving Corporation and their respective officers,
Stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement until the Expiration Date (as defined in Section
12.6) from and against all claims, damages, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by USFloral, Newco or the Surviving Corporations as a
result of or arising from (i) any breach of the representations and warranties
made by Stockholders set forth herein or on the schedules or certificates
delivered in connection herewith, (ii) any nonfulfillment of any agreement on
the part of Stockholders or the Company under this Agreement or (iii) any
liability under the Securities Act of 1933, as amended, (the "1933 Act"), the
Exchange Act or other Federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to the Company (including the Company's
Subsidiaries) or Stockholders, and provided to USFloral or its counsel by the
Company (including any Company Subsidiary) or Stockholders, contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or
32
<PAGE>
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to the Company (including any
Company Subsidiary) or Stockholders required to be stated therein or necessary
to make the statements therein not misleading, and not provided to USFloral or
its counsel by the Company (including the Company's Subsidiaries) or
Stockholders, provided, however, that such indemnity shall not inure to the
benefit of USFloral, Newco and the Surviving Corporation to the extent that such
untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and Stockholders
provided, in writing, corrected information to USFloral for inclusion in the
final prospectus, and such information was not so included.
12.2 Specific Indemnification by Stockholders. Subject to the limitations
----------------------------------------
contained in Section 12.5 hereof, notwithstanding any disclosure made in this
Agreement or in the Schedules or Exhibits hereto, and notwithstanding any
investigation by USFloral or Newco, the Stockholders covenant and agree that
they will indemnify, defend, protect and hold harmless USFloral, Newco and the
Surviving Corporation and their respective officers, stockholders, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, agents, employees,
successors and assigns at all times from and after the date of this Agreement,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by USFloral, Newco or the Surviving Corporation as a
result of or incident to: (a) the existence of liabilities of the Company in
excess of the liabilities set forth on Schedule 6.10, but only to the extent of
such excess, with the parties acknowledging and agreeing that (i) the existence
of liabilities (such as accounts payable) of the Company on the Merger Effective
Date that are different (but not in the aggregate greater) than the liabilities
of the Company set forth on Schedule 6.10 on the date hereof shall not give rise
to any obligations of the Stockholder under the provisions of this Section 12
and (ii) the existence of liabilities that arise in the ordinary course of
business of the Company that do not arise as a result of a breach by the
Stockholders of any of their obligations set forth in Sections 8.2 or 8.3 hereof
shall not give rise to any obligations of the Stockholders under the provisions
of this Section 12; and (b) all liability resulting from the litigation matters
listed on Schedule 6.20.
12.3 Indemnification by USFloral and Newco. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFloral and Newco, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
Stockholders at all times from and after the date of this Agreement from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by
Stockholders as a result of or arising from (i) any breach of the
representations and warranties made by USFloral and Newco set forth herein or on
the schedules or certificates attached hereto, (ii) any nonfulfillment of any
agreement on the part of USFloral under this Agreement, (iii) any liabilities
which Stockholders may incur due to USFloral's failure to be responsible for the
liabilities and obligations of the Surviving Corporation as provided in Section
1.5 hereof (except to the extent that USFloral has claims against Stockholders
by reason of such liabilities); or (iv) any liability under the 1933 Act, the
Exchange Act or other Federal or
33
<PAGE>
state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
relating to USFloral (including any entities proposed to be acquired, directly
or indirectly, by USFloral other than the Company (the "Other Targets"))
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to USFloral (including the Other Targets)
required to be stated therein or necessary to make the statements therein not
misleading.
12.4 Third Person Claims. Promptly after any party hereto (hereinafter the
-------------------
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement (a "Third Person") or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently.
If the Indemnifying Party undertakes to defend or settle, it shall promptly
notify the Indemnified Party of its intention to do so, and the Indemnified
Party shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the Indemnifying Party that are
in the Indemnified Party's possession or control. Notwithstanding the foregoing,
the Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel); provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and out-of-
pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section 12 with respect to such Third Person claim shall be limited
to the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense,
34
<PAGE>
the Indemnified Party may undertake such defense through counsel of its choice,
at the cost and expense of the Indemnifying Party, and the Indemnified Party may
settle such matter, and the Indemnifying Party shall reimburse the Indemnified
Party for the amount paid in such settlement and any other liabilities or
expenses incurred by the Indemnified Party in connection therewith, provided,
however, that under no circumstances shall the Indemnified Party settle any
Third Person claim without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
12.5 Limitations on Indemnification. No Indemnified Party shall assert any
------------------------------
claim (other than a Third Person claim) for indemnification hereunder until such
time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall exceed an amount equal to 2% of the sum of
(i) $6,044,500 and (ii) 495,550 times the price at which shares of USFloral
Stock are sold in the IPO, at which time, an Indemnified Party shall be entitled
to seek indemnification for all claims not previously asserted pursuant to this
Section. For purposes of the preceding sentence, USFloral, Newco and the
Surviving Corporation shall be considered to be a single Indemnifying and
Indemnified Party and Stockholders shall be considered to be a single
Indemnifying and Indemnified Party. Notwithstanding any other term of this
Agreement, in no event shall any Stockholder be liable under this Section 12 for
an amount which exceeds the aggregate value (determined at the Merger Effective
Date) of the consideration received by such Stockholder under this Agreement.
"Excess Net Worth" shall mean the amount, if any, by which the aggregate
shareholders' equity as shown on the Closing Date Balance Sheet is greater than
the aggregate shareholders' equity as shown on the Balance Sheet of the Company
as at December 31, 1996, adjusted to reflect the Real Property Distribution.
All indemnification obligations of the Stockholders with respect to unpaid
accounts receivable pursuant to Section 6.11 hereof shall be reduced by the
amount of any Excess Net Worth (but only to the extent such Excess Net Worth has
not previously been utilized to reduce an indemnification obligation pursuant to
this sentence).
12.6 Survival of Representations and Warranties. The parties agree that
------------------------------------------
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of twelve (12) months from the Merger Effective Date (which
date is hereinafter called the "Expiration Date"), except that (i) the
representations and warranties contained in Section 6.21 hereof shall survive
until such time as the limitations period has run for all tax periods ended
prior to the Merger Effective Date, which shall be deemed to be the Expiration
Date for purposes of this clause (i), (ii) the representations and warranties
contained in Sections 6.26 and 6.27 hereof shall survive for a period of three
years from the Merger Effective Date, which shall be deemed the Expiration Date
for purposes of this clause (ii), (iii) solely for purposes of Section 12.1(iii)
hereof, and solely to the extent that USFloral actually incurs liability under
the 1933 Act, the Exchange Act, or any other Federal or state securities laws,
the representations and warranties set forth herein shall survive for a period
of three years from the Merger Effective Date, which shall be deemed to be the
Expiration Date for purposes of this clause (iii) and (iv) any representations
and warranties which serve as a basis of the indemnity obligations of
Stockholders under Section 12.2 shall survive the Merger Effective Date without
time limitation.
35
<PAGE>
12.7 Sole Remedies. The provisions of this Section 12 shall be the exclusive
-------------
basis for assertion of claims against, or the imposition of liability on, the
Stockholders in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the Stockholders.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFloral or Stockholders may, by notice in
--------------------------
the manner hereinafter provided on or before the Closing Date, terminate this
Agreement (i) if a material default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date and shall not reasonably be
expected to occur (ii) if the Registration Statement has not been declared
effective by December 24, 1997; (iii) if the Closing has not occurred by
December 31, 1997; or (iv) if the IPO price is determined to be less than $8.00
and USFloral does not offer to increase the number of shares of USFloral Stock
to be delivered in the Merger such that the Stockholders will receive the same
economic benefit in dollar terms as if the IPO price had been $8.00 per share.
During the period from the Closing Date to the Merger Effective Date, this
Agreement may only be terminated by the parties as provided in Section 5 hereof.
13.2 Liquidated Damages.
------------------
(a) If the Stockholders terminate this Agreement after the satisfaction of the
conditions set forth in Article 9 or if the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to USFloral at law, in equity or pursuant to this Agreement,
Stockholders shall pay to USFloral the sum of $500,000 as liquidated damages.
It is hereby agreed that USFloral's damages in the event of a termination or
default by Company hereunder are uncertain and impossible to ascertain and that
the foregoing constitutes a reasonable liquidation of such damages and is
intended not as penalty but as liquidated damages.
(b) If USFloral terminates this Agreement after the satisfaction of the
conditions set forth in Article 10 or if the Merger fails to occur because of
the default of USFloral or Newco, then, in addition to the other remedies
available to the Company and the Stockholders at law, in equity or pursuant to
this Agreement, USFloral shall pay to the Stockholders the sum of $500,000 as
liquidated damages. It is hereby agreed that the Stockholders' damages in the
event of a termination by USFloral hereunder are uncertain and impossible to
ascertain and that the foregoing constitutes a reasonable liquidation of such
damages and is intended not as penalty but as liquidated damages.
14. NONCOMPETITION
14.1 Prohibited Activities. Stockholders agree that for a period of two
---------------------
years following the Merger Effective Date, they shall not:
36
<PAGE>
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
business selling any products or services in direct competition with the
Surviving Corporation or USFloral that involves the importing, brokerage,
shipping or marketing of floral products, or any business engaging in the
consolidation of the floral industry within the United States (the
"Territory");
(ii) call upon any person who is, at that time, within the Territory, an
employee of USFloral or any subsidiary of USFloral in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out
of the employ of USFloral or such subsidiary;
(iii) call upon any person or entity which is, at that time, or which has
been, within one year prior to that time, a customer of USFloral or any
subsidiaries of USFloral, the Company or the Company's Subsidiaries within the
Territory for the purpose of soliciting or selling floral products within the
Territory;
(iv) call upon any prospective acquisition candidate, on their own behalf
or on behalf of any competitor, which candidate was either called upon by any
of them or for which any of them made an acquisition analysis for themselves
or USFloral or any subsidiaries of USFloral, any Company or such Company's
Subsidiaries; or
(v) disclose customers, whether in existence or proposed, of any Company
(or such Company's Subsidiaries) to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Stockholders from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market, or (ii) engaging
in any activity to which USFloral shall have provided its prior written consent.
In addition, the foregoing covenant shall not be deemed to prohibit any
Stockholder, who, as of the date hereof, has an interest, as an owner, operator,
creditor, employee or otherwise, in a floral business independent (except as a
customer or supplier) of the Company, from continuing to maintain such interest,
provided that if such business is not, as of the date hereof, operating at more
than one level of distribution of floral products, no Stockholder shall
integrate such business during the two-year period set forth in this Section
14.1.
14.2 Damages. Because of the difficulty of measuring economic losses to
-------
USFloral and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFloral and the Surviving Corporation for which they would
have no other adequate remedy, Stockholders agree that, in the event of a breach
by them of the foregoing covenant, the covenant may be enforced by USFloral or
the Surviving Corporation by, without limitation, injunctions and restraining
orders.
37
<PAGE>
14.3 Reasonable Restraint. It is agreed by the parties that the foregoing
--------------------
covenants in this Section 14 impose a reasonable restraint on Stockholders in
light of the activities and business of USFloral on the date of the execution of
this Agreement and the current and future plans of USFloral and the Surviving
Corporation (as successors to the business of the Company).
14.4 Severability; Reformation. The covenants in this Section 14 are
-------------------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
14.5 Independent Covenant. All of the covenants in this Section 14 shall be
--------------------
construed as an agreement independent of any other provision of this Agreement,
and the existence of any claim or cause of action of Stockholders against the
Company, any Company Subsidiary, the Surviving Corporation or USFloral, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
years stated above, shall be computed by excluding from such computation any
time during which any Stockholder is in violation of any provision of this
Section 14 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
the Surviving Corporation seeks to enforce the agreements and covenants of
Stockholders or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement.
14.6 Materiality. Stockholders hereby agree that this covenant is a material
-----------
and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Stockholders. Stockholders recognize and acknowledge that they have in
------------
the past, currently have, and in the future may possibly have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, and pricing and cost policies that are valuable, special and unique
assets of the Company and the Company's business. Stockholders agree that they
will not disclose any confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of USFloral, unless such information becomes known to
the public generally through no fault of Stockholders. In the event of a breach
or threatened breach by Stockholders of the provisions of this Section, USFloral
and the Surviving Corporation shall be entitled to an injunction restraining
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting USFloral and the
Surviving Corporation from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
38
<PAGE>
15.2 USFloral. USFloral recognizes and acknowledges that it has in the past,
--------
currently has, and prior to the Closing Date, will have access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. USFloral agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the Stockholders. In the event of
a breach or threatened breach by USFloral of the provisions of this Section,
Stockholders shall be entitled to an injunction restraining USFloral from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting Stockholders from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 Damages. Because of the difficulty of measuring economic losses as a
-------
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Surviving Corporation and Stockholders agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, the
Stockholders hereby irrevocably agree that for a period of 180 days after the
date of the effectiveness of the Registration Statement, as the same may be
amended, not to (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of (except as
contemplated in Section 4.2 hereof), directly or indirectly, any shares of
USFloral Stock or any securities convertible into or exercisable or exchangeable
for shares of USFloral Stock, or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the USFloral Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of USFloral Stock or such
other securities, in cash or otherwise without the prior written consent of the
underwriters in the IPO. The Stockholders agree that the foregoing shall be
binding upon the Stockholders' transferees, successors, assigns, heirs, and
personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. In furtherance of the foregoing, USFloral and its
transfer agent are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Article 16.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The Stockholders acknowledge and agree that the shares of USFloral Stock to be
delivered to the Stockholders pursuant to this Agreement have not been and will
not be registered under the Act and therefore may not be resold without
compliance with the Act. The Stockholders represent and warrant that the
USFloral Stock to be acquired by Stockholders pursuant to this Agreement is
39
<PAGE>
being acquired solely for their own account, for investment purposes only, and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution.
17.1 Compliance with Law. The Stockholders covenant, warrant and represent
-------------------
that none of the shares of USFloral Stock issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC.
17.2 Economic Risk; Sophistication. Stockholders represent and warrant
-----------------------------
that they are able to bear the economic risk of an investment in USFloral Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. They further represent and warrant that they, either
individually or together with their purchaser representatives, (i) fully
understand the nature, scope and duration of the limitations on transfer
contained in this Agreement and (ii) have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of the proposed investment and therefore have the capacity to protect
their own interests in connection with the acquisition of the USFloral Stock.
The purchaser representatives represent and warrant that they have had an
adequate opportunity to ask questions and receive answers from the officers of
USFloral concerning any and all matters relating to the acquisition of USFloral
Stock as contemplated by this Agreement including, without limitation, the
background and experience of the officers and directors of USFloral, the plans
for the operations of the business of USFloral, and any plans for additional
acquisitions and the like. The purchaser representatives have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
17.3 Registration Statement. Each Stockholder has received the prospectus
----------------------
included in the draft Registration Statement delivered to him or her on or about
August 2, 1997 that describes, among other things, the Merger, the other
acquisitions proposed to be undertaken by USFloral and the target companies of
the other acquisitions. The purchaser representatives have had an adequate
opportunity to ask questions and receive answers to their satisfaction from the
officers of USFloral concerning the business, operations and financial condition
of USFloral.
18. SECURITIES LEGENDS
The certificates evidencing the USFloral Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as USFloral may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD,
40
<PAGE>
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE 1933 ACT AND ANY STATE
SECURITIES OR BLUE SKY LAWS, UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM
AND SUBSTANCE SATISFACTORY TO USFLORAL) OF COUNSEL SATISFACTORY TO
USFLORAL, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear such other legends as counsel for
USFloral reasonably determines are required under the applicable laws of any
state.
19. GENERAL.
19.1 Cooperation. Stockholders and USFloral shall each deliver or cause to
-----------
be delivered to the other on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
Stockholders will cooperate and use their best efforts to have the present
officers, directors and employees of the Company cooperate with USFloral on and
after the Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
19.2 Successors and Assigns. This Agreement and the rights of the parties
----------------------
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of Stockholders.
19.3 Entire Agreement. This Agreement (including the schedules, exhibits and
----------------
annexes attached hereto) and the documents delivered pursuant hereto constitute
the entire agreement and understanding between Stockholders, the Company,
USFloral and Newco and supersede any prior agreement and understanding relating
to the subject matter of this Agreement. This Agreement, upon execution,
constitutes a valid and binding agreement on the parties thereto enforceable in
accordance with its terms and may be modified or amended only by a written
instrument executed by Stockholders (subject to the limitations set forth
below), the Company, USFloral, and Newco acting through their respective
officers, duly authorized by their respective Boards of Directors; provided,
that the Stockholder who owns a majority of the outstanding shares of capital
stock of the Company shall have the authority to approve and execute any
amendment to this Agreement on behalf of all of the Stockholders and without the
necessity of such majority Stockholder obtaining consent or authorization from
any other Stockholder, unless such amendment relates to any representation of
warranty made by a Stockholder other than such majority Stockholder which may
only be amended by the written agreement of such person.
41
<PAGE>
19.4 Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19.5 Brokers and Agents. Each party represents and warrants that it employed
------------------
no broker or agent in connection with this transaction and agrees to indemnify
the other against all loss, cost, damages or expense arising out of claims for
fees or commissions of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall be
--------
consummated, USFloral will pay the fees, expenses and disbursements of USFloral
and Newco and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto.
Whether or not the transactions herein contemplated shall be consummated,
Stockholders will pay the fees, expenses and disbursements of the Company, the
Stockholders and their agents, representatives, accountants and counsel incurred
in connection with the subject matter of this Agreement and any amendments
hereto and all other costs and expenses incurred in the performance and
compliance with all conditions to be performed by the Stockholders and the
Company under this Agreement.
19.7 Notices. All notices of communication required or permitted hereunder
-------
shall be in writing and shall be given by overnight courier, addressed to the
party to be notified, or by delivering the same in person to an officer or agent
of such party.
(a) If to USFloral or Newco, addressed to them at:
3500 Whitehaven Parkway
Washington, DC 20007
(b) If to Stockholders, addressed to them:
c/o Frederick H. Grein, Jr., Esq.
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
19.8 Governing Law. This Agreement shall be construed in accordance with the
-------------
laws of the State of Delaware.
19.9 Exercise of Rights and Remedies. Except as otherwise provided herein, no
-------------------------------
delay of or omission in the exercise of any right, power or remedy accruing to
any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
42
<PAGE>
19.10 Time. Time is of the essence with respect to this Agreement.
----
19.11 Reformation and Severability. In case any provision of this Agreement
----------------------------
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
19.12 Remedies Cumulative. No right, remedy or election given by any term of
-------------------
this Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
19.13 Captions. The headings of this Agreement are inserted for convenience
--------
only and shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
19.14 Standstill Agreement. Unless and until this Agreement is terminated
--------------------
pursuant to Article 13 hereof without the Merger Effective Date having taken
place, Stockholders will not directly or indirectly solicit offers for any
Company Stock or the assets of the Company or a merger or consolidation
involving the Company from, or respond to inquiries from, share information
with, negotiate with or in any way facilitate inquiries or offers from, third
parties who express or who have heretofore expressed an interest in acquiring
the Company by merger or consolidation or acquiring any of its assets or any
Company Stock; nor will they permit the Company to do any of the foregoing.
43
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFloral" "Stockholders"
U.S.A. FLORAL PRODUCTS, INC. Roger H. and Arline B. Anderson
Katheryn W. Bacon
By /s/ Robert J. Poirier Brenda W. Bastug
---------------------
Name: Robert J. Poirier Theresa J. Baudin
Title: President/CEO Frederick Brasco
Carmela Brasco
"Newco" Bruce E. Burke
Louis O. Caporiccio, Jr.
BSF ACQUISITION CORP. Warren J. Carey
Adah F. Carey
By /s/ Robert J. Poirier Douglas H. Carey
---------------------
Name: Robert J. Poirier James F. Carey
Title: President/CEO John M. Cross
Charles J. and Marguerite M. Ferguson
"Company" Judith F. and Gustave Geisler
Frederick H. Grein, Jr.
BAY STATE FLORIST SUPPLY, INC. William Hines
Francis R. and Theresa F. Iacovelli
By /s/ Frederick H. Grein, Jr. Ralph Johnson
---------------------------
Name: Frederick H. Grein, Jr. Winifred N. Kneisel
Title: Director Charles Laughton
Frances H. Laughton
Edward M. Loiseau
A. John and Marian K. Marabello
Steven K. Palmer
Louise W. Pickett
William and Barbara Rudolph
Stephan Smith
Joan C. and Richard L. Sullivan
Philip R. and Dorothy Temple
Victor A. Tomyl
Barry Williams
R. Craig Williams
Mark R. Woodbury
Thomas Yaiser
/s/ Frederick H. Grein, Jr.
--------------------------
By Frederick H. Grein, Jr.
under Power of Attorney
The undersigned Frederick H. Grein, Jr., for
himself and the other purchaser
representatives, hereby confirms the
representation and warranty set forth in
Section 17.2 hereof.
/s/ Frederick H. Grein, Jr.
---------------------------
<PAGE>
ANNEXES
ANNEX I [Form of Articles of Merger]
ANNEX II [Consideration]
ANNEX III [Form of Employment Agreement]
ANNEX IV [Form of Lease Agreement]
<PAGE>
EXHIBIT 10.04
- -------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
USA FLORAL PRODUCTS, INC.
(a Delaware corporation),
USA FLORAL ACQUISITION CO.
(a California corporation),
MONTEREY BAY BOUQUET, INC.
(a California corporation),
BAY AREA BOUQUETS, INC.
(a California corporation)
and
JEFFREY BROTHERS, PHILIP BURAN and DOUGLAS ANDERSON
Dated as of August 5, 1997
- -------------------------------------------------------------------------------
<PAGE>
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
COMPANIES, the MERGED COMPANY and NEWCO.......................... 3
1.5 Effect of Merger................................................. 3
2. CONVERSION AND EXCHANGE OF STOCK...................................... 4
2.1 Manner of Conversion............................................. 4
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION....................... 4
3.1 Consideration.................................................... 4
3.2 Delivery of COMPANY Stock........................................ 5
4. POST CLOSING ADJUSTMENT; INDEMNITY ESCROW............................. 5
4.1 Adjustment....................................................... 5
4.2 Security......................................................... 5
4.3 Indemnity Escrow................................................. 6
5. CLOSING; MERGER EFFECTIVE DATE........................................ 7
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS........................ 7
6.1 Due Organization................................................. 7
6.2 Authorization.................................................... 8
6.3 Capital Stock of Each Company.................................... 8
6.4 Transactions in Capital Stock.................................... 8
6.5 No Bonus Shares.................................................. 8
6.6 Subsidiaries..................................................... 8
6.7 Predecessor Status; etc.......................................... 8
6.8 Spin-off by COMPANIES............................................ 9
6.9 Financial Statements............................................. 9
6.10 Liabilities and Obligations..................................... 9
6.11 Accounts and Notes Receivable................................... 10
6.12 Permits and Intangibles......................................... 10
6.13 Real and Personal Property...................................... 10
6.14 Material Contracts and Commitments.............................. 11
6.15 Insurance....................................................... 11
i
<PAGE>
6.16 Officers, Directors and Employees Compensation.................. 11
6.17 Employee Plans.................................................. 12
6.18 Compliance with ERISA........................................... 12
6.19 Conformity with Law............................................. 14
6.20 Taxes........................................................... 14
6.21 Completeness; No Violations..................................... 15
6.22 Government Contracts............................................ 15
6.23 Absence of Changes.............................................. 15
6.24 Deposit Accounts; Powers of Attorney............................ 16
6.25 Environmental Matters........................................... 17
6.26 Underground Storage Tanks....................................... 17
6.27 Validity of Obligations......................................... 18
6.28 Relations with Governments...................................... 18
6.29 Disclosure...................................................... 18
6.30 Authority; Ownership............................................ 19
7. REPRESENTATIONS OF USFLORAL AND NEWCO................................. 19
7.1 Due Organization................................................ 19
7.2 USFLORAL Stock.................................................. 19
7.3 Authorization................................................... 19
7.4 Validity of Obligations......................................... 20
7.5 No Conflicts.................................................... 20
7.6 Miscellaneous................................................... 20
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING................ 20
8.1 Access and Cooperation........................................... 20
8.2 Conduct of Business.............................................. 21
8.3 Prohibited Activities............................................ 21
8.4 Supplier Approval................................................ 22
8.5 Notice to Bargaining Agents...................................... 23
8.6 No Shop.......................................................... 23
8.7 Notification of Certain Matters.................................. 23
8.8 Amendment of Schedules........................................... 23
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS................... 24
9.1 Representations and Warranties; Performance of Obligations....... 24
9.2 No Litigation.................................................... 24
9.3 Employment Agreements............................................ 24
9.4 Opinion of Counsel............................................... 24
9.5 Registration Statement........................................... 25
ii
<PAGE>
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO............. 25
10.1 Representations and Warranties; Performance of Obligations...... 25
10.2 No Litigation................................................... 25
10.3 Examination of Financial Statements............................. 25
10.4 No Material Adverse Change...................................... 26
10.5 Regulatory Review............................................... 26
10.6 STOCKHOLDERS Release............................................ 26
10.7 Employment Agreements........................................... 26
10.8 Opinion of Counsel.............................................. 26
10.9 Consents and Approvals.......................................... 27
10.10 Additional Liabilities and Obligations.......................... 28
10.11 Additional Contracts............................................ 28
10.12 Good Standing Certificates...................................... 28
10.13 Registration Statement.......................................... 28
10.14 Repayment of Indebtedness....................................... 28
10.15 Net Income...................................................... 28
10.16 Merger of Companies............................................. 28
11. COVENANTS OF USFLORAL................................................. 28
11.1 Release From Guarantees......................................... 28
11.2 Leases.......................................................... 29
11.3 USFLORAL Stock Options.......................................... 29
11.4 Earn-Out Consideration.......................................... 29
11.5 34 Act Obligations.............................................. 30
11.6 Certain Transactions............................................ 30
11.7 Piggy-Back Registrations........................................ 31
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES........... 31
12.1 General Indemnification by STOCKHOLDERS......................... 31
12.2 Specific Indemnification by STOCKHOLDERS........................ 32
12.3 Indemnification by USFLORAL and NEWCO........................... 33
12.4 Third Person Claims............................................. 33
12.5 Limitations on Indemnification.................................. 34
12.6 Survival of Representations and Warranties...................... 35
12.7 Sole Remedies................................................... 35
13. TERMINATION OF AGREEMENT............................................. 35
13.1 Termination by the Parties..................................... 35
13.2 Liquidated Damages............................................. 36
iii
<PAGE>
14. NONCOMPETITION....................................................... 36
14.1 Prohibited Activities.......................................... 36
14.2 Damages........................................................ 37
14.3 Reasonable Restraint........................................... 37
14.4 Severability; Reformation...................................... 37
14.5 Independent Covenant........................................... 37
14.6 Materiality.................................................... 38
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................ 38
15.1 STOCKHOLDERS................................................... 38
15.2 USFLORAL....................................................... 38
15.3 Damages........................................................ 38
16. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS
ON USFLORAL STOCK................................................... 39
16.1 Compliance with Law............................................ 39
16.2 Economic Risk; Sophistication.................................. 39
16.3 Registration Statement......................................... 39
17. LOCK-UP AGREEMENTS; SECURITIES LEGENDS............................... 40
17.1 Lock-up........................................................ 40
17.2 Legends........................................................ 40
18. GENERAL.............................................................. 41
18.1 Cooperation.................................................... 41
18.2 Successors and Assigns......................................... 41
18.3 Entire Agreement............................................... 41
18.4 Counterparts................................................... 41
18.5 Brokers and Agents............................................. 41
18.6 Expenses....................................................... 41
18.7 Notices........................................................ 42
18.8 Governing Law.................................................. 42
18.9 Exercise of Rights and Remedies................................ 42
18.10 Time........................................................... 42
18.11 Reformation and Severability................................... 42
18.12 Remedies Cumulative............................................ 43
18.13 Captions....................................................... 43
18.14 Attorneys' Fees................................................ 43
iv
<PAGE>
Exhibit A Companies and NEWCO to be Merged
ANNEX I Form of Articles of Merger
ANNEX II Calculation and Composition of Consideration
ANNEX III Form of Employment Agreement
ANNEX IV Form of Lease
SCHEDULES
v
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement")
is made as of the 5th day of August, 1997, between USA FLORAL PRODUCTS, INC., a
Delaware corporation ("USFLORAL"); the corporation listed on Exhibit A formed
for the sole purpose of effecting this transaction ("NEWCO"); the target
companies also listed on Exhibit A, which are to be merged together prior to
being acquired pursuant to this Agreement (hereinafter referred to individually
as a "COMPANY" and collectively as the "COMPANIES") and Jeffrey Brothers, Philip
Buran and Douglas Anderson (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
stock (the "IPO") on or about October 15, 1997 and in connection therewith
intends to file a Registration Statement on Form S-1 with the Securities and
Exchange Commission within 30 days of the execution and delivery of this
Agreement;
WHEREAS, NEWCO has been duly organized and is existing under the laws of
its state of incorporation as set forth on Exhibit A, having been incorporated
on the date shown solely for the purpose of completing this transaction, and
is a wholly-owned subsidiary of USFLORAL; and
WHEREAS, each COMPANY is a corporation organized and existing under the
laws of their respective states of incorporation as shown on Exhibit A; and
WHEREAS, the respective Boards of Directors of USFLORAL, NEWCO 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, following
a merger of the COMPANIES (the survivor of such merger being herein called the
"MERGED COMPANY"), NEWCO merge with and into the MERGED COMPANY, pursuant to
this Agreement and the applicable provisions of the laws of the respective
states of incorporation of NEWCO and the MERGED COMPANY, such transaction
between NEWCO and the MERGED COMPANY being herein called the "Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351 of
the Internal Revenue Code of 1986, as amended;
<PAGE>
WHEREAS, the parties hereto entered into that certain Agreement and Plan
of Contribution on July 1, 1997 (the "Original Agreement") and now wish to
amend and restate the Original Agreement in its entirety as of August 5, 1997
in order to achieve conformity with similar agreements USFLORAL has entered
into with other floral products businesses;
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 Secretary of State of the State of California 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, NEWCO shall be merged
with and into the MERGED COMPANY in accordance with the Articles of Merger and
the separate existence of NEWCO shall cease. The MERGED COMPANY, as the party
surviving the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation."
1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
---------------------------------------------------------------------
Corporation. At the Merger Effective Date:
- -----------
(i) the Articles of Incorporation of the MERGED COMPANY shall become
the Articles of Incorporation of the Surviving Corporation; and subsequent to
the Merger Effective Date, such Articles of Incorporation shall be the
Articles of Incorporation ation of the Surviving Corporation until changed as
provided by law;
(ii) the Bylaws of the MERGED COMPANY shall become the Bylaws of the
Surviving Corporation; and subsequent to the Merger Effective Date, such
Bylaws shall be the Bylaws of the Surviving Corporation until they shall
thereafter be duly amended;
(iii) the name of the person who shall serve as the sole member of the
Board of Directors of the Surviving Corporation shall be Robert Poirier; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the State of California.
2
<PAGE>
(iv) the officers of the MERGED COMPANY immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to
serve, subject to the provisions of the Articles of Incorporation and Bylaws
of the Surviving Corporation and any Employment Agreement executed pursuant
to Section 10.7 hereof, until his successor is elected and qualified.
1.4 Certain Information with Respect to the Capital Stock of the COMPANIES,
-----------------------------------------------------------------------
the MERGED COMPANY and NEWCO. The respective designations and numbers of
- ----------------------------
outstanding shares and voting rights of each class of outstanding capital stock
of each COMPANY the MERGED COMPANY and NEWCO as of the date of this Agreement
are as follows:
(i) the authorized capital stock of each COMPANY consists of the
number of shares of common stock, no par value, as shown on Exhibit A, of
which the shares indicated on Exhibit A are issued and outstanding;
(ii) the authorized capital stock of the MERGED COMPANY shall, at the
Merger Effective Date, consist of the number of Shares of common stock, no
par value, as shown on Exhibit A (the "COMPANY Stock"), of which the shares
indicated on Exhibit A shall be issued and outstanding on the Merger
Effective Date; and
(iii) the authorized capital stock of NEWCO consists of 1,000 shares of
common stock, no par value (the "NEWCO Stock"), of which 1,000 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 the MERGED COMPANY shall continue unaffected and unimpaired by
the Merger, and the Surviving Corporation shall be fully vested therewith. At
the Merger Effective Date, the separate existence of NEWCO shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
chooses in action, and all and every other interest of or belonging to or due to
each of the MERGED COMPANY and NEWCO shall be taken and deemed to be transferred
to, and vested in, the Surviving Corporation without further act or deed; and
all property, rights and privileges, powers and franchises and all and every
other interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of each of the MERGED 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 MERGED COMPANY and NEWCO, shall
not revert or be in any way impaired by reason of the Merger. The Surviving
Corporation shall thenceforth be responsible and liable for all the liabilities
and obligations of each of the MERGED COMPANY
3
<PAGE>
and NEWCO and any claim existing, or action or proceeding pending, by or against
the MERGED COMPANY or NEWCO may be prosecuted as if the Merger had not taken
place, or the Surviving Corporation may be substituted in its place. Neither the
rights of creditors nor any liens upon the property of the MERGED COMPANY or
NEWCO shall be impaired by the Merger, and all debts, liabilities and duties of
each of the MERGED COMPANY and NEWCO shall attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. As of the Merger Effective Date:
--------------------
(i) all of the shares of COMPANY Stock issued and outstanding immediately
prior to the Merger Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, automatically be converted into
the right to receive from USFLORAL the amount of cash set forth on Annex II
attached hereto and the Earn-Out Consideration pursuant to Section 11.4
hereof, to be distributed to the STOCKHOLDERS in the percentages set forth on
Annex II and at the times specified in Section 5 and Section 11.4 hereof; and
(ii) each share of NEWCO Stock issued and outstanding immediately prior
to the Effective Time of the Merger shall, by virtue of the Merger and
without any action on the part of the holder thereof, automatically be
converted into one fully paid and non-assessable share of stock of the
Surviving Corporation, which shall constitute all of the outstanding shares
of said Surviving Corporation immediately after the Merger Effective Date.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 Consideration. At the Merger Effective Date, 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 amount of
cash set forth on Annex II and the Earn-Out Consideration pursuant to Section
11.4 hereof, to be distributed to the STOCKHOLDERS in the percentages set forth
on Annex II opposite the name of each STOCKHOLDERS; provided, that $125,000 of
--------
the amount of cash set forth on Annex II (the "Holdback Amount") shall be
delivered by USFLORAL by wire transfer of immediately available funds to a
third-party escrow agent reasonably acceptable to NEWCO (the "Escrow Agent")
under an escrow agreement to be entered into on the Closing Date by the
STOCKHOLDERS, the COMPANY, Purchaser and the Escrow Agent (the "Escrow
Agreement"), which Escrow Agreement shall provide for a 12-month escrow of the
Holdback Amount and the Pledged Securities (as defined in Section 11.4) (the
"Indemnity Escrow") as security for the indemnification obligation of the
STOCKHOLDERS pursuant to Section 12 hereof and the payment of amounts pursuant
to Section 4.1 hereof. Pursuant to Section 11.4, the
4
<PAGE>
Escrow Agent shall also hold in a Securities Escrow (as defined in Section 11.4)
300,000 shares of USFLORAL Stock.
3.2 Delivery of COMPANY Stock. The STOCKHOLDERS shall deliver at the
-------------------------
Closing (as defined in Section 5 hereof) the certificates representing the
respective shares of COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS
or accompanied by blank stock powers, with signatures guaranteed by a national
bank, and with all necessary transfer tax and other revenue stamps, acquired at
the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree to cure
any deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such COMPANY Stock or with respect to
the stock powers accompanying any COMPANY Stock.
4. POST CLOSING ADJUSTMENT; INDEMNITY ESCROW
4.1 Adjustment. 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 consolidated balance sheet of the Companies (the
"Closing Date Balance Sheets") as of the end of business on the Closing Date.
If the aggregate shareholders' equity as shown on the Closing Date Balance
Sheets is less than the aggregate shareholders' equity as shown on the
Consolidated Balance Sheets as at December 31, 1996 (any such deficiency shall
be referred to herein as the "Net Worth Deficiency"), within ten business days
--------------------
after delivery of the Closing Date Balance Sheets to USFLORAL, the STOCKHOLDERS
shall pay USFLORAL by wire transfer of immediately available funds an amount
equal to the Net Worth Deficiency. Notwithstanding anything in this Section 4
to the contrary, if there is any Net Worth Deficiency and the STOCKHOLDERS
dispute any item contained on the Closing Date Balance Sheets, the STOCKHOLDERS
shall notify USFLORAL in writing of each disputed item (collectively, the
"Disputed Amounts"), and specify the amount thereof in dispute within thirty
business days after the delivery of the Closing Date Balance Sheets. If
USFLORAL and the STOCKHOLDERS cannot resolve any such dispute which would
eliminate or reduce the amount of the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to USFLORAL and the STOCKHOLDERS (the "Independent
-----------
Accounting Firm"). The determination of the Independent Accounting Firm shall
- ---------------
be made as promptly as practical and shall be final and binding on the parties,
absent manifest error which error may only be corrected by such Independent
Accounting Firm. Any expenses relating to the engagement of the Independent
Accounting Firm shall be allocated between USFLORAL and the STOCKHOLDERS so that
the STOCKHOLDERS' aggregate share of such costs shall bear the same proportion
to the total costs that the Disputed Amounts unsuccessfully contested by the
STOCKHOLDERS (as finally determined by the Independent Accounting Firm) bear to
the total of the Disputed Amounts so submitted to the Independent Accounting
Firm.
4.2 Security. (a) As collateral security for the payment of any
--------
indemnification obligations of the STOCKHOLDERS pursuant to Sections 12.1 and
12.2 hereof and for the payment of amounts pursuant to Section 4.1 hereof, each
STOCKHOLDER shall, and by
5
<PAGE>
execution hereof does hereby, transfer, pledge and assign to USFLORAL, for the
benefit of USFLORAL, a security interest in the following assets:
(i) the Pledged Securities (as defined in Section 11.4 hereof), the
certificates and instruments representing or evidencing such STOCKHOLDERS'
Pledged Securities, and all cash and non-cash dividends and other property at
any time received or otherwise distributed in respect of or in exchange for
any or all of such STOCKHOLDERS' Pledged Securities; and in the event such
STOCKHOLDERS receives any such certificates or property, such STOCKHOLDERS
shall immediately deliver such certificates or property to the Escrow Agent
to be held hereunder as Pledged Securities;
(ii) all securities hereafter delivered to such STOCKHOLDERS 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 STOCKHOLDERS receives any such property, such STOCKHOLDERS 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.
(b) Each certificate evidencing STOCKHOLDERS' Pledged Securities issued in
his, her or its name, shall within 15 days of receipt by such STOCKHOLDER, be
delivered to the Escrow Agent together with a stock power duly signed in blank
by him, her or it, such certificate bearing no restrictive or cautionary legend
other than those imprinted by USFLORAL's transfer agent at USFLORAL's request.
(c) 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.
4.3 Indemnity Escrow. In the event that STOCKHOLDERS fail to timely pay
----------------
USFLORAL any amount which it is due pursuant to Sections 12.1 or 12.2 hereof,
USFLORAL (i) shall have the right to have the Escrow Agent deduct any such
amount from Holdback Amount in the Indemnity Escrow and pay such amount to
USFLORAL and (ii) shall have all rights of a secured party under the Uniform
Commercial Code as in effect in California with respect to the Pledged
Securities with respect to the unpaid amount; provided, however, that prior to
exercising any such remedies USFLORAL shall give STOCKHOLDERS 10 days' prior
notice of the unpaid amount and a description of the determination thereof.
During such 10-day period, STOCKHOLDERS shall have the right to object to such
unpaid amount. If STOCKHOLDERS do not object by delivering written notice to
USFLORAL within such 10-day period,
6
<PAGE>
STOCKHOLDERS shall be deemed to have irrevocably agreed to the validity of such
unpaid amount. If STOCKHOLDERS do so object, USFLORAL shall review the
objections and respond to the STOCKHOLDERS. If the parties do not resolve the
dispute within 30 days of the date of the STOCKHOLDERS' objection, the parties
agree to submit the dispute for binding arbitration with a panel of three
arbitrators appointed by the American Arbitration Association under the
Commercial Arbitration Rules of such Association then in effect.
5. CLOSING; MERGER EFFECTIVE DATE
Within two business days following the date on which the price of the shares
of USFLORAL Stock in the initial public offering of USFLORAL Stock described in
Section 9.5 shall have been determined, the parties shall take all actions
necessary to effect the Merger (including the filing with the appropriate state
authorities of the Articles of Merger, which shall become effective on the
Merger Effective Date) and to effect the conversion and delivery of shares
referred to in Section 3 hereof (hereinafter referred to as the "Closing");
provided, that such actions shall not include the actual completion of the
Merger or the conversion and delivery of the shares referred to in Section 3
hereof, which actions shall only be taken on the Merger Effective Date as herein
provided. The Closing shall take place at the offices of Morgan, Lewis &
Bockius LLP, 801 S. Grand Avenue, 22nd Floor, Los Angeles, California. The date
on which the Closing shall occur shall be referred to as the "Closing Date."
Concurrently with the closing in respect of the initial public offering of
USFLORAL Stock, the Merger shall become effective and all transactions
contemplated by this Agreement, including the conversion and delivery of shares
and the delivery of a check or checks in an amount equal to the cash which the
STOCKHOLDERS shall be entitled to receive pursuant to the Merger referred to in
Section 3 hereof, shall occur and be deemed to be completed. The date on which
the Merger is effected shall be referred to as the "Merger Effective Date."
During the period from the Closing Date to the Merger Effective Date, this
Agreement may only be terminated by the parties if the underwriting agreement in
respect of the initial public offering of USFLORAL Stock is terminated pursuant
to the terms of such agreement. This Agreement shall in any event terminate if
the Merger Effective Date has not occurred within 10 business days of the
Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and (with respect to MERGED COMPANY only) 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 California,
and is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
respective 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
7
<PAGE>
or condition, (financial or otherwise) (a "Material Adverse Effect") of such
COMPANY taken as a whole. True, complete and correct copies of the Articles of
Incorporation (certified by the Secretaries of State of the State of California)
and Bylaws (certified by the Secretary of each 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. Each STOCKHOLDER and each COMPANY has full legal
-------------
right, power and authority to enter into this Agreement and has the full legal
right, power and authority to enter into the Merger. The conversion of NEWCO
Stock into COMPANY Stock pursuant to the provisions of this Agreement will
transfer valid title in the COMPANY Stock to USFLORAL, 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 consists solely of the shares as shown on Schedule 6.3, of which the
shares issued and outstanding are shown. All of the issued and outstanding
shares of the capital stock of each COMPANY are owned by the STOCKHOLDERS as set
forth on Exhibit A, and are free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind. All of the issued and outstanding shares of COMPANY Stock have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the STOCKHOLDERS and in the amounts set forth in
Annex II and further, such shares were offered, issued, sold and delivered by
merged 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. No COMPANY has acquired any treasury
-----------------------------
stock. No option, warrant, call, conversion right or commitment of any kind
exists which obligates any COMPANY to issue any of their respective authorized
but unissued capital stock. In addition, no COMPANY has an obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
6.5 No Bonus Shares. None of the shares of the COMPANY Stock was issued
---------------
pursuant to awards, grants or bonuses.
6.6 Subsidiaries. No 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. No 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 each COMPANY previously acquired significant assets.
Except as set forth on Schedule 6.7, no
8
<PAGE>
COMPANY has ever been a subsidiary or division of another corporation nor been a
part of an acquisition which was later rescinded.
6.8 Spin-off by COMPANIES. There has never been any sale or spin-off of
---------------------
significant assets of any 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 each
COMPANY: Each COMPANY's Consolidated Balance Sheet as of December 31, 1996,
1995 and 1994 and Statements of Incomes, Cash Flows and Retained Earnings for
each of the years in the three year period ended December 31, 1996, and each
COMPANY's Consolidated Balance Sheet as of each of March 31, 1997 and 1996, and
Statements of Incomes, Cash Flows and Retained Earnings for the three (3) month
periods then ended (March 31, 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 each
COMPANY (and the COMPANY Subsidiaries on a consolidated basis) as of the dates
indicated thereon, and such Statements of Incomes, Cash Flows and Retained
Earnings present fairly the results of their respective operations for the
periods indicated thereon.
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
---------------------------
accurate list, as of the Balance Sheet Date, of all material liabilities of each
COMPANY (including each COMPANY's Subsidiaries), which are reflected in the most
recent available balance sheet and any significant liabilities incurred
thereafter in the ordinary course of business, or material liabilities which are
not reflected in the balance sheet, of any kind, character and description,
whether accrued, absolute, secured or unsecured, contingent or otherwise,
together with, in the case of those liabilities which are not fixed, an estimate
of the maximum amount which may be payable. For each such liability for which
the amount is not fixed or is contested, STOCKHOLDERS shall provide to USFLORAL
the following information:
(i) a summary description of the liability together with
the following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought;
(c) names of claimant and all other parties to the claim, suit
or proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending;
9
<PAGE>
(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 each COMPANY, including receivables from and advances to employees and
STOCKHOLDERS, including any such amounts which are not reflected in the most
recent available balance sheet. STOCKHOLDERS shall provide USFLORAL with an
aging of all accounts and notes receivable showing amounts due in 30 day aging
categories. Except as set forth on Schedule 6.11, such accounts and notes are
collectible in the amount shown on Schedule 6.11.
6.12 Permits and Intangibles. Attached hereto as Schedule 6.12 is an
-----------------------
accurate list and summary description, as of the Balance Sheet Date, of all
permits, titles, licenses, franchises, certificates, trademarks, trade names,
service marks, patents, patent applications and copyrights owned or held by 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
respective businesses as presently constituted. Except as set forth on Schedule
6.12, the STOCKHOLDERS have delivered to USFLORAL a description and copies as of
the date of this Agreement, of all material records, reports, notifications,
permits, pending permit applications, engineering studies, environmental impact
studies, filed or submitted or required to be filed or submitted to governmental
agencies and of all material notifications from such governmental agencies
relating to the above or relating to the discharge or release of materials into
the environment or otherwise relating to the protection of the public health or
the environment.
6.13 Real and Personal Property. Attached hereto as Schedule 6.13 is an
--------------------------
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the real and personal property (which in the case of personal
property had an original cost in excess of $50,000) owned or leased by each
COMPANY, 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 each COMPANY and including an
indication as to which assets were formerly owned by the STOCKHOLDERS or
affiliates (which term, as used herein, shall have the meaning ascribed thereto
in Rule 144(a)(1) under the Securities Act of 1933, as amended) of each COMPANY.
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
10
<PAGE>
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. STOCKHOLDERS have heretofore delivered to
USFLORAL copies of all title reports and title insurance policies received or
held by each COMPANY. 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 each 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, as of the Balance Sheet Date, of all material contracts,
commitments and similar agreements to which each COMPANY is a party or by which
any of them 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). 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 are 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 the
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 or subject to) any arrangement with
any labor union. Except as set forth on Schedule 6.14, no employees of any
COMPANY are represented by any labor union or covered by any collective
bargaining agreement nor, to the best of STOCKHOLDERS' knowledge, is any
organization campaign to establish such representation in progress. There is no
pending or, to the best of STOCKHOLDERS' knowledge, threatened labor dispute
involving any COMPANY and any group of their employees nor has any COMPANY
experienced any labor interruptions over the past three years and each COMPANY
considers its relationship with employees to be good.
6.15 Insurance. Attached hereto as Schedule 6.15 is an accurate list, as
---------
of the Balance Sheet Date, of all insurance policies carried by each COMPANY
and an accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. STOCKHOLDERS have heretofore delivered
to USFLORAL complete copies of all policies currently in effect. The insurance
carried by each COMPANY with respect to their respective properties, assets and
businesses is with financially sound insurers. Such insurance policies are
currently in full force and effect and shall remain in full force and effect, or
comparable policies substituted therefor, through the Merger Effective Date. No
COMPANY's insurance has ever been canceled and no COMPANY has ever been denied
coverage.
11
<PAGE>
6.16 Officers, Directors and Employees Compensation. Attached hereto as
----------------------------------------------
Schedule 6.16 is an accurate schedule showing all officers, directors and
employees of each COMPANY and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date.
STOCKHOLDERS have heretofore delivered to USFLORAL copies of the payroll lists
covering all employees of each COMPANY as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.16, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
6.17 Employee Plans. Attached hereto as Schedule 6.17 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 each COMPANY, or to which any COMPANY currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), including
of any trusts related thereto and a classification of employees covered thereby
(collectively, the "Plans"). Schedule 6.17 sets forth all of the Plans that
have been terminated within the past three years.
6.18 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, have been delivered to
USFLORAL. 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, except for transactions for
which an individual class exemption exists under Section 4975 of the Code or
Section 408 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
12
<PAGE>
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;
(ii) no Plan that 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 required to be
reported and 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 no COMPANY has (and will
incur no) direct or indirect liability and are not (and will not be) subject
to any loss, assessment, excise tax penalty, loss of federal income tax
deduction or other sanction, arising on account of or in respect of any direct
or indirect failure by any COMPANY and the STOCKHOLDERS, at any time prior to
the Closing Date, to comply with any such federal or state benefit
continuation requirement, which is capable of being assessed or asserted
before or after the Closing Date directly or indirectly against any COMPANY or
the STOCKHOLDERS with respect to such group health plans;
13
<PAGE>
(vi) No COMPANY is now nor has it been within the past five years a
member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(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, except routine claims for benefits;
(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 that would
cause such Financial Statements not to be representative of the expense of such
Plans as of the Balance Sheet Date; and
(ix) No COMPANY has incurred liability under Section 4062 of ERISA.
6.19 Conformity with Law. Except as set forth on Schedule 6.19, 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 6.19, there are no claims, actions, suits or proceedings,
pending or threatened, against or affecting any COMPANY, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction 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 would have a Material Adverse Effect on
such COMPANY, taken as a whole.
6.20 Taxes. Each COMPANY has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all tax years ended on
or before the Closing Date. There are no open years, examinations in progress or
claims asserted against any COMPANY for federal and other taxes 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. Correct and complete copies of (i) all revenue agent reports that
have been delivered to the COMPANY, (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,
14
<PAGE>
have heretofore been delivered by STOCKHOLDERS to USFLORAL. Each such 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 such COMPANY currently utilizes the cash receipts and disbursements
method of accounting for income tax purposes and has not changed its method of
accounting in the past five years.
6.21 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 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 6.21, 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.
6.22 Government Contracts. No COMPANY is now or has ever been a party to
--------------------
any governmental contracts subject to price redetermination or renegotiation.
6.23 Absence of Changes. Since the Balance Sheet Date, except for the
------------------
transactions contemplated by this Agreement, 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;
15
<PAGE>
(v) any increase in the compensation, bonus, sales commissions or
fees arrangement payable or to become payable by such COMPANY to any of
their respective 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, other
than in the ordinary course of business;
(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
their respective businesses.
6.24 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule 6.24
------------------------------------
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
16
<PAGE>
(iv) the name of each person authorized to draw thereon or have
access thereto.
Schedule 6.24 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.
6.25 Environmental Matters. To the knowledge of the STOCKHOLDERS, each
---------------------
COMPANY have complied with and are in material compliance with all federal,
state, local and foreign statutes (civil and criminal), laws, ordinances,
regulations, rules, notices, permits, judgments, orders and decrees applicable
to any of them or any of their respective properties, assets, operations and
businesses relating to environmental protection (collectively "Environmental
Laws") including, without limitation, Environmental Laws relating to air, water,
land and the generation, storage, use, handling, transportation, treatment or
disposal of Hazardous Wastes and Hazardous Substances (as such terms are defined
in any applicable Environmental Law) except to the extent that noncompliance
with any Environmental Law, either singly or in the aggregate, would not have a
Material Adverse Effect on such COMPANY , taken as a whole. Each COMPANY have
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.
STOCKHOLDERS know of no on-site location to which any COMPANY has transported or
disposed of Hazardous Wastes and Hazardous Substances or arranged for the
transportation of Hazardous Wastes and Hazardous Substances, which site is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against COMPANY, USFLORAL or any
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.
6.26 Underground Storage Tanks. Except as set forth on Schedule 6.26, 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 6.26, such COMPANY has provided the
following to USFLORAL:
(i) The location of the UST and whether the COMPANY currently owns or
leases the property in which the UST is located;
17
<PAGE>
(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 such as the results of
groundwater or soil tests; and
(vii) a summary description of all instances in which the UST failed
to meet applicable standards and regulations for tightness or otherwise.
6.27 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.
6.28 Relations with Governments. No COMPANY has made, offered or agreed to
--------------------------
offer anything of value to any governmental official, political party or
candidate for government office nor has any 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.
6.29 Disclosure. Without limiting any exclusion, exception or other
----------
limitation contained in any of the representations and warranties made herein,
this Agreement and the schedules hereto and all other documents and information
furnished to USFLORAL and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If any
STOCKHOLDERS become aware of any fact or circumstance which would change a
representation or warranty of any STOCKHOLDER in this Agreement or any
representation made on behalf of any COMPANY , the STOCKHOLDERS shall promptly
give notice of such fact or circumstance to USFLORAL. However, such
notification shall not relieve any COMPANY or STOCKHOLDERS of their respective
obligations under this Agreement, and at the sole option of USFLORAL, the truth
and accuracy of any and all warranties and representations of the STOCKHOLDERS,
at the date of this Agreement and at the closing, shall be a precondition to the
consummation of this transaction.
18
<PAGE>
6.30 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 cash pursuant
to the provisions of this Agreement will transfer to USFLORAL valid title in the
shares of COMPANY Stock owned by such STOCKHOLDER, free and clear of all liens,
encumbrances and claims of every kind.
7. REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFLORAL and NEWCO, jointly and severally, represent to the
STOCKHOLDERS and as follows.
7.1 Due Organization. USFLORAL and NEWCO are duly organized, validly
----------------
existing and in good standing under the laws of the States of Delaware and
California, 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 states where the failure to be so authorized, qualified or licensed
would not have a Material Adverse Effect on their respective businesses. True,
complete and correct copies of the Articles of Incorporation (certified by the
Secretary of State of the States of Delaware and California, respectively) and
the Bylaws, as amended, of USFLORAL and NEWCO (certified by the Secretary of
the respective corporations) have heretofore been delivered by USFLORAL to
STOCKHOLDERS.
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 Robert Poirier or Jonathan Ledecky (i) have
registration rights with respect to USFLORAL Stock that are superior to
registration rights that the STOCKHOLDERS have, or (ii) will have the right to
include any USFLORAL Stock in the IPO.
7.3 Authorization. The representatives of USFLORAL and NEWCO executing
-------------
this Agreement have the corporate authority to enter into and bind USFLORAL and
NEWCO by the terms of this Agreement. USFLORAL and NEWCO have full legal right,
power and authority to enter into this Agreement and have the full legal right,
power and authority to enter into the Merger.
19
<PAGE>
7.4 Validity of Obligations. The execution of this Agreement by USFLORAL
-----------------------
and NEWCO and the performance of the transactions contemplated herein have been
duly and validly authorized by the Board of Directors of USFLORAL and by the
Board of Directors and the stockholder of NEWCO, and this Agreement has been
duly and validly authorized by all necessary corporate action and is a legal,
valid and binding obligation of USFLORAL and NEWCO, respectively.
7.5 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of either USFLORAL or NEWCO,
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which either
USFLORAL or NEWCO is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any of USFLORAL's or NEWCO's properties
pursuant to (A) any law or regulation to which USFLORAL or NEWCO, or any of
their property is subject, or (B) any judgment, order or decree to which
USFLORAL or NEWCO is bound or any of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFLORAL or
NEWCO; or
(iv) require any filing or other notice under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
7.6 Miscellaneous. Prior to the consummation of the Merger, USFLORAL and
-------------
NEWCO have no material properties or assets and are not party to any contracts
other than this Agreement, the letters of intent between USFLORAL and certain of
the STOCKHOLDERS, certain employment agreements with officers of USFLORAL and
those agreements and letters of intent listed on Schedule 7.6 hereof.
8. COVENANTS OF STOCKHOLDERS AND COMPANY 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 each
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 each 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
20
<PAGE>
any documents or other material which may be required in connection with any
documents or materials required by any governmental agency. USFLORAL will cause
all information obtained in connection with the negotiation and performance of
this Agreement to be treated as confidential in accordance with the provisions
of Section 15 hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, STOCKHOLDERS will cause each COMPANY to:
(i) carry on its respective businesses in substantially the same
manner as it has heretofore and not introduce any material new method of
management, operation or accounting;
(ii) maintain its respective 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 respective material obligations under
agreements relating to or affecting its respective assets, properties or
rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) use its best efforts to maintain and preserve its business
organization intact, retain its respective present employees and maintain its
respective relationships with suppliers, customers and others having business
relations with each COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations and consent orders of any court or federal, state, municipal on
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, except as related to effecting the merger
between the COMPANIES, without prior written consent of USFLORAL:
(i) make any change in their respective Articles of Incorporation or
Bylaws;
21
<PAGE>
(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 it stock, other than
dividends or bonuses in the ordinary course of its business of up to $50,000;
(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, STOCKHOLDERS, employee or agent other than ordinary salary
increases implemented on a basis consistent with past practices, or make any
bonus or management fee payment to any such person;
(vi) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except as set forth in Schedule 8.3(vi);
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment, except in the normal course of business;
(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.
22
<PAGE>
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, 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, any COMPANY or a merger, consolidation or business
combination of any COMPANY.
8.7 Notification of Certain Matters. 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 COMPANY the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in
Section 6 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of any
STOCKHOLDER or any 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
23
<PAGE>
known at the date of this Agreement, would have been required to be set forth or
described in the Schedules, provided that no amendment or supplement to a
Schedule that constitutes or reflects a material adverse change to the COMPANY
may be made unless USFLORAL consents to such amendment or supplement; and
provided further, however, that USFLORAL may not withhold consent to such
amendment or supplement if the same relates to (i) changes in facts or
circumstances occurring subsequent to the date hereof, or (ii) facts and
circumstances existing as of the date hereof that were not disclosed by the
STOCKHOLDERS because they did not have knowledge of them (but, with respect to
facts and circumstances described in (ii) only to the extent that the omission
thereof from the Schedules attached hereto as of the date hereof was not the
result of a lack of good faith diligence on the part of the STOCKHOLDERS). No
amendment of or supplement to a Schedule shall be made later than 48 hours prior
to the anticipated effectiveness of the Registration Statement defined in
Section 9.5.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of STOCKHOLDERS hereunder are subject to the satisfaction on
or prior to the Closing Date (or such earlier date specified below) of the
following conditions:
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFLORAL and NEWCO contained in Section 7
shall be accurate as of the Closing Date as though such representations and
warranties had been made as of such times; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by USFLORAL and
NEWCO on or before the Closing Date shall have been duly complied with and
performed; and a certificate to the foregoing effect dated the Merger Effective
Date and signed by the President or any Vice President of USFLORAL shall have
been delivered to STOCKHOLDERS.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFLORAL of the COMPANY Stock and no governmental
agency or body shall have taken any other action or made any request of the
COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
9.3 Employment Agreements. The Surviving Corporation shall execute and
---------------------
deliver Employment Agreements, in the form of Annex III attached hereto, to each
of the persons listed on Schedule 9.3 hereto.
9.4 Opinion of Counsel. STOCKHOLDERS shall have received an opinion from
------------------
counsel for USFLORAL, dated the Closing Date, in form and substance satisfactory
to STOCKHOLDERS, to the effect that:
24
<PAGE>
(i) USFLORAL and NEWCO have been duly organized and are validly
existing in good standing under the laws of the States of Delaware and
California, respectively; and
(ii) this Agreement has been duly authorized, executed and delivered
by USFLORAL and NEWCO and constitutes a valid and binding agreement of
USFLORAL and NEWCO enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting
the rights of creditors and except (X) as the same may be subject to the
effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein.
9.5 Registration Statement. USFLORAL shall have filed with the Securities
----------------------
and Exchange Commission ("SEC") a registration statement on Form S-1 covering
the offer and sale of shares of USFLORAL Stock (the "Registration Statement").
The Registration Statement shall have been declared effective by the SEC not
later than December 24, 1997, 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.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFLORAL and NEWCO hereunder are, at their option,
subject to the satisfaction, on or prior to the Closing Date (or such earlier
date specified below), of the following conditions:
10.1 Representations and Warranties; Performance of Obligations.
----------------------------------------------------------
STOCKHOLDERS shall have delivered to USFLORAL a certificate dated the Closing
Date and signed by them to the effect that all the representations and
warranties of STOCKHOLDERS contained in this Agreement shall be true on and as
of the Closing Date and as of the Merger Effective Date with the same effect as
though such representations and warranties had been made on and as of such
dates, except for matters expressly disclosed in the certificate or a schedule
thereto; each and all of the agreements of STOCKHOLDERS and 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 COMPANIES as of September 30, 1997, and the unaudited statements of income,
cash flow and stockholder's
25
<PAGE>
investment of 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 any 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 said COMPANY to conduct its business; and USFLORAL shall have
received on the Closing Date a certificate signed by STOCKHOLDERS dated the
Merger Effective Date to such effect.
10.5 Regulatory Review. USFLORAL, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
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 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 (including such COMPANY's Subsidiaries) from any and all claims of
STOCKHOLDERS against said COMPANY (including such COMPANY's Subsidiaries).
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
------------------
Grunsky, Ebey, Farrer & Howell, APC, counsel to the STOCKHOLDERS, dated the
Closing Date, in form and substance satisfactory to USFLORAL, to the effect that
with respect to each COMPANY:
(i) the COMPANY has been duly organized and is validly existing in
good standing under the laws of the state of its incorporation;
(ii) 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;
26
<PAGE>
(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 against them 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;
(vi) except to the extent set forth on Schedules 6.10 and 6.19, there
are no claims, actions, suits or proceedings pending, or threatened against or
affecting any COMPANY, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality wherever located;
(vii) to the knowledge of such counsel, no notice to, consent,
authorization, approval or order of any court or governmental agency or body or
of any other third party is required in connection with the execution, delivery
or consummation of this Agreement by any STOCKHOLDERS or for the transfer to
USFLORAL of the COMPANY Stock; and
(viii) 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 any COMPANY's Articles of
Incorporation or the by-laws of any COMPANY or of any lease, instrument,
license, permit or any other agreement to which any COMPANY is a party or by
which any 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
27
<PAGE>
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 (including
each COMPANY's Subsidiaries) arising since the Balance Sheet Date.
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 (including each COMPANY's Subsidiaries) since the Balance Sheet Date.
10.12 Good Standing Certificates. STOCKHOLDERS shall have delivered to
--------------------------
USFLORAL certificates, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the State
of California and, unless waived by USFLORAL, in each state in which MERGED
COMPANY is authorized to do business, showing that each MERGED COMPANY is in
good standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for 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
acquired the shares of USFLORAL Stock covered thereby.
10.14 Repayment of Indebtedness. Prior to the Closing Date, the STOCKHOLDERS
-------------------------
shall have repaid each COMPANY (including each Company's Subsidiaries) in full
all amounts owing by the STOCKHOLDERS.
10.15 Net Income. The COMPANIES shall have aggregate pre-tax net operating
----------
income for the nine (9) months ended September 30, 1997 as determined by Price
Waterhouse, LLP, of at least $800,000.
10.16 Merger of Companies. Prior to the Closing Date, Bay Area Bouquets,
-------------------
Inc. shall have merged with and into Monterey Bay Bouquet, Inc. in accordance
with the laws of the State of California.
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
28
<PAGE>
guarantees of any indebtedness set forth on Schedule 11.1 that they personally
guaranteed for the benefit of any COMPANY (including such COMPANY's
Subsidiaries), 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 Leases. At the Merger Effective Date, the Surviving Corporation shall
------
enter into lease arrangements with each of the persons or entities listed in
Schedule 11.2 with respect to the corresponding properties or assets listed on
Schedule 11.2 in accordance with the terms and conditions of the form of lease
agreement attached hereto as Annex IV.
11.3 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 Amended and Restated 1997 Long-Term Incentive Plan (the "Plan").
As soon as practicable after the payment of the Earn-Out Consideration pursuant
to Section 11.4, options to purchase such number of shares of USFLORAL Stock as
shall have a fair market value on December 31, 1997 equal to 6.25% of the Earn-
Out Consideration shall be available for issuance to the key employees of the
Surviving Corporation, 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 the Plan.
11.4 Earn-Out Consideration.
----------------------
(a) If the pre-tax operating income for the Surviving Corporation's
fiscal year ending December 31, 1997 is equal to or exceeds $500,000, USFLORAL
shall pay to the STOCKHOLDERS (allocated among the STOCKHOLDERS according to the
percentages set forth on Annex II) additional consideration in the amount of (x)
$500,000 plus (y) $6.00 for each $1.00 of pre-tax operating income achieved in
excess of $500,000 for the year ended December 31, 1997 ("Earn-Out
Consideration"), subject to a maximum of $3,500,000 in total Earn-Out
Consideration. The Earn-Out Consideration shall be paid 1/7 in cash and 6/7 in
USFLORAL Stock. Until January 1, 1998, USFLORAL shall cause the COMPANY to
continue to operate its business and financial accounts in a manner consistent
with past practice and will not cause the COMPANY to make any changes which
would negatively impact the COMPANY's earnings. These changes include but are
not limited to, creating larger reserves for accounts receivable and inventory
than have historically been created, adding additional personnel, allocating
expenses of USFLORAL or any of its other subsidiaries to the COMPANY that are
greater in amount than
29
<PAGE>
the expenses the COMPANY currently pays for comparable services, writing off any
asset, increasing accruals beyond historical practice, or creating or increasing
any reserve or similar account in respect of any matter for which the
STOCKHOLDERS are obligated to indemnify USFLORAL.
(b) 300,000 shares of USFLORAL Stock, representing the stock portion of
the maximum Earn-Out Consideration (assuming an IPO price of $10 per share),
shall be issued in the STOCKHOLDERS' names at Closing and shall be held in
escrow (the "Securities Escrow") by the Escrow Agent. Promptly following the
date on which the Surviving Corporation's pre-tax operating income for its
fiscal year ended December 31, 1997 is finally determined by Price Waterhouse
(USFLORAL hereby agreeing that it shall cause Price Waterhouse to commence
determining the same promptly and with all due diligence and will in all events
cause it to be determined by June 30, 1998), (i) USFLORAL shall pay to the
STOCKHOLDERS the cash portion of the Earn-Out Consideration and (ii) the Escrow
Agent shall deliver to the STOCKHOLDERS out of the Securities Escrow such number
of shares of USFLORAL Stock as has a fair market value (based on the average
closing price of the USFLORAL Stock on the ten trading days prior to December
31, 1997) (the "Fair Market Value"), equal to the portion of the Earn-Out
Consideration that the STOCKHOLDERS are entitled to receive in USFLORAL Stock
("Earn-Out Securities"), with the remainder being delivered to USFLORAL for
cancellation. If the Fair Market Value of the USFLORAL Stock is less than is
necessary so that, when multiplied by 300,000, such price produces an amount
less than the portion of the Earn-Out Consideration that the STOCKHOLDERS are
entitled to receive in USFLORAL Stock, USFLORAL shall deliver to the
STOCKHOLDERS, in its sole discretion, (i) such additional number of shares of
USFLORAL Stock, (ii) such additional amount of cash or (iii) such combination of
shares of USFLORAL Stock and cash as necessary to make up the difference.
Notwithstanding the foregoing, at the time any Earn-Out Securities are delivered
by the Escrow Agent to the STOCKHOLDERS out of the Securities Escrow, the Escrow
Agent shall retain and place into the Indemnity Escrow that number of Earn-Out
Securities equal in value to 10% of the total Consideration paid to STOCKHOLDERS
hereunder (the "Pledged Securities") as collateral pursuant to Section 4.2 for
the indemnification obligation of STOCKHOLDERS pursuant to Section 12 hereof and
the payment of amounts under Section 4.1 hereof.
(c) For purposes of calculating pre-tax operating income under this
Section 11.4, pre-tax operating income shall not include any administrative
expenses of USFLORAL allocated to Surviving Corporation.
11.5 34 Act Obligations. For at least two years subsequent to the Merger
------------------
Effective Date, USFLORAL agrees to timely file all documents required to be
filed with the Securities and Exchange Commission pursuant to Sections 13 and 14
of the Securities Exchange Act of 1934.
11.6 Certain Transactions. USFLORAL will cause its existing stockholders to
--------------------
participate, within the standards established by Revenue Procedure 77-37, in the
IPO to the
30
<PAGE>
extent necessary to cause the group consisting of (i) those existing
stockholders who purchase USFLORAL Stock from USFLORAL at the time of the IPO,
(ii) other persons acquiring stock in the IPO and (iii) the persons acquiring
stock as a result of the Merger and other concurrent mergers to possess at least
80% of the outstanding stock of USFLORAL. Each of the concurrent mergers will
be a reverse triangular merger in which not more than 60% of the consideration
being transferred to each stockholder of the target corporations shall consist
of USFLORAL Stock.
11.7 Piggy-Back Registrations. If at any time after the expiration of the
------------------------
restrictions contained in Section 16 USFLORAL shall determine to register shares
of USFLORAL Stock for its own account or the account of others under the 1933
Act (other than on Form S-8 or Form S-4 or their then equivalents relating to
shares of USFLORAL Stock to be issued solely in connection with any acquisition
of any entity or business or shares of USFLORAL Stock issuable in connection
with stock option or other employee benefit plans, and other than any "shelf"
registration statement relating to securities to be issued by USFLORAL), then it
shall send to each holder of shares of USFLORAL Stock issued in the Merger
("Registrable Shares") (all such security holders and being referred to as
"Holders") written notice of such determination. If, within 15 days after
receipt of such notice, such Holder shall so request in writing, then USFLORAL
shall use its best efforts to include in such registration statement all or any
part of the Registrable Shares such Holder requests to be registered, except
that if, in connection with any offering involving an underwriting of USFLORAL
Stock to be issued by USFLORAL, the managing underwriter shall impose a
limitation on the number of shares of such USFLORAL Stock which may be included
in the registration statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution, then USFLORAL shall be
obligated to include in such registration statement only such limited portion of
the Registrable Shares with respect to which such Holder has requested inclusion
hereunder; provided, however, that USFLORAL shall not so exclude any Registrable
-------- -------
Shares unless it has first excluded all securities to be offered and sold by
directors, officers or other employees of USFLORAL or by shareholders who do not
have contractual, incidental rights to include such securities. Except as
provided in the previous sentence of this Section 11.7 any exclusion of
Registrable Shares shall be made pro rata among the Holders of Registrable
--- ----
Shares seeking to include such shares, in proportion to the number of such
shares sought to be included by such Holders. The obligations of USFLORAL under
this Section 11.7 may be waived at any time upon the written consent of Holders
of a majority-in-interest of the Registrable Shares and shall expire as to each
Holder immediately upon all of such Holder's Registrable Shares being capable of
sale within a three-month period in accordance with the volume and manner-of-
sale limitations of Rule 144 under the 1933 Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by STOCKHOLDERS. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, STOCKHOLDERS, jointly and severally, covenant
and agree
31
<PAGE>
that they will indemnify, defend, protect and hold harmless USFLORAL, NEWCO and
the Surviving Corporation and their respective officers, stockholders,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement until the Expiration Date (as defined in Section 12.6) from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by USFLORAL,
NEWCO or the Surviving Corporation as a result of or arising from (i) any breach
of the representations and warranties made by STOCKHOLDERS set forth herein or
on the schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of STOCKHOLDERS or any COMPANY under
this Agreement or (iii) any liability under the Securities Act of 1933, as
amended, (the "1933 Act"), the Securities Exchange Act of 1934, as amended (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 any COMPANY or STOCKHOLDERS, and
provided to USFLORAL or its counsel by any COMPANY or 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 any COMPANY or STOCKHOLDERS required to be stated therein or
necessary to make the statements therein not misleading, and not provided to
USFLORAL or its counsel by any COMPANY or STOCKHOLDERS, provided, however, that
such indemnity shall not inure to the benefit of USFLORAL, NEWCO and the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and STOCKHOLDERS provided, in writing, corrected
information to USFLORAL for inclusion in the final prospectus, and such
information was not so included.
12.2 Specific Indemnification by STOCKHOLDERS. Subject to the limitations
----------------------------------------
contained in Section 12.5 hereof, notwithstanding any disclosure made in this
Agreement or in the Schedules or Exhibits hereto, and notwithstanding any
investigation by USFLORAL or NEWCO, the STOCKHOLDERS covenant and agree that
they will indemnify, defend, protect and hold harmless USFLORAL, NEWCO and the
Surviving Corporation and their respective officers, stockholders, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, agents, employees,
successors and assigns at all times from and after the date of this Agreement,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, penalties, costs and expenses whatsoever (including
specifically, but without limitation, reasonable attorneys' fees and expenses of
investigation) incurred by USFLORAL, NEWCO or the Surviving Corporation as a
result of or incident to: (a) the existence of liabilities of the COMPANY in
excess of the liabilities set forth on Schedule 6.10, but only to the extent of
such excess, with the parties acknowledging and agreeing that (i) the existence
of liabilities (such as accounts payable) of the COMPANY on the Merger Effective
Date that are different (but not in the aggregate greater) than the liabilities
of the COMPANY set forth on Schedule 6.10 on the date hereof shall not give rise
to any obligations of the STOCKHOLDERS under the provisions
32
<PAGE>
of this Section 12 and (ii) the existence of liabilities that arise in the
ordinary course of business of the COMPANY that do not arise as a result of a
breach by the STOCKHOLDERS of any of their obligations set forth in Sections 8.2
or 8.3 hereof shall not give rise to any obligations of the STOCKHOLDERS under
the provisions of this Section 12; and (b) all liability resulting from the
litigation matters listed on Schedule 6.19.
12.3 Indemnification by USFLORAL and NEWCO. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFLORAL and NEWCO, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
STOCKHOLDERS at all times from and after the date of this Agreement from and
against all claims, damages actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by
STOCKHOLDERS as a result of or arising from (i) any breach of the
representations and warranties made by USFLORAL and NEWCO set forth herein or on
the schedules or certificates attached hereto, (ii) any nonfulfillment of any
agreement on the part of USFLORAL or NEWCO under this Agreement, (iii) any
liabilities which STOCKHOLDERS may incur due to USFLORAL's failure to be
responsible for the liabilities and obligations of the Surviving Corporation as
provided in Section 1.5 hereof (except to the extent that USFLORAL has claims
against STOCKHOLDERS by reason of such liabilities); or (iv) any liability under
the 1933 Act, the Exchange Act or other Federal or 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 (other than those referred to in
subpart (iii) of Section 12.1) relating to USFLORAL or NEWCO 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,
(other than those referred to in subpart (iii) Section 12.1) required to be
stated therein or necessary to make the statements therein not misleading.
12.4 Third Person Claims. Promptly after any party hereto (hereinafter the
-------------------
"Indemnified Party") has received notice of or has knowledge of any claim by a
person not a party to this Agreement (a "Third Person") or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have 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
33
<PAGE>
Indemnified Party's possession or control. Notwithstanding the foregoing, the
Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel); provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and out-of-
pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section 12 with respect to such Third Person claim shall be limited
to the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim and except as provided
in the immediately preceding sentence. 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. (a) 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 (i) $50,000 prior to the payment of
the Earn-Out Consideration, or (ii) after the payment of the Earn-Out
Consideration, that amount equal to $50,000 plus 2% of the Earn-Out
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, NEWCO and the Surviving
Corporation shall be considered to be a single Indemnifying and Indemnified
Party and STOCKHOLDERS shall be considered to be a single Indemnifying and
Indemnified Party.
(b) "Excess Net Worth" shall mean the amount, if any, by which the
aggregate shareholders' equity as shown on the Closing Date Balance Sheet is
greater than the aggregate shareholders' equity as shown on the Balance Sheet of
the Company as at
34
<PAGE>
December 31, 1996. All indemnification obligations of the Stockholders with
respect to unpaid accounts receivable pursuant to Section 6.11 hereof shall be
reduced by the amount of any Excess Net Worth (but only to the extent such
Excess Net Worth has not previously been utilized to reduce an indemnification
obligation pursuant to this sentence).
(c) 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 of the consideration received by such STOCKHOLDER under this
Agreement.
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 6.20 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 6.25 and 6.26 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 Article 12 shall be the exclusive
-------------
basis for assertion of claims against, or the imposition of liability on, the
STOCKHOLDERS in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the STOCKHOLDERS.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFLORAL or STOCKHOLDERS may, by notice in
--------------------------
the manner hereinafter provided on or before the Closing Date, terminate this
Agreement (i) if a material default shall be made by the other party in the
observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Closing Date and shall not reasonably be
expected to occur or (ii) if the Registration Statement has not been declared
effective on or prior to December 24, 1997 or the Closing shall not have
occurred by December 31, 1997. USFLORAL may, by notice in the manner
hereinafter provided on or before 30 days after the delivery by STOCKHOLDERS of
any Schedule pursuant hereto,
35
<PAGE>
terminate this Agreement in the event information is disclosed on such Schedules
that might have a Material Adverse Effect on either of the COMPANIES. During
the period from the Closing Date to the Merger Effective Date, this Agreement
may only be terminated by the parties as provided in Section 5 hereof.
13.2 Liquidated Damages. If the STOCKHOLDERS terminate this Agreement after
------------------
the satisfaction of the conditions set forth in Section 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. If USFLORAL terminates this Agreement after the
satisfaction of the conditions set forth in Section 10 or if the Merger fails to
occur because of the default of USFLORAL, then, in addition to the other
remedies available to STOCKHOLDERS and the COMPANIES at law, in equity or
pursuant to this Agreement, USFLORAL shall pay the STOCKHOLDERS the sum of
$500,000 as liquidated damages. It is hereby agreed that USFLORAL's damages in
the event of a termination or default by COMPANY or the STOCKHOLDERS and the
STOCKHOLDERS' damages in the event of 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. STOCKHOLDERS agree that for a period of two
---------------------
years following the Merger Effective Date, they shall not in the United States:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative,
in any business selling any products or services in direct competition with
Surviving Corporation or USFLORAL that involves the importing, brokerage,
shipping or marketing of floral products or the manufacturing or mass
marketing of bouquets, or any business engaging in the consolidation of the
floral industry within the United States;
(ii) call upon any person who is, at that time, 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, any COMPANY for the purpose of soliciting or
selling floral products within the Territory;
36
<PAGE>
(iv) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon
by any of them or for which any of them made an acquisition analysis for
themselves or USFLORAL or any subsidiaries of USFLORAL, any COMPANY; or
(v) disclose customers, whether in existence or proposed, of any
COMPANY to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit STOCKHOLDERS from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market, (ii) engaging in
any activity to which USFLORAL shall have provided its prior written consent or
(iii) engaging in the business of growing flowers in the United States.
14.2 Damages. Because of the difficulty of measuring economic losses to
-------
USFLORAL and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFLORAL and the Surviving Corporation for which they would
have no other adequate remedy, STOCKHOLDERS agree that, in the event of a breach
by them of the foregoing covenant, the covenant may be enforced by USFLORAL or
the Surviving Corporation by, without limitation, injunctions and restraining
orders.
14.3 Reasonable Restraint. It is agreed by the parties that the foregoing
--------------------
covenants in this Section 14 impose a reasonable restraint on STOCKHOLDERS in
light of the activities and business of USFLORAL on the date of the execution of
this Agreement and the current and future plans of USFLORAL and the Surviving
Corporation (as successors to the businesses of the COMPANIES).
14.4 Severability; Reformation. The covenants in this Section 14 are
-------------------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
14.5 Independent Covenant. All of the covenants in this Section 14 shall be
--------------------
construed as an agreement independent of any other provision of this Agreement,
and the existence of any claim or cause of action of STOCKHOLDERS against any
COMPANY, any COMPANY's Subsidiaries, the Surviving Corporation or USFLORAL,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants. It is specifically agreed that the
period of two years stated above shall be computed by excluding from such
computation any time during which any STOCKHOLDER is in violation of any
37
<PAGE>
provision of this Section 14 and any time during which there is pending in any
court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action USFLORAL or the Surviving Corporation seek to enforce the
agreements and covenants of STOCKHOLDERS or in which any person contests the
validity of such agreements and covenants or their enforceability or seeks to
avoid their performance or enforcement.
14.6 Materiality. STOCKHOLDERS hereby agree that this covenant is a
-----------
material and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. STOCKHOLDERS recognize and acknowledge that they have in
------------
the past, currently have, and in the future may possibly have, access to certain
confidential information of the 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.
STOCKHOLDERS agree that they will not disclose any confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of USFLORAL, unless such
information becomes known to the public generally through no fault of
STOCKHOLDERS. In the event of a breach or threatened breach by STOCKHOLDERS of
the provisions of this Section, USFLORAL and the Surviving Corporation shall be
entitled to an injunction restraining STOCKHOLDERS from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting USFLORAL and the Surviving Corporation from pursuing any other
available remedy for such breach or threatened breach, including the recovery of
damages.
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 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, STOCKHOLDERS shall be entitled to an injunction restraining USFLORAL
from disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 Damages. Because of the difficulty of measuring economic losses as a
-------
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFLORAL, the
38
<PAGE>
Surviving Corporation and STOCKHOLDERS agree that, in the event of a breach by
any of them of the foregoing covenant, the covenant may be enforced against them
by injunctions and restraining orders.
16. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The STOCKHOLDERS acknowledge and agree that any shares of USFLORAL Stock to
be delivered to the STOCKHOLDERS pursuant to Section 11.4 this Agreement may not
have been and may not be registered under the Act and therefore may not be
resold without compliance with the Act. The STOCKHOLDERS represent and warrant
that the USFLORAL Stock to be acquired by STOCKHOLDERS pursuant to Section 11.4
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.
16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent
-------------------
that none of the shares of USFLORAL Stock issued to such STOCKHOLDERS pursuant
to Section 11.4 of this Agreement 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.
16.2 Economic Risk; Sophistication. STOCKHOLDERS represent and warrant
-----------------------------
that they are able to bear the economic risk of an investment in USFLORAL Stock
acquired pursuant to this Agreement and can afford to sustain a total loss of
such investment. They further represent and warrant that they (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.
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.
STOCKHOLDERS have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
16.3 Registration Statement. Each STOCKHOLDER has received the prospectus
----------------------
included in the draft Registration Statement delivered to him on or about August
2, 1997 that describes, among other things, the Merger, the other acquisitions
proposed to be undertaken by USFLORAL and the target companies of the other
acquisitions. Each STOCKHOLDER has had an adequate opportunity to ask questions
and receive answers to his satisfaction from the officers of USFLORAL concerning
the business, operations and financial condition of USFLORAL.
39
<PAGE>
17. LOCK-UP AGREEMENTS; SECURITIES LEGENDS
17.1 Lock-up. In connection with the IPO, for good and valuable
-------
consideration, the STOCKHOLDERS hereby irrevocably agree that for a period of
180 days after the date of the effectiveness of the Registration Statement, as
the same may be amended, not to (i) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of (except as contemplated in Section 4.2 hereof), directly or indirectly, any
shares of USFLORAL Stock or any securities convertible into or exercisable or
exchangeable for shares of USFLORAL Stock, or (ii) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
of ownership of the USFLORAL Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of USFLORAL Stock or such
other securities, in cash or otherwise without the prior written consent of the
underwriters in the IPO. The STOCKHOLDERS agree that the foregoing shall be
binding upon the STOCKHOLDERS' transferees, successors, assigns, heirs, and
personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. In furtherance of the foregoing, USFLORAL and its
transfer agent are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Section 17.1.
17.2 Legends. The certificates evidencing the USFLORAL Stock to be received
-------
by the Stockholders pursuant to Section 11.4 hereunder will bear a legend
substantially in the form set forth below and containing such other information
as USFLORAL may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "1933 ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, 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.
40
<PAGE>
18. GENERAL
18.1 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.
18.2 Successors and Assigns. This Agreement and the rights of the parties
----------------------
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFLORAL, and the heirs and legal representatives of STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules, exhibits
----------------
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding between STOCKHOLDERS,
COMPANIES, USFLORAL and NEWCO and supersede any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement on the parties thereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by STOCKHOLDERS (subject to the limitations set
forth below), COMPANIES, USFLORAL, and NEWCO acting through their respective
officers, duly authorized by their respective Boards of Directors; provided,
that the STOCKHOLDER who owns a majority of the outstanding shares of capital
stock of the COMPANIES shall have the authority to approve and execute any
amendment to this Agreement on behalf of all of the STOCKHOLDERS and without the
necessity of such majority STOCKHOLDER obtaining consent or authorization from
any other STOCKHOLDER, unless such amendment relates to any representation of
warranty made by a STOCKHOLDER other than such majority STOCKHOLDER which may
only be amended by the written agreement of such person.
18.4 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.
18.5 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.
18.6 Expenses. Whether or not the transactions herein contemplated shall
--------
be consummated, USFLORAL will pay the fees, expenses and disbursements of
USFLORAL and
41
<PAGE>
NEWCO and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto.
Whether or not the transactions herein contemplated shall be consummated,
STOCKHOLDERS will pay the fees, expenses and disbursements of STOCKHOLDERS and
COMPANIES 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 STOCKHOLDERS and COMPANIES under this
Agreement.
18.7 Notices. All notices of communication required or permitted hereunder
-------
shall be in writing and shall be given by overnight courier service, addressed
to the party to be notified, postage prepaid or by delivering the same in person
to an officer or agent of such party, and shall be deemed effective upon
delivery.
(a) If to USFLORAL or NEWCO:
USA FLORAL PRODUCTS, INC.
3500 Whitehaven Parkway
Washington, DC 20007
(b) If to STOCKHOLDERS, addressed to them at:
P.O. Box 1778
261 Coward Road
Watsonville, CA 95077
18.8 Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of Delaware.
18.9 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.
18.10 Time. Time is of the essence with respect to this Agreement.
----
18.11 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.
42
<PAGE>
18.12 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.
18.13 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.
18.14 Attorneys' Fees. If any party to this Agreement shall bring any action
---------------
or proceeding for any relief against the other, declaratory or otherwise,
arising out of this Agreement, the losing party shall pay to the prevailing
party a reasonable sum for attorney fees and costs incurred in bringing or
defending such action or proceeding and/or enforcing any judgment granted
therein, all of which shall be deemed to have accrued upon the commencement of
such action or proceeding and shall be paid whether or not such action or
proceeding is prosecuted to final judgment. Any judgment or order entered in
such action or proceeding shall contain a specific provision providing for the
recovery of attorney fees and costs, separate from the judgment, incurred in
enforcing such judgment. The prevailing party shall be determined by the trier
of fact based upon an assessment of which party's major arguments or positions
taken in the proceedings could fairly be said to have prevailed over the other
party's major arguments or positions on major disputed issues. For the purposes
of this section, attorney fees shall include, without limitation, fees incurred
in the following: (1) post-judgment motions; (2) contempt proceedings; (3)
garnishment, levy, and debtor and third party examinations; (4) discovery; and
(5) bankruptcy litigation. This Section 18.14 is intended to be expressly
severable from the other provisions of this Agreement, is intended to survive
any judgment and is not to be deemed merged into the judgment.
43
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFLORAL"
USA FLORAL PRODUCTS, INC.
By /s/ Robert J. Poirier
------------------------------
Name: Robert J. Poirier
Title: President/CEO
"NEWCO"
USA FLORAL ACQUISITION CO.
By /s/ Robert J. Poirier
------------------------------
Name: Robert J. Poirier
Title: President
"COMPANY"
MONTEREY BAY BOUQUET, INC.
By /s/ Jeff E. Brothers
------------------------------
Name: Jeff E. Brothers
Title: President
"COMPANY"
BAY AREA BOUQUETS, INC.
By /s/ Jeff E. Brothers
------------------------------
Name: Jeff E. Brothers
Title: President
"STOCKHOLDERS"
/s/ Jeff E. Brothers
--------------------------
Jeffrey Brothers
/s/ Philip Buran
--------------------------
Philip Buran
/s/ Douglas Anderson
--------------------------
Douglas Anderson
<PAGE>
EXHIBIT
Exhibit A Companies and NEWCO to be Merged
ANNEXES
ANNEX I Form of Articles of Merger
ANNEX II Calculation and Composition of Consideration
ANNEX III Form of Employment Agreement
ANNEX IV Form of Lease
SCHEDULES
Schedule 6.1 [Lack of necessary qualifications, licenses, permits, etc.]
Schedule 6.3 [COMPANY Shares]
Schedule 6.7 [Predecessor companies]
Schedule 6.9 [COMPANY financial statements]
Schedule 6.10 [COMPANY liabilities]
Schedule 6.11 [COMPANY accounts and notes receivable]
Schedule 6.12 [Permits and intangibles]
Schedule 6.13 [Real and personal property, including leases]
Schedule 6.14 [Material contracts of COMPANY]
Schedule 6.15 [COMPANY insurance policies]
Schedule 6.16 [Officers, directors and employees/compensation]
Schedule 6.17 [Employee benefit plans]
Schedule 6.19 [Violations of law]
Schedule 6.20 [Tax matters]
Schedule 6.21 [Required consents, approvals, etc.]
Schedule 6.24 [Deposit accounts, safe deposit boxes, etc.]
Schedule 6.26 [Underground storage tanks]
Schedule 7.6 [Existing Contracts of USFLORAL and NEWCO]
Schedule 8.3(vi) [Permitted Liens]
Schedule 9.3 [Persons to execute Employment Agreements]
Schedule 10.10 [Post Balance Sheet Date Liabilities]
Schedule 10.11 [Material contracts subsequent to Balance Sheet Date.]
Schedule 11.1 [Guaranties to be released]
Schedule 11.2 [Leases]
<PAGE>
EXHIBIT 10.05
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
AGFS ACQUISITION CORP.
(a Delaware corporation),
ALPINE GEM FLOWER SHIPPERS, INC.
(a Montana corporation),
and
John Q. Graham, Jr.
and
Diane Lizotte-Graham
Dated as of August 5, 1997
- --------------------------------------------------------------------------------
<PAGE>
Table Of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
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..........................................................................................................3
1.5 Effect of Merger...................................................................................................3
1.6 AAA Distribution...................................................................................................3
2. CONVERSION AND EXCHANGE OF STOCK...............................................................................................3
2.1 Manner of Conversion...............................................................................................3
2.2 Calculation of USFloral Shares.....................................................................................4
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION................................................................................4
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES......................................................................................5
5. CLOSING; MERGER EFFECTIVE DATE.................................................................................................7
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.................................................................................7
6.1 Due Organization...................................................................................................7
6.2 Authorization......................................................................................................8
6.3 Capital Stock of Each Company......................................................................................8
6.4 Transactions in Capital Stock......................................................................................8
6.5 No Bonus Shares....................................................................................................8
6.6 Subsidiaries.......................................................................................................8
6.7 Predecessor Status; etc............................................................................................8
6.8 Spin-off by Company................................................................................................9
6.9 Financial Statements...............................................................................................9
6.10 Liabilities and Obligations........................................................................................9
6.11 Accounts and Notes Receivable.....................................................................................10
6.12 Permits and Intangibles...........................................................................................10
6.13 Real and Personal Property........................................................................................10
6.14 Material Contracts and Commitments................................................................................11
6.15 Title to Real Property............................................................................................11
6.16 Insurance.........................................................................................................11
6.17 Officers, Directors and Employees Compensation....................................................................12
6.18 Employee Plans....................................................................................................12
6.19 Compliance with ERISA.............................................................................................12
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
6.20 Conformity with Law..............................................................................................14
6.21 Taxes............................................................................................................14
6.22 Completeness; No Violations......................................................................................15
6.23 Government Contracts.............................................................................................15
6.24 Absence of Changes...............................................................................................15
6.25 Deposit Accounts; Powers of Attorney.............................................................................16
6.26 Environmental Matters............................................................................................17
6.27 Underground Storage Tanks........................................................................................17
6.28 Validity of Obligations..........................................................................................18
6.29 Relations with Governments.......................................................................................18
6.30 Disclosure.......................................................................................................18
6.31 Authority; Ownership.............................................................................................18
7. REPRESENTATIONS OF USFLORAL AND NEWCO........................................................................................19
7.1 Due Organization.................................................................................................19
7.2 USFloral Stock...................................................................................................19
7.3 Authorization....................................................................................................19
7.4 No Conflicts.....................................................................................................19
7.5 Validity of Obligations..........................................................................................20
7.6 Other Agreements.................................................................................................20
8. COVENANTS OF STOCKHOLDERS AND COMPANY PRIOR TO CLOSING.......................................................................20
8.1 Access and Cooperation...........................................................................................20
8.2 Conduct of Business..............................................................................................21
8.3 Prohibited Activities............................................................................................21
8.4 Supplier Approval................................................................................................22
8.5 Notice to Bargaining Agents......................................................................................22
8.6 No Shop..........................................................................................................22
8.7 Notification of Certain Matters..................................................................................23
8.8 Amendment of Schedules...........................................................................................23
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS..........................................................................24
9.1 Representations and Warranties; Performance of Obligations.......................................................24
9.2 No Litigation....................................................................................................24
9.3 Employment Agreements............................................................................................24
9.4 Opinion of Counsel...............................................................................................24
9.5 Registration Statement...........................................................................................25
9.6 Market Capitalization............................................................................................25
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
USFLORAL AND NEWCO..........................................................................................................25
10.1 Representations and Warranties; Performance of Obligations.......................................................25
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
10.2 No Litigation...................................................................................................25
10.3 Examination of Financial Statements.............................................................................25
10.4 No Material Adverse Change......................................................................................25
10.5 Regulatory Review...............................................................................................26
10.6 Stockholders Release............................................................................................26
10.7 Employment Agreements...........................................................................................26
10.8 Opinion of Counsel..............................................................................................26
10.9 Consents and Approvals..........................................................................................27
10.10 Additional Liabilities and Obligations..........................................................................28
10.11 Additional Contracts............................................................................................28
10.12 Good Standing Certificates......................................................................................28
10.13 Registration Statement..........................................................................................28
10.14 Repayment of Indebtedness.......................................................................................28
10.15 Earnings........................................................................................................28
11. COVENANTS OF USFLORAL.......................................................................................................28
11.1 Release From Guarantees.........................................................................................28
11.3 Leases..........................................................................................................29
11.4 Exchange Act Reporting Requirements.............................................................................29
11.5 Certain Transactions............................................................................................29
11.6 Piggy-Back Registrations........................................................................................29
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES..............................................................................................................30
12.1 General Indemnification by Stockholders.........................................................................30
12.2 Specific Indemnification by the Stockholders....................................................................30
12.3 Indemnification by USFloral and Newco...........................................................................31
12.4 Third Person Claims.............................................................................................31
12.5 Limitations on Indemnification..................................................................................32
12.6 Survival of Representations and Warranties......................................................................33
12.7 Sole Remedies...................................................................................................33
13. TERMINATION OF AGREEMENT....................................................................................................33
13.1 Termination by the Parties......................................................................................33
13.2 Termination by USFloral.........................................................................................33
13.3 Liquidated Damages to USFloral..................................................................................34
13.4 Liquidated Damages to the Stockholders..........................................................................34
14. NONCOMPETITION..............................................................................................................34
14.1 Prohibited Activities...........................................................................................34
14.2 Damages.........................................................................................................35
14.3 Reasonable Restraint............................................................................................35
</TABLE>
iii
<PAGE>
<TABLE>
<C> <S> <C>
14.4 Severability; Reformation......................................................................................35
14.5 Independent Covenant...........................................................................................35
14.6 Materiality....................................................................................................36
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...................................................................................36
15.1 Stockholders...................................................................................................36
15.2 USFloral.......................................................................................................36
15.3 Damages........................................................................................................36
16. LOCK-UP AGREEMENTS.........................................................................................................37
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK......................................................37
17.1 Compliance with Law............................................................................................37
17.2 Economic Risk; Sophistication..................................................................................37
17.3 Registration Statement.........................................................................................38
18. SECURITIES LEGENDS..........................................................................................................38
19. GENERAL.....................................................................................................................38
19.1 Cooperation....................................................................................................38
19.2 Successors and Assigns.........................................................................................39
19.3 Entire Agreement...............................................................................................39
19.4 Counterparts...................................................................................................39
19.5 Brokers and Agents.............................................................................................39
19.6 Expenses.......................................................................................................39
19.7 Notices........................................................................................................39
19.8 Governing Law..................................................................................................40
19.9 Exercise of Rights and Remedies................................................................................40
19.10 Time...........................................................................................................40
19.11 Reformation and Severability...................................................................................40
19.12 Remedies Cumulative............................................................................................40
19.13 Captions.......................................................................................................40
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement")
is made as of the 5th day of August, 1997, between U.S.A. FLORAL PRODUCTS, INC.,
a Delaware corporation ("USFloral"), AGFS Acquisition Corp., a Delaware
corporation ("Newco") formed for the sole purpose of effecting this transaction,
Alpine Gem Flower Shippers, Inc., a Montana Corporation (the "Company") and
John Q. Graham, Jr. and Diane Lizotte-Graham (collectively referred to as the
"Stockholders"), who are all of the stockholders of the Company.
WHEREAS, USFloral was incorporated on April 2, 1997 (the "Formation") under
the laws of the State of Delaware for the purpose of acquiring floral products
businesses in different locations; and
WHEREAS, USFloral intends to undertake an initial public offering of its
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, Newco has been duly organized and is existing under the laws of
the State of Delaware, having been incorporated on July 1, 1997, solely for
the purpose of completing this transaction, and is a wholly-owned subsidiary
of USFloral; and
WHEREAS, the Company is a corporation organized and existing under the laws
of the State of Montana; and
WHEREAS, the respective Boards of Directors of USFloral, Newco and the
Company (all of which companies are hereinafter collectively referred to as
the "Constituent Corporations") deem it advisable and in the best interests of
the Constituent Corporations and their respective stockholders that Newco
merge with and into the Company pursuant to this Agreement and the applicable
provisions of the laws of the respective states of incorporation of Newco and
Company, such transactions being herein called the "Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351 of
the Internal Revenue Code of 1986, as amended;
WHEREAS, the parties hereto entered into that certain Agreement and Plan of
Contribution on July 1, 1997 (the "Original Agreement") and now wish to amend
and restate the Original Agreement in its entirety as of August 5, 1997 in
order to achieve conformity with similar agreements USFloral has entered into
with other floral products businesses;
<PAGE>
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 Newco and the
Company on or before the Merger Effective Date (as defined in Section 5).
1.2 Merger Effective Date. The "Merger Effective Date" shall be the date
---------------------
specified in Section 5. At the Merger Effective Date, Newco shall be merged
with and into the Company in accordance with the Articles of Merger and the
separate existence of Newco shall cease. The Company, as the party surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
---------------------------------------------------------------------
Corporation. At the Merger Effective Date:
- -----------
(i) the Articles of Incorporation of the Company shall become the Articles
of Incorporation of the 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 the Surviving Corporation until changed as provided by law;
(ii) the Bylaws of the Company shall become the Bylaws of the Surviving
Corporation; and subsequent to the Merger Effective Date, such Bylaws shall be
the Bylaws of the Surviving Corporation until they shall thereafter be duly
amended;
(iii) the name of the person who shall serve as the sole member of the
Board of Directors of the Surviving Corporation shall be Robert Poirier; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the state of incorporation and of the Articles of
Incorporation and Bylaws of each Surviving Corporation.
(iv) the officers of the Company immediately prior to the Merger Effective
Date shall continue as the officers of the Surviving Corporation in the same
capacity or capacities, each of such officers to serve, subject to the
provisions of the Articles of Incorporation and Bylaws of the Surviving
Corporation, until his successor is elected and qualified.
2
<PAGE>
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 class of outstanding capital stock of the Company and Newco as of
the date of this Agreement are as follows:
(i) the authorized capital stock of the Company consists of 50,000 shares
of common stock, without par value (the "Company Stock"), of which 20,000
shares are issued and outstanding; and
(ii) the authorized capital stock of 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 the Company shall continue unaffected and unimpaired by the
Merger, and the Surviving Corporation shall be fully vested therewith. At the
Merger Effective Date, the separate existence of Newco shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
the Company or Newco shall be taken and deemed to be transferred to, and vested
in, the Surviving Corporation without further act or deed; and all property,
rights and privileges, powers and franchises and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Company and Newco; and the title to any real estate, or
interest therein, whether by deed or otherwise, under the laws of the state of
incorporation vested in the Company or Newco, shall not revert or be in any way
impaired by reason of the Merger. The Surviving Corporation shall thenceforth
be responsible and liable for all the liabilities and obligations of the Company
and Newco and any claim existing, or action or proceeding pending, by or against
the Company or Newco may be prosecuted as if the Merger had not taken place, or
the Surviving Corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of the Company or Newco shall be
impaired by the Merger, and all debts, liabilities and duties of the Company and
Newco shall attach to the Surviving Corporation, and may be enforced against it
to the same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
1.6 AAA Distribution. The parties agree that, immediately prior to the
----------------
Closing, the Company shall distribute to its stockholders the amount of the
Company's accumulated adjustment account.
2. CONVERSION AND EXCHANGE OF STOCK
3
<PAGE>
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 Merger and without
any action on the part of the holder thereof, automatically be converted into
that number of shares of USFloral Stock and the right to receive cash from
USFloral as determined pursuant to Section 2.2 below, all to be distributed to
Stockholders in the percentages set forth on Annex II and at the times
specified in Section 5 hereof; and
(ii) each share of Newco Stock issued and outstanding immediately prior to
the Merger Effective Date shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of stock of the Surviving Corporation
which shall constitute all of the outstanding shares of the Surviving
Corporation immediately after the Merger Effective Date.
All USFloral Stock to be received by the Stockholders as a result of the
merger shall, except for restrictions on resale or transfer described in Section
16 hereof, have the same rights as the majority of outstanding USFloral Stock.
All voting rights are fully exercisable by 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.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 At the Merger Effective Date:
(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
4
<PAGE>
(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.
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES
4.1 As soon as practicable, but in any event within 30 days after the
Closing, USFloral shall engage Price Waterhouse to prepare, in accordance with
GAAP, a balance sheet of the Company (the "Closing Date Balance Sheet") as of
the end of business on the day prior to the Closing Date (as defined in Section
5 hereof). If the aggregate stockholders' equity as shown on the Closing Date
Balance Sheet is less than the aggregate stockholders' equity as shown on the
Consolidated Balance Sheet as at December 31, 1996 (such difference the "Net
Worth Deficiency"), the Stockholders shall pay an amount equal to the Net Worth
Deficiency to USFloral as provided below. Notwithstanding anything in this
Article 4 to the contrary, if there is any Net Worth Deficiency and the
Stockholders dispute any item contained on the Closing Date Balance Sheet, the
Stockholders shall notify USFloral in writing of each disputed item
(collectively, the "Disputed Amounts"), and specify the amount thereof in
dispute within thirty business days after the delivery of the Closing Date
Balance Sheet. If the Stockholders do not notify USFloral of any Disputed
Amount within the thirty business day period, then within ten business days
after the expiration of the thirty business day period, the Stockholders shall
pay USFloral by wire transfer of immediately available funds, an amount equal to
the Net Worth Deficiency. If USFloral and the Stockholders cannot resolve any
such dispute which would eliminate or reduce the amount of the Net Worth
Deficiency, then such dispute shall be resolved by an independent nationally
recognized accounting firm which is reasonably acceptable to USFloral and the
Stockholders (the "Independent Accounting Firm"). The determination of the
Independent Accounting Firm shall be made as promptly as practical and shall be
final and binding on the parties, absent manifest error which error may only be
corrected by such Independent Accounting Firm. Any disputed amount of the Net
Worth 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
5
<PAGE>
Accounting Firm) bear to the total of the Disputed Amounts so submitted to the
Independent Accounting Firm.
4.2 (a) Any indemnification obligations of the Stockholders pursuant to
Sections 12.1 and 12.2 hereof and amounts payable pursuant to Section 4.1 hereof
shall be satisfied initially through recourse to the assets pledged for such
purpose under the following paragraph (valued for such purposes on the date the
indemnification obligation is paid pursuant to Section 12 or ten days after
USFloral notifies the Stockholders of the Net Worth Deficiency pursuant to
Section 4.1).
(b) At the Closing each Stockholder shall, 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 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 or her name in the Merger, shall, at the Closing, be delivered to
USFloral, together with a stock power duly signed in blank by him or her, 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.
6
<PAGE>
(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 Merger
(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 Merger or the 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 Morgan, Lewis & Bockius LLP, One Oxford Centre, 32nd Floor, Pittsburgh,
Pennsylvania 15219. 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
Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery of a
check or checks in an amount equal to the cash which the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Section 3 hereof,
shall occur and be deemed to be completed. The date on which the Merger is
effected shall be referred to as the "Merger Effective Date." During the period
from the Closing Date to the Merger Effective Date, this Agreement may only be
terminated by the parties if the underwriting agreement in respect of the
initial public offering of USFloral Stock is terminated pursuant to the terms of
such agreement. This Agreement shall in any event terminate if the Merger
Effective Date has not occurred within 10 business days of the Closing Date.
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each Stockholder, jointly and severally, represents and warrants
as follows.
6.1 Due Organization. The Company is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the state of Montana, 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
7
<PAGE>
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 the 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 the
-----------------------------
Company consists solely of 50,000 shares of common stock, of which 20,000 shares
are issued and outstanding. All of the issued and outstanding shares of the
capital stock of the 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
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. The Company has never acquired any
-----------------------------
treasury stock. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any of their respective
authorized but unissued capital stock. In addition, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof.
6.5 No Bonus Shares. 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, the Company does not
------------
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity. Except as set forth
on Schedule 6.6, the Company is not, 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 the Company, including the names of any
entities from whom the Company previously acquired significant assets. Except as
set forth on Schedule 6.7, the Company
8
<PAGE>
has never 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 the 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
Company: Balance Sheet as of December 31, 1996, 1995 and 1994 and Statements of
Incomes, Cash Flows and Retained Earnings for each of the years in the three
year period ended December 31, 1996, and the Company's unaudited Balance Sheet
as of each of April 30, 1997 and 1996, (April 30, 1997 being hereinafter
referred to as the "Balance Sheet Date") and Statements of Incomes, Cash Flows
and Retained Earnings for the four (4) month periods then ended. Such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted). Except as set forth on Schedule 6.9, such Balance Sheets
present fairly the financial position of the Company as of the dates indicated
thereon, and such Statements of Incomes, Cash Flows and Retained Earnings
present fairly the results of the Company's operations for the periods indicated
thereon.
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
---------------------------
accurate list, as of the Balance Sheet Date, of all material liabilities of the
Company, which are reflected in the April 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 April 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;
9
<PAGE>
(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 Company, 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. The Stockholders shall provide USFloral with 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, as of the Balance Sheet Date, of all
permits, titles, licenses, franchises, certificates, trademarks, trade names,
service marks, patents, patent applications and copyrights owned or held by the
Company all of which are now valid, in good standing and in full force and
effect. Except as set forth on Schedule 6.12, such permits, licenses, orders,
approvals, franchises, etc. are adequate for the operation of the Company's
business as presently constituted. Except as set forth on Schedule 6.12, the
Stockholders have delivered to USFloral a description and copies as of the date
of this Agreement, of all material records, reports, notifications, permits,
pending permit applications, engineering studies, environmental impact studies,
filed or submitted or required to be filed or submitted to governmental agencies
and of all material notifications from such governmental agencies relating to
the above or relating to the discharge or release of materials into the
environment or otherwise relating to the protection of the public health or the
environment.
6.13 Real and Personal Property. Attached hereto as Schedule 6.13 is an
--------------------------
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the 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
Company 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 business of the Company and including an indication as to which
assets were formerly owned by the Stockholders or affiliates (which term, as
used herein, shall have the meaning ascribed thereto in Rule 144(a)(1) under the
Securities Act of 1933, as amended) of the Company. Except as set forth on
Schedule 6.13, substantially all of the trucks, machinery and equipment of the
Company are in good working order and condition, ordinary wear and tear
excepted. All leases set forth on Schedule 6.13 have been duly authorized,
executed and delivered and constitute the legal, valid and binding obligations
of the Company and, to the knowledge of the Stockholders, no other party to any
such lease is in default thereunder and such leases constitute the legal, valid
and binding obligations of such other parties. All fixed assets used by the
Company in the operation of its business are either owned by the 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
10
<PAGE>
or held by the Company. The Stockholders have indicated on Schedule 6.13 a
summary description of all plans or projects involving the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business, to which management of the Company has devoted
any significant effort or expenditure in the two year period prior to the date
of this Agreement, which if pursued by the Company would require additional
expenditures of significant efforts or capital.
6.14 Material Contracts and Commitments. Attached hereto as Schedule 6.14 is
----------------------------------
an accurate list, as of the Balance Sheet Date, of all material contracts,
commitments and similar agreements to which the Company is a party or by which
the Company or its properties are bound (including, but not limited to, joint
venture or partnership agreements, contracts with any labor organizations, loan
agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements). The Stockholders
have heretofore delivered to USFloral true copies of such agreements. Except as
set forth on Schedule 6.14, the Company has complied with all material
commitments and obligations pertaining to it, and is not in material default
under any such agreement and no notice of default has been received. The
Company is not a party to any contract, agreement or other instrument or
commitment which cannot be terminated by the Company on 30 days notice without
any liability to the Company which would have a Material Adverse Effect on the
Company taken as a whole. Except as set forth on Schedule 6.14, the Company is
not bound by or subject to (and none of their respective assets or properties is
bound by or subject to) any arrangement with any labor union. Except as set
forth on Schedule 6.14, no employees of the Company are represented by any labor
union or covered by any collective bargaining agreement nor, to the
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 the Company and any group of its
employees nor has the Company experienced any labor interruptions over the past
three years and the Company considers its relationship with employees to be
good.
6.15 Title to Real Property. The Company has good and insurable title to the
----------------------
real property owned and used in its business, 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.
11
<PAGE>
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list, as of
---------
the Balance Sheet Date, of all insurance policies carried by the Company and an
accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. The Stockholders have heretofore
delivered to USFloral complete copies of all policies currently in effect. The
insurance carried by the Company with respect to its properties, assets and
business 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. The Company's
insurance has never been canceled and the Company has never 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 Company and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date. The
Stockholders have heretofore delivered to USFloral copies of the payroll lists
covering all employees of the Company as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.17, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
6.18 Employee Plans. Attached hereto as Schedule 6.18 are complete and
--------------
accurate copies, as of the Balance Sheet Date, of all employee benefit plans,
all employee welfare benefit plans, all employee pension benefit plans, all
multi-employer plans and all multi-employer welfare arrangements (as defined in
Sections 3(3), (1), (2), (37) and (40), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), which are currently
maintained and/or sponsored by the Company, or to which the Company currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), together
with copies of any trusts related thereto and a classification of employees
covered thereby (collectively, the "Plans"). Schedule 6.18 sets forth all of
the Plans that have been terminated within the past three years.
6.19 Compliance with ERISA. All Plans are in substantial compliance with all
---------------------
applicable provisions of ERISA and the regulations issued thereunder, as well as
with all other applicable laws, and, in all material respects, have been
administered, operated and managed in substantial accordance with the governing
documents. All Plans that are intended to qualify (the "Qualified Plans") under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code")
have been determined by the Internal Revenue Service to be so qualified, and
copies of the current plan determination letters, most recent actuarial
valuation reports, if any, most recent Form 5500, or, as applicable, Form 5500-
C/R filed with respect to each such Qualified Plan or employee welfare benefit
plan and most recent trustee or custodian report, are included as part of
Schedule 6.18. To the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within 120
days after the Closing Date. All reports and other documents
12
<PAGE>
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, annual reports,
summary annual reports, actuarial reports, PBGC-1 Forms, audits or tax returns)
have been timely filed or distributed. None of: (i) the Stockholders; (ii) any
Plan; or (iii) the Company has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA. No Plan has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the Company does not currently have (nor
at the Closing Date will have) any direct or indirect liability whatsoever
(including being subject to any statutory lien to secure payment of any such
liability), to the Pension Benefit Guaranty Corporation ("PBGC") with respect to
any such Plan under Title IV of ERISA or to the Internal Revenue Service for any
excise tax or penalty; and neither the Company nor any member of a "controlled
group" (as defined in ERISA Section 4001(a)(14)) currently has (or at the
Closing Date will have) any obligation whatsoever to contribute to any "multi-
employer pension plan" (as defined in ERISA Section 4001(a)(14), nor has any
withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further:
(i) there have been no terminations, partial terminations or discontinuance
of contributions to any Qualified Plan without notice to and approval by the
Internal Revenue Service;
(ii) no Plan which is subject to the provisions of Title IV of ERISA has
been terminated;
(iii) there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(iv) the valuation of assets of any Qualified Plan, as of the Closing Date,
shall exceed the actuarial present value of all accrued pension benefits under
any such Qualified Plan in accordance with the assumptions contained in the
Regulations of the PBGC governing the funding of terminated defined benefit
plans;
(v) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the Company and the Stockholders have complied (and on the Closing
Date will have complied), in all respects with all reporting, disclosure,
notice, election and other benefit continuation requirements imposed
thereunder as and when applicable to such plans, and the Company has no (and
will incur no) direct or indirect liability and is not (and will not be)
subject to any loss, assessment, excise tax penalty, loss of federal income
tax deduction or other sanction, arising
13
<PAGE>
on account of or in respect of any direct or indirect failure by the Company
or the Stockholders, at any time prior to the Closing Date, to comply with any
such federal or state benefit continuation requirement, which is capable of
being assessed or asserted before or after the Closing Date directly or
indirectly against the Company or the Stockholders with respect to such group
health plans;
(vi) The Company is not now nor has it been within the past five years a
member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(vii) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the 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
(ix) The Company has not incurred liability under Section 4062 of ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, the Company
-------------------
is not in violation of any law or regulation or under any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction which would have a
Material Adverse Effect on the Company, 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 the
Company, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction and no notice of any claim, action, suit or
proceeding, whether pending or threatened, has been received. The Company has
conducted and is conducting its business in substantial compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing which might have a Material Adverse Effect on the Company, taken
as a whole.
6.21 Taxes. The Company has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing Date. There are no open years, examinations in
progress or claims against the Company for federal and other taxes (including
penalties and interest) for any period or periods prior to and including the
Balance Sheet Date and no notice of any claim, whether pending or threatened,
for taxes has been received.
14
<PAGE>
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 the Company for the last
three fiscal years, or such shorter period of time as it shall have existed,
have heretofore been delivered by the Stockholders to USFloral. The 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. The 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. The Company currently utilizes the cash receipts and
disbursements method of accounting for income tax purposes and has not changed
its method of accounting in the past five years.
6.22 Completeness; No Violations. The certified copies of the Articles of
---------------------------
Incorporation and Bylaws, both as amended to date, of the Company, and the
copies of all leases, instruments, agreements, licenses, permits, certificates
or other documents which are included on schedules attached hereto or have been
delivered to USFloral in connection with the transactions contemplated hereby
are complete and correct; neither the Company nor, to the knowledge of the
Stockholders, any other party thereto, is in material default thereunder; and,
except as set forth in the schedules and documents attached to this Agreement,
the rights and benefits of the Company thereunder will not be materially and
adversely affected by the transactions contemplated hereby; and the execution of
this Agreement and the performance of the obligations hereunder will not result
in a material violation or breach or constitute a material default under any of
the terms or provisions thereof. Except as set forth on Schedule 6.22, none of
such leases, instruments, agreements, contracts, licenses, permits, certificates
or other documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions contemplated
hereby to remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.23 Government Contracts. The Company is not now nor has it ever been a
--------------------
party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Absence of Changes. Since the Balance Sheet Date, there has not been:
------------------
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by insurance)
which has had a Material Adverse Effect on the Company, taken as a whole;
15
<PAGE>
(iii) any change in the authorized capital of the Company or in its
securities outstanding or any change in its 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 the Company except for dividends,
bonuses and other distributions to the Stockholders in amounts not in excess
of those necessary to cover the payment of income taxes by the Stockholders
attributable to the Company's Subchapter S income;
(v) any increase in the compensation, bonus, sales commissions or fees
arrangement payable or to become payable by the Company to any of its
officers, directors, Stockholders, employees, consultants or agents other than
ordinary salary increases implemented on a basis consistent with past
practices;
(vi) any work interruptions, labor grievances or claims filed, or any
proposed law or regulation or any event or condition of any character, which
has had a Material Adverse Effect on the Company, taken as a whole;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Company to any person, including,
without limitation, the Stockholders and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to the Company, including without limitation any indebtedness
or obligation of any Stockholder or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of the assets, properties or rights of
the Company or requiring consent of any party to the transfer and assignment
of any such assets, properties or rights;
(x) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any properties, rights or assets of the Company;
(xi) any waiver of any material rights or claims of the Company;
(xii) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party; or
(xiii) any transaction by the Company outside the ordinary course of its
business.
16
<PAGE>
6.25 Deposit Accounts; Powers of Attorney. Attached hereto as Schedule 6.25
------------------------------------
is an accurate list, as of the date of this Agreement, of:
(i) the name of each financial institution in which the Company has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 6.25 also sets forth the name of each person, corporation, firm or
other entity holding a general or special power of attorney from the Company and
a description of the terms of such power.
6.26 Environmental Matters. To the knowledge of the Stockholders, the
---------------------
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 the Company
or any of its properties, assets, operations and business relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances (as such terms are defined in any applicable
Environmental Law) except to the extent that noncompliance with any
Environmental Law, either singly or in the aggregate, would not have a Material
Adverse Effect on the Company, taken as a whole. The Company has obtained and
adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances and has reported, to the extent required by all Environmental Laws,
all past and present sites owned and operated by the Company where Hazardous
Wastes or Hazardous Substances have been treated, stored, disposed of or
otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in or on any property owned or operated
by the Company except as permitted by Environmental Laws. The Stockholders know
of no off-site location to which the 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 the Company, USFloral or Newco for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. The Company has
no contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
6.27 Underground Storage Tanks. Except as set forth on Schedule 6.27, the
-------------------------
Company has never owned or leased any real estate having any underground storage
tanks containing
17
<PAGE>
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:
(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
(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 the Company and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the Company and
the Stockholders, and this Agreement has been duly and validly authorized by all
necessary corporate action and is a legal, valid and binding obligation of the
Company.
6.29 Relations with Governments. The Company has not 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 the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended or any law of similar effect.
6.30 Disclosure. Without limiting any exclusion, exception or other
----------
limitation contained in any of the representations and warranties made herein,
this Agreement and the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If any
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholder shall immediately
18
<PAGE>
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 NEWCO
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 Newco 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 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 Bylaws, as amended, of USFloral and Newco (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 Robert Poirier or Jonathan Ledecky (i) have
registration rights with respect to USFloral Stock that are superior to
registration rights that the Stockholders have, or (ii) will have the right to
include any USFloral Stock in the IPO.
7.3 Authorization. The representatives of USFloral and Newco executing this
-------------
Agreement have the corporate authority to enter into and bind USFloral and Newco
by the terms of this Agreement. USFloral and Newco have full legal right, power
and authority to enter into this Agreement and have the full legal right, power
and authority to enter into the Merger, and the
19
<PAGE>
conversion of Company Stock into Newco Stock, pursuant to the provisions of this
Agreement will transfer valid title to USFloral Stock to the Stockholders, free
and clear of all liens, encumbrances and claims of every kind.
7.4 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the Certificate
of Incorporation or Bylaws of either USFloral or Newco,
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which either
USFloral or Newco is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any of USFloral's or Newco's properties
pursuant to (A) any law or regulation to which USFloral or Newco, or any of
their property is subject, or (B) any judgment, order or decree to which
USFloral or Newco is bound or any of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(iv) require any filing or other notice under the Hart-Scott-Rodino
Antitrust Improvement Act.
7.5 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by USFloral and Newco and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of
USFloral and the Board of Directors and the stockholder of Newco, and this
Agreement has been duly and validly authorized by all necessary corporate
action. This Agreement is a legal, valid and binding obligation of USFloral and
Newco, respectively.
7.6 Other Agreements. Prior to the consummation of the Merger, USFloral and
----------------
Newco have no material properties or assets and are not party to any contracts
other than this Agreement, the letters of intent between USFloral and 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 COMPANY PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access during normal business hours to all of the
Company's sites, properties, books and records and will
20
<PAGE>
furnish USFloral with such additional financial and operating data and other
information as to the business and properties of the Company as USFloral may
from time to time reasonably request in writing. The Company will cooperate
with the reasonable requests of USFloral, its representatives, engineers,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with any documents or materials required by any
governmental agency. USFloral will cause all information obtained in connection
with the negotiation and performance of this Agreement to be treated as
confidential in accordance with the provisions of Section 15 hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, the Stockholders will cause the 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;
(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 the 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, the Company will not, without prior written consent of USFloral:
(i) make any change in its Articles of Incorporation or Bylaws;
21
<PAGE>
(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 amounts not
in excess of those necessary to cover the payment of income taxes by the
Stockholders attributable to the Company's Subchapter S income;
(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;
(viii) negotiate for the acquisition of any business or the start-up of any
new business;
(ix) merge or consolidate or agree to merge or consolidate with or into any
other corporation;
(x) waive any material rights or claims;
(xi) breach or permit a breach, amend or terminate any material agreement
or any permit, license or other right; or
(xii) enter into any other transaction outside the ordinary course of its
business or prohibited hereunder.
8.4 Supplier Approval. Prior to the Closing Date, the Company shall satisfy
-----------------
any requirement for notice and approval of the transactions contemplated by this
Agreement under applicable supplier agreements, and shall provide USFloral with
satisfactory evidence of such approvals.
22
<PAGE>
8.5 Notice to Bargaining Agents. Prior to the Closing Date, the Company
---------------------------
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide USFloral with proof that any required notice has been sent.
8.6 No Shop. None of the Stockholders, the Company or any agent, officer,
-------
director or any representative of any of the foregoing will, during the period
commencing on the date of this Agreement and ending with the earlier to occur of
the Merger Effective Date or the termination of this Agreement in accordance
with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person for,
(ii) participate in any discussions pertaining to or
(iii) furnish any information to any person other than USFloral or Newco
relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company.
8.7 Notification of Certain Matters. The Stockholders and the Company shall
-------------------------------
give prompt notice to USFloral of (i) the occurrence or non-occurrence of any
event known to any Stockholder or the Company the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained in
Section 6 to be untrue or inaccurate in any material respect at or prior to the
Closing Date or Merger Effective Date and (ii) any material failure of any
Stockholder or the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by such person hereunder. USFloral
shall give prompt notice to each Stockholder of (i) the occurrence or non-
occurrence of any event known to USFloral the occurrence 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
23
<PAGE>
Schedules, provided that no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to the Company may be made
unless USFloral consents to such amendment or supplement; and provided further,
however, that USFloral may not withhold consent to such amendment or supplement
if the same relates to (i) changes in facts or circumstances occurring
subsequent to the date hereof, or (ii) facts and circumstances existing as of
the date hereof that were not disclosed by the Stockholders because they did not
have knowledge of them (but, with respect to facts and circumstances described
in (ii) only to the extent that the omission thereof from the Schedules attached
hereto as of the date hereof was not the result of a lack of good faith
diligence on the part of the Stockholders). No amendment of or supplement to a
Schedule shall be made later than 48 hours prior to the anticipated
effectiveness of the Registration Statement defined in Section 9.5.
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.
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFloral and Newco contained in Section 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by USFloral and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of USFloral shall have been delivered to 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 the
Company as a result of which the management of the Company deems it inadvisable
to proceed with the transactions hereunder.
9.3 Employment Agreements. The Surviving Corporation shall execute and
---------------------
deliver Employment Agreements, in the form of Annex III attached hereto, to each
of the persons listed on Schedule 9.3 hereto.
9.4 Opinion of Counsel. 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 Newco have been duly organized and are validly existing in
good standing under the laws of the State of Delaware;
24
<PAGE>
(ii) this Agreement has been duly authorized, executed and delivered by
USFloral and Newco and constitutes a valid and binding agreement of USFloral
and Newco enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting
the rights of creditors and except (X) as the same may be subject to the
effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein; and
(iii) the shares of USFloral Stock to be received by the Stockholders on
the Merger Effective Date shall be duly authorized, fully paid and
nonassessable.
9.5 Registration Statement. USFloral shall have filed with the SEC the
----------------------
Registration Statement. The Registration Statement shall have been declared
effective by the SEC not later than December 24, 1997 and the underwriters named
therein shall have agreed to acquire, subject to the conditions set forth in the
underwriting agreement, the shares of USFloral Stock covered by such
Registration Statement.
9.6 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.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFloral and Newco hereunder are, at their option, subject
to the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions.
10.1 Representations and Warranties; Performance of Obligations. Stockholders
----------------------------------------------------------
shall have delivered to USFloral a certificate dated the Merger Effective Date
and signed by them to the effect that all the representations and warranties of
Stockholders contained in this Agreement shall be true on and as of the Closing
Date and as of the Merger Effective Date with the same effect as though such
representations and warranties had been made on and as of such dates, except for
matters expressly disclosed in the certificate or a Schedule thereto; each and
all of the agreements of the Stockholders and the Company to be performed on or
before the Closing Date pursuant to the terms hereof shall have been performed.
10.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of USFloral
as a result of which the management of USFloral deems it inadvisable to proceed
with the transactions hereunder.
25
<PAGE>
10.3 Examination of Financial Statements. Prior to the Closing Date,
-----------------------------------
USFloral shall have had sufficient time to review the unaudited balance sheets
of the Company as of June 30, 1997, and the unaudited statements of income, cash
flow and retained earnings of the Company for the periods then ended, disclosing
no material adverse change in the financial condition of the Company or the
results of their respective operations from the financial statements originally
furnished by the 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 the Company shall have
occurred, and the Company shall not have suffered any material loss or damages
to any of its properties or assets, whether or not covered by insurance, since
the Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and USFloral shall
have received on the Closing Date a certificate signed by the Stockholders dated
the Merger Effective Date to such effect.
10.5 Regulatory Review. USFloral, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
the Company including, but not limited to, environmental and land use practices,
import and export laws, compliance with contracts and federal, state and local
laws and regulations governing the respective operations of the Company, which
review reflects compliance with all applicable laws governing the Company,
disclosing no material actual or probable violations, compliance problems,
required capital 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
the Company from any and all claims of the Stockholders against the Company.
10.7 Employment Agreements. Each of the persons listed on Schedule 9.3 shall
---------------------
execute and deliver an Employment Agreement, in the form of Annex III attached
hereto.
10.8 Opinion of Counsel. USFloral shall have received an opinion from
------------------
Alexander A. George, counsel to the Stockholders, dated the Merger Effective
Date, in form and substance satisfactory to USFloral, to the effect that with
respect to the Company:
(i) the Company has been duly organized and is validly existing in good
standing under the laws of the state of its incorporation;
(ii) 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;
26
<PAGE>
(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 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, the Company is not in violation of or default under any law or
regulation, or under any order of any court, commission, board, bureau, agency
or instrumentality wherever located and there are no claims, actions, suits or
proceedings pending, or threatened against or affecting the Company, at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality wherever
located;
(vii) to the knowledge of such counsel, except to the extent set forth on
Schedule 6.14, the Company is not in default under any of its material
contracts or agreements or has received notice of such default;
(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.
27
<PAGE>
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. The Stockholders shall have
--------------------------------------
delivered to USFloral a schedule (Schedule 10.10), dated the Merger Effective
Date, setting forth all liabilities and obligations of the Company arising since
the Balance Sheet Date.
10.11 Additional Contracts. The Stockholders shall have delivered to USFloral
--------------------
a schedule (Schedule 10.11), dated the Merger Effective Date, showing all
material contracts and agreements, together with copies thereof, entered into by
the Company since the Balance Sheet Date.
10.12 Good Standing Certificates. The Stockholders shall have delivered to
--------------------------
USFloral certificates, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's states 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 the Closing Date, the Stockholders
-------------------------
shall have repaid the Company in full all amounts owing by the Stockholders.
10.15 Earnings. The Company shall have aggregate earnings for the period from
--------
January 1, 1997 through the day immediately prior to the Closing Date as
determined by Price Waterhouse, LLP, of not less than $300,000.
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
28
<PAGE>
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 Amended and Restated 1997 Long-Term Incentive Plan (the "Plan").
11.3 Leases. At the Merger Effective Date, the Surviving Corporation shall
------
enter into lease arrangements with each of the persons or entities listed in
Schedule 11.2 with respect to the corresponding properties or assets listed on
Schedule 11.2 in accordance with the terms and conditions of the form of lease
agreement attached hereto as Annex IV.
11.4 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. 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. If at any time after the expiration of the
------------------------
restrictions contained in Section 16 USFloral shall determine to register shares
of USFloral Stock for its own account or the account of others under the 1933
Act (other than on Form S-8 or Form S-4 or their then equivalents relating to
shares of USFloral Stock to be issued solely in connection with any acquisition
of any entity or business or shares of USFloral Stock issuable in connection
with stock option or other employee benefit plans, and other than any "shelf"
registration statement relating to securities to be issued by USFloral), then it
shall send to each holder of shares of USFloral Stock issued in the Merger
("Registrable Shares") (all such security holders and being referred to as
29
<PAGE>
"Holders") written notice of such determination. If, within 15 days after
receipt of such notice, such Holder shall so request in writing, then USFloral
shall use its best efforts to include in such registration statement all or any
part of the Registrable Shares such Holder requests to be registered, except
that if, in connection with any offering involving an underwriting of USFloral
Stock to be issued by USFloral, the managing underwriter shall impose a
limitation on the number of shares of such USFloral Stock which may be included
in the registration statement because, in its judgment, such limitation is
necessary to effect an orderly public distribution, then USFloral shall be
obligated to include in such registration statement only such limited portion of
the Registrable Shares with respect to which such Holder has requested inclusion
hereunder; provided, however, that USFloral shall not so exclude any Registrable
-------- -------
Shares unless it has first excluded all securities to be offered and sold by
directors, officers or other employees of USFloral or by shareholders who do not
have contractual, incidental rights to include such securities. Except as
provided in the previous sentence of this Section 11.6 any exclusion of
Registrable Shares shall be made pro rata among the Holders of Registrable
--- ----
Shares seeking to include such shares, in proportion to the number of such
shares sought to be included by such Holders. The obligations of USFloral under
this Section 11.6 may be waived at any time upon the written consent of Holders
of a majority-in-interest of the Registrable Shares and shall expire as to each
Holder immediately upon all of such Holder's Registrable Shares being capable of
sale within a three-month period in accordance with the volume and manner-of-
sale limitations of Rule 144 under the 1933 Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by Stockholders. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, each Stockholder, jointly and severally,
covenants and agrees that such Stockholder will indemnify, defend, protect and
hold harmless USFloral, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement until the
Expiration Date (as defined in Section 12.6) from and against all claims,
damages, actions, suits, proceedings, demands, assessments, adjustments, costs
and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by USFloral, Newco or
the Surviving Corporation 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 the 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 a
material fact relating to the Company or the Stockholders, and provided to
USFloral or its counsel by the 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 the 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 the Company or the Stockholders, provided, however,
that such indemnity shall not inure to the benefit of
30
<PAGE>
USFloral, Newco and the Surviving Corporation to the extent that such untrue
statement (or alleged untrue statement) was made in, or omission (or alleged
omission) occurred in, any preliminary prospectus and 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 hereto, and
notwithstanding any investigation by USFloral or Newco, the Stockholders
covenant and agree that they will indemnify, defend, protect and hold harmless
USFloral, Newco and the Surviving Corporation and their respective officers,
stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, costs and
expenses whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by USFloral, Newco or
the Surviving Corporation as a result of or incident to: (a) the existence of
liabilities of the Company in excess of the liabilities set forth on Schedule
6.10, but only to the extent of such excess, with the parties acknowledging and
agreeing that (i) the existence of liabilities (such as accounts payable) of the
Company on the Merger Effective Date that are different (but not in the
aggregate greater) than the liabilities of the Company set forth on Schedule
6.10 on the date hereof shall not give rise to any obligations of the
Stockholder under the provisions of this Section 12 and (ii) the existence of
liabilities that arise in the ordinary course of business of the Company that do
not arise as a result of a breach by the Stockholders of any of their
obligations set forth in Sections 8.2 or 8.3 hereof shall not give rise to any
obligations of the Stockholders under the provisions of this Section 12; and (b)
all liability resulting from the litigation matters listed on Schedule 6.20.
12.3 Indemnification by USFloral and Newco. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFloral and Newco, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
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 Newco set forth herein or on
the schedules or certificates attached hereto, (ii) any nonfulfillment of any
agreement on the part of USFloral under this Agreement, (iii) any liabilities
which 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
31
<PAGE>
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. 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
32
<PAGE>
without the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld.
12.5 Limitations on Indemnification. No Indemnified Party shall assert any
------------------------------
claim (other than a Third Person claim) for indemnification hereunder until such
time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall exceed an amount equal to 2% of the sum of
(i) $1,600,000 and (ii) 160,000 times the price at which shares of USFloral
Stock are sold to the public in the IPO, at which time, an Indemnified Party
shall be entitled to seek indemnification for all claims not previously asserted
pursuant to this Section. For purposes of the preceding sentence, USFloral,
Newco and the Surviving Corporation shall be considered to be a single
Indemnifying and Indemnified Party and 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 shareholder's equity as shown on the
Closing Date Balance Sheet is greater than the aggregate shareholders' equity as
shown on the December 31 Balance Sheet. 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 any Excess 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.
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
33
<PAGE>
otherwise, except to the extent that any such claim or liability is based on
intentional misstatement, fraud or misrepresentation by the Stockholders.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFloral or Stockholders may, by notice in
--------------------------
the manner hereinafter provided on or before the Closing Date, terminate this
Agreement 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 Termination by USFloral. To the extent that any Schedules required to
-----------------------
be provided by the Company or the Stockholders as of the date of execution of
this Agreement have not been so provided, the Stockholders shall deliver such
Schedules to USFloral within 14 days of the date of this Agreement. USFloral
may terminate this Agreement upon written notice to the Stockholders within 10
days after USFloral's receipt of all of such Schedules.
13.3 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 the Company or the
Stockholders, then, in addition to the other remedies available to USFloral at
law, in equity or pursuant to this Agreement, Stockholders shall pay to USFloral
the sum of $500,000 as liquidated damages. It is hereby agreed that USFloral's
damages in the event of a termination or default by Company hereunder are
uncertain and impossible to ascertain and that the foregoing constitutes a
reasonable liquidation of such damages and is intended not as penalty but as
liquidated damages.
13.4 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 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:
34
<PAGE>
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any
business selling any products or services in direct competition with the
Surviving Corporation or USFloral, including without limitation the importing,
brokerage, shipping or marketing of floral products, or any business engaging
in the consolidation of the floral industry 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, (ii) engaging in
any activity to which USFloral shall have provided its prior written consent, or
(iii) owning or engaging in the business of Jeffco, as presently conducted.
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).
35
<PAGE>
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
the Company, the Surviving Corporation or USFloral, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
such covenants. It is specifically agreed that the period of two years stated
above, shall be computed by excluding from such computation any time during
which any Stockholder is in violation of any provision of this Section 14 and
any time during which there is pending in any court of competent jurisdiction
any action (including any appeal from any judgment) brought by any person,
whether or not a party to this Agreement, in which action USFloral or the
Surviving Corporation seeks to enforce the agreements and covenants of 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 Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's business. The 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 Corporation shall
be entitled to an injunction restraining the Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting USFloral and the Surviving Corporation from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
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
36
<PAGE>
Company, such as lists of customers, operational policies, pricing and cost
policies that are valuable, special and unique assets of the Company and the
Company's business. USFloral agrees that it will not disclose any confidential
information to any person, firm, corporation, association, or other entity for
any purpose or reason whatsoever, prior to the Closing Date without prior
written consent of the Stockholders. In the event of a breach or threatened
breach by USFloral of the provisions of this Section, 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 Corporation and the Stockholders agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, the
Stockholders hereby irrevocably agree that for a period of 180 days after the
date of the effectiveness of the Registration Statement, as the same may be
amended, not to (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of (except as
contemplated in Section 4.2 hereof), directly or indirectly, any shares of
USFloral Stock or any securities convertible into or exercisable or exchangeable
for shares of USFloral Stock, or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the USFloral Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of USFloral Stock or such
other securities, in cash or otherwise without the prior written consent of the
underwriters in the IPO. The Stockholders agree that the foregoing shall be
binding upon the Stockholders' transferees, successors, assigns, heirs, and
personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. In furtherance of the foregoing, USFloral and its
transfer agent are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Article 16.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The Stockholders acknowledge and agree that the shares of USFloral Stock to be
delivered to the Stockholders pursuant to this Agreement have not been and will
not be registered under the 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
37
<PAGE>
no present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
17.1 Compliance with Law. The Stockholders covenant, warrant and represent
-------------------
that none of the shares of USFloral Stock issued to such Stockholders will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC.
17.2 Economic Risk; Sophistication. The Stockholders represent and warrant
-----------------------------
that they are able to bear the economic risk of an investment in the 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.
17.3 Registration Statement. Each Stockholder has received the prospectus
----------------------
included in the draft Registration Statement delivered to him or her on or about
August 2, 1997 that describes, among other things, the Merger, the other
acquisitions proposed to be undertaken by USFloral and the target companies of
the other acquisitions. Each Stockholder has had an adequate opportunity to ask
questions and receive answers to his or her satisfaction from the officers of
USFloral concerning the business, operations and financial condition of
USFloral.
18. SECURITIES LEGENDS
The certificates evidencing the USFloral Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as USFloral may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY STATE
SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
38
<PAGE>
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 Company,
USFloral and Newco 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 Company, USFloral, and Newco acting
through their respective officers, duly authorized by their respective Boards of
Directors.
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,
39
<PAGE>
cost, damages or expense arising out of claims for fees or commissions of
brokers employed or alleged to have been employed by such indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall be
--------
consummated, USFloral will pay the fees, expenses and disbursements of USFloral
and Newco and its agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments thereto.
Whether or not the transactions herein contemplated shall be consummated, the
Company will pay the fees, expenses and disbursements of the Company 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.
3500 Whitehaven Parkway
Washington, D.C. 20007
Attention: Robert Poirier
with a required copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219
(b) If to Stockholders, addressed to them at:
____________________________________
____________________________________
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
40
<PAGE>
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.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFloral"
U.S.A. FLORAL PRODUCTS, INC.
By /s/ Robert J. Poirier
----------------------------------------
Name: Robert J. Poirier
Title: President/CEO
"Newco"
AGFS ACQUISITION CORP.
By /s/ Robert J. Poirier
-----------------------------------------
Name: Robert J. Poirier
Title: President
41
<PAGE>
"Company"
ALPINE GEM FLOWER SHIPPERS, INC.
By /s/ John Q. Graham
---------------------------------------------
Name: John Q. Graham
Title: President
"Stockholders"
/s/ John Q. Graham
---------------------------------------------
John Q. Graham, Jr.
/s/ Diane Lizotte-Graham
---------------------------------------------
Diane Lizotte-Graham
42
<PAGE>
ANNEXES
ANNEX I [Form of Articles of Merger]
ANNEX II [Consideration]
ANNEX III [Form of Employment Agreements]
ANNEX IV [Form of Lease Agreement]
<PAGE>
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. Warren Stephenson
and
Raymond R. Ashmore
Dated as of August 4, 1997
- -------------------------------------------------------------------------------
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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. Warren Stephenson and Raymond R. Ashmore (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:
<PAGE>
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 Robert
Poirier; 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
<PAGE>
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
<PAGE>
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
<PAGE>
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 Trammel Crow Real Estate Services, Inc.
("Trammel Crow") 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 Trammel Crow, 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 Trammel Crow 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 Trammel Crow
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,
Trammel Crow 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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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 Morgan, Lewis & Bockius LLP, One
Oxford Centre, 32nd Floor, Pittsburgh, Pennsylvania 15219. 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
(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
<PAGE>
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 Robert Poirier or Jonathan Ledecky (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
<PAGE>
(iv) require any filing or other notice under the Hart-Scott-Rodino
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
<PAGE>
(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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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, Harper, Pruniski & Calhoun 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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
3500 Whitehaven Parkway
Washington, D.C. 20007
Attention: Robert Poirier
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attention: F. Traynor Beck
41
<PAGE>
(b) If to Stockholders, addressed to them at:
G. Warren Stephenson
68 Robinwood Drive
Little Rock, Arkansas 12227
and
Raymond R. Ashmore
29 Cascades Drive
Little Rock, Arkansas 12212
with a required copy to:
Ken F. Calhoon, Esquire
Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd.
Eighth Floor - The Mercantile Bank Building
One Riverfront Place
North Little Rock, Arkansas 72114
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
<PAGE>
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
<PAGE>
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/ Robert J. Poirier
-------------------------------
Name: Robert J. Poirier
Title: President/CEO
UNITED WHOLESALE FLORISTS, INC.
By /s/ Raymond R. Ashmore
-------------------------------
Name: Raymond R. Ashmore
Title: President
UNITED WHOLESALE FLORISTS OF
AMERICA, INC.
By /s/ Raymond R. Ashmore
-------------------------------
Name: Raymond R. Ashmore
Title: President
UWF ACQUISITION CORP.
By /s/ Robert J. Poirier
-------------------------------
Name: Robert J. Poirier
Title: President
UWFA ACQUISITION CORP.
By /s/ Robert J. Poirier
-------------------------------
Name: Robert J. Poirier
Title: President
/s/ G. Warren Stephenson
-------------------------------
G. Warren Stephenson
/s/ Raymond R. Ashmore
-------------------------------
Raymond R. Ashmore
44
<PAGE>
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
<PAGE>
EXHIBIT 10.07
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation),
AFS ACQUISITION CORP.
(a Delaware corporation),
AMERICAN FLORIST SUPPLY, INC.
(a Massachusetts corporation),
and
JOHN T. DICKINSON
Dated as of August 5, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<C> <C> <S> <C>
1. THE MERGER............................................................ 2
1.1 Delivery and Filing of Articles of Merger....................... 2
1.2 Merger Effective Date........................................... 2
1.3 Articles of Organization, Bylaws and Board of Directors of
Surviving Corporation........................................... 2
1.4 Certain Information with Respect to the Capital Stock of the
Company and Newco............................................... 3
1.5 Effect of Merger................................................ 3
2. CONVERSION AND EXCHANGE OF STOCK...................................... 4
2.1 Manner of Conversion............................................ 4
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION....................... 4
3.1 Consideration................................................... 4
3.2 Delivery of Company Stock....................................... 5
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES............................. 5
4.1 Determination of Net Worth Deficiencies......................... 5
4.2 Priority of Payment from Indemnity Escrow....................... 6
5. CLOSING; MERGER EFFECTIVE DATE........................................ 6
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER......................... 7
6.1 Due Organization................................................ 7
6.2 Authorization................................................... 7
6.3 Capital Stock of the Company.................................... 7
6.4 Transactions in Capital Stock................................... 8
6.5 No Bonus Shares................................................. 8
6.6 Subsidiaries.................................................... 8
6.7 Predecessor Status; etc......................................... 8
6.8 Spin-off by the Company......................................... 8
6.9 Financial Statements............................................ 8
6.10 Liabilities and Obligations..................................... 9
6.11 Accounts and Notes Receivable................................... 9
6.12 Permits and Intangibles......................................... 9
6.13 Real and Personal Property...................................... 10
6.14 Material Contracts and Commitments.............................. 10
6.15 Title to Real Property.......................................... 11
6.16 Insurance....................................................... 11
</TABLE>
i
<PAGE>
<TABLE>
<C> <C> <S> <C>
6.17 Officers, Directors and Employees Compensation.................. 11
6.18 Employee Plans.................................................. 11
6.19 Compliance with ERISA........................................... 12
6.20 Conformity with Law............................................. 14
6.21 Taxes........................................................... 14
6.22 Completeness; No Violations..................................... 14
6.23 Government Contracts............................................ 15
6.24 Absence of Changes.............................................. 15
6.25 Deposit Accounts; Powers of Attorney............................ 16
6.26 Environmental Matters........................................... 16
6.27 Underground Storage Tanks....................................... 17
6.28 Validity of Obligations......................................... 17
6.29 Relations with Governments...................................... 17
6.30 Disclosure...................................................... 17
6.31 Authority; Ownership............................................ 18
7. REPRESENTATIONS OF USFLORAL AND NEWCO................................. 18
7.1 Due Organization................................................ 18
7.2 USFloral Stock.................................................. 18
7.3 Authorization................................................... 19
7.4 No Conflicts.................................................... 19
7.5 Validity of Obligations......................................... 19
7.6 Other Agreements................................................ 19
8. COVENANTS OF STOCKHOLDER AND COMPANY PRIOR TO CLOSING................. 20
8.1 Access and Cooperation........................................... 20
8.2 Conduct of Business.............................................. 20
8.3 Prohibited Activities............................................ 21
8.4 Supplier Approval................................................ 22
8.5 Notice to Bargaining Agents...................................... 22
8.6 No Shop.......................................................... 22
8.7 Notification of Certain Matters.................................. 23
8.8 Amendment of Schedules........................................... 23
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER................ 24
9.1 Representations and Warranties; Performance of Obligations....... 24
9.2 No Litigation.................................................... 24
9.3 Employment Agreements............................................ 24
9.4 Opinion of Counsel............................................... 24
9.5 Registration Statement........................................... 25
9.6 Market Capitalization............................................ 25
</TABLE>
ii
<PAGE>
<TABLE>
<C> <C> <S> <C>
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO....... 25
10.1 Representations and Warranties; Performance of Obligations...... 25
10.2 No Litigation................................................... 25
10.3 Examination of Financial Statements............................. 25
10.4 No Material Adverse Change...................................... 26
10.5 Regulatory Review............................................... 26
10.6 Stockholder Release............................................. 26
10.7 Employment Agreement............................................ 26
10.8 Opinion of Counsel.............................................. 26
10.9 Consents and Approvals.......................................... 26
10.10 Additional Liabilities and Obligations.......................... 27
10.11 Additional Contracts............................................ 27
10.12 Good Standing Certificates...................................... 27
10.13 Registration Statement.......................................... 27
10.14 Repayment of Indebtedness....................................... 27
10.15 Annual Adjusted Operating Income................................ 27
10.16 Board of Directors and Stockholder Approval..................... 27
11. COVENANTS OF USFLORAL................................................. 27
11.1 Registration Statement.......................................... 27
11.2 USFloral Stock Options.......................................... 27
11.3 Release From Guarantees......................................... 28
11.4 Piggy-Back Registrations........................................ 28
11.5 Compliance with the 1934 Act.................................... 29
11.6 Certain Transactions............................................ 29
11.7 Earn-Out Consideration.......................................... 29
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES........... 30
12.1 General Indemnification by the Stockholder..................... 30
12.2 Specific Indemnification by the Stockholder.................... 31
12.3 Indemnification by USFloral and Newco.......................... 31
12.4 Third Person Claims............................................ 32
12.5 Limitations on Indemnification................................. 33
12.6 Survival of Representations and Warranties..................... 33
12.7 Sole Remedies.................................................. 34
13. TERMINATION OF AGREEMENT............................................. 34
13.1 Termination by the Parties..................................... 34
13.2 Termination by USFloral........................................ 34
13.3 Liquidated Damages to USFloral................................. 34
13.4 Liquidated Damages to the Stockholder.......................... 34
</TABLE>
iii
<PAGE>
<TABLE>
<C> <C> <S> <C>
14. NONCOMPETITION........................................................ 35
14.1 Prohibited Activities........................................... 35
14.2 Damages......................................................... 36
14.3 Reasonable Restraint............................................ 36
14.4 Severability; Reformation....................................... 36
14.5 Independent Covenant............................................ 36
14.6 Materiality..................................................... 36
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................. 36
15.1 Stockholder..................................................... 36
15.2 USFloral........................................................ 37
15.3 Both Parties.................................................... 37
15.4 Damages......................................................... 37
16. LOCK-UP AGREEMENTS.................................................... 37
17. 1933 ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK............... 38
17.1 Compliance with Law............................................. 38
17.2 Economic Risk; Sophistication................................... 38
18. SECURITIES LEGENDS.................................................... 39
19. GENERAL............................................................... 39
19.1 Cooperation..................................................... 39
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......................................................... 40
19.8 Governing Law................................................... 41
19.9 Exercise of Rights and Remedies................................. 41
19.10 Time............................................................ 41
19.11 Reformation and Severability.................................... 41
19.12 Remedies Cumulative............................................. 42
19.13 Captions........................................................ 42
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the
"Agreement") is made as of the 5th day of August, 1997, among U.S.A. FLORAL
PRODUCTS, INC., a Delaware corporation ("USFloral"); AFS ACQUISITION CORP., a
Delaware corporation ("Newco"); AMERICAN FLORIST SUPPLY, INC., a Massachusetts
corporation (the "Company") and JOHN T. DICKINSON (the "Stockholder"), who is
the sole stockholder of the Company.
WHEREAS, USFloral was incorporated on April 2, 1997 (the "Formation")
under the laws of the State of Delaware for the purpose of acquiring floral
products businesses in different locations; and
WHEREAS, USFloral intends to undertake an initial public offering of
its stock (the "IPO") on or about September 15, 1997 and in connection
therewith intends to file a Registration Statement on Form S-1 (the
"Registration Statement"), pursuant to the Securities Act of 1933, as
amended (the "1933 Act") with the Securities and Exchange Commission (the
"SEC") within 30 days of the execution and delivery of this Agreement;
WHEREAS, Newco has been duly organized and is existing under the laws
of the State of Delaware, having been incorporated on July 14, 1997 solely
for the purpose of completing this transaction, and is a wholly-owned
subsidiary of USFloral; and
WHEREAS, the Company is a corporation organized and existing under the
laws of the Commonwealth of Massachusetts; and
WHEREAS, the respective Boards of Directors of USFloral, Newco and the
Company (all of which companies are hereinafter collectively referred to as
the "Constituent Corporations") deem it advisable and in the best interests
of the Constituent Corporations and their respective Stockholders that
Newco merge with and into the Company pursuant to this Agreement and the
applicable provisions of the laws of the respective states of incorporation
of Newco and the Company, such transaction being herein called the
"Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken
pursuant to an integrated transaction intended to qualify under Section 351
of the Internal Revenue Code of 1986, as amended; and
WHEREAS, the parties hereto entered into that certain Agreement and
Plan of Contribution on July 30, 1997 (the "Original Agreement") and now
wish to amend and restate the Original Agreement in its entirety as of
August 5, 1997 in order to achieve conformity with similar agreements
USFloral has entered into with other floral products businesses;
<PAGE>
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 each of
Newco and the Company on or before the Merger Effective Date (as defined in
Section 5).
1.2 Merger Effective Date. The "Merger Effective Date" shall be the date
---------------------
specified in Section 5. At the Merger Effective Date, Newco shall be merged
with and into the Company in accordance with the Articles of Merger and the
separate existence of Newco shall cease. The Company, as the party surviving the
Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.3 Articles of Organization, Bylaws and Board of Directors of Surviving
--------------------------------------------------------------------
Corporation. At the Merger Effective Date:
- -----------
(i) the Articles of Organization of the Company shall become
the Articles of Organization of the 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 Organization
shall be the Articles of Organization of the Surviving Corporation
until changed as provided by law;
(ii) the Bylaws of the Company shall become the Bylaws of the
Surviving Corporation; and subsequent to the Merger Effective Date,
such Bylaws shall be the Bylaws of the Surviving Corporation until
they shall there after be duly amended;
(iii) the name of the person who shall serve as the sole member
of the Board of Directors of the Surviving Corporation shall be Robert
Poirier; the Director of the Surviving Corporation shall hold office
subject to the provisions of the laws of the state of incorporation
and of the Articles of Organization and Bylaws of the Surviving
Corporation.
(iv) the officers of the Company immediately prior to the Merger
Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers
to serve,
2
<PAGE>
subject to the provisions of the Articles of Organization and Bylaws
of 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 designation and number of outstanding shares and voting rights of
- ---------
each class of outstanding capital stock of the Company and Newco as of the date
of this Agreement are as follows:
(i) the authorized capital stock of the Company consists of 5,000
shares of common stock, no par value (the "Company Stock"), of which
1,000 shares are issued and outstanding and all of which are owned,
beneficially and of record, by the Stockholder; and
(ii) the authorized capital stock of 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 the Company shall continue unaffected and unimpaired by the
Merger, and the Surviving Corporation shall be fully vested therewith. At the
Merger Effective Date, the separate existence of Newco shall cease and, in
accordance with the terms of this Agreement, the Surviving Corporation shall
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest of or belonging to or due to
the Company and Newco shall be taken and deemed to be transferred to, and vested
in, the respective Surviving Corporation without further act or deed; and all
property, rights and privileges, powers and franchises and all and every other
interest shall be thereafter as effectually the property of the Surviving
Corporation as they were of each of the Company and Newco; and the title to any
real estate, or interest therein, whether by deed or otherwise, under the laws
of the state of incorporation vested in the Company and Newco, shall not revert
or be in any way impaired by reason of the Merger. The Surviving Corporation
shall thenceforth be responsible and liable for all the liabilities and
obligations of the Company and Newco and any claim existing, or action or
proceeding pending, by or against the Company or Newco may be prosecuted as if
the Merger had not taken place, or the Surviving Corporation may be substituted
in its place. Neither the rights of creditors nor any liens upon the property of
the Company or Newco shall be impaired by the Merger, and all debts, liabilities
and duties of each of the Company and Newco shall attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
3
<PAGE>
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
Merger and without any action on the part of the holder thereof,
automatically be converted into the right to receive cash from
USFloral in the amount set forth on Annex II attached hereto and the
Earn Out Consideration pursuant to Section 11.7 hereof, all to be
distributed to the Stockholder at the times specified in Section 5 and
Section 11.7 hereof; and
(ii) each share of Newco Stock issued and outstanding immediately
prior to the Merger Effective Date shall, by virtue of the Merger and
without any action on the part of the holder thereof, automatically be
converted into 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 Stockholder as a result of the
Merger shall, except for restrictions on resale or transfer described in Section
16 hereof, have the same rights as the majority of outstanding USFloral Stock.
All voting rights are fully exercisable by the Stockholder and the Stockholder
is 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.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 Consideration At the Merger Effective Date, the Stockholder, as the
-------------
holder of all outstanding certificates representing shares of Company Stock
shall, upon surrender of such certificates, be entitled to receive the amount of
cash set forth on Annex II and the Earn-Out Consideration pursuant to Section
11.7 hereof; provided, that $240,000 of the amount of cash set forth on Annex II
--------
(the "Holdback Amount") shall be delivered by USFloral by wire transfer of
---------------
immediately available funds to a third-party escrow agent reasonably acceptable
to NEWCO (the "Escrow Agent") under an escrow agreement to be entered into on
------------
the Closing Date by the Stockholder, the Company, USFloral and the Escrow Agent
(the "Escrow Agreement") upon such terms as are reasonably acceptable to the
----------------
Stockholder, the Company and USFloral, which
4
<PAGE>
terms shall include the right of the Stockholder to buy USFloral Stock from the
Securities Escrow (as defined in Section 11.7) for cash of an equal value and
to satisfy his obligations under the Escrow Agreement with the payment of cash
instead of with USFloral Stock, in the Stockholder's sole discretion. The
Escrow Agreement shall provide for an 12-month escrow of the Holdback Amount
(the "Indemnity Escrow") as security for the indemnification obligation of
----------------
Stockholder pursuant to Section 12 hereof and the payment of amounts pursuant to
Section 4.1 hereof. Pursuant to Section 11.7, the Escrow Agent shall also hold
in a Securities Escrow, as defined, 240,000 shares of USFloral Stock a
percentage of which shall be put into the Indemnity Escrow, as set forth in
Section 11.7.
3.2 Delivery of Company Stock. The Stockholder shall deliver at the
-------------------------
Closing (as defined in Section 5 hereof) the certificates representing the
shares of Company Stock, duly endorsed in blank by the Stockholder 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 Stockholder's expense, affixed and canceled. The Stockholder agrees to cure
any deficiencies with respect to the endorsement of the certificates or other
documents of conveyance with respect to such Company Stock or with respect to
the stock powers accompanying any Company Stock.
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES
4.1 Determination of Net Worth Deficiencies. As soon as practicable,
---------------------------------------
but in any event within 30 days after the Closing, USFloral shall engage Price
Waterhouse LLP ("Price Waterhouse") to prepare, in accordance with GAAP, applied
on a consistent basis with the basis used by Price Waterhouse in preparing and
auditing financial statements of the Company as of December 31, 1995 and 1996, a
balance sheet of the Company (the "Closing Date Balance Sheet") as of the end of
business on the day prior to the Closing Date. The parties acknowledge and agree
that the Closing Date Balance Sheet shall be prepared without taking into
account (i) expenses associated with fully funding and removing Stephen
Dabrieo's deferred compensation plan as outlined in Schedule 6.17 (estimated to
be approximately $30,000) and (ii) the transfer by the Company to Stephen
Dabrieo of two life insurance policies currently reflected on the Company's
balance sheet within other assets (with an estimated value of $43,000 at
12/31/96) and his educational fund included on the Company's balance sheet
(approximately $27,000 at 12/31/96).
Within five days of the preparation of the Closing Date Balance Sheet,
Price Waterhouse shall deliver a copy to the Stockholder. If the aggregate
shareholders' equity as shown on the Closing Date Balance Sheet is less than the
aggregate shareholders' equity as shown on the Balance Sheet as at December 31,
1996 (such difference, the "Net Worth Deficiency"), the Stockholder shall remit
to USFloral an amount equal to the Net Worth Deficiency, as provided below.
Notwithstanding anything in this Article 4 to the contrary, if there is any Net
Worth Deficiency and the Stockholder disputes any item contained on the Closing
Date Balance Sheet, the Stockholder shall notify USFloral in writing of each
disputed item (collectively, the
5
<PAGE>
"Disputed Amounts"), and specify the amount thereof in dispute within thirty
business days after the delivery of the Closing Date Balance Sheet to the
Stockholder. If the Stockholder does not notify USFloral of any Disputed Amount
within the thirty business day period, then within ten business days after the
expiration of the thirty business day period, the Stockholder shall pay USFloral
by wire transfer of immediately available funds, an amount equal to the Net
Worth Deficiency. If USFloral and the Stockholder cannot resolve any such
dispute which would eliminate or reduce the amount of the Net Worth Deficiency,
then such dispute shall be resolved by an independent nationally recognized
accounting firm which is reasonably acceptable to USFloral and the Stockholder
(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 Net Worth
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 Stockholder so that the Stockholder's aggregate share of such
costs shall bear the same proportion to the total costs that the Disputed
Amounts unsuccessfully contested by the Stockholder (as finally determined by
the Independent Accounting Firm) bear to the total of the Disputed Amounts so
submitted to the Independent Accounting Firm.
4.2 Priority of Payment from Indemnity Escrow. Any indemnification
-----------------------------------------
obligations of the Stockholder pursuant to Sections 12.1 and 12.2 hereof and
amounts payable pursuant to Section 4.1 hereof shall be satisfied (i) prior to
the payment of the Earn-Out Consideration, first through recourse to the
Holdback Amount and then through recourse to the Securities Escrow, and (ii)
after the payment of the Earn-Out Consideration in accordance with Section 11.7,
first through recourse to the Securities Escrow (valued for such purposes on the
date the indemnification obligation is paid pursuant to Section 12 or ten days
after USFloral notifies the Stockholder of the Net Worth Deficiency pursuant to
Section 4.1) and then to the Holdback Amount, if any, remaining in the Indemnity
Escrow.
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 Merger
(other than the filing with the appropriate state authorities of the Articles of
Merger which shall be filed on the Merger Effective Date) and to effect the
conversion and delivery of shares referred to in Section 3 hereof (hereinafter
referred to as the "Closing"); provided, that such actions shall not include the
actual completion of the Merger or the conversion and delivery of the shares
referred to in Section 3 hereof, which actions shall be taken only on the Merger
Effective Date as herein provided. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, One Logan Square, Philadelphia, PA 19103. 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, the Articles of
Merger shall be filed with the appropriate
6
<PAGE>
state authorities and the Articles of Merger and the Merger shall become
effective and all transactions contemplated by this Agreement, including the
conversion and delivery of shares and the delivery of a check or checks in an
amount equal to the cash which the Stockholder shall be entitled to receive
pursuant to the Merger referred to in Section 3 hereof, shall occur and be
deemed to be completed. The date on which the Merger is effected shall be
referred to as the "Merger Effective Date." During the period from the Closing
Date to the Merger Effective Date, this Agreement may only be terminated by the
parties if the underwriting agreement in respect of the IPO 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 STOCKHOLDER
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, the Stockholder represents and warrants as follows.
6.1 Due Organization. The Company is a corporation duly organized,
----------------
validly existing and in good standing under the laws of Massachusetts 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") on
the Company taken as a whole. True, complete and correct copies of the Articles
of Organization (certified by the Secretary of State of Massachusetts) and
Bylaws (certified by the Secretary of the Company) have heretofore been
delivered to USFloral. The stock records and minute books of the Company, as
heretofore made available to USFloral, are correct and complete.
6.2 Authorization. Upon the approval of this Agreement by the
-------------
Stockholder, the Company has the full legal right, power and authority to enter
into this Agreement and has the full legal right, power and authority to enter
into the Merger. The conversion of Company Stock into Newco Stock pursuant to
the provisions of this Agreement will transfer valid title in the Company Stock
to Newco, free and clear of all liens, encumbrances and claims of every kind.
6.3 Capital Stock of the Company. The authorized capital stock of the
----------------------------
Company consists solely of the shares as shown on Schedule 6.3, of which the
shares issued and outstanding are shown. All of the issued and outstanding
shares of the capital stock of the Company are owned by the Stockholder and are
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. All of the issued
and outstanding shares of Company Stock have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the Stockholder. Further, such shares were offered, issued, sold and
delivered by the Company in compliance with
7
<PAGE>
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. The Company has never acquired any
-----------------------------
treasury stock. No option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company to issue any of its authorized but
unissued capital stock. Except as set forth on Schedule 6.4, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof.
6.5 No Bonus Shares. Except as set forth on Schedule 6.5, none of the
---------------
shares of the Company Stock was issued pursuant to awards, grants or bonuses.
6.6 Subsidiaries. The Company does not presently own, of record or
------------
beneficially, or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation,
association or business entity. The Company is not, 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 the Company, including the names of
any entities from whom the Company previously acquired significant assets.
Except as set forth on Schedule 6.7, the Company has never been a subsidiary or
division of another corporation nor been a part of an acquisition which was
later rescinded.
6.8 Spin-off by the Company. Since the Balance Sheet Date there has not
-----------------------
been any sale or spin-off of significant assets of the Company other than in the
ordinary course of business.
6.9 Financial Statements. Attached hereto as Schedule 6.9 are copies of
--------------------
the following audited financial statements (the "Financial Statements") of the
Company: The Company's Balance Sheet as of December 31, 1996, 1995 and 1994 and
Statements of Incomes, Cash Flows and Retained Earnings for each of the years in
the three year period ended December 31, 1996, and the Company's Balance Sheet
as of each of March 31, 1997 and 1996, (March 31, 1997 being hereinafter
referred to as the "Balance Sheet Date") and Statements of Incomes, Cash Flows
and Retained Earnings for the three (3) month periods then ended. Such
Financial Statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
indicated (except as noted). Except as set forth on Schedule 6.9, such Balance
Sheets present fairly the financial position of the Company as of the dates
indicated thereon, and such Statements of Incomes, Cash Flows and Retained
Earnings present fairly the results of the Company's operations for the periods
indicated thereon.
8
<PAGE>
6.10 Liabilities and Obligations. Attached hereto as Schedule 6.10 is an
---------------------------
accurate list, as of the Balance Sheet Date, of all material liabilities of the
Company, which are reflected in the March 31, 1997 Balance Sheet and any
significant liabilities incurred thereafter in the ordinary course of business,
or material liabilities which are not reflected in the March 31, 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 Stockholder has 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 Company of the maximum amount, if any,
which is likely to become payable with respect to each such liability
(exclusive of defense costs). If no estimate is provided, the Company's
best estimate shall for purposes of this Agreement be deemed to be zero.
6.11 Accounts and Notes Receivable. Attached hereto as Schedule 6.11 is
-----------------------------
an accurate list as of the date hereof of the accounts and notes receivable of
the Company, including receivables from and advances to employees and the
Stockholder, including any such amounts which are not reflected in the most
recent available balance sheet. The Stockholder shall provide USFloral with 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, as of the date hereof, of all permits,
titles, licenses, franchises, certificates, trademarks, trade names, service
marks, patents, patent applications and copyrights owned or held by the Company,
all of which are now valid, in good standing and in full force and effect.
Except as set forth on Schedule 6.12, such permits, licenses, orders, approvals,
9
<PAGE>
franchises, etc. are adequate for the operation of the Company business as
presently constituted. Except as set forth on Schedule 6.12, the Stockholder has
delivered to USFloral a description and copies as of the date of this Agreement,
of all material records, reports, notifications, permits, pending permit
applications, engineering studies, environmental impact studies, filed or
submitted or required to be filed or submitted to governmental agencies and of
all material notifications from such governmental agencies relating to the above
or relating to the discharge or release of materials into the environment or
otherwise relating to the protection of the public health or the environment.
6.13 Real and Personal Property. Attached hereto as Schedule 6.13 is an
--------------------------
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the personal property, which had an original cost in excess
of $25,000, owned or leased by the Company and true and correct copies of leases
for equipment and real properties on which are situated buildings, warehouses
and other structures used in the operation of the business of the Company and
including an indication as to which assets were formerly owned by the
Stockholder or affiliates (which term, as used herein, shall have the meaning
ascribed thereto in Rule 144(a)(1) under the 1933 Act) of the Company. Except
as set forth on Schedule 6.13, substantially all of the trucks, machinery and
equipment of the Company are in good working order and condition, ordinary wear
and tear excepted. All leases set forth on Schedule 6.13 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the Company and, to the knowledge of the Stockholder, no other
party to any such lease is in default thereunder and such leases constitute the
legal, valid and binding obligations of such other parties. All fixed assets
used by the Company in the operation of its business are either owned by the
Company or leased under an agreement set forth on Schedule 6.13. The
Stockholder has heretofore delivered to USFloral copies of all title reports and
title insurance policies received or held by the Company. The Stockholder has
indicated on Schedule 6.13 a summary description of all plans or projects
involving the opening of new operations, expansion of any existing operations or
the acquisition of any real property or existing business, to which management
of the Company has devoted any significant effort or expenditure in the two year
period prior to the date of this Agreement, which if pursued by the Company
would require additional expenditures of significant efforts or capital.
6.14 Material Contracts and Commitments. Attached hereto as Schedule
----------------------------------
6.14 is an accurate list, as of the date hereof, of all material contracts,
commitments and similar agreements to which the Company is a party or by which
the Company or any of its properties are bound (including, but not limited to,
joint venture or partnership agreements, contracts with any labor organizations,
loan agreements, indemnity or guaranty agreements, bonds, mortgages, options to
purchase land, liens, pledges or other security agreements). The Stockholder has
heretofore delivered to USFloral true copies of such agreements. Except as set
forth on Schedule 6.14, the Company has complied with all material commitments
and obligations pertaining to it and is not in material default under any such
agreement and no notice of default has been received. The Company is not a party
to any contract, agreement or other instrument or commitment which cannot be
terminated by the Company on 30 days notice without any liability
10
<PAGE>
to the Company which would have a Material Adverse Effect on the Company taken
as a whole. Except as set forth on Schedule 6.14, the Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
arrangement with any labor union. Except as set forth on Schedule 6.14, no
employees of the Company are represented by any labor union or covered by any
collective bargaining agreement nor, to the Stockholder's knowledge, is any
organization campaign to establish such representation in progress. There is no
pending or, to the best of Stockholder's knowledge, threatened labor dispute
involving the Company and any group of its employees nor has the Company
experienced any labor interruptions over the past three years and the Company
considers its relationship with employees to be good.
6.15 Title to Real Property. The Company owns no real property. The
----------------------
property listed on Schedule 6.13 includes all interests in real property
necessary to conduct the business and operations of the Company. None of the
leases set forth on Schedule 6.13 requires the consent or approval of any party
thereto in connection with the consummation of the transactions contemplated
hereby, except for the consents listed on Schedule 6.15 hereto, which shall have
been obtained prior to the Merger Effective Date.
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list,
---------
as of the date hereof, of all insurance policies carried by the Company and an
accurate list of all insurance loss runs or worker's compensation claims
received for the past three policy years. The Stockholder has heretofore
delivered to USFloral complete copies of all policies currently in effect. The
insurance carried by the Company with respect to its properties, assets and
business is, to the Stockholder's 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. The Company's
insurance has never been canceled and the Company has never 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 Company and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of
directors, officers and key employees, as of the Balance Sheet Date. The
Stockholder has heretofore delivered to USFloral copies of the payroll lists
covering all employees of the Company as of a recent date. Since the Balance
Sheet Date in the case of Schedule 6.17, and since the date of such payroll list
in the case of all other employees, there have been no increases in the
compensation payable to any officer, director, key employee or other employee,
except ordinary salary increases implemented on a basis consistent with past
practices.
6.18 Employee Plans. Attached hereto as Schedule 6.18 are complete and
--------------
accurate copies, as of the date hereof, 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
11
<PAGE>
maintained and/or sponsored by the Company or to which the Company currently
contributes, or has an obligation to contribute in the future (including,
without limitation, employment agreements and any other agreements containing
"golden parachute" provisions and deferred compensation agreements), together
with copies of any trusts related thereto and a classification of employees
covered thereby (collectively, the "Plans"). Schedule 6.18 sets forth all of
the Plans that have been terminated within the past three years.
6.19 Compliance with ERISA. All Plans are in substantial compliance with
---------------------
all applicable provisions of ERISA and the regulations issued thereunder, as
well as with all other applicable laws, and, in all material respects, have been
administered, operated and managed in substantial accordance with the governing
documents. All Plans that are intended to qualify (the "Qualified Plans") under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code")
have been determined by the Internal Revenue Service to be so qualified, and
copies of the current plan determination letters, most recent actuarial
valuation reports, if any, most recent Form 5500, or, as applicable, Form 5500-
C/R filed with respect to each such Qualified Plan or employee welfare benefit
plan and most recent trustee or custodian report, are included as part of
Schedule 6.18. To the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within 120
days after the Closing Date. All reports and other documents required to be
filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or tax returns) have been
timely filed or distributed. None of: (i) the Stockholder; (ii) any Plan; or
(iii) the Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company does not currently have (nor at the
Closing Date will have) any direct or indirect liability whatsoever (including
being subject to any statutory lien to secure payment of any such liability), to
the Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Plan
under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty; and neither the Company nor any member of a "controlled group" (as
defined in ERISA Section 4001(a)(14)) currently has (or at the Closing Date will
have) any obligation whatsoever to contribute to any "multi-employer pension
plan" (as defined in ERISA Section 4001(a)(14), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and
approval by the Internal Revenue Service;
(ii) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
12
<PAGE>
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any Plan which were not
properly reported;
(iv) the valuation of assets of any Qualified Plan, as of the Closing
Date, shall exceed the actuarial present value of all accrued pension
benefits under any such Qualified Plan in accordance with the assumptions
contained in the Regulations of the PBGC governing the funding of
terminated defined benefit plans;
(v) except as set forth on Schedule 6.19, with respect to Plans
which qualify as "group health plans" under Section 4980B of the Internal
Revenue Code and Section 607(1) of ERISA and related regulations (relating
to the benefit continuation rights imposed by "COBRA"), the Company and the
Stockholder have complied (and on the Closing Date will have complied), in
all respects with all reporting, disclosure, notice, election and other
benefit continuation requirements imposed thereunder as and when applicable
to such plans, and the Company has (and will incur) no direct or indirect
liability and is not (and will not be) subject to any loss, assessment,
excise tax penalty, loss of federal income tax deduction or other sanction,
arising on account of or in respect of any direct or indirect failure by
the Company and the Stockholder, at any time prior to the Closing Date, to
comply with any such federal or state benefit continuation requirement,
which is capable of being assessed or asserted before or after the Closing
Date directly or indirectly against the Company or the Stockholder with
respect to such group health plans;
(vi) the Company is not now nor has it been within the past five
years a member of a "controlled group" as defined in ERISA Section
4001(a)(14);
(vii) except as set forth on Schedule 6.19, there is no pending
litigation, arbitration, or disputed claim, settlement or adjudication
proceeding, and to the Stockholder's knowledge, there is no threatened
litigation, arbitration or disputed claim, settlement or adjudication
proceeding, or any governmental or other proceeding, or investigation with
respect to any Plan, or with respect to any fiduciary, administrator, or
sponsor thereof (in their capacities as such), or any party in interest
thereof;
(viii) 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
13
<PAGE>
(ix) the Company has not incurred liability under Section 4062 of
ERISA.
6.20 Conformity with Law. The Company is not in violation of any law or
-------------------
regulation or under any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction which would have a Material Adverse Effect on the Company;
and there are no claims, actions, suits or proceedings, pending, or to the
Stockholder's knowledge, threatened, against or affecting the Company, at law or
in equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction and no notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received. The Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
might have a Material Adverse Effect on the Company, taken as a whole.
6.21 Taxes. The Company has filed or will file in a timely manner all
-----
requisite federal, state, local and other tax returns for all fiscal periods
ended on or before the Closing Date. Except as set forth on Schedule 6.21,
there are no open years, examinations in progress or claims against the Company
for federal and other taxes (including penalties and interest) for any period or
periods prior to and including the Balance Sheet Date and no notice of any
claim, whether pending or threatened, for taxes has been received. The amounts
shown as accruals for taxes on the Financial Statements, as of the Balance Sheet
Date, are sufficient for the payment of all taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on or before
that date. 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 the Company for the last three fiscal
years, or such shorter period of time as any of them shall have existed, have
heretofore been delivered by Stockholder to USFloral. The Company (as set forth
on Schedule 6.21) made an election to be taxed under the provisions of
Subchapter S of the Internal Revenue Code in 1987 and has, at no time since
1988, been taxed under the provisions of Subchapter C of the Internal Revenue
Code. The Company currently uses the cash receipts and disbursements method of
accounting for income tax purposes and has not changed its method of accounting
in the past five years.
6.22 Completeness; No Violations. The certified copies of the Articles of
---------------------------
Organization and Bylaws, both as amended to date, of the Company, and the copies
of all leases, instruments, agreements, licenses, permits, certificates or other
documents which are included on Schedules attached hereto, or have been
delivered to USFloral in connection with the transactions contemplated hereby,
are complete and correct; neither the Company nor, to the knowledge of the
Stockholder, any other party thereto, is in material default thereunder; and,
except as set forth in the Schedules and documents attached to this Agreement,
the rights and benefits of the Company thereunder will not be materially and
adversely affected by the
14
<PAGE>
transactions contemplated hereby; and the execution of this Agreement and the
performance of the obligations hereunder will not result in a material violation
or breach or constitute a material default under any of the terms or provisions
thereof. Except as set forth on Schedule 6.22, none of such leases,
instruments, agreements, contracts, licenses, permits, certificates or other
documents requires notice to, or the consent or approval of, any governmental
agency or other third party to any of the transactions contemplated hereby to
remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.23 Government Contracts. The Company is not now nor has it ever been a
--------------------
party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Absence of Changes. Since the Balance Sheet Date, there has not
------------------
been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(ii) any damage, destruction or loss (whether or not covered by
insurance) which has had a Material Adverse Effect on the Company, taken as
a whole;
(iii) except as set forth in Schedule 6.24, any change in the
authorized capital of the Company or in its securities outstanding or any
change in its ownership interests or any grant of any options, warrants,
calls, conversion rights or commitments;
(iv) except as set forth in Schedule 6.24, any declaration or payment
of any dividend or distribution in respect of the capital stock or any
direct or indirect redemption, purchase or other acquisition of any of the
capital stock of the Company;
(v) except as set forth in Schedule 6.24, any increase in the
compensation, bonus, sales commissions or fees arrangement payable or to
become payable by the Company to any of its officers, directors,
Stockholder, employees, consultants or agents other than ordinary salary
increases implemented on a basis consistent with past practices;
(vi) any work interruptions, labor grievances or claims filed, or any
proposed law or regulation or any event or condition of any character,
which has had a Material Adverse Effect on the Company, taken as a whole;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the Company to any person,
including, without limitation, the Stockholder and his affiliates;
15
<PAGE>
(viii) except as set forth on Schedule 6.24 hereto, any cancellation,
or agreement to cancel, any indebtedness or other obligation owing to the
Company, including without limitation any indebtedness or obligation of the
Stockholder or any affiliate of the Stockholder;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, properties
or rights of the Company or requiring consent of any party to the transfer
and assignment of any such assets, properties or rights;
(x) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any properties, rights or assets of the Company;
(xi) any waiver of any material rights or claims of the Company;
(xii) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
or
(xiii) any transaction by the Company outside the ordinary course of
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 the 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 the Company and
a description of the terms of such power.
6.26 Environmental Matters. To the knowledge of the Stockholder, the
---------------------
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 the Company
or any of its properties, assets, operations and business relating to
environmental protection (collectively "Environmental Laws") including, without
16
<PAGE>
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances (as such terms are defined in any applicable
Environmental Law) except to the extent that noncompliance with any
Environmental Law, either singly or in the aggregate, would not have a Material
Adverse Effect on the Company, taken as a whole. The Company has obtained and
adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances and has reported, to the extent required by all Environmental Laws,
all past and present sites owned and operated by the Company where Hazardous
Wastes or Hazardous Substances have been treated, stored, disposed of or
otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in or on any property owned or operated
by the Company except as permitted by Environmental Laws. Stockholder knows of
no off-site location to which the Company has transported or disposed of
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the Company, USFloral or Newco for any
clean-up cost, remedial work, damage to natural resources or personal injury,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended. The Company has
no contingent liability in connection with any release of any Hazardous Waste or
Hazardous Substance into the environment.
6.27 Underground Storage Tanks. The Company has never owned or leased any
-------------------------
real estate having any underground storage tanks containing petroleum products
or wastes or other hazardous substances regulated by 40 CFR 280 and/or other
applicable federal, state or local laws, rules and regulations and requirements.
As noted in Schedule 6.27, the Company from time to time uses (without a formal
lease) certain facilities located on premises adjacent to its leased facilities
that contain two underground storage tanks.
6.28 Validity of Obligations. The execution and delivery of this Agreement
-----------------------
by the Company and the performance of the transactions contemplated herein have
been duly and validly authorized by the Board of Directors of the Company and by
the Stockholder of the Company, and this Agreement has been duly and validly
authorized by all necessary corporate action and is a legal, valid and binding
obligation of the Company.
6.29 Relations with Governments. The Company has never made, offered or
--------------------------
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has the Company otherwise taken any
action which would cause the Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended or any law of similar effect.
6.30 Disclosure. Without limiting any exclusion, exception or other
----------
limitation contained in any of the representations and warranties made herein,
this Agreement and the schedules hereto and all other documents and information
furnished to USFloral and its
17
<PAGE>
representatives pursuant hereto do not and will not include any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein not misleading. If the Stockholder becomes aware of any fact
or circumstance which would change a representation or warranty of the
Stockholder in this Agreement or any representation made on behalf of the
Company, the Stockholder shall immediately give notice of such fact or
circumstance to USFloral. However, subject to the provisions of Section 8.8
hereof, 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 Stockholder, at the date of this Agreement and at the closing, shall be a
precondition to the consummation of this transaction.
6.31 Authority; Ownership. The Stockholder has the full legal right,
--------------------
power and authority to enter into this Agreement. The Stockholder owns
beneficially and of record all of the shares of Company stock identified on
Annex II as being owned by him. 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 the Stockholder,
free and clear of all liens, encumbrances and claims of every kind.
7. REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFloral and Newco, jointly and severally, represent and warrant
to the Company and the Stockholder as follows.
7.1 Due Organization. USFloral and Newco are duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware, and are
duly authorized, qualified and licensed under all applicable laws, regulations,
and ordinances of public authorities to carry on their respective businesses in
the places and in the manner as now conducted except the states where the
failure to be so authorized, qualified or licensed would not have a Material
Adverse Effect on their respective businesses. Copies of the Certificates of
Incorporation (certified by the Secretary of State of the State of Delaware) and
the Bylaws, as amended, of USFloral and Newco (certified by the Secretary of the
respective corporations) have heretofore been delivered by USFloral to
Stockholder.
7.2 USFloral Stock. The USFloral Stock to be delivered to Stockholder 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 Stockholder 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
Robert Poirier or Jonathan Ledecky (i) have registration rights with respect to
USFloral Stock that are superior to
18
<PAGE>
registration rights that the Stockholder has, or (ii) will have the right to
include any USFloral Stock in the IPO.
7.3 Authorization. The representatives of USFloral and Newco executing
-------------
this Agreement have the corporate authority to enter into and bind USFloral and
Newco by the terms of this Agreement. USFloral and Newco have full legal right,
power and authority to enter into this Agreement and have the full legal right,
power and authority to enter into the Merger, and the conversion of Company
Stock into Newco Stock, pursuant to the provisions of this Agreement will
transfer valid title to USFloral Stock to the Stockholder, free and clear of all
liens, encumbrances and claims of every kind.
7.4 No Conflicts. The execution, delivery and performance of this
------------
Agreement, the consummation of any transactions herein referred to or
contemplated by and the fulfillment of the terms hereof and thereof will not:
(i) conflict with, or result in a breach or violation of, the
Certificate of Incorporation or Bylaws of either USFloral or Newco;
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which either
USFloral or Newco is a party, or result in the creation or imposition of
any lien, charge or encumbrance on any of USFloral's or Newco's properties
pursuant to (A) any law or regulation to which USFloral or Newco, or any of
their property is subject, or (B) any judgment, order or decree to which
USFloral or Newco is bound or any of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(iv) require any filing or other notice under the Hart-Scott-Rodino
Antitrust Improvement Act.
7.5 Validity of Obligations. The execution and delivery of this
-----------------------
Agreement by USFloral and Newco and the performance of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of USFloral and the Board of Directors and 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 Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letters of intent between USFloral and
the Stockholder, certain employment
19
<PAGE>
agreements with officers of USFloral and those agreements and letters of intent
listed on Schedule 7.6 hereof.
8. COVENANTS OF STOCKHOLDER AND COMPANY PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access during normal business hours to all of the
Company's sites, properties, books and records and will furnish USFloral with
such additional financial and operating data and other information as to the
business and properties of the Company as USFloral may from time to time
reasonably request in writing. The Company will cooperate with the reasonable
requests of USFloral, its representatives, engineers, auditors and counsel in
the preparation of any documents or other material which may be required in
connection with any documents or materials required by any governmental agency.
USFloral will cause all information obtained in connection with the negotiation
and performance of this Agreement to be treated as confidential in accordance
with the provisions of Section 15 hereof.
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, the Stockholder will cause the 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, facilities and equipment and other
assets in as good working order and condition as at present, ordinary wear
and tear excepted;
(iii) perform all of its material obligations under debt and lease
instruments and other agreements relating to or affecting its assets,
properties, equipment and rights;
(iv) maintain present debt and lease instruments and not enter in new
or amended debt or lease instruments other than in the ordinary course of
business without the knowledge and consent of Newco;
(v) keep in full force and effect present insurance policies or
other comparable insurance coverage;
(vi) use its best efforts to maintain and preserve its business
organization intact, retain its present employees and maintain its
relationships and present agreements with suppliers, customers and others
having business relations with the Company;
20
<PAGE>
(vii) not effect any change in the capital structure of the Company,
including, but not limited to, the issuance of any option, warrant, call,
conversion right or commitment of any kind with respect to the Company's
capital stock or the purchase or other reacquisition of any outstanding
shares for treasury stock;
(viii) not materially increase present salaries and commission levels
for any and all officers, directors, employees and agents;
(ix) prohibit expenditures outside the normal course of business,
and prohibit capital expenditures in excess of $25,000 in the aggregate,
without the prior approval of Newco;
(x) maintain compliance in all material respects with all material
permits, rules, laws, and regulations, consent orders and the like, the
failure to comply with which would have a material, adverse effect on the
Company or its business or assets; and
(xi) not, without the knowledge and consent of Newco, declare any
dividends or make any distribution with respect to its stock, whether now
or hereafter outstanding, nor pay out any extraordinary bonuses, fees,
commissions or any other unusual distributions to the Stockholder,
directors, management or other personnel between the date of this Agreement
and the Closing; provided, however, Newco acknowledges that the Company may
pay dividends, bonuses, and other distributions in the ordinary course of
its business not to exceed what is necessary for the Stockholder to pay
taxes and to continue receiving his current salary, consistent with past
practice.
8.3 Prohibited Activities. Between the Balance Sheet Date and the Merger
---------------------
Effective Date, the Company will not, without prior written consent of USFloral:
(i) make any change in its Articles of Organization or Bylaws;
(ii) issue any securities, options, warrants, calls, conversion
rights or commitments relating to its securities of any kind;
(iii) purchase, redeem or otherwise acquire or retire for value any
shares of its stock;
(iv) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures in excess of $25,000;
(v) increase the compensation payable or to become payable to any
officer, director, 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;
21
<PAGE>
(vi) create, assume or permit to exist any mortgage, pledge or
other lien or encumbrance upon any assets or properties whether now owned
or hereafter acquired, except as set forth in Schedule 8.3(vi);
(vii) sell, assign, lease or otherwise transfer or dispose of any
property or equipment, except in the normal course of business and except
as otherwise contemplated by Section 8.2(xi) hereof;
(viii) negotiate for the acquisition of any business or the start-up
of any new business;
(ix) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(x) waive any material rights or claims;
(xi) breach or permit a breach, amend or terminate any material
agreement or any permit, license or other right; or
(xii) enter into any other transaction outside the ordinary course
of its business or prohibited hereunder.
8.4 Supplier Approval. Prior to the Closing Date, the Company shall
-----------------
satisfy any requirement for notice and approval of the transactions contemplated
by this Agreement under applicable supplier agreements, and shall provide
USFloral with satisfactory evidence of such approvals.
8.5 Notice to Bargaining Agents. Prior to the Closing Date, the Company
---------------------------
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 Stockholder, the Company 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
22
<PAGE>
(iii) furnish any information to any person other than USFloral or
Newco relating to,
any acquisition or purchase of all or a material amount of the assets of, or any
equity interest in, the Company or a merger, consolidation or business
combination of the Company.
8.7 Notification of Certain Matters. The Stockholder and the Company
-------------------------------
shall give prompt notice to USFloral of (i) the occurrence or non-occurrence of
any event known to the Stockholder or the Company the occurrence or non-
occurrence of which would be likely to cause any representation or warranty
contained in Section 6 to be untrue or inaccurate in any material respect at or
prior to the Closing Date or Merger Effective Date and (ii) any material failure
of the Stockholder or the Company to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by such person
hereunder. USFloral shall give prompt notice to each Stockholder of (i) the
occurrence or non-occurrence of any event known to USFloral the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in Section 7 to be untrue or inaccurate in any material respect at or
prior to the Closing Date or Merger Effective Date and (ii) any material failure
of USFloral to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder. The delivery of any notice pursuant
to this Section 8.7 shall not be deemed to (i) modify the representations or
warranties hereunder of the party delivering such notice, which modification may
only be made pursuant to Section 8.8, (ii) modify the conditions set forth in
Sections 9 and 10, or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
8.8 Amendment of Schedules. Each party hereto agrees that, with respect
----------------------
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the Merger Effective Date
to supplement or amend promptly the Schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules, provided that no amendment or supplement to a Schedule that
constitutes or reflects a material adverse change to the Company may be made
unless USFloral consents to such amendment or supplement; and provided further,
however, that USFloral may not withhold consent to such amendment or supplement
if the same relates to (i) changes in facts or circumstances occurring
subsequent to the date hereof, or (ii) facts and circumstances existing as of
the date hereof that were not disclosed by the Stockholder because he 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 Stockholder). 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.
23
<PAGE>
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDER
The obligations of the Stockholder hereunder are, at his option, subject
to the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions.
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFloral and Newco contained in Section 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by USFloral and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of USFloral shall have been delivered to
Stockholder.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of the
Company as a result of which the management of the Company deems it inadvisable
to proceed with the transactions hereunder.
9.3 Employment Agreements. The Surviving Corporation shall execute and
---------------------
deliver an Employment Agreement, in the form of Annex III attached hereto, to
the Stockholder. In addition, the Surviving Corporation shall execute and
deliver to Stephen Dabrieo an employment agreement with a two year term
providing for an annual salary of $100,000, an annual bonus to be determined in
accordance with the policies of USFloral and otherwise having term and
conditions reasonably satisfactory to the Surviving Corporation and Stephen
Dabrieo.
9.4 Opinion of Counsel. Stockholder shall have received an opinion from
------------------
counsel for USFloral, dated the Merger Effective Date, in form and substance
satisfactory to the Stockholder, to the effect that:
(i) USFloral and Newco have been duly organized and are validly
existing and in good standing under the laws of the State of Delaware;
(ii) this Agreement has been duly authorized, executed and
delivered by USFloral and Newco and constitutes a valid and binding
agreement of USFloral and Newco enforceable in accordance with its terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to
or affecting the rights of creditors and except (X) as the same may be
subject to the effect of general principles of equity and (Y) that no
opinion need be expressed as to the enforceability of indemnification
provisions included herein; and
24
<PAGE>
(iii) the shares of USFloral Stock to be received by the
Stockholder on the Merger Effective Date shall be duly authorized, fully
paid and nonassessable.
9.5 Registration Statement. USFloral shall have filed with the SEC the
----------------------
Registration Statement and a registration statement under the Securities
Exchange Act of 1934, as amended (the "1934 Act"). The Registration Statement
shall have been declared effective by the SEC not later than December 24, 1997
and the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the underwriting agreement, the shares of USFloral Stock
covered by such Registration Statement.
9.6 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
the public in the IPO) shall be not less than $50 million.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFloral and Newco hereunder are, at their option,
subject to the satisfaction, on or prior to the Closing Date (or such earlier
date specified below), of the following conditions.
10.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
Stockholder shall have delivered to USFloral a certificate dated the Merger
Effective Date and signed by him to the effect that all the representations and
warranties of the Stockholder 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 Stockholder and the Company to be
performed on or before the Closing Date pursuant to the terms hereof shall have
been performed.
10.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFloral of the Company Stock and no governmental
agency or body shall have taken any other action or made any request of USFloral
as a result of which the management of USFloral deems it inadvisable to proceed
with the transactions hereunder.
10.3 Examination of Financial Statements. Prior to the Closing Date,
-----------------------------------
USFloral shall have had sufficient time to review the unaudited balance sheets
of the Company as of June 30, 1997, and the unaudited statements of income, cash
flow and retained earnings of the Company for the periods then ended, disclosing
no material adverse change in the financial condition of the Company or the
results of its operations from the financial statements originally furnished by
each Company as set forth in Schedule 6.9. In the opinion of Newco's
independent public accountants, the historical financial statements of the
Company must be suitable or
25
<PAGE>
adaptable for incorporation in the Registration Statement and other filings of
USFloral with the SEC.
10.4 No Material Adverse Change. No material adverse change in the
--------------------------
results of operations, financial position or business of the Company shall have
occurred, and the Company shall not have suffered any material loss or damages
to any of its properties or assets, whether or not covered by insurance, since
the Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company to conduct its business; and USFloral shall
have received on the Closing Date a certificate signed by the Stockholder dated
the Merger Effective Date to such effect.
10.5 Regulatory Review. USFloral, through its authorized representatives,
-----------------
shall have completed a satisfactory review of the practices and procedures of
the Company including, but not limited to, environmental and land use practices,
import and export laws, compliance with contracts and federal, state and local
laws and regulations governing the respective operations of the Company; which
review reflects compliance with all applicable laws governing the Company,
disclosing no material actual or probable violations, compliance problems,
required capital 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 Stockholder Release. At the Closing, the Stockholder shall have
-------------------
delivered to USFloral an instrument dated the Merger Effective Date releasing
the Company from any and all claims of the Stockholder against the Company.
10.7 Employment Agreement. The Stockholder shall have executed and
--------------------
delivered an Employment Agreement in the form of Annex III attached hereto.
In addition, the Company shall have terminated the employment agreement dated
April 7, 1997 between the Company and Stephen Dabrieo.
10.8 Opinion of Counsel. USFloral shall have received an opinion from
------------------
Bingham, Dana & Gould LLP, counsel to the Stockholder, dated the Merger
Effective Date, in the form as set forth on Schedule 10.8 hereto.
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.
26
<PAGE>
10.10 Additional Liabilities and Obligations. The Stockholder shall
--------------------------------------
have delivered to USFloral a Schedule (Schedule 10.10), dated the Merger
Effective Date, setting forth all liabilities and obligations of the Company
arising since the Balance Sheet Date.
10.11 Additional Contracts. The Stockholder shall have delivered to
--------------------
USFloral a Schedule (Schedule 10.11), dated the Merger Effective Date, showing
all material contracts and agreements, together with copies thereof, entered
into by the Company since the Balance Sheet Date.
10.12 Good Standing Certificates. The Stockholder shall have delivered to
--------------------------
USFloral certificates, dated as of a date no earlier than five days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by USFloral, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.13 Registration Statement. The Registration Statement shall have been
----------------------
declared effective by the SEC, and the underwriters named therein shall have
agreed to acquire, subject to the conditions set forth in the underwriting
agreement, the shares of USFloral Stock covered thereby.
10.14 Repayment of Indebtedness. Prior to the Closing Date, the
-------------------------
Stockholder shall have repaid the Company in full all amounts owing by the
Stockholder.
10.15 Annual Adjusted Operating Income. The Company shall have annual
--------------------------------
adjusted operating income before management bonuses, interest and taxes
(inclusive of add-backs) as of December 31, 1996 as determined by Price
Waterhouse, LLP ("Price Waterhouse") of at least $737,000.
10.16 Board of Directors and Stockholder Approval. The Board of
-------------------------------------------
Directors of the Company and the Stockholder shall have approved the terms and
conditions of this Agreement and the transactions contemplated hereby.
11. COVENANTS OF USFLORAL
11.1 Registration Statement. As soon as practicable following the
----------------------
execution of this Agreement and in any event within 45 days thereafter, USFloral
shall prepare and file with the SEC the Registration Statement.
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 set forth
in Annex II of this Agreement shall be
27
<PAGE>
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 Release From Guarantees. Not later than 120 days following the
-----------------------
Merger Effective Date, USFloral shall cause the Stockholder to be released from
any and all guarantees of any indebtedness set forth on Schedule 11.3 that he
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.
11.4 Piggy-Back Registrations. If at any time after the expiration of the
------------------------
restrictions contained in Section 16 USFloral shall determine to register shares
of USFloral Stock for its own account or the account of others under the
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 11.4, any exclusion of Registrable Shares shall be made pro rata among
--- ----
all holders of USFloral stock having registration rights 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 11.4 may be waived at
any time upon the written consent of Holders of a majority-in-interest of the
Registrable Shares and shall expire as to each Holder immediately upon all of
such Holder's Registrable Shares being capable
28
<PAGE>
of sale within a three-month period in accordance with the volume and manner-of-
sale limitations of Rule 144 under the Securities Act.
11.5 Compliance with the 1934 Act. For a period of two years following
----------------------------
the Merger Effective Date, USFloral shall (i) make and keep public information
available, as those terms are defined in Rule 144 promulgated under the 1933 Act
or any successor rule hereafter promulgated by the SEC ("Rule 144") and (ii)
file with the SEC in a timely manner all reports and other documents required of
USFloral under the 1933 Act and the 1934 Act.
11.6 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.
11.7 Earn-Out Consideration. (a) If the EBIT (inclusive of the add backs
----------------------
set forth on Schedule 11.7 for the Surviving Corporation's fiscal year ending
December 31, 1997 is equal to or exceeds $800,000 (as determined consistent with
past practice), USFloral shall pay to the Stockholder additional consideration
in the amount of $6.00 for each $1.00 of EBIT achieved in excess of $800,000 for
the year ended December 31, 1997 ("Earn-Out Consideration"), subject to a
maximum of $2,400,000 in total Earn-Out Consideration. The Earn-Out
Consideration shall be paid in USFloral Stock.
(b) 240,000 shares of USFloral Stock, representing the maximum Earn-Out
Consideration (assuming an IPO price of $10 per share), shall be issued in the
name of the Stockholder at Closing and shall be held in escrow (the "Securities
Escrow") by Bingham, Dana & Gould LLP, as securities escrow agent ("Securities
Escrow Agent"). Promptly following the date on which the Surviving
Corporation's EBIT for its fiscal year ended December 31, 1997 is finally
determined by Price Waterhouse (USFloral hereby agreeing that it shall cause
Price Waterhouse to commence determining the same promptly and with all due
diligence and will in all events cause it to be determined by June 30, 1998),
the Securities Escrow Agent shall deliver to the Stockholder out of the
Securities Escrow such number of shares of USFloral Stock equal to the portion
of the Earn-Out Consideration that the Stockholder is entitled to receive in
USFloral Stock ("Earn-Out Securities"), with the remainder being delivered to
USFloral for cancellation. If the average closing price of the USFloral Stock
on the ten trading days prior to December 31, 1997 is less than is necessary so
that, when multiplied by 240,000, such price produces an amount less than the
portion of the Earn-Out Consideration that the Stockholder is entitled to
receive in USFloral Stock, USFloral shall deliver to the Stockholder, in its
sole discretion, (i) such additional number of shares of USFloral Stock, (ii)
such additional amount of
29
<PAGE>
cash or (iii) such combination of shares of USFloral Stock and cash as necessary
to make up the difference. Furthermore, in the event that USFloral enters into
a transaction for the sale of USFloral or the Company (or enters into an
alternative type transaction to a sale that otherwise makes performance by the
Company impossible) prior to December 31,1997, which transaction makes it
impossible for the Company to earn the maximum Earn-Out Consideration, then, (i)
any Earn-Out Consideration actually earned shall be paid to the Stockholder, and
(ii) if the Stockholder can reasonably demonstrate to the Board of Directors of
USFloral that its EBIT was on a pace to meet the maximum Earn-Out Consideration,
then he shall be paid the maximum Earn-Out Consideration. Provided further,
that if at any time prior to December 31, 1997, the Stockholder is terminated
without cause under that certain Employment Agreement of even date herewith, the
maximum Earn-Out Consideration shall be paid to the Stockholder. Notwithstanding
the foregoing, at the time any Earn-Out Securities are delivered by the
Securities Escrow Agent to the Stockholder out of the Securities Escrow, the
Securities Escrow Agent shall retain and place into the Indemnity Escrow that
number of Earn-Out Securities equal in value to 10% of the total Consideration
paid to the Stockholder hereunder as collateral pursuant to Section 4.2 for the
indemnification obligation of the Stockholder pursuant to Section 12 hereof and
the payment of amounts under Section 4.1 hereof (or, in the discretion of the
Stockholder, by the payment of an equal amount of cash), and, if securities are
so escrowed, any cash remaining in the Indemnity Escrow Account at such time
shall be released.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by the Stockholder. Subject to the
------------------------------------------
limitations contained in Section 12.5 hereof, the Stockholder, covenants and
agrees that he will indemnify, defend, protect and hold harmless USFloral, Newco
and the Surviving Corporation and their respective officers, stockholders,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement until the Expiration Date (as defined in Section 12.6) from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by USFloral,
Newco or the Surviving Corporation as a result of or arising from (i) any breach
of the representations and warranties made by the Stockholder set forth herein
or on the schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of the Stockholder or the Company
under this Agreement or (iii) any liability under the 1933 Act, the 1934 Act or
other Federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to the Company or the Stockholder, and provided to
USFloral or its counsel by the Company or the Stockholder, 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 the Company or the Stockholder required to be stated therein or
necessary to make the statements therein not misleading, and not
30
<PAGE>
provided to USFloral or its counsel by the Company or the Stockholder,
provided, however, that such indemnity shall not inure to the benefit of
USFloral, Newco and the Surviving Corporation to the extent that such untrue
statement (or alleged untrue statement) was made in, or omission (or alleged
omission) occurred in, any preliminary prospectus and the Stockholder 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 Stockholder. Subject to the
-------------------------------------------
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the Schedules or Exhibits hereto, and
notwithstanding any investigation by USFloral or Newco, the Stockholder,
covenants and agrees that he will indemnify, defend, protect and hold harmless
USFloral, Newco and the Surviving Corporation and their respective officers,
stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement, from and against all claims, damages, actions,
suits, proceedings, demands, assessments, adjustments, penalties, costs and
expenses whatsoever (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) incurred by USFloral, Newco or
the Surviving Corporation as a result of or incident to: (a) the existence of
liabilities of the Company in excess of the liabilities set forth on Schedule
6.10, but only to the extent of such excess, with the parties acknowledging and
agreeing (i) that the existence of liabilities (such as accounts payable) of the
Company on the Merger Effective Date that are different (but not in the
aggregate greater) than the liabilities of the Company set forth on Schedule
6.10 on the date hereof shall not give rise to any obligations of the
Stockholder under the provisions of this Section 12 and (ii) the existence of
liabilities that arise in the ordinary course of business of the Company that do
not arise as a result of a breach by the Stockholder of any of his obligations
set forth in Sections 8.2 or 8.3 hereof shall not give rise to any obligations
of the Stockholder under the provisions of this Section 12; and (b) all
liability resulting from the litigation matters listed on Schedule 6.20.
12.3 Indemnification by USFloral and Newco. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFloral and Newco, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
the Stockholder 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
Stockholder as a result of or arising from (i) any breach of the representations
and warranties made by USFloral and Newco set forth herein or on the schedules
or certificates attached hereto, (ii) any nonfulfillment of any agreement on the
part of USFloral under this Agreement, including, without limitation, the
agreement set forth in Section 11.3 hereof, (iii) any liabilities which the
Stockholder may incur due to USFloral's failure to be responsible for the
liabilities and obligations of the Surviving Corporation as provided in Section
1.5 hereof (except to the extent that USFloral has claims against Stockholder 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
31
<PAGE>
material fact relating to USFloral (including any entities proposed to be
acquired, directly or indirectly, by USFloral other than the Company (the "Other
Targets")) contained in any preliminary prospectus, the Registration Statement
or any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to USFloral (including the Other Targets)
required to be stated therein or necessary to make the statements therein not
misleading.
12.4 Third Person Claims. Promptly after any party hereto (hereinafter
-------------------
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement (a "Third Person") or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently. If
the Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. Notwithstanding the foregoing, the
Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel); provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the Indemnified Party of its intention to
undertake to defend or settle any such asserted liability, and for so long as
the Indemnifying Party diligently pursues such defense, the Indemnifying Party
shall not be liable for any additional legal expenses incurred by the
Indemnified Party in connection with any defense or settlement of such asserted
liability, except to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and out-of-
pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section 12 with respect to such Third Person claim shall be limited
to the amount so offered in settlement by said Third Person and the Indemnified
Party shall reimburse the Indemnifying Party for any additional costs of defense
which it subsequently incurs with respect to such claim. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
32
<PAGE>
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 (i) $96,000 prior to the payment of
the Earn-Out Consideration, or (ii) after the payment of the Earn-Out
Consideration, an amount equal to 2% of the sum of $4,800,000 and the Earn-Out
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, Newco and the Surviving
Corporation shall be considered to be a single Indemnifying and Indemnified
Party and Stockholder shall be considered to be a single Indemnifying and
Indemnified Party. "Excess Net Worth" shall mean the amount, if any, by which
the aggregate shareholder's equity as shown on the Closing Date Balance Sheet is
greater than the aggregate shareholder's equity as shown on the December 31
Balance Sheet. 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 any Excess 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 the Stockholder be liable under this Section 12 for an amount which
exceeds the aggregate value of the consideration received by such Stockholder
under this Agreement.
12.6 Survival of Representations and Warranties. The parties agree that
------------------------------------------
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of twelve (12) months from the Merger Effective Date (which
date is hereinafter called the "Expiration Date"), except that (i) the
representations and warranties contained in Section 6.21 hereof shall survive
until such time as the limitations period has run for all tax periods ended
prior to the Merger Effective Date, which shall be deemed to be the Expiration
Date for purposes of this clause (i), (ii) the representations and warranties
contained in Sections 6.26 and 6.27 hereof shall survive for a period of three
years from the Merger Effective Date, which shall be deemed the Expiration Date
for purposes of this clause (ii), (iii) solely for purposes of Section 12.1(iii)
hereof, and solely to the extent that USFloral actually incurs liability under
the 1933 Act, the 1934 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 the
Stockholder under Section 12.2 shall survive the Merger Effective Date without
time limitation.
33
<PAGE>
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 Stockholder in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the Stockholder.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFloral or the Stockholder may, by
--------------------------
notice in the manner hereinafter provided on or before the Closing Date,
terminate this Agreement (i) if a material default shall be made by the other
party in the observance or in the due and timely performance of any of the
covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before the Closing Date and shall not
reasonably be expected to occur; (ii) if the Registration Statement has not been
declared effective by December 24, 1997; or (iii) if the Closing has not
occurred by December 31, 1997. Upon any such termination, each party shall
return to the other party all Confidential Information (as set forth in Section
15.1) provided to such party, including, without limitation, all Schedules
provided by the Company and/or the Stockholder to USFloral.
13.2 Termination by USFloral. To the extent that any Schedules required
-----------------------
to be provided by the Company or the Stockholder as of the date of execution of
this Agreement have not been so provided, the Stockholder shall deliver such
Schedules to USFloral within 14 days of the date of this Agreement. USFloral may
terminate this Agreement upon written notice to the Stockholder within 10 days
after USFloral's receipt of all such Schedules, and each party shall return to
the other party all Confidential Information (as set forth in Section 15.1)
provided to such party, including, without limitation, all Schedules provided by
the Company and/or the Stockholder to USFloral.
13.3 Liquidated Damages to USFloral. If the Stockholder terminates this
------------------------------
Agreement after the satisfaction of the conditions set forth in Article 9 or if
the Merger fails to occur because of the default of the Company or the
Stockholder, then, in addition to the other remedies available to USFloral at
law, in equity or pursuant to this Agreement, Stockholder shall pay to USFloral
the sum of $500,000 as liquidated damages. It is hereby agreed that USFloral's
damages in the event of a termination or default by Company hereunder are
uncertain and impossible to ascertain and that the foregoing constitutes a
reasonable liquidation of such damages and is intended not as penalty but as
liquidated damages.
13.4 Liquidated Damages to the Stockholder. If USFloral terminates this
-------------------------------------
Agreement after the satisfaction of the conditions set forth in Article 10 or if
the Merger fails to occur because of the default of USFloral or Newco, then, in
addition to the other remedies available to the Company and the Stockholder at
law, in equity or pursuant to this Agreement, USFloral shall pay to the
Stockholder the sum of $500,000 as liquidated damages. It is hereby agreed that
the Stockholder's damages in the event of a termination by USFloral hereunder
are
34
<PAGE>
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 Stockholder agrees that for a period of
---------------------
two years following the Merger Effective Date, he 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 any business selling any products or services in direct
competition with the Surviving Corporation or USFloral including, without
limitation, the importing, brokerage, shipping or marketing of floral
products, or any business engaging in the consolidation of the floral
industry within the United States (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of USFloral or any subsidiary of USFloral in a
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of USFloral or such subsidiary;
(iii) call upon any person or entity which is, at that time, or
which has been, within one year prior to that time, a customer of USFloral
or any subsidiaries of USFloral or 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 or 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 the Stockholder from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market, (ii) engaging
in any activity to which USFloral shall have provided its prior written consent,
or (iii) maintaining his directorship in the Meadow Flower, S.A. rose farm,
located in Ecuador.
35
<PAGE>
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 Stockholder agrees that, in the event of a
breach by him 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 Stockholder in
light of the activities and business of USFloral on the date of the execution of
this Agreement and the current and future plans of USFloral and the Surviving
Corporation (as successors to the business of the Company).
14.4 Severability; Reformation. The covenants in this Section 14 are
-------------------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
14.5 Independent Covenant. All of the covenants in this Section 14 shall
--------------------
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholder
against the Company, the Surviving Corporation or USFloral, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
years stated above, shall be computed by excluding from such computation any
time during which the Stockholder is in violation of any provision of this
Section 14 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
the Surviving Corporation seeks to enforce the agreements and covenants of
Stockholder or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if the Stockholder is found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
14.6 Materiality. The Stockholder hereby agrees that this covenant is a
-----------
material and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 Stockholder. The Stockholder recognizes and acknowledges that he has
-----------
in the past, currently has, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost
36
<PAGE>
policies that are valuable, special and unique assets of the Company and the
Company's business. The Stockholder agrees that he will not disclose any
confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except to authorized
representatives of USFloral, unless such information becomes known to the public
generally through no fault of the Stockholder. In the event of a breach or
threatened breach by Stockholder of the provisions of this Section, USFloral and
the Surviving Corporation shall be entitled to an injunction restraining
Stockholder from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting USFloral and the Surviving
Corporation from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
15.2 USFloral. USFloral recognizes and acknowledges that it has in the
--------
past, currently has, and prior to the Closing Date, will have access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. USFloral agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the Stockholder. In the event of
a breach or threatened breach by USFloral of the provisions of this Section,
Stockholder shall be entitled to an injunction restraining USFloral from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting Stockholder from pursuing any
other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 Both Parties. Each of USFloral and the Stockholder hereby agrees that
------------
in the event that this Agreement is terminated in accordance with its terms that
(i) it shall promptly either return or destroy written materials provided by
the other party, (ii) until June 29, 1999, it shall not call upon any person
who is, either presently or at any time before June 29, 1999, an employee of the
other party for the purpose or with the intent of enticing such employee away
from or out of his or her employment. The parties specifically acknowledge that
the provisions of paragraph (ii) shall survive the termination of this
Agreement.
15.4 Damages. Because of the difficulty of measuring economic losses as a
-------
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Surviving Corporation and Stockholder agrees
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, the
Stockholder hereby irrevocably agrees that for a period of 180 days after the
date of the effectiveness of the Registration Statement, as the same may be
amended, not to (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
37
<PAGE>
option, right or warrant to purchase or otherwise transfer or dispose of (except
as contemplated in Section 4.2 hereof), directly or indirectly, any shares of
USFloral Stock or any securities convertible into or exercisable or exchangeable
for shares of USFloral Stock, or (ii) enter into any swap or other agreement
that transfers, in whole or in part, any of the economic consequences of
ownership of the USFloral Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of USFloral Stock or such
other securities, in cash or otherwise without the prior written consent of the
underwriters in the IPO. The Stockholder agrees that the foregoing shall be
binding upon the 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. 1933 ACT AND CONTRACTUAL RESTRICTIONS ON USFLORAL STOCK
The Stockholder acknowledges and agrees that the shares of USFloral Stock
to be delivered to the Stockholder 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 Stockholder represents and warrants
that the USFloral Stock to be acquired by the Stockholder pursuant to this
Agreement is being acquired solely for his own account, for investment purposes
only, and with no present intention of distributing, selling or otherwise
disposing of it in connection with a distribution.
17.1 Compliance with Law. The 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. Stockholder represents and warrants
-----------------------------
that he is 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. He further represents and warrants that he (i) fully
understands the nature, scope and duration of the limitations on transfer
contained in this Agreement and (ii) has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of the proposed investment and therefore has the capacity to protect his
own interests in connection with the acquisition of the USFloral Stock.
Stockholder represents and warrants that he has 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.
Stockholder has asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to his satisfaction.
38
<PAGE>
17.3 Registration Statement. The Stockholder has received the prospectus
----------------------
included in the draft Registration Statement delivered to him on or about August
2, 1997 that describes, among other things, the Merger, the other acquisitions
proposed to be undertaken by USFloral and the target companies of the other
acquisitions. The Stockholder has had an adequate opportunity to ask questions
and receive answers to his satisfaction from the officers of USFloral concerning
the business, operations and financial condition of USFloral.
18. SECURITIES LEGENDS
The certificates evidencing the USFloral Stock to be received by the
Stockholder hereunder will bear a legend substantially in the form set forth
below and containing such other information as USFloral may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR ANY
STATE SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, 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. Stockholder 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.
Stockholder will cooperate and use its best efforts to have the present
officers, directors and employees of the Company cooperate with USFloral on and
after the Closing Date in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
39
<PAGE>
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 Stockholder.
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 Stockholder, the
Company, USFloral and Newco and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement on the parties thereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by Stockholder (subject to the limitations set
forth below), the Company, USFloral, and Newco acting through their respective
officers, duly authorized by their respective Boards of Directors.
19.4 Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19.5 Brokers and Agents. Each party represents and warrants that it
------------------
employed no broker or agent in connection with this transaction and agrees to
indemnify the other against all loss, cost, damages or expense arising out of
claims for fees or commissions of brokers employed or alleged to have been
employed by such indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall
--------
be consummated, USFloral will pay the fees, expenses and disbursements of
USFloral and Newco and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto. Whether or not the transactions herein contemplated shall be
consummated, Stockholder will pay the fees, expenses and disbursements of the
Company, the Stockholder 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 Stockholder and the
Company under this Agreement.
19.7 Notices. All notices of communication required or permitted
-------
hereunder shall be in writing and shall be given by overnight courier, addressed
to the party to be notified, or by delivering the same in person to an officer
or agent of such party.
(a) If to USFloral or Newco, addressed to them at:
3500 Whitehaven Parkway
Washington, DC 20007
40
<PAGE>
with a required copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, 32nd Floor
Pittsburgh, PA 15219
Attn: Eric D. Kline, Esq.
(b) If to Stockholder, addressed to him at:
John T. Dickinson
18 Wheeler Road
Lincoln, Massachusetts 01773
with a required copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02100
Attn: Brian Keeler, Esq.
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.
41
<PAGE>
19.12 Remedies Cumulative. No right, remedy or election given by any
-------------------
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 Captions. The headings of this Agreement are inserted for
--------
convenience only and shall not constitute a part of this Agreement or be used
to construe or interpret any provision hereof.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFloral"
U.S.A. FLORAL PRODUCTS, INC.
By: /s/ Robert J. Poirier
------------------------------------------
Name: Robert J. Poirier
Title: President/CEO
"Newco"
AFS ACQUISITION CORP.
By: /s/ Robert J. Poirier
------------------------------------------
Name: Robert J. Poirier
Title: President
"Company"
AMERICA FLORIST SUPPLY, INC.
dba Johnsons Roses
By: /s/ John T. Dickinson
--------------------------------------
Name: John T. Dickinson
Title: President
"Stockholder"
By: /s/ John T. Dickinson
--------------------------------------
John T. Dickinson
43
<PAGE>
ANNEXES
ANNEX I [Form of Articles of Merger to be provided]
ANNEX II [Consideration]
ANNEX III [Attach form of Employment Agreement]
SCHEDULE
Schedule 11.7 [Addbacks for Earn-out]
44
<PAGE>
EXHIBIT 10.8
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
USA FLORAL PRODUCTS, INC.
(a Delaware corporation),
FT ACQUISITION CORPORATION
(a Delaware corporation),
FLOWER TRADING CORPORATION
(a Florida corporation),
FLOWTRAD CORPORATION N.V.
(a Delaware corporation),
and
THE STOCKHOLDERS OF FLOWTRAD CORPORATION N.V.
Dated as of August 4, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
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 COMPANIES, NEWCO and USFLORAL.......................................................................... -2-
2. CONVERSION AND EXCHANGE OF STOCK...................................................................................... -3-
2.1 Manner of Conversion........................................................................................... -3-
2.2 Calculation of USFLORAL Shares................................................................................. -4-
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION....................................................................... -4-
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES............................................................................. -4-
5. CLOSING; MERGER EFFECTIVE DATE........................................................................................ -6-
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS........................................................................ -7-
6.1 Due Organization............................................................................................... -7-
6.2 Authorization.................................................................................................. -7-
6.3 Capital Stock.................................................................................................. -7-
6.4 Transactions in Capital Stock.................................................................................. -8-
6.5 No Bonus Shares................................................................................................ -8-
6.6 Subsidiaries................................................................................................... -8-
6.7 Predecessor Status............................................................................................. -8-
6.8 Spin-off by the COMPANIES...................................................................................... -8-
6.9 Financial Statements........................................................................................... -8-
6.10 Liabilities and Obligations.................................................................................... -9-
6.11 Accounts and Notes Receivable.................................................................................. -9-
6.12 Permits and Intangibles........................................................................................ -9-
6.13 Real and Personal Property.....................................................................................-10-
6.14 Material Contracts and Commitments.............................................................................-10-
6.15 Title to Real Property.........................................................................................-11-
6.16 Insurance......................................................................................................-11-
6.17 Officers, Directors and Employees Compensation.................................................................-11-
6.18 Employee Plans.................................................................................................-11-
6.19 Compliance with ERISA..........................................................................................-11-
6.20 Conformity with Law............................................................................................-13-
</TABLE>
-i-
<PAGE>
<TABLE>
<C> <S> <C>
6.21 Taxes..........................................................................................................-14-
6.22 Completeness; No Violations....................................................................................-14-
6.23 Government Contracts...........................................................................................-14-
6.24 Absence of Changes.............................................................................................-14-
6.25 Deposit Accounts; Powers of Attorney...........................................................................-16-
6.26 Environmental Matters..........................................................................................-16-
6.27 Underground Storage Tanks......................................................................................-17-
6.28 Validity of Obligations........................................................................................-17-
6.29 Relations with Governments.....................................................................................-17-
6.30 Disclosure.....................................................................................................-17-
6.31 Ownership......................................................................................................-17-
7. REPRESENTATIONS OF USFLORAL AND NEWCO.................................................................................-18-
7.1 Due Organization...............................................................................................-18-
7.2 USFLORAL Stock.................................................................................................-18-
7.3 Authorization..................................................................................................-18-
7.4 Validity of Obligations........................................................................................-18-
7.5 No Conflicts...................................................................................................-18-
7.6 Other Agreements...............................................................................................-19-
7.7 Reasonable and Adequate Capital................................................................................-19-
8. COVENANTS PRIOR TO CLOSING............................................................................................-19-
8.1 Access and Cooperation.........................................................................................-19-
8.2 Conduct of Business............................................................................................-20-
8.3 Prohibited Activities..........................................................................................-20-
8.4 Supplier Approval..............................................................................................-21-
8.5 UltraFlora Corporation.........................................................................................-21-
8.6 No Shop........................................................................................................-22-
8.7 Notification of Certain Matters................................................................................-22-
8.8 Amendment of Schedules.........................................................................................-22-
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS...................................................................-23-
9.1 Representations and Warranties; Performance of
Obligations...................................................................................................-23-
9.2 No Litigation..................................................................................................-23-
9.3 Employment Agreements..........................................................................................-23-
9.4 Opinion of Counsel.............................................................................................-23-
9.5 Registration Statement.........................................................................................-24-
9.6 Market Capitalization..........................................................................................-24-
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO.............................................................-24-
10.1 Representations and Warranties; Performance of Obligations.....................................................-24-
</TABLE>
-ii-
<PAGE>
<TABLE>
<C> <S> <C>
10.2 No Litigation..................................................................................................-25-
10.3 Examination of Financial Statements............................................................................-25-
10.4 No Material Adverse Change.....................................................................................-25-
10.5 Regulatory Review..............................................................................................-25-
10.6 STOCKHOLDERS Release...........................................................................................-25-
10.7 Employment Agreements..........................................................................................-25-
10.8 Opinion of Counsel.............................................................................................-25-
10.9 Consents and Approvals.........................................................................................-27-
10.10 Additional Liabilities and Obligations.........................................................................-27-
10.11 Additional Contracts...........................................................................................-27-
10.12 Good Standing Certificates.....................................................................................-27-
10.13 Registration Statement.........................................................................................-27-
10.14 Repayment of Indebtedness......................................................................................-27-
10.15 Pretax Income..................................................................................................-27-
11. COVENANTS OF USFLORAL.................................................................................................-28-
11.1 Release From Guarantees........................................................................................-28-
11.2 USFLORAL Stock Options.........................................................................................-28-
11.3 Exchange Act Obligations.......................................................................................-28-
11.4 Certain Transactions...........................................................................................-28-
11.5 Piggy-Back Registrations.......................................................................................-28-
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
AND WARRANTIES........................................................................................................-29-
12.1 General Indemnification by STOCKHOLDERS........................................................................-29-
12.2 Specific Indemnification by STOCKHOLDERS.......................................................................-30-
12.3 Indemnification by USFLORAL and NEWCO..........................................................................-31-
12.4 Third-Person Claims............................................................................................-31-
12.5 Limitations on Indemnification.................................................................................-32-
12.6 Survival of Representations and Warranties.....................................................................-32-
12.7 Sole Remedies..................................................................................................-33-
13. TERMINATION OF AGREEMENT..............................................................................................-33-
13.1 Termination by the Parties.....................................................................................-33-
13.2 Liquidated Damages.............................................................................................-33-
14. NONCOMPETITION........................................................................................................-34-
14.1 Prohibited Activities..........................................................................................-34-
14.2 Damages........................................................................................................-35-
14.3 Reasonable Restraint...........................................................................................-35-
14.4 Severability; Reformation......................................................................................-35-
14.5 Independent Covenant...........................................................................................-35-
14.6 Materiality....................................................................................................-36-
</TABLE>
-iii-
<PAGE>
<TABLE>
<C> <S> <C>
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.............................................................................-36-
15.1 STOCKHOLDERS...................................................................................................-36-
15.2 USFLORAL.......................................................................................................-36-
15.3 Damages........................................................................................................-36-
16. LOCK-UP AGREEMENTS....................................................................................................-37-
17. FEDERAL SECURITIES ACT AND CONTRACTUAL
RESTRICTIONS ON USFLORAL STOCK........................................................................................-37-
17.1 Compliance with Law............................................................................................-37-
17.2 Economic Risk; Sophistication..................................................................................-37-
18. SECURITIES LEGENDS....................................................................................................-38-
19. GENERAL -38-
19.1 Cooperation....................................................................................................-38-
19.2 Successors and Assigns.........................................................................................-39-
19.3 Entire Agreement...............................................................................................-39-
19.4 Counterparts...................................................................................................-39-
19.5 Brokers and Agents.............................................................................................-39-
19.6 Expenses.......................................................................................................-39-
19.7 Notices........................................................................................................-39-
19.8 Governing Law..................................................................................................-40-
19.9 Exercise of Rights and Remedies................................................................................-40-
19.10 Time...........................................................................................................-40-
19.11 Reformation and Severability...................................................................................-40-
19.12 Remedies Cumulative............................................................................................-41-
19.13 Captions.......................................................................................................-41-
ANNEX I
CERTIFICATE OF MERGER................................................................................................. I-1
ANNEX II
CALCULATION AND COMPOSITION OF CONSIDERATION..........................................................................II-1
ANNEX III
EMPLOYMENT AGREEMENT.................................................................................................III-1
</TABLE>
-iv-
<PAGE>
AGREEMENT AND PLAN OF CONTRIBUTION
THIS AGREEMENT AND PLAN OF CONTRIBUTION (the "Agreement") is made as of the
4th day of August, 1997, among USA FLORAL PRODUCTS, INC., a Delaware corporation
("USFLORAL"), FT ACQUISITION CORPORATION, a Delaware corporation ("NEWCO"),
FLOWER TRADING CORPORATION, a Florida corporation ("FT"), FLOWTRAD CORPORATION
N.V., a Delaware corporation ("FLOWTRAD") (FT and FLOWTRAD are hereinafter
collectively referred to as the "COMPANIES") and Gustavo Moreno, Seacross
Trading, Inc., a corporation organized under the laws of the British Virgin
Islands ("Seacross"), and Alvaro McAllister (collectively referred to as the
"STOCKHOLDERS"), who directly or indirectly own all the shares of FLOWTRAD.
WHEREAS, USFLORAL was incorporated on April 2, 1997 (the "Formation") under
the laws of the State of Delaware for the purpose of acquiring floral products
businesses in different locations; and
WHEREAS, USFLORAL intends to undertake an initial public offering of its stock
(the "IPO") and in connection therewith intends to file a Registration Statement
on Form S-1 with the Securities and Exchange Commission within 30 days of the
execution and delivery of this Agreement; and
WHEREAS, NEWCO has been duly organized and is existing under the laws of the
State of Delaware solely for the purpose of completing this transaction, and is
a wholly owned subsidiary of USFLORAL; and
WHEREAS, the COMPANIES are corporations organized and existing under the laws
of the States of Florida and Delaware; and
WHEREAS, FLOWTRAD owns all the outstanding common stock of FT; and
WHEREAS, the respective Boards of Directors of USFLORAL, NEWCO and FLOWTRAD
(all of which companies are hereinafter collectively referred to as the
"Constituent Corporations") deem it advisable and in the best interests of the
Constituent Corporations and their respective stockholders that NEWCO merge with
and into FLOWTRAD pursuant to this Agreement and the applicable provisions of
the laws of the State of Delaware, such transaction being herein called the
"Merger"; and
WHEREAS, the Formation, the IPO and the Merger are being undertaken pursuant
to an integrated transaction intended to qualify under Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code");
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:
<PAGE>
1. THE MERGER
1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations
-----------------------------------------
will cause a Certificate of Merger in substantially the form of Annex I attached
hereto (the "Certificate of Merger") to be signed and delivered to the Secretary
of State of Delaware on or before the Merger Effective Date (as defined in
Section 5).
1.2 Merger Effective Date. At the Merger Effective Date, NEWCO shall be
---------------------
merged with and into FLOWTRAD in accordance with the Certificate of Merger and
the separate existence of NEWCO shall cease. FLOWTRAD, as the party surviving
the Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
1.3 Articles of Incorporation, Bylaws and Board of Directors of Surviving
---------------------------------------------------------------------
Corporation. At the Merger Effective Date:
- -----------
(i) the Certificate of Incorporation of NEWCO shall become the Certificate
of Incorporation of the Surviving Corporation; and, subsequent to the Merger
Effective Date, such Certificate of Incorporation shall be the Certificate of
Incorporation of the Surviving Corporation until changed as provided by law;
(ii) the Bylaws of NEWCO shall become the Bylaws of the Surviving
Corporation; and, subsequent to the Merger Effective Date, such Bylaws shall
be the Bylaws of the Surviving Corporation until they shall thereafter be duly
amended;
(iii) the name of the person who shall serve as the sole member of the
Board of Directors of the Surviving Corporation shall be Robert Poirier; the
Director of the Surviving Corporation shall hold office subject to the
provisions of the laws of the State of Delaware and of the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
(iv) the officers of FLOWTRAD immediately prior to the Merger Effective
Date shall continue as the officers of the Surviving Corporation in the same
capacity or capacities, each of such officers to serve, subject to the
provisions of the Certificate of Incorporation and Bylaws of the Surviving
Corporation, until their successor is elected and qualified.
1.4 Certain Information with Respect to the Capital Stock of the COMPANIES,
-----------------------------------------------------------------------
NEWCO and USFLORAL. The respective designations and numbers of outstanding
- ------------------
shares and voting rights of each class of outstanding capital stock of the
COMPANIES, NEWCO and USFLORAL as of the date of this Agreement are as follows:
(i) the authorized capital stock of FLOWTRAD consists of 150,000 shares of
common stock, $1.00 par value (the "FLOWTRAD Stock"), of which 150,000 shares
are issued and outstanding;
-2-
<PAGE>
(ii) the authorized capital stock of FT consists of 10,000 shares of
common stock, $1.00 par value (the "FT Stock"), of which 10,000 shares are
issued and outstanding (the FT Stock and FLOWTRAD Stock are hereinafter
collectively referred to as the "COMPANIES' Stock");
(iii) the authorized capital stock of NEWCO consists of 100 shares of
common stock, $0.01 par value (the "NEWCO Stock"), of which 100 shares are
issued and outstanding; and
(iv) the authorized capital stock of USFLORAL consists of 100,000,000
shares of common stock, $0.01 par value (the "USFLORAL Stock"), of which
2,400,000 shares are issued and outstanding.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. The manner of converting the shares of FLOWTRAD
--------------------
Stock issued and outstanding immediately prior to the Merger Effective Date into
cash and shares of USFLORAL Stock shall be as follows:
As of the Merger Effective Date:
(i) all of the shares of FLOWTRAD Stock issued and outstanding immediately
prior to the Merger Effective Date shall, by virtue of the Merger and without
any action on the part of the holder thereof, automatically be converted into
that number of shares of USFLORAL Stock and the right to receive cash from
USFLORAL as determined pursuant to Section 2.2 below, all to be distributed to
STOCKHOLDERS in the percentages set forth on Annex II and at the times
specified in Section 5 hereof; and
(ii) each share of NEWCO Stock issued and outstanding immediately prior to
the Effective Time of the Merger Effective Date shall, by virtue of the Merger
and without any action on the part of the holder thereof, automatically be
converted into one fully paid and non-assessable share of stock of the
Surviving Corporation which shall constitute all of the outstanding shares of
said Surviving Corporation immediately after the Merger Effective Date.
All USFLORAL Stock to be received by STOCKHOLDERS as a result of the Merger
shall, except for restrictions on resale or transfer described in Section 16
hereof, have the same rights as the outstanding USFLORAL Stock. All voting
rights are fully exercisable by STOCKHOLDERS and STOCKHOLDERS are neither
deprived nor restricted in exercising those rights. At the Merger Effective
Date, USFLORAL shall have no class of capital stock issued and outstanding which
shall have any rights or preferences senior to the shares of USFLORAL Stock,
including, without limitation, any rights or preferences as to dividends or as
to the assets of USFLORAL upon liquidation or dissolution or as to voting
rights.
-3-
<PAGE>
2.2 Calculation of USFLORAL Shares. The FLOWTRAD 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.
3. DELIVERY OF SHARES; ALLOCATION OF CONSIDERATION
3.1 At the Merger Effective Date:
(i) STOCKHOLDERS, as the holders, directly or indirectly, of all
outstanding certificates representing shares of FLOWTRAD Stock, shall, upon
surrender of such certificates, be entitled to receive the number of shares of
USFLORAL Stock and the amount of cash set forth on Annex II opposite the name
of the STOCKHOLDERS; and
(ii) until the certificates representing the FLOWTRAD Stock have been
surrendered by STOCKHOLDERS and replaced by certificates representing the
USFLORAL Stock, the certificates for the FLOWTRAD Stock shall, for all
corporate purposes be deemed to evidence ownership of the USFLORAL Stock
notwithstanding the number of shares of FLOWTRAD Stock such certificates
represent.
3.2 The STOCKHOLDERS shall deliver at the Closing (as defined in Section 5
hereof) the certificates representing their shares of FLOWTRAD Stock, duly
endorsed in blank by the STOCKHOLDERS or accompanied by blank stock powers. The
STOCKHOLDERS agree to cure any deficiencies with respect to the endorsement of
the certificates or other documents of conveyance with respect to the FLOWTRAD
Stock or with respect to the stock powers accompanying the FLOWTRAD Stock.
4. POST CLOSING ADJUSTMENT; PLEDGE OF SHARES
4.1 As soon as practicable, but in any event within 30 days after the Closing,
USFLORAL shall engage Price Waterhouse to prepare, in accordance with generally
accepted accounting principles ("GAAP"), a Consolidated FLOWTRAD Balance Sheet
(the "Closing Date Balance Sheet") as of the close of business on the day prior
to the Closing Date. If the aggregate shareholders' equity as shown on the
Closing Date Balance Sheet is less than $2,000,000 within 30 business days after
delivery of the Closing Date Balance Sheet to USFLORAL and the STOCKHOLDERS, the
STOCKHOLDERS shall pay USFLORAL by wire transfer of immediately available funds
an amount equal to the shareholders' equity deficiency. Notwithstanding
anything in this Article 4 to the contrary, if there is any shareholders' equity
deficiency and the STOCKHOLDERS dispute any item contained on the Closing Date
Balance Sheet, the STOCKHOLDERS shall notify USFLORAL in writing of each
disputed item (collectively, the "Disputed Amounts"), and specify the amount
thereof in dispute within 30 business days after the delivery of the Closing
Date Balance Sheet. If USFLORAL and STOCKHOLDERS cannot resolve any such
dispute which would eliminate or reduce the amount of the shareholders' equity
deficiency, then such dispute shall be resolved by an independent nationally
recognized accounting firm which
-4-
<PAGE>
is reasonably acceptable to USFLORAL and STOCKHOLDERS (the "Independent
Accounting Firm"). The determination of the Independent Accounting Firm shall
be made as promptly as practical and shall be final and binding on the parties,
absent manifest error which error may only be corrected by such Independent
Accounting Firm. Any expenses relating to the engagement of the Independent
Accounting Firm shall be allocated between USFLORAL and 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 and USFLORAL'S aggregate share of such costs shall bear the same proportion
to the total costs that the Disputed Amounts successfully contested by the
STOCKHOLDERS (as finally determined by the Independent Accounting Firm) bear to
the total of the Disputed Amounts as submitted to the Independent Accounting
Firm. STOCKHOLDERS shall have the right to examine, upon written demand, in
person or by agent or attorney, at any reasonable time or times, all the books
and records of accounts of the COMPANIES to determine if there are any Disputed
Amounts and in connection with any resolution thereof.
4.2 (a) As collateral security for the payment of any indemnification
obligations of STOCKHOLDERS pursuant to Sections 12.1 and 12.2 hereof and for
the payment of amounts pursuant to Section 4.1 hereof, at the Closing each of
the STOCKHOLDERS 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 non-cash dividends and other
property at any time received or otherwise distributed in respect of or in
exchange for any or all of such STOCKHOLDER'S Pledged Securities; and in the
event such STOCKHOLDER receives any such non-cash dividends or property with
respect to such Pledged Securities, such STOCKHOLDER shall immediately deliver
such non-cash dividends 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 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.
-5-
<PAGE>
(b) Each certificate evidencing a STOCKHOLDER'S Pledged Securities issued
in his or its name in the Merger, shall, at the Closing, be delivered to
USFLORAL, together with a stock power duly signed in blank by him or it, such
certificate bearing no restrictive or cautionary legend other than those
imprinted by USFLORAL'S transfer agent at USFLORAL'S request.
(c) 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.
(d) In the event that STOCKHOLDERS fail to timely pay USFLORAL any amount
which it is due pursuant to Sections 12.1 or 12.2 hereof, USFLORAL shall have
all the rights of a secured party under the Uniform Commercial Code as in effect
in Florida with respect to the unpaid amount; provided, however, that prior to
exercising such remedies USFLORAL shall give STOCKHOLDERS 10 days' prior notice
of the unpaid amount and a description of the determination thereof. During
such 10-day period, each STOCKHOLDER shall have the right to object to such
unpaid amount. If a STOCKHOLDER does not object by delivering written notice to
USFLORAL within such 10-day period, STOCKHOLDERS shall be deemed to have
irrevocably agreed to the validity of such unpaid amount. If any STOCKHOLDER
does so object, USFLORAL shall review the objections and respond to such
STOCKHOLDER. If the parties do not resolve the dispute within 30 days of the
date of the STOCKHOLDER'S objection, the parties agree to submit the dispute for
binding arbitration with a panel of three arbitrators appointed by the American
Arbitration Association under the Commercial Arbitration Rules of such
Association then in effect using the Federal Rules of Civil Procedure.
(e) The Pledged Securities or any remaining Pledged Securities shall be
returned to the respective STOCKHOLDER on the one-year anniversary of the Merger
Effective Date and all rights of USFLORAL with regard to such Pledged Securities
will cease.
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 Merger
(including the filing of the Articles of Merger which shall become effective on
the Merger Effective Date) and to effect the conversion and delivery of shares
referred to in Section 3 hereof (hereinafter referred to as the "Closing");
provided, that such actions shall not include the actual completion of the
Merger or the conversion and delivery of the shares referred to in Section 3
hereof, which actions shall only be taken on the Merger Effective Date as herein
provided. The Closing shall take place at the offices of Morgan, Lewis &
Bockius LLP, 5300 First Union Financial Center, 200 South Biscayne Boulevard,
Miami, Florida. 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, the
Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the wire transfer
in an amount equal to the cash which the STOCKHOLDERS shall be entitled to
receive pursuant to the Merger referred to in Section 3 hereof, shall occur and
be deemed to be completed. The date on which the Merger
-6-
<PAGE>
is effected shall be referred to as the "Merger Effective Date." During the
period from the Closing Date to the Merger Effective Date, this Agreement may
only be terminated by the parties if the underwriting agreement in respect of
the IPO 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 of the STOCKHOLDERS, jointly and severally, represents and
warrants, as follows (provided, however, that for purposes of the following
representations and warranties, it shall be assumed that the shares of
UltraFlora Corporation ("UltraFlora") shall have been transferred by FT prior to
the date hereof):
6.1 Due Organization. The COMPANIES are corporations duly organized, validly
----------------
existing and in good standing under the laws of the States of Florida and
Delaware, as the case may be, and are duly authorized, qualified and licensed
under all applicable laws, regulations, ordinances and orders of public
authorities to carry on their respective businesses in the places and in the
manner as now conducted except (i) as set forth on Schedule 6.1 or (ii) where
the failure to be so authorized, qualified or licensed would not have a material
adverse effect on the business, operations, properties, assets or condition
(financial or otherwise) (a "Material Adverse Effect"), of the COMPANIES taken
as a whole. True, complete and correct copies of the Articles and Certificate
of Incorporation and Bylaws (certified by the Secretary of the respective
COMPANIES) of the COMPANIES have heretofore been delivered to USFLORAL. The
stock records and minute books of the COMPANIES, as heretofore made available to
USFLORAL, are correct and complete.
6.2 Authorization. STOCKHOLDERS and each of the COMPANIES 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.
6.3 Capital Stock. The authorized capital stock of each of the COMPANIES
-------------
consists solely of the shares as shown on Schedule 6.3, of which the shares
issued and outstanding are shown. Except as set forth on Schedule 6.3, all of
the issued and outstanding shares of the capital stock of the COMPANIES is
owned, directly or indirectly, by the STOCKHOLDERS 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
COMPANIES' Stock have been duly authorized and validly issued, are fully paid
and nonassessable, are owned of record and beneficially by the STOCKHOLDERS and
in the amounts set forth in Annex II and further, such shares were offered,
issued, sold and delivered by the COMPANIES 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.
-7-
<PAGE>
6.4 Transactions in Capital Stock. Neither of the COMPANIES has ever
-----------------------------
acquired any treasury stock. No option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANIES to issue any of
their authorized but unissued capital stock. In addition, the COMPANIES do not
have any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of their 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 COMPANIES' Stock was issued
---------------
pursuant to awards, grants or bonuses.
6.6 Subsidiaries. Except as set forth on Schedule 6.6, the COMPANIES
------------
presently own, of record or beneficially, or control, directly or indirectly, no
capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity (except FT). The
COMPANIES are not, directly or indirectly, participants in any joint venture,
partnership or other noncorporate entity.
6.7 Predecessor Status. Set forth in Schedule 6.7 is a listing of all names
------------------
of all predecessor companies of each of the COMPANIES, including the names of
any entities from whom each of the COMPANIES previously acquired significant
assets (other than in the ordinary course of business). FLOWTRAD has never been
a subsidiary or division of another corporation and neither of the Companies has
ever been a part of an acquisition which was later rescinded.
6.8 Spin-off by the COMPANIES. The COMPANIES have never effected any sale or
-------------------------
spin-off of significant assets other than in the ordinary course of business.
6.9 Financial Statements. Attached hereto as Schedule 6.9 are copies of the
--------------------
following financial statements (the "Financial Statements") of each of the
COMPANIES: Balance Sheets as of December 31, 1996, 1995 and 1994 and
Comparative Income Statements and Shareholders' Equity for each of the years in
the three-year period ended December 31, 1996, and the unaudited Balance Sheets
as of March 31, 1997, March 31, 1996 and June 30, 1997 (June 30, 1997 being
hereinafter referred to as the "Balance Sheet Date"), and Balance Sheets and
Shareholders' Equity for the three-month and six-month periods then ended. Such
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated (except as noted on Schedule
6.9). Except as set forth on Schedule 6.9, such Balance Sheets present fairly
in all material respects the financial position of each of the COMPANIES as of
the dates indicated thereon, and such Comparative Income Statements present
fairly in all material respects the results of their operations for the periods
indicated thereon.
-8-
<PAGE>
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
each the COMPANIES, which are reflected in the COMPANIES' Statement of Financial
Condition as of June 30, 1997 and any material liabilities incurred thereafter
through the date hereof in the ordinary course of business, or material
liabilities which are not reflected in their balance sheet or the notes thereof,
of any kind, character and description, whether accrued, absolute, secured or
unsecured, contingent or otherwise. For each such liability for which the
amount is not fixed or is contested, STOCKHOLDERS shall provide to USFLORAL the
following information:
(i) a summary description of the liability together with the following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(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; and
(iv) a best estimate by STOCKHOLDERS of the maximum amount, if any, which
is likely to become payable with respect to each such liability exclusive of
the costs of defense thereof. If no estimate is provided, 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 each of the COMPANIES, including receivables from and advances to
employees and STOCKHOLDERS. STOCKHOLDERS have provided USFLORAL with an aging
of all accounts and notes receivable showing amounts due in 30-day aging
categories. Except as set forth on Schedule 6.11, such accounts and notes are
collectible in the amount shown on Schedule 6.11 net of the allowance for
doubtful accounts as shown on such balance sheet.
6.12 Permits and Intangibles. Attached hereto as Schedule 6.12 is an
-----------------------
accurate list and summary description, as of the Balance Sheet Date, of all
permits, licenses, franchises, certificates, trademarks, trade names, service
marks, patents, patent applications and copyrights owned or held by each of the
COMPANIES 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,
franchises, certificates, trademarks, trade names, service marks, patents,
patent applications and copyrights owned or held
-9-
<PAGE>
by each of the COMPANIES are adequate for the operation of the COMPANIES
business as presently conducted.
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 $50,000 or in the case of leased
property requires annual rental payments in excess of $5,000), owned or leased
by each of the COMPANIES. The STOCKHOLDERS have provided USFLORAL 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 business
of each 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 (the "1933 Act")) of the COMPANIES. Except as set forth
on Schedule 6.13, substantially all of the trucks, machinery and equipment of
the COMPANIES are in good working order and condition, ordinary wear and tear
excepted. All leases set forth on Schedule 6.13 have been duly authorized,
executed and delivered and constitute the legal, valid and binding obligations
of the COMPANIES and, except as set forth on Schedule 6.13, to the knowledge of
the STOCKHOLDERS, no other party to any such lease is in default thereunder and
such leases constitute the legal, valid and binding obligations of such other
parties. All fixed assets used by the COMPANIES in the operation of their
respective businesses are either owned by the COMPANIES or leased under an
agreement set forth on Schedule 6.13.
6.14 Material Contracts and Commitments. Attached hereto as Schedule
----------------------------------
6.14 is an accurate list, as of the Balance Sheet Date, of all material
contracts, commitments and similar agreements to which each of the COMPANIES is
a party or by which it or any of their properties are bound (including, but not
limited to, joint venture or partnership agreements, contracts with any labor
organizations, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements). STOCKHOLDERS have heretofore delivered to USFLORAL true copies of
such agreements. Except as set forth on Schedule 6.14, each of the COMPANIES
has complied with all material commitments and obligations pertaining to it and
is not in material default under any such agreement and no notice of default has
been received. Except as set forth on Schedule 6.14, the COMPANIES are not a
party to any contract, agreement or other instrument or commitment which cannot
be terminated by the COMPANIES on 30 days' notice without any liability to the
COMPANIES which would have a Material Adverse Effect on the COMPANIES taken as a
whole. Except as set forth on Schedule 6.14, the COMPANIES are not bound by or
subject to (and none of their assets or properties are bound by or subject to)
any arrangement with any labor union. Except as set forth on Schedule 6.14, no
employees of the COMPANIES are represented by any labor union or covered by any
collective bargaining agreement nor, to the best of STOCKHOLDER'S knowledge, is
any organization campaign to establish such representation in progress. There
is no pending or, to the best of STOCKHOLDERS' knowledge, threatened labor
dispute involving the COMPANIES and any group of their employees nor have the
COMPANIES experienced any labor interruptions over the past three years and the
COMPANIES consider their relationship with employees to be good.
-10-
<PAGE>
6.15 Title to Real Property. As of the date hereof, the COMPANIES do not
----------------------
own any real property.
6.16 Insurance. Attached hereto as Schedule 6.16 is an accurate list, as
---------
of the Balance Sheet Date, of all insurance policies carried by the COMPANIES
and an accurate list of all worker's compensation claims received for the past
three policy years. There have been no other insurance claims in excess of
$10,000 in the last three years. STOCKHOLDERS have heretofore delivered to
USFLORAL complete copies of all such policies. To the best of the STOCKHOLDERS'
knowledge, the insurance carried by the COMPANIES with respect to their
properties, assets and business is with financially sound insurers. Such
insurance policies are currently in full force and effect and shall remain in
full force and effect, or comparable policies substituted therefor, through the
Merger Effective Date. The insurance of the COMPANIES has never been canceled
nor have either of the COMPANIES 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 each of the COMPANIES. Each of the COMPANIES has delivered to
USFLORAL a true and complete schedule of the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of directors, officers and key employees, as of the Balance Sheet
Date. STOCKHOLDERS have heretofore delivered to USFLORAL copies of the payroll
lists covering all employees of the COMPANIES as of a recent date. Since the
Balance Sheet Date other than as described in Schedule 6.17, and since the date
of such payroll list in the case of all other employees, there have been no
increases in the compensation payable to any officer, director, key employee or
other employee, except ordinary salary increases implemented on a basis
consistent with past practices.
6.18 Employee Plans. Attached hereto as Schedule 6.18 is a list, 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 the COMPANIES currently contribute, or have an
obligation to contribute in the future (including, without limitation,
employment agreements and any other agreements containing "golden parachute"
provisions and deferred compensation agreements), including 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 Code have been determined by the Internal Revenue Service
to be so qualified, and copies of the current plan determination letters, most
recent actuarial
-11-
<PAGE>
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, have been delivered to
USFLORAL. To the extent that any Qualified Plans have not been amended to
comply with applicable law, the remedial amendment period permitting retroactive
amendment of such Qualified Plans has not expired and will not expire within 120
days after the Closing Date. All reports and other documents required to be
filed with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or tax returns) have been
timely filed or distributed. None of: (i) the STOCKHOLDERS; (ii) any Plan; or
(iii) the COMPANIES has engaged in any transaction prohibited under the
provisions of Section 4975 of the Code or Section 406 of ERISA, except for
transactions for which an individual class exemption exists under Section 4975
of the Code or Section 408 of ERISA. No Plan has incurred an accumulated
funding deficiency, as defined in Section 412(a) of the Code and Section 302(1)
of ERISA; and the COMPANIES currently has no (and at the Closing Date will not
have) direct or indirect liability whatsoever (including being subject to any
statutory lien to secure payment of any such liability), to the Pension Benefit
Guaranty Corporation ("PBGC") with respect to any such Plan under Title IV of
ERISA or to the Internal Revenue Service for any excise tax or penalty; and
neither the COMPANIES nor any member of a "controlled group" (as defined in
ERISA Section 4001(a)(14)) currently have (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 or partial terminations of any
Qualified Plan without notice to and approval by the Internal Revenue Service;
(ii) prior to the Closing Date, 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 required to be
reported and 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 Code and Section 607(1) of ERISA and related regulations
(relating to the benefit continuation rights imposed by "COBRA"), the
COMPANIES have complied (and on the Closing Date will have complied), in all
respects with all reporting, disclosure, notice,
-12-
<PAGE>
election and other benefit continuation requirements imposed thereunder as and
when applicable to such plans, and the COMPANIES have (and will incur) no
direct or indirect liability and is not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect
failure by the COMPANIES 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 COMPANIES with respect to such group health plans;
(vi) the COMPANIES are a member of a "controlled group" as defined in ERISA
Section 4001(a)(14) which is described on Schedule 6.19 attached hereto;
(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, except routine claims for benefits;
(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 not to be representative of the expense
of such Plans as of the Balance Sheet Date; and
(ix) the COMPANIES have never incurred liability under Section 4062 of
ERISA.
6.20 Conformity with Law. Except as set forth on Schedule 6.20, neither
-------------------
of the COMPANIES 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 the COMPANIES taken as a whole; and
except as set forth on Schedule 6.20, there are no claims, actions, suits or
proceedings, pending or threatened to the STOCKHOLDERS' knowledge, against or
affecting the COMPANIES 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 of the
COMPANIES has conducted and is conducting its business in all material respects
in 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 would have a Material Adverse Effect on
the COMPANIES taken as a whole.
-13-
<PAGE>
6.21 Taxes. Each of the COMPANIES has filed or will file in a timely
-----
manner all requisite federal, state, local and other tax returns for all tax
years ended on or before the Closing Date. To the best of STOCKHOLDERS'
knowledge, there are no examinations in progress or claims asserted against the
COMPANIES 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. Correct and complete copies of (i) all revenue agent reports
which have been delivered to each of the COMPANIES, (ii) extensions of statutory
limitations and (iii) the federal and local income tax returns and franchise tax
returns of the COMPANIES for the last three fiscal years, or such shorter period
of time as any of them shall have existed, have heretofore been delivered by
STOCKHOLDERS to USFLORAL. Each of the COMPANIES 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 Code. Each of the COMPANIES currently
utilizes the accrual method of accounting for income tax purposes and have not
changed their method of accounting in the past five years.
6.22 Completeness; No Violations. The certified copies of the Articles
---------------------------
and Certificate of Incorporation and Bylaws, all as amended to date, of the
COMPANIES, and the copies of all leases, instruments, agreements, licenses,
permits, certificates or other documents of each of COMPANIES 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 of
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, (i) the rights and benefits
of either of the COMPANIES thereunder will not be materially and adversely
affected by the transactions contemplated hereby; and (ii) 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. Except as set forth on Schedule
6.22, the consummation of the transactions contemplated hereby will not give
rise to any right of termination, cancellation or acceleration or result in the
loss of any right or benefit thereunder.
6.23 Government Contracts. The COMPANIES are not now nor have they ever
--------------------
been a party to any governmental contracts subject to price redetermination or
renegotiation.
6.24 Absence of Changes. Except as set forth in Schedule 6.24, since the
------------------
Balance Sheet Date, except in connection with this Agreement and the
transactions contemplated hereby:
-14-
<PAGE>
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of either of the
COMPANIES;
(ii) any damage, destruction or loss (whether or not covered by insurance)
which has had a Material Adverse Effect on the COMPANIES taken as a whole;
(iii) any change in the authorized capital of either of the COMPANIES or
in their securities outstanding or any change in their 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 either of the COMPANIES;
(v) any work interruptions, labor grievances or claims filed, or any
proposed law or regulation or any event or condition of any character, which
has had a Material Adverse Effect on the COMPANIES taken as a whole;
(vi) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of either of the COMPANIES to any person,
including, without limitation, the STOCKHOLDERS and their affiliates, other
than in the ordinary course of business;
(vii) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to either of the COMPANIES, including without limitation any
indebtedness or obligation of any STOCKHOLDERS or any affiliate thereof;
(viii) any plan, agreement or arrangement granting any preferential rights
to purchase or acquire any interest in any of the assets, properties or rights
of either of the COMPANIES or requiring consent of any party to the transfer
and assignment of any such assets, properties or rights;
(ix) any purchase or acquisition, or agreement, plan or arrangement to
purchase or acquire, any properties, rights or assets of the COMPANIES other
than in the ordinary course of business;
(x) any waiver of any material rights or claims of either of the COMPANIES;
(xi) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which either of the COMPANIES is
a party; or
(xii) any transaction by either of the COMPANIES outside the ordinary
course of their business.
-15-
<PAGE>
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 of the COMPANIES
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 either of the
COMPANIES and a description of the terms of such power.
6.26 Environmental Matters. Each of the COMPANIES has materially
---------------------
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 it or any of their
properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances (as such terms are defined in any applicable Environmental
Law) except to the extent that noncompliance with any Environmental Law, either
singly or in the aggregate, would not have a Material Adverse Effect on the
COMPANIES taken as a whole. The COMPANIES have 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
have reported, to the extent required by all Environmental Laws, all past and
present sites owned and operated by either of the COMPANIES where Hazardous
Wastes or Hazardous Substances have been treated, stored, disposed of or
otherwise handled. There have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in or on any property owned or operated
by the COMPANIES except as permitted by Environmental Laws. STOCKHOLDERS do not
know of any on-site location to which either of the COMPANIES has transported or
disposed of Hazardous Wastes and Hazardous Substances or arranged for the
transportation of Hazardous Wastes and Hazardous Substances, which site is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the COMPANIES, USFLORAL or
NEWCO for any clean-up cost, remedial work, damage to natural resources or
personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended. Neither of the COMPANIES has any contingent liability in connection
with any release of any Hazardous Waste or Hazardous Substance into the
environment.
-16-
<PAGE>
6.27 Underground Storage Tanks. Neither of the COMPANIES 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.
6.28 Validity of Obligations. The execution and delivery of this
-----------------------
Agreement by the COMPANIES and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of each
of the COMPANIES and Seacross and the stockholders of each of the COMPANIES, and
this Agreement has been duly and validly authorized by all necessary corporate
action and is a legal, valid and binding obligation of each of the COMPANIES and
Seacross.
6.29 Relations with Governments. Neither of the COMPANIES has made,
--------------------------
offered or agreed to offer anything of value to any governmental official,
political party or candidate for government office nor has either of the
COMPANIES otherwise taken any action which would cause either of the COMPANIES
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 STOCKHOLDERS
become aware of any fact or circumstance which would change a representation or
warranty of STOCKHOLDERS in this Agreement or any representation made on behalf
of either of the COMPANIES, STOCKHOLDERS shall promptly give notice of such fact
or circumstance to USFLORAL. However, such notification shall not relieve either
of the COMPANIES or STOCKHOLDERS of their respective obligations under this
Agreement, and, at the sole option of USFLORAL, the truth and accuracy of any
and all warranties and representations of STOCKHOLDERS, at the date of this
Agreement and at the closing, shall be a precondition to the consummation of
this transaction.
6.31 Ownership. The STOCKHOLDERS own beneficially and of record all of
---------
the shares of FLOWTRAD Stock identified on Annex II as being owned by such
STOCKHOLDERS. Further, FLOWTRAD owns all of the FT Stock. The conversion of
FLOWTRAD Stock into USFLORAL Stock and cash pursuant to the provisions of this
Agreement will transfer to USFLORAL valid title in the shares of FLOWTRAD Stock
owned by such STOCKHOLDERS, free and clear of all liens, encumbrances and claims
of every kind.
-17-
<PAGE>
7. REPRESENTATIONS OF USFLORAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, USFLORAL and NEWCO, jointly and severally, represent to
STOCKHOLDERS as follows:
7.1 Due Organization. USFLORAL and NEWCO are corporations 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, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted except the states where the failure to be so authorized, qualified or
licensed would not have a Material Adverse Effect on their respective
businesses. True, complete and correct copies of the Certificates of
Incorporation (certified by the Secretary of State of the State of Delaware) and
the Bylaws, as amended, of USFLORAL and NEWCO (certified by the Secretary of the
respective corporations) have heretofore been delivered by USFLORAL to
STOCKHOLDERS.
7.2 USFLORAL Stock. The USFLORAL Stock to be delivered to 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 set forth in Section 16, will be legally equivalent in all respects to
the USFLORAL Stock issued and outstanding as of the date hereof or to be issued
in the IPO. 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 Robert Poirier or Jonathan Ledecky (i)
have registration rights with respect to USFLORAL Stock that are superior to
registration rights that the STOCKHOLDERS have, or (ii) will have the right to
include any USFLORAL Stock in the IPO.
7.3 Authorization. The representatives of USFLORAL and NEWCO executing this
-------------
Agreement have the corporate authority to enter into and bind USFLORAL and NEWCO
by the terms of this Agreement. USFLORAL and NEWCO have full legal right, power
and authority to enter into this Agreement and have the full legal right, power
and authority to enter into the Merger.
7.4 Validity of Obligations. The execution and delivery of this Agreement by
-----------------------
USFLORAL and NEWCO and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of USFLORAL and
by the Board of Directors and the stockholder of NEWCO, and this Agreement has
been duly and validly authorized by all necessary corporate action and is a
legal, valid and binding obligation of each of USFLORAL and NEWCO.
7.5 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:
-18-
<PAGE>
(i) conflict with, or result in a breach or violation of, the Certificate
of Incorporation or Bylaws of either USFLORAL or NEWCO,
(ii) materially conflict with, or result in a material default (or
constitute a default but for any requirement of notice or lapse of time or
both) under any document, agreement or other instrument to which either
USFLORAL or NEWCO is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any of USFLORAL'S or NEWCO's properties
pursuant to (A) any law or regulation to which USFLORAL or NEWCO, or any of
their property is subject, or (B) any judgment, order or decree to which
USFLORAL or NEWCO is bound or any of their property is subject;
(iii) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFLORAL or
NEWCO; or
(iv) require any filing or other notice under the Hart-Scott-Rodino
Antitrust Improvement Act.
7.6 Other Agreements. Prior to the consummation of the Merger, USFLORAL and
----------------
NEWCO have no material properties or assets and are not party to any contracts
other than this Agreement, the letter of intent between USFLORAL, certain of the
STOCKHOLDERS and the COMPANIES, certain employment agreements with officers of
USFLORAL and those agreements and letters of intent listed on Schedule 7.6
hereof.
7.7 Reasonable and Adequate Capital. On the Merger Effective Date, the
-------------------------------
Surviving Corporation will have an amount of capital which is reasonable in
light of the business purposes of the Surviving Corporation and adequate to
enable the Surviving Corporation to achieve its business purposes.
8. COVENANTS PRIOR TO CLOSING
8.1 Access and Cooperation. Between the date of this Agreement and the
----------------------
Closing Date, the COMPANIES will afford to the officers and authorized
representatives of USFLORAL access during normal business hours to all of the
COMPANIES' sites, properties, books and records and will furnish USFLORAL with
such additional financial and operating data and other information as to the
business and properties of the COMPANIES as USFLORAL may from time to time
reasonably request in writing. The COMPANIES 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.
-19-
<PAGE>
8.2 Conduct of Business. Between the Balance Sheet Date and the Merger
-------------------
Effective Date, STOCKHOLDERS will cause each of the COMPANIES to:
(i) carry on their business in substantially the same manner as they have
heretofore and not introduce any material new method of management, operation
or accounting;
(ii) maintain their 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 their material obligations under agreements relating
to or affecting their assets, properties or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) use their best efforts to maintain and preserve their business
organization intact, retain their present employees and maintain their
relationships with suppliers, customers and others having business relations
with either of the COMPANIES;
(vi) maintain compliance with all material permits, laws, rules and
regulations and any consent orders of any court or federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction; and
(vii) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments without the written consent of USFLORAL.
8.3 Prohibited Activities. Between the Balance Sheet Date and the Merger
---------------------
Effective Date, neither of the COMPANIES will, without prior written consent of
USFLORAL:
(i) make any change in their Articles or Certificate of Incorporation or
Bylaws;
(ii) issue any securities, options, warrants, calls, conversion rights or
commitments relating to their securities of any kind;
(iii) declare or pay any dividend or make any distribution in respect of
their stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of their stock;
(iv) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures in excess of $200,000, except as
contemplated by this Agreement;
-20-
<PAGE>
(v) increase the compensation payable or to become payable to any officer,
director, employee, agent or the STOCKHOLDERS other than ordinary salary
increases (and tax payment distribution) 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, other than those in existence on the date hereof;
(vii) sell, assign, lease or otherwise transfer or dispose of any property
or equipment, except in the normal course of business and except for the
disposition of UltraFlora in accordance with Section 8.5 hereof;
(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 their
business or prohibited hereunder except for the disposition of UltraFlora and
except as set forth in the agreements to be executed prior to the Closing Date
(with the prior consent of USFLORAL) with UltraFlora for the conduct of its
business upon the premises of FT including, but not limited to, the sharing of
assets, facilities and personnel at no greater than the current allocation of
expenses.
8.4 Supplier Approval. Prior to the Closing Date, each of the COMPANIES 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 UltraFlora Corporation. Immediately prior to the Closing, FT agrees to
----------------------
sell all of its shares of UltraFlora to Seacross (or its assigns), and Seacross
agrees to purchase such shares, for an aggregate purchase price of $2,052,632,
payable in the form of a promissory note which shall be due and payable in full
immediately after the Closing. Seacross agrees that $2,052,632 of the cash
portion of the Consideration received by it in the Merger shall be held in
escrow for payment of such note (in the manner as FT and Seacross shall mutually
agree). Seacross agrees to reimburse FT the amount, if any, of capital gains
tax liability incurred by FT with respect to such sale of
-21-
<PAGE>
UltraFlora in excess of $478,714. The parties agree that on the two-year
anniversary of the Closing Date (i) Multiflora C.I., S.A. ("Multiflora") may
increase its charges to FT for administrative, quality control and public
relations services in Colombia from $0.50 per box by the percentage increase, if
any, of the Consumers Price Index for all Urban Consumers, U.S. City Average,
for All Items, as published in the Bureau of Labor Statistics of the Department
of Labor (the "CPI"), from the Closing Date; and (ii) FT may increase its
charges for services provided to UltraFlora (and its subsidiary) in the United
States by the percentage increase, if any, in the CPI from the Closing Date.
8.6 No Shop. None of the STOCKHOLDERS, the COMPANIES nor 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 of the COMPANIES or a merger, consolidation or
business combination of the COMPANIES.
8.7 Notification of Certain Matters. Each of the STOCKHOLDERS and each of the
-------------------------------
COMPANIES shall give prompt notice to USFLORAL of (i) the occurrence or non-
occurrence of any event known to such STOCKHOLDERS or such COMPANIES the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Section 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or Merger Effective Date
and (ii) any material failure of any STOCKHOLDERS or either of the COMPANIES 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 of the STOCKHOLDERS 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
-22-
<PAGE>
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 Effect to the COMPANIES taken as a whole 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 he or it 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.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of STOCKHOLDERS hereunder are subject to the satisfaction on
or prior to the Closing Date (or such earlier date specified below) of the
following conditions:
9.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of USFLORAL and NEWCO contained in Section 7
shall be accurate as of the Closing Date as though such representations and
warranties had been made as of such times; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by USFLORAL and
NEWCO on or before the Closing Date shall have been duly complied with and
performed; and a certificate to the foregoing effect dated the Merger Effective
Date and signed by the President or any Vice President of USFLORAL shall have
been delivered to STOCKHOLDERS.
9.2 No Litigation. No action or proceeding before a court or any other
-------------
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by USFLORAL of the FLOWTRAD Stock and no
governmental agency or body shall have taken any other action or made any
request of the COMPANIES as a result of which the management of either of the
COMPANIES deems it inadvisable to proceed with the transactions hereunder.
9.3 Employment Agreements. The COMPANY shall have executed and delivered an
---------------------
Employment Agreement with Gustavo Moreno in the form of Annex III attached
hereto.
9.4 Opinion of Counsel. STOCKHOLDERS shall have received an opinion from
------------------
Morgan, Lewis & Bockius LLP, counsel for USFLORAL, dated the Closing Date, in
form and substance satisfactory to STOCKHOLDERS, to the effect that:
-23-
<PAGE>
(i) USFLORAL and NEWCO have been duly organized and are validly existing
in good standing under the laws of the State of Delaware;
(ii) this Agreement has been duly authorized, executed and delivered by
USFLORAL and NEWCO and constitutes a valid and binding agreement of USFLORAL
and NEWCO enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting
the rights of creditors and except (X) as the same may be subject to the
effect of general principles of equity and (Y) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein; and
(iii) the shares of USFLORAL Stock to be received by the STOCKHOLDERS on
the Merger Effective Date shall be duly authorized, fully paid and
nonassessable.
9.5 Registration Statement. USFLORAL shall have filed with the Securities and
----------------------
Exchange Commission ("SEC") a registration statement on Form S-1 covering the
offer and sale of shares of USFLORAL Stock (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. Prior to
effectiveness, STOCKHOLDERS shall have the right to review and comment upon the
Registration Statement for accuracy with respect to disclosures concerning the
COMPANIES and the STOCKHOLDERS.
9.6 Market Capitalization. The aggregate post closing market capitalization
---------------------
of USFLORAL (determined by multiplying the number of shares of USFLORAL Stock
outstanding immediately subsequent to the Merger Effective Date by the initial
price to the public in the IPO) shall be not less than $50 million.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF USFLORAL AND NEWCO
The obligations of USFLORAL and NEWCO hereunder are, at their option, subject
to the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions:
10.1 Representations and Warranties; Performance of Obligations. The
----------------------------------------------------------
representations and warranties of the STOCKHOLDERS contained in Section 6 shall
be accurate as of the Closing 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 the COMPANIES and each of
the STOCKHOLDERS 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 the STOCKHOLDERS and the President or any Vice
President of each of the COMPANIES and Seacross shall have been delivered to
USFLORAL.
-24-
<PAGE>
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 FLOWTRAD 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 each of the COMPANIES as of the month ended immediately prior to the Closing
Date and the unaudited statements of income, cash flow and stockholder's equity
of each of the COMPANIES for the periods then ended, disclosing no material
adverse change in the financial condition of the COMPANIES taken as a whole or
the results of their operations from the financial statements originally
furnished by the COMPANIES as set forth in Schedule 6.9.
10.4 No Material Adverse Change. There shall not have been any Material
--------------------------
Adverse Effect on the COMPANIES taken as a whole, and neither of the COMPANIES
shall have suffered any material loss or damages to any of their 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 either of
the COMPANIES to conduct their business; and USFLORAL shall have received on the
Closing Date a certificate signed by STOCKHOLDERS to such effect.
10.5 Regulatory Review. USFLORAL, through its authorized
-----------------
representatives, shall have completed a satisfactory review of the practices and
procedures of each of the COMPANIES 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 operations of each
of the COMPANIES; which review reflects compliance in all material respects with
all applicable laws governing the COMPANIES, 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 of the COMPANIES from any and all claims of STOCKHOLDERS against
the COMPANIES, exclusive of continuing indemnification rights which STOCKHOLDERS
may have for third-party claims against them (other than claims in connection
with which STOCKHOLDERS is obligated to indemnify USFLORAL or the Surviving
Corporation pursuant to Article 12 hereof).
10.7 Employment Agreements. Gustavo Moreno shall have executed and
---------------------
delivered an Employment Agreement in the form of Annex III attached hereto.
-25-
<PAGE>
10.8 Opinion of Counsel. USFLORAL shall have received an opinion from
------------------
Holland & Knight LLP, counsel to the STOCKHOLDERS, dated the Closing Date, in
form and substance satisfactory to USFLORAL, to the effect that with respect to
each of the COMPANIES:
(i) the COMPANIES have been duly organized and are validly existing in good
standing under the laws of the States of Delaware and Florida;
(ii) the authorized and outstanding capital stock of the COMPANIES 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 the
STOCKHOLDERS;
(iii) to the knowledge of such counsel, neither of the COMPANIES has any
outstanding options, warrants, calls, conversion rights or other commitments
of any kind to issue or sell any of their capital stock;
(iv) this Agreement has been duly authorized, executed and delivered by
each of the COMPANIES and the STOCKHOLDERS and constitutes a valid and binding
agreement of each of the COMPANIES and the STOCKHOLDERS enforceable in
accordance with its terms, except as such enforceability may be subject to
bankruptcy, moratorium, insolvency, reorganization, arrangement and other
similar laws relating to or affecting the rights of creditors and except (X)
as the same may be subject to the effect of general principles of equity and
(Y) that no opinion need be expressed as to the enforceability of
indemnification provisions included herein;
(v) except to the extent set forth on Schedules 6.10 and 6.20, to the
knowledge of such counsel, there are no claims, actions, suits or proceedings
pending, or threatened against or affecting either the COMPANIES, 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;
(vi) to the knowledge of such counsel, no notice to, consent,
authorization, approval or order of any court or governmental agency or body
or of any other third party is required in connection with the execution,
delivery or consummation of this Agreement by the STOCKHOLDERS or for the
transfer to USFLORAL of the FLOWTRAD Stock; and
(vii) 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 either the COMPANIES' Articles
or Certificates of Incorporation or the Bylaws of the COMPANIES or of any
lease, instrument, license, permit or any other agreement to which either of
the COMPANIES is a party or by which the COMPANIES or any STOCKHOLDERS are
bound.
-26-
<PAGE>
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 FLOWTRAD 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 Closing Date,
setting forth all material liabilities and obligations of each of the COMPANIES
arising since the Balance Sheet Date.
10.11 Additional Contracts. STOCKHOLDERS shall have delivered to USFLORAL
--------------------
a schedule (Schedule 10.11), dated the Closing Date, showing all material
contracts and agreements, together with copies thereof, entered into by each of
the COMPANIES 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 Secretary of State of Florida and Delaware and,
unless waived by USFLORAL, in each state in which the COMPANIES are authorized
to do business, showing that each of the COMPANIES is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for the COMPANIES 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 the shares of USFLORAL Stock covered thereby.
10.14 Repayment of Indebtedness. Prior to the Closing Date, the
-------------------------
STOCKHOLDERS shall have repaid the COMPANIES in full all amounts owing by the
STOCKHOLDERS.
10.15 Pretax Income. FLOWTRAD, on a consolidated basis with FT, shall
-------------
have had auditable adjusted average yearly pretax income of $1,200,000 for the
three fiscal years ending December 31, 1994, 1995 and 1996, and the pretax
income of FLOWTRAD, on a consolidated basis with FT, for the year ending
December 31, 1997 shall be projected to be at least $1,200,000 based on
annualization of the pretax income of FLOWTRAD for the year to date as of the
month ended immediately prior to the Closing Date. For purposes of this Section
10.15, the amount of bonuses paid in excess of base salaries shall be added back
to pretax net income.
-27-
<PAGE>
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 COMPANIES, 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. In the event any of the
STOCKHOLDERS are called upon to make any payment under any such guarantee after
the Merger Effective Date, USFLORAL will promptly reimburse such STOCKHOLDER the
amount of any such payment.
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 sum 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's President and acceptable to
USFLORAL) in accordance with USFLORAL'S policies, and authorized and issued
under the terms of USFLORAL'S Amended and Restated 1997 Long-Term Incentive
Plan. USFLORAL will cause its Amended and Restated 1997 Long-Term Incentive
Plan to be in effect on the Closing Date. The USFLORAL stock options shall be
offered to the key employees of such Surviving Corporation on the same terms
offered to the key employees of the surviving corporations in the other
concurrent mergers of USFLORAL.
11.3 Exchange Act Obligations. For at least two years subsequent to the
------------------------
Merger Effective Date, USFLORAL agrees to timely file all documents required to
be filed with the Securities and Exchange Commission pursuant to Sections 13 and
14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
11.4 Certain Transactions. USFLORAL will cause its existing stockholders
--------------------
to participate, within the standards established by Rev. Pro. 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) other persons acquiring stock in the
IPO and (iii) the persons acquiring stock as a result of the Merger and other
concurrent mergers to possess at least 80% of the outstanding stock of USFLORAL.
11.5 Piggy-Back Registrations. If at any time after the expiration of
------------------------
the restrictions contained in Section 16 USFLORAL shall determine to register
shares of USFLORAL Stock for its own account or the account of others under the
1933 Act (other than on Form S-8 or Form S-4 or their then equivalents relating
to shares of USFLORAL Stock to be issued solely in connection with any
acquisition of any entity or business or shares of USFLORAL Stock issuable in
connection with stock option or other employee benefit plans, and other than any
"shelf" registration statement
-28-
<PAGE>
relating to securities to be issued by USFLORAL), then it shall send to each
holder of shares of USFLORAL Stock issued in the Merger ("Registrable Shares")
(all such security holders 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's requests to be registered, except that if, in connection with any
offering involving an underwriting of USFLORAL Stock to be issued by USFLORAL,
the managing underwriter shall impose a limitation on the number of shares of
such USFLORAL Stock which may be included in the registration statement because,
in its judgment, such limitation is necessary to effect an orderly public
distribution, then USFLORAL shall be obligated to include in such registration
statement only such limited portion of the Registrable Shares with respect to
which such Holder has requested inclusion hereunder; provided, however, that
-------- -------
USFLORAL shall not so exclude any Registrable Shares unless it has first
excluded all securities to be offered and sold by directors, officers or other
employees of USFLORAL or by shareholders who do not have contractual, incidental
rights to include such securities. Except as provided in the previous sentence
of this Section 11.5, 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 USFLORAL 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 being capable of sale within a three-month period in
accordance with the volume and manner-of-sale limitations of Rule 144 under the
1933 Act.
12. INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
12.1 General Indemnification by STOCKHOLDERS. Subject to the limitations
---------------------------------------
contained in Section 12.5 hereof, each of the STOCKHOLDERS, jointly and
severally, covenants and agrees that they will indemnify, defend, protect and
hold harmless USFLORAL, NEWCO and the Surviving Corporation and their respective
officers, stockholders, directors, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement until the Expiration Date (as defined in Section 12.6) from and
against all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by USFLORAL,
NEWCO or the Surviving Corporation as a result of or arising from (i) any breach
of the representations and warranties made by STOCKHOLDERS set forth herein or
on the schedules or certificates delivered in connection herewith, (ii) any
nonfulfillment of any agreement on the part of STOCKHOLDERS or the COMPANIES
under this Agreement prior to the Merger Effective Date 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 a material fact relating to the
COMPANIES or STOCKHOLDERS, and provided to USFLORAL or its counsel by the
COMPANIES or 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
-29-
<PAGE>
of or based upon any omission or alleged omission to state therein a material
fact relating to the COMPANIES or STOCKHOLDERS required to be stated therein or
necessary to make the statements therein not misleading, and not provided to
USFLORAL or its counsel by the COMPANIES or STOCKHOLDERS, provided, however,
that such indemnity shall not inure to the benefit of USFLORAL, NEWCO or the
Surviving Corporation to the extent that (i) such untrue statement (or alleged
untrue statement) was made in, or omission (or alleged omission) occurred in,
any preliminary prospectus and STOCKHOLDERS provided, in writing, corrected
information to USFLORAL for inclusion in the final prospectus, and such
information was not so included or (ii) such untrue statement (or alleged untrue
statement) or omission (or alleged omission) was corrected in writing by the
STOCKHOLDERS prior to the effectiveness of the Registration Statement and such
correction was not made in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto.
12.2 Specific Indemnification by STOCKHOLDERS. Subject to the
----------------------------------------
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the Schedules or Exhibits, and notwithstanding any
investigation by USFLORAL or NEWCO, each of the STOCKHOLDERS, jointly and
severally, covenants and agrees that they will indemnify, defend, protect and
hold harmless USFLORAL, NEWCO and the Surviving Corporation and their respective
officers, stockholders, directors, divisions, subdivisions, affiliates,
subsidiaries, parents, agents, employees, successors and assigns at all times
from and after the date of this Agreement, from and against all claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, penalties, costs
and expenses whatsoever (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by USFLORAL,
NEWCO or the Surviving Corporation as a result of or incident to: (a) the
existence of liabilities of either of the COMPANIES in excess of the liabilities
set forth on Schedule 6.10, but only to the extent of such excess (the duties
referred to in 12.2(c) shall not be deemed liabilities subject to this clause
12.2(a)), with the parties acknowledging and agreeing (i) that 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 COMPANIES 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 his or its 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; (b) all liability resulting from the litigation
matters listed on Schedule 6.20; and (c) amounts due and payable for anti-
dumping duties for periods prior to March 1,1997 (if the aggregate amount of all
prior periods is finally determined prior to the third anniversary of the Merger
Effective Date) in amounts in excess of (i) the amount, if any, by which the
aggregate shareholders' equity of FLOWTRAD (on a consolidated basis with FT as
determined in accordance with GAAP) as of the Merger Effective Date exceeds
$2,000,000, (ii) the amount accrued on the balance sheet of FT as an accounts
payable for anti-dumping duties as of the Merger Effective Date and (iii) any
refunds of anti-dumping duties received from the U.S. Customs Service.
-30-
<PAGE>
12.3 Indemnification by USFLORAL and NEWCO. Subject to the limitations
-------------------------------------
contained in Section 12.5 hereof, USFLORAL and NEWCO, jointly and severally,
covenant and agree that they will indemnify, defend, protect and hold harmless
STOCKHOLDERS and their respective heirs, executors, personal representatives 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, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by
STOCKHOLDERS and their respective heirs, executors, personal representatives and
assigns as a result of or arising from (i) any breach of the representations and
warranties made by USFLORAL and NEWCO set forth herein or on the schedules or
certificates attached hereto, (ii) any nonfulfillment of any agreement on the
part of USFLORAL or NEWCO under this Agreement, (iii) any liabilities which
STOCKHOLDERS may incur due to USFLORAL'S failure to be responsible for the
liabilities and obligations of the Surviving Corporation (except to the extent
that USFLORAL has claims against STOCKHOLDERS by reason of such liabilities); or
(iv) any liability under the 1933 Act, the Exchange Act or other federal or
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 (other
than those referred to in clause (iii) of Section 12.1) 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
(other than those referred to in clause (iii) of Section 12.1) required to be
stated therein or necessary to make the statements therein not misleading.
12.4 Third-Person Claims. Promptly after any party hereto (hereinafter
-------------------
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement (a "Third Person") or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party
written notice of such claim or the commencement of such action or proceeding.
Such notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have right to
defend and settle, at its own expense and by its own counsel, any such matter so
long as the Indemnifying Party pursues the same in good faith and diligently.
If the Indemnifying Party undertakes to defend or settle, it shall promptly
notify the Indemnified Party of its intention to do so, and the Indemnified
Party shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but
shall not be limited to, furnishing the Indemnifying Party with any books,
records or information reasonably requested by the Indemnifying Party that are
in the Indemnified Party's possession or control. Notwithstanding the foregoing,
the Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel); provided that the
Indemnifying Party's counsel shall always be lead counsel and shall determine
all litigation and settlement steps, strategy and the like. After the
Indemnifying Party has notified the
-31-
<PAGE>
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 and except as provided in
the immediately preceding sentence. 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. Any final
and complete settlement of a Third-Person claim accepted by the Indemnifying
Party shall include a release of the Indemnified Party from all Third-Person
claims and actions or proceedings by the Third Person.
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 the amount equal to 2% of the market
value of the Consideration described on Annex II hereto (USFLORAL Stock being
valued for this purpose at the Price to Public of such shares in the IPO), at
which time an Indemnified Party shall be entitled to seek indemnification for
all claims not previously asserted pursuant to this Section. For purposes of
the preceding sentence, USFLORAL, NEWCO and the Surviving Corporation shall be
considered to be a single Indemnifying and Indemnified Party and STOCKHOLDERS
shall be considered to be a single Indemnifying and Indemnified Party.
Notwithstanding any other term of this Agreement, in no event shall the
STOCKHOLDERS 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 the STOCKHOLDERS under this Agreement.
12.6 Survival of Representations and Warranties. The parties agree that
------------------------------------------
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of 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
-32-
<PAGE>
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 the 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); (iv) the representations and
warranties which serve as a basis for the indemnity obligations of STOCKHOLDERS
under Sections 12.2(a) and (b) shall survive the Merger Effective Date, without
limitation; (v) the indemnity obligations of the STOCKHOLDERS under Section
12.2(c) shall survive for a period of three years from the Merger Effective
Date; and (vi) solely for the purposes of Section 12.3(iv) hereof, and solely to
the extent that STOCKHOLDERS actually incur 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 (vi).
12.7 Sole Remedies. The provisions of this Section 12 shall be the
-------------
exclusive basis for assertion of claims against, or the imposition of liability
on, the STOCKHOLDERS in connection with this Agreement and/or the transactions
contemplated hereby, whether based on contract, tort, statute, or otherwise,
except to the extent that any such claim or liability is based on intentional
misstatement, fraud or misrepresentation by the STOCKHOLDERS.
13. TERMINATION OF AGREEMENT
13.1 Termination by the Parties. USFLORAL or STOCKHOLDERS may, by notice
--------------------------
in the manner hereinafter provided on or before the Closing Date, terminate this
Agreement 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 has not been consummated on
or prior to December 31, 1997. During the period from the Closing Date to the
Merger Effective Date, this Agreement may only be terminated by the parties as
provided in Section 5 hereof.
13.2 Liquidated Damages. If (i) the STOCKHOLDERS terminate this
------------------
Agreement after the satisfaction of the conditions set forth in Article 9, (ii)
USFLORAL terminates this Agreement after the satisfaction of the conditions set
forth in Article 10, (iii) the Merger fails to occur because of the default of
the COMPANIES or the STOCKHOLDERS or (iv) the Merger fails to occur because of
the default of USFLORAL, then, in the event of (i) or (iii), in addition to the
other remedies available to USFLORAL in equity or expressly provided for in this
Agreement, STOCKHOLDERS shall pay to USFLORAL the sum of $500,000 as liquidated
damages; or, in the
-33-
<PAGE>
event of (ii) or (iv), in addition to the other remedies available to the
STOCKHOLDERS in equity or expressly provided for in this Agreement, USFLORAL
shall pay to the STOCKHOLDERS the aggregate sum of $500,000 as liquidated
damages. It is hereby agreed that the damaged party's damages in the event of a
termination or default by the other party hereunder are uncertain and impossible
to ascertain and that the foregoing constitutes a reasonable liquidation of such
damages and is intended not as a penalty but as liquidated damages.
14. NONCOMPETITION
14.1 Prohibited Activities. STOCKHOLDERS agree that for a period of two
---------------------
years following the Merger Effective Date, they shall not:
(i) except as otherwise provided in this Section 14, engage, as an officer,
director, shareholder, owner, partner, joint venturer, or in a managerial
capacity, whether as an employee, independent contractor, consultant or
advisor, or as a sales representative, in any business selling any products or
services in direct competition with the Surviving Corporation or USFLORAL that
involves the importing, brokerage, shipping or marketing of floral products,
or any business engaging in the consolidation of the floral industry within
the United States;
(ii) call upon any person who is, at that time within the United States, 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) except as otherwise provided in this Section 14, 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, either of
the COMPANIES or either of the COMPANIES' subsidiaries within the United
States for the purpose of soliciting or selling floral products within the
United States;
(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, either of the COMPANIES or either
of the COMPANIES' Subsidiaries; or
(v) disclose customers, whether in existence or proposed, of either the
COMPANIES (or either the COMPANIES' Subsidiaries) to any person, firm,
partnership, corporation or business (other than UltraFlora, Multiflora or
Artistry in Bloom, Inc.) for any reason or purpose whatsoever.
-34-
<PAGE>
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit STOCKHOLDERS from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market or (ii) engaging
in any activity to which USFLORAL shall have provided its prior written consent.
In addition, the foregoing covenants in this Section 14 shall not be deemed to
prohibit any of the STOCKHOLDERS, who, as of the date hereof, has an interest,
as an owner, operator, creditor, employee or otherwise, in (i) a retail floral
business independent (except as a customer) of the COMPANIES or (ii) in
UltraFlora, Artistry in Bloom, Inc. (or a new entity which replaces Artistry in
Bloom, Inc. and conducts the same type of business as Artistry in Bloom, Inc.,
herein called the "Replacer") and Multiflora, as presently conducted (or to be
conducted by the Replacer), from continuing to maintain such interest. However,
the STOCKHOLDERS may not maintain any interest in UltraFlora, Artistry in Bloom
Company or Multiflora if any such company is in direct competition with the
COMPANIES in the importation of flowers into the United States (other than
UltraFlora's activities as an importer of record for distribution to
supermarkets, convenience stores and mass market retailers).
14.2 Damages. Because of the difficulty of measuring economic losses to
-------
USFLORAL and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFLORAL and the Surviving Corporation for which they would
have no other adequate remedy, STOCKHOLDERS agree that, in the event of a breach
by them of the foregoing covenant, the covenant may be enforced by USFLORAL or
the Surviving Corporation by, without limitation, injunctions and restraining
orders.
14.3 Reasonable Restraint. It is agreed by the parties that the
--------------------
foregoing covenants in this Section 14 impose a reasonable restraint on
STOCKHOLDERS in light of the activities and business of USFLORAL on the date of
the execution of this Agreement and the current and future plans of USFLORAL and
the Surviving Corporation (as successor to the business of the COMPANIES).
14.4 Severability; Reformation. The covenants in this Section 14 are
-------------------------
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
14.5 Independent Covenant. All of the covenants in this Section 14 shall
--------------------
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of STOCKHOLDERS
against either of the COMPANIES, any COMPANIES' Subsidiary, the Surviving
Corporation or USFLORAL, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement of such covenants. It is
specifically agreed that the period of two years stated above, shall be computed
by excluding from such computation any time during which the STOCKHOLDERS are in
violation of any provision
-35-
<PAGE>
of this Section 14 and any time during which there is pending in any court of
competent jurisdiction any action (including any appeal from any judgment)
brought by any person, whether or not a party to this Agreement, in which action
USFLORAL or the Surviving Corporation seeks to enforce the agreements and
covenants of STOCKHOLDERS or in which any person contests the validity of such
agreements and covenants or their enforceability or seeks to avoid their
performance or enforcement, unless in each such case the STOCKHOLDER prevails in
such action.
14.6 Materiality. STOCKHOLDERS hereby agree that this covenant contained
-----------
in this Article 14 is a material and substantial part of this transaction.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. STOCKHOLDERS recognize and acknowledge that they have
------------
in the past, currently have, and in the future may possibly have, access to
certain confidential information of the 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' business. Subject to the
last sentence of Section 14.1, STOCKHOLDERS agree that they will not disclose
any confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except to authorized
representatives of USFLORAL, unless such information becomes known to the public
generally through no fault of STOCKHOLDERS. In the event of a breach or
threatened breach by STOCKHOLDERS of the provisions of this Section 15, USFLORAL
and the Surviving Corporation shall be entitled to an injunction restraining
STOCKHOLDERS from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting USFLORAL and the
Surviving Corporation from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
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 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' business. USFLORAL agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the STOCKHOLDERS. In the event of
a breach or threatened breach by USFLORAL of the provisions of this Section,
STOCKHOLDERS shall be entitled to an injunction restraining USFLORAL from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting STOCKHOLDERS from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 Damages. Because of the difficulty of measuring economic losses as
-------
a result of the breach of the foregoing covenants in this Article 15, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, USFLORAL, the Surviving Corporation
and STOCKHOLDERS agree that, in the event of a breach
-36-
<PAGE>
of any such covenant, the covenant may be enforced against them by injunctions
and restraining orders.
16. LOCK-UP AGREEMENTS
In connection with the IPO, for good and valuable consideration, the
STOCKHOLDERS hereby irrevocably agree that for a period of 180 days after the
date of the effectiveness (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 received as a result of the Merger or
any securities received as a result of the Merger 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 received as a result of the
Merger, whether or not any such transaction described in clause (i) or (ii)
above is to be settled by delivery of USFLORAL Stock received as a result of the
Merger or such other securities, in cash or otherwise without the prior written
consent of the lead underwriter of the IPO. Each of the STOCKHOLDERS agrees
that the foregoing shall be binding upon their 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 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 of the STOCKHOLDERS 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 and except
as contemplated by Section 4.2 hereof.
17.2 Economic Risk; Sophistication. Each of the STOCKHOLDERS represents
-----------------------------
and warrants that he or it is 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. Each of the STOCKHOLDERS further represents and
warrants that he or it (i) fully understands the
-37-
<PAGE>
nature, scope and duration of the limitations on transfer contained in this
Agreement and (ii) has such knowledge and experience in financial and business
matters that he or it is capable of evaluating the merits and risks of the
proposed investment and therefore has the capacity to protect his or its own
interests in connection with the acquisition of the USFLORAL Stock. Each
STOCKHOLDER represents and warrants that he or it has 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. Each STOCKHOLDER has asked any and all questions in
the nature described in the preceding sentence and all questions have been
answered to his or its 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:
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 each of the COMPANIES 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.
-38-
<PAGE>
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 among STOCKHOLDERS, the
COMPANIES, USFLORAL and NEWCO and supersede any prior agreement and
understanding relating to the subject matter of this Agreement (other than that
certain letter agreement among USFLORAL, the COMPANIES and the STOCKHOLDERS
dated July 23, 1997 which remains in full force and effect). This Agreement,
upon execution, constitutes a valid and binding agreement on the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by STOCKHOLDERS (subject to the limitations set
forth below), the COMPANIES, USFLORAL and NEWCO acting through their respective
officers, duly authorized by their respective Boards of Directors; provided,
that the STOCKHOLDER who owns a majority of the outstanding shares of capital
stock of FLOWTRAD shall have the authority to approve and execute any amendment
to this Agreement on behalf of all of the STOCKHOLDERS and without the necessity
of such majority STOCKHOLDER obtaining consent or authorization from any other
STOCKHOLDER, unless such amendment relates to any representation of warranty
made by a STOCKHOLDER other than such majority STOCKHOLDER which may only be
amended by the written agreement of such person.
19.4 Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19.5 Brokers and Agents. Each party represents and warrants that it
------------------
employed no broker or agent in connection with this transaction and agrees to
indemnify the other against all loss, cost, damages or expense arising out of
claims for fees or commissions of brokers employed or alleged to have been
employed by such indemnifying party.
19.6 Expenses. Whether or not the transactions herein contemplated shall
--------
be consummated, USFLORAL will pay the fees, expenses and disbursements of
USFLORAL and NEWCO and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto. Whether or not the transactions herein contemplated shall
be consummated, the COMPANIES will pay the fees, expenses and disbursements of
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 STOCKHOLDERS and the COMPANIES
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 as follows:
-39-
<PAGE>
(a) If to USFLORAL or NEWCO, addressed to them at:
3500 Whitehaven Parkway
Washington, D.C.
Attention: Robert Poirier
with a required copy to:
John S. Fletcher, Esq.
Morgan, Lewis & Bockius LLP
5300 First Union Financial Center
200 South Biscayne Boulevard
Miami, Florida 33131-2339
(b) If to STOCKHOLDERS, addressed to them at:
1950 Northwest 89th Place
Miami, Florida 33172
with a required copy to:
Bernard Jacobson, Esq.
Holland & Knight LLP
701 Brickell Avenue
Miami, Florida 33131
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.
-40-
<PAGE>
19.12 Remedies Cumulative. No right, remedy or election given by any
-------------------
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 Captions. The headings of this Agreement are inserted for convenience
--------
only and shall not constitute a part of this Agreement or be used to construe or
interpret any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
"USFLORAL"
USA FLORAL PRODUCTS, INC.
By /s/ Robert J. Poirier
---------------------------------------------
Name: Robert J. Poirier
Title: President/CEO
"NEWCO"
FT ACQUISITION CORPORATION
By /s/ Robert J. Poirier
---------------------------------------------
Name: Robert J. Poirier
Title: President
"COMPANIES"
FLOWER TRADING CORPORATION
By /s/ Gustavo Moreno
---------------------------------------------
Name: Gustavo Moreno
Title: President
-41-
<PAGE>
FLOWTRAD CORPORATION N.V.
By /s/ Gustavo Moreno
---------------------------------------------
Name: Gustavo Moreno
Title: President
"STOCKHOLDERS"
/s/ Gustavo Moreno
---------------------------------------------
Gustavo Moreno
/s/ Alvaro McAllister
---------------------------------------------
Alvaro McAllister
SEACROSS TRADING, INC.
By /s/ Alvaro McAllister
---------------------------------------------
Name: Alvaro McAllister
Title: President
-42-
<PAGE>
ANNEXES
ANNEX I [Certificate of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Employment Agreement]
SCHEDULES
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 6.19 [ERISA Matters]
Schedule 6.20 [Conformity with Law]
Schedule 6.22 [Required Consents]
Schedule 6.24 [Changes Since Balance Sheet Date]
Schedule 6.25 [Deposit Accounts; Powers of Attorney]
Schedule 7.6 [Other Agreements]
Schedule 10.10 [Additional Liabilities and Obligations]
Schedule 10.11 [Additional Contracts]
Schedule 11.1 [Guarantees to be Released]
<PAGE>
EXHIBIT 10.9(a)
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into,
effective for all purposes and in all respects as of the 22nd day of April,
1997, by and between U.S.A. FLORAL PRODUCTS, INC., a Delaware corporation (the
"Company"), and ROBERT POIRIER ("Employee").
R E C I T A L S
A. The Company desires to employ Employee in the capacity as Chief
Executive Officer, President and Chairman of the Board of the Company, under the
terms and conditions set forth in this Agreement.
B. Employee desires to be employed by the Company in such capacity, under
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
herein contained and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
1. Employment and Duties.
---------------------
(a) The Company hereby employs Employee as Chief Executive Officer,
President and Chairman of the Board of the Company. As such, Employee shall
have responsibilities, duties and authority reasonably accorded to and expected
of a chief executive officer, president and chairman of the board and will
report directly to the Board of Directors of the Company. Employee hereby
accepts this employment upon the terms and conditions herein contained and
agrees to devote his time, attention and efforts to promote and further the
business of the Company. Employee shall be appointed as a director of the
Company upon the effective date of this Agreement.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the Term of his employment hereunder,
be engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. However, the foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require his services in the operation or affairs of
the companies or enterprises in which such investments are made, nor violate the
terms of paragraph 4 hereof.
2. Compensation. For all services rendered by Employee hereunder, the
------------
Company shall compensate Employee as follows:
<PAGE>
(a) Base Salary. Effective April 1, 1997, the base salary payable to
-----------
Employee shall be at the per annum rate of One Hundred Twenty Thousand Dollars
--- -----
($120,000), payable on a regular basis in accordance with the Company's standard
payroll procedures, but not less than monthly. On at least an annual basis, the
Board of Directors of the Company will review Employee's performance and may
make increases to such base salary if, in its discretion, any such increase is
warranted.
(b) Incentive Bonus Plan. The Board of Directors of the Company will
--------------------
develop a written Incentive Bonus Plan within one hundred and twenty (120) days
of the date hereof setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
Employee will be eligible to participate in any such plan on terms and
conditions determined by the Board.
3. Executive Perquisites and Benefits. Employee shall be entitled to
----------------------------------
receive additional benefits from the Company in such form and to such extent as
specified below:
(a) From and after the effective date of this Agreement, the Company
shall pay Employee's costs for COBRA coverage for Employee and his
dependent family members under the health, hospitalization and/or dental
insurance plans and/or policies (if any) of his immediately previous
employer; provided, that the Company's obligation to pay Employee's Cobra
costs shall cease at such time as Employee and his dependent family members
become eligible to receive coverage under any similar benefit plans adopted
by the Company.
(b) Payment of annual premiums for a long-term disability insurance
policy providing benefits equal to sixty percent (60%) of Employee's annual
base salary for three (3) years following a termination of his employment
due to disability.
(c) Payment of annual premiums for whole life insurance policy issued
on July 25, 1993 by Phoenix Home Life, One American Row, Hartford,
Connecticut 06115, Policy number 2612789, insuring the life of Employee and
benefiting his dependent family members, in an aggregate amount not to
exceed Ten Thousand Dollars ($10,000) per annum, it being understood and
--- -----
agreed that this allowance shall not be increased at any time during the
twelve (12)-month period immediately following the effective date of this
Agreement (unless such an increase is deemed advisable by the Board of
Directors of the Company, in its discretion).
(d) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
-2-
<PAGE>
(e) The Company shall pay for or reimburse Employee up to an amount
equal to Six Thousand Dollars ($6,000) per annum, for expenses incurred by
--- -----
Employee in connection with his use of an automobile in connection with his
employment hereunder.
(f) The Company shall pay for or reimburse Employee up to an amount
equal to Two Thousand Dollars ($2,000) per month, for expenses incurred by
--- -----
Employee in connection with his rental or ownership of living
accommodations.
(g) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board of Directors of the Company and participation in all other
Company-wide employee benefits as available from time to time.
(h) The benefits, payments or reimbursements provided for in this
Section 3 shall be subject to informational reporting and standard
withholding deductions as required by law as determined by the Company in
its reasonable discretion.
4. Non-Competition Agreement.
-------------------------
(a) Employee will not, during the period of his employment by or with
the Company, and, for a period equal to two (2) years following the termination
of his employment under this Agreement, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other person,
persons, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business a principal purpose of which is to engage,
directly or indirectly, in effecting consolidation of ownership (whether
such consolidation occurs by acquisition, merger or otherwise) in the
wholesale and/or retail floral industry;
(ii) call upon any person who is, at that time, an employee of
the Company (including the respective affiliates thereof) in a managerial
capacity for the purpose or with the intent of enticing such employee away
from or out of the employ of the Company (including the respective
affiliates thereof), provided that Employee shall be permitted to call upon
and hire any member of his or her immediate family; or
(iii) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate was
either called upon by the Company (including the respective affiliates
thereof) or for which the Company (including the respective affiliates
thereof) made an acquisition analysis, for the purpose of acquiring such
entity.
-3-
<PAGE>
In the event that the Company fails to succeed in consolidating the wholesale
and/or retail floral industry, as contemplated by the parties hereto, and
Employee's employment is terminated as a result thereof pursuant to paragraph 6
hereof, Employee shall not be bound by the provisions of this paragraph 4(a),
unless Employee's acts or omissions materially contributed to such failure, in
which case, the Employee shall continue to be bound by the covenant in this
paragraph 4(a). No provision of this paragraph 4(a) shall be deemed to prohibit
Employee from acquiring as an investment not more than one percent (1%) of the
capital stock of a competing business, whose stock is traded on a national
securities exchange or on an over-the-counter market.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
covenant, in addition to and not in limitation of any other rights, remedies or
damages available to the Company at law, in equity or under this Agreement, may
be enforced by the Company in the event of the breach or threatened breach by
Employee, by injunctions and/or restraining orders.
(c) It is agreed by the parties that the covenants contained in
paragraphs 4(a) and 4(b) hereof impose a reasonable restraint on Employee in
light of the activities and business of the Company (including the Company's
affiliates) on the date of the execution of this Agreement and the current plans
of the Company (including the Company's affiliates).
(d) The covenants in this paragraph 4 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
herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent that such court deems reasonable,
and the Agreement shall thereby be reformed to reflect the same.
(e) All of the covenants in this paragraph 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of two (2) years stated in paragraph 4(a) hereof, during
which the agreements and covenants of Employee made in this paragraph 4 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 4.
(f) Notwithstanding any of the foregoing, if any applicable law,
judicial ruling or order shall reduce the time period during which Employee
shall be prohibited from engaging in any competitive activity described in
paragraph 4(a) hereof, the period of time for which Employee shall be prohibited
pursuant to paragraph 4(a) hereof shall be the maximum time permitted by law.
However, in the event that the time period specified by paragraph 4(a)
-4-
<PAGE>
hereof shall be so reduced, then, notwithstanding the provisions of paragraph
6(b)(iv) hereof, Employee shall be entitled to receive from the Company his base
salary at the rate then in effect solely for the time period during which the
provisions of paragraph 4(a) hereof shall be enforceable under the provisions of
such applicable law, ruling or order.
5. Place of Performance.
--------------------
(a) Employee understands that he may be requested by the Board to
relocate from his present residence to another geographic location in order to
more efficiently carry out his duties and responsibilities under this Agreement
or as part of a promotion or other increase in duties and responsibilities. In
such event, if Employee agrees to relocate, the Company will pay all relocation
costs to move Employee, his immediate family and their personal property and
effects. Such costs may include, by way of example, but are not limited to,
pre-move visits to search for a new residence, investigate schools or for other
purposes; temporary lodging and living costs prior to moving into a new
permanent residence; duplicate home carrying costs; all closing costs on the
sale of Employee's present residence and on the purchase of a comparable
residence in the new location; and added income taxes that Employee may incur if
any relocation costs are not deductible for income tax purposes. The general
intent of the foregoing is that Employee shall not personally bear any out-of-
pocket costs or expenses as a result of the relocation, with an understanding
that Employee will use his best efforts to incur only those costs or expenses
which are reasonable-and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of the Company and
the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board
to relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 6(b)(iii) hereof.
6. Term; Termination; Rights on Termination.
----------------------------------------
(a) The term of this Agreement shall begin on the date hereof and
continue for twenty-four (24) consecutive months (the "Term").
(b) The Term of this Agreement and Employee's employment hereunder may
be terminated in any one of the followings ways:
(i) Death. The death of Employee shall immediately terminate the
-----
Agreement with no severance compensation due to Employee's estate.
(ii) Disability. If, as a result of incapacity due to physical
----------
or mental illness or injury, Employee shall have been absent from his full-
time duties hereunder for four (4) consecutive months, then thirty (30)
days after written notice to Employee (which notice may occur before or
after the end of such four (4) month period, but which
-5-
<PAGE>
shall not be effective earlier than the last day of such four (4) month
period), the Company may terminate Employee's employment hereunder,
provided that Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his
employment hereunder if his health should become impaired to an extent that
makes the continued performance of his duties hereunder hazardous to his
physical or mental health or his life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to
such effect, and provided, further, that, at the Company's request made
within thirty (30) days of the date of such written statement, Employee
shall submit to an examination by a doctor selected by the Company who is
reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. Subject to
paragraphs 4(g) and 6(e) hereof, in the event this Agreement is terminated
as a result of Employee's disability, Employee shall receive from the
Company the base salary, at the rate then in effect, and the additional
benefits and requirements described in subparagraphs 3(a), (b), (c), (e),
(f) and (h), for whatever time period is remaining under the Term of this
Agreement, payable over the remaining period of the Term and otherwise in
accordance with the provisions of this Agreement.
(iii) Cause. This Agreement shall terminate ten (10) days after
-----
written notice to Employee specifying "cause" therefor. For purposes of
this Agreement, the term "cause" shall mean and refer to: (A) Employee's
willful, material and irreparable breach of this Agreement; (B) Employee's
gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to
cure) of any of Employee's material duties and responsibilities hereunder;
(C) Employee's willful dishonesty, fraud or misconduct with respect to the
business or affairs of the Company which materially and adversely affects
the operations or reputation of the Company; (D) Employee's conviction of a
felony or other crime involving moral turpitude; or (E) chronic alcohol or
illegal drug abuse by Employee. In the event of a termination for cause,
as enumerated above, Employee shall have no right to any severance
compensation.
(iv) Without Cause. At any time after the commencement of
-------------
employment, the Company may, without cause, terminate this Agreement and
Employee's employment hereunder, effective thirty (30) days after written
notice is provided to Employee. Should Employee be terminated by the
Company without cause, subject to paragraphs 4(g) and 6(e) hereof, Employee
shall receive from the Company the base salary at the rate then in effect
at the time of such termination, and the additional benefits and
requirements described in subparagraphs 3(a), (b), (c), (e), (f) and (h),
payable over the two (2) year period following the effective date of such
termination, and otherwise in accordance with the provisions of this
Agreement. If Employee resigns or otherwise terminates his employment
without cause pursuant to this paragraph 6(b)(iv), Employee shall receive
no severance compensation.
-6-
<PAGE>
(c) Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above. All
other rights and obligations of the Company and Employee under this Agreement
shall cease as of the effective date of termination, except that the Company's
obligations under paragraph 10 herein and Employee's obligations under
paragraphs 4, 7, 8, 9 and 11 herein shall survive such termination in accordance
with their terms.
(d) If termination of Employee's employment arises out of the
Company's failure to pay Employee on a timely basis the amounts to which he is
entitled under this Agreement or as a result of any other breach of this
Agreement by the Company, as determined by a court of competent jurisdiction or
pursuant to the provisions of paragraph 16 below, the Company shall pay all
amounts and damages to which Employee may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Employee to enforce his rights hereunder. Further,
none of the provisions of paragraph 4 shall apply in the event this Agreement is
terminated as a result of a breach by the Company.
(e) In the event that Employee secures employment during the period
that any payment is continuing pursuant to the provisions of this paragraph 6,
the amounts to be paid hereunder shall be reduced by the amount of Employee's
earnings from such other employment.
7. Return of Company Property. All records, designs, patents, business
--------------------------
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company (including
the respective affiliates thereof) or their representatives, vendors or
customers which pertain to the business of the Company (including the respective
affiliates thereof) shall be and remain the property of the Company, and be
subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of the
Company which is collected by Employee or otherwise in Employee's possession or
control shall be delivered promptly to the Company, without request by the
Company, upon termination of Employee's employment hereunder.
8. Inventions. Employee shall disclose promptly to the Company any and
----------
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company and which are
conceived as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all of his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
-7-
<PAGE>
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
9. Trade Secrets. Employee is employed hereunder by the Company in a
-------------
confidential relationship wherein Employee, in the course of his employment with
the Company, has and will continue to become familiar with and aware of
information as to the Company and its affiliates, customers, relationships or
agreements with their respective vendors or customers, specific manner of doing
business, including the processes, techniques and trade secrets utilized by the
Company and its affiliates, and future plans with respect thereto, all of which
has been and will be established and maintained at great expense to the Company
and its affiliates; any and all of such information are trade secrets and
constitute the valuable goodwill of the Company and its affiliates. Employee
agrees that he will not, during or after the Term of this Agreement, disclose
any of such information and/or trade secrets, whether in existence or proposed,
to any person, firm, partnership, corporation or business for any reason or
purpose whatsoever.
10. Indemnification. In the event Employee is made a party to any
---------------
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including reasonable attorneys' fees), judgments, fines and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made
a party to the same third-party action, complaint, suit or proceeding, the
Company agrees to engage competent legal representation, and Employee agrees to
use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and the Company shall pay all
attorneys' fees of such separate counsel. Further, while Employee is expected
at all times to use his best efforts to faithfully discharge his duties under
this Agreement, Employee cannot be held liable to the Company for errors or
omissions made in good faith where Employee has not exhibited gross, willful or
wanton negligence or misconduct or performed criminal or fraudulent acts which
materially damage the business of the Company.
11. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any written agreement with a former employer, client or any other
person or entity. Further, Employee agrees to indemnify the Company for any
claim, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company based upon or arising out of any
written noncompetition agreement, invention or secrecy agreement between
Employee and such third party which was in existence as of the date of this
Agreement. The Company agrees to indemnify Employee for the cost and expense of
any claim, including, but not limited to, attorneys' fees and expenses of
investigation, brought by Employee's former employer against Employee based upon
or arising out of the
-8-
<PAGE>
Company's employment of Employee and not otherwise related, directly or
indirectly, to any written agreement between Employee and his former employer.
12. Assignment: Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two (2) sentences, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
13. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Employee is and shall be an employee at-will and the Company may
terminate this Agreement at any time, with or without cause, subject to the
Company's obligations under paragraph 6 above. Emoloyee has no oral
representations, understandings or agreements with the Company or any of its
officers or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: U.S.A. Floral Products, Inc.
c/o Tucker, Flyer & Lewis
1615 L Street, N.W.
Suite 400
Washington, D.C. 20036
To Employee: Robert Poirier
3500 Whitehaven Parkway, N.W.
Washington, D.C. 20007
With a copy to: Fitzsimmons, Roberts & Paine
20 N. Wacker Drive
Suite 3850
Chicago, IL 60606
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first-class mail,
certified, return-receipt requested, or when
-9-
<PAGE>
actually received. Either party may change the address for notice by notifying
the other party of such change in accordance with this paragraph 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration,
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof, nor to award punitive damages to any
injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, vesting of options (or cash compensation in lieu of
vesting of options), reimbursement of costs, including those incurred to enforce
this Agreement, and interest thereon, in the event the arbitrators determine
that Employee was terminated without disability or cause, as defined in
paragraphs 6(b)(ii) and 6(b)(iii), respectively, or that the Company has
otherwise materially breached this Agreement. A decision by a majority of the
arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by the Company. The arbitration proceeding
shall be held in the city where the Company's corporate headquarters is located.
17. Governing Law. This Agreement shall in all respects be governed by
-------------
and construed in accordance with the laws of the State of Delaware.
-10-
<PAGE>
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement
as of the date first above written.
ATTEST: COMPANY:
-------
U.S.A. FLORALPRODUCTS, INC., a
Delaware corporation
/s/ Jonathan Ledecky By: /s/ Robert Poirier
- --------------------------- ---------------------------
Jonathan Ledecky, Secretary Robert Poirier, President
WITNESS: EMPLOYEE:
--------
/s/ Robert Poirier (SEAL)
- --------------------------- ------------------------------
ROBERT POIRIER
-11-
<PAGE>
EXHIBIT 10.9(b)
USA FLORAL PRODUCTS,
3500 Whitehaven Parkway, N.W.
Washington, D.C. 20007
August 6, 1997
Robert Poirier
3500 Whitehaven Parkway, N.W.
Washington, D.C. 20007
Re: Amendment to Employment Agreement
---------------------------------
Dear Bob:
USA Floral Products, Inc. (the "Company") would like to amend the terms of your
employment as set forth in the Employment Agreement, dated as of April 22, 1997,
between you and the Company (the "Agreement"), in the following respects:
1. Base Salary. Your base salary, as specified in Section 2(a) of the
-----------
Agreement, will be increased from $120,000 per annum to $160,000 per annum,
effective immediately.
2 Stock Options. Effective upon the consummation of an initial public
-------------
offering of the Company's stock (the "IPO"), you will be granted an option
under the Company's 1997 Long Term Incentive Plan to purchase 110,000
shares of Company stock at a price per share equal to the IPO price. The
option shall be fully vested and immediately exercisable with respect to
60,000 shares, and the other 50,000 shares shall vest at the rate of 12,500
per year on each of the first four anniversary dates of the IPO. In
addition, on the first anniversary of the IPO (provided you remain employed
through such date), you shall be granted a fully vested and immediately
exercisable option to purchase an additional 60,000 shares at a price equal
to the then market value of the Company's stock. Upon a termination of your
employment by the Company without cause pursuant to Section 6(b)(iv) of the
Agreement, all outstanding unvested options shall become fully vested and
all options will remain exercisable for the 90 day period following your
termination. Upon your resignation or other termination of employment
pursuant to Section 6(b)(iv) of the Agreement, or if your employment is
terminated by the Company for cause under circumstances described in clause
(A) or (B) of Section 6(b)(iii), all unvested option shall immediately
terminate and all vested options will remain exercisable for the 90 day
period following your termination. If your termination
<PAGE>
is by reason of death or disability pursuant to Section 6(b)(i) or (ii) of
the Agreement, all unvested options shall immediately terminate and all
vested options will remain exercisable for the one year period following
your termination. Upon termination of your employment for cause under
circumstances described in clause (C) or (D) of Section 6(b)(iii), all
outstanding options, whether or not vested, shall immediately terminate.
All exercisable options may be exercised through a broker-assisted
"cashless" exercise arrangement to be made available by the Company.
3. Deferred Compensation. In lieu of paying $10,000 per annum in life
---------------------
insurance premiums as specified in Section 3(c) of the Agreement, the
Company will credit such amounts to a deferred compensation account to be
established on your behalf. Such account will be notionally invested in
such manner as you and the Company shall agree, and will be paid on the
fourth anniversary of the date hereof. You will have the ability to elect
to receive your account before such date (i) if you have an unforeseeable
emergency, or (ii) if you agree to a reduction of your account equal to 10%
of the amount withdrawn.
* * * *
If these amendment are acceptable to you, please sign and return the enclosed
copy of this letter.
Sincerely,
USA FLORAL PRODUCTS, INC.
By: /s/ Robert J. Poirier
----------------------
Agreed to and Accepted by:
/s/ Robert J. Poirier
- --------------------------
Robert Poirier
<PAGE>
EXHIBIT 10.10
U.S.A. FLORAL PRODUCTS, INC.
1997 LONG-TERM INCENTIVE PLAN
1. Purpose. The purpose of this 1997 Long-Term Incentive Plan (the
-------
"Plan") of U.S.A. Floral Products, Inc., a Delaware corporation (the "Company"),
is to advance the interests of the Company and its stockholders by providing a
means to attract, retain and reward directors, officers and other key employees
and consultants of and service providers to the Company and its subsidiaries and
to enable such persons to acquire or increase a proprietary interest in the
Company, thereby promoting a closer identity of interests between such persons
and the Company's stockholders.
2. Definitions. The definitions of awards under the Plan, including
-----------
Options, SARs (including Limited SARs), Restricted Stock, Deferred Stock, Stock
granted as a bonus or in lieu of other awards, Dividend Equivalents and Other
Stock-Based Awards are set forth in Section 6 of the Plan. Such awards,
together with any other right or interest granted to a Participant under the
Plan, are termed "Awards." For purposes of the Plan, the following additional
terms shall be defined as set forth below:
(a) "Award Agreement" means any written agreement, contract, notice or
other instrument or document evidencing an Award.
(b) "Beneficiary" shall mean the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or, if there is no
designated Beneficiary or surviving designated Beneficiary, then the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(c) "Board" means the Board of Directors of the Company.
(d) A "Change in Control" shall be deemed to have occurred if:
(i) the date of the acquisition by any "person" (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act), excluding the Company or
any of its subsidiaries or affiliates or any employee benefit plan
sponsored by any of the foregoing, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of 30% or more of either (x)
the then outstanding shares of common stock of the Company or (y) the then
outstanding voting securities entitled to vote generally in the election of
directors; or
(ii) the date the individuals who constitute the Board as of the date
of the Initial Public Offering (the "Incumbent Board") cease for any reason
to constitute at least a majority of the members of the Board, provided
that any individual becoming a director subsequent to the effective date of
this Agreement
<PAGE>
whose election, or nomination for election by the Company's stockholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than any individual whose nomination
for election to Board membership was not endorsed by the Company's
management prior to, or at the time of, such individual's initial
nomination for election) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iii) the consummation of a merger, consolidation, recapitalization,
reorganization, sale or disposition of all or a substantial portion of the
Company's assets, a reverse stock split of outstanding voting securities,
the issuance of shares of stock of the Company in connection with the
acquisition of the stock or assets of another entity, provided, however,
that a Change in Control shall not occur under this clause (iii) if
consummation of the transaction would result in at least 70% of the total
voting power represented by the voting securities of the Company (or, if
not the Company, the entity that succeeds to all or substantially all of
the Company's business) outstanding immediately after such transaction
being beneficially owned (within the meaning of Rule 13d-3 promulgated
pursuant to the Exchange Act) by at least 75% of the holders of outstanding
voting securities of the Company immediately prior to the transaction, with
the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code shall be deemed to include
regulations thereunder and successor provisions and regulations thereto.
(f) "Committee" means the committee appointed by the Board to administer
the Plan, or if no committee is appointed, the Board.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include rules thereunder and successor provisions and rules thereto.
(h) "Fair Market Value" means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee, provided, however, that (i) if the Stock is listed on a
national securities exchange or quoted in an interdealer quotation system, the
Fair Market Value of such Stock on a given date shall be based upon the last
sales price or, if unavailable, the average of the closing bid and asked prices
per share of the Stock on such date (or, if there was no trading or quotation in
the Stock on such date, on the next preceding date on which there was trading or
quotation) as provided by one of such organizations, (ii) the "fair market
value" of Stock on the date on which shares of Stock
2
<PAGE>
are first issued and sold pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission shall be the
Initial Public Offering price of the shares so issued and sold, as set forth in
the first final prospectus used in such offering and (iii) the "fair market
value" of Stock prior to the date of the Initial Public Offering shall be as
determined by the Board.
(i) "Initial Public Offering" shall mean an initial public offering of
shares of Stock in a firm commitment underwriting registered with the Securities
and Exchange Commission in compliance with the provisions of the 1933 Act.
(j) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
(l) "Participant" means a person who, at a time when eligible under Section
5 hereof, has been granted an Award under the Plan.
(m) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(n) "Stock" means the Common Stock, par value $.01, of the Company and such
other securities as may be substituted for Stock or such other securities
pursuant to Section 4.
3. Administration.
--------------
(a) Authority of the Committee. The Plan shall be administered by the
--------------------------
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select persons to whom Awards may be granted;
(ii) to determine the type or types of Awards to be granted to each
such person;
(iii) to determine the number of Awards to be granted, the number of
shares of Stock to which an Award will relate, the terms and conditions of
any Award granted under the Plan (including, but not limited to, any
exercise price, grant price or purchase price, any restriction or
condition, any schedule for lapse of restrictions or conditions relating to
transferability or forfeiture, exercisability or settlement of an Award,
and waivers or accelerations thereof, performance conditions relating to an
Award (including performance conditions relating to Awards not intended to
be governed by Section 7(f) and waivers and modifications thereof), based
in each case on such considerations as the Committee shall determine), and
all other matters to be determined in connection with an Award;
3
<PAGE>
(iv) to determine whether, to what extent and under what circumstances
an Award may be settled, or the exercise price of an Award may be paid, in
cash, Stock, other Awards, or other property, or an Award may be canceled,
forfeited, or surrendered;
(v) to determine whether, to what extent and under what circumstances
cash, Stock, other Awards or other property payable with respect to an
Award will be deferred either automatically, at the election of the
Committee or at the election of the Participant;
(vi) to prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(vii) to adopt, amend, suspend, waive and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(viii) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement or other instrument
hereunder; and
(ix) to make all other decisions and determinations as may be required
under the terms of the Plan or as the Committee may deem necessary or
advisable for the administration of the Plan.
Other provisions of the Plan notwithstanding, the Board may perform any function
of the Committee under the Plan, including without limitation for the purpose of
ensuring that transactions under the Plan by Participants who are then subject
to Section 16 of the Exchange Act in respect of the Company are exempt under
Rule 16b-3. In any case in which the Board is performing a function of the
Committee under the Plan, each reference to the Committee herein shall be deemed
to refer to the Board.
(b) Manner of Exercise of Committee Authority. Any action of the Committee
-----------------------------------------
with respect to the Plan shall be final, conclusive and binding on all persons,
including the Company, subsidiaries of the Company, Participants, any person
claiming any rights under the Plan from or through any Participant and
stockholders, except to the extent the Committee may subsequently modify, or
take further action not consistent with, its prior action. If not specified in
the Plan, the time at which the Committee must or may make any determination
shall be determined by the Committee, and any such determination may thereafter
by modified by the Committee (subject to Section 8(e)). The express grant of
any specific power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or authority of the
Committee. Except as provided under Section 7(f), the Committee may delegate to
officers or managers of the Company or any subsidiary of the Company the
authority, subject to such terms as the Committee shall determine, to perform
such functions as the Committee may determine, to the extent permitted under
applicable law.
4
<PAGE>
(c) Limitation of Liability. Each member of the Committee shall be
-----------------------
entitled to, in good faith, rely or act upon any report or other information
furnished to him by any officer or other employee of the Company or any
subsidiary, the Company's independent certified public accountants or any
executive compensation consultant, legal counsel or other professional retained
by the Company to assist in the administration of the Plan. No member of the
Committee, nor any officer or employee of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Committee and any officer or employee of the Company acting on
its behalf shall, to the extent permitted by law, be fully indemnified and
protected by the Company with respect to any such action, determination or
interpretation.
4. Stock Subject to Plan.
---------------------
(a) Amount of Stock Reserved. The total amount of Stock that may be
------------------------
subject to outstanding awards, determined immediately after the grant of any
Award, shall not exceed 15% of the total number of shares of Stock outstanding
at the effective time of such grant. Notwithstanding the foregoing, the number
of shares that may be delivered upon the exercise of ISOs shall not exceed 15%
of the total number of shares of Stock outstanding immediately after the
consummation of the Initial Public Offering (subject to adjustment as provided
in Section 4(c)), provided, however, that shares subject to ISOs shall not be
-----------------
deemed delivered if such ISOs are forfeited, expire or otherwise terminate
without delivery of shares to the Participant. If an Award valued by reference
to Stock may only be settled in cash, the number of shares to which such Award
relates shall be deemed to be Stock subject to such Award for purposes of this
Section 4(a). Any shares of Stock delivered pursuant to an Award may consist,
in whole or in part, of authorized and unissued shares, treasury shares or
shares acquired in the market for a Participant's Account.
(b) Annual Per-Participant Limitations. During any calendar year, no
----------------------------------
Participant may be granted Awards that may be settled by delivery of more than
750,000 shares of Stock, subject to adjustment as provided in Section 4(c). In
addition, with respect to Awards that may be settled in cash (in whole or in
part), no Participant may be paid during any calendar year cash amounts relating
to such Awards that exceed the greater of the Fair Market Value of the number of
shares of Stock set forth in the preceding sentence at the date of grant or the
date of settlement of Award. This provision sets forth two separate
limitations, so that Awards that may be settled solely by delivery of Stock will
not operate to reduce the amount of cash-only Awards, and vice versa;
nevertheless, Awards that may be settled in Stock or cash must not exceed either
limitation.
(c) Adjustments. In the event that the Committee shall determine that any
-----------
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase or exchange of Stock or other
securities, Stock dividend or other special, large and non-recurring dividend or
distribution (whether in the form of cash, securities or other property),
liquidation, dissolution, or other similar corporate transaction or event,
affects
5
<PAGE>
the Stock such that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Participants under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any or all of (i) the
number and kind of shares of Stock reserved and available for Awards under
Section 4(a), including shares reserved for ISOs, (ii) the number and kind of
shares of Stock specified in the Annual Per-Participant Limitations under
Section 4(b), (iii) the number and kind of shares of outstanding Restricted
Stock or other outstanding Award in connection with which shares have been
issued, (iv) the number and kind of shares that may be issued in respect of
other outstanding Awards and (v) the exercise price, grant price or purchase
price relating to any Award. (or, if deemed appropriate, the Committee may make
provision for a cash payment with respect to any outstanding Award). In
addition, the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including, without
limitation, cancellation of unexercised or outstanding Awards, or substitution
of Awards using stock of a successor or other entity) in recognition of unusual
or nonrecurring events (including, without limitation, events described in the
preceding sentence and events constituting a Change in Control) affecting the
Company or any subsidiary or the financial statements of the Company or any
subsidiary, or in response to changes in applicable laws, regulations, or
accounting principles.
5. Eligibility. Executive officers and other key employees of the Company
-----------
and its subsidiaries, including any officer or member of the Board who is also
such an employee, and persons who provide consulting or other services to the
Company deemed by the Committee to be of substantial value to the Company, are
eligible to be granted Awards under the Plan. In addition, persons who have
been offered employment by the Company or its subsidiaries, and persons employed
by an entity that the Committee reasonably expects to become a subsidiary of the
Company, are eligible to be granted an Award under the Plan; provided, however,
-----------------
that such Award shall be canceled if such person fails to commence such
employment, or such entity fails to become a subsidiary, and no payment of value
may be made in connection with such Award until such person has commenced such
employment or until such entity becomes a subsidiary.
6. Specific Terms of Awards.
------------------------
(a) General. Awards may be granted on the terms and conditions set forth
-------
in this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment or
service of the Participant. Except as provided in Section 6(f), 6(h), or 7(a),
or to the extent required to comply with requirements of applicable law, only
services may be required as consideration for the grant (but not the exercise)
of any Award.
(b) Options. The Committee is authorized to grant Options (including
-------
"reload" options automatically granted to offset specified exercises of Options)
on the following terms and conditions ("Options"):
6
<PAGE>
(i) Exercise Price. The exercise price per share of Stock purchasable
--------------
under an Option shall be determined by the Committee.
(ii) Time and Method of Exercise. The Committee shall determine the
---------------------------
time or times at which an Option may be exercised in whole or in part, the
methods by which such exercise price may be paid or deemed to be paid, the
form of such payment, including, without limitation, cash, Stock, other
Awards or awards granted under other Company plans or other property
(including notes or other contractual obligations of Participants to make
payment on a deferred basis, such as through "cashless exercise"
arrangements, to the extent permitted by applicable law), and the methods
by which Stock will be delivered or deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall
----
comply in all respects with the provisions of Section 422 of the Code,
including but not limited to the requirement that no ISO shall be granted
with an exercise price less than 100% (110% for an individual described in
Section 422(b)(6) of the Code) of the Fair Market Value of a share of Stock
on the date of grant and granted no more than ten years after the effective
date of the Plan. Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to ISOs shall be interpreted, amended, or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify either the Plan or any ISO under Section 422
of the Code, unless requested by the affected Participant.
(iv) Termination of Employment. Unless otherwise determined by the
-------------------------
Committee, upon termination of a Participant's employment with the Company
and its subsidiaries, such Participant may exercise any Options during the
three-month period following such termination of employment, but only to
the extent such Option was exercisable immediately prior to such
termination of employment. Notwithstanding the foregoing, if the Committee
determines that such termination is for cause, all Options held by the
Participant shall terminate as of the termination of employment.
(c) Stock Appreciation Rights. The Committee is authorized to grant SARs
-------------------------
on the following terms and conditions ("SARs"):
(i) Right to Payment. An SAR shall confer on the Participant to whom
----------------
it is granted a right to receive, upon exercise thereof, the excess of (A)
the Fair Market Value of one share of Stock on the date of exercise (or, if
the Committee shall so determine in the case of any such right other than
one related to an ISO, the Fair Market Value of one share at any time
during a specified period before or after the date of exercise), over (B)
the grant price of the SAR as determined by the Committee as of the date of
grant of the SAR, which, except as provided in Section 7(a), shall be not
less than the Fair Market Value of one share of Stock on the date of grant.
7
<PAGE>
(ii) Other Terms. The Committee shall determine the time or times at
-----------
which an SAR may be exercised in whole or in part, the method of exercise,
method of settlement, form of consideration payable in settlement, method
by which Stock will be delivered or deemed to be delivered to Participants,
whether or not an SAR shall be in tandem with any other Award, and any
other terms and conditions of any SAR. Limited SARs that may only be
exercised upon the occurrence of a Change in Control may be granted on such
terms, not inconsistent with this Section 6(c), as the Committee may
determine. Limited SARs may be either freestanding or in tandem with other
Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted
----------------
Stock on the following terms and conditions ("Restricted Stock"):
(i) Grant and Restrictions. Restricted Stock shall be subject to such
----------------------
restrictions on transferability and other restrictions, if any, as the
Committee may impose, which restrictions may lapse separately or in
combination at such times, under such circumstances, in such installments,
or otherwise, as the Committee may determine. Except to the extent
restricted under the terms of the Plan and any Award Agreement relating to
the Restricted Stock, a Participant granted Restricted Stock shall have all
of the rights of a stockholder including, without limitation, the right to
vote Restricted Stock or the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
----------
termination of employment or service (as determined under criteria
established by the Committee) during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided, however, that the
-----------------
Committee may provide, by rule or regulation or in any Award Agreement, or
may determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock will be waived in whole or in part
in the event of termination resulting from specified causes.
(iii) Certificates for Stock. Restricted Stock granted under the
----------------------
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, such certificates may bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted
Stock, the Company may retain physical possession of the certificate, and
the Participant shall have delivered a stock power to the Company, endorsed
in blank, relating to the Restricted Stock.
(iv) Dividends. Dividends paid on Restricted Stock shall be either
---------
paid at the dividend payment date in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such dividends, or
the payment of such dividends shall be deferred and/or the amount or value
thereof automatically reinvested in additional Restricted Stock, other
Awards, or other investment vehicles, as the Committee shall
8
<PAGE>
determine or permit the Participant to elect. Stock distributed in
connection with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to which
such Stock or other property has been distributed, unless otherwise
determined by the Committee.
(e) Deferred Stock. The Committee is authorized to grant Deferred Stock
--------------
subject to the following terms and conditions ("Deferred Stock"):
(i) Award and Restrictions. Delivery of Stock will occur upon
----------------------
expiration of the deferral period specified for an Award of Deferred Stock
by the Committee (or, if permitted by the Committee, as elected by the
Participant). In addition, Deferred Stock shall be subject to such
restrictions as the Committee may impose, if any, which restrictions may
lapse at the expiration of the deferral period or at earlier specified
times, separately or in combination, in installments or otherwise, as the
Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
----------
termination of employment or service (as determined under criteria
established by the Committee) during the applicable deferral period or
portion thereof to which forfeiture conditions apply (as provided in the
Award Agreement evidencing the Deferred Stock), all Deferred Stock that is
at that time subject to such forfeiture conditions shall be forfeited;
provided, however, that the Committee may provide, by rule or regulation or
-----------------
in any Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock will be
waived in whole or in part in the event of termination resulting from
specified causes.
(f) Bonus Stock and Awards in Lieu of Cash Obligations. The Committee is
--------------------------------------------------
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of Company obligations to pay cash under other plans or compensatory
arrangements.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
--------------------
Equivalents entitling the Participant to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock ("Dividend Equivalents"). Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
------------------------
limitations under applicable law, to grant such other Awards that may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on, or related to, Stock and factors that
9
<PAGE>
may influence the value of Stock, as deemed by the Committee to be consistent
with the purposes of the Plan, including, without limitation, convertible or
exchangeable debt securities, other rights convertible or exchangeable into
Stock, purchase rights for Stock, Awards with value and payment contingent upon
performance of the Company or any other factors designated by the Committee and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries ("Other Stock Based Awards").
The Committee shall determine the terms and conditions of such Awards. Stock
issued pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times,
by such methods, and in such forms, including, without limitation, cash, Stock,
other Awards, or other property, as the Committee shall determine. Cash awards,
as an element of or supplement to any other Award under the Plan, may be granted
pursuant to this Section 6(h).
7. Certain Provisions Applicable to Awards.
---------------------------------------
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted
------------------------------------------------------
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with or in substitution for any other Award granted
under the Plan or any award granted under any other plan of the Company, any
subsidiary or any business entity to be acquired by the Company or a subsidiary,
or any other right of a Participant to receive payment from the Company or any
subsidiary. Awards granted in addition to or in tandem with other Awards or
awards may be granted either as of the same time as or a different time from the
grant of such other Awards or awards.
(b) Term of Awards. The term of each Award shall be for such period as may
--------------
be determined by the Committee; provided, however, that in no event shall the
-----------------
term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and any
----------------------------
applicable Award Agreement, payments to be made by the Company or a subsidiary
upon the grant, exercise or settlement of an Award may be made in such forms as
the Committee shall determine, including, without limitation, cash, Stock, other
Awards or other property, and may be made in a single payment or transfer, in
installments or on a deferred basis. Such payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents in respect of installment or deferred payments denominated in Stock.
(d) Rule 16b-3 Compliance.
---------------------
(i) Six-Month Holding Period. Unless a Participant could otherwise
------------------------
dispose of equity securities, including derivative securities, acquired
under the Plan without incurring liability under Section 16(b) of the
Exchange Act,
10
<PAGE>
equity securities acquired under the Plan must be held for a period of six
months following the date of such acquisition, provided that this condition
shall be satisfied with respect to a derivative security if at least six
months elapse from the date of acquisition of the derivative security to
the date of disposition of the derivative security (other than upon
exercise or conversion) or its underlying equity security.
(ii) Other Compliance Provisions. With respect to a Participant who is
---------------------------
then subject to Section 16 of the Exchange Act in respect of the Company,
the Committee shall implement transactions under the Plan and administer
the Plan in a manner that will ensure that each transaction by such a
Participant is exempt from liability under Rule 16b-3, except that such a
Participant may be permitted to engage in a non-exempt transaction under
the Plan if written notice has been given to the Participant regarding the
non-exempt nature of such transaction. The Committee may authorize the
Company to repurchase any Award or shares of Stock resulting from any Award
in order to prevent a Participant who is subject to Section 16 of the
Exchange Act from incurring liability under Section 16(b). Unless otherwise
specified by the Participant, equity securities, including derivative
securities, acquired under the Plan which are disposed of by a Participant
shall be deemed to be disposed of in the order acquired by the Participant.
(e) Loan Provisions. With the consent of the Committee, and subject at all
---------------
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to the Company, the Company may make, guarantee or arrange for a loan
or loans to a Participant with respect to the exercise of any Option or other
payment in connection with any Award, including the payment by a Participant of
any or all federal, state or local income or other taxes due in connection with
any Award. Subject to such limitations, the Committee shall have full authority
to decide whether to make a loan or loans hereunder and to determine the amount,
terms and provisions of any such loan or loans, including the interest rate to
be charged in respect of any such loan or loans, whether the loan or loans are
to be with or without recourse against the borrower, the terms on which the loan
is to be repaid and conditions, if any, under which the loan or loans may be
forgiven.
(f) Performance-Based Awards. The Committee may, in its discretion,
------------------------
designate any Award the exercisability or settlement of which is subject to the
achievement of performance conditions as a performance-based Award subject to
this Section 7(f), in order to qualify such Award as "qualified performance-
based compensation" within the meaning of Code Section 162(m) and regulations
thereunder. The performance objectives for an Award subject to this Section
7(f) shall consist of one or more business criteria and a targeted level or
levels of performance with respect to such criteria, as specified by the
Committee but subject to this Section 7(f). Performance objectives shall be
objective and shall otherwise meet the
11
<PAGE>
requirements of Section 162(m)(4)(C) of the Code. Business criteria used by the
Committee in establishing performance objectives for Awards subject to this
Section 7(f) shall be selected from among the following:
(1) Annual return on capital;
(2) Annual earnings or earnings per share;
(3) Annual cash flow provided by operations;
(4) Changes in annual revenues; and/or
(5) Strategic business criteria, consisting of one or more objectives
based on meeting specified revenue, market penetration, geographic
business expansion goals, cost targets, and goals relating to
acquisitions or divestitures.
The levels of performance required with respect to such business criteria may be
expressed in absolute or relative levels. Achievement of performance objectives
with respect to such Awards shall be measured over a period of not less than one
year nor more than five years, as the Committee may specify. Performance
objectives may differ for such Awards to different Participants. The Committee
shall specify the weighting to be given to each performance objective for
purposes of determining the final amount payable with respect to any such Award.
The Committee may, in its discretion, reduce the amount of a payout otherwise to
be made in connection with an Award subject to this Section 7(f), but may not
exercise discretion to increase such amount, and the Committee may consider
other performance criteria in exercising such discretion. All determinations by
the Committee as to the achievement of performance objectives shall be in
writing. The Committee may not delegate any responsibility with respect to an
Award subject to this Section 7(f).
(g) Acceleration upon a Change of Control. Notwithstanding anything
-------------------------------------
contained herein to the contrary, all conditions and/or restrictions relating
to the continued performance of services and/or the achievement of performance
objectives with respect to the exercisability or full enjoyment of an Award
shall immediately lapse upon a Change in Control, provided, however, that such
lapse shall not occur if (i) it is intended that the transaction constituting
such Change in Control be accounted for as a pooling of interests under
Accounting Principles Board Option No. 16 (or any successor thereto), and
operation of this Section 7(g) would otherwise violate Paragraph 47(c) thereof,
or (ii) the Committee, in its discretion, determines that such lapse shall not
occur, provided, further, that the Committee shall not have the discretion
granted in clause (ii) if it is intended that the transaction constituting such
Change in Control be accounted for as a pooling of interests under Accounting
Principles Board Option No. 16 (or any successor thereto), and such discretion
would otherwise violate Paragraph 47(c) thereof.
8. General Provisions.
------------------
12
<PAGE>
(a) Compliance With Laws and Obligations. The Company shall not be
------------------------------------
obligated to issue or deliver Stock in connection with any Award or take any
other action under the Plan in a transaction subject to the requirements of any
applicable securities law, any requirement under any listing agreement between
the Company and any national securities exchange or automated quotation system
or any other law, regulation or contractual obligation of the Company until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock issued under the Plan will be subject to such stop-transfer orders and
other restrictions as may be applicable under such laws, regulations and other
obligations of the Company, including any requirement that a legend or legends
be placed thereon.
(b) Limitations on Transferability. Awards and other rights under the Plan
------------------------------
will not be transferable by a Participant except by will or the laws of descent
and distribution or to a Beneficiary in the event of the Participant's death,
shall not be pledged, mortgaged, hypothecated or otherwise encumbered, or
otherwise subject to the claims of creditors, and, in the case of ISOs and SARs
in tandem therewith, shall be exercisable during the lifetime of a Participant
only by such Participant or his guardian or legal representative; provided,
---------
however, that such Awards and other rights (other than ISOs and SARs in tandem
- -------
therewith) may be transferred to one or more transferees during the lifetime of
the Participant to the extent and on such terms as then may be permitted by the
Committee.
(c) No Right to Continued Employment or Service. Neither the Plan nor any
-------------------------------------------
action taken hereunder shall be construed as giving any employee or other person
the right to be retained in the employ or service of the Company or any of its
subsidiaries, nor shall it interfere in any way with the right of the Company or
any of its subsidiaries to terminate any employee's employment or other person's
service at any time.
(d) Taxes. The Company and any subsidiary is authorized to withhold from
-----
any Award granted or to be settled, any delivery of Stock in connection with an
Award, any other payment relating to an Award or any payroll or other payment to
a Participant amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations.
(e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
------------------------------
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or Participants, except that
any such action shall be subject to the approval of the Company's stockholders
at or before the next annual meeting of stockholders for which the record date
is after such Board action if such stockholder approval is required by any
federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the
13
<PAGE>
Stock may then be listed or quoted, and the Board may otherwise, in its
discretion, determine to submit other such changes to the Plan to stockholders
for approval; provided, however, that, without the consent of an affected
-----------------
Participant, no such action may materially impair the rights of such Participant
under any Award theretofore granted to him (as such rights are set forth in the
Plan and the Award Agreement). The Committee may waive any conditions or rights
under, or amend, alter, suspend, discontinue, or terminate, any Award
theretofore granted and any Award Agreement relating thereto; provided, however,
-----------------
that, without the consent of an affected Participant, no such action may
materially impair the rights of such Participant under such Award (as such
rights are set forth in the Plan and the Award Agreement).
(f) No Rights to Awards; No Stockholder Rights. No Participant or employee
------------------------------------------
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants and employees. No Award
shall confer on any Participant any of the rights of a stockholder of the
Company unless and until Stock is duly issued or transferred and delivered to
the Participant in accordance with the terms of the Award or, in the case of an
Option, the Option is duly exercised.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
---------------------------------------------
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
- -----------------
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
--------------------------
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Plan, and
such arrangements may be either applicable generally or only in specific cases.
(i) No Fractional Shares. No fractional shares of Stock shall be issued or
--------------------
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Compliance with Code Section 162(m). It is the intent of the Company
-----------------------------------
that employee Options, SARs and other Awards designated as Awards subject to
Section 7(f) shall constitute "qualified performance-based compensation" within
the meaning of Code Section 162(m). Accordingly, if any provision of the Plan or
any Award Agreement relating to such an Award does not comply or is inconsistent
with the requirements of Code Section 162(m), such provision shall
14
<PAGE>
be construed or deemed amended to the extent necessary to conform to such
requirements, and no provision shall be deemed to confer upon the Committee or
any other person discretion to increase the amount of compensation otherwise
payable in connection with any such Award upon attainment of the performance
objectives.
(k) Governing Law. The validity, construction and effect of the Plan, any
-------------
rules and regulations relating to the Plan and any Award Agreement shall be
determined in accordance with the laws of the State of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
(l) Effective Date; Plan Termination. The Plan shall become effective as
--------------------------------
of the date of its adoption by the Board and approval of the Company's
stockholders, and shall continue in effect until terminated by the Board.
15
<PAGE>
EXHIBIT 10.11
U.S.A. FLORAL PRODUCTS, INC.
1997 NON-EMPLOYEE DIRECTORS' STOCK PLAN
1. Purpose. The purpose of this 1996 Non-Employee Directors' Stock Plan
-------
(the "Plan") of U.S.A. Floral Products, Inc., a Delaware corporation (the
"Company"), is to advance the interests of the Company and its stockholders by
providing a means to attract and retain highly qualified persons to serve as
non-employee directors of the Company and to enable such persons to acquire or
increase a proprietary interest in the Company, thereby promoting a closer
identity of interests between such persons and the Company's stockholders.
2. Definitions. In addition to terms defined elsewhere in the Plan, the
-----------
following are defined terms under the Plan:
(a) "Board" means the Board of Directors of the Company.
(b) A "Change in Control" shall be deemed to have occurred if:
(i) the date of the acquisition by any "person" (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act), excluding the Company or
any of its subsidiaries or affiliates or any employee benefit plan
sponsored by any of the foregoing, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of 30% or more of either (x)
the then outstanding shares of common stock of the Company or (y) the then
outstanding voting securities entitled to vote generally in the election of
directors; or
(ii) the date the individuals who constitute the Board as of the date
of the Initial Public Offering (the "Incumbent Board") cease for any reason
to constitute at least a majority of the members of the Board, provided
that any individual becoming a director subsequent to the effective date of
this Agreement whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than any individual
whose nomination for election to Board membership was not endorsed by the
Company's management prior to, or at the time of, such individual's initial
nomination for election) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or
(iii) the consummation of a merger, consolidation, recapitalization,
reorganization, sale or disposition of all or a substantial portion of the
Company's assets, a reverse stock split of outstanding voting securities,
the issuance of shares of stock of the Company in connection with the
acquisition of the stock or assets of another entity, provided, however,
that a Change in Control shall not occur under this clause (iii) if
consummation of the transaction would result in at least
1
<PAGE>
70% of the total voting power represented by the voting securities of the
Company (or, if not the Company, the entity that succeeds to all or
substantially all of the Company's business) outstanding immediately after
such transaction being beneficially owned (within the meaning of Rule 13d-3
promulgated pursuant to the Exchange Act) by at least 75% of the holders of
outstanding voting securities of the Company immediately prior to the
transaction, with the voting power of each such continuing holder relative
to other such continuing holders not substantially altered in the
transaction.
(c) "Deferred Share" means a credit to a Participant's deferral account
under Section 7 which represents the right to receive one Share upon settlement
of the deferral account. Deferral accounts, and Deferred Shares credited
thereto, are maintained solely as bookkeeping entries by the Company evidencing
unfunded obligations of the Company.
(d) "Fair Market Value" of a Share on a given date mean the last sales
price or, if last sales information is generally unavailable, the average of the
closing bid and asked prices per Share on such date (or, if there was no trading
or quotation in the stock on such date, on the next preceding date on which
there was trading or quotation) as reported in the Wall Street Journal.
-------------------
(e) "Initial Public Offering" shall mean an initial public offering of
shares of stock in a firm commitment underwriting registered with the Securities
and Exchange Commission in compliance with the provisions of the 1933 Act.
(f) "Option" means the right, granted to a director under Section 6, to
purchase a specified number of Shares at the specified exercise price for a
specified period of time under the Plan. All Options will be non-qualified
stock options.
(g) "Participant" means any person who, as a non-employee director of the
Company, has been granted an Option or Deferred Shares which remain outstanding
or who has elected to be paid fees in the form of Shares or Deferred Shares
under the Plan.
(h) "Share" means a share of common stock, $.01 par value, of the Company
and such other securities as may be substituted for such Share or such other
securities pursuant to Section 8.
3. Shares Available Under the Plan. Subject to adjustment as provided in
-------------------------------
Section 8, the total number of Shares reserved and available for issuance under
the Plan is 300,000. Such Shares may be authorized but unissued Shares,
treasury Shares, or Shares acquired in the market for the account of the
Participant. For purposes of the Plan, Shares that may be purchased upon
exercise of an Option or delivered in settlement of Deferred Shares will not be
considered to be available after such Option has been granted or Deferred Share
credited, except for purposes of issuance in connection with such Option or
Deferred Share; provided, however, that, if an Option expires for any reason
-----------------
without having been exercised in full, the Shares subject to the
2
<PAGE>
unexercised portion of such Option will again be available for issuance under
the Plan.
4. Administration of the Plan. The Plan will be administered by the
--------------------------
Board; provided, however, that any action by the Board relating to the Plan will
-----------------
be taken only if, in addition to any other required vote, such action is
approved by the affirmative vote of a majority of the directors who are not then
eligible to participate in the Plan.
5. Eligibility. Each director of the Company who, on any date on which an
-----------
Option is to be granted under Section 6 or on which fees are to be paid which
could be received in the form of Shares or deferred in the form of Deferred
Shares under Section 7, is not an employee of the Company or any subsidiary of
the Company will be eligible, at such date, to be granted an Option under
Section 6 or receive fees in the form of Shares or defer fees in the form of
Deferred Shares under Section 7. No person other than those specified in this
Section 5 will be eligible to participate in the Plan.
6. Options.
-------
(a) Number of Shares.
----------------
(i) Initial Grants. On the later of (A) the date of a director's
--------------
initial election to the Board and (B) the effective date of a registration
statement under the Securities Act of 1933, as amended, relating to the sale of
shares in an Initial Public Offering, each newly-elected director or director
then serving upon such effective date, as applicable, and who is otherwise
eligible pursuant to Section 5, shall receive an Option to purchase 21,000
Shares, in each case subject to adjustment as provided in Section 8.
(ii) Annual Grants. On the day after each annual meeting of the
-------------
Company's stockholders occurring after the date of the Initial Public Offering,
each person who at such time is serving as a director and who is otherwise
eligible pursuant to Section 5 shall receive an Option to purchase 6,000 Shares,
in each case subject to adjustment as provided in Section 8.
(b) Exercise Price. The exercise price per Share purchasable upon exercise
--------------
of an Option will be equal to 100% of the Fair Market Value of a Share on the
date of grant of the Option.
(c) Option Expiration. A Participant's Option will expire at the earlier
-----------------
of (i) 10 years after the date of grant or (ii) one year after the date the
Participant ceases to serve as a director of the Company for any reason,
provided, however, that with respect to clause (ii), such Option shall be
exercisable during such one-year period only to the extent it was exercisable
pursuant to Section 6(d) on the date of such cessation.
(d) Exercisability. Each Option shall become exercisable in two equal
--------------
installments.
3
<PAGE>
The first installment shall become exercisable on the date that is six months
from the date the Option is granted and the second installment shall become
exercisable on the date that is one year from the date the Option is granted,
provided, however, that unless otherwise determined by the Board, all Options
held by a Participant shall become immediately exercisable upon (i) a Change in
Control or (ii) the death of such Participant.
(e) Method of Exercise. A Participant may exercise an Option, in whole or
------------------
in part, at such time as it is exercisable and prior to its expiration, by
giving written notice of exercise to the Secretary of the Company, specifying
the Option to be exercised and the number of Shares to be purchased, and paying
in full the exercise price in cash (including by check) or by surrender of
Shares already owned by the Participant (except for Shares acquired from the
Company by exercise of an option less than six months before the date of
surrender) having a Fair Market Value at the time of exercise equal to the
exercise price, or by a combination of cash and Shares.
7. Receipt of Shares or Deferred Shares In Lieu of Fees. Each director of
----------------------------------------------------
the Company may elect to be paid fees, in his or her capacity as a director
(including annual retainer fees for service on the Board, fees for service on a
Board committee, fees for service as chairman of a Board committee, and any
other fees paid to directors) in the form of Shares or Deferred Shares in lieu
of cash payment of such fees, if such director is eligible to do so under
Section 5 at the date any such fee is otherwise payable. If so elected, payment
of fees in the form of Shares or Deferred Shares shall be made in accordance
with this Section 7.
(a) Elections. Each director who elects to be paid fees for a given
---------
calendar year in the form of Shares shall file an election in such form and in
such time in advance as prescribed by the Board. Unless otherwise determined by
the Board, each director who elects to defer such payment of fees in the form of
Deferred Shares for such year must file an irrevocable written election with the
Secretary of the Company no later than December 31 of the year preceding such
calendar year; provided, however, that any newly elected or appointed director
-----------------
may file an election for any year not later than 30 days after the date such
person first became a director, and a director may file an election for the year
in which the Plan became effective not later than 30 days after the date of
effectiveness. An election by a director shall be deemed to be continuing
unless the director revokes or changes such election by filing a new election
form by the due date for such form specified in this Section 7(a). The election
must specify the following:
(i) A percentage of fees to be received in the form of Shares or
deferred in the form of Deferred Shares under the Plan; and
(ii) In the case of a deferral, the period or periods during which
settlement of Deferred Shares will be deferred (subject to such limitations
as may be specified by counsel to the Company).
(b) Payment of Fees in the Form of Shares. At any date on which fees are
-------------------------------------
payable to a Participant who has elected to receive such fees in the form of
Shares, the Company will issue
4
<PAGE>
to such Participant, or to a designated third party for the account of such
Participant, a number of Shares having an aggregate Fair Market Value at that
date equal to the fees, or as nearly as possible equal to the fees (but in no
event greater than the fees), that would have been payable at such date but for
the Participant's election to receive Shares in lieu thereof. If the Shares are
to be credited to an account maintained by the Participant and to the extent
reasonably practicable without requiring the actual issuance of fractional
Shares, the Company shall cause fractional Shares to be credited to the
Participant's account. If fractional Shares are not so credited, any part of
the Participant's fees not paid in the form of whole Shares will be payable in
cash to the Participant (either paid separately or included in a subsequent
payment of fees, including a subsequent payment of fees subject to an election
under this Section 7).
(c) Deferral of Fees in the Form of Deferred Shares. The Company will
-----------------------------------------------
establish a deferral account for each Participant who elects to defer fees in
the form of Deferred Shares under this Section 7. At any date on which fees are
payable to a Participant who has elected to defer fees in the form of Deferred
Shares, the Company will credit such Participant's deferral account with a
number of Deferred Shares equal to the number of Shares having an aggregate Fair
Market Value at that date equal to the fees that otherwise would have been
payable at such date but for the Participant's election to defer receipt of such
fees in the form of Deferred Shares. The amount of Deferred Shares so credited
shall include fractional Shares calculated to at least three decimal places.
(d) Crediting of Dividend Equivalents. Whenever dividends are paid or
---------------------------------
distributions made with respect to Shares, a Participant to whom Deferred Shares
are then credited in a deferral account shall be entitled to be receive, as
dividend equivalents, an amount equal in value to the amount of the dividend
paid or property distributed on a single Share multiplied by the number of
Deferred Shares (including any fractional Share) credited to his or her deferral
account as of the record date for such dividend or distribution. Such dividend
equivalents shall be credited to the Participant's deferral account as a number
of Deferred Shares determined by dividing the aggregate value of such dividend
equivalents by the Fair Market Value of a Share at the payment date of the
dividend or distribution.
(e) Settlement of Deferred Shares. The Company will settle the
-----------------------------
Participant's deferral account by delivering to the Participant (or his or her
beneficiary) a number of Shares equal to the number of whole Deferred Shares
then credited to his or her deferral account (or a specified portion in the
event of any partial settlement), together with cash in lieu of any fractional
Share remaining at a time that less than one whole Deferred Share is credited to
such deferral account. Such settlement shall be made at the time or times
specified in the Participant's election filed in accordance with Section 7(a);
provided, however, that a Participant may further defer settlement of Deferred
- -----------------
Shares if counsel to the Company determines that such further deferral likely
would be effective under applicable federal income tax laws and regulations.
(f) Nonforfeitability. The interest of each Participant in any fees paid
-----------------
in the form of Shares or Deferred Shares (and any deferral account relating
thereto) at all times will be
5
<PAGE>
nonforfeitable.
8. Adjustment Provisions.
---------------------
(a) Corporate Transactions and Events. In the event any dividend or other
---------------------------------
distribution (whether in the form of cash, Shares or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, exchange of Shares or other
securities of the Company, extraordinary dividend (whether in the form of cash,
Shares, or other property), liquidation, dissolution, or other similar corporate
transaction or event affects the Shares such that an adjustment is appropriate
in order to prevent dilution or enlargement of each Participant's rights under
the Plan, then an adjustment shall be made, in a manner that is proportionate to
the change to the Shares and otherwise equitable, in (i) the number and kind of
Shares remaining reserved and available for issuance under Section 3, (ii) the
number and kind of Shares issuable upon exercise of outstanding Options, and/or
the exercise price per Share thereof (provided that no fractional Shares will be
issued upon exercise of any Option), (iii) the kind of Shares to be issued in
lieu of fees under Section 7, and (iv) the number and kind of Shares to be
issued upon settlement of Deferred Shares under Section 7. In addition, the
Board is authorized to make such adjustments in recognition of unusual or non-
recurring events (including, without limitation, events described in the
preceding sentence) affecting the Company or any subsidiary or the financial
statements of the Company or any subsidiary, or in response to changes in
applicable laws, regulations or accounting principles. The foregoing not
withstanding, no adjustment may be made hereunder except as will be necessary to
maintain the proportionate interest of the Participant under the Plan and to
preserve, without exceeding, the value of outstanding Options and potential
grants of Options and the value of outstanding Deferred Shares.
(b) Insufficient Number of Shares. If at any date an insufficient number
-----------------------------
of Shares are available under the Plan for the receipt of fees in the form of
Shares or deferral of fees in the form of Deferred Shares at that date, fees
shall be paid in the form of Shares or deferred in the form of Deferred Shares
proportionately among directors then eligible to participate to the extent
Shares are then available and otherwise as provided under Section 7.
9. Changes to the Plan. The Board of Directors may amend, alter, suspend,
-------------------
discontinue, or terminate the Plan or authority to grant Options or pay fees in
the form of Shares or Deferred Shares under the Plan without the consent of
stockholders or Participants, except that any amendment or alteration will be
subject to the approval of the Company's stockholders at or before the next
annual meeting of stockholders for which the record date is after the date of
such Board action if such stockholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated
quotation system as then in effect, and the Board may otherwise determine to
submit other such amendments or alterations to stockholders for approval;
provided, however, that, without the consent of an affected Participant, no such
- -----------------
action may materially impair the rights of such Participant with respect to any
previously granted Option or any previous payment of fees in the form of Shares
or Deferred Shares.
6
<PAGE>
10. General Provisions.
------------------
(a) Agreements. Options, Deferred Shares, and any other right or
----------
obligation under the Plan may be evidenced by agreements or other documents
executed by the Company and the Participant incorporating the terms and
conditions set forth in the Plan, together with such other terms and conditions
not inconsistent with the Plan, as the Board may from time to time approve.
(b) Compliance with Laws and Obligations. The Company will not be
------------------------------------
obligated to issue or deliver Shares in connection with any Option, in payment
of any directors' fees, or in settlement of Deferred Shares in a transaction
subject to the registration requirements of the Securities Act of 1933, as
amended, or any other federal or state securities law, any requirement under any
listing agreement between the Company and any stock exchange or automated
quotation system, or any other law, regulation, or contractual obligation of the
Company, until the Company is satisfied that such laws, regulations, and other
obligations of the Company have been complied with in full. Certificates
representing Shares issued under the Plan will be subject to such stop-transfer
orders and other restrictions as may be applicable under such laws, regulations,
and other obligations of the Company, including any requirement that a legend or
legends be placed thereon.
(c) Limitations on Transferability. Unless otherwise permitted by the
------------------------------
Board, Options, Deferred Shares, and any other right under the Plan will not be
transferable by a Participant except by will or the laws of descent and
distribution (or to a designated beneficiary in the event of a Participant's
death), and will be exercisable during the lifetime of the Participant only by
such Participant or his or her guardian or legal representative. Options,
Deferred Shares, and other rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to the claims of
creditors of any Participant.
(d) No Right To Continue as a Director. Nothing contained in the Plan or
----------------------------------
any agreement hereunder will confer upon any Participant any right to continue
to serve as a director of the Company.
(e) No Stockholder Rights Conferred. Nothing contained in the Plan or any
-------------------------------
agreement hereunder will confer upon any Participant (or any person or entity
claiming rights by or through a Participant) any rights of a stockholder of the
Company unless and until Shares are in fact issued to such Participant (or
person) or, in the case an Option, such Option is validly exercised in
accordance with Section 6.
(f) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
--------------------------
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements for directors as it may deem desirable.
(g) Governing Law. The validity, construction, and effect of the Plan and
-------------
any
7
<PAGE>
agreement hereunder will be determined in accordance with the laws of the State
of Delaware, without giving effect to principles of conflicts of laws, and
applicable federal law.
11. Effective Date and Plan Termination. The Plan will be effective as of
-----------------------------------
the date of its approval by the stockholders of the Company, and, unless earlier
terminated by action of the Board, shall terminate at such time as no Shares
remain available for issuance under the Plan and the Company and Participants
have no further rights or obligations under the Plan.
8
<PAGE>
EXHIBIT 10.12
U.S.A. FLORAL PRODUCTS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
Introduction
Sec. 1.01 Statement of Purpose. The purpose of the U.S.A. Floral
Products, Inc. Employee Stock Purchase Plan is to provide eligible employees of
the Company and its Subsidiaries, who wish to become stockholders, an
opportunity to purchase Common Stock of the Company. The Board of Directors of
the Company believes that employee participation in ownership will be to the
mutual benefit of the employees and the Company.
Sec. 1.02 Internal Revenue Code Considerations. The Plan is intended to
constitute an "employee stock purchase plan" within the meaning of section 423
of the Internal Revenue Code of 1986, as amended.
ARTICLE II
Definitions
Sec. 2.01 "Administrative Committee" means the committee appointed by the
Board to administer the Plan, as provided in Section 6.04 hereof.
Sec. 2.02 "Board" means the Board of Directors of the Company.
Sec. 2.03 "Code" means the Internal Revenue Code of 1986, as amended.
Sec. 2.04 "Company" means U.S.A. Floral Products, Inc., a Delaware
corporation.
Sec. 2.05 "Compensation" means the total remuneration paid, during the
period of reference, to an Employee by the Company or a Subsidiary, including
regular salary or wages, overtime payments, bonuses, commissions and vacation
pay, to which has been added (a) any elective deferral amounts by which the
Employee has had his current remuneration reduced for the purposes of funding a
contribution to any plan sponsored by the Company and satisfying the
requirements of section 401(k) of the Code, and (b) any amounts by which the
Employee's compensation has been reduced pursuant to a compensation reduction
agreement between the Employee and the Company for the purpose of funding
benefits through any cafeteria plan sponsored by the Company meeting the
requirements of section 125 of the Code. There shall be excluded from
"Compensation" for the purposes of the Plan, whether or not reportable as income
by the Employee, expense reimbursements of all types, payments in lieu of
expenses, the Company contributions to any qualified retirement plan or other
program of deferred compensation (except as provided above), the Company
contributions to Social Security or worker's compensation, the costs paid by the
<PAGE>
Company in connection with fringe benefits and relocation, including gross-ups,
and any amounts accrued for the benefit of the Employee, but not paid, during
the period of reference.
Sec. 2.06 "Continuous Service" means the period of time during which the
Employee has been employed by the Company or a Subsidiary and during which there
has been no interruption of the Employee's employment by the Company. For this
purpose, periods of Excused Absence shall not be considered to be interruptions
of Continuous Service.
Sec. 2.07 "Effective Date" shall mean the date determined by the
Administrative Committee on which the first Offering shall commence, if within
twelve months of that date, the Plan is or has been approved at a meeting of the
stockholders of the Company by the affirmative vote of the holders of the
majority of Common Stock of the Company outstanding.
Sec. 2.08 "Eligible Employee" means each person who:
(a) is an Employee whose customary employment is for more than 5
months in any calendar year;
(b) is an Employee whose customary employment is for more than 20
hours per week;
(c) is employed on the Effective Date, or has completed at least
one year of Continuous Service; and
(d) is not deemed for purposes of section 423(b)(3) of the Code
to own stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company.
Sec. 2.09 "Employee" means each person employed by the Company or a
Subsidiary.
Sec. 2.10 "Excused Absence" means absence pursuant to a leave of
absence granted by the Company or any other entity constituting the Company,
absence due to disability or illness, absence by reason of a layoff, or absence
by reason of active duty in the armed forces of the United States. In no event
may an Excused Absence exceed six (6) months in length (or, if longer and if
applicable, the period of the individual's active duty in the armed forces of
the United States and such period thereafter as such individual's right to
reemployment by the Company is protected by law), and any absence shall cease to
be an Excused Absence upon the earlier of (a) the last day of the calendar month
in which the duration of the absence reaches six (6) months or (b) the last day
of the calendar month in which the leave expires by its terms, the layoff ends
by recall or permanent separation from service, or recovery from illness or
disability occurs.
Sec. 2.11 "Exercise Date" means the last day of each Purchase Period,
as determined by the Administrative Committee.
2
<PAGE>
Sec. 2.12 "Market Value" means, with respect to Stock, the fair
market value of such Stock, determined by such methods or procedures as shall be
established from time to time by the Administrative Committee, provided,
however, that if the Stock is listed on a national securities exchange or quoted
in an interdealer quotation system, the Market Value of such Stock on a given
date shall be based upon the last sales price or, if unavailable, the average of
the closing bid and asked prices per share of the Stock on such date (or, if
there was no trading or quotation in the Stock on such date, on the next
preceding date on which there was trading or quotation) as provided by one of
such organizations.
Sec. 2.13 "Offering" means the offering of shares of Stock under the
Plan.
Sec. 2.14 "Offering Date" means the date on which each Offering is to
commence, as determined by the Administrative Committee.
Sec. 2.15 "Participant" means each Eligible Employee who elects to
participate in the Plan.
Sec. 2.16 "Plan" means the U.S.A. Floral Products, Inc. Employee
Stock Purchase Plan, as the same is set forth herein and as the same may
hereafter be amended.
Sec. 2.17 "Purchase Agreement" means the document prescribed by the
Administrative Committee pursuant to which an Eligible Employee has enrolled to
be a Participant.
Sec. 2.18 "Purchase Period" means the period beginning on an Offering
Date and ending on the Exercise Date.
Sec. 2.19 "Purchase Price" means such term as it is defined in
Section 4.03 hereof.
Sec. 2.20 "Stock" means Common Stock of the Company.
Sec. 2.21 "Stock Purchase Account" means a noninterest bearing
account consisting of all amounts withheld from an Employee's compensation (or
otherwise paid into the Plan) for the purpose of purchasing shares of Stock for
such employee under the Plan, reduced by all amounts applied to the purchase of
Stock for such Employee under the Plan.
Sec. 2.22 "Subsidiary" shall mean a corporation described in section
424(f) of the Code that has, with the permission of the Board, adopted the Plan.
ARTICLE III
3
<PAGE>
Admission to Participation
Sec. 3.01 Initial Participation. Any Eligible Employee may elect to
be a Participant and may become a Participant by executing and filing with the
Administrative Committee a Purchase Agreement at such time in advance and on
such forms as prescribed by the Administrative Committee. The effective date of
an Eligible Employee's participation shall be the Offering Date next following
the date on which the Administrative Committee receives from the Eligible
Employee a properly executed and timely filed Purchase Agreement. Participation
in the Plan will continue automatically from one Purchase Period to another
unless notice is given pursuant to Section 3.02.
Sec. 3.02 Voluntary Discontinuance of Participation. Any Participant
may voluntarily withdraw from the Plan by filing a notice of withdrawal with the
Administrative Committee at such time in advance as the Administrative Committee
may specify. Upon such withdrawal, there shall be paid to the Participant the
amount, if any, standing to his credit in his Stock Purchase Account.
Sec. 3.03 Involuntary Discontinuance of Participation. If a
Participant ceases to be an Eligible Employee, the entire amount, if any,
standing to the Participant's credit in his Stock Purchase Account shall be
refunded to him.
Sec. 3.04 Readmission to Participation. Any Eligible Employee who
has previously been a Participant, who has discontinued participation, and who
wishes to be reinstated as a Participant may again become a Participant for any
subsequent Purchase Period by executing and filing with the Administrative
Committee, at such time in advance as the Administrative Committee shall
determine, a new Purchase Agreement on forms provided by the Administrative
Committee. Reinstatement to Participant status shall be effective as of the
Offering Date next following the date on which the Administrative Committee
receives from the Eligible Employee the properly executed and timely filed
Purchase Agreement. Notwithstanding the foregoing, readmission of any Eligible
Employee may be suspended for such time as may be necessary to comply with Rule
16b-3 promulgated under the Securities Exchange Act of 1934.
ARTICLE IV
Stock Purchase
Sec. 4.01 Reservation of Shares. There shall be 1,000,000 shares of
Stock reserved for the Plan, subject to adjustment in accordance with the
antidilution provisions hereinafter set forth. Except as provided in Section
5.02 hereof, the aggregate number of shares that may be purchased under the Plan
shall not exceed the number of shares reserved for the Plan.
Sec. 4.02 Limitation on Shares Available. The maximum number of
shares of Stock that may be purchased for each Participant on an Exercise Date
is the least of (a) the number of shares of Stock that can be purchased by
applying the full balance of his Stock Purchase Account to such purchase of
shares at the Purchase Price (as hereinafter determined), or (b) the
Participant's
4
<PAGE>
proportionate part of the maximum number of whole shares of Stock available
within the limitation established by the maximum aggregate number of such shares
reserved for the Plan, as stated in Section 4.01 hereof. Notwithstanding the
foregoing, if any person entitled to purchase shares pursuant to any offering
hereunder would be deemed for the purposes of section 423(b)(3) of the Code to
own stock (including any number of shares that such person would be entitled to
purchase hereunder) possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of Company, the maximum number of
shares that such person shall be entitled to purchase pursuant to the Plan shall
be reduced to that number which, when added to the number of shares of Stock
that such person is so deemed to own (excluding any number of shares that such
person would be entitled to purchase hereunder), is one less than such five
percent (5%). Any portion of a Participant's Stock Purchase Account that cannot
be applied by reason of the foregoing limitation shall remain in the
Participant's Stock Purchase Account for application to the purchase of Stock on
the next Offering Date (unless withdrawn before that Offering Date).
Sec. 4.03 Purchase Price of Shares. The Purchase Price per share of
the Stock sold to Participants pursuant to any Offering shall be the sum of (a)
eighty-five percent (85%) of the Market Value of such share on the Offering Date
on which such Offering commences or on the Exercise Date on which such Offering
expires, whichever is lower, and (b) any transfer, excise or similar tax imposed
on the transaction pursuant to which such share of Stock is purchased. If the
Exercise Date with respect to the purchase of Stock is a day on which the stock
is selling ex-dividend but is on or before the record date for such dividend,
then for Plan purposes the Purchase Price per share will be increased by an
amount equal to the dividend per share. In no event shall the Purchase Price be
less than the par value of the Stock.
Sec. 4.04 Exercise of Purchase Privilege.
(a) Subject to the provisions of Section 4.02 above, if on the date of
the last paycheck of a Participant issued prior to any Exercise Date there is
a credit balance in the Participant's Stock Purchase Account, there shall be
purchased for the Participant at the Purchase Price for the Purchase Period
that expires on such Exercise Date the largest number of whole shares of
Stock, as can be purchased with the entire amount standing to the
Participant's credit in his Stock Purchase Account on such paycheck issue
date. Each such purchase shall be deemed to have occurred on the Exercise Date
occurring at the close of the Offering for which the purchase was made.
(b) Any amount remaining in the Stock Purchase Account on the Exercise
Date after the purchase of the maximum number of whole shares shall remain in
the Stock Purchase Account to the credit of the Participant and applied to
purchase additional shares of Stock on subsequent Exercise Dates.
(c) Notwithstanding anything contained herein to the contrary, a
Participant may not during any calendar year purchase shares of Stock having
an aggregate Market
5
<PAGE>
Value, determined at the time of each Offering Date during such calendar year,
of more than $25,000.
Sec. 4.05 Establishment of Stock Purchase Account. Each Participant
shall authorize payroll deductions from Compensation for the purposes of funding
his Stock Purchase Account. In the Purchase Agreement, each Participant shall
authorize a deduction from each payment of his Compensation during a Purchase
Period, subject to Section 4.04(c). Subject to Section 3.02, a Participant may
not reduce or increase his payroll deduction rate during any Purchase Period.
However, a Participant may change the deduction to any permissible level for any
subsequent Offering by filing notice thereof at such time preceding the Offering
Date on which such subsequent Offering commences as the Administrative Committee
shall determine.
Sec. 4.06 Payment for Stock. The Purchase Price for all shares of
Stock purchased by a Participant under the Plan shall be paid out of the
Participant's Stock Purchase Account. As of each Exercise Date, the entire
amount standing to the credit of each Participant in his Stock Purchase Account
on the date of the last paycheck issued to the Participant prior to the Exercise
Date in the Purchase Period that expires on such Exercise Date shall be charged
with the aggregate Purchase Price of the shares of Stock purchased by such
Participant on the Exercise Date. No interest shall be paid or payable with
respect to any amount held in the Participant's Stock Purchase Account.
Sec. 4.07 Share Ownership; Issuance of Certificates.
(a) The shares purchased by a Participant on an Exercise Date
shall, for all purposes, be deemed to have been issued and/or sold at the
close of business on such Exercise Date. Prior to that time, none of the
rights or privileges of a stockholder of the Company shall inure to the
Participant with respect to such shares. All the shares of Stock purchased
under the Plan shall be delivered by the Company in a manner as determined
by the Administrative Committee.
(b) The Administrative Committee, in its sole discretion, may
determine that the shares of Stock shall be delivered by the Company (i) by
issuing and delivering to the Participant a certificate for the number of
whole shares of Stock purchased by such Participant on an Exercise Date or
during a Calendar year, or (ii) by issuing and delivering a certificate or
certificates for the number of shares of Stock purchased by all
Participants on an Exercise Date or during a Calendar year to a member firm
of the New York Stock Exchange which is also a member of the National
Association of Securities Dealers, as selected by the Administrative
Committee from time to time, which shares shall be maintained by such
member firm in separate brokerage accounts of each Participant, or (iii) by
issuing and delivering a certificate or certificates for the number of
shares of Stock purchased by all Participants on an Exercise Date or during
the calendar year to a bank or trust company or affiliate thereof, as
selected by the Administrative Committee from time to time, which shares
shall be maintained by such bank or trust company or affiliate
6
<PAGE>
in separate accounts for each Participant or, if he designates on his Stock
Purchase Agreement, in his name jointly with his spouse, with right of
survivorship. A Participant who is a resident of a jurisdiction that does
not recognize such joint tenancy may have a certificate or account in his
name as tenant in common with his spouse, without right of survivorship.
Such designation may be changed by filing a notice thereof signed by the
Participant and his spouse. Such spouse shall be bound by all of the terms
and conditions of the Plan as if such spouse were a Participant.
Sec. 4.08 Restrictions on Resale. Stock acquired under the Plan may
not be sold or otherwise disposed of for at least one year after the Exercise
Date on which the shares were acquired, except in the case of death or
disability.
ARTICLE V
Special Adjustments
Sec. 5.01 Shares Unavailable. If, on any Exercise Date, the
aggregate funds available for the purchase of Stock would purchase a number of
shares in excess of the number of shares then available for purchase under the
Plan, the following events shall occur:
(a) The number of shares that would otherwise be purchased by
each Participant shall be proportionately reduced on the Exercise Date in
order to eliminate such excess;
(b) The Plan shall automatically terminate immediately after the
Exercise Date as of which the supply of available shares is exhausted; and
(c) Any amount remaining in the Stock Purchase Account of each of
the Participants shall be repaid to such Participants.
Sec. 5.02 Antidilution Provisions. The aggregate number of shares of
Stock reserved for purchase under the Plan, as hereinabove provided, and the
calculation of the Purchase Price per share may be appropriately adjusted to
reflect any increase or decrease in the number of issued shares of Stock
resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend, or other increase or decrease in
such shares, if effected without receipt of consideration by the Company. Any
such adjustment shall be made by the Administrative Committee acting with the
consent of, and subject to the approval of, the Board.
Sec. 5.03 Effect of Certain Transactions. Subject to any required
action by the stockholders, if the Company shall be the surviving or resulting
corporation in any merger or consolidation, or if the Company shall be merged
for the purpose of changing the jurisdiction of its incorporation, any Offering
hereunder shall pertain to and apply to the shares of stock of the
7
<PAGE>
Company or the survivor. However, in the event of a dissolution or liquidation
of the Company, or of a merger or consolidation in which the Company is not the
surviving or resulting corporation, the Plan and any Offering hereunder shall
terminate upon the effective date of such dissolution, liquidation, merger or
consolidation, and the balance then standing to the credit of each Participant
in his Stock Purchase Account shall be returned to him.
ARTICLE VI
Miscellaneous
Sec. 6.01 Nonalienation. The right to purchase shares of Stock under
the Plan is personal to the Participant, is exercisable only by the Participant
during his lifetime except as hereinafter set forth, and may not be assigned or
otherwise transferred by the Participant. Notwithstanding the foregoing, there
shall be delivered to the executor, administrator or other personal
representative of a deceased Participant such shares of Stock and such residual
balance as may remain in the Participant's Stock Purchase Account as of the date
the Participant's death occurs. However, such representative shall be bound by
the terms and conditions of the Plan as if such representative were a
Participant.
Sec. 6.02 Administrative Costs. The Company shall pay all
administrative expenses associated with the operation of the Plan. No
administrative charges shall be levied against the Stock Purchase Accounts of
the Participants.
Sec. 6.03 Collection of Taxes. The Company shall be entitled to
require any Participant to remit, through payroll withholding or otherwise, any
tax that it determines it is so obligated to collect with respect to the
issuance of Stock hereunder, or the subsequent sale or disposition of such
Stock, and the Administrative Committee shall institute such mechanisms as shall
insure the collection of such taxes.
Sec. 6.04 Administrative Committee. The Compensation Committee of
the Board shall appoint an Administrative Committee, which shall have the
authority and power to administer the Plan and to make, adopt, construe, and
enforce rules and regulations not inconsistent with the provisions of the Plan.
The Administrative Committee shall adopt and prescribe the contents of all forms
required in connection with the administration of the Plan, including, but not
limited to, the Purchase Agreement, payroll withholding authorizations,
withdrawal documents, and all other notices required hereunder. The
Administrative Committee shall have the fullest discretion permissible under law
in the discharge of its duties. The Administrative Committee's interpretations
and decisions in respect of the Plan, the rules and regulations pursuant to
which it is operated, and the rights of Participants hereunder shall be final
and conclusive.
Sec. 6.05 Amendment of the Plan. The Board may amend the Plan
without the consent of stockholders or Participants, except that any such action
shall be subject to the approval
8
<PAGE>
of the Company's stockholders at or before the next annual meeting of
stockholders for which the record date is after such Board action if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the Stock
may then be listed or quoted, and the Board may otherwise, in its discretion,
determine to submit other such changes to the Plan to stockholders for approval;
provided, however, that, without the consent of an affected Participant, no such
action may materially impair the rights of such Participant under any award
theretofore granted to him.
Sec. 6.06 Termination of the Plan. The Plan shall continue in effect
unless terminated pursuant to action by the Board, which shall have the right to
terminate the Plan at any time without prior notice to any Participant and
without liability to any Participant. Upon the termination of the Plan, the
balance, if any, then standing to the credit of each Participant in his Stock
Purchase Account shall be refunded to him.
Sec. 6.07 Repurchase of Stock. The Company shall not be required to
purchase or repurchase from any Participant any of the shares of Stock that the
Participant acquired under the Plan.
Sec. 6.08 Notice. A Purchase Agreement and any notice that a
Participant files pursuant to the Plan shall be on the form prescribed by the
Administrative Committee and shall be effective only when received by the
Administrative Committee. Delivery of such forms may be made by hand or by
certified mail, sent postage prepaid, to U.S.A. Floral Products, Inc., 3500
Whitehaven Parkway, Washington, D.C. 20007, Attention: Stock Purchase Plan
Committee. Delivery by any other mechanism shall be deemed effective at the
option and discretion of the Administrative Committee.
Sec. 6.09 Government Regulation. The Company's obligation to sell
and to deliver the Stock under the Plan is at all times subject to all approvals
of any governmental authority required in connection with the authorization,
issuance, sale or delivery of such Stock.
Sec. 6.10 Headings, Captions, Gender. The headings and captions
herein are for convenience of reference only and shall not be considered as part
of the text. The masculine shall include the feminine, and vice versa.
Sec. 6.11 Severability of Provisions; Prevailing Law. The provisions
of the Plan shall be deemed severable. In the event any such provision is
determined to be unlawful or unenforceable by a court of competent jurisdiction
or by reason of a change in an applicable statute, the Plan shall continue to
exist as though such provision had never been included therein (or, in the case
of a change in an applicable statute, had been deleted as of the date of such
change). The Plan shall be governed by the laws of the State of Delaware, to
the extent such laws are not in conflict with, or superseded by, federal law.
<PAGE>
Exhibit 10.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this ___ day of ___________, 1997,
is by and between U.S.A. Floral Products, Inc., a Delaware corporation (the
"Company") and Raymond C. Anderson ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term").
2. Position and Duties. The Company hereby employs Employee as Chief
-------------------
Financial Officer. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of the chief financial officer of
the Company. Employee will report directly to the Chief Executive Officer or
the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and agrees to
devote all of his professional time, attention, and efforts to promote and
further the business of the Company. Employee shall faithfully adhere to,
execute, and fulfill all policies established by the Company.
3. Compensation. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board, in its sole and absolute discretion, and such
determination shall be binding and final. To the extent that such bonus is to
be determined in light of financial performance
<PAGE>
during a specified fiscal period and this Agreement commences on a date after
the start of such fiscal period, any bonus payable in respect of such fiscal
period's results may be prorated. In addition, if the period of Employee's
employment hereunder expires before the end of a fiscal period, and if Employee
is eligible to receive a bonus at such time (such eligibility being subject to
the restrictions set forth in Section 6 below), any bonus payable in respect of
such fiscal period's results may be prorated.
(c) Stock Options. Upon execution of this Agreement, the Company shall
grant Employee options to purchase 50,000 shares of the Company's common stock,
which shall vest at the rate of 25% per year, commencing one year from the date
of grant. The options will have an exercise price equal to the greater of $8.00
or 60% of the initial public offering price per share.
(d) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Place of Performance. Employee understands that he may be requested by
--------------------
the Company to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will provide Employee with a relocation allowance, in an amount determined by
the Company, to assist Employee in covering the costs of moving himself, his
immediate family, and their personal property and effects. The total amount and
type of costs to be covered shall be determined by the Company, in light of
prevailing Company policy at the time. Provided, however, the Company shall not
request Employee to relocate for a period of one year from the date hereof.
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis
2
<PAGE>
for a period of four consecutive months, or for a total of four months in any
six-month period, then 30 days after written notice to the Employee (which
notice may be given before or after the end of the aforementioned periods, but
which shall not be effective earlier than the last day of the applicable
period), the Company may terminate Employee's employment hereunder if Employee
is unable to resume his full-time duties at the conclusion of such notice
period. Subject to Section 6(f) below, if Employee's employment is terminated
as a result of Employee's disability, the Company shall continue to pay Employee
his base salary at the then-current rate for the lesser of (i) three months from
the effective date of termination, or (ii) whatever time period is remaining
under the then-current period of the Term (without regard to renewals thereof).
Such payments shall be made in accordance with the Company's regular payroll
cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company, and that in the judgment
of the Company materially and adversely affects the operations or reputation of
the Company; (iv) Employee's conviction of a felony or other crime involving
moral turpitude; or (v) Employee's abuse of alcohol or drugs (legal or illegal)
that, in the Company's judgment, materially impairs Employee's ability to
perform his duties hereunder. In the event of a termination "for cause," as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for the lesser of (i) three months from the effective date of
termination, or (ii) whatever time period is remaining under the then-current
period of the Term (without regard to renewals thereof). Such payments shall be
made in accordance with the Company's regular payroll cycle. If Employee
resigns or otherwise terminates his employment for any reason or for no reason,
Employee shall receive no severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 6. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared
3
<PAGE>
but not paid prior to termination. In addition, in the event of a termination
by the Company under Section 6(b) or 6(d), Employee shall be entitled to receive
incentive bonus compensation through the end of the Company's fiscal year in
which termination occurs, calculated as if Employee had remained employed by the
Company through the end of such fiscal year, and paid in such amounts, at such
times, and in such forms as are determined pursuant to Section 3(b) above and
Exhibit A attached hereto. Except as specified in the preceding two sentences,
Employee shall not be entitled to receive any incentive bonus compensation after
the effective date of termination of his employment. All other rights and
obligations the Company, and Employee under this Agreement shall cease as of the
effective date of termination, except that Employee's obligations under Sections
7, 8, 9 and 10 below shall survive such termination in accordance with their
terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
on an "at will" basis, for the duration of such period, and thereafter for a
period equal to the longer of (x) two years, or (y) the period during which
Employee is receiving any severance pay from the Company, Employee shall not,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, company, partnership, corporation, business, group, or other
entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company
including without limitation the importing, brokerage, shipping or marketing of
floral products, or any business engaging in the consolidation of the floral
industry within the United States of America (the "Territory");
(ii) call upon any Person who is, at that time, within the Territory,
an employee of the Company for the purpose or with the intent of enticing such
employee away from or out of the employ of the Company;
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company within the Territory; or
4
<PAGE>
(iv) on Employee's own behalf or on behalf of any competitor, call
upon any Person who or that, during Employee's employment by the Company was
either called upon by the Company as a prospective acquisition candidate or was
the subject of an acquisition analysis conducted by the Company.
(b) The foregoing covenants shall not be deemed to prohibit Employee from
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
through the automated quotation system of a registered securities association.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company and enters into a business or pursues other activities
that, at such time, are not in competition with the Company, Employee shall not
be chargeable with a violation of this Section 7 if the Company subsequently
enters the same (or a similar) competitive business or activity. In addition,
if Employee has no actual knowledge that his actions violate the terms of this
Section 7, Employee shall not be deemed to have breached the restrictive
covenants contained herein if, promptly after being notified by the Company of
such breach, Employee ceases the prohibited actions.
(d) For purposes of this Section 7, references to "the Company" shall mean
U.S.A. Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this Agreement shall automatically be considered to have
been amended and revised to reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants; provided, that upon
--------
the failure of the Company to make any payments required under this Agreement,
the Employee may, upon 30 days' prior written notice to the Company, waive his
right to receive any additional compensation pursuant to this Agreement and
engage in any activity prohibited by the covenants of this Section 7. It is
specifically agreed that the period of two years stated at the beginning of this
Section 7, during which the agreements and covenants of Employee made in this
Section 7 shall be effective, shall be computed by excluding from such
computation any time during which Employee is in violation of any provision of
this Section 7.
5
<PAGE>
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company, and its respective officers,
directors, employees, and stockholders. It is further agreed that the Company
and Employee intend that such covenants be construed and enforced in accordance
with the changing activities, business, and locations of the Company throughout
the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
(including all trade secrets), in whatever form, whether oral, written, or
electronic (collectively, the "Confidential Information"), to which Employee
has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company because such Confidential
Information encompasses technical know-how, trade secrets, or technical,
financial, organizational, sales, or other valuable aspects of the Company's
business and trade, including, without limitation, technologies, products,
processes, plans, clients, personnel, operations, and business activities. This
restriction shall not apply to any Confidential Information that (a) becomes
known generally to the public through no fault of the Employee; (b) is required
by applicable law, legal process, or any order or mandate of a court or other
governmental authority to be disclosed; or (c) is reasonably believed by
Employee, based upon the advice of legal counsel, to be required to be disclosed
in defense of a lawsuit or other legal or administrative action brought against
Employee; provided, that in the case of clauses (b) or (c), Employee shall give
--------
the Company reasonable advance written notice of the Confidential Information
intended to be disclosed and the reasons and circumstances surrounding such
disclosure, in order to permit the Company to seek a protective order or other
appropriate request for confidential treatment of the applicable Confidential
Information.
9. Inventions. Employee shall disclose promptly to the Company any and
----------
all significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
year thereafter, and that are directly related to the business or activities of
the Company and that Employee conceives as a result of his employment by the
Company, regardless of whether or not such ideas, inventions, or improvements
qualify as "works for hire." Employee hereby assigns and agrees to assign all
his interests therein to the Company or its nominee. Whenever requested to do
so by the Company, Employee shall execute any and all applications, assignments,
or other instruments that the Company shall deem necessary to apply for
6
<PAGE>
and obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company's interest therein.
10. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company or its respective representatives,
vendors, or customers that pertain to the business of the Company, whether in
paper, electronic, or other form; and (c) all keys, credit cards, vehicles, and
other property of the Company. Employee shall not retain or cause to be
retained any copies of the foregoing. Employee hereby agrees that all of the
foregoing shall be and remain the property of the Company, as the case may be,
and be subject at all times to its discretion and control.
11. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company without the prior
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns.
13. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement and
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or
7
<PAGE>
written agreements. This written Agreement may not be later modified except by
a further writing signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a writing signed
by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
Attention: Robert Poirier
To Employee: Raymond C. Anderson
5722 Crestview
Western Springs, Illinois 60558
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 15.
16. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company as a result of a breach of the restrictive covenants set
forth in Sections 7, 8, 9 and 10, and because of the immediate and irreparable
damage that would be caused to the Company for which monetary damages would not
be a sufficient remedy, it is hereby agreed that in addition to all other
remedies that may be available to the Company at law or in equity, the Company
shall be entitled to specific performance and any injunctive or other equitable
relief as a remedy for any breach or threatened breach of the aforementioned
restrictive covenants.
18. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct
8
<PAGE>
expense of any arbitration proceeding shall be borne by the Company. Each party
shall bear its own counsel fees. The arbitration proceeding shall be held in
the city where the principal office of the Company is located. Notwithstanding
the foregoing, the Company shall be entitled to seek injunctive or other
equitable relief, as contemplated by Section 17 above, from any court of
competent jurisdiction, without the need to resort to arbitration.
19. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Illinois, without regard to its conflict
of laws principles.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
U.S.A. FLORAL PRODUCTS, INC.
By:
--------------------------
Name: Robert J. Poirier
Title: President and CEO
EMPLOYEE:
- --------------------------------
Raymond C. Anderson
10
<PAGE>
Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this ___ day of ___________, 1997,
is by and between The Roy Houff Company, an Illinois corporation (the "Company")
and a wholly-owned subsidiary of U.S.A. Floral Products, Inc. ("USFloral"), a
Delaware corporation, and Roy O. Houff ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term").
2. Position and Duties. The Company hereby employs Employee as Chief
-------------------
Executive Officer. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of the chief executive officer of
the Company. Employee will report directly to the Board of Directors of the
Company (the "Board"). Employee hereby accepts this employment upon the terms
and conditions herein contained and agrees to devote all of his professional
time, attention, and efforts to promote and further the business of the Company.
Employee shall faithfully adhere to, execute, and fulfill all policies
established by the Company.
3. Compensation. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board, in its sole and absolute discretion, and such
determination shall be
<PAGE>
binding and final. To the extent that such bonus is to be determined in light
of financial performance during a specified fiscal period and this Agreement
commences on a date after the start of such fiscal period, any bonus payable in
respect of such fiscal period's results may be prorated. In addition, if the
period of Employee's employment hereunder expires before the end of a fiscal
period, and if Employee is eligible to receive a bonus at such time (such
eligibility being subject to the restrictions set forth in Section 6 below), any
bonus payable in respect of such fiscal period's results may be prorated.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board. Employee shall be permitted to take up to twelve weeks of
vacation during each calendar year.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Place of Performance. Employee understands that he may be requested by
--------------------
the Company to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will provide Employee with a relocation allowance, in an amount determined by
the Company, to assist Employee in covering the costs of moving himself, his
immediate family, and their personal property and effects. The total amount and
type of costs to be covered shall be determined by the Company, in light of
prevailing Company policy at the time.
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to
2
<PAGE>
resume his full-time duties at the conclusion of such notice period. Subject to
Section 6(f) below, if Employee's employment is terminated as a result of
Employee's disability, the Company shall continue to pay Employee his base
salary at the then-current rate for the lesser of (i) three months from the
effective date of termination, or (ii) whatever time period is remaining under
the then-current period of the Term (without regard to renewals thereof). Such
payments shall be made in accordance with the Company's regular payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company or USFloral, and that in
the judgment of the Company or USFloral materially and adversely affects the
operations or reputation of the Company or USFloral; (iv) Employee's conviction
of a felony or other crime involving moral turpitude; or (v) Employee's abuse of
alcohol or drugs (legal or illegal) that, in the Company's judgment, materially
impairs Employee's ability to perform his duties hereunder. In the event of a
termination "for cause," as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for the lesser of (i) three months from the effective date of
termination, or (ii) whatever time period is remaining under the then-current
period of the Term (without regard to renewals thereof). Such payments shall be
made in accordance with the Company's regular payroll cycle. If Employee
resigns or otherwise terminates his employment for any reason or for no reason,
Employee shall receive no severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 6. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 6(b) or 6(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Company's fiscal year in which termination
occurs, calculated as if Employee had
3
<PAGE>
remained employed by the Company through the end of such fiscal year, and paid
in such amounts, at such times, and in such forms as are determined pursuant to
Section 3(b) above and Exhibit A attached hereto. Except as specified in the
preceding two sentences, Employee shall not be entitled to receive any incentive
bonus compensation after the effective date of termination of his employment.
All other rights and obligations of USFloral, the Company, and Employee under
this Agreement shall cease as of the effective date of termination, except that
Employee's obligations under Sections 7, 8, 9 and 10 below shall survive such
termination in accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or USFloral on an "at will" basis, for the duration of such period, and
thereafter for a period equal to the longer of (x) two years, or (y) the period
during which Employee is receiving any severance pay from the Company, Employee
shall not, directly or indirectly, for himself or on behalf of or in conjunction
with any other person, company, partnership, corporation, business, group, or
other entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company or
USFloral including without limitation the importing, brokerage, shipping or
marketing of floral products, or any business engaging in the consolidation of
the floral industry within the United States of America (the "Territory");
(ii) call upon any Person who is, at that time, within the Territory, an
employee of the Company or USFloral for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company or
USFloral;
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company or USFloral within
the Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or USFloral within the Territory; or
(iv) on Employee's own behalf or on behalf of any competitor, call upon
any Person who or that, during Employee's employment by the Company or USFloral
was either called
4
<PAGE>
upon by the Company or USFloral as a prospective acquisition candidate or was
the subject of an acquisition analysis conducted by the Company or USFloral.
(b) The foregoing covenants shall not be deemed to prohibit Employee from
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
through the automated quotation system of a registered securities association.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or USFloral and enters into a business or pursues other
activities that, at such time, are not in competition with the Company or
USFloral, Employee shall not be chargeable with a violation of this Section 7 if
the Company or USFloral subsequently enters the same (or a similar) competitive
business or activity. In addition, if Employee has no actual knowledge that his
actions violate the terms of this Section 7, Employee shall not be deemed to
have breached the restrictive covenants contained herein if, promptly after
being notified by the Company or USFloral of such breach, Employee ceases the
prohibited actions.
(d) For purposes of this Section 7, references to "USFloral" shall mean
U.S.A. Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this Agreement shall automatically be considered to have
been amended and revised to reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USFloral, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by USFloral or the Company of such
covenants; provided, that upon the failure of the Company to make any payments
--------
required under this Agreement, the Employee may, upon 30 days' prior written
notice to the Company, waive his right to receive any additional compensation
pursuant to this Agreement and engage in any activity prohibited by the
covenants of this Section 7. It is specifically agreed that the period of two
years stated at the beginning of this Section 7, during which the agreements and
covenants of Employee made in this Section 7 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this Section 7.
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to
5
<PAGE>
receive from the Company his base salary at the rate then in effect solely for
the longer of (i) the time period during which the provisions of this Section 7
shall be enforceable under the provisions of such applicable law, or (ii) the
time period during which Employee is not engaging in any competitive activity,
but in no event longer than the applicable period provided in Section 6 above.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and USFloral, and their
respective officers, directors, employees, and stockholders. It is further
agreed that the Company and Employee intend that such covenants be construed and
enforced in accordance with the changing activities, business, and locations of
the Company and USFloral throughout the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or USFloral (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company and/or USFloral because such
Confidential Information encompasses technical know-how, trade secrets, or
technical, financial, organizational, sales, or other valuable aspects of the
Company's and USFloral's business and trade, including, without limitation,
technologies, products, processes, plans, clients, personnel, operations, and
business activities. This restriction shall not apply to any Confidential
Information that (a) becomes known generally to the public through no fault of
the Employee; (b) is required by applicable law, legal process, or any order or
mandate of a court or other governmental authority to be disclosed; or (c) is
reasonably believed by Employee, based upon the advice of legal counsel, to be
required to be disclosed in defense of a lawsuit or other legal or
administrative action brought against Employee; provided, that in the case of
--------
clauses (b) or (c), Employee shall give the Company reasonable advance written
notice of the Confidential Information intended to be disclosed and the reasons
and circumstances surrounding such disclosure, in order to permit the Company to
seek a protective order or other appropriate request for confidential treatment
of the applicable Confidential Information.
9. Inventions. Employee shall disclose promptly to the Company and
----------
USFloral any and all significant conceptions and ideas for inventions,
improvements, and valuable discoveries, whether patentable or not, that are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one year thereafter, and that are directly related to
the business or activities of the Company or USFloral and that Employee
conceives as a result of his employment by the Company, regardless of whether or
not such ideas, inventions, or improvements qualify as "works for hire."
Employee hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments, or other instruments that
the Company shall deem
6
<PAGE>
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
10. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USFloral or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USFloral, whether in paper, electronic, or other form; and (c) all
keys, credit cards, vehicles, and other property of the Company or USFloral.
Employee shall not retain or cause to be retained any copies of the foregoing.
Employee hereby agrees that all of the foregoing shall be and remain the
property of the Company or USFloral, as the case may be, and be subject at all
times to their discretion and control.
11. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company without the prior
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns. Notwithstanding the foregoing, if Employee accepts
employment with a subsidiary or affiliate of USFloral other than the Company,
unless Employee and his new employer agree otherwise in writing, this Agreement
shall automatically be deemed to have been assigned to such new employer (which
shall thereafter be an additional or substitute beneficiary of the covenants
contained herein, as appropriate), with the consent of Employee, such assignment
shall be considered a condition of employment by such new employer, and
references to the "Company" in this Agreement shall be deemed to refer to such
new employer. If the Company is merged with or into another subsidiary or
affiliate of USFloral, such action shall
7
<PAGE>
not be considered to cause an assignment of this Agreement, and the surviving or
successor entity shall become the beneficiary of this Agreement and all
references to the "Company" shall be deemed to refer to such surviving or
successor entity. It is intended that USFloral will be a third-party beneficiary
of the rights of the Company under this Agreement. No other Person shall be a
third-party beneficiary.
13. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement and
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: The Roy Houff Company
6200 South Oak Park Avenue
Chicago, Illinois 60638
Attention: Secretary
with a copy to: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
Attention: Robert Poirier
To Employee: Roy O. Houff
33 Baybrook Lane
Oak Brook, Illinois 60521
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 15.
16. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions
8
<PAGE>
of Section 7(e) above. The paragraph headings herein are for reference purposes
only and are not intended in any way to describe, interpret, define or limit the
extent or intent of the Agreement or of any part hereof.
17. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company and/or USFloral as a result of a breach of the restrictive
covenants set forth in Sections 7, 8, 9 and 10, and because of the immediate and
irreparable damage that would be caused to the Company and/or USFloral for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or USFloral
at law or in equity, the Company and USFloral shall be entitled to specific
performance and any injunctive or other equitable relief as a remedy for any
breach or threatened breach of the aforementioned restrictive covenants.
18. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the principal office of
the Company is located. Notwithstanding the foregoing, the Company and/or
USFloral shall be entitled to seek injunctive or other equitable relief, as
contemplated by Section 17 above, from any court of competent jurisdiction,
without the need to resort to arbitration.
19. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Illinois, without regard to its conflict
of laws principles.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
THE ROY HOUFF COMPANY
By: ___________________________
Name:
Title:
EMPLOYEE:
9
<PAGE>
______________________________
Roy O. Houff
10
<PAGE>
EXHIBIT A
- ---------
Under USFloral's Incentive Bonus Plan, Employee will be eligible to earn up to
100% of Employee's base salary in bonus compensation, payable out of a bonus
pool determined by the Board of Directors of USFloral or a compensation
committee thereof, depending upon the achievement of specified criteria and
payable in the form of cash, stock options, or other non-cash awards, in such
proportions, and in such forms, as are determined by the Board of Directors of
USFloral or a compensation committee thereof. Bonuses under the Incentive Bonus
Plan will be determined by measuring Employee's performance, the Company's
performance and USFloral's performance based on the following criteria, weighted
as indicated, and measured against target performance levels established by the
Board of Directors of USFloral or such compensation committee: (i) USFloral's
profit - 25%, (ii) the profit of the Company - 50% and (iii) revenue growth of
the Company due to acquisitions - 25%.
11
<PAGE>
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of the ___ day of ___________, 1997, is
by and between CFX, Inc., a Florida corporation (the "Company") and a wholly
owned subsidiary of USA Floral Products, Inc. ("USAF"), a Delaware corporation,
and Dwight Haight ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term").
2. Position and Duties. The Company hereby employs Employee as President.
-------------------
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a president of the Company. Employee will report
directly to the Board of Directors of the Company (the "Board"). Employee
hereby accepts this employment upon the terms and conditions herein contained
and agrees to devote a majority of his professional time, attention, and efforts
to promote and further the business of the Company. Employee shall faithfully
adhere to, execute, and fulfill all policies established by the Company.
3. Compensation. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $216,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board in its sole and absolute discretion, and such
determination shall be binding and final. To the extent that such bonus is to
be determined in light of financial performance
<PAGE>
during a specified fiscal period and this Agreement commences on a date after
the start of such fiscal period, any bonus payable in respect of such fiscal
period's results may be prorated. In addition, if the period of Employee's
employment hereunder expires before the end of a fiscal period, and if Employee
is eligible to receive a bonus at such time (such eligibility being subject to
the restrictions set forth in Section 6 below), any bonus payable in respect of
such fiscal period's results may be prorated.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Place of Performance. Employee understands that he may be requested by
--------------------
the Company to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will provide Employee with a relocation allowance, in an amount determined by
the Company, to assist Employee in covering the costs of moving himself, his
immediate family, and their personal property and effects. The total amount and
type of costs to be covered shall be determined by the Company, in light of
prevailing Company policy at the time.
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall
2
<PAGE>
continue to pay Employee his base salary at the then-current rate for the lesser
of (i) 12 months from the effective date of termination, or (ii) whatever time
period is remaining under the then-current period of the Term (without regard to
renewals thereof). Such payments shall be made in accordance with the Company's
regular payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company or USAF, and that in the
judgment of the Company or USAF materially and adversely affects the operations
or reputation of the Company or USAF; (iv) Employee's conviction of a felony or
other crime involving moral turpitude; or (v) Employee's abuse of alcohol or
drugs (legal or illegal) that, in the Company's judgment, materially impairs
Employee's ability to perform his duties hereunder. In the event of a
termination "for cause," as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for whatever time period is remaining under the then-current period of
the Term (without regard to renewals thereof). Such payments shall be made in
accordance with the Company's regular payroll cycle. If Employee resigns or
otherwise terminates his employment for any reason or for no reason, Employee
shall receive no severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 6. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 6(b) or 6(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Company's fiscal year in which termination
occurs, calculated as if Employee had remained employed by the Company through
the end of such fiscal year, and paid in such amounts, at such times, and in
such forms as are determined pursuant to Section 3(b) above and Exhibit A
attached hereto. Except as specified in the preceding two sentences, Employee
shall not be entitled
3
<PAGE>
to receive any incentive bonus compensation after the effective date of
termination of his employment. All other rights and obligations of USAF, the
Company, and Employee under this Agreement shall cease as of the effective date
of termination, except that Employee's obligations under Sections 7, 8, 9 and
10 below shall survive such termination in accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided that, in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment, except that no such reduction
shall be made for Employee's earnings from the companies referred to by name in
Section 7(b) hereof.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or USAF on an "at will" basis, for the duration of such period, and thereafter
for a period equal to the longer of (x) two years, or (y) the period during
which Employee is receiving any severance pay from the Company, Employee shall
not, directly or indirectly, for himself or on behalf of or in conjunction with
any other person, company, partnership, corporation, business, group, or other
entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company or USAF,
within 100 miles of any location where the Company or USAF conducts business
(the "Territory");
(ii) call upon any Person who is, at that time, within the Territory, an
employee of the Company or USAF for the purpose or with the intent of enticing
such employee away from or out of the employ of the Company or USAF;
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company or USAF within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or USAF within the Territory; or
(iv) on Employee's own behalf or on behalf of any competitor, call upon any
Person who or that, during Employee's employment by the Company or USAF was
either called upon by the Company or USAF as a prospective acquisition candidate
or was the subject of an acquisition analysis conducted by the Company or USAF.
4
<PAGE>
(b) The foregoing covenants shall not be deemed to prohibit Employee from
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
through the automated quotation system of a registered securities association or
owning or engaging in any business, acting in any capacity for, or otherwise
operating H&H Flowers, Inc., d/b/a LaFleurette, Flying High Venture, Floraltech,
Inc., Day One Fresh, LLC, Cultivitos Miramonte and its subsidiaries, C.I.
Colombiana De Bouquets or Agropecuaria Pamputik, S.A. and its subsidiaries.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or USAF and enters into a business or pursues other
activities that, at such time, are not in competition with the Company or USAF,
Employee shall not be chargeable with a violation of this Section 7 if the
Company or USAF subsequently enters the same (or a similar) competitive business
or activity or commences competitive operations within 100 miles of the
Employee's new business or activities. In addition, if Employee has no actual
knowledge that his actions violate the terms of this Section 7, Employee shall
not be deemed to have breached the restrictive covenants contained herein if,
promptly after being notified by the Company or USAF of such breach, Employee
ceases the prohibited actions.
(d) For purposes of this Section 7, references to "USAF" shall mean USA
Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this Agreement shall automatically be considered to have
been amended and revised to reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USAF, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by USAF or the Company of such covenants; provided,
--------
that upon the failure of the Company to make any payments required under this
Agreement, the Employee may, upon 30 days' prior written notice to the Company,
waive his right to receive any additional compensation pursuant to this
Agreement and engage in any activity prohibited by the covenants of this Section
7. It is specifically agreed that the period of two years stated at the
beginning of this Section 7, during which the agreements and covenants of
Employee made in this Section 7 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 7.
5
<PAGE>
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above. If Employee is subject to a restriction on
competitive activity as a party to that certain Amended and Restated Agreement
and Plan of Contribution, dated as of August 5, 1997, by and among USA Floral
Products, Inc., Floral Acquisition Corporation, CFX, Inc. and the Stockholders
of CFX, Inc. (the "Merger Agreement"), then Employee shall abide by, and in all
cases be subject to, the restrictive covenants (whether in this Section 7 or in
the Merger Agreement) that, in the aggregate, impose restrictions on Employee
for the longest duration and the broadest geographic scope (taking into account
the effect of any applicable court decisions limiting the scope or duration of
such restrictions), it being agreed that all such restrictive covenants are
supported by separate and distinct consideration. This Section 7(g) shall be
construed and interpreted in light of the duration of the applicable restrictive
covenants.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and USAF, and their respective
officers, directors, employees, and stockholders. It is further agreed that the
Company and Employee intend that such covenants be construed and enforced in
accordance with the changing activities, business, and locations of the Company
and USAF throughout the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or USAF (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company and/or USAF because such
Confidential Information encompasses technical know-how, trade secrets, or
technical, financial, organizational, sales, or other valuable aspects of the
Company's and USAF's business and trade, including, without limitation,
technologies, products, processes, plans, clients, personnel, operations, and
business activities. This restriction shall not apply to any Confidential
Information that (a) becomes known generally to the public through no fault of
the Employee; (b) is required by applicable law, legal process, or any order or
mandate of a court or other governmental authority to be disclosed; (c) is
reasonably believed by Employee, based upon the advice of legal counsel, to be
required to be disclosed in defense of a lawsuit or other legal or
administrative action brought against Employee; or (d) becomes known to Employee
through his affiliation with the entities set forth in Section 7(b); provided
--------
that, in the case of clauses (b) or (c), Employee shall give the Company
reasonable advance written notice of the Confidential Information intended to be
disclosed and the
6
<PAGE>
reasons and circumstances surrounding such disclosure, in order to permit the
Company to seek a protective order or other appropriate request for confidential
treatment of the applicable Confidential Information.
9. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USAF or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USAF, whether in paper, electronic, or other form; and (c) all keys,
credit cards, vehicles, and other property of the Company or USAF. Employee
shall not retain or cause to be retained any copies of the foregoing. Employee
hereby agrees that all of the foregoing shall be and remain the property of the
Company or USAF, as the case may be, and be subject at all times to their
discretion and control.
10. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
11. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company without the prior
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns. Notwithstanding the foregoing, if Employee accepts
employment with a subsidiary or affiliate of USAF other than the Company, unless
Employee and his new employer agree otherwise in writing, this Agreement shall
automatically be deemed to have been assigned to such new employer (which shall
thereafter be an additional or substitute beneficiary of the covenants contained
herein, as appropriate), with the consent of Employee, such assignment shall be
considered a condition of employment by such new employer, and references to the
"Company" in this Agreement shall be deemed to refer to such new employer.
7
<PAGE>
If the Company is merged with or into another subsidiary or affiliate of USAF,
such action shall not be considered to cause an assignment of this Agreement,
and the surviving or successor entity shall become the beneficiary of this
Agreement and all references to the "Company" shall be deemed to refer to such
surviving or successor entity. It is intended that USAF will be a third-party
beneficiary of the rights of the Company under this Agreement. No other Person
shall be a third-party beneficiary.
12. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement together with the Merger Agreement, is the final,
complete, and exclusive statement and expression of the agreement between the
Company and Employee with respect to the subject matter hereof and thereof, and
cannot be varied, contradicted, or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Company and Employee, and no term of this Agreement may be waived except
by a writing signed by the party waiving the benefit of such term.
13. Notice. Whenever any notice is required hereunder, it 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.
If to the Company: CFX, Inc.
1500 NW 95 Avenue
Miami, FL 33172
Attention: Dwight Haight
with a copy to: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
and a copy to: John S. Fletcher, Esq.
Morgan, Lewis & Bockius LLP
5300 First Union Financial Center
200 South Biscayne Boulevard
Miami, FL 33131-2339
8
<PAGE>
If to Employee: Dwight Haight
c/o CFX, Inc.
1500 N.W. 95 Avenue
Miami, FL 33172
and a copy to: William R. Nuernberg, Esq.
Eckert Seamans Cherin & Mellott, LC
Barnett Tower, 18th Floor
701 Brickell Avenue
Miami, FL 33131
Notice shall be deemed given and effective when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this Section 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company and/or USAF as a result of a breach of the restrictive
covenants set forth in Sections 7, 8, 9 and 10, and because of the immediate and
irreparable damage that would be caused to the Company and/or USAF for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or USAF at
law or in equity, the Company and USAF shall be entitled to specific performance
and any injunctive or other equitable relief as a remedy for any breach or
threatened breach of the aforementioned restrictive covenants.
17. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the Company is located.
Notwithstanding the foregoing, the Company and/or USAF shall be entitled to seek
injunctive or other equitable relief, as contemplated by Section 17 above, from
any court of competent jurisdiction, without the need to resort to arbitration.
9
<PAGE>
18. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Florida, without regard to its conflict of
laws principles.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
CFX, INC.
By: _______________________________
Name:
Title:
EMPLOYEE:
______________________________
Dwight Haight
10
<PAGE>
EXHIBIT A
---------
Under USAF's Incentive Bonus Plan, Employee will be eligible to earn up to 100%
of Employee's base salary in bonus compensation, payable out of a bonus pool
determined by the Board of Directors of USAF or a compensation committee
thereof, depending upon the achievement of specified criteria and payable in the
form of cash, stock options, or other non-cash awards, in such proportions, and
in such forms, as are determined by the Board of Directors of USAF or a
compensation committee thereof. Bonuses under the Incentive Bonus Plan will be
determined by measuring Employee's performance, the Company's performance and
USAF's performance based on the following criteria, weighted as indicated, and
measured against target performance levels established by the Board of Directors
of USAF or such compensation committee: (i) USAF's profit - 25%, (ii) the
profit of the Company - 50% and (iii) revenue growth of the Company due to
acquisitions -25%.
11
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this ___ day of ___________, 1997,
is by and between Bay State Florist Supply, Inc., a Massachusetts corporation
(the "Company") and a wholly-owned subsidiary of U.S.A. Floral Products, Inc.
("US Floral"), a Delaware corporation, and William W. Rudolph ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. EMPLOYMENT; TERM. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term").
2. POSITION AND DUTIES. The Company hereby employs Employee as President.
-------------------
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of the president of the Company. Employee will report
directly to the Board of Directors of the Company (the "Board"). Employee
hereby accepts this employment upon the terms and conditions herein contained
and agrees to devote all of his professional time, attention, and efforts to
promote and further the business of the Company. Employee shall faithfully
adhere to, execute, and fulfill all policies established by the Company.
3. COMPENSATION. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof and through December 31,
1997, the base salary payable to Employee shall be Employee's current salary
with the Company. Commencing January 1, 1998, the base salary payable to
Employee shall be $150,000 per year. Base salary shall be payable on a regular
basis in accordance with the Company's standard payroll procedures, but not less
than monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its sole
discretion, any such increase is warranted.
(b) Incentive Bonus. During the Term, Employee shall be eligible to receive
an incentive bonus up to the amount, based upon the criteria, and payable at
such times, (i) for the portion of the Term commencing on the date hereof and
ending December 31, 1997, in accordance with the bonus structure adopted by the
Compensation Committee of the Company's Board of Directors on February 25, 1997,
and (ii) commencing January 1, 1998, as are specified in Exhibit A attached
hereto. The amount, manner of payment, and form of consideration, if any, shall
be determined by the Board, in its sole and absolute discretion, and such
determination shall be binding and final. To the extent that such bonus is to be
determined in light of financial performance during a specified fiscal period
and this Agreement commences on a date after the start of such fiscal period,
any bonus payable in respect of such fiscal period's results may be prorated. In
addition, if the period of Employee's
<PAGE>
employment hereunder expires before the end of a fiscal period, and if Employee
is eligible to receive a bonus at such time (such eligibility being subject to
the restrictions set forth in Section 6 below), any bonus payable in respect of
such fiscal period's results may be prorated.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board.
4. EXPENSE REIMBURSEMENT. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. PLACE OF PERFORMANCE. Employee understands that he may be requested by
--------------------
the Company to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will provide Employee with a relocation allowance, in an amount determined by
the Company, to assist Employee in covering the costs of moving himself, his
immediate family, and their personal property and effects. The total amount and
type of costs to be covered shall be determined by the Company, in light of
prevailing Company policy at the time.
6. TERMINATION; RIGHTS ON TERMINATION. Employee's employment may be
----------------------------------
terminated in any one of the following ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) three months from the effective date of termination, or
(ii) whatever time period is remaining under the then-current period of the Term
(without regard to renewals thereof). Such payments shall be made in accordance
with the Company's regular payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of
2
<PAGE>
this Agreement, which breach is not cured within 10 days of receipt by Employee
of written notice from the Company specifying the breach; (ii) Employee's gross
negligence in the performance of his duties hereunder, intentional
nonperformance or mis-performance of such duties, or refusal to abide by or
comply with the directives of the Board, his superior officers, or the Company's
policies and procedures, which actions continue for a period of at least 10 days
after receipt by Employee of written notice of the need to cure or cease; (iii)
Employee's willful dishonesty, fraud, or misconduct with respect to the business
or affairs of the Company or US Floral, and that in the judgment of the Company
or US Floral materially and adversely affects the operations or reputation of
the Company or US Floral; (iv) Employee's conviction of a felony or other crime
involving moral turpitude; or (v) Employee's abuse of alcohol or drugs (legal or
illegal) that, in the Company's judgment, materially impairs Employee's ability
to perform his duties hereunder. In the event of a termination "for cause," as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for the lesser of (i) three months from the effective date of
termination, or (ii) whatever time period is remaining under the then-current
period of the Term (without regard to renewals thereof). Such payments shall be
made in accordance with the Company's regular payroll cycle. If Employee
resigns or otherwise terminates his employment for any reason or for no reason,
Employee shall receive no severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 6. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 6(b) or 6(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Company's fiscal year in which termination
occurs, calculated as if Employee had remained employed by the Company through
the end of such fiscal year, and paid in such amounts, at such times, and in
such forms as are determined pursuant to Section 3(b) above and Exhibit A
attached hereto. Except as specified in the preceding two sentences, Employee
shall not be entitled to receive any incentive bonus compensation after the
effective date of termination of his employment. All other rights and
obligations of US Floral, the Company, and Employee under this Agreement shall
cease as of the effective date of termination, except that Employee's
obligations under Sections 7, 8, 9 and 10 below shall survive such termination
in accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment.
3
<PAGE>
7. RESTRICTION ON COMPETITION.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or US Floral on an "at will" basis, for the duration of such period, and
thereafter for a period equal to the longer of (x) two years, or (y) the period
during which Employee is receiving any severance pay from the Company, Employee
shall not, directly or indirectly, for himself or on behalf of or in conjunction
with any other person, company, partnership, corporation, business, group, or
other entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company or
US Floral, within the United States (the "Territory");
(ii) call upon any Person who is, at that time, within the Territory,
an employee of the Company or US Floral for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company or
US Floral;
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company or US Floral
within the Territory for the purpose of soliciting or selling products or
services in direct competition with the Company or US Floral within the
Territory; or
(iv) on Employee's own behalf or on behalf of any competitor, call
upon any Person who or that, during Employee's employment by the Company or
US Floral was either called upon by the Company or US Floral as a prospective
acquisition candidate or was the subject of an acquisition analysis conducted by
the Company or US Floral.
(b) The foregoing covenants shall not be deemed to prohibit Employee from
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
through the automated quotation system of a registered securities association.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or US Floral and enters into a business or pursues other
activities that, at such time, are not in competition with the Company or US
Floral, Employee shall not be chargeable with a violation of this Section 7 if
the Company or US Floral subsequently enters the same (or a similar) competitive
business or activity. In addition, if Employee has no actual knowledge that his
actions violate the terms of this Section 7, Employee shall not be deemed to
have breached the restrictive covenants contained herein if, promptly after
being notified by the Company or US Floral of such breach, Employee ceases the
prohibited actions.
(d) For purposes of this Section 7, references to "US Floral" shall mean
U.S.A. Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this
4
<PAGE>
Section 7 relating to the time period or geographic area of the restrictive
covenants shall be declared by a court of competent jurisdiction to exceed the
maximum time period or geographic area, as applicable, that such court deems
reasonable and enforceable, said time period or geographic area shall be deemed
to be, and thereafter shall become, the maximum time period or largest
geographic area that such court deems reasonable and enforceable and this
Agreement shall automatically be considered to have been amended and revised to
reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
US Floral, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by US Floral or the Company of such
covenants; provided, that upon the failure of the Company to make any payments
--------
required under this Agreement, the Employee may, upon 30 days' prior written
notice to the Company, waive his right to receive any additional compensation
pursuant to this Agreement and engage in any activity prohibited by the
covenants of this Section 7. It is specifically agreed that the period of two
years stated at the beginning of this Section 7, during which the agreements and
covenants of Employee made in this Section 7 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this Section 7.
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and US Floral, and their
respective officers, directors, employees, and stockholders. It is further
agreed that the Company and Employee intend that such covenants be construed and
enforced in accordance with the changing activities, business, and locations of
the Company and US Floral throughout the term of these covenants.
8. CONFIDENTIAL INFORMATION. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or US Floral (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company and/or US Floral because such
Confidential Information encompasses technical know-how, trade secrets, or
technical, financial, organizational, sales, or other valuable aspects of the
Company's and US Floral's business and trade, including, without limitation,
technologies, products, processes, plans, clients, personnel, operations, and
business activities. This restriction shall not apply to any Confidential
Information that (a) becomes known generally to the public through no fault of
the Employee; (b) is required by applicable law, legal process, or any order or
mandate of a court or other governmental authority to be disclosed; or (c) is
reasonably believed by Employee, based upon the advice of legal counsel, to be
required to be disclosed in defense of a lawsuit
5
<PAGE>
or other legal or administrative action brought against Employee; provided, that
--------
in the case of clauses (b) or (c), Employee shall give the Company reasonable
advance written notice of the Confidential Information intended to be disclosed
and the reasons and circumstances surrounding such disclosure, in order to
permit the Company to seek a protective order or other appropriate request for
confidential treatment of the applicable Confidential Information.
9. INVENTIONS. Employee shall disclose promptly to the Company and
----------
US Floral any and all significant conceptions and ideas for inventions,
improvements, and valuable discoveries, whether patentable or not, that are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one year thereafter, and that are directly related to
the business or activities of the Company or US Floral and that Employee
conceives as a result of his employment by the Company, regardless of whether or
not such ideas, inventions, or improvements qualify as "works for hire."
Employee hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments, or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
10. RETURN OF COMPANY PROPERTY. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, US Floral or their respective
representatives, vendors, or customers that pertain to the business of the
Company or US Floral, whether in paper, electronic, or other form; and (c) all
keys, credit cards, vehicles, and other property of the Company or US Floral.
Employee shall not retain or cause to be retained any copies of the foregoing.
Employee hereby agrees that all of the foregoing shall be and remain the
property of the Company or US Floral, as the case may be, and be subject at all
times to their discretion and control.
11. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
12. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this
6
<PAGE>
Agreement. This Agreement may not be assigned or transferred by the Company
without the prior written consent of Employee. Subject to the preceding two
sentences, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors, and assigns. Notwithstanding the foregoing, if
Employee accepts employment with a subsidiary or affiliate of US Floral other
than the Company, unless Employee and his new employer agree otherwise in
writing, this Agreement shall automatically be deemed to have been assigned to
such new employer (which shall thereafter be an additional or substitute
beneficiary of the covenants contained herein, as appropriate), with the consent
of Employee, such assignment shall be considered a condition of employment by
such new employer, and references to the "Company" in this Agreement shall be
deemed to refer to such new employer. If the Company is merged with or into
another subsidiary or affiliate of US Floral, such action shall not be
considered to cause an assignment of this Agreement, and the surviving or
successor entity shall become the beneficiary of this Agreement and all
references to the "Company" shall be deemed to refer to such surviving or
successor entity. It is intended that US Floral will be a third-party
beneficiary of the rights of the Company under this Agreement. No other Person
shall be a third-party beneficiary.
13. COMPLETE AGREEMENT; WAIVER; AMENDMENT. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement and
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.
14. NOTICE. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: Bay State Florist Supply, Inc.
______________________
______________________
Attention: Secretary
with a copy to: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
Attention: Robert Poirier
To Employee: William W. Rudolph
________________________
________________________
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express
7
<PAGE>
delivery, hand delivery, or facsimile, when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this Section 15.
16. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. EQUITABLE REMEDY. Because of the difficulty of measuring economic
----------------
losses to the Company and/or US Floral as a result of a breach of the
restrictive covenants set forth in Sections 7, 8, 9 and 10, and because of the
immediate and irreparable damage that would be caused to the Company and/or US
Floral for which monetary damages would not be a sufficient remedy, it is hereby
agreed that in addition to all other remedies that may be available to the
Company or US Floral at law or in equity, the Company and US Floral shall be
entitled to specific performance and any injunctive or other equitable relief as
a remedy for any breach or threatened breach of the aforementioned restrictive
covenants.
18. ARBITRATION. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the principal office of
the Company is located. Notwithstanding the foregoing, the Company and/or
US Floral shall be entitled to seek injunctive or other equitable relief, as
contemplated by Section 17 above, from any court of competent jurisdiction,
without the need to resort to arbitration.
19. GOVERNING LAW. This Agreement shall in all respects be construed
-------------
according to the laws of the Commonwealth of Massachusetts, without regard to
its conflict of laws principles.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
BAY STATE FLORIST SUPPLY, INC.
By: ___________________________
Name:
Title:
EMPLOYEE:
______________________________
William W. Rudolph
9
<PAGE>
EXHIBIT A
- ---------
Under US Floral's Incentive Bonus Plan, Employee will be eligible to earn up to
100% of Employee's base salary in bonus compensation, payable out of a bonus
pool determined by the Board of Directors of US Floral or a compensation
committee thereof, depending upon the achievement of specified criteria and
payable in the form of cash, stock options, or other non-cash awards, in such
proportions, and in such forms, as are determined by the Board of Directors of
US Floral or a compensation committee thereof. Bonuses under the Incentive Bonus
Plan will be determined by measuring Employee's performance, the Company's
performance and US Floral's performance based on the following criteria,
weighted as indicated, and measured against target performance levels
established by the Board of Directors of US Floral or such compensation
committee: (i) US Floral's profit + 25%, (ii) the profit of the Company + 50%
and (iii) revenue growth of the Company due to acquisitions + 25%.
10
<PAGE>
EXHIBIT 10.17
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of this ___ day of
___________, 1997, is by and between Monterey Bay Bouquet, Inc., a California
corporation (the "Company") and a wholly-owned subsidiary of USA Floral
Products, Inc. ("USAF"), a Delaware corporation, and Jeffrey Brothers
("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term"). The Term of this Agreement shall be automatically
renewed for one one-year period, unless the Company or USAF gives notice to the
Employee at least six months prior to the expiration of the initial two-year
Term that this Agreement shall not be renewed.
2. Position and Duties. The Company hereby employs Employee as its
-------------------
President. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a President of the Company. Employee
will report directly to the Board of Directors of the Company (the "Board").
Employee hereby accepts this employment upon the terms and conditions herein
contained and agrees to devote all of his professional time, attention, and
efforts to promote and further the business of the Company. Employee shall
faithfully adhere to, execute, and fulfill all policies established by the
Company.
3. Compensation. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $170,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
1
<PAGE>
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board of Directors of USAF, in its sole and absolute
discretion, and such determination shall be binding and final. To the extent
that such bonus is to be determined in light of financial performance during a
specified fiscal period and this Agreement commences on a date after the start
of such fiscal period, any bonus payable in respect of such fiscal period's
results may be prorated. In addition, if the period of Employee's employment
hereunder expires before the end of a fiscal period, and if Employee is eligible
to receive a bonus at such time (such eligibility being subject to the
restrictions set forth in Section 6 below), any bonus payable in respect of such
fiscal period's results may be prorated.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board. In addition, Employee shall receive options to purchase 50,000
shares of USAF stock (at the price at which such shares were sold in the initial
public offering of USAF stock), promptly after registration of the USA Floral
Products, Inc. 1997 Long-Term Incentive Plan ("Long-Term Incentive Plan"). The
Company shall cause the Long-Term Incentive Plan to be registered promptly after
the execution of this Agreement.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Place of Performance. Employee understands that he may be requested by
--------------------
the Company to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will provide Employee with a relocation allowance, in an amount determined by
the Company, to assist Employee in covering the costs of moving himself, his
immediate family, and their personal property and effects. The total amount and
type of costs to be covered shall be determined by the Company, in light of
prevailing Company policy at the time. If Employee is requested to relocate to
an area more than thirty miles in any direction from his present residence and
Employee does not agree to relocate, Employee may terminate his employment
hereunder and Employee shall receive from the Company base salary at the rate
then in effect for the time remaining under the then-current period of the Term
and the one-year renewal term.
2
<PAGE>
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate. Any stock options
held by Employee at the time of his death shall be exercisable pursuant to their
terms by Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) 3 months from the effective date of termination, or (ii)
whatever time period is remaining under the then-current period of the Term
(without regard to renewals thereof). Such payments shall be made in accordance
with the Company's regular payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, if any, or the Company's policies and procedures, which actions
continue for a period of at least 10 days after receipt by Employee of written
notice of the need to cure or cease; (iii) Employee's willful dishonesty, fraud,
or misconduct with respect to the business or affairs of the Company or USAF,
and that in the judgment of the Company or USAF materially and adversely affects
the operations or reputation of the Company or USAF; (iv) Employee's conviction
of a felony or other crime involving moral turpitude; or (v) Employee's abuse of
alcohol or drugs (legal or illegal) that, in the Company's judgment, materially
impairs Employee's ability to perform his duties hereunder. In the event of a
termination "for cause," as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Cause. At any time after December 31, 1997, the Company may,
without cause, terminate the Term and Employee's employment, effective 30 days
after written notice is provided to the Employee. Should Employee be terminated
by the Company without cause, subject to Section 6(f) below, Employee shall
receive from the Company the base salary at the rate then in effect for whatever
time period is remaining under the then-current period of the Term (without
regard to renewals thereof). Such payments shall be made in accordance with the
3
<PAGE>
Company's regular payroll cycle. If Employee resigns or otherwise terminates
his employment for any reason or for no reason, Employee shall receive no
severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 6. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 6(b) or 6(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Company's fiscal year in which termination
occurs, calculated as if Employee had remained employed by the Company through
the end of such fiscal year, and paid in such amounts, at such times, and in
such forms as are determined pursuant to Section 3(b) above and Exhibit A
attached hereto. Except as specified in the preceding two sentences, Employee
shall not be entitled to receive any incentive bonus compensation after the
effective date of termination of his employment. All other rights and
obligations of USAF, the Company, and Employee under this Agreement shall cease
as of the effective date of termination, except that Employee's obligations
under Sections 7, 8, 9 and 10 below shall survive such termination in
accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or USAF on an "at will" basis, for the duration of such period, and thereafter
for a period equal to the longer of (x) two years, or (y) the period during
which Employee is receiving any severance pay from the Company, Employee shall
not, directly or indirectly, for himself or on behalf of or in conjunction with
any other person, company, partnership, corporation, business, group, or other
entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company or USAF
that involves the importing, brokerage, shipping or marketing of floral
4
<PAGE>
products or the manufacturing or mass marketing of bouquets, or any business
engaging in the consolidation of the floral industry, within the United States
(the "Territory");
(ii) call upon any Person who is, at that time, within the Territory, an
employee of the Company or USAF for the purpose or with the intent of enticing
such employee away from or out of the employ of the Company or USAF;
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company or USAF within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or USAF within the Territory; or
(iv) on Employee's own behalf or on behalf of any competitor, call upon any
Person who or that, during Employee's employment by the Company or USAF was
either called upon by the Company or USAF as a prospective acquisition candidate
or was the subject of an acquisition analysis conducted by the Company or USAF.
(b) The foregoing covenants shall not be deemed to prohibit Employee 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
through the automated quotation system of a registered securities association or
(ii) engaging in the business of growing flowers in the United States.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or USAF and enters into a business or pursues other
activities that, at such time, are not in competition with the Company or USAF,
Employee shall not be chargeable with a violation of this Section 7 if the
Company or USAF subsequently enters the same (or a similar) competitive business
or activity or commences competitive operations within the Territory. In
addition, if Employee has no actual knowledge that his actions violate the terms
of this Section 7, Employee shall not be deemed to have breached the restrictive
covenants contained herein if, promptly after being notified by the Company or
USAF of such breach, Employee ceases the prohibited actions.
(d) For purposes of this Section 7, references to "USAF" shall mean USA
Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this
5
<PAGE>
Agreement shall automatically be considered to have been amended and revised to
reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USAF, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by USAF or the Company of such covenants; provided,
--------
that upon the failure of the Company to make any payments required under this
Agreement, the Employee may, upon 30 days' prior written notice to the Company,
waive his right to receive any additional compensation pursuant to this
Agreement and engage in any activity prohibited by the covenants of this Section
7. It is specifically agreed that the period of two years stated at the
beginning of this Section 7, during which the agreements and covenants of
Employee made in this Section 7 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 7.
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above. If Employee is subject to a restriction on
competitive activity as a party to that certain Amended and Restated Agreement
and Plan of Contribution, dated as of August 5, 1997, by and among Employee, the
Company, Bay Area Bouquets, Inc., USAF, Philip Buran and Douglas Anderson (the
"Merger Agreement"), then Employee shall abide by, and in all cases be subject
to, the restrictive covenants (whether in this Section 7 or in the Merger
Agreement) that, in the aggregate, impose restrictions on Employee for the
longest duration and the broadest geographic scope (taking into account the
effect of any applicable court decisions limiting the scope or duration of such
restrictions), it being agreed that all such restrictive covenants are supported
by separate and distinct consideration. This Section 7(g) shall be construed
and interpreted in light of the duration of the applicable restrictive
covenants.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and USAF, and their respective
officers, directors, employees, and stockholders. It is further agreed that the
Company and Employee intend that such covenants be construed and enforced in
accordance with the changing activities, business, and locations of the Company
and USAF throughout the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information
6
<PAGE>
relating to the Company and/or USAF (including all trade secrets), in whatever
form, whether oral, written, or electronic (collectively, the "Confidential
Information"), to which Employee has, or is given (or has had or been given),
access as a result of his employment by the Company. It is agreed that the
Confidential Information is confidential and proprietary to the Company and/or
USAF because such Confidential Information encompasses technical know-how, trade
secrets, or technical, financial, organizational, sales, or other valuable
aspects of the Company's and USAF's business and trade, including, without
limitation, technologies, products, processes, plans, clients, personnel,
operations, and business activities. This restriction shall not apply to any
Confidential Information that (a) becomes known generally to the public through
no fault of the Employee; (b) is required by applicable law, legal process, or
any order or mandate of a court or other governmental authority to be disclosed;
or (c) is reasonably believed by Employee, based upon the advice of legal
counsel, to be required to be disclosed in defense of a lawsuit or other legal
or administrative action brought against Employee; provided, that in the case of
--------
clauses (b) or (c), Employee shall give the Company reasonable advance written
notice of the Confidential Information intended to be disclosed and the reasons
and circumstances surrounding such disclosure, in order to permit the Company to
seek a protective order or other appropriate request for confidential treatment
of the applicable Confidential Information.
9. Inventions. Employee shall disclose promptly to the Company and USAF
----------
any and all significant conceptions and ideas for inventions, improvements, and
valuable discoveries, whether patentable or not, that are conceived or made by
Employee, solely or jointly with another, during the period of employment or
within one year thereafter, and that are directly related to the business or
activities of the Company or USAF and that Employee conceives as a result of his
employment by the Company, regardless of whether or not such ideas, inventions,
or improvements qualify as "works for hire." Employee hereby assigns and agrees
to assign all his interests therein to the Company or its nominee. Whenever
requested to do so by the Company, Employee shall execute any and all
applications, assignments, or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
10. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USAF or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USAF, whether in paper, electronic, or other form; and (c) all keys,
credit cards, vehicles, and other property of the Company or USAF. Employee
shall not retain or cause to be retained any copies of the foregoing. Employee
hereby agrees that all of the foregoing shall be and remain the property of the
Company or USAF, as the case may be, and be subject at all times to their
discretion and control.
7
<PAGE>
11. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company without the prior
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns. Notwithstanding the foregoing, if Employee accepts
employment with a subsidiary or affiliate of USAF other than the Company, unless
Employee and his new employer agree otherwise in writing, this Agreement shall
automatically be deemed to have been assigned to such new employer (which shall
thereafter be an additional or substitute beneficiary of the covenants contained
herein, as appropriate), with the consent of Employee, such assignment shall be
considered a condition of employment by such new employer, and references to the
"Company" in this Agreement shall be deemed to refer to such new employer. If
the Company is merged with or into another subsidiary or affiliate of USAF, such
action shall not be considered to cause an assignment of this Agreement, and the
surviving or successor entity shall become the beneficiary of this Agreement and
all references to the "Company" shall be deemed to refer to such surviving or
successor entity. It is intended that USAF will be a third-party beneficiary of
the rights of the Company under this Agreement. No other Person shall be a
third-party beneficiary.
13. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement together with the Merger Agreement, is the final,
complete, and exclusive statement and expression of the agreement between the
Company and Employee with respect to the subject matter hereof and thereof, and
cannot be varied, contradicted, or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly
8
<PAGE>
authorized officer of the Company and Employee, and no term of this Agreement
may be waived except by a writing signed by the party waiving the benefit of
such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: Monterey Bay Bouquet, Inc.
P. O. Box 1778
261 Coward Road
Watsonville, CA 95077
Attention: __________________
with a copy to: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
To Employee: Jeffrey Brothers
P. O. Box 1778
261 Coward Road
Watsonville, CA 95077
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 14.
15. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company and/or USAF as a result of a breach of the restrictive
covenants set forth in Sections 7, 8, 9 and 10, and because of the immediate and
irreparable damage that would be caused to the Company and/or USAF for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or
9
<PAGE>
USAF at law or in equity, the Company and USAF shall be entitled to specific
performance and any injunctive or other equitable relief as a remedy for any
breach or threatened breach of the aforementioned restrictive covenants.
17. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the Company is located.
Notwithstanding the foregoing, the Company and/or USAF shall be entitled to seek
injunctive or other equitable relief, as contemplated by Section 16 above, from
any court of competent jurisdiction, without the need to resort to arbitration.
18. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of California, without regard to its conflict
of laws principles.
19. Attorneys' Fees. If any party to this Agreement shall bring any
---------------
action or proceeding for any relief against the other, declaratory or otherwise,
arising out of this Agreement, the losing party shall pay to the prevailing
party a reasonable sum for attorney fees and costs incurred in bringing or
defending such action or proceeding and/or enforcing any judgment granted
therein, all of which shall be deemed to have accrued upon the commencement of
such action or proceeding and shall be paid whether or not such action or
proceeding is prosecuted to final judgment. Any judgment or order entered in
such action or proceeding shall contain a specific provision providing for the
recovery of attorney fees and costs, separate from the judgment, incurred in
enforcing such judgment. The prevailing party shall be determined by the trier
of fact based upon an assessment of which party's major arguments or positions
taken in the proceedings could fairly be said to have prevailed over the other
party's major arguments or positions on major disputed issues. For the purposes
of this section, attorney fees shall include, without limitation, fees incurred
in the following: (1) post-judgment motions; (2) contempt proceedings; (3)
garnishment, levy, and debtor and third party examinations; (4) discovery; and
(5) bankruptcy litigation. This Section is intended to be expressly severable
from the other provisions of this Agreement, is intended to survive any judgment
and is not to be deemed merged into the judgment.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
MONTEREY BAY BOUQUET, INC.
By: ___________________________
Name:
Title:
EMPLOYEE:
______________________________
Jeffrey Brothers
11
<PAGE>
EXHIBIT A
- ---------
Under USAF's Incentive Bonus Plan, Employee will be eligible to earn up to 100%
of Employee's base salary in bonus compensation, payable out of a bonus pool
determined by the Board of Directors of USAF or a compensation committee
thereof, depending upon the achievement of specified criteria and payable in the
form of cash, stock options, or other non-cash awards, in such proportions, and
in such forms, as are determined by the Board of Directors of USAF or a
compensation committee thereof. Bonuses under the Incentive Bonus Plan will be
determined by measuring Employee's performance, the Company's performance and
USAF's performance based on the following criteria, weighted as indicated, and
measured against target performance levels established by the Board of Directors
of USAF or such compensation committee: (i) USAF's profit - 25%, (ii) the profit
of the Company - 50% and (iii) revenue growth of the Company due to acquisitions
- -25%.
12
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this ___ day of ___________, 1997,
is by and between Alpine Gem Flower Shippers, Inc, a Montana corporation (the
"Company") and a wholly-owned subsidiary of U.S.A. Floral Products, Inc.
("USFloral"), a Delaware corporation, and John Q. Graham, Jr. ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term").
2. Position and Duties. The Company hereby employs Employee as President.
-------------------
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of the president of the Company. Employee will report
directly to the Board of Directors of the Company (the "Board"). Employee
hereby accepts this employment upon the terms and conditions herein contained
and agrees to devote all of his professional time, attention, and efforts to
promote and further the business of the Company. Employee shall faithfully
adhere to, execute, and fulfill all policies established by the Company.
3. Compensation. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $80,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board, in its sole and absolute discretion, and such
determination shall be binding and final. To the extent that such bonus is to
be determined in light of financial performance during a specified fiscal period
and this Agreement commences on a date after the start of such fiscal
<PAGE>
period, any bonus payable in respect of such fiscal period's results may be
prorated. In addition, if the period of Employee's employment hereunder expires
before the end of a fiscal period, and if Employee is eligible to receive a
bonus at such time (such eligibility being subject to the restrictions set forth
in Section 6 below), any bonus payable in respect of such fiscal period's
results may be prorated.
(c) Stock Options. Upon execution of this Agreement, the Company shall
grant Employee options to purchase 50,000 shares of the Company's common stock,
which shall vest at the rate of 25% per year, commencing one year from the date
of grant. The options will have an exercise price equal to the initial public
offering price per share.
(d) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Place of Performance. The parties agree that Employee will not be
--------------------
required by the Company to relocate from his present residence to another
geographic location. However, if Employee agrees to relocate upon request by
the Company, the Company will provide Employee with a relocation allowance, in
an amount determined by the Company, to assist Employee in covering the costs of
moving himself, his immediate family, and their personal property and effects.
The total amount and type of costs to be covered shall be determined by the
Company, in light of prevailing Company policy at the time.
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable
2
<PAGE>
period), the Company may terminate Employee's employment hereunder if Employee
is unable to resume his full-time duties at the conclusion of such notice
period. Subject to Section 6(f) below, if Employee's employment is terminated
as a result of Employee's disability, the Company shall continue to pay Employee
his base salary at the then-current rate for the lesser of (i) twelve months
from the effective date of termination, or (ii) whatever time period is
remaining under the then-current period of the Term (without regard to renewals
thereof). Such payments shall be made in accordance with the Company's regular
payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company or USFloral, and that in
the judgment of the Company or USFloral materially and adversely affects the
operations or reputation of the Company or USFloral; (iv) Employee's conviction
of a felony or other crime involving moral turpitude; or (v) Employee's abuse of
alcohol or drugs (legal or illegal) that, in the Company's judgment, materially
impairs Employee's ability to perform his duties hereunder. In the event of a
termination "for cause," as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for whatever time period is remaining under the then-current period of
the Term (without regard to renewals thereof). Such payments shall be made in
accordance with the Company's regular payroll cycle. If Employee resigns or
otherwise terminates his employment for any reason or for no reason, Employee
shall receive no severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 6. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 6(b) or 6(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Company's fiscal year in which termination
occurs, calculated as if Employee had
3
<PAGE>
remained employed by the Company through the end of such fiscal year, and paid
in such amounts, at such times, and in such forms as are determined pursuant to
Section 3(b) above and Exhibit A attached hereto. Except as specified in the
preceding two sentences, Employee shall not be entitled to receive any incentive
bonus compensation after the effective date of termination of his employment.
All other rights and obligations of USFloral, the Company, and Employee under
this Agreement shall cease as of the effective date of termination, except that
Employee's obligations under Sections 7, 8, 9 and 10 below shall survive such
termination in accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or USFloral on an "at will" basis, for the duration of such period, and
thereafter for a period equal to the longer of (x) two years, or (y) the period
during which Employee is receiving any severance pay from the Company, Employee
shall not, directly or indirectly, for himself or on behalf of or in conjunction
with any other person, company, partnership, corporation, business, group, or
other entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company or
USFloral including without limitation the importing, brokerage, shipping or
marketing of floral products, or any business engaging in the consolidation of
the floral industry, within the United States (the "Territory");
(ii) call upon any Person who is, at that time, within the Territory,
an employee of the Company or USFloral for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company or
USFloral;
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company or USFloral within
the Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or USFloral within the Territory; or
(iv) on Employee's own behalf or on behalf of any competitor, call upon
any Person who or that, during Employee's employment by the Company or USFloral
was either called
4
<PAGE>
upon by the Company or USFloral as a prospective acquisition candidate or was
the subject of an acquisition analysis conducted by the Company or USFloral.
(b) The foregoing covenants shall not be deemed to prohibit Employee from
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
through the automated quotation system of a registered securities association.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or USFloral and enters into a business or pursues other
activities that, at such time, are not in competition with the Company or
USFloral, Employee shall not be chargeable with a violation of this Section 7 if
the Company or USFloral subsequently enters the same (or a similar) competitive
business or activity or commences competitive operations within 100 miles of the
Employee's new business or activities. In addition, if Employee has no actual
knowledge that his actions violate the terms of this Section 7, Employee shall
not be deemed to have breached the restrictive covenants contained herein if,
promptly after being notified by the Company or USFloral of such breach,
Employee ceases the prohibited actions.
(d) For purposes of this Section 7, references to "USFloral" shall mean
U.S.A. Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this Agreement shall automatically be considered to have
been amended and revised to reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USFloral, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by USFloral or the Company of such
covenants; provided, that upon the failure of the Company to make any payments
--------
required under this Agreement, the Employee may, upon 30 days' prior written
notice to the Company, waive his right to receive any additional compensation
pursuant to this Agreement and engage in any activity prohibited by the
covenants of this Section 7. It is specifically agreed that the period of two
years stated at the beginning of this Section 7, during which the agreements and
covenants of Employee made in this Section 7 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this Section 7.
5
<PAGE>
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above. If Employee is subject to a restriction on
competitive activity as a party to that certain Agreement and Plan of
Contribution, dated as of July __, 1997, by and among USFloral, AGFS Acquisition
Corp., the Company, Employee and Diane L. Graham (the "Merger Agreement"), then
Employee shall abide by, and in all cases be subject to, the restrictive
covenants (whether in this Section 7 or in the Merger Agreement) that, in the
aggregate, impose restrictions on Employee for the longest duration and the
broadest geographic scope (taking into account the effect of any applicable
court decisions limiting the scope or duration of such restrictions), it being
agreed that all such restrictive covenants are supported by separate and
distinct consideration. This Section 7(g) shall be construed and interpreted in
light of the duration of the applicable restrictive covenants.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and USFloral, and their
respective officers, directors, employees, and stockholders. It is further
agreed that the Company and Employee intend that such covenants be construed and
enforced in accordance with the changing activities, business, and locations of
the Company and USFloral throughout the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or USFloral (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company and/or USFloral because such
Confidential Information encompasses technical know-how, trade secrets, or
technical, financial, organizational, sales, or other valuable aspects of the
Company's and USFloral's business and trade, including, without limitation,
technologies, products, processes, plans, clients, personnel, operations, and
business activities. This restriction shall not apply to any Confidential
Information that (a) becomes known generally to the public through no fault of
the Employee; (b) is required by applicable law, legal process, or any order or
mandate of a court or other governmental authority to be disclosed; or (c) is
reasonably believed by Employee, based upon the advice of legal counsel, to be
required to be disclosed in defense of a lawsuit or other legal or
administrative action brought against Employee; provided, that in the case of
--------
clauses (b) or (c), Employee shall give the Company reasonable advance written
notice of the Confidential Information intended to be disclosed and the reasons
and circumstances surrounding such disclosure, in order to permit the Company to
seek a
6
<PAGE>
protective order or other appropriate request for confidential treatment of the
applicable Confidential Information.
9. Inventions. Employee shall disclose promptly to the Company and
----------
USFloral any and all significant conceptions and ideas for inventions,
improvements, and valuable discoveries, whether patentable or not, that are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one year thereafter, and that are directly related to
the business or activities of the Company or USFloral and that Employee
conceives as a result of his employment by the Company, regardless of whether or
not such ideas, inventions, or improvements qualify as "works for hire."
Employee hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments, or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
10. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USFloral or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USFloral, whether in paper, electronic, or other form; and (c) all
keys, credit cards, vehicles, and other property of the Company or USFloral.
Employee shall not retain or cause to be retained any copies of the foregoing.
Employee hereby agrees that all of the foregoing shall be and remain the
property of the Company or USFloral, as the case may be, and be subject at all
times to their discretion and control.
11. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills.
7
<PAGE>
Employee agrees, therefore, that he cannot assign all or any portion of his
performance under this Agreement. This Agreement may not be assigned or
transferred by the Company without the prior written consent of Employee.
Subject to the preceding two sentences, this Agreement shall be binding upon,
inure to the benefit of, and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors, and assigns.
Notwithstanding the foregoing, if Employee accepts employment with a subsidiary
or affiliate of USFloral other than the Company, unless Employee and his new
employer agree otherwise in writing, this Agreement shall automatically be
deemed to have been assigned to such new employer (which shall thereafter be an
additional or substitute beneficiary of the covenants contained herein, as
appropriate), with the consent of Employee, such assignment shall be considered
a condition of employment by such new employer, and references to the "Company"
in this Agreement shall be deemed to refer to such new employer. If the Company
is merged with or into another subsidiary or affiliate of USFloral, such action
shall not be considered to cause an assignment of this Agreement, and the
surviving or successor entity shall become the beneficiary of this Agreement and
all references to the "Company" shall be deemed to refer to such surviving or
successor entity. It is intended that USFloral will be a third-party beneficiary
of the rights of the Company under this Agreement. No other Person shall be a
third-party beneficiary.
13. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement together with the Merger Agreement, is the final,
complete, and exclusive statement and expression of the agreement between the
Company and Employee with respect to the subject matter hereof and thereof, and
cannot be varied, contradicted, or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Company and Employee, and no term of this Agreement may be waived except
by a writing signed by the party waiving the benefit of such term.
8
<PAGE>
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: Alpine Gem Flower Shippers, Inc.
______________________
______________________
Attention: Secretary
with a copy to: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
To Employee: John Q. Graham, Jr.
________________________
________________________
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 15.
16. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company and/or USFloral as a result of a breach of the restrictive
covenants set forth in Sections 7, 8, 9 and 10, and because of the immediate and
irreparable damage that would be caused to the Company and/or USFloral for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or USFloral
at law or in equity, the Company and USFloral shall be entitled to specific
performance and any injunctive or other equitable relief as a remedy for any
breach or threatened breach of the aforementioned restrictive covenants.
18. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the
9
<PAGE>
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. A decision by a majority of the
arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by the Company. Each party shall bear its
own counsel fees. The arbitration proceeding shall be held in the city where
the Company is located. Notwithstanding the foregoing, the Company and/or
USFloral shall be entitled to seek injunctive or other equitable relief, as
contemplated by Section 17 above, from any court of competent jurisdiction,
without the need to resort to arbitration.
19. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Montana, without regard to its conflict of
laws principles.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
ALPINE GEM FLOWER SHIPPERS, INC.
By: ___________________________
Name:
Title:
EMPLOYEE:
______________________________
John Q. Graham, Jr.
10
<PAGE>
EXHIBIT A
- ---------
Under USFloral's Incentive Bonus Plan, Employee will be eligible to earn up to
100% of Employee's base salary in bonus compensation, payable out of a bonus
pool determined by the Board of Directors of USFloral or a compensation
committee thereof, depending upon the achievement of specified criteria and
payable in the form of cash, stock options, or other non-cash awards, in such
proportions, and in such forms, as are determined by the Board of Directors of
USFloral or a compensation committee thereof. Bonuses under the Incentive Bonus
Plan will be determined by measuring Employee's performance, the Company's
performance and USFloral's performance based on the following criteria, weighted
as indicated, and measured against target performance levels established by the
Board of Directors of USFloral or such compensation committee: (i) USFloral's
profit - 25%, (ii) the profit of the Company - 50% and (iii) revenue growth of
the Company due to acquisitions - 25%.
11
<PAGE>
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this ___ day of ___________, 1997,
is by and between United Wholesale Florists, Inc., an Arkansas corporation (the
"Company") and a wholly-owned subsidiary of U.S.A. Floral Products, Inc.
("USAF"), a Delaware corporation, and Raymond R. Ashmore ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term"), which Term shall be automatically renewed for an
additional one year period unless notice is given by the Company or USAF to
Employee of its desire not to renew this Employment Agreement no less than six
months prior to the end of the Term.
2. Position and Duties. The Company hereby employs Employee as President.
-------------------
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of the president of the Company. Employee will report
directly to the Board of Directors of the Company (the "Board"). Employee
hereby accepts this employment upon the terms and conditions herein contained
and agrees to devote all of his professional time, attention, and efforts to
promote and further the business of the Company. Employee shall faithfully
adhere to, execute, and fulfill all policies established by the Company.
3. Compensation. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
<PAGE>
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board, in its sole and absolute discretion, and such
determination shall be binding and final. To the extent that such bonus is to
be determined in light of financial performance during a specified fiscal period
and this Agreement commences on a date after the start of such fiscal period,
any bonus payable in respect of such fiscal period's results may be prorated.
In addition, if the period of Employee's employment hereunder expires before the
end of a fiscal period, and if Employee is eligible to receive a bonus at such
time (such eligibility being subject to the restrictions set forth in Section 6
below), any bonus payable in respect of such fiscal period's results may be
prorated.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Place of Performance. Employee understands that he may be requested by
--------------------
the Company to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee consents to relocate, which
consent may be given or withheld by Employee in his sole and absolute
discretion, the Company will provide Employee with a relocation allowance, in an
amount determined by the Company, to assist Employee in covering the costs of
moving himself, his immediate family, and their personal property and effects.
The total amount and type of costs to be covered shall be determined by the
Company, in light of prevailing Company policy at the time.
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
2
<PAGE>
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) twelve months from the effective date of termination, or
(ii) whatever time period is remaining under the then-current period of the Term
(without regard to renewals thereof). Such payments shall be made in accordance
with the Company's regular payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company or USAF, and that in the
judgment of the Company or USAF materially and adversely affects the operations
or reputation of the Company or USAF; (iv) Employee's conviction of a felony or
other crime involving moral turpitude; or (v) Employee's abuse of alcohol or
drugs (legal or illegal) that, in the Company's judgment, materially impairs
Employee's ability to perform his duties hereunder. In the event of a
termination "for cause," as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for whatever time period is remaining under the then-current period of
the Term (without regard to renewals thereof). Such payments shall be made in
accordance with the Company's regular payroll cycle. If Employee resigns or
otherwise terminates his employment for any reason or for no reason, Employee
shall receive no severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of
3
<PAGE>
termination. Additional compensation subsequent to termination, if any, will be
due and payable to Employee only to the extent and in the manner expressly
provided above in this Section 6. With respect to incentive bonus compensation,
Employee shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 6(b) or 6(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Company's fiscal year in which termination
occurs, calculated as if Employee had remained employed by the Company through
the end of such fiscal year, and paid in such amounts, at such times, and in
such forms as are determined pursuant to Section 3(b) above and Exhibit A
attached hereto. Except as specified in the preceding two sentences, Employee
shall not be entitled to receive any incentive bonus compensation after the
effective date of termination of his employment. All other rights and
obligations of USAF, the Company, and Employee under this Agreement shall cease
as of the effective date of termination, except that Employee's obligations
under Sections 7, 8, 9 and 10 below shall survive such termination in
accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or USAF on an "at will" basis, for the duration of such period, and thereafter
for a period equal to the longer of (x) two years, or (y) the period during
which Employee is receiving any severance pay from the Company, Employee shall
not, directly or indirectly, for himself or on behalf of or in conjunction with
any other person, company, partnership, corporation, business, group, or other
entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner, joint
venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company or USAF,
including without limitation the importing, brokerage, shipping or marketing of
floral products, or any business engaging in the consolidation of the floral
industry within the United States of America, within the United States (the
"Territory");
(ii) call upon any Person who is, at that time, within the Territory, an
employee of the Company or USAF for the purpose or with the intent of enticing
such employee away from or out of the employ of the Company or USAF;
4
<PAGE>
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company or USAF within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or USAF within the Territory; or
(iv) on Employee's own behalf or on behalf of any competitor, call upon any
Person who or that, during Employee's employment by the Company or USAF was
either called upon by the Company or USAF as a prospective acquisition candidate
or was the subject of an acquisition analysis conducted by the Company or USAF.
(b) The foregoing covenants shall not be deemed to prohibit Employee from
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
through the automated quotation system of a registered securities association.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or USAF and enters into a business or pursues other
activities that, at such time, are not in competition with the Company or USAF,
Employee shall not be chargeable with a violation of this Section 7 if the
Company or USAF subsequently enters the same (or a similar) competitive business
or activity. In addition, if Employee has no actual knowledge that his actions
violate the terms of this Section 7, Employee shall not be deemed to have
breached the restrictive covenants contained herein if, promptly after being
notified by the Company or USAF of such breach, Employee ceases the prohibited
actions.
(d) For purposes of this Section 7, references to "USAF" shall mean U.S.A.
Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this Agreement shall automatically be considered to have
been amended and revised to reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USAF, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by USAF or the Company of such covenants; provided,
--------
that upon the failure of the Company to make any payments required under this
Agreement, the Employee may, upon 30 days' prior written notice to the Company,
waive
5
<PAGE>
his right to receive any additional compensation pursuant to this Agreement and
engage in any activity prohibited by the covenants of this Section 7. It is
specifically agreed that the period of two years stated at the beginning of this
Section 7, during which the agreements and covenants of Employee made in this
Section 7 shall be effective, shall be computed by excluding from such
computation any time during which Employee is in violation of any provision of
this Section 7.
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and USAF, and their respective
officers, directors, employees, and stockholders. It is further agreed that the
Company and Employee intend that such covenants be construed and enforced in
accordance with the changing activities, business, and locations of the Company
and USAF throughout the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or USAF (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company and/or USAF because such
Confidential Information encompasses technical know-how, trade secrets, or
technical, financial, organizational, sales, or other valuable aspects of the
Company's and USAF's business and trade, including, without limitation,
technologies, products, processes, plans, clients, personnel, operations, and
business activities. This restriction shall not apply to any Confidential
Information that (a) becomes known generally to the public through no fault of
the Employee; (b) is required by applicable law, legal process, or any order or
mandate of a court or other governmental authority to be disclosed; or (c) is
reasonably believed by Employee, based upon the advice of legal counsel, to be
required to be disclosed in defense of a lawsuit or other legal or
administrative action brought against Employee; provided, that in the case of
--------
clauses (b) or (c), Employee shall give the Company reasonable advance written
notice of the Confidential Information intended to be disclosed and the reasons
and circumstances surrounding such disclosure, in order to permit the Company to
seek a protective order or other appropriate request for confidential treatment
of the applicable Confidential Information.
6
<PAGE>
9. Inventions. Employee shall disclose promptly to the Company and USAF
----------
any and all significant conceptions and ideas for inventions, improvements, and
valuable discoveries, whether patentable or not, that are conceived or made by
Employee, solely or jointly with another, during the period of employment or
within one year thereafter, and that are directly related to the business or
activities of the Company or USAF and that Employee conceives as a result of his
employment by the Company, regardless of whether or not such ideas, inventions,
or improvements qualify as "works for hire." Employee hereby assigns and agrees
to assign all his interests therein to the Company or its nominee. Whenever
requested to do so by the Company, Employee shall execute any and all
applications, assignments, or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
10. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USAF or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USAF, whether in paper, electronic, or other form; and (c) all keys,
credit cards, vehicles, and other property of the Company or USAF. Employee
shall not retain or cause to be retained any copies of the foregoing. Employee
hereby agrees that all of the foregoing shall be and remain the property of the
Company or USAF, as the case may be, and be subject at all times to their
discretion and control.
11. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance
7
<PAGE>
under this Agreement. This Agreement may not be assigned or transferred by the
Company without the prior written consent of Employee. Subject to the preceding
two sentences, this Agreement shall be binding upon, inure to the benefit of,
and be enforceable by the parties hereto and their respective heirs, legal
representatives, successors, and assigns. Notwithstanding the foregoing, if
Employee accepts employment with a subsidiary or affiliate of USAF other than
the Company, unless Employee and his new employer agree otherwise in writing,
this Agreement shall automatically be deemed to have been assigned to such new
employer (which shall thereafter be an additional or substitute beneficiary of
the covenants contained herein, as appropriate), with the consent of Employee,
such assignment shall be considered a condition of employment by such new
employer, and references to the "Company" in this Agreement shall be deemed to
refer to such new employer. If the Company is merged with or into another
subsidiary or affiliate of USAF, such action shall not be considered to cause an
assignment of this Agreement, and the surviving or successor entity shall become
the beneficiary of this Agreement and all references to the "Company" shall be
deemed to refer to such surviving or successor entity. It is intended that USAF
will be a third-party beneficiary of the rights of the Company under this
Agreement. No other Person shall be a third-party beneficiary.
13. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement and
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: United Wholesale Florists, Inc.
______________________
______________________
Attention: Secretary
with a copy to: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
Attention: Robert Poirier
8
<PAGE>
To Employee: Raymond R. Ashmore
________________________
________________________
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 15.
16. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company and/or USAF as a result of a breach of the restrictive
covenants set forth in Sections 7, 8, 9 and 10, and because of the immediate and
irreparable damage that would be caused to the Company and/or USAF for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or USAF at
law or in equity, the Company and USAF shall be entitled to specific performance
and any injunctive or other equitable relief as a remedy for any breach or
threatened breach of the aforementioned restrictive covenants.
18. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the principal office of
the Company is located. Notwithstanding the foregoing, the Company and/or USAF
shall be entitled to seek injunctive or other equitable relief, as contemplated
by Section 17 above, from any court of competent jurisdiction, without the need
to resort to arbitration.
19. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Arkansas, without regard to its conflict
of laws principles.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
UNITED WHOLESALE FLORISTS, INC.
By: ___________________________
Name:
Title:
EMPLOYEE:
______________________________
Raymond R. Ashmore
10
<PAGE>
EXHIBIT A
- ---------
Under USAF's Incentive Bonus Plan, Employee will be eligible to earn up to 100%
of Employee's base salary in bonus compensation, payable out of a bonus pool
determined by the Board of Directors of USAF or a compensation committee
thereof, depending upon the achievement of specified criteria and payable in the
form of cash, stock options, or other non-cash awards, in such proportions, and
in such forms, as are determined by the Board of Directors of USAF or a
compensation committee thereof. Bonuses under the Incentive Bonus Plan will be
determined by measuring Employee's performance, the Company's performance and
USAF's performance based on the following criteria, weighted as indicated, and
measured against target performance levels established by the Board of Directors
of USAF or such compensation committee: (i) USAF's profit - 25%, (ii) the profit
of the Company - 50% and (iii) revenue growth of the Company due to acquisitions
- - 25%.
11
<PAGE>
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this ___ day of __________, 1997, is
by and between American Florist Supply, Inc., a Massachusetts corporation (the
"Company") and a wholly-owned subsidiary of U.S.A. Floral Products, Inc.
("USFloral"), a Delaware corporation, and John T. Dickinson ("Employee").
Capitalized terms not otherwise defined herein shall have the meanings given to
them in the Agreement and Plan of Contribution ("Agreement") of even date
herewith.
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term"), which Term shall be automatically renewed for an
additional one year period unless notice is given by the Company or USFloral to
Employee of its desire not to renew this Employment Agreement no less than six
months prior to the end of the Term.
2. Position and Duties. The Company hereby employs Employee as President.
-------------------
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a president of the Company. Employee will report
directly to the Board of Directors of the Company (the "Board"). Employee
hereby accepts this employment upon the terms and conditions herein contained
and agrees to devote all of his professional time, attention, and efforts to
promote and further the business of the Company. Employee shall faithfully
adhere to, execute, and fulfill all policies established by the Company.
3. Compensation. For all services rendered by Employee, the Company shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $150,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive
<PAGE>
bonus up to the amount, based upon the criteria, and payable at such times as
are, specified in Exhibit A attached hereto. The amount, manner of payment, and
form of consideration, if any, shall be determined by the Board of Directors of
USFloral or a compensation committee thereof in its sole and absolute
discretion, and such determination shall be binding and final. To the extent
that such bonus is to be determined in light of financial performance during a
specified fiscal period and this Agreement commences on a date after the start
of such fiscal period, any bonus payable in respect of such fiscal period's
results may be prorated. In addition, if the period of Employee's employment
hereunder expires before the end of a fiscal period, and if Employee is eligible
to receive a bonus at such time (such eligibility being subject to the
restrictions set forth in Section 6 below), any bonus payable in respect of such
fiscal period's results may be prorated.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board. In addition, Employee shall be entitled to receive the following
additional benefits and/or compensation:
i. Option Grant. Employee shall be granted options to purchase
------------
50,000 shares of USFloral Stock, to be exercisable at the price
at which the USFloral Stock is offered in the IPO. The stock
options shall be granted under the terms of USFloral's 1997 Long-
Term Incentive Plan, shall permit cashless exercise, and shall
vest over a four year period.
ii. Board Seat. Employee shall be offered a seat on the Board of
----------
Directors of USFloral on the same terms and conditions as apply
to all other founding companies of USFloral.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Place of Performance. The parties agree that Employee will not be
--------------------
required by the Company to relocate from his present residence to another
geographic location. However, if Employee agrees to relocate upon request by
the Company, the Company will provide Employee with a relocation allowance, in
an amount determined by the Company, to assist Employee in covering the costs of
moving himself, his immediate family, and their personal property and effects.
The total amount and type of costs to be covered shall be determined by the
Company, in light of prevailing Company policy at the time.
2
<PAGE>
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) twelve months from the effective date of termination, or
(ii) whatever time period is remaining under the then-current period of the Term
(without regard to renewals thereof). Such payments shall be made in accordance
with the Company's regular payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company or USFloral, and that in
the judgment of the Company or USFloral materially and adversely affects the
operations or reputation of the Company or USFloral; (iv) Employee's conviction
of a felony or other crime involving moral turpitude; or (v) Employee's abuse of
alcohol or drugs (legal or illegal) that, in the Company's judgment, materially
impairs Employee's ability to perform his duties hereunder. In the event of a
termination "for cause," as enumerated above, Employee shall have no right to
any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for whatever time period is remaining under the then-current period of
the Term (without regard to renewals thereof). Such payments shall be made in
accordance with the Company's regular payroll cycle. If Employee resigns or
otherwise terminates his employment for any reason or for no reason, Employee
shall receive no severance compensation.
3
<PAGE>
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 6. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 6(b) or 6(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Company's fiscal year in which termination
occurs, calculated as if Employee had remained employed by the Company through
the end of such fiscal year, and paid in such amounts, at such times, and in
such forms as are determined pursuant to Section 3(b) above and Exhibit A
attached hereto. Except as specified in the preceding two sentences, Employee
shall not be entitled to receive any incentive bonus compensation after the
effective date of termination of his employment. All other rights and
obligations of USFloral, the Company, and Employee under this Agreement shall
cease as of the effective date of termination, except that Employee's
obligations under Sections 7, 8, 9 and 10 below shall survive such termination
in accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or USFloral on an "at will" basis, for the duration of such period, and
thereafter for a period equal to the longer of (x) two years, or (y) the period
during which Employee is receiving any severance pay from the Company, Employee
shall not, directly or indirectly, for himself or on behalf of or in conjunction
with any other person, company, partnership, corporation, business, group, or
other entity (each, a "Person"):
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant, advisor, or sales representative, in any business
selling any products or services in direct competition with the Company or
USFloral, within the United States (the "Territory");
(ii) call upon any Person who is, at that time, within the Territory,
an employee of the Company or USFloral for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company or
USFloral;
4
<PAGE>
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company or USFloral within
the Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or USFloral within the Territory; or
(iv) on Employee's own behalf or on behalf of any competitor, call
upon any Person who or that, during Employee's employment by the Company or
USFloral was either called upon by the Company or USFloral as a prospective
acquisition candidate or was the subject of an acquisition analysis conducted by
the Company or USFloral.
(b) The foregoing covenants shall not be deemed to prohibit Employee 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
through the automated quotation system of a registered securities association
(ii) engaging in any activity to which USFloral shall have provided its prior
written consent, or (iii) maintaining his directorship in the Meadow Flower,
S.A. rose farm, located in Ecuador.
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or USFloral and enters into a business or pursues other
activities that, at such time, are not in competition with the Company or
USFloral, Employee shall not be chargeable with a violation of this Section 7 if
the Company or USFloral subsequently enters the same (or a similar) competitive
business or activity or commences competitive operations within 100 miles of the
Employee's new business or activities. In addition, if Employee has no actual
knowledge that his actions violate the terms of this Section 7, Employee shall
not be deemed to have breached the restrictive covenants contained herein if,
promptly after being notified by the Company or USFloral of such breach,
Employee ceases the prohibited actions.
(d) For purposes of this Section 7, references to "USFloral" shall mean USA
Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this Agreement shall automatically be considered to have
been amended and revised to reflect such determination.
(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USFloral, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by USFloral or the Company of such
covenants;
5
<PAGE>
provided, that upon the failure of the Company to make any payments required
- --------
under this Agreement, the Employee may, upon 30 days' prior written notice to
the Company, waive his right to receive any additional compensation pursuant to
this Agreement and engage in any activity prohibited by the covenants of this
Section 7. It is specifically agreed that the period of two years stated at the
beginning of this Section 7, during which the agreements and covenants of
Employee made in this Section 7 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 7.
(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above. If Employee is subject to a restriction on
competitive activity as a party to that certain Amended and Restated Agreement
and Plan of Contribution, dated as of August 5, 1997, by and among USFloral, AFS
Acquisition Corp., the Company and the stockholders of the Company (the "Merger
Agreement"), then Employee shall abide by, and in all cases be subject to, the
restrictive covenants (whether in this Section 7 or in the Merger Agreement)
that, in the aggregate, impose restrictions on Employee for the longest duration
and the broadest geographic scope (taking into account the effect of any
applicable court decisions limiting the scope or duration of such restrictions),
it being agreed that all such restrictive covenants are supported by separate
and distinct consideration. This Section 7(g) shall be construed and
interpreted in light of the duration of the applicable restrictive covenants.
(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and USFloral, and their
respective officers, directors, employees, and stockholders. It is further
agreed that the Company and Employee intend that such covenants be construed and
enforced in accordance with the changing activities, business, and locations of
the Company and USFloral throughout the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or USFloral (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company and/or USFloral because such
Confidential Information encompasses technical know-how, trade secrets, or
technical, financial, organizational, sales, or other valuable aspects of the
Company's and USFloral's business and trade, including, without limitation,
technologies, products, processes, plans, clients, personnel, operations, and
business activities. This restriction shall not apply to any Confidential
Information that (a)
6
<PAGE>
becomes known generally to the public through no fault of the Employee; (b) is
required by applicable law, legal process, or any order or mandate of a court or
other governmental authority to be disclosed; or (c) is reasonably believed by
Employee, based upon the advice of legal counsel, to be required to be disclosed
in defense of a lawsuit or other legal or administrative action brought against
Employee; provided, that in the case of clauses (b) or (c), Employee shall give
--------
the Company reasonable advance written notice of the Confidential Information
intended to be disclosed and the reasons and circumstances surrounding such
disclosure, in order to permit the Company to seek a protective order or other
appropriate request for confidential treatment of the applicable Confidential
Information.
9. Inventions. Employee shall disclose promptly to the Company and
----------
USFloral any and all significant conceptions and ideas for inventions,
improvements, and valuable discoveries, whether patentable or not, that are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one year thereafter, and that are directly related to
the business or activities of the Company or USFloral and that Employee
conceives as a result of his employment by the Company, regardless of whether or
not such ideas, inventions, or improvements qualify as "works for hire."
Employee hereby assigns and agrees to assign all his interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments, or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
10. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USFloral or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USFloral, whether in paper, electronic, or other form; and (c) all
keys, credit cards, vehicles, and other property of the Company or USFloral.
Employee shall not retain or cause to be retained any copies of the foregoing.
Employee hereby agrees that all of the foregoing shall be and remain the
property of the Company or USFloral, as the case may be, and be subject at all
times to their discretion and control.
11. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent
7
<PAGE>
that Employee had any oral or written employment agreement or understanding with
the Company, this Agreement shall automatically supersede such agreement or
understanding, and upon execution of this Agreement by Employee and the Company,
such prior agreement or understanding automatically shall be deemed to have been
terminated and shall be null and void.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company without the prior
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns. Notwithstanding the foregoing, if Employee accepts
employment with a subsidiary or affiliate of USFloral other than the Company,
unless Employee and his new employer agree otherwise in writing, this Agreement
shall automatically be deemed to have been assigned to such new employer (which
shall thereafter be an additional or substitute beneficiary of the covenants
contained herein, as appropriate), with the consent of Employee, such assignment
shall be considered a condition of employment by such new employer, and
references to the "Company" in this Agreement shall be deemed to refer to such
new employer. If the Company is merged with or into another subsidiary or
affiliate of USFloral, such action shall not be considered to cause an
assignment of this Agreement, and the surviving or successor entity shall become
the beneficiary of this Agreement and all references to the "Company" shall be
deemed to refer to such surviving or successor entity. It is intended that
USFloral will be a third-party beneficiary of the rights of the Company under
this Agreement. No other Person shall be a third-party beneficiary.
13. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement together with the Merger Agreement, is the final,
complete, and exclusive statement and expression of the agreement between the
Company and Employee with respect to the subject matter hereof and thereof, and
cannot be varied, contradicted, or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Company and Employee, and no term of this Agreement may be waived except
by a writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To the Company: American Florist Supply, Inc.
200 Wildwood Street
Woburn, Massachusetts 01801
Attention: Secretary
8
<PAGE>
with a copy to: U.S.A. Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
To Employee: John T. Dickinson
18 Wheeler Road
Lincoln, Massachusetts 01773
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 15.
16. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company and/or USFloral as a result of a breach of the restrictive
covenants set forth in Sections 7, 8, 9 and 10, and because of the immediate and
irreparable damage that would be caused to the Company and/or USFloral for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or USFloral
at law or in equity, the Company and USFloral shall be entitled to specific
performance and any injunctive or other equitable relief as a remedy for any
breach or threatened breach of the aforementioned restrictive covenants.
18. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the Company is located.
Notwithstanding the foregoing, the Company and/or USFloral shall be entitled to
seek injunctive or other equitable relief, as contemplated by Section 17 above,
from any court of competent jurisdiction, without the need to resort to
arbitration.
9
<PAGE>
19. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
AMERICAN FLORIST SUPPLY, INC.
By:___________________________
Name:
Title:
EMPLOYEE:
______________________________
[Name]
10
<PAGE>
EXHIBIT A
- ---------
Under USFloral's Incentive Bonus Plan, Employee will be eligible to earn up to
100% of Employee's base salary in bonus compensation, payable out of a bonus
pool determined by the Board of Directors of USFloral or a compensation
committee thereof, depending upon the achievement of specified criteria and
payable in the form of cash, stock options, or other non-cash awards, in such
proportions, and in such forms, as are determined by the Board of Directors of
USFloral or a compensation committee thereof. Bonuses under the Incentive Bonus
Plan will be determined by measuring Employee's performance, the Company's
performance and USFloral's performance based on the following criteria, weighted
as indicated, and measured against target performance levels established by the
Board of Directors of USFloral or such compensation committee: (i) USFloral's
profit - 25%, (ii) the profit of the Company - 50% and (iii) revenue growth of
the Company due to acquisitions -25%.
11
<PAGE>
Exhibit 10.21
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of the ___ day of ___________, 1997, is
by and between FLOWER TRADING CORPORATION, a Florida corporation (the "Company")
and a wholly owned subsidiary of U.S.A. Floral Products, Inc. ("USAF"), a
Delaware corporation, and Gustavo Moreno ("Employee").
RECITALS
The Company desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with the
Company, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
1. Employment; Term. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term").
2. Position and Duties. The Company hereby employs Employee as President
-------------------
and Chief Executive Officer. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a president and
chief executive officer of the Company. Employee will report directly to the
Board of Directors of the Company (the "Board"). All other employees and
officers of the Company will report to the Employee. Employee hereby accepts
this employment upon the terms and conditions herein contained and agrees to
devote a majority of his professional time, attention, and efforts to promote
and further the business of the Company. Employee shall faithfully adhere to,
execute, and fulfill all policies established by the Company. During the Term,
the Company's principal executive office shall be located in Dade County,
Florida and Employee shall not be required to be based in any other offices.
3. Compensation. For all services rendered by Employee (including the
------------
restriction on competition contained in Section 6 hereof and Section 14 of the
Agreement and Plan of Contribution dated August 4, 1997), the Company shall
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $270,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures, but not less than monthly. On
at least an annual basis, the Board will review Employee's performance and may
make increases to such base salary if, in its sole discretion, any such increase
is warranted.
<PAGE>
(b) Incentive Bonus. During the Term, Employee shall be a participant in
USAF's Incentive Bonus Plan and be eligible to receive an incentive bonus up to
the amount, based upon the criteria, and payable at such times as are, specified
in Exhibit A attached hereto. The amount, manner of payment, and form of
consideration, if any, shall be determined by the Board in its sole and absolute
discretion, and such determination shall be binding and final. To the extent
that such bonus is to be determined in light of financial performance during a
specified fiscal period and this Agreement commences on a date after the start
of such fiscal period, any bonus payable in respect of such fiscal period's
results may be prorated. In addition, if the period of Employee's employment
hereunder expires before the end of a fiscal period, Employee will be eligible
to receive a bonus in accordance with the terms of Section 6 hereof. Employee's
participation in USAF's Incentive Bonus Plan shall be on the same terms as all
the presidents of the other subsidiaries of USAF.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board. Employee shall be covered by a director and officer insurance
policy of either the Company or USAF. During the Term, the Company shall
continue to make all payments under the current automobile lease for the
Employee and shall lease a comparable automobile on his behalf upon the
expiration of such lease.
4. Expense Reimbursement. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.
5. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no severance compensation shall be owed to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 5(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) 12 months from
2
<PAGE>
the effective date of termination, or (ii) whatever time period is remaining
under the then-current period of the Term. Such payments shall be made in
accordance with the Company's regular payroll cycle.
(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
intentional refusal to abide by or comply with the directives of the Board, or
the Company's policies and procedures, which actions continue for a period of at
least 10 days after receipt by Employee of written notice of the need to cure or
cease; (iii) Employee's willful dishonesty or fraud, with respect to the
business or affairs of the Company or USAF, and that in the reasonable judgment
of the Company or USAF materially and adversely affects the operations or
reputation of the Company or USAF; (iv) Employee's conviction of a felony or
other crime involving moral turpitude; or (v) Employee's abuse of alcohol or
drugs (legal or illegal) that, in the Company's reasonable judgment (confirmed
by a medical doctor), materially impairs Employee's ability to perform his
duties hereunder. In the event of a termination "for cause," as enumerated
above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment, the
Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 5(f)
below, Employee shall receive from the Company the base salary at the rate then
in effect for whatever time period is remaining under the then-current period of
the Term. Such payments shall be made in accordance with the Company's regular
payroll cycle. If Employee resigns or otherwise terminates his employment for
any reason or for no reason, Employee shall receive no severance compensation.
(e) Payment Through Termination. Upon termination of Employee's employment
for any reason provided above, Employee shall be entitled to receive all
compensation earned and all benefits and reimbursements (including payments for
accrued vacation and sick leave, in each case in accordance with applicable
policies of the Company) due through the effective date of termination.
Additional compensation subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the manner expressly provided
above in this Section 5. With respect to incentive bonus compensation, Employee
shall be entitled to receive any bonus declared but not paid prior to
termination. In addition, in the event of a termination by the Company under
Section 5(b) or 5(d), Employee shall be entitled to receive incentive bonus
compensation through the end of the Term, calculated as if Employee had remained
employed by the Company through the end of the Term, and paid in such amounts,
at such times, and in such forms as are determined pursuant to Section 3(b)
above and Exhibit A attached hereto. Except as specified in the preceding two
sentences, Employee shall not be entitled to receive any incentive bonus
compensation after the effective date of termination of his employment. All
other rights and obligations of USAF, the
3
<PAGE>
Company, and Employee under this Agreement shall cease as of the effective date
of termination, except that Employee's obligations under Sections 6, 7, 8 and 9
below shall survive such termination in accordance with their terms.
(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided that, in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 5, the Company
shall have the right to reduce the amounts to be paid hereunder by the amount of
Employee's earnings from such other employment, except that no such reduction
shall be made for Employee's earnings from the companies referred to by name in
Section 6(b) hereof.
(g) Upon termination for disability or without cause, Employee shall
continue in all of the benefit plans of the Company for a period of twelve
months. Also, upon any termination, Employee will have the right to buy any
existing life insurance policy from the Company.
6. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
or USAF on an "at will" basis, for the duration of such period, and thereafter
for a period equal to the longer of (x) two years, or (y) the period during
which Employee is receiving any severance pay from the Company, Employee shall
not, directly or indirectly, for himself or on behalf of or in conjunction with
any other person, company, partnership, corporation, business, group, or other
entity (each, a "Person"):
(i) except as otherwise provided in this Section 6, engage, as an
officer, director, shareholder, owner, partner, joint venturer, or in a
managerial capacity, whether as an employee, independent contractor, consultant
or advisor, or as a sales representative, in any business selling any products
or services in direct competition with the Company or USAF that involves the
importing, brokerage, shipping or marketing of floral products, or any business
engaging in the consolidation of the floral industry within the United States;
(ii) call upon any person who is, at that time within the United
States, an employee of USAF or any subsidiary of USAF in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of USAF or such subsidiary;
(iii) except as otherwise provided in this Section 6, 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 the Company or USAF within the United States
for the purpose of soliciting or selling floral products within the United
States;
4
<PAGE>
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was either called
upon by the Company or USAF or was the subject of an acquisition analysis
conducted by the Company or USAF; or
(v) disclose customers, whether in existence or proposed, of the
Company or USAF to any person, firm, partnership, corporation or business (other
than UltraFlora, Multiflora C.I., S.A. or Artistry in Bloom, Inc.) for any
reason or purpose whatsoever.
(b) Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee 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 USAF shall have provided its prior written consent. In
addition, this Section 6 shall not be deemed to prohibit Employee, if as of the
date hereof, he has an interest, as an owner, operator, creditor, employee or
otherwise, in (i) a retail floral business independent (except as a customer)
Company or (ii) in UltraFlora, Artistry in Bloom, Inc. (or a new entity which
replaces Artistry in Bloom, Inc. and conducts the same type of business as
Artistry in Bloom, Inc., herein called the "Replacer") and Multiflora, as
presently conducted (or to be conducted by the Replacer), from continuing to
maintain such interest. However, Employee may not maintain any interest in
UltraFlora, Artistry in Bloom, Inc. or Multiflora if any such company is in
direct competition with the COMPANIES in the importation of flowers into the
United States (other than UltraFlora's activities as an importer of record for
distribution to supermarkets, convenience stores and mass market retailers).
(c) It is further agreed that, in the event that Employee shall cease to be
employed by the Company or USAF and enters into a business or pursues other
activities that, at such time, are not a breach of this Section 6, Employee
shall not be chargeable with a violation of this Section 6 if the Company or
USAF subsequently enters the same (or a similar) competitive business or
activity or commences competitive operations within 100 miles of the Employee's
new business or activities. In addition, if Employee has no actual knowledge
that his actions violate the terms of this Section 6, Employee shall not be
deemed to have breached the restrictive covenants contained herein if, promptly
after being notified by the Company or USAF of such breach, Employee ceases the
prohibited actions.
(d) For purposes of this Section 6, references to "USAF" shall mean USA
Floral Products, Inc., together with its subsidiaries.
(e) The covenants in this Section 6 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 6 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic
5
<PAGE>
area that such court deems reasonable and enforceable and this Agreement shall
automatically be considered to have been amended and revised to reflect such
determination.
(f) All of the covenants in this Section 6 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
USAF, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by USAF or the Company of such covenants; provided,
--------
that upon the failure of the Company to make any payments required under this
Agreement, the Employee may, upon 30 days' prior written notice to the Company,
waive his right to receive any additional compensation pursuant to this
Agreement and engage in any activity prohibited by the covenants of this Section
6. It is specifically agreed that the period of two years stated at the
beginning of this Section 6, during which the agreements and covenants of
Employee made in this Section 6 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this Section 6.
(g) If Employee is subject to a restriction on competitive activity as a
party to that certain Agreement and Plan of Contribution, dated as of August 4,
1997, by and among USA Floral Products, Inc., FT Acquisition Corporation, Flower
Trading Corporation, Flowtrad Corporation N.V. and the Stockholders of Flowtrad
Corporation N.V. (the "Merger Agreement"), then Employee shall abide by, and in
all cases be subject to, the restrictive covenants (whether in this Section 6 or
in the Merger Agreement) that, in the aggregate, impose restrictions on Employee
for the longest duration and the broadest geographic scope (taking into account
the effect of any applicable court decisions limiting the scope or duration of
such restrictions), it being agreed that all such restrictive covenants are
supported by separate and distinct consideration. This Section 6(g) shall be
construed and interpreted in light of the duration of the applicable restrictive
covenants.
(h) Employee has carefully read and considered the provisions of this
Section 6 and, having done so, agrees that the restrictive covenants in this
Section 6 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company and USAF, and their respective
officers, directors, employees, and stockholders. It is further agreed that the
Company and Employee intend that such covenants be construed and enforced in
accordance with the changing activities, business, and locations of the Company
and USAF throughout the term of these covenants.
7. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
and/or USAF (including all trade secrets), in whatever form, whether oral,
written, or electronic (collectively, the "Confidential Information"), to which
Employee has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company and/or USAF because such
Confidential Information encompasses technical know-how, trade secrets, or
technical, financial, organizational, sales, or other valuable aspects of the
Company's and USAF's business and trade,
6
<PAGE>
including, without limitation, technologies, products, processes, plans,
clients, personnel, operations, and business activities. This restriction shall
not apply to any Confidential Information that (a) becomes known generally to
the public through no fault of the Employee; (b) is required by applicable law,
legal process, or any order or mandate of a court or other governmental
authority to be disclosed; (c) is reasonably believed by Employee, based upon
the advice of legal counsel, to be required to be disclosed in defense of a
lawsuit or other legal or administrative action brought against Employee; (d) is
authorized by the Company or USAF to be disclosed; or (e) becomes known to
Employee through his affiliation with the entities set forth in Section 6(b);
provided that, in the case of clauses (b) or (c), Employee shall give the
- --------
Company reasonable advance written notice of the Confidential Information
intended to be disclosed and the reasons and circumstances surrounding such
disclosure, in order to permit the Company to seek a protective order or other
appropriate request for confidential treatment of the applicable Confidential
Information.
8. Return of Company Property. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company, USAF or their respective
representatives, vendors, or customers that pertain to the business of the
Company or USAF, whether in paper, electronic, or other form; and (c) all keys,
credit cards, vehicles, and other property of the Company or USAF. Employee
shall not retain or cause to be retained any copies of the foregoing. Employee
hereby agrees that all of the foregoing shall be and remain the property of the
Company or USAF, as the case may be, and be subject at all times to their
discretion and control.
9. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
10. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company without the prior
7
<PAGE>
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns. Notwithstanding the foregoing, if Employee accepts
employment with a subsidiary or affiliate of USAF other than the Company, unless
Employee and his new employer agree otherwise in writing, this Agreement shall
automatically be deemed to have been assigned to such new employer (which shall
thereafter be an additional or substitute beneficiary of the covenants contained
herein, as appropriate), with the consent of Employee, such assignment shall be
considered a condition of employment by such new employer, and references to the
"Company" in this Agreement shall be deemed to refer to such new employer. If
the Company is merged with or into another subsidiary or affiliate of USAF, such
action shall not be considered to cause an assignment of this Agreement, and the
surviving or successor entity shall become the beneficiary of this Agreement
and bound by its terms and all references to the "Company" shall be deemed to
refer to such surviving or successor entity. It is intended that USAF will be a
third-party beneficiary of the rights of the Company under this Agreement. No
other Person shall be a third-party beneficiary.
11. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement and
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.
12. Notice. Whenever any notice is required hereunder, it shall be in
------
writing and shall be given by overnight courier service or by delivering the
same in person as follows:
If to the Company: Flower Trading Corporation
1950 N.W. 89th Place
Miami, Florida 33172
with a copy to: USA Floral Products, Inc.
3500 Whitehaven Parkway
Washington, DC 20007
and a copy to: John S. Fletcher, Esq.
Morgan, Lewis & Bockius LLP
5300 First Union Financial Center
200 South Biscayne Boulevard
Miami, FL 33131-2339
8
<PAGE>
If to Employee: Gustavo Moreno
c/o Flower Trading Corporation
1950 N.W. 89th Place
Miami, Florida 33172
and a copy to: Bernard Jacobson
Holland & Knight LLP
701 Brickell Avenue
Miami, Florida 33131
Notice shall be deemed given and effective when actually received. Either party
may change the address for notice by notifying the other party of such change in
accordance with this Section 12.
13. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 6(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
14. Equitable Remedy. Because of the difficulty of measuring economic
----------------
losses to the Company and/or USAF as a result of a breach of the restrictive
covenants set forth in Sections 6, 7, and 8, and because of the immediate and
irreparable damage that would be caused to the Company and/or USAF for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company or USAF at
law or in equity, the Company and USAF shall be entitled to specific performance
and any injunctive or other equitable relief as a remedy for any breach or
threatened breach of the aforementioned restrictive covenants.
15. Arbitration. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the Company is located.
Notwithstanding the foregoing, the Company and/or USAF shall be entitled to seek
injunctive or other equitable relief, as contemplated by Section 14 above, from
any court of competent jurisdiction, without the need to resort to arbitration.
9
<PAGE>
16. Governing Law. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Florida, without regard to its conflict of
laws principles.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.
FLOWER TRADING CORPORATION
By: _______________________________
Name:
Title:
EMPLOYEE:
______________________________
Gustavo Moreno
10
<PAGE>
EXHIBIT A
---------
Under USAF's Incentive Bonus Plan, Employee will be eligible to earn up to 100%
of Employee's base salary in bonus compensation, payable out of a bonus pool
determined by the Board of Directors of USAF or a compensation committee
thereof, depending upon the achievement of specified criteria and payable in the
form of cash, stock options, or other non-cash awards, in such proportions, and
in such forms, as are determined by the Board of Directors of USAF or a
compensation committee thereof. Bonuses under the Incentive Bonus Plan will be
determined by measuring Employee's performance, the Company's performance and
USAF's performance based on the following criteria, weighted as indicated, and
measured against target performance levels established by the Board of Directors
of USAF or such compensation committee: (i) USAF's profit - 25%, (ii) the
profit of the Company - 50% and (iii) revenue growth of the Company due to
acquisitions - 25%.
<PAGE>
Exhibit 10.22
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of July
25, 1997, by and among U.S.A. FLORAL PRODUCTS, INC., a Delaware corporation
(the "Company"), ROBERT J. POIRIER and JONATHAN J. LEDECKY (each of Messrs.
Poirier and Ledecky being a "Founder," and both of them together being the
"Founders").
B A C K G R O U N D :
- - - - - - - - - -
WHEREAS, the Founders were the Company's founders and initial stockholders;
WHEREAS, the Founders created the Company, which currently has no
operations other than organizational and related activities, with the intention
that the Company comprise a number of operating businesses (the "Founding
Companies") that are to be acquired (the "Acquisitions") contemporaneously with
an underwritten initial public offering (an "IPO") of the Company's common
stock, par value $.001 per share ("Common Stock"); and
WHEREAS, in consideration of the Founders' creation of and initial
investment in the Company and their concomitant efforts to formulate and execute
the Company's intentions and to identify the Founding Companies, the Company
determined to grant the Founders registration rights with respect to the shares
of Common Stock owned beneficially by them and described on Schedule A attached
hereto (the "Founders' Shares") co-equal with any registration rights that are
granted to the recipients of shares of Common Stock issued in the Acquisitions
("Acquisition Shares," and together with the Founders' Shares, "Registrable
Shares");
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:
1. Piggy-Back Registration Transactions. If, at any time after the
------------------------------------
expiration of any "lock-up" restrictions upon the transfer of Founders' Shares
that may be required pursuant to the underwriting agreement executed by the
Company in connection with the IPO, the Company shall determine to register
shares of Common 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 the Company shall send
to each "Holder" (as defined in Section 5) of Founders' Shares written notice of
such determination. If, within 15 days after receipt of such notice, such
Holder shall so request in writing, then the Company shall use its best efforts
to include in such registration statement all or any part of the Founders'
Shares that such Holder requests to be registered.
2. Underwriters' Cutbacks. Notwithstanding the provisions of Section 1 of
----------------------
this Agreement, if, in connection with any offering involving an underwriting of
Common Stock to be
<PAGE>
issued by the Company, the managing underwriter shall impose a limitation on the
number of shares of such Common Stock which may be included in the registration
statement because, in its judgment, such limitation is necessary to effect an
orderly public distribution, then the Company shall be obligated to include in
such registration statement only such limited portion of the Founders' Shares
with respect to which such Holder has requested inclusion hereunder; provided,
--------
however, that the Company shall not so exclude any Founders' Shares unless it
- -------
has first excluded all securities to be offered and sold by directors, officers
or other employees of the Company or by stockholders who do not have
contractual, incidental rights to include such securities. Except as provided
in this Section 2, any exclusion of Founders' Shares shall be made pro rata
--- ----
among the holders of all Registrable Shares seeking to include such shares, in
proportion to the number of such Registrable Shares sought to be included by
such holders of Registrable Shares.
3. Waiver of Company Obligations. The obligations of the Company under
-----------------------------
this Agreement may be waived at any time upon the written consent of a majority-
in-interest of the Holders.
4. Expiration. The obligations of the Company under this Agreement shall
----------
expire as to each Holder immediately upon all of such Holder's Founders' Shares
being capable of sale within a three-month period in accordance with the volume
and manner-of-sale limitations of Rule 144 under the Securities Act.
5. Transferees. Each person or entity who is a permitted transferee of
-----------
any Founders' Shares that are subject to the provisions of that certain Business
Agreement, dated as of April 22, 1997, among the Company and the Founders and
who agrees to be bound by the provisions of this Agreement concurrently with
becoming such a permitted transferee by executing a joinder in the form of Annex
I hereto, shall thereafter be a holder of Founders' Shares (a "Holder") for all
of the purposes of this Agreement; provided, that no person or entity who
--------
acquires any Founders' Shares from any person or entity other than directly from
a Founder shall become a Holder hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
U.S.A. FLORAL PRODUCTS, INC.
By: ___________________________________
Name:
Title:
_______________________________________
Robert J. Poirier
_______________________________________
Jonathan J. Ledecky
3
<PAGE>
Schedule A
Founders' Shares
----------------
Founder Number of Founders' Shares
------- --------------------------
Robert J. Poirier 1,000,000 shares
Jonathan J. Ledecky 1,210,000 shares*
- ------
* Includes 110,000 shares that are to be issuable upon the exercise of an
immediately exercisable option that is to be granted to Mr. Ledecky in
connection with the treatment of the Acquisitions as a tax-free exchange
pursuant to Section 351 of the Internal Revenue Code of 1986, as amended.
4
<PAGE>
Annex I
Form of Joinder
---------------
The undersigned hereby represents and warrants to, and covenants and agrees
with, U.S.A. Floral Products, Inc., a Delaware corporation (the "Company"), as
follows:
1. The undersigned is a permitted transferee of shares of the Company's
Common Stock, par value $.001 per share ("Common Stock"), that are subject to
the provisions of that certain Business Agreement, dated as of April 22, 1997
(the "Business Agreement"), among the Company, Robert J. Poirier and Jonathan
J. Ledecky (each of Messrs. Poirier and Ledecky being a "Founder," and both of
them together being the "Founders").
2. The shares of Common Stock as to which the undersigned is a permitted
transferee under the Business Agreement (the "Acquired Shares") are "Founders'
Shares" as such term is defined in that certain Registration Rights Agreement,
dated as of July 25, 1997, by and among the Company and the Founders (the
"Registration Rights Agreement").
3. The undersigned acquired the Acquired Shares directly from a Founder.
4. The undersigned agrees to be bound by the provisions of the
Registration Rights Agreement as a "Holder" (as such term is defined in the
Registration Rights Agreement).
IN WITNESS WHEREOF, the undersigned has executed this Joinder on the date
first written below.
Date: ________________________ _______________________________________
Name: __________________________
Address: __________________________
__________________________
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports relating to the respective
financial statements which appear in such Prospectus.
<TABLE>
<CAPTION>
Financial Statements Date
-------------------- ----
<S> <C>
USA Floral Products, Inc. July 30, 1997
The Roy Houff Company June 25, 1997
CFX, Inc. June 20, 1997
Bay State Florist Supply, Inc. June 27, 1997
Flowtrad Corporation, N.V. d/b/a
Flower Trading Corporation August 1, 1997
United Wholesale Florists, Inc. and
United Wholesale Florists of
America, Inc. July 15, 1997
American Florist Supply, Inc. July 11, 1997
Monterey Bay Bouquet, Inc.
and Bay Area Bouquet, Inc. June 20, 1997
Alpine Gem Flower Shippers, Inc. June 20, 1997
</TABLE>
We also consent to the reference to us under the heading "Experts".
PRICE WATERHOUSE LLP
September 17, 1997
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 8, 1996, relating
to the financial statements of CFX, Inc., which appear in such Prospectus. We
also consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Prospectus. However, it should be noted that Madsen,
Snapp, Mena, Rodriguez & Co., P.A. has not prepared or certified such "Selected
Financial Data."
/s/ Madsen, Snapp, Mena, Rodriguez & Co., P.A
Madsen, Snapp, Mena, Rodriguez & Co., P.A
Plantation, Florida
September 16, 1997
