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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 28, 1998
U.S.A. Floral Products, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-23121 52-2030697
(State or other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1025 Thomas Jefferson Street, N.W., Suite 600 West, Washington, D.C. 20007
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (202) 333-0800
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On January 28, 1998 pursuant to the Purchase Agreement ("Purchase
Agreement") by and among U.S.A. Floral Products, Inc., ("USA Floral"), CFL
Acquisition Corp., ABCL Acquisition Corp., Continental Farms Limited, Atlantic
Bouquet Company Limited ("Atlantic Bouquet"), Continental Farms Management, Inc.
("Continental Farms") and the Limited Partners named therein, ABCL Acquisition
Corp. and CFL Acquisition Corp., each a wholly-owned subsidiary of USA Floral,
acquired all of the partnership interests of each of Continental Farms and
Atlantic Bouquet, each a Florida limited partnership. Continental Farms is an
importer and broker of floral products from South America and Latin America and
Atlantic Bouquet is a bouquet manufacturer. Both companies distribute their
products throughout the United States and Canada. Continental Farms and Atlantic
Bouquet are headquartered in Miami, Florida.
Pursuant to the terms of the Purchase Agreement: (i) ABCL Acquisition Corp.
acquired 1% of the partnership interests in Continental Farms; (ii) CFL
Acquisition Corp. acquired 99% of the partnership interests in Continental
Farms; and (iii) CFL Acquisition Corp. acquired 1% of the partnership interests
of Atlantic Bouquet directly and acquired the remaining 99% of the partnership
interests of Atlantic Bouquet indirectly through the acquisition of Continental
Farms. In consideration for the exchange of their partnership interests, the
former holders of the partnership interests received in the aggregate: (a)
1,642,672 shares of USA Floral Common Stock (the "Common Shares") valued at
$16.741 per share ($27.5 million of Common Shares in the aggregate); (b) $27.5
million in cash; and (c) the extinguishment of $1.0 million in short-term
indebtedness. In addition, under the terms of the Purchase Agreement, key
employees of the sellers also may receive up to an aggregate of 181,921 options
under USA Floral's existing stock option plan. The $32.0 million in cash for the
acquisitions (which included the establishment of $3.5 million escrow for
potential contingent liabilities) was obtained from available working capital
and borrowings of $30.5 million under USA Floral's existing credit facility with
a syndicate of lenders for whom Bankers Trust Company ("BT") is agent.
The total consideration of approximately $56.0 million (including the
extinguishment of debt but excluding the escrow discussed above) was determined
on the basis of arms' length negotiations between representatives of USA Floral
and former holders of the partnership interests. The price per share was
determined by a formula of average prices for USA Floral Common Stock over a
recent period.
On January 29, 1998 pursuant to the Agreement and Plan of Reorganization
(the "Agreement") by and among USA Floral, XLG Acquisition Corp., XL Group, Inc.
("XL Group") and Peter F. Ullrich, XL Group, a Florida corporation, was acquired
by, and merged with and into, XLG Acquisition Corp., a wholly-owned subsidiary
of USA Floral. XL Group, which does business under the name "Condor Farms,
Inc", imports fresh cut floral products from Costa Rica, Ecuador and Columbia
and distributes these products to wholesalers and supermarkets throughout the
United States. The company is headquartered in Miami, Florida.
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Pursuant to the terms of the Agreement, all shares of capital stock of XL
Group that were owned directly or indirectly by XL Group were canceled and each
share of capital stock of XL Group outstanding immediately prior to the Merger
was automatically canceled and extinguished and converted into the right to
receive in the aggregate: (a) 660,938 Common Shares valued at $16.643 per share
($11,000,000 of Common Shares in the aggregate); and (b) $11,000,000 in cash.
In addition, under the terms of the Purchase Agreement, key employees of the
seller may receive up to an aggregate of 67,901 options under USA Floral's
existing stock option plan. Cash for the acquisition was obtained from
available working capital and $11.0 million in borrowings under USA Floral's
existing credit facility with a syndicate of lenders for whom BT is
agent.
The total consideration of approximately $22.0 million was determined on
the basis of arms' length negotiations between representatives of USA Floral and
the former sole shareholder of XL Group. The price per share was determined by
a formula of average prices for USA Floral Common Stock over a recent period.
Item 5. Other Events
USA Floral also recently consummated the acquisition of the following four
companies:
In January 1998 USA Floral acquired Everflora, Inc. ("Everflora") and
Everflora Miami, Inc. ("Everflora Miami"). Everflora and Everflora Miami are
both importers/brokers of perishable floral products. Everflora, headquartered
in Creskill, New Jersey, sells various types of flowers to wholesalers across
the United States. Everflora Miami, headquartered in Miami, Florida, sells
various types of flowers and bouquets, primarily imported from Central and South
America.
Also in January 1998 USA Floral acquired H&H Flowers, Inc. ("H&H"
Flowers"). H&H Flowers, which does business under the name of "La Fleurette,"
assembles and sells floral bouquets and other arrangements to the supermarket
industry primarily throughout the Eastern United States. The company is
headquartered in Miami, Florida. Dwight Haight, a member of the Board of
Directors ("Board") of USA Floral, was a stockholder in H&H Flowers.
Also in January 1998 USA Floral acquired UltraFlora Corporation
("UltraFlora"). UltraFlora imports fresh cut floral products primarily from
Colombia and distributes them to retail stores throughout the United States and
Canada. The company is headquartered in Miami, Florida. Gustavo Moreno, a
member of the Board of USA Floral, was a stockholder in UltraFlora.
Also in January 1998 USA Floral acquired Koehler & Dramm, Inc. ("Koehler &
Dramm"). Koehler & Dramm is a regional wholesale florist company serving
retailers throughout the upper Midwest United States. The company is
headquartered in Minneapolis, Minnesota and has a branch operation in Kansas
City, Missouri.
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) The financial statements required to be filed for Continental Farms and
for XL Group are not available and will be filed by amendment to this Form 8-K
no later than 60 days from the date this report is required to be filed.
(b) The pro forma financial information will be filed at the time the
required financial statements for Continental Farms and XL Group are filed.
(c) Exhibits. The following exhibits are filed as part of this Current
Report on Form 8-K:
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<CAPTION>
Description Exhibit No.
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<S> <C>
Purchase Agreement by and among U.S.A. Floral 2.1
Products, Inc. CFL Acquisition Corp., Continental
Farms Limited, Atlantic Bouquet Company Limited,
Continental Farms Management, Inc. and the Limited
Partners named therein.
Agreement and Plan of Reorganization by and among 2.2
U.S.A. Floral Products, Inc., XLG Acquisition Corp.,
XL Group, Inc. and Peter F. Ullrich.
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S.A. Floral Products, Inc.
Date: February 9, 1998 By: /s/ Raymond C. Anderson
-----------------------------
Raymond C. Anderson
Chief Financial Officer
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EXHIBIT INDEX
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<CAPTION>
Sequential
Exhibit No. Description Page No.
- ------------ ------------------------------------------------------ ----------
<S> <C> <C>
2.1 Purchase Agreement by and among U.S.A. Floral
Products, Inc. CFL Acquisition Corp., Continental
Farms Limited, Atlantic Bouquet Company
Limited, Continental Farms Management, Inc. and
the Limited Partners named therein.
2.2 Agreement and Plan of Reorganization by and
among U.S.A. Floral Products, Inc., XLG
Acquisition Corp., XL Group, Inc. and Peter F.
Ullrich.
</TABLE>
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Exhibit 2.1
PURCHASE AGREEMENT
By and Among
U.S.A. Floral Products, Inc.,
CFL Acquisition Corp.,
ABCL Acquisition Corp.,
Continental Farms Limited,
Atlantic Bouquet Company Limited,
Continental Farms Management, Inc.
and
The Limited Partners Named Therein
made effective as of January 20, 1998
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Table of Contents
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Page
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1. SALE................................................................. 1
1.1 Agreement to Sell............................................ 1
1.2 Agreement to Purchase........................................ 2
2. CONSIDERATION AND EXCHANGE........................................... 2
2.1 Consideration................................................ 2
2.2 Exchange of Interests and Payment of Cash.................... 3
3. POST-CLOSING ADJUSTMENT; PLEDGED ASSETS.............................. 4
3.1 Post-Closing Adjustment...................................... 4
3.2 Pledged Assets............................................... 5
3.3 Sellers' Representative...................................... 6
4. CLOSING.............................................................. 7
5. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIPS AND THE SELLERS... 7
5.1 Due Organization............................................ 7
5.2 Authorization; Validity..................................... 8
5.3 No Conflicts................................................ 8
5.4 Interests; Manager Stockholders............................. 8
5.5 Transactions in Partnership Interests....................... 8
5.6 Subsidiaries, Stock, and Notes.............................. 9
5.7 Predecessor Status.......................................... 9
5.8 Absence of Claims Against the Partnerships.................. 9
5.9 Partnerships' Financial Conditions ......................... 9
5.10 Financial Statements........................................ 9
5.11 Liabilities and Obligations................................. 10
5.12 Accounts and Notes Receivable............................... 10
5.13 Books and Records........................................... 11
5.14 Permits..................................................... 11
5.15 Real Property .............................................. 11
5.16 Personal Property .......................................... 15
5.17 Intellectual Property ...................................... 15
5.18 Material Contracts and Commitments.......................... 17
5.19 Government Contracts........................................ 18
5.20 Insurance................................................... 19
5.21 Labor and Employment Matters................................ 19
5.22 Employee Benefit Plans...................................... 20
5.23 Conformity with Law; Litigation............................. 22
5.24 Taxes....................................................... 22
5.25 Absence of Changes.......................................... 24
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5.26 Deposit Accounts; Powers of Attorney....................... 26
5.27 Environmental Matters...................................... 27
5.28 Relations with Governments................................. 28
5.29 Disclosure................................................. 28
5.30 USFloral Prospectus; Securities Representations............ 28
5.31 Affiliates................................................. 29
5.32 Location of Chief Executive Offices........................ 29
5.33 Location of Equipment and Inventory........................ 29
6. REPRESENTATIONS OF USFLORAL AND THE NEWCO........................... 29
6.1 Due Organization........................................... 29
6.2 USFloral Common Stock...................................... 30
6.3 Authorization; Validity of Obligations..................... 30
6.4 No Conflicts............................................... 30
6.5 Capitalization of USFloral and Ownership of
USFloral Stock........................................... 30
6.6 WARN Act................................................... 31
6.7 SEC Filings................................................ 31
7. COVENANTS........................................................... 31
7.1 Tax Matters................................................ 31
7.2 Accounts Receivable ....................................... 32
7.3 Title Insurance and Surveys................................ 32
7.4 Related-Party Agreements................................... 33
7.5 Cooperation................................................ 34
7.6 Conduct of Business Pending Closing........................ 34
7.7 Access to Information...................................... 35
7.8 Prohibited Activities...................................... 35
7.9 Sales of USFloral Common Stock............................. 37
7.10 USFloral Stock Options..................................... 38
7.11 Board of Directors Proposal................................ 38
7.12 Survival of Partnerships................................... 39
7.13 Tax Position............................................... 39
7.14 Announcement............................................... 39
7.15 Bank Approval.............................................. 39
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND
THE NEWCOS.......................................................... 39
8.1 Representations and Warranties; Performance
of Obligations........................................... 39
8.2 No Litigation.............................................. 39
8.3 No Material Adverse Change................................. 40
8.4 Consents and Approvals..................................... 40
8.5 Opinion of the Partnerships' Counsel....................... 40
8.6 Opinions of Accountants and Tax Counsel.................... 40
8.7 Opinion of the Trusts' Counsel............................. 40
8.8 Charter Documents.......................................... 40
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8.9 Quarterly Financial Statements............................. 40
8.10 [Intentionally omitted.]................................... 40
8.11 Delivery of Closing Financial Certificate.................. 40
8.12 FIRPTA Compliance.......................................... 42
8.13 Employment Agreements...................................... 42
8.14 Release.................................................... 42
8.15 Related-Party Indebtedness................................. 42
8.16 Flower Supply Agreement.................................... 42
8.17 Tax Escrow Agreement....................................... 42
8.18 Board Approval............................................. 42
8.19 Bank Approval.............................................. 42
8.20 Personal Guaranties........................................ 42
8.21 Promissory Note............................................ 42
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTNERSHIPS AND THE
SELLERS............................................................. 43
9.1 Representations and Warranties; Performance of
Obligations.............................................. 43
9.2 No Litigation.............................................. 43
9.3 Consents and Approvals..................................... 43
9.4 Employment Agreements...................................... 43
9.5 Tax Escrow Agreement....................................... 44
10. INDEMNIFICATION..................................................... 44
10.1 General Indemnification by the Sellers..................... 44
10.2 Limitation and Expiration.................................. 45
10.3 Indemnification Procedures................................. 46
10.4 Survival of Representations Warranties and Covenants....... 48
10.5 Sole Remedy................................................ 48
10.6 Right to Set Off........................................... 48
11. NONCOMPETITION....................................................... 48
11.1 Prohibited Activities....................................... 48
11.2 Damages..................................................... 49
11.3 Reasonable Restraint........................................ 49
11.4 Severability; Reformation................................... 49
11.5 Independent Covenant ....................................... 50
11.6 Materiality ................................................ 50
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION............................ 50
12.1 Sellers..................................................... 50
12.2 USFloral.................................................... 50
12.3 Damages..................................................... 51
13. GENERAL.............................................................. 51
13.1 Termination................................................. 51
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13.2 Effect of Termination....................................... 51
13.3 Successors and Assigns...................................... 52
13.4 Entire Agreement; Amendment; Waiver......................... 52
13.5 Counterparts................................................ 52
13.6 Brokers and Agents.......................................... 52
13.7 Expenses ................................................... 53
13.8 Specific Performance; Remedies.............................. 53
13.9 Notices..................................................... 53
13.10 Governing Law; Legal Action................................. 54
13.11 Severability................................................ 55
13.12 Absence of Third-Party Beneficiary Rights................... 55
13.13 Further Representations..................................... 55
13.14 Accounting Terms............................................ 55
14. DEFINITIONS.......................................................... 55
</TABLE>
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<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is made and entered into this
20th day of January, 1998, by and among U.S.A. Floral Products, Inc., a Delaware
corporation ("USFloral"), CFL Acquisition Corp. and ABCL Acquisition Corp., each
a Delaware corporation and a newly-formed, wholly-owned subsidiary of USFloral
(each a "Newco" and together the "Newcos"), the holders of the limited
partnership interests (the "LP Interests") in both Continental Farms Limited, a
Florida limited partnership ("Continental Farms"), Atlantic Bouquet Company
Limited, a Florida limited partnership ("Atlantic Bouquet" and, together with
Continental Farms, the "Partnerships" and each separately, a "Partnership")
listed as limited partners on the signature page hereto (the holders of the
Class A LP Interests (Fiduciary Trust (Cayman) Limited, as trustee for the Joya
Trust dated November 27, 1995, Fiduciary Trust (Cayman) Limited, as trustee for
the Hortensia Trust dated November 27, 1995 and Fiduciary Trust (Cayman)
Limited, as trustee for the Relic Trust dated November 27, 1995) being referred
to collectively as the "Trusts" and the holders of the Class B interests listed
thereon being referred to collectively as "Management") collectively the
"Limited Partners"), and Continental Farms Management, Inc., a Florida
corporation and the general partner of each Partnership (the "Manager" and
together with the Limited Partners, the "Sellers" and each separately, a
"Seller"), which holds all of the general partnership interests ("GP Interests,"
and together with the LP Interests, the "Partnership Interests") in the
Partnerships.
BACKGROUND
WHEREAS, the Boards of Directors of the Newcos deem it advisable and in
the best interest of each Newco and its stockholders that such Newco purchase
from the Sellers all of the Sellers' right, title and interest in and to the
applicable Partnership Interests pursuant to this Agreement; and
WHEREAS, the Sellers desire to sell to the Newcos all of the Sellers'
right, title and interest in and to the Partnership Interests pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual benefits to
be derived from this Agreement and of the representations, warranties, covenants
and agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. SALE AND PURCHASE
1.1 Agreement to Sell. On the Closing Date hereunder (as defined in
Article 4), the Sellers shall sell, assign and transfer
(a) to CFL Acquisition Corp., 99% of the Partnership Interests in
Continental Farms (as limited partner) and 1% of the Partnership Interests in
Atlantic Bouquet (as general partner),
<PAGE>
(b) to ABCL Acquisition Corp., 1% of the Partnership Interests in
Continental Farms (as general partner),
in each case upon and subject to the terms and conditions of this Agreement,
such that, upon such sale, assignment and transfer, the Newcos shall be the
holder of 100% of the Partnership Interests, free and clear of all liens,
pledges, security interests, charges, claims, restrictions and other
encumbrances of any nature whatsoever.
1.2 Agreement to Purchase. On the Closing Date hereunder, the Newcos
shall purchase the Partnership Interests from the Sellers, as aforesaid, upon
and subject to the terms and conditions of this Agreement and upon the
representations and warranties contained herein, and will deliver the
Consideration defined in Section 2.1.
2. CONSIDERATION AND EXCHANGE
2.1 Consideration.
(a) For purposes of this Agreement, the "Consideration" shall be $55.0
million adjusted pursuant to this Section 2.1 and Section 3.1. Of the
Consideration:
(i) in exchange for the Class A LP Interests in the Partnerships,
(A) $19,186,636 shall be paid pro rata to the Limited Partners who are
--- ----
holders of Class A LP Interests in the Partnerships in cash at Closing in
immediately available funds; and
(B) $19,186,636 shall be paid pro rata to the Limited Partners who are
--- ----
holders of Class A LP Interests in the Partnerships in 1,146,086 shares of
USFloral common stock, par value $.001 per share ("USFloral Common Stock"),
valued at $16.741 per share (the "Closing Price");
(ii) in exchange for the Class B LP Interests in the Partnerships,
(A) $8,038,364 shall be paid to the Limited Partners who are holders
of Class B LP Interests in the Partnerships in cash at Closing in immediately
available funds in the respective amounts set forth on Schedule 2.1(a)(ii); and
(B) $8,038,364 shall be paid to the Limited Partners who are holders
of Class B LP Interests in the Partnerships in 480,160 shares of USFloral Common
Stock at the Closing Price in the respective amounts set forth on Schedule
2.1(a)(ii); and
(iii) in exchange for the GP Interests in the Partnerships,
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(A) $275,000 shall be paid to the Manager in cash at Closing in
immediately available funds and
(B) $275,000 shall be paid to the Manager in 16,426 shares of USFloral
Common Stock at the Closing Price.
At Closing, the 1,642,672 shares of USFloral Common Stock to be issued to
Sellers (subject to adjustment as provided in this Section 2.1 and Section 3.1)
shall be registered under the Securities Act of 1933, as amended (the "1933
Act"). In reliance upon the opinions to be delivered at Closing pursuant to
Section 8.6 hereof, USFloral shall not withhold any amounts in respect of United
States federal income tax or other tax from the cash to be distributed to the
Sellers at Closing.
(b) The Consideration has been calculated based upon several factors,
including the assumption that the net worth of the Partnerships, calculated in
accordance with generally accepted accounting principles ("GAAP") and the
Partnerships' accounting practices consistently applied, is equal to or greater
than $6,698,000 (the "Net Worth Target") (i) as of the Closing and (ii) as of
December 31, 1997.
(c) If, on the Closing Financial Certificate (as defined in Section
8.9), the Certified Closing Net Worth (as defined in Section 8.9) is less than
the Net Worth Target, then the Consideration to be delivered to the Sellers may,
at USFloral's election, be reduced either (i) at the Closing, or (ii) after
completion of the Post-Closing Audit (as defined in Section 3.1(b)), by the
difference between the Net Worth Target and the Certified Closing Net Worth set
forth on the Closing Financial Certificate (which reduction shall be pro rata in
--- ----
cash and in USFloral Common Stock valued at the Closing Price in the same
proportions as the cash and USFloral Common Stock components of the
Consideration as provided in Section 2.1(a)).
2.2 Exchange of Interests and Payment of Cash.
(a) In exchange for the Partnership Interests, USFloral shall pay to
the Sellers the Consideration as adjusted pursuant to Section 2.1 and Section
3.1. The certificates evidencing the USFloral Common Stock component of the
Consideration shall bear appropriate legends pursuant to the terms of this
Agreement, and USFloral shall be entitled to issue appropriate stop transfer
instructions to its transfer agent consistent with the terms of this Agreement.
No fractional shares of USFloral Common Stock shall be issued, but in lieu
thereof each Seller who would otherwise be entitled to receive a fraction of a
share of USFloral Common Stock shall receive from USFloral an amount of cash
equal to the Closing Price, multiplied by the fraction of a share of USFloral
Common Stock to which such holder would otherwise be entitled. The fractional
share interests of each Seller shall be aggregated, so that no Seller shall
receive cash in an amount greater than the value of one full share of USFloral
Common Stock.
(b) All USFloral Common Stock and cash to be delivered (including
USFloral Common Stock delivered pursuant to Section 3.2(b) but withheld) on the
Closing Date in accordance with the terms hereof shall be deemed to have been
delivered in full satisfaction of and as full
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payment for all Partnership Interests, and following the Closing Date the
Sellers shall have no further rights to, or ownership in, the Partnerships.
3. POST-CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 Post-Closing Adjustment.
(a) The Consideration shall be subject to adjustment after the Closing
Date as specified in this Section 3.1.
(b) Following the Closing Date, USFloral shall cause Price Waterhouse
LLP ("USFloral's Accountant") to audit the Partnerships' books to determine the
accuracy of the information set forth on the Closing Financial Certificate (the
"Post-Closing Audit") with the expectation that the Post-Closing Audit shall be
completed by May 15, 1998. The parties acknowledge and agree that for purposes
of determining the net worth of the Partnerships as of the Closing Date, the
value of the assets of the Partnerships shall, except with the prior written
consent of USFloral, be calculated as provided in the last paragraph of Section
8.11. Each Seller shall cooperate and shall use reasonable efforts to cause the
officers and employees of the Partnerships and the Manager to cooperate with
USFloral and USFloral's Accountant after the Closing Date in furnishing
information, documents, evidence and other assistance to USFloral's Accountant
to facilitate the completion of the Post-Closing Audit within the aforementioned
time period. Without limiting the generality of the foregoing, within two weeks
after the Closing the Sellers shall provide USFloral's Accountant with the
information and/or documents requested on the Post-Closing Audit Checklist set
forth as Schedule 3.1 hereto. In the event that USFloral's Accountant determines
that the actual Partnerships' net worth as of the Closing Date was less than the
Certified Closing Net Worth, USFloral shall deliver a written notice (the
"Financial Adjustment Notice") to the Sellers' Representative, as defined in
Section 3.3, setting forth (i) the determination made by USFloral's Accountant
of the actual Partnerships' net worth (the "Actual Partnerships' Net Worth"),
(ii) the amount of the Consideration that would have been payable at Closing
pursuant to Section 2.1(c) had the Actual Partnerships' Net Worth been reflected
on the Closing Financial Certificate instead of the Certified Closing Net Worth,
and (iii) the amount by which the number of shares issued as the Consideration
would have been reduced at Closing had the Actual Partnerships' Net Worth been
used in the calculations pursuant to Section 2.1(c) (the "Consideration
Adjustment"). The Consideration Adjustment shall take account of the reduction,
if any, to the Consideration already taken pursuant to Section 2.1(c)(i).
(c) The Sellers' Representative shall have thirty days from the
receipt of the Financial Adjustment Notice to notify USFloral if any Seller
disputes such Financial Adjustment Notice. If USFloral has not received notice
of such a dispute within such thirty-day period, USFloral shall be entitled to
receive from the Sellers the Consideration Adjustment (which USFloral shall be
obligated to take first from the Pledged Assets, as defined in Section 3.2, up
to an amount not to exceed one-half of the Pledged Assets then remaining). If,
however, the Sellers' Representative have delivered notice of such a dispute to
USFloral within such thirty-day period, then Deloitte & Touche
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LLP ("D&T") shall review the Partnerships' books, Closing Financial Certificate
and Financial Adjustment Notice (and related information) to determine the
amount, if any, of the Consideration Adjustment. If D&T has an actual conflict
of interest arising from such appointment or would otherwise fail to be deemed
"independent" with respect to any party hereto, then USFloral's Accountant
shall, with the advice and consent of USFloral and the Sellers (which consent
will not be unreasonably withheld), select an independent accounting firm that
has not represented any of the parties hereto within the preceding two years to
review the Partnerships' books, Closing Financial Certificate and Financial
Adjustment Notice (and related information) to determine the amount, if any, of
the Consideration Adjustment. Such independent accounting firm shall be
confirmed by the Sellers' Representative and USFloral within five days of its
selection, unless there is an actual conflict of interest. Either D&T or the
independent accounting firm, as the case may be, shall be directed to consider
only those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to USFloral's
Accountant in connection with the transactions contemplated hereby, or (ii)
reviewed by USFloral's Accountant during the course of the Post-Closing Audit.
The independent accounting firm shall make its determination of the
Consideration Adjustment, if any, within thirty days of its selection. The
determination made by the independent accounting firm shall be final and binding
on the parties hereto, absent manifest error, and upon such determination,
USFloral shall be entitled to receive from the Sellers the Consideration
Adjustment (which USFloral shall be obligated to take from the Pledged Assets,
as defined in Section 3.2, up to an amount not to exceed one-half of the Pledged
Assets then remaining). The costs of the independent accounting firm shall be
borne by the party (either USFloral or the Sellers as a group) whose
determination of net worth at Closing was further from the determination of the
independent accounting firm, or equally by USFloral and the Sellers in the event
that the determination by the independent accounting firm is equidistant between
the Certified Closing Net Worth and the Actual Partnerships' Net Worth.
3.2 Pledged Assets.
(a) As collateral security for the payment of any Consideration
Adjustment under Section 3.1, and any indemnification obligations of the Sellers
pursuant to Article 10, the Sellers shall, and by execution hereof do hereby,
transfer, pledge and assign to USFloral, for the benefit of USFloral, a security
interest in the following assets (the "Pledged Assets"):
(i) that number of shares of USFloral Common Stock with a value, based
on the Closing Price equal to ten percent (10%) of each Seller's share of the
Consideration as the same may have been adjusted pursuant to Section 2.1 or
Section 3.1 hereof, and the certificates and instruments, if any, representing
or evidencing each such Seller's Pledged Assets;
(ii) all securities hereafter delivered to such Seller with respect to
or in substitution for such Seller's Pledged Assets, all certificates and
instruments representing or evidencing such securities, and all cash and non-
cash dividends and other property at any time received, receivable or otherwise
distributed in respect of or in exchange for any or all thereof; and in the
event any Seller receives any such property, such Seller shall hold such
property in trust for
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USFloral and shall immediately deliver such property to USFloral to be held
hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing property
and all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property.
(b) Each issued certificate, if any, evidencing a Seller's Pledged
Assets shall be delivered to USFloral directly by the transfer agent, such
certificate bearing no restrictive or cautionary legend other than those
imprinted by the transfer agent at USFloral's request. Each Seller shall, at
the Closing, deliver to USFloral, for each such certificate, a stock power duly
signed in blank. Any cash comprising a Seller's Pledged Assets shall be
withheld by USFloral from distribution to such Seller.
(c) The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Consideration pursuant to Section 3.1 and any indemnification
obligations of the Sellers pursuant to Article 10, until the date which is one
year after the Closing Date (the "Release Date"). Promptly following the Release
Date, USFloral shall return or cause to be returned to the Sellers the Pledged
Assets, less Pledged Assets having an aggregate value equal to the amount of (i)
any Consideration Adjustment under Section 3.1, (ii) any pending claim made in
good faith by any Indemnified Party (as defined in Section 10.1) for
indemnification in accordance with the provisions for making claims under
Article 10, and (iii) any amounts paid in satisfaction of indemnification
obligations of the Sellers pursuant to Article 10. For purposes of the preceding
sentence and Article 10, the USFloral Common Stock held as Pledged Assets shall
be valued at (x) the Closing Price with respect to any Consideration Adjustment
under Section 3.1 and (y) the average of the closing price on the Nasdaq
National Market per share of USFloral Common Stock for the ten trading days
prior to the satisfaction of an indemnification obligation (the "Market Value")
with respect to indemnification obligations pursuant to Article 10.
3.3 Sellers' Representative.
(a) Each Seller, by signing this Agreement, designates L. James Teper
or, in the event that L. James Teper is unable or unwilling to serve, Timothy D.
Richards to be the Sellers' Representative for purposes of this Agreement. In
the event that neither L. James Teper or Timothy D. Richards is willing or able
to serve, the Sellers may designate a Sellers' Representative by notice sent in
accordance with Section 13.9 hereof. The Sellers shall be bound by any and all
actions taken by the Sellers' Representative on their behalf.
(b) USFloral and the Newcos shall be entitled to rely upon any
communication or writings given or executed by the Sellers' Representative. All
communications or writings to be sent to any Sellers pursuant to this Agreement
may be addressed to the Sellers' Representative and any communication or writing
so sent shall be deemed notice to all Sellers hereunder. The Sellers hereby
consent and agree that the Sellers' Representative is authorized to accept
deliveries, including any notice, on their behalf pursuant hereto.
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(c) The Sellers' Representative is hereby appointed and constituted
the true and lawful attorney-in-fact of each Seller, with full power in his or
her name and on his or her behalf to act according to the terms of this
Agreement in his or her absolute discretion, and in general to do all things and
to perform all acts including, without limitation, executing and delivering all
agreements, certificates, receipts, instructions and other instruments
contemplated by or deemed advisable in connection with Article 10 of this
Agreement. This power of attorney and all authority hereby conferred is granted
subject to and coupled with the interest of the other Sellers hereunder and in
consideration of the mutual covenants and agreements made herein, and shall be
irrevocable and shall not be terminated by any act of any Seller, by operation
of law, whether by such Seller's death or any other event.
4. CLOSING
The consummation of this transaction and the other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Morgan, Lewis & Bockius LLP, 5300 First Union Financial Center, 200 South
Biscayne Boulevard, Miami, Florida 33131-2339, on January 23, 1998, providing
that all conditions to Closing shall have been satisfied or waived, or at such
other time and date as USFloral, the Partnerships and the Sellers may mutually
agree, which date shall be referred to as the "Closing Date."
5. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIPS AND THE SELLERS
To induce USFloral and the Newcos to enter into this Agreement and
consummate the transactions contemplated hereby, each Partnership and each
Seller (including each stockholder of the Manager), jointly and severally,
represents and warrants to USFloral and the Newcos as follows (for purposes of
this Agreement, the phrases "knowledge of the Partnership" or the "Partnership's
knowledge," or words of similar import, mean the knowledge of any Seller or any
stockholder of the Manager, including facts of which any Seller or any
stockholder of the Manager, in the reasonably prudent exercise of his or its
respective duties, should be aware):
5.1 Due Organization. Each Partnership is a limited partnership duly
organized, validly existing and in good standing under the laws of Florida and
is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances and orders of public authorities to own, operate and
lease its properties and to carry on its business in the places and in the
manner as now conducted except where the failure to be so authorized, qualified
or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of either
Partnership ("Material Adverse Effect"). Schedule 5.l hereto contains a list of
all jurisdictions in which each Partnership is authorized or qualified to do
business. Each Partnership is in good standing in each jurisdiction it which it
does business. Each Partnership has delivered to USFloral true, complete and
correct copies of the limited partnership agreement of such Partnership.
Neither Partnership is in violation of its limited partnership agreement.
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5.2 Authorization; Validity. Each Partnership has the full legal right,
requisite power and authority to enter into this Agreement and the transactions
contemplated hereby and to perform the obligations detailed herein. Each Seller
has the full legal right, power and authority to enter into this Agreement and
the transactions contemplated hereby and to perform the obligations detailed
herein. The execution and delivery of this Agreement by each Partnership and
the performance by each Partnership of the transactions contemplated herein has
been duly and validly authorized by its respective Sellers, including all
necessary corporate action by the Board of Directors and stockholders of the
Manager. This Agreement is a legal, valid and binding obligation of each
Partnership and each Seller, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, either
Partnership's limited partnership agreement;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which either Partnership
or any Seller is a party or by which either Partnership or any Seller is bound,
or result in the creation or imposition of any lien, charge or encumbrance on
either of the Partnership's properties pursuant to (i) any law or regulation to
which either Partnership or any Seller or any of their respective property is
subject, or (ii) any judgment, order or decree to which either Partnership or
any Seller is bound or any of their respective property is subject;
(c) result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of either Partnership; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which either Partnership or any Seller is subject or by which
either Partnership or any Seller is bound including, without limitation, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), together
with all rules and regulations promulgated thereunder.
5.4 Interests; Manager Stockholders. Schedule 5.4 sets forth (a) all of
the outstanding Partnership Interests of the Partnerships and the holders
thereof and (b) all of the owners of outstanding equity interests of the Manager
and the number of shares and relative percentage ownership held by each.
5.5 Transactions in Partnership Interests. No option, other right or
other contract or commitment of any kind exists of any character, written or
oral, which may obligate either Partnership to issue, sell or otherwise cause to
become outstanding any additional Partnership Interests. The Manager has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. As a result of the transactions
contemplated hereby, the Newcos will
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be the record and beneficial owner of 100% of the Partnership Interests, free
and clear of all liens, pledges, security interests, charges, claims,
restrictions and other encumbrances of any nature whatsoever.
5.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 5.6(a), neither Partnership holds
any interest in any other entity, directly or indirectly.
(b) Except as set forth on Schedule 5.6(b), neither Partnership
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, nor is either
Partnership, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
(c) Except as set forth on Schedule 5.6(c), there are no promissory
notes that have been issued to, or are held by, either Partnership.
5.7 Predecessor Status. Schedule 5.7 sets forth a list of all names of
all predecessor business entities of each of the Partnerships, including the
names of any entities from which either of the Partnerships' previously acquired
significant assets. Neither Partnership has ever been a subsidiary or division
of another entity, nor has it been a part of an acquisition that was later
rescinded.
5.8 Absence of Claims Against the Partnerships. No Seller has any claims
against either Partnership.
5.9 Partnerships' Financial Conditions. The Partnerships' combined net
worth (i) as of the end of its most recent fiscal year ending prior to December
31, 1997 was not less than $6,698,000, and (ii) as of the Closing will not be
less than the Net Worth Target. For purposes of this Section 5.9(a),
calculation of amounts as of the Closing shall be made in accordance with the
last paragraph of Section 8.9.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete and
correct copies of the Partnerships' combined balance sheet as of its fiscal year
ended December 31, 1996, and combined income statement for the year ended
December 31, 1996 reviewed by Rachlin Cohen & Holtz, certified public
accountants and consultants (collectively, the "Reviewed Financials") and (b)
true, complete and correct copies of the Partnerships' combined balance sheet
(the "Interim Balance Sheet") as of September 30, 1997 (the "Balance Sheet
Date") and combined income statement, for the nine-month period then ended
(collectively, the "Interim Financials," and together with the Reviewed
Financials, the "Partnerships' Financial Statements"). Except as noted in the
notes to the Reviewed Financials, the Partnerships' Financial Statements have
been prepared in accordance with GAAP consistently applied, subject to, in the
case of the Interim Financials, (i) normal year-end adjustments, which
individually or in the aggregate will not be material, (ii) the exceptions
stated
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on Schedule 5.10, and (iii) the omission of footnote information. Each combined
balance sheet included in the Partnerships' Financial Statements presents fairly
the financial condition of the Partnerships as of the date indicated thereon and
on the basis indicated thereon, and each of the combined income statements
included in the Partnerships' Financial Statements presents fairly the results
of its operations for the periods indicated thereon and on the basis indicated
thereon. Since the dates of the Partnerships' Financial Statements, there have
been no material changes in either Partnership's accounting policies other than
as requested by USFloral to conform each Partnership's accounting policies to
GAAP.
5.11 Liabilities and Obligations.
(a) The Partnerships are not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Interim Balance Sheet and not
previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its business
consistent with past practice under any contract, commitment or agreement
specifically disclosed on any Schedule to this Agreement or not required to be
disclosed thereon because of the term or amount involved or otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practice.
(b) Each Partnership has delivered to USFloral, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) Schedule 5.11(c) includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of either Partnership has made any material expenditure in the
two-year period prior to the date of this Agreement, which if pursued by either
of the Partnerships or the Newcos would require additional material expenditures
of capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall
include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmatured or otherwise and whether known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured. Schedule 5.11(d)
contains a complete list of all indebtedness of each Partnership.
5.12 Accounts and Notes Receivable. Each Partnership has delivered to
USFloral a complete and accurate list, as of a date not more than two business
days prior to the date hereof, of the accounts and notes receivable of such
Partnership (including without limitation receivables from
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and advances to employees and the Sellers), which includes an aging of all
accounts and notes receivable showing amounts due in 30-day aging categories
(collectively, the "Accounts Receivable"). On the Closing Date, each Partnership
will deliver to USFloral a complete and accurate list, as of a date not more
than two business days prior to the Closing Date, of the Accounts Receivable.
All Accounts Receivable represent valid obligations arising from sales actually
made or services actually performed in the ordinary course of business. The
Accounts Receivable are current and collectible net of any respective reserves
shown on each Partnership's respective books and records (which reserves are
adequate and calculated consistent with past practice). Subject to such
reserves, each of the Accounts Receivable will be collected in full, without any
set-off, within ninety days after the day on which it first became due and
payable. There is no contest, claim, or right of set-off, other than rebates and
returns in the ordinary course of business, under any contract with any obligor
of an Account Receivable relating to the amount or validity of such Account
Receivable.
5.13 Books and Records. Except as set forth on Schedule 5.13, each
Partnership has made and kept books and records and accounts, which, in
reasonable detail, accurately and fairly reflect its activities. Neither
Partnership has engaged in any transaction, maintained any bank account, or used
any Partnership funds except for transactions, bank accounts, and funds which
have been and are reflected in its normally maintained books and records.
5.14 Permits. Each Partnership owns or holds all licenses, franchises,
permits and other governmental authorizations, including without limitation
permits, titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and neither Partnership has received any
notice that any governmental authority intends to modify, cancel, terminate or
fail to renew any Permit. No present or former officer, manager, member or
employee of either Partnership or any affiliate thereof, or any other person,
firm, corporation or other entity, owns or has any proprietary, financial or
other interest (direct or indirect) in any Permits. Each Partnership has
conducted and is conducting its respective business in compliance with the
requirements, standards, criteria and conditions set forth in the Permits and
other applicable orders, approvals, variances, rules and regulations and is not
in violation of any of the foregoing. The transactions contemplated by this
Agreement will not result in a default under, or a breach or violation of, or
adversely affect the rights and benefits afforded to either Partnership by, any
Permit.
5.15 Real Property.
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, easements, licenses, rights to
access, and rights of way, and all buildings and other improvements thereon,
owned or used by either Partnership, together with any additions thereto or
replacements thereof.
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(b) Schedule 5.15(b) contains a complete and accurate description of
all Real Property (including street address, legal description (where known),
owner, and Partnership's use thereof) and, to each Partnership's knowledge, any
mortgage, security interest, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), charge, preference,
priority or other security agreement, option, warrant, attachment, right of
first refusal, preemptive, conversion, put, call or other claim or right,
restriction on transfer (other than restrictions imposed by federal and state
securities laws), or preferential arrangement of any kind or nature whatsoever
(including any restriction on the transfer of any assets, any conditional sale
or other title retention agreement, any financing lease involving substantially
the same economic effect as any of the foregoing and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction)(collectively, "Liens"). Schedule 5.15(b) indicates whether the
Real Property is owned or leased. The Real Property listed on Schedule 5.15(b)
includes all interests in real property necessary to conduct the business and
operations of the Partnerships.
(c) Except as set forth in Schedule 5.15(c):
(i) Each Partnership has good and marketable undivided and insurable
title to the Real Property free and clear of any Liens other than (A) liens for
current taxes not yet due and payable, (B) easements, covenants, conditions,
restrictions, and title defects that have been approved by USFloral, as set
forth on Schedule 5.15(c)(i), and (C) liens securing indebtedness for borrowed
money having an outstanding principal balance at Closing not in excess of $1.0
million that USFloral or one of its affiliates has elected to assume, as set
forth on Schedule 5.15(c)(i) (collectively, "Permitted Encumbrances").
(ii) The legal descriptions for the Real Property contained in the
respective deeds thereof describe the properties fully and adequately. All
structures, facilities and improvements to the Real Property ("Structures") are
located within the boundary lines of the Real Property and no structures,
facilities or other improvements on any parcel adjacent to the Real Property
encroach onto any portion of the Real Property. The Structures do not encroach
on any easement which burdens any portion of the Real Property, and none of the
Real Property serves any adjacent parcel for any purpose inconsistent with the
use of the Real Property.
(iii) Each Partnership has good and valid rights of ingress and
egress to and from all Real Property from and to the public street systems for
all usual street, road and utility purposes.
(iv) Except as set forth on Schedule 5.15(c)(iv), all structures and
all structural, mechanical and other physical systems thereof that constitute
part of the Real Property, including but not limited to the walls, roofs and
structural elements thereof and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, waste water, storm water, paving and
parking equipment, systems and facility included therein, and other material
items at the Real Property (collectively, the "Tangible Assets"), are free of
defects and in good operating condition and repair. For purposes of this
Section, a defect shall mean a condition relating to the structures or any
structural, mechanical or physical system which requires an expenditure of more
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than $2,500 to correct. No maintenance or repair to the Real Property,
Structures or any Tangible Asset has been unreasonably deferred. There is no
water, chemical or gaseous seepage, diffusion or other intrusion into said
buildings, including any subterranean portions, that would impair beneficial use
of the Real Property, Structures or any Tangible Asset. Schedule 5.15(c)(iv)
contains a good faith estimate of the amounts needed to be expended for
corrections hereunder; the cost of corrections undertaken by USFloral or its
designees to the items indicated on such Schedule shall not exceed the
respective estimated expenditures set forth thereon.
(v) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any applicable law or by the use
and operation of the Real Property in the conduct of the Partnerships'
businesses are installed to the property lines of the Real Property, enter the
Real Property through adjoining public streets, are connected pursuant to valid
permits to municipal or public utility services or proper drainage facilities,
are fully operable and are adequate to service the Real Property in the
operation of the Partnerships' businesses and to permit full compliance with the
requirements of all laws in the operation of such business. No fact or
condition exists which could result in the termination or material reduction of
the current access from the Real Property to existing roads or to sewer or other
utility services presently serving the Real Property. Each Real Property is an
independent unit which does not rely on any drainage, sewer, access, structural
or other facilities located on any property not included in such Real Property
(A) to fulfill any zoning, building code or other municipal or governmental
requirement, (B) for structural support, (C) to furnish to such Real Property
any essential building systems or utilities or (D) to fulfill the requirements
of any agreement affecting such Real Property. No building or other improvement
not included in any part of such Real Property relies on any part of such Real
Property to fulfill any zoning, building code or other municipal or governmental
requirement or for structural support or the furnishing of any building systems
or utility.
(vi) The Real Property and all present uses and operations of the Real
Property comply with all applicable statutes, rules, regulations, ordinances,
orders, writs, injunctions, judgments, decrees, awards or restrictions of any
government entity having jurisdiction over any portion of the Real Property
(including, without limitation, applicable statutes, rules, regulations, orders
and restrictions relating to zoning, land use, safety, health, employment and
employment practices and access by the handicapped) (collectively, "Laws"),
covenants, conditions, restrictions, easements, disposition agreements and
similar matters affecting the Real Property. Each Partnership has obtained all
approvals of governmental authorities (including certificates of use and
occupancy, licenses and permits) required in connection with the construction,
ownership, use, occupation and operation of the Real Property.
(vii) Except as set forth on Schedule 5.15(c)(vii), none of the
Structures, the appurtenances thereto or the equipment therein or the operation
or maintenance thereof, or the conduct of the Partnerships' businesses, violates
any restrictive covenant or encroaches on any property owned by others or any
easement, right of way or other Lien or restriction affecting such Real Property
in any respect. The Real Property and its continued use, occupancy and
operation as used, occupied and operated in the conduct of the Partnerships'
businesses does not constitute a
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nonconforming use and is not the subject of a special use permit under any
applicable Law. No encroachment described in Schedule 5.15(c)(vii) is material
in extent or effect.
(viii) There are no pending or, to either Partnership's knowledge,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
effect the current use, occupancy or value thereof, nor has either Partnership
or any of the Sellers received notice of any pending or threatened special
assessment proceedings affecting any portion of the Real Property.
(ix) No portion of the Real Property or the Structures has suffered
any damage by fire or other casualty which has not heretofore been completely
repaired and restored to its original condition.
(x) There are no parties other than the Partnerships in possession of
any of the Real Property or any portion thereof, and there are no leases,
subleases, licenses, concessions or other agreements, written or oral, granting
to any party or parties the right of use or occupancy of any portion of the Real
Property or any portion thereof.
(xi) There are no outstanding options or rights of first refusal to
purchase the Real Property, or any portion thereof or interest therein. Neither
Partnership has transferred any air rights or development rights relating to the
Real Property.
(xii) There are no service contracts or other agreements relating to
the use or operation of the Real Property.
(xiii) No portion of the Real Property is located in a wetlands area,
as defined by Laws, or in a designated or recognized flood plain, flood plain
district, flood hazard area or area of similar characterization. No commercial
use of any portion of the Real Property will violate any requirement of the
United States Corps of Engineers or Laws relating to wetlands areas.
(xiv) All real property taxes and assessments that are due and
payable with respect to the Real Property have been paid or will be paid at or
prior to Closing.
(xv) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which either
Partnership leases from any other party any real property, including all
amendments, renewals, extensions, modifications or supplements to any of the
foregoing or substitutions for any of the foregoing (collectively, the "Leases")
are valid and in full force and effect. Each Partnership has provided USFloral
with true and complete copies of all of the Leases, all amendments, renewals,
extensions, modifications or supplements thereto, and all material
correspondence related thereto, including all correspondence pursuant to which
any party to any of the Leases declared a default thereunder or provided notice
of the exercise of any operation granted to such party under such Lease. The
Leases and each Partnership's interests thereunder are free of all Liens.
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(xvi) None of the Leases requires the consent or approval of any
party thereto in connection with the consummation of the transactions
contemplated hereby and there exist no uncured defaults under any Lease.
5.16 Personal Property.
(a) Schedule 5.16(a) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by either Partnership with a current book value in
excess of $10,000 both (i) as of the Balance Sheet Date and (ii) acquired since
the Balance Sheet Date, including in each case true, complete and correct copies
of leases for material equipment and an indication as to which assets are
currently owned, or were formerly owned, by any Seller or business or personal
affiliates of any Seller or of either of the Partnerships.
(b) Each Partnership currently owns or leases all personal property
necessary to conduct the business and operations of such Partnership as it is
currently being conducted.
(c) All of the trucks and other material machinery and equipment of
the Partnerships, including those listed on Schedule 5.16(a), are in good
working order and condition, ordinary wear and tear excepted. All leases set
forth on Schedule 5.16(a) are in full force and effect and constitute valid and
binding agreements of the Partnerships, and the Partnerships are not in breach
of any of their terms. All fixed assets used by the Partnerships that are
material to the operation of its business are either owned by the Partnerships
or leased under an agreement listed on Schedule 5.16(a).
5.17 Intellectual Property.
(a) The Partnerships are the true and lawful owner of, or are licensed
or otherwise possess legally enforceable rights to use, the registered and
unregistered Marks listed on Schedule 5.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Partnerships now own
or use in connection with their business. Except with respect to those Marks
shown as licensed on Schedule 5.17(a), the Partnerships own all of the
registered and unregistered trademarks, service marks, and trade names that they
use. The Marks listed on Schedule 5.17(a) will not cease to be valid rights of
the Partnerships by reason of the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby. For
purposes of this Section 5.17, the term "Mark" shall mean all right, title and
interest in and to any United States or foreign trademarks, service marks and
trade names now held by the Partnerships, including any registration or
application for registration of any trademarks and service marks in the PTO or
the equivalent thereof in any state of the United States or in any foreign
country, as well as any unregistered marks used by the Partnerships, and any
trade dress (including logos, designs, company names, business names, fictitious
names and other business identifiers) used by the Partnerships in the United
States or any foreign country.
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(b) The Partnerships are the true and lawful owner of, or are licensed
or otherwise possess legally enforceable rights to use, all rights in the
Patents listed on Schedule 5.17(b)(i) and in the Copyright registrations listed
on Schedule 5.17(b)(ii). Such Patents and Copyrights constitute all of the
Patents and Copyrights that the Partnerships now own or are licensed to use.
The Partnerships own or are licensed to practice under all patents and copyright
registrations that the Partnerships now own or use in connection with their
businesses. For purposes of this Section 5.17, the term "Patent" shall mean any
United States or foreign patent to which either Partnership has title as of the
date of this Agreement, as well as any application for a United States or
foreign patent made by either Partnership; the term "Copyright" shall mean any
United States or foreign copyright owned by either Partnership as of the date of
this Agreement, including any registration of copyrights, in the United States
Copyright Office or the equivalent thereof in any foreign county, as well as any
application for a United States or foreign copyright registration made by either
Partnership.
(c) The Partnerships are the true and lawful owner of, or are licensed
or otherwise possess legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "Other Rights") listed on
Schedule 5.17(c). Those Other Rights constitute all of the Other Rights that
the Partnerships now own or are licensed to use. The Partnerships own or are
licensed to practice under all trade secrets, franchises or similar rights that
they own, use or practice under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on
Schedules 5.17(a), 5.17(b)(i), 5.17(b)(ii), and 5.17(c) are referred to
collectively herein as the "Intellectual Property." The Intellectual Property
owned by the Partnerships is referred to herein collectively as the "Partnership
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third-Party Intellectual Property." Except as indicated on
Schedule 5.17(d), the Partnerships have no obligations to compensate any person
for the use of any Intellectual Property nor have the Partnerships granted to
any person any license, option or other rights to use in any manner any
Intellectual Property, whether requiring the payment of royalties or not.
(e) The Partnerships have not, nor will they be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any Third-Party Intellectual Property license,
sublicense or agreement described in Schedule 5.17(a), (b), or (c). No claims
with respect to the Partnership Intellectual Property or Third-Party
Intellectual Property are currently pending or, to the knowledge of either
Partnership, are threatened by any person, nor, to either Partnership's
knowledge, do any grounds for any claims exist: (i) to the effect that the
manufacture, sale, licensing or use of any product as now used, sold or licensed
or proposed for use, sale or license by either Partnership infringes on any
copyright, patent, trademark, service mark or trade secret; (ii) against the use
by either Partnership of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in either Partnership's business as currently conducted by either
Partnership; (iii) challenging the ownership, validity or effectiveness of any
of the Partnership Intellectual Property or other trade secret material to
either Partnership; or (iv) challenging either Partnership's license or legally
enforceable right to use of the Third-Party Intellectual Property. To each
Partnership's knowledge,
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there is no unauthorized use, infringement or misappropriation of any of the
Partnership Intellectual Property by any third party. Neither of the
Partnerships nor any of their subsidiaries (x) has been sued or charged in
writing as a defendant in any claim, suit, action or proceeding which involves a
claim or infringement of trade secrets, any patents, trademarks, service marks,
or copyrights and which has not been finally terminated or been informed or
notified by any third party that such Partnership may be engaged in such
infringement or (y) has knowledge of any infringement liability with respect to,
or infringement by, such Partnership or any of its subsidiaries of any trade
secret, patent, trademark, service mark, or copyright of another.
(f) All Intellectual Property in the form of computer software that is
utilized by the Partnerships in the operation of their businesses is capable of
processing date data between and within the twentieth and twenty-first
centuries, or can be made so capable within 30 days and at an aggregate cost not
in excess of $2,500.
5.18 Material Contracts and Commitments.
(a) Schedule 5.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which either Partnership is a party or by which it or its
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) to which either Partnership and any affiliate of either
Partnership or any Seller are parties ("Related-Party Agreements"); or (ii) that
may give rise to obligations or liabilities exceeding, during the current term
thereof, $50,000, or that may generate revenues or income exceeding, during the
current term thereof, $50,000 (collectively with the Related-Party Agreements,
the "Material Contracts"). Each Partnership has delivered to USFloral true,
complete and correct copies of the Material Contracts. Each Partnership has
complied with all of its commitments and obligations and is not in default under
any of the Material Contracts, and no notice of default has been received with
respect to any thereof, and there are no Material Contracts that were not
negotiated at arm's length. Each Partnership is a party to all contracts,
commitments, leases, instruments, agreements, licenses or permits, written or
oral, which are necessary for the continued operation of its business as it is
currently being conducted.
(b) Each Material Contract, except those terminated pursuant to
Section 7.4, is valid and binding on the Partnership which is a signatory
thereto and is in full force and effect and currently is not subject to any
default thereunder by any party obligated to the Partnership which is a
signatory thereto. To each Partnership's knowledge, no basis for assertion of
default exists under any Material Contract, except those terminated pursuant to
Section 7.4, against any party obligated to the Partnership which is a signatory
thereto. Each Partnership will obtain prior to the Closing Date all necessary
consents, waivers and approvals of parties to any Material Contracts that are
required in connection with any of the transactions contemplated hereby, or are
required by any governmental agency or other third party or are advisable in
order that any such Material Contract remain in effect without modification
after the consummation of the underlying transaction and
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without giving rise to any right to termination, cancellation or acceleration or
loss of any right or benefit ("Third-Party Consents"). All Third-Party Consents
are listed on Schedule 5.18(b).
(c) The outstanding balance on all loans or credit agreements either
(i) between either Partnership and any entity in which any of the Sellers own a
material interest, or (ii) guaranteed by either Partnership for the benefit of
any entity in which any of the Sellers own a material interest, are set forth in
Schedule 5.18(c).
(d) The pledge, hypothecation or mortgage of the Partnership Interests
will not, except as set forth on Schedule 5.18(d), (i) result in the breach or
violation of, (ii) constitute a default under, (iii) create a right of
termination under, or (iv) result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of the assets of the
Partnerships (other than a lien created pursuant to the pledge, hypothecation or
mortgage described at the start of this Section 5.18(d)) pursuant to any of the
terms and provisions of, any Material Contract to which either Partnership is a
party or by which the property of either Partnership is bound.
5.19 Government Contracts.
(a) Neither Partnership is a party to any government contracts.
(b) Neither Partnership has been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of either
Partnership, has any suspension or debarment action been threatened or
commenced. There is no valid basis for either Partnership's suspension or
debarment from bidding on contracts or subcontracts for any agency of the United
States Government or any state or local government.
(c) Neither Partnership has been, or is now being, audited, or
investigated by any government agency, or the inspector general or auditor
general or similar functionary of any agency or instrumentality, nor, to the
knowledge of either Partnership, has such audit or investigation been
threatened.
(d) Neither Partnership has any dispute pending before a contracting
office of, nor any current claim (other than the Accounts Receivable) pending
against, any agency or instrumentality of the United States Government or any
state or local government, relating to a contract.
(e) Neither Partnership has, with respect to any government contract,
received a cure notice advising such Partnership that it is or was in default or
would, if it failed to take remedial action, be in default under such contract.
(f) Neither Partnership has submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to
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a contract to any agency or instrumentality of the United States Government or
any state or local government.
(g) No Seller, employee, agent, consultant, representative, or
affiliate of either Partnership is in receipt or possession of any competitor or
government proprietary or procurement sensitive information related to such
Partnership's business under circumstances where there is reason to believe that
such receipt or possession is unlawful or unauthorized.
(h) Each Partnership's government contracts has been issued, awarded
or novated to such Partnership in that Partnership's name.
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate list of
all insurance policies carried by the Partnerships and all insurance loss runs
or workmen's compensation claims received for the past two policy years. The
Partnerships have delivered to USFloral true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and each Partnership is
otherwise in full compliance with the terms of such policies. Such policies of
insurance are of the type and in amounts that are adequate for the conduct of
the Partnerships' businesses. To the knowledge of each Partnership, there have
been no threatened terminations of, or oral or written notice of pending or
anticipated material premium increases with respect to, any of such policies.
5.21 Labor and Employment Matters. With respect to employees of and
service providers to each Partnership:
(a) each Partnership is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice;
(b) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against either Partnership pending or, to
either Partnership's knowledge, threatened, before the National Labor Relations
Board or any other comparable authority;
(c) there is not now, nor within the past three years has there been,
any labor strike, slowdown or stoppage actually pending or, to either
Partnership's knowledge, threatened, against or directly affecting either
Partnership;
(d) to each Partnership's knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three years;
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(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to each Partnership's
knowledge, no claims therefor exist or have been threatened;
(f) the employees of the each Partnership are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against either Partnership or currently being negotiated by
either Partnership; and
(g) all persons classified by either Partnership as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and each Partnership has fully and accurately reported their
compensation on IRS Forms 1099 when required to do so.
5.22 Employee Benefit Plans. Attached hereto as Schedule 5.22 are
complete and accurate copies of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multi-employer plans and
all multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), which are currently maintained and/or sponsored by
either Partnership, or to which either Partnership currently contributes, or has
an obligation to contribute in the future (including, without limitation,
employment agreements and any other agreements containing "golden parachute"
provisions and deferred compensation agreements), together with copies of any
trusts related thereto and a classification of employees covered thereby
(collectively, the "Plans"). Schedule 5.22 sets forth all of the Plans that
have been terminated within the past three years.
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. Except as
set forth on Schedule 5.22, 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 5.22. To the extent that any Qualified Plans have not been amended
to comply with applicable law, the remedial amendment period permitting
retroactive amendment of such Qualified Plans has not expired and will not
expire within 120 days after the Closing Date. All reports and other documents
required to be filed with any governmental agency or distributed to plan
participants or beneficiaries (including, but not limited to, annual reports,
summary annual reports, actuarial reports, PBGC-1 Forms, audits or tax returns)
have been timely filed or distributed. None of: (i) the Sellers; (ii) any
Plan; or (iii) the Partnerships 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 each Partnership 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),
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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 Partnerships nor any member of a "controlled
group" (as defined in ERISA Section 4001(a)(14)) currently has (or at the
Closing Date will have) any obligation whatsoever to contribute to any "multi-
employer pension plan" (as defined in ERISA Section 4001(a)(14), nor has any
withdrawal liability whatsoever (whether or not yet assessed) arising under or
capable of assertion under Title IV of ERISA (including, but not limited to,
Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by any Plan.
Further:
(a) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and
approval by the Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of ERISA
has been terminated;
(c) there have been no "reportable events" (as that phrase is defined
in Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(d) the valuation of assets of any Qualified Plan, as of the Closing
Date, shall exceed the actuarial present value of all accrued pension benefits
under any such Qualified Plan in accordance with the assumptions contained in
the Regulations of the PBGC governing the funding of terminated defined benefit
plans;
(e) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
COBRA), the Partnerships and the Partners 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 neither Partnership has any (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 such Partnership or the Sellers, 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 such Partnership or the Sellers with respect to
such group health plans;
(f) Both Partnerships are now and have been within the past five years
a member of a "controlled group" as defined in ERISA Section 4001(a)(14), the
only members of which are the Partnerships;
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to each Partnership's knowledge,
there is no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other
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proceeding, or investigation with respect to any Plan, or with respect to any
fiduciary, administrator, or sponsor thereof (in their capacities as such), or
any party in interest thereof;
(h) the Financial Statements as of the Balance Sheet Date reflect the
approximate total pension, medical and other benefit expense for all Plans, and
no material funding changes or irregularities are reflected thereon which would
cause such Financial Statements to be not representative of most prior periods;
and
(i) neither Partnership has incurred liability under Section 4062 of
ERISA.
5.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 5.23(a), neither Partnership 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 Partnership. Each Partnership 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
could reasonably be expected to have a Material Adverse Effect on such
Partnership.
(b) Notwithstanding the joint and several nature of the
representations and warranties set forth in this Article 5, each Seller
severally and not jointly represents and warrants that neither such Seller nor,
if applicable, any partner, officer, director or other controlling person of
such Seller, has, at any time: (i) committed any criminal act (except for minor
traffic violations); (ii) engaged in acts of fraud, dishonesty, gross negligence
or moral turpitude; (iii) filed for personal bankruptcy; or (iv) been a partner,
officer, director, manager, trustee or controlling shareholder of a business
entity that filed for bankruptcy or Chapter 11 protection.
(c) Except as set forth on Schedule 5.23(c), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of each Partnership,
threatened against or affecting either Partnership at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality having jurisdiction over it
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. There are no judgments, orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against either Partnership or against any of their
properties or businesses.
5.24 Taxes.
(a)
(i) The Manager, each Partnership and each Seller with respect to the
Partnerships has timely filed all Tax Returns due on or before the Closing Date
and all such Tax Returns are true, correct and complete in all respects.
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(ii) The Manager, each Partnership and each Seller with respect to the
Partnerships has paid in full on a timely basis all Taxes owed by it, whether or
not shown on any Tax Return.
(iii) The amount of the Sellers' liability with respect to the
Partnerships for unpaid Taxes as of the Balance Sheet Date did not exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) shown on the Interim Balance Sheet, and the amount of the
Sellers' liability for unpaid Taxes for all periods or portions thereof ending
on or before the Closing Date will not exceed the amount of the current
liability accruals for Taxes (excluding reserves for deferred Taxes) as such
accruals are reflected on the books and records of each Partnership on the
Closing Date.
(iv) Except as set forth on Schedule 5.24(a)(iv), there are no ongoing
examinations or claims against any Seller for Taxes with respect to the
Partnerships, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received.
(v) Each Partnership has a taxable year ended on December 31, in each
year commencing January 1, 1996.
(vi) Each Partnership currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not changed
since the Partnerships' inception. Neither Partnership has agreed to, and is not
and will not be required to, make any adjustments under Code Section 481(a) as a
result of a change in accounting methods.
(vii) Each Partnership has withheld and paid over to the proper
governmental authorities all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in connection
with amounts paid to any employee, independent contractor, creditor or third
party.
(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of each Partnership for the last five fiscal years have been delivered
to USFloral.
(ix) There are (and as of immediately following the Closing there will
be) no liens on the assets of either Partnership relating to or attributable to
Taxes.
(x) Except as set forth on Schedule 5.24(a)(x), to each Partnership's
knowledge, there is no basis for the assertion of any claim relating to or
attributable to Taxes which, if adversely determined, would result in any Lien
on the assets of either Partnership or otherwise have an adverse effect on
either Partnership or its business.
(xi) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of
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either Partnership that, individually or collectively, could give rise to any
payment (or portion thereof) that would not be deductible pursuant to Sections
280G, 404 or 162 of the Code.
(xii) Except as set forth on Schedule 5.24(a)(xii), neither
Partnership is, or has at any time been, a party to a tax sharing, tax indemnity
or tax allocation agreement, and neither Partnership has assumed the tax
liability of any other person under contract.
(xiii) Each Partnership's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Partnership's tax books and records.
(b) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental
charge, impost or levy (including without limitation income taxes, franchise
taxes, transfer taxes or fees, sales taxes, use taxes, gross receipt taxes,
value added taxes, employment taxes, excise taxes, ad valorem taxes, property
taxes, withholding taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or interest imposed
by the United States or any state, county, local or foreign government or
subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any
information return), report, statement, schedule, notice, form, estimate or
declaration of estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any tax.
(c) For the purposes of this Section 5.24, each representation or
warranty made by any "Seller with respect to the Partnerships" shall be deemed
to have been made severally and not jointly by each such Seller (notwithstanding
the joint and several nature of the representations and warranties set forth in
this Section 5); provided, however, that the Trusts shall be jointly and
--------
severally liable for any breach of any representation or warranty set forth in
this Section 5.24 made by the Trusts.
5.25 Absence of Changes. Since the Balance Sheet Date, each of the
Partnerships and the Manager have conducted their businesses consistent with the
ordinary course of business and past actions and practices in the nine months
prior to the Balance Sheet Date (or, to the extent not inconsistent with such
nine-month period, in periods prior thereto) and, except as contemplated herein
or as set forth on Schedule 5.25, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of either of the
Partnerships or the Manager;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of either of the
Partnerships or the Manager;
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(c) any declaration or payment of any distribution of either of the
Partnerships or the Manager other than up to $6.0 million in cash permitted to
be distributed to the Partners, prior to Closing, other than ordinary and
customary distributions to the Partners through Closing for the payment of
income taxes by the Partners which distributions are made in the ordinary course
of the Partnerships' business and in amounts not materially in excess of the tax
liabilities of the Partners subsequent to September 30, 1997, and other than the
payment of fees and expenses actually incurred by the Partnerships and the
Manager in connection with the subject matter of this Agreement made prior to or
at Closing (it being understood that no distribution or payment under this
subparagraph (c) or otherwise shall in any way vitiate or reduce the minimum net
worth requirements set forth in Section 3.1);
(d) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by either of the Partnerships or the
Manager to any of their respective partners, officers, directors, stockholders,
employees, consultants or agents, except for ordinary and customary bonuses and
salary or wage increases for employees in accordance with past practice and
other than the raise of approximately $100,000 received by Bonnie Armellini on
November 1, 1997;
(e) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(f) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of either of the Partnerships (including, but
not limited to Partnership Interests) or the Manager to any person, including
without limitation the Sellers and their affiliates;
(g) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to either of the Partnerships or the Manager, including
without limitation any indebtedness or obligation of the Sellers or their
stockholders and their respective affiliates, provided that either of the
Partnerships or the Manager may negotiate and adjust bills in the course of good
faith disputes with customers in a manner consistent with past practice;
(h) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property or
rights of either of the Partnerships or the Manager or requiring consent of any
party to the transfer and assignment of any such assets, property or rights;
(i) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the ordinary
course of business of either of the Partnerships or the Manager;
(j) any waiver of any material rights or claims of either of the
Partnerships or the Manager;
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(k) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which either of the Partnerships or
the Manager is a party;
(l) any transaction by either of the Partnerships or the Manager
outside the ordinary course of business;
(m) any capital commitment by either of the Partnerships or the
Manager, either individually or in the aggregate, exceeding $50,000;
(n) any creation or assumption by either of the Partnerships or the
Manager of any mortgage, pledge, security interest or lien or other encumbrance
on any asset (other than liens arising under existing lease financing
arrangements which are not material and liens for Taxes not yet due and
payable);
(o) any entry into, amendment of, relinquishment, termination or non-
renewal by either of the Partnerships or the Manager of any contract, lease
transaction, commitment or other right or obligation requiring aggregate
payments by either of the Partnerships or the Manager in excess of $50,000;
(p) any loan by either of the Partnerships or the Manager to any
person or entity, incurring by either of the Partnerships or the Manager, of any
indebtedness, guaranteeing by either of the Partnerships or the Manager of any
indebtedness, issuance or sale of any debt securities of either of the
Partnerships or the Manager or guaranteeing of any debt securities of others;
(q) the commencement or notice or, to the knowledge of either of the
Partnerships or the Manager, threat of commencement, of any lawsuit or
proceeding against, or investigation of, either of the Partnerships or the
Manager or any of its affairs; or
(r) negotiation or agreement by either of the Partnerships or the
Manager or any officer, director or employee thereof to do any of the things
described in the preceding clauses (a) through (q) (other than negotiations with
USFloral and its representatives regarding the transactions contemplated by this
Agreement).
5.26 Deposit Accounts; Powers of Attorney. Schedule 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which each Partnership
has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
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(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding
a general or special power of attorney from each Partnership and a description
of the terms of such power.
5.27 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 5.27(a),
no underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "Hazardous Material"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that either Partnership has at any time
owned, operated, occupied or leased. Schedule 5.27(a) identifies all underground
and aboveground storage tanks, and the capacity, age, and contents of such
tanks, located on Real Property owned or leased by either Partnership.
(b) Hazardous Materials Activities. Neither Partnership has
transported, stored, used, manufactured, disposed of or released, or exposed its
employees or others to, Hazardous Materials in violation of any law in effect on
or before the Closing Date, nor has either Partnership disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (collectively,
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. Each Partnership currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Partnership Hazardous Material
Activities and other business of each Partnership as such activities and
business are currently being conducted. All Environmental Permits are in full
force and effect. Each Partnership (A) is in compliance in all material respects
with all terms and conditions of the Environmental Permits and (B) is in
compliance in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the laws of all Governmental Entities relating to
pollution or protection of the environment or contained in any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder. To each Partnership's knowledge, there are
no circumstances that may prevent or interfere with such compliance in the
future. Schedule 5.27(c) includes a listing and description of all
Environmental Permits currently held by each Partnership.
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(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of either Partnership, threatened concerning any Environmental Permit,
Hazardous Material or any Partnership Hazardous Materials Activity. There are
no past or present actions, activities, circumstances, conditions, events, or
incidents that could involve either Partnership (or any person or entity whose
liability either Partnership has retained or assumed, either by contract or
operation of law) in any environmental litigation, or impose upon either
Partnership (or any person or entity whose liability either Partnership has
retained or assumed, either by contract or operation of law) any environmental
liability including, without limitation, common law tort liability.
5.28 Relations with Governments. Each Partnership has not made, offered
or agreed to offer anything of value to any governmental official, political
party or candidate for government office, nor has it otherwise taken any action
that would cause either Partnership to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any law of similar effect.
5.29 Disclosure. Each Partnership has delivered to USFloral and the
Newcos true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is referred to in the Schedules or that has
been requested by USFloral. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If, prior to
Closing, any Seller becomes aware of any fact or circumstance which would change
a representation or warranty of any Seller in this Agreement or any
representation made on behalf of either Partnership, the Seller shall
immediately give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve either Partnership or the Sellers 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
Partnerships and Sellers, at the date of this Agreement and as of the Closing
Date, shall be a precondition to the consummation of this transaction.
5.30 USFloral Prospectus; Securities Representations. Each Seller has
received and reviewed a copy of the prospectus dated November 18, 1997 including
all supplements thereto (as supplemented, the "USFloral Prospectus") contained
in USFloral's shelf registration statement on Form S-1 (File No. 333-39969).
Each Seller (a) has such knowledge, sophistication and experience in business
and financial matters that they are capable of evaluating the merits and risks
of an investment in the shares of USFloral Common Stock, (b) fully understands
the nature, scope, and duration of the limitations on transfer contained herein
and under applicable law, and (c) can bear the economic risk of any investment
in the shares of USFloral Common Stock and can afford a complete loss of such
investment. Each Seller has had an adequate opportunity to ask questions and
receive answers (and has asked such questions and received answers to its
satisfaction) from the officers of USFloral concerning the business, operations
and financial condition of USFloral. None of the Sellers has any contract,
undertaking, agreement or arrangement, written or oral, with any other person to
sell, transfer or grant participation in any shares of USFloral Common Stock to
be
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acquired by such Seller in the underlying transaction. Each Seller acknowledges
and agrees that USFloral has not and will not provide such Seller or any other
party with a prospectus for such Seller's use in selling USFloral Common Stock.
5.31 Affiliates. The Sellers are the only persons who are, in the
reasonable judgment of each of the Partnerships and each of the Sellers,
affiliates of the Partnerships within the meaning of Rule 145 (each such person
an "Affiliate") promulgated under the 1933 Act.
5.32 Location of Chief Executive Offices. Schedule 5.32 sets forth the
location of each of the Partnership's chief executive offices.
5.33 Location of Equipment and Inventory. All Inventory and Equipment
held on the date hereof by each of the Partnerships is located at one of the
locations shown on Schedule 5.33. For purposes of this Agreement, (a) the term
"Inventory" shall mean any "inventory" as such term is defined in the Uniform
Commercial Code as in effect on October 16, 1997 in the State of New York (the
"N.Y.U.C.C.") owned by either of the Partnerships as of the date hereof, and, in
any event, shall include, but shall not be limited to, all merchandise,
inventory and goods, and all additions, substitutions and replacements thereof,
wherever located, together with all goods, supplies, incidentals, packaging
materials, labels, materials and any other items used or usable in
manufacturing, processing, packaging or shipping same; in all stages of
production, and all proceeds therefrom; and (b) the term "Equipment" shall mean
any "equipment" as such term is defined in the N.Y.U.C.C. owned by either of the
Partnerships as of October 16, 1997, and, in any event, shall include, but shall
not be limited to, all machinery, equipment, furnishings, fixtures and vehicles
owned by each of the Partnerships, wherever located, together with all
attachments, components, parts, equipment and accessories installed thereon or
affixed thereto.
6. REPRESENTATIONS OF USFLORAL AND THE NEWCOS
To induce the Partnerships and the Sellers to enter into this Agreement and
consummate the transactions contemplated hereby, each of USFloral and each
Newco, jointly and severally, represents and warrants to the Partnerships and
the Sellers as follows:
6.1 Due Organization. Each of USFloral and each Newco is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and each is duly authorized, qualified and licensed to do
business and is in good standing under all applicable laws, regulations,
ordinances and orders of public authorities to own, operate and lease its
properties and to carry on its respective business in the places and in the
manner as now conducted, except where the failure to be so authorized, qualified
or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition, financial or otherwise, of such
entity. Copies of the Certificate of Incorporation and the Bylaws, each as
amended, of USFloral and each Newco (collectively, the "USFloral Charter
Documents") have been made available to the Partnerships. Neither USFloral nor
either Newco is in violation of any USFloral Charter Document.
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6.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Sellers at the Closing Date, when delivered in accordance with
the terms of this Agreement, will be valid and legally issued shares of USFloral
capital stock, fully paid and nonassessable.
6.3 Authorization; Validity of Obligations. The representatives of USFloral
and the Newcos executing this Agreement have all requisite corporate power and
authority to enter into and bind USFloral and the Newcos to the terms of this
Agreement. USFloral and the Newcos have the full legal right, power and
corporate authority to enter into this Agreement and the transactions
contemplated hereby and to perform the obligations detailed herein. The
execution and delivery of this Agreement by USFloral and the Newcos and the
performance by each of USFloral and each Newco of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of USFloral and each Newco, and this Agreement has been duly and
validly authorized by all necessary corporate action. This Agreement is a legal,
valid and binding obligation of each of USFloral and each Newco enforceable in
accordance with its terms.
6.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and its
lenders, conflict with, or result in a default (or would constitute a default
but for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which either USFloral or either Newco is a
party or by which either USFloral or either Newco is bound, or result in the
creation or imposition of any lien, charge or encumbrance on any of USFloral's
or Newco's properties pursuant to (i) any law or regulation to which either
USFloral or either Newco or any of their respective property is subject, or (ii)
any judgment, order or decree to which USFloral or either Newco is bound or any
of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
either Newco; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USFloral or either Newco is subject, or by which USFloral or
either Newco is bound, (including, without limitation, the HSR Act, together
with all rules and regulations promulgated thereunder).
6.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 9,594,050 shares were outstanding on November 19, 1997. The
authorized capital stock of each Newco consists of 1,000 shares of Common Stock,
of which 100 shares are outstanding. All of the issued and outstanding shares
of each Newco are owned beneficially, and of record by USFloral. All of the
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shares of USFloral Common Stock to be issued to the Sellers in accordance
herewith will be offered, issued, sold and delivered by USFloral in compliance
with all applicable state and federal laws concerning the issuance of securities
and none of such shares was or will be issued in violation of the preemptive
rights of any stockholder of USFloral.
6.6 WARN Act. The consummation of the transactions contemplated hereby
will not give rise to any requirement of notification by USFloral or any Newco
under the Worker Adjustment Retraining Notification Act.
6.7 SEC Filings. USFloral has delivered to the Sellers a copy of each
registration statement or report filed by USFloral with the Securities and
Exchange Commission since October 9, 1997 (the "USFloral SEC Filings"). As of
their respective dates, the USFloral SEC Filings did 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 made therein, in light of the
circumstances under which they were made, not misleading.
7. COVENANTS
7.1 Tax Matters.
(a) The following provisions shall govern the allocation of
responsibility as between the Sellers, on the one hand, and the Newcos, on the
other, for certain tax matters following the Closing Date:
(i) The Sellers shall prepare or cause to be prepared and file or
cause to be filed, within the time and in the manner provided by law, all Tax
Returns of the Sellers with respect to the Partnerships for all periods ending
on or before the Closing Date that are due after the Closing Date. Sellers
shall pay on or before the due date of such Tax Returns the amount of all Taxes
shown as due on such Tax Returns. Such Tax Returns shall be prepared and filed
in accordance with applicable law and in a manner consistent with past practices
and shall be subject to review and approval by USFloral, which approval shall
not be unreasonably withheld.
(ii) The Newcos shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Partnerships for all periods which end
after the Closing Date. For purposes of this Section 7.1, in the case of any
Taxes that are imposed on a periodic basis and are payable for a taxable period
that includes (but does not end on) the Closing Date, the portion of such Tax
which relates to the portion of such taxable period ending on the Closing Date
shall (x) in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date. Any credits relating to a taxable period that begins before
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and ends after the Closing Date shall be taken into account as though the
relevant taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in the Newcos'
reasonable judgment.
(iii) USFloral and the Newcos on the one hand and the Sellers on the
other hand shall (A) cooperate fully, as reasonably requested, in connection
with the preparation and filing of Tax Returns of the Partnerships pursuant to
this Section 7.1 and any audit, litigation or other proceeding with respect to
Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Partnerships for all periods ending prior to or including the Closing Date; and
(C) preserve information, records or documents relating to Tax matters pertinent
to the Partnerships that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof, at
which time USFloral and the Newcos shall provide copies of all such records or
documents relating to the Partnerships for all periods ending prior to or
including the Closing Date to the Sellers.
(iv) The Sellers shall timely pay all transfer, documentary, sales,
use, stamp, registration and other Taxes and fees arising from or relating to
the transactions contemplated by this Agreement, and the Sellers shall, at their
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration, and other
Taxes and fees. If required by applicable law, USFloral and the Newcos will
join in the execution of any such Tax Returns and other documentation.
7.2 Accounts Receivable. In the event that all Accounts Receivable are
not collected in full (net of reserves specified in Section 5.12) within ninety
days after the Closing then, at the request of the Newcos, the Sellers shall pay
(based on their percentage interest in the aggregate Consideration) the Newcos
an amount equal to the Accounts Receivable not so collected, and upon receipt of
such payment the Newcos shall assign to the Sellers making the payment all of
the Newcos' rights with respect to the uncollected Accounts Receivable giving
rise to the payment and shall also thereafter promptly remit any excess
collections received by them with respect to such assigned Accounts Receivable.
7.3 Title Insurance and Surveys.
(a) With respect to each fee estate included in the Real Property, the
Sellers will obtain and deliver to USFloral (i) as soon as practicable after the
date of this Agreement, a title commitment disclosing the condition of title to
such fee estate and all easements, rights of way, and restrictions of record
with respect thereto, as of a date not earlier than the date of this Agreement,
accompanied by copies of all instruments evidencing the scope and extent of all
such easements, rights of way, and restrictions of record (the "Title
Commitment"), and (ii) at or prior to Closing, an ALTA Owner's Policy of Title
Insurance on a form customarily used in the state in which the Real Property is
located, issued by a title insurer satisfactory to USFloral, in an amount equal
to the fair market value of the Real Property (as reasonably determined by
USFloral), insuring title to such property to be in the name of the party
designated by USFloral on Schedule 7.3, subject only to Permitted Encumbrances
(each a "Title Policy").
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(b) Each Title Policy obtained and delivered to USFloral pursuant to
this Agreement shall, except to the extent that title insurers in the state in
which the applicable property is located are not lawfully permitted to issue
such policies, (i) insure title to the property described in the policy and all
recorded easements benefitting such property, (ii) contain an "extended coverage
endorsement" or similar modification insuring over or otherwise eliminating the
general exceptions customarily contained in title policies, (iii) contain an
endorsement insuring that the property described in the policy is the same real
estate shown in the survey delivered with respect to such property, (iv) contain
a "contiguity" endorsement with respect to any property consisting of more than
one record parcel, (v) provide full coverage against mechanics' and
materialmen's liens arising out of the construction, repair or alteration of any
of the Real Property, (vi) contain any special endorsements reasonably required
by USFloral, including, without limitation, an endorsement insuring that the
improvements included in the Real Property are a permitted use under the zoning
designation applicable to the Real Property, and (vii) not be subject to any
survey exception.
(c) With respect to each Real Property interest as to which a Title
Policy is to be procured pursuant to this Agreement, the Sellers will obtain and
deliver to USFloral as soon as practicable after the date of this Agreement a
current survey of the relevant parcel, prepared and certified to USFloral and to
the title insurer of such Real Property interest by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters customarily shown on such surveys,
and showing access affirmatively to public streets and roads.
(d) The Sellers shall be responsible for all costs associated with
obtaining the title commitments and surveys described above, and USFloral shall
be responsible for the costs of purchasing the Title Policies described above.
7.4 Related-Party Agreements. At Closing, the Partnerships and/or the
Sellers, as the case may be, shall terminate any Related-Party Agreements which
USFloral requests the Partnerships or Sellers to terminate. Any Related-Party
Agreements not so terminated shall be renegotiated, subject to USFloral's
approval, effective not later than the Closing Date to provide that transactions
between USFloral, either Newco or any subsidiary of either of them, on the one
hand, and the other parties thereto, on the other hand, shall from and after the
Closing Date be on terms no less favorable to USFloral, such Newco or any such
subsidiary of either of them than those that they would obtain in arm's-length
transactions. At the Closing, USFloral and Lewis Marketing Ltd. (the
obligations of which will be guaranteed by Flores de los Andes Ltda., Cultivos
Buena Vista Ltda., Inversiones Penas Blancas Ltda. and Flores Horizonte Ltda.)
shall enter into a Flower Supply Agreement in the form of Exhibit A attached
hereto, in replacement of any Related-Party Agreement between either
Partnership and any of the entities named in this sentence (the "Related-Party
Suppliers").
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7.5 Cooperation.
(a) The Partnerships, the Sellers, USFloral and the Newcos shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such instruments as the
other may reasonably request for the purpose of carrying out this Agreement. In
connection therewith, if required, Manager as general partner of the
Partnerships shall execute any documentation required by USFloral's independent
public accountants (in connection with such accountants' audit of the Company)
or the Nasdaq National Market.
(b) The Sellers and the Partnerships shall cooperate and use their
reasonable efforts to have the Sellers and employees and agents of the
Partnerships cooperate with USFloral on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby
(d) At or prior to the Closing, the Partnerships, the Sellers and
USFloral have filed all notices and other information and documents required
under the HSR Act and have used their best efforts to seek early termination of
the waiting period related thereto at a time mutually agreeable to them.
7.6 Conduct of Business Pending Closing. Between the date hereof and the
Closing Date, each of the Partnerships and the Manager will (except as requested
or agreed by USFloral):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its material obligations under debt and lease
instruments and other agreements relating to or affecting its assets, properties
equipment or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) 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 Partnerships or either of them;
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(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new
or amended debt or lease instruments; and
(h) maintain present salaries and commission levels for any and all
employees and agents;
7.7 Access to Information. Between the date of this Agreement and the
Closing Date, the Partnerships will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of the Partnerships and (ii) such additional financial and operating
data and other information as to the business and properties of the Partnerships
as USFloral may from time to time reasonably request, including without
limitation, access upon reasonable request to the Partnership's employees,
customers, vendors, suppliers and creditors for due diligence inquiry. No
information or knowledge obtained in any investigation pursuant to this Section
7.7 shall affect or be deemed to modify any representation or warranty contained
in this Agreement or the conditions to the obligations of the parties to
consummate the transaction.
7.8 Prohibited Activities. Between the date hereof and the Closing Date,
each of the Partnerships and the Manager will not, without the prior written
consent of USFloral:
(a) make any change to its limited partnership agreement, or authorize
or propose the same;
(b) not, without the knowledge and consent of USFloral, declare any
unusual partnership distributions nor pay out any extraordinary bonuses, fees,
commissions or any other unusual distributions to the Partners or the Manager,
or directors, management or other personnel prior to the Closing, other than up
to $6.0 million in cash permitted to be distributed to the Partners, prior to
Closing, and other than ordinary and customary distributions to the Partners
subsequent to September 30, 1997 for the payment of income taxes by the Partners
which distributions are made in the ordinary course of the Partnerships'
businesses and in amounts not materially in excess of the tax liabilities of the
Partners, and other than the payment of fees and expenses actually incurred by
the Partnerships and the Manager in connection with the subject matter of this
Agreement made prior to or at Closing (it being understood that no distribution
or payment under this subparagraph (b) or otherwise shall in any way vitiate or
reduce the minimum net worth requirements set forth in Section 3.1);
(c) not make expenditures outside the normal course of business,
except with respect to this transaction, and not make capital expenditures in
excess of $100,000;
(d) not effect any change in the ownership structure of the
Partnerships or the Manager, including, but not limited to, the issuance of any
option, warrant, call, conversion right or commitment of any kind with respect
to the Partnership Interests or any equity interests in the
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Manager or the purchase or other reacquisition of any outstanding Partnership
Interests or any equity interests in the Manager.
(e) enter into any contract or commitment, including contracts to
provide services to customers, or incur or agree to incur any liability or make
any capital expenditures, or guarantee any indebtedness, except in the ordinary
course of business and consistent with past practice;
(f) materially increase present salaries and commission levels for any
or all officers, directors, employees and agents or pay any bonus compensation
other than (i) bonus compensation accrued on the balance sheets of the
Partnerships as of the Balance Sheet Date and (ii) bonus compensation accrued on
the balance sheets of the Partnerships between the Balance Sheet Date and the
Closing Date (but not in excess of the amount so accrued in the corresponding
period of the immediately preceding year).
(g) create or assume any mortgage, pledge or other lien or encumbrance
upon any assets or properties whether now owned or hereafter acquired;
(h) sell, assign, lease, pledge or otherwise transfer or dispose of
any property or equipment except in the ordinary course of business consistent
with past practice;
(i) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets that are material, individually or in the aggregate, to the
Partnerships;
(j) be acquired or agree to be acquired by any other entity;
(k) waive any material rights or claims of either of the Partnerships,
provided that either of the Partnerships may negotiate and adjust bills in the
course of good faith disputes with customers in a manner consistent with past
practice;
(l) commit a breach of or amend or terminate any material agreement,
permit, license or other right;
(m) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with either of the Partnerships
or any employee or partner of either of the Partnerships or (ii) outside the
ordinary course of business consistent with past practice or (iii) prohibited
hereunder;
(n) commence a lawsuit other than for routine collection of bills;
(o) revalue any of its assets, including without limitation, writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practice;
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(p) make any tax election other than in the ordinary course of
business and consistent with past practice, change any tax election, adopt any
tax accounting method other than in the ordinary course of business and
consistent with past practice, change any tax accounting method, file any Tax
Return (other than any estimated tax returns, payroll tax returns or sales tax
returns) or any amendment to a Tax Return, enter into any closing agreement,
settle any tax claim or assessment, or consent to any tax claim or assessment,
without the prior written consent of USFloral; or
(q) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.8(a) through (p) above, or any action which
would make any of the representations and warranties of the Partnerships and the
Sellers contained in this Agreement untrue or result in any of the conditions
set forth in Articles 8 and 9 not being satisfied.
7.9 Sales of USFloral Common Stock.
(a) No Seller will, directly or indirectly, offer, sell, contract to
sell, pledge or otherwise dispose of: (i) any of the shares of USFloral Common
Stock to be received by such Seller pursuant to this Agreement prior to six
months after the Closing Date; or (ii) more than one-half of the shares of
USFloral Common Stock to be received by such Seller pursuant to this Agreement
prior to the first anniversary of the Closing Date; provided, however, that bona
fide transfers for estate planning purposes to persons or entities who or which
agree to be bound by such restrictions on transfer shall be deemed not to
violate this Section 7.9(a); and provided, however, that the Trusts shall
collectively be permitted to sell, in brokers' transactions (as defined in Rule
144 promulgated under the 1933 Act), within the first 90 days after the Closing
Date, shares having an aggregate value (as reflected by gross sale proceeds) not
in excess of $1,750,000; and provided further, however, that if the last sale
price per share of USFloral Common Stock on any date from December 15, 1998 to
and including December 30, 1998 (a "Sale Date") is less than the Closing Price,
then each Seller who is a member of Management (and not the Trusts) shall be
granted the ability to sell, contract to sell, offer, pledge or otherwise
dispose of (the "Tax Proceeds Sale") between the period commencing on the day
immediately after the earliest Sale Date and terminating on December 31, 1998,
up to that number of shares of USFloral Common Stock in the aggregate that
yields a capital loss up to the capital gain incurred by such Seller with
respect to the sale of the Partnership Interests hereunder.
(b) Each Seller acknowledges and agrees that USFloral will not provide
such Seller with a prospectus for such Seller's use in selling the shares of
USFloral Common Stock to be received by such Seller pursuant to this Agreement,
and agrees to sell such shares only in accordance with the requirements, if any,
of Rule 145(d) promulgated under the 1933 Act. USFloral acknowledges that the
provisions of this Section 7.9(b) will be satisfied as to any sale by a Seller
of the USFloral Common Stock that Seller may acquire pursuant to this Agreement
pursuant to Rule 145(d) under the 1933 Act, by a broker's letter and a letter
from the Seller with respect to that sale stating that the applicable
requirements of Rule 145(d)(1) have been met or are inapplicable by virtue of
Rule 145(d)(2) or Rule 145(d)(3) provided, however, that USFloral has no
reasonable basis to believe that such sales were not made in compliance with
such provisions of Rule 145(d) and subject to any changes in Rule 145 after the
date of this Agreement.
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(c) The certificate or certificates evidencing the shares of USFloral
Common Stock to be delivered to the Sellers pursuant to this Agreement will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON JULY 20, 1998 WITH RESPECT TO ONE-HALF OF SUCH
SHARES; JANUARY 20, 1999 WITH RESPECT TO THE BALANCE OF THE SHARES.
PURSUANT TO THAT CERTAIN PURCHASE AGREEMENT, DATED AS OF JANUARY 20, 1998,
AMONG THE ISSUER, THE HOLDER AND OTHER PARTIES. PRIOR TO THE EXPIRATION OF
SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
TRANSFER OR ASSIGNMENT EXCEPT AS PROVIDED IN SUCH PURCHASE AGREEMENT. UPON
THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) WHEN THE HOLDING PERIOD HAS EXPIRED.
7.10 USFloral Stock Options. As of the Closing, options to purchase such
number of shares of USFloral Common Stock as shall have a fair market value as
of the date of issuance equal to 6.25% of the Consideration provided for in
Section 2.1 above shall be issued to the key employees of the Newcos after the
Closing who were not Limited Partners (provided, however, that options to
purchase up to an aggregate of 50% of the options available in such pool may be
granted to L. James Teper, Lawrence Howkins, Barry Gottlieb and Bonnie
Armellini), as determined by L. James Teper (or other officer designated by L.
James Teper and acceptable to USFloral) in accordance with USFloral's policies,
and authorized and issued under and subject to the terms of USFloral's 1997
Long-Term Incentive Plan.
7.11 Board of Directors Proposal. Promptly following consummation of the
transactions contemplated hereby, USFloral shall use its best efforts to cause
its Board of Directors to consider and approve a proposal to (a) increase the
number of members of its Board of Directors (and specifically of Class II
thereof, the directors in which Class have terms expiring in USFloral's 1999
Annual Meeting of Stockholders) by one, and (b) designate one individual
acceptable to the Sellers and USFloral to fill the vacancy created thereby.
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7.12 Survival of Partnerships. From the Closing Date until at least the
first anniversary thereof, USFloral shall cause the ownership structure of the
Partnerships set forth in Section 1.1 to be maintained.
7.13 Tax Position. Neither USFloral nor its affiliates will take a tax
position on any federal tax return filed by the Partnerships after the Closing
Date with respect to periods prior to and including the Closing Date that is
inconsistent with that position taken by the Partnerships with respect to
periods prior to the Closing Date without the consent of the Sellers'
Representative (which shall not be unreasonably withheld).
7.14 Announcement. Unless required to do so by law, based upon the advice
of its counsel, USFloral shall not announce the underlying transaction prior to
the approval and adoption of this Agreement by the Board of Directors of
USFloral in accordance with the Delaware General Corporation Law, as amended,
and the bylaws of USFloral. USFloral shall provide to the Manager a draft of
those portions of said announcement applicable to the transactions contemplated
hereby prior to its release.
7.15 Bank Approval. USFloral shall promptly and diligently seek the
approval of its lenders for the underlying transaction in accordance with its
existing credit facility.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND THE NEWCOS
The obligation of USFloral and the Newcos to effect the transactions
contemplated hereby is subject to the satisfaction or waiver, at or before the
Closing Date, of the following conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Sellers and the Partnerships contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Partnerships and the Sellers on or before the Closing Date shall have been duly
complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed on behalf of each Partnership and by
each Seller shall have been delivered to USFloral.
8.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Partnership Interests, or limiting or
restricting USFloral's conduct or operation of the business of the Partnerships
(or its own business) following the consummation of the transactions
contemplated hereby shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no
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action, suit claim or proceeding of any nature pending or threatened against
USFloral, either Newco, Manager or either Partnership, their respective
properties or any of their stockholders, officers or directors, or the Sellers,
that could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of the Partnerships.
8.3 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of either of the Partnerships, taken as a whole, since the Balance
Sheet Date; and USFloral shall have received a certificate signed on behalf of
each Partnership and by each Seller dated the Closing Date to such effect.
8.4 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Partnerships and the Sellers of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the transactions contemplated hereby under the
HSR Act shall have expired or been terminated, and no action by the Department
of Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
8.5 Opinion of the Partnerships' Counsel. USFloral shall have received an
opinion from Richards, P.A. as counsel to the Partnerships and the Sellers,
addressed to USFloral and dated the Closing Date, in a form reasonably
satisfactory to USFloral.
8.6 Opinions of Accountants and Tax Counsel. USFloral shall have received
opinions from Arthur Andersen LLP and Greenberg Traurig Hoffman Lipoff Rosen &
Quentel, P.A., addressed to USFloral and dated the Closing Date, in the forms
respectively attached hereto as Exhibit A and Exhibit B.
8.7 Opinion of the Trusts' Counsel. USFloral shall have received an
opinion from W.S. Walker & Company, as counsel to the Trusts, addressed to
USFloral and dated the Closing Date, in the form attached hereto as Exhibit C.
8.8 Charter Documents. USFloral shall have received a copy of the limited
partnership agreements of each of the Partnerships certified by the Manager.
8.9 Quarterly Financial Statements. USFloral shall have received from the
Partnerships completed quarterly financial statements for the fourth quarter of
1997 in a form reasonably satisfactory to USFloral.
8.10 [Intentionally omitted.]
8.11 Delivery of Closing Financial Certificate. USFloral shall have
received from the Partnerships a certificate (the "Closing Financial
Certificate"), dated as of the Closing Date, signed
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by the Manager as general partner on behalf of each Partnership and by each of
the respective Limited Partners of each Partnership, setting forth:
(a) the combined net worth of the Partnerships as of the last day of
its most recent fiscal year (the "Certified Year-End Net Worth");
(b) the combined net worth of the Partnerships as of the Closing Date
(the "Certified Closing Net Worth");
(c) the combined earnings of the Partnerships before interest and
taxes (after the addition of "add-backs" set forth on Schedule 8.11(c)) for the
nine-month period ending on September 30, 1997 (the "Certified Closing EBIT");
(d) a statement that all of the Partnerships' financial conditions set
forth in Section 5.9 of the Agreement are satisfied as of the Closing Date; and
(e) a representation and warranty (which shall be deemed to have been
made pursuant to this Agreement) that the Partnerships have neither:
(i) made any declaration or payment of any unusual partnership
distributions nor payed out any extraordinary bonuses, fees, commissions or any
other unusual distributions to the Partners or the Manager, or directors,
management or other personnel prior to the Closing, other than up to $6.0
million in cash permitted to be distributed to the Partners, prior to Closing,
and other than ordinary and customary distributions to the Partners subsequent
to September 30, 1997 for the payment of income taxes by the Partners which
distributions were made in the ordinary course of the Partnerships' businesses
and in amounts not materially in excess of the tax liabilities of the Partners,
and other than the payment of fees and expenses actually incurred by the
Partnerships and the Manager in connection with the subject matter of this
Agreement made prior to or at Closing, all in accordance with Section 7.8(b) of
this Agreement; nor
(ii) materially increased present salaries and commission levels for
any or all officers, directors, employees and agents or paid any bonus
compensation other than (A) bonus compensation accrued on the balance sheets of
the Partnerships as the Balance Sheet Date and (B) bonus compensation accrued on
the balance sheets of the Partnerships between the Balance Sheet Date and the
Closing Date (but not in excess of the amount so accrued in the corresponding
period of the immediately preceding year), all in accordance with Section 7.8(f)
of this Agreement.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth and the Certified Closing EBIT, neither Partnership shall take
account of any increase in intangible assets (including without limitation
goodwill, franchises and intellectual property) accounted for after December 31,
1997.
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8.12 FIRPTA Compliance. Each of the Sellers shall have delivered to
USFloral a properly executed statement in a form reasonably acceptable to
USFloral for purposes of satisfying USFloral's obligations under Treas. Reg. (S)
1.1445-2(b).
8.13 Employment Agreements. Each of L. James Teper, Lawrence Howkins,
Barry Gottlieb and Bonnie Armellini shall have entered into an employment
agreement with a Newco in a form reasonably satisfactory to USFloral.
8.14 Release. Each Seller shall have delivered to USFloral an instrument
dated the Closing Date releasing the Partnerships, USFloral and the Newcos from
any and all claims of such Seller.
8.15 Related-Party Indebtedness. All notes receivable by the Partnerships
from the Limited Partners, the Manager, employees and/or affiliates shall have
been repaid in full in accordance with their terms.
8.16 Flower Supply Agreement. The Related-Party Suppliers shall have
executed and delivered a Flower Supply Agreement with USFloral in the form
attached hereto as Exhibit D.
8.17 Tax Escrow Agreement. The Trusts shall have executed and delivered a
Tax Escrow Agreement with USFloral and an escrow agent in the form attached
hereto as Exhibit E.
8.18 Board Approval. This Agreement shall have been approved and adopted
by the Board of Directors of USFloral in accordance with the Delaware General
Corporation Law, as amended, and the bylaws of USFloral.
8.19 Bank Approval. The consent of USFloral's lenders under its existing
credit facility shall have been received. In the event that such approval is
not received and the transactions contemplated hereby are not consummated as a
result of the failure of USFloral's lenders to provide such consent, USFloral
shall provide to the Manager, for its review and comment, a draft of any
announcement disclosing such failure prior to its release. USFloral agrees to
revise such announcement to reflect the Manager's comments to the reasonable
satisfaction of both USFloral and the Manager, provided, however, that USFloral
shall be entitled to make such revisions thereto as it reasonably believes,
based upon the advice of its counsel, to be necessary or appropriate to comply
with law or the rules of the Nasdaq Stock Market, Inc.
8.20 Personal Guaranties. Each of the settlors of the Trusts shall have
executed and delivered to USFloral a personal guaranty of the obligations of the
Trusts under this Agreement, which guaranty shall be in the form attached hereto
as Exhibit F.
8.21 Promissory Note. Flores Timana S.A. shall have executed and delivered
a Promissory Note as maker thereunder payable in the amount of US$30,000 to
Continental Farms in the form attached hereto as Exhibit G. In the event that
Flores Timana S.A. shall not have
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executed such Promissory Note, the Sellers shall deliver US$30,000 to USFloral
on the Closing Date in immediately available funds.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTNERSHIPS AND THE SELLERS
The obligation of the Sellers and the Partnerships to effect the
transactions contemplated hereby are subject to the satisfaction or waiver, at
or before the Closing Date, of the following conditions and deliveries:
9.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral and the Newcos contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by USFloral and the Newcos
on or before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of USFloral shall have been
delivered to the Partnerships and the Sellers.
9.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Partnership Interests, or limiting or
restricting USFloral's conduct or operation of the business of the Partnerships
(or its own business) following the consummation of the transactions
contemplated hereby shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or
threatened, against USFloral, either Newco or either Partnership, their
respective properties or any of their officers, directors, or Sellers that could
materially and adversely affect the business, assets, liabilities, financial
condition, results of operations or prospects of USFloral and its subsidiaries
taken as a whole.
9.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral and the Newcos of the transactions contemplated herein, shall have
been obtained and made. Any waiting period applicable to the consummation of
the transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and no action by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated hereby shall be pending.
9.4 Employment Agreements. USFloral or its affiliate shall have afforded:
(i) each of L. James Teper, Lawrence Howkins and Barry Gottlieb an opportunity
to enter into an employment agreement with Continental Farms and (ii) Bonnie
Armellini an opportunity to enter into an employment agreement with Atlantic
Bouquet.
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9.5 Tax Escrow Agreement. USFloral shall have executed and delivered a
Tax Escrow Agreement with the Trusts and an escrow agent in the form attached
hereto as Exhibit E.
10. INDEMNIFICATION
10.1 General Indemnification by the Sellers. Each Seller, jointly and
severally, covenants and agrees to indemnify, defend, protect and hold harmless
USFloral and the Newcos and their respective officers, directors, employees,
stockholders, assigns, successors and affiliates (individually, an "Indemnified
Party" and collectively, "Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of any Seller or
either Partnership set forth in this Agreement or any Schedule or certificate,
delivered by or on behalf of any Seller or either Partnership in connection
herewith; or
(ii) any nonfulfillment of any covenant or agreement by any Seller or,
prior to the Closing Date, either Partnership, under this Agreement; or
(iii) the business, operations or assets of each of the Partnerships
prior to the Closing Date or the actions or omissions of the Sellers, employees
or agents prior to the Closing Date, other than Damages arising from matters
expressly disclosed in the Partnership Financial Statements, this Agreement or
the Schedules to this Agreement;
(iv) the matters disclosed on Schedules 5.22 (employee benefit plans)
pursuant to the second paragraph of Section 5.22, 5.23 (conformity with law;
litigation) after taking into account reserves therefor on the balance sheets of
the Partnerships as of the Closing Date, 5.24 (taxes) and 5.27 (environmental
matters); or
(v) the allocation of Consideration among or between the Sellers in
any manner other than pro rata among all Partnership Interests without regard to
--- ----
class or any other factor; or
(vi) any breach of the representation and warranty set forth in the
Closing Financial Certificate in compliance with Section 8.9(f) of this
Agreement; and
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(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 10.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
$750,000 (the "Indemnification Threshold"); provided, however, that the
Indemnification Threshold shall not apply to (i) adjustments to the
Consideration as set forth in Sections 2.1 and 3.1; (ii) Damages arising out of
any breaches of the covenants of the Sellers set forth in this Agreement or
representations and warranties made in Sections 5.4 (ownership interests), 5.5
(transactions in partnership interests), 5.9 (Partnerships' financial
conditions), 5.18 (material contracts and commitments), 5.23 (conformity with
law; litigation) after taking into account reserves therefor on the balance
sheets of the Partnerships as of the Closing Date, 5.24 (taxes), 5.27
(environmental matters), (iii) Damages described in Section 10.1(a)(iv), (v) or
(vi) or (iv) Damages for liability for anti-dumping duties in excess of reserves
therefor on the balance sheets of the Partnerships as of the Closing Date
(regardless of whether or not disclosed on any schedule to this Agreement);
(b) the aggregate amount of the Sellers' liability under this Article
10 shall not exceed the Consideration; provided, however, that: (i) the
Sellers' liability for Damages arising out of any breaches of the
representations and warranties made in Sections 5.24 (taxes), without giving
effect to the qualifications thereof contained in any Schedule to such Section
5.24 or any subsection thereof, or 5.27 (environmental matters) or Damages
described in Section 10.1(a)(ii), Section 10.1(a)(iv) , Section 10.1(a)(v)
and/or Section 10.1(a)(vi) shall not be subject to such limitation; (ii) the
aggregate liability under this Article 10 of each of Lawrence Howkins, Barry
Gottlieb and Bonnie Armellini shall (A) not exceed the Consideration received by
such person under this Agreement, (B) be several only and not joint, and (C) be
in proportion to their relative interest in the Consideration; (iii) the
liability of L. James Teper under this Article 10 shall (a) be in proportion to
his relative percentage interest in the Consideration, (B) not exceed the
Consideration received by him under this Agreement, and (C) be several only and
not joint; and (iv) the liability of each Trust shall (A) be in proportion to
its respective percentage interest in its share of the Consideration, provided
that each Trust shall be liable for its pro rata share (defined as its
--- ----
percentage interest in the Consideration over the aggregate percentage of the
total Consideration received by the Trusts as a group) of any liability that
would otherwise have been attributable to L. James Teper but for the limitation
contained in Section 10.2(b)(iii)(B) and only after such limitation shall in
fact have been reached, and (B) be several only and not joint.
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.2(c):
(i)
(1) except as to representations, warranties, and covenants specified
in clause (i)(2) of this Section 10.2(c), the first anniversary of the Closing
Date, or
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(2) with respect to representations and warranties contained in
Sections 5.22 (employee benefit plans), 5.24 (taxes), 5.27 (environmental
matters), and the indemnification set forth in Section 10.1(a)(ii), (iii) or
(iv), on (A) the date that is six months after the expiration of the longest
applicable federal or state statute of limitation (including extensions
thereof), or (B) if there is no applicable statute of limitation, (x) ten years
after the Closing Date if the Claim is related to the cost of investigating,
containing, removing, or remediating a release of Hazardous Material into the
environment, or (y) five years after the Closing Date for any other Claim
covered by clause (i)(2)(B) of this Section 10.2(c); or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 10.2(c) (such claims
referred to as "Pending Claims").
10.3 Indemnification Procedures. All claims or demands for indemnification
under this Agreement ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 10.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Sellers' Representative of such Claim,
specifying the nature of such Claim and the amount or the estimated amount
thereof to the extent then feasible (the "Claim Notice"). If the Sellers'
Representative does not notify the Indemnified Party within thirty (30) days
after the date of delivery of the Claim Notice that the Indemnifying Party
disputes such Claim, with a detailed statement of the basis of such position,
the amount of such Claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder. In case an objection is made in writing in
accordance with this Section 10.3(a), the Indemnified Party shall respond in a
written statement to the objection within thirty days and, for sixty days
thereafter, attempt in good faith to agree upon the rights of the respective
parties with respect to each of such Claims (and, if the parties should so
agree, a memorandum setting forth such agreement shall be prepared and signed by
both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party (a "Third-Party Claim"), the Indemnified Party shall
deliver a Claim Notice to the Sellers' Representative within ten days of receipt
of such Third-Party Claim. The Sellers' Representative shall have thirty days
from the date of delivery of the Claim Notice to notify the Indemnified Party
(A) whether the Indemnifying Party disputes liability to the Indemnified Party
hereunder with respect to the Third-Party Claim, and, if so, the basis for such
a dispute, and (B) if such party does not dispute liability, whether or not the
Indemnifying Party desires, at the sole cost and expense of the Indemnifying
Party, to defend against the Third-Party Claim, provided that the Indemnified
Party is hereby authorized (but not obligated) to file any motion, answer or
other pleading and to take any other action which the Indemnified Party shall
deem necessary or appropriate to protect the Indemnified Party's interests.
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(ii) In the event that Sellers' Representative timely notifies the
Indemnified Party that the Indemnifying Party does not dispute the Indemnifying
Party's obligation to indemnify with respect to the Third-Party Claim, the
Indemnifying Party shall defend the Indemnified Party against such Third-Party
Claim by appropriate proceedings, provided that, unless the Indemnified Party
otherwise agrees in writing, the Indemnifying Party may not settle any Third-
Party Claim (in whole or in part) if such settlement does not include a complete
and unconditional release of the Indemnified Party. If the Indemnified Party
desires to participate in, but not control, any such defense or settlement the
Indemnified Party may do so at its sole cost and expense. If the Indemnifying
Party elects not to defend the Indemnified Party against a Third-Party Claim,
whether by failure of such party to give the Indemnified Party timely notice as
provided herein or otherwise, then the Indemnified Party, without waiving any
rights against such party, may settle or defend against such Third-Party Claim
in the Indemnified Party's sole discretion and the Indemnified Party shall be
entitled to recover from the Indemnifying Party the amount of any settlement or
judgment and, on an ongoing basis, all indemnifiable costs and expenses of the
Indemnified Party with respect thereto, including interest from the date such
costs and expenses were incurred.
(iii) If at any time, in the reasonable opinion of the
Indemnified Party, notice of which shall be given in writing to the Sellers'
Representative, any Third-Party Claim seeks material prospective relief which
could have an adverse effect on any Indemnified Party or any Newco or any
subsidiary, the Indemnified Party shall have the right to control or assume (as
the case may be) the defense of any such Third-Party Claim and the amount of any
judgment or settlement and the reasonable costs and expenses of defense shall be
included as part of the indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party elects to exercise such right, the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third-Party Claim at the sole cost and expense of the
Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 10.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 10.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
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10.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Partnerships, the Sellers,
USFloral and the Newcos in or pursuant to this Agreement or in any document
delivered pursuant hereto shall be deemed to have been made on the date of this
Agreement (except as otherwise provided herein) and, if a Closing occurs, as of
the Closing Date. The representations of the Partnerships and the Sellers will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 10.2. The
representations of USFloral and the Newcos will survive the Closing and will
remain in effect until, and will expire upon the first anniversary of the
Closing Date.
10.5 Sole Remedy. The remedies set forth in this Article 10 shall be the
sole and exclusive remedies with respect to monetary damages for matters other
than fraud. With respect to monetary damages for fraud and with respect to any
non-monetary damages or relief, the remedies set forth in this Article 10 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
10.6 Right to Set Off. USFloral shall be obligated first to set off
against the Pledged Assets, up to an amount not to exceed one-half of the
Pledged Assets then remaining, amounts finally determined under Section 10.3 to
be owed to USFloral by the Sellers under Section 10.1 hereof; provided, however,
that Sellers have the right, after 10 business days' prior notice of USFloral's
intent so to set off, to pay such amounts, in whole or in part, in cash to
USFloral.
11. NONCOMPETITION
11.1 Prohibited Activities. The Sellers agree that for a period of four
years following the Closing Date, they shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with USFloral or either
Newco, including without limitation the importing, brokerage, manufacture,
assembly, packaging, distribution, shipping or marketing of floral products
(including, without limitation, hardgoods), or any business engaging in the
consolidation of the floral industry within the United States of America (the
"Territory");
(b) call upon any person who is, at that time, within the Territory,
an employee of USFloral or any subsidiary of USFloral in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of USFloral or such subsidiary;
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of USFloral or any
subsidiaries of USFloral, or the
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Partnerships within the Territory for the purpose of soliciting or selling
floral products within the Territory;
(d) except for those persons or entities set forth on Schedule 11.1(d)
or as otherwise approved by USFloral or its designated representative in
writing, 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 Partnerships; or
(e) disclose customers, whether in existence or proposed, of the
Partnerships to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever.
Notwithstanding subsections (a) through (e) above, the foregoing covenant
shall not be deemed to prohibit Sellers from (i) acquiring as an investment not
more than two 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) retaining interests in floral cultivation companies
located outside of the Territory owned by them on the Closing Date ("Foreign
Companies"). Notwithstanding subsections (a) through (e) above, the Limited
Partners shall not be required to restrict or limit the businesses or operations
of any such Foreign Companies; provided, however, that any transactions between
USFloral, either Newco or any subsidiary of either of them and any Foreign
Company shall be on terms no less favorable to USFloral, such Newco or such
subsidiary than those that would obtain in arm's-length transactions.
11.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and the Newcos 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 Newcos for which they would have no other adequate remedy, the Sellers
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced by USFloral or either Newco by, without limitation,
injunctions and restraining orders.
11.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Sellers 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 Newcos (as
successors to the businesses of the Partnerships).
11.4 Severability; Reformation. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
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11.5 Independent Covenant. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Sellers
against the Partnerships, the Newcos 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 Seller is in violation of any provision of this Article 11 and any
time during which there is pending in any court of competent jurisdiction any
action (including any appeal from any judgment) brought by any person, whether
or not a party to this Agreement, in which action USFloral or either Newco seeks
to enforce the agreements and covenants of the Sellers 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 Seller is found not to be in violation of the agreements or covenants in any
such activity the period during which the action was pending shall not be
excluded from such computation.
11.6 Materiality. The Partnerships and each Seller hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 Sellers. The Sellers 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 Partnerships, such as information or material
generated or collected or utilized in the operations of the Partnerships that
relates to the actual or anticipated business, products, prospects, customers or
research and development of the Partnerships, including, but not limited to,
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Partnerships and the Partnerships'
businesses, know-how, designs, reports, data bases, data files, marketing and
selling information, business plans, budgets and financial statements
(collectively, the "Confidential Information"). The Sellers agree that they
will not disclose any Confidential Information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of USFloral, unless the Sellers can show that such
Confidential Information has become known to the public generally through no
fault of the Sellers or is required to disclose such Confidential Information by
law, legal process or any order or mandate of court or government authority. In
the event of a breach or threatened breach by the Sellers of the provisions of
this Article 12, USFloral and the Newcos shall be entitled to an injunction
restraining the Sellers from disclosing, in whole or in part, such Confidential
Information. Nothing herein shall be construed as prohibiting USFloral and the
Newcos from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
12.2 USFloral. USFloral recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
Confidential Information of the Partnerships, such as lists of customers,
operational policies, pricing and cost policies that are
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valuable, special and unique assets of the Partnerships and the Partnerships'
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 Sellers. In the event of a breach or threatened breach by
USFloral of the provisions of this Article 12, the Sellers 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 Sellers from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Newcos and the Sellers agree that, in the event
of a breach by any of them of the foregoing covenant, the covenant may be
enforced against them by injunctions and restraining orders.
13. GENERAL
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
(a) by mutual consent of the board of directors of USFloral and the
Sellers; or
(b) by the Sellers and the Partnerships as a group, on the one hand,
or by USFloral, on the other hand, if the Closing shall not have occurred on or
before the later of January 31, 1998 or the expiration of any applicable waiting
period (including extensions thereof and requests for further information in
connection therewith) under the HSR Act, provided that the right to terminate
this Agreement under this Section 13.1(b) shall not be available to either party
(with the Sellers and the Partnerships deemed to be a single party for this
purpose) whose material misrepresentation, breach of warranty or failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such Closing Date; or
(c) by the Sellers and the Partnerships as a group, on the one hand,
or by USFloral, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the Sellers
and the Partnership deemed to be a single party for this purpose) of any of the
representations and warranties contained herein or in the due and timely
performance and satisfaction of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made or
shall not reasonably be expected to occur before the Closing Date; or
(d) by the Sellers and the Partnerships as a group, on the one hand,
or by USFloral, on the other hand, if there shall be a final nonappealable order
of a federal or state court in effect preventing consummation of the
transactions contemplated hereby; or there shall be any action taken, or any
statute, rule regulation or order enacted, promulgated or issued or deemed
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applicable to the transactions contemplated hereby by any governmental entity
which would make the consummation of the transactions contemplated hereby
illegal.
13.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its partners, officers, directors or shareholders.
Notwithstanding the foregoing sentence, (i) the provisions of this Article 13
shall remain in full force and effect and survive any termination of this
Agreement; (ii) each party shall remain liable for any breach of this Agreement
prior to its termination; and (iii) in the event of termination of this
Agreement pursuant to Section 13.1(c) above, then notwithstanding the provisions
of Section 13.7 below, the breaching party (with the Sellers and the
Partnerships deemed to be a single party for purposes of this Article 13), shall
be liable to the other party to the extent of the expenses incurred by such
other party in connection with this Agreement and the transactions contemplated
hereby, as well as any damages in accordance with applicable law.
13.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Sellers.
13.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the parties hereto, or in accordance with Section 11.4. Any
extension or waiver by any party of any provision hereto shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 Brokers and Agents. USFloral and the Newcos (as a group) and the
Partnerships and Sellers (as a group) each represent and warrant to the other
that it has not employed any broker or agent in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
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13.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and the Newcos and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement. The Partners (and not the Partnerships or the Manager) shall be
responsible for the fees, expenses and disbursements of the Sellers, the
Partnerships, and their agents, representatives, financial advisers, accountants
and counsel incurred in connection with the subject matter of this Agreement (it
being understood that (a) the Partnerships may pay any such fees and expenses
actually incurred by them and the Manager in connection with the subject matter
of this Agreement at or prior to Closing and (b) such payment shall be deemed to
have been made immediately prior to the time to which the audited balance sheet
as of the Closing relates, so that to the extent that any such payment or any
other factor results in the inability of the Partnerships to satisfy any minimum
net worth requirement contained herein, the Consideration shall be adjusted
downward on a dollar-for-dollar basis); provided, however, that any fees, costs
and expenses incurred in connection with the audit of the financial statements
with respect to the Partnerships (as may be required by applicable federal
securities laws or rules or regulations promulgated thereunder as they relate to
USFloral upon or following the acquisition of the Partnerships pursuant to this
Agreement) shall be borne and paid solely by USFloral.
13.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to USFloral or a Newco to:
U.S.A. Floral Products, Inc.
1025 Thomas Jefferson Street, N.W.
Suite 600 West
Washington DC 20007
Attn: Robert J. Poirier
Chairman, President and Chief Executive Officer
(Telefax: (202) 333-0803)
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with a required copy to:
David A. Gerson, Esquire
Morgan, Lewis & Bockius LLP
One Oxford Centre
Thirty-Second Floor
Pittsburgh, PA 15219
(Telefax: (412) 560-3399)
If to Sellers' Representative:
L. James Teper
c/o Continental Farms Limited
2020 N.W. 89th Place
Miami, FL 33172
(Telefax: (305) 594-2518)
with a required copy to:
Timothy D. Richards, Esquire
Richards, a Professional Association
Grand Bay Plaza, Suite 703
2665 South Bayshore Drive
Miami, FL 33133
(Telefax: (305) 285-0015)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
13.10 Governing Law; Legal Action. This Agreement shall be governed by
and construed, interpreted and enforced in accordance with the laws of the State
of Delaware, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction. All parties hereto: agree that any legal action or proceeding
under this Agreement may be brought in the courts of the State of Florida
located in Dade County or in the United States District Court for the Southern
District of Florida; (b) irrevocably submit to the jurisdiction of such courts;
(c) agree not to assert any claim or defense that it is not personally subject
to the jurisdiction of such courts, and that any such forum is not convenient or
the venue thereof is improper, or that this Agreement or the subject matter
hereof may not be enforced in such courts; and (d) agree to accept service of
process on it by certified or registered mail or by any other method authorized
by law.
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13.11 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable. The preceding sentence is in addition to and not in place of the
severability provisions in Section 11.4.
13.12 Absence of Third-Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third-party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
13.13 Further Representations. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
13.14 Accounting Terms. Except as otherwise expressly provided herein
or in the Schedules, all accounting terms used in this Agreement shall be
interpreted, and all financial statements, Schedules, certificates and reports
as to financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
14. DEFINITIONS.
14.1 "1933 Act" is defined in section 2.1(a).
14.2 "Accounts Receivable" are defined in Section 5.12.
14.3 "Actual Partnerships Net Worth" is defined in Section 3.1(b).
14.4 "Affiliate" is defined in Section 5.31.
14.5 "Agreement" is defined in the preamble to this Agreement.
14.6 "Atlantic Bouquet" is defined in the preamble to this Agreement.
14.7 "Balance Sheet Date" is defined in Section 5.10.
14.8 "Certified Closing EBIT" is defined in Section 8.11(c).
14.9 "Certified Closing Net Worth" is defined in Section 8.11(b).
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14.10 "Certified Year-End Net Worth" is defined in Section 8.11(a).
14.11 "Claim Notice" is defined in Section 10.3(a).
14.12 "Claims" are defined in Section 10.3.
14.13 "Closing" is defined in Article 4.
14.14 "Closing Date" is defined in Article 4.
14.15 "Closing Financial Certificate" is defined in Section 8.11.
14.16 "Closing Price" is defined in Section 2.1(a)(i)(B).
14.17 "Code" is defined in Section 5.22.
14.18 "Confidential Information" is defined in Section 12.1.
14.19 "Consideration" is defined in Section 2.1.
14.20 "Consideration Adjustment" is defined in Section 3.1(b).
14.21 "Continental Farms" is defined in the preamble to this Agreement.
14.22 "Copyright" is defined in Section 5.17(b).
14.23 "D&T" is defined in Section 3.1(c).
14.24 "Damages" are defined in Section 10.1(a).
14.25 "Environmental Permits" are defined in Section 5.27(c).
14.26 "ERISA" is defined in Section 5.22.
14.27 "Financial Adjustment Notice" is defined in Section 3.1(b).
14.28 "Foreign Companies" are defined in Section 11.1.
14.29 "GAAP" is defined in Section 2.1(b)
14.30 "GP Interests" are defined in the preamble to this Agreement.
14.31 "Hazardous Material" is defined in Section 5.27(a).
14.32 "Hazardous Materials Activities" are defined in Section 5.27(b)
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14.33 "HSR Act" is defined in Section 5.3(d).
14.34 "Indemnification Threshold" is defined in Section 10.2(a).
14.35 "Indemnified Party" is defined in Section 10.1.
14.36 "Indemnified Parties" are defined in Section 10.1.
14.37 "Intellectual Property" is defined in Section 5.17(d).
14.38 "Interim Financials" is defined in Section 5.10.
14.39 "Interim Balance Sheet" is defined in Section 5.10.
14.40 "Knowledge of the Partnership" is defined in Article 5.
14.41 "Laws" are defined in Section 5.15(c)(vi).
14.42 "Leases" are defined in Section 5.15(c)(xv).
14.43 "Liens" are defined in Section 5.15(b).
14.44 "Limited Partners" are defined in the preamble to this Agreement.
14.45 "LP Interests" are defined in the preamble to this Agreement.
14.46 "Management" is defined in the preamble to this Agreement.
14.47 "Manager" is defined in the preamble to this Agreement.
14.48 "Market Value" is defined in Section 3.2(c).
14.49 "Material Adverse Effect" is defined in Section 5.1.
14.50 "Material Contracts" are defined in Section 5.18(a).
14.51 "Net Worth Target" is defined in Section 2.1(b).
14.52 "Newco" is defined in the preamble to this Agreement.
14.53 "Newcos" are defined in the preamble to this Agreement.
14.54 "Other Rights" are defined in Section 5.17(c).
14.55 "Partnership" is defined in the preamble to this Agreement.
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14.56 "Partnership's knowledge" is defined in Article 5.
14.57 "Partnerships" are defined in the preamble to this Agreement.
14.58 "Partnerships' Financial Statements" are defined in Section 5.10.
14.59 "Partnership Intellectual Property" is defined in Section
5.17(d).
14.60 "Partnership Interests" are defined in the preamble to this
Agreement.
14.61 "Patent" is defined in Section 5.17(b).
14.62 "PBGC" is defined in Section 5.22.
14.63 "Pending Claims" are defined in Section 10.2(c)(ii).
14.64 "Permits" are defined in Section 5.14.
14.65 "Permitted Encumbrances" are defined in Section 5.15(c)(i)
14.66 "Plans" are defined in Section 5.22.
14.67 "Pledged Assets" are defined in Section 3.2(a).
14.68 "Post-Closing Audit" is defined in Section 3.1(b).
14.69 "PTO" is defined in Section 5.17(a).
14.70 "Qualified Plans" are defined in Section 5.22.
14.71 "Related-Party Agreements" are defined in Section 5.18(a).
14.72 "Related-Party Suppliers" are defined in Section 7.4.
14.73 "Real Property" is defined in Section 5.15(a).
14.74 "Release Date" is defined in Section 3.2(c).
14.75 "Reviewed Financials" is defined in Section 5.10.
14.76 "Seller" is defined in the preamble to this Agreement.
14.77 "Sellers" are defined in the preamble to this Agreement.
14.78 "Structures" are defined in Section 5.15(c)(ii).
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14.79 "Tangible Assets" are defined in Section 5.15(c)(iv).
14.80 "Tax" is defined in Section 5.24(b)(i).
14.81 "Tax Returns" are defined in Section 5.24(b)(ii).
14.82 "Territory" is defined in Section 11.1(a).
14.83 "Third-Party Claim" is defined in Section 10.3(b).
14.84 "Third-Party Consents" are defined in Section 5.18(b).
14.85 "Third-Party Intellectual Property" is defined in Section
5.17(d).
14.86 "Title Commitment" is defined in Section 7.3(a).
14.87 "Title Policy" is defined in Section 7.3(a).
14.88 "Trusts" are defined in the preamble to this Agreement.
14.89 "USFloral" is defined in the preamble to this Agreement.
14.90 "USFloral SEC Filings" are defined in Section 6.7.
14.91 "USFloral Charter Documents" are defined in Section 6.1.
14.92 "USFloral's Accountant" is defined in Section 3.1(b).
14.93 "USFloral Common Stock" is defined in Section 2.1(a)(i)(B).
14.94 "USFloral Prospectus" is defined in Section 5.30.
[Execution Pages Follow]
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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.
/s/ Robert J. Poirier
By:__________________________________
Robert J. Poirier
Chairman, President & CEO
CFL ACQUISITION CORP.
/s/ Robert J. Poirier
By:__________________________________
Robert J. Poirier
President
ABCL ACQUISITION CORP.
/s/ Robert J. Poirier
By:__________________________________
Robert J. Poirier
President
THE SELLERS:
CONTINENTAL FARMS LIMITED
a Florida limited partnership
General Partner:
CONTINENTAL FARMS MANAGEMENT, INC.
a Florida corporation, the General Partner
/s/ L. James Teper
By:___________________________________
L. James Teper
President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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Limited Partners:
FIDUCIARY TRUST (CAYMAN) LIMITED,
as Trustee for the JOYA TRUST dated
November 27, 1995
/s/ K. M. Hugh (Director)
By:__________________________________
FIDUCIARY TRUST (CAYMAN) LIMITED,
as Trustee for HORTENSIA TRUST, dated
November 27, 1995
/s/ K. M. Hugh (Director)
By:__________________________________
FIDUCIARY TRUST (CAYMAN) LIMITED,
as Trustee for RELIC TRUST, dated
November 27, 1995
/s/ K. M. Hugh (Director)
By:__________________________________
/s/ L. James Teper
_____________________________________
L. James Teper
/s/ Lawrence N. Howkins
_____________________________________
Lawrence N. Howkins
/s/ Barry Gottlieb
_____________________________________
Barry Gottlieb
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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ATLANTIC BOUQUET COMPANY, LIMITED,
a Florida limited partnership
General Partner:
CONTINENTAL FARMS MANAGEMENT, INC.
a Florida corporation, the General Partner
/s/ L. James Teper
By:___________________________________
L. James Teper
President
Limited Partner:
CONTINENTAL FARMS LIMITED
a Florida limited partnership
/s/ L. James Teper
By:__________________________________
L. James Teper
President of General Partner
CONTINENTAL FARMS
MANAGEMENT, INC.
a Florida corporation, the General Partner
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ATLANTIC BOUQUET COMPANY, LIMITED,
a Florida limited partnership
General Partner:
CONTINENTAL FARMS MANAGEMENT, INC.
a Florida corporation, the General Partner
/s/ Lawrence N. Howkins
By:___________________________________
Lawrence N. Howkins
Vice President
Limited Partner:
CONTINENTAL FARMS LIMITED
a Florida limited partnership
/s/ Lawrence N. Howkins
By:__________________________________
Lawrence N. Howkins
Vice President of General Partner
CONTINENTAL FARMS
MANAGEMENT, INC.
a Florida corporation, the General Partner
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Exhibit 2.2
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
U.S.A. Floral Products, Inc.,
XLG Acquisition Corp.,
XL Group, Inc.
and
Peter F. Ullrich
dated as of January 20, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
1. THE MERGER........................................................ 1
1.1 The Merger................................................. 1
1.2 Articles of Incorporation; Bylaws, Directors and Officers.. 1
1.3 Effects of the Merger...................................... 2
2. CONVERSION AND EXCHANGE OF STOCK.................................. 2
2.1 Manner of Conversion....................................... 2
2.2 Merger Consideration....................................... 3
2.3 Exchange of Certificates and Payment of Cash............... 4
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS........................... 5
3.1 Post-Closing Adjustment.................................... 5
3.2 Pledged Assets............................................. 7
4. CLOSING........................................................... 8
4.1 Location and Date.......................................... 8
4.2 Effect..................................................... 8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER. 8
5.1 Due Organization........................................... 8
5.2 Authorization; Validity.................................... 9
5.3 No Conflicts............................................... 9
5.4 Capital Stock of the Company............................... 9
5.5 Transactions in Capital Stock.............................. 10
5.6 Subsidiaries, Stock, and Notes............................. 10
5.7 Predecessor Status......................................... 10
5.8 Absence of Claims Against the Company...................... 11
5.9 Company Financial Conditions............................... 11
5.10 Financial Statements....................................... 11
5.11 Liabilities and Obligations................................ 11
5.12 Accounts and Notes Receivable.............................. 12
5.13 Books and Records.......................................... 12
5.14 Permits.................................................... 12
5.15 Real Property.............................................. 13
5.16 Personal Property.......................................... 14
5.17 Intellectual Property...................................... 14
5.18 Material Contracts and Commitments......................... 16
5.19 Government Contracts....................................... 17
i
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TABLE OF CONTENTS
Page
----
5.20 Insurance.................................................. 18
5.21 Labor and Employment Matters ............................. 18
5.22 Employee Benefit Plans ................................... 19
5.23 Conformity with Law; Litigation........................... 21
5.24 Taxes..................................................... 21
5.25 Absence of Changes........................................ 24
5.26 Deposit Accounts; Powers of Attorney...................... 25
5.27 Environmental Matters..................................... 26
5.28 Relations with Governments................................ 27
5.29 Disclosure................................................ 27
5.30 USFloral Prospectus; Securities Representations........... 27
5.31 Affiliates................................................ 28
5.32 Location of Chief Executive Offices....................... 28
5.33 Location of Equipment and Inventory....................... 28
6. REPRESENTATIONS OF USFLORAL AND NEWCO............................. 28
6.1 Due Organization.......................................... 28
6.2 USFloral Common Stock..................................... 28
6.3 Authorization; Validity of Obligations.................... 29
6.4 No Conflicts.............................................. 29
6.5 Capitalization of USFloral and Ownership of
USFloral Stock......................................... 29
7. COVENANTS......................................................... 30
7.1 Tax Matters............................................... 30
7.2 Title Insurance and Surveys............................... 31
7.3 Related Party Agreements.................................. 32
7.4 Cooperation............................................... 32
7.5 Conduct of Business Pending Closing....................... 32
7.6 Access to Information..................................... 33
7.7 Prohibited Activities..................................... 33
7.8 Notice to Bargaining Agents............................... 35
7.9 Sales of USFloral Common Stock............................ 35
7.10 USFloral Stock Options.................................... 36
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO..... 37
8.1 Representations and Warranties; Performance
of Obligations.......................................... 37
8.2 No Litigation ............................................ 37
8.3 No Material Adverse Change................................ 37
8.4 Consents and Approvals.................................... 37
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TABLE OF CONTENTS
Page
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8.5 Opinion of Counsel........................................ 38
8.6 Charter Documents......................................... 38
8.7 Quarterly Financial Statements............................ 38
8.8 Due Diligence Review...................................... 38
8.9 Delivery of Closing Financial Certificate ................ 38
8.10 FIRPTA Compliance......................................... 39
8.11 Employment Agreements..................................... 39
8.12 Stockholder's Release..................................... 39
8.13 Related Party Agreements.................................. 39
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDER.................................................... 39
9.1 Representations and Warranties; Performance of
Obligations............................................. 39
9.2 No Litigation............................................. 39
9.3 Consents and Approvals.................................... 40
9.4 Employment Agreements..................................... 40
10. INDEMNIFICATION.................................................. 40
10.1 General Indemnification by the Stockholder................ 40
10.2 Limitation and Expiration................................. 41
10.3 Indemnification Procedures................................ 42
10.4 Survival of Representations Warranties and Covenants...... 43
10.5 Remedies Cumulative....................................... 44
10.6 Right to Set Off.......................................... 44
10.7 Liability................................................. 44
11. NONCOMPETITION................................................... 44
11.1 Prohibited Activities..................................... 44
11.2 Damages................................................... 45
11.3 Reasonable Restraint...................................... 45
11.4 Severability; Reformation ................................ 45
11.5 Independent Covenant...................................... 45
11.6 Materiality............................................... 45
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION........................ 46
12.1 Stockholder............................................... 46
12.2 USFloral.................................................. 46
12.3 Damages................................................... 46
13. GENERAL.......................................................... 46
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TABLE OF CONTENTS
Page
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13.1 Termination............................................... 46
13.2 Effect of Termination..................................... 47
13.3 Successors and Assigns.................................... 47
13.4 Entire Agreement; Amendment; Waiver....................... 47
13.5 Counterparts.............................................. 48
13.6 Brokers and Agents........................................ 48
13.7 Expenses.................................................. 48
13.8 Specific Performance; Remedies............................ 48
13.9 Notices................................................... 48
13.10 Governing Law............................................. 49
13.11 Severability.............................................. 49
13.12 Absence of Third Party Beneficiary Rights................. 50
13.13 Further Representations................................... 50
13.14 Accounting Terms.......................................... 50
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into this 20th day of January, 1998, by and among U.S.A. Floral
Products, Inc., a Delaware corporation ("USFloral"), XLG Acquisition Corp., a
Delaware corporation and a newly-formed, wholly-owned subsidiary of USFloral
("Newco"), XL Group, Inc., a Florida corporation (the "Company") and Peter F.
Ullrich (the "Stockholder").
BACKGROUND
WHEREAS, the respective Boards of Directors of Newco and the Company
(which together are sometimes referred to as the "Constituent Corporations")
deem it advisable and in the best interests of the Constituent Corporations and
their respective stockholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement, the Plan of Merger (defined below) and the
applicable provisions of the laws of the State of Florida.
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 4.2), the
Company shall be merged with and into Newco pursuant to this Agreement and a
plan of merger (the "Plan of Merger") substantially in the form attached as
Schedule 1.1 hereto, and the separate corporate existence of the Company shall
cease. Newco, as it exists from and after the Effective Time, is sometimes
referred to as the "Surviving Corporation."
1.2 Articles of Incorporation; Bylaws, Directors and Officers. At the
Effective Time:
(a) The Articles of Incorporation of the Surviving Corporation from and
after the Effective Time shall be the Articles of Incorporation of Newco until
thereafter amended in accordance with the provisions therein and as provided by
the applicable provisions of the Florida Business Corporation Act.
(b) The Bylaws of the Surviving Corporation from and after the Effective
Time shall be the Bylaws of Newco in effect immediately prior to the Effective
Time, continuing until thereafter amended in accordance with their terms and the
Articles of Incorporation of the Surviving Corporation and as provided by the
Florida Business Corporation Act.
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(c) The initial director of the Surviving Corporation shall be Robert J.
Poirier until his successor is elected and qualified, and the initial officers
of the Surviving Corporation shall be the officers of the Company immediately
prior to the Effective Time, with the addition of Robert J. Poirier as Assistant
Secretary of the Surviving Corporation, in each case until their successors are
duly elected and qualified.
1.3 Effects of the Merger. The Merger shall have the effects provided
therefor by the Florida Business Corporation Act. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time (i) all
the rights, privileges, immunities, powers and franchises, of a public as well
as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including without limitation subscriptions to
shares, and all other choses in action, and all and every other interest of or
belonging to or due to the Company or Newco shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, immunities, powers and franchises
and all and every other interest shall be thereafter as effectually the property
of the Surviving Corporation, as they were of the Company and Newco, and (ii)
all debts, liabilities, duties and obligations of the Company and Newco, subject
to the terms hereof, shall become the debts, liabilities and duties of the
Surviving Corporation and the Surviving Corporation shall thenceforth be
responsible and liable for all the debts, liabilities, duties and obligations of
the Company and Newco and neither the rights of creditors nor any liens upon the
property of the Company or Newco shall be impaired by the Merger, and may be
enforced against the Surviving Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. At the Effective Time, by virtue of the Merger
and without any action on the part of USFloral, Newco, the Company or any
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of capital
stock of Newco shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable Common
Stock of the Surviving Corporation. Each stock certificate of Newco evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company. All
shares of capital stock of the Company that are owned directly or indirectly by
the Company shall be canceled and no stock of USFloral or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section 2.1(d),
and Sections 2.2, 3.1 and 3.2, each issued and outstanding share of common stock
of the Company, $1.00 par value per share ("Company Common Stock") (other than
shares to be canceled pursuant to Section 2.1(b)), that is issued and
outstanding immediately prior to the Effective Time shall automatically be
canceled and extinguished and converted, without any action on the part of the
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holder thereof, into the right to receive (i) an amount of cash equal to the
cash portion of the Merger Consideration divided by the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time and
(ii) that number of shares of USFloral common stock, $.001 par value ("USFloral
Common Stock"), valued at the Merger Price (as defined in Section 2.2), that is
equal in value to the USFloral Common Stock portion of the Merger Consideration
(as defined in Section 2.2) divided by the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time. All such shares of
Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the consideration
therefor upon the surrender of such certificate in accordance with Section 2.3
of this Agreement.
(d) Fractional Shares. No fractional shares of USFloral Common Stock shall
be issued, but in lieu thereof each holder of shares of Company Common Stock who
would otherwise be entitled to receive a fraction of a share of USFloral Common
Stock shall receive from USFloral an amount of cash equal to the Merger Price,
as defined in Section 2.2(a), multiplied by the fraction of a share of USFloral
Common Stock to which such holder would otherwise be entitled. The fractional
share interests of each Stockholder shall be aggregated, so that no Stockholder
shall receive cash in an amount greater than the value of one full share of
USFloral Common Stock.
2.2 Merger Consideration.
(a) For purposes of this Agreement, the "Merger Consideration" shall be
$22,000,000 (the "Closing Date Consideration") plus the Earn-Out Consideration
(as defined in this Section 2.2(a)), adjusted pursuant to this Section 2.2 and
Section 3.1. Of the Merger Consideration, $11,000,000 shall be paid in cash at
Closing in immediately available funds and $11,000,000 shall be paid at Closing
in shares of USFloral Common Stock valued at $16.643 per share (the "Merger
Price"). The 660,938 shares of USFloral Common Stock to be issued (subject to
adjustment as provided in this Section 2.2 and Section 3.1) shall be registered
under the Securities Act of 1933, as amended (the "1933 Act"). For each $1.00
by which the combined earnings before interest and taxes ("EBIT") of the Company
and the Surviving Corporation for the year ending December 31, 1997, adjusted
for amounts paid by the Company in respect of those items set forth on Schedule
5.9(b) hereof ("1997 Adjusted EBIT") falls short of $3,050,000 (as determined by
Price Waterhouse LLP), the Stockholder shall remit to USFloral, within 10 days
after notice of such determination by Price Waterhouse LLP, $3.00 in cash and
$3.00 in shares of USFloral Common Stock valued at the Merger Price (the "1997
Shortfall"). For each $1.00 by which the Surviving Corporation's EBIT for the
year ending December 31, 1998 ("1998 EBIT") exceeds the 1997 Adjusted EBIT for
the year ending December 31, 1997 (as determined by Price Waterhouse LLP),
USFloral shall pay to the Stockholder $6.00 (the "Earn-Out Consideration");
provided, that the aggregate Merger Consideration, as adjusted pursuant to this
- --------
Section 2.2, shall in no event exceed $26,000,000. The Earn-Out Consideration
shall be paid (i) to the extent of the 1997 Shortfall, $3.00 in cash and $3.00
in shares of USFloral Common Stock, and (ii) thereafter, in shares of USFloral
Common Stock valued at the average of the closing price per share of USFloral
Common Stock on the Nasdaq National Market for each trading day during the
thirty calendar day period ending December 31,
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1998 (the "Earn-Out Price"). The Earn-Out Consideration, if any, shall be paid
within 30 days of the determination by Price Waterhouse LLP of the 1998 EBIT.
In calculating 1998 EBIT, Price Waterhouse LLP (i) shall add to EBIT any amounts
paid by the Company in respect of those items set forth on Schedule 5.9(b)
hereof during the period beginning on January 1, 1998 and ending on the Closing
Date, and (ii) shall not take into consideration any amount attributable to
charges for corporate overhead imposed upon the Surviving Corporation for any
function or service rendered to the Surviving Corporation by USFloral or any
affiliate in excess of the amounts expended (including, without limitation and
as applicable, salaries, benefits, rent, utilities and other charges, costs and
expenses) by the Company in the fiscal year ended December 31, 1998 for the
corresponding functions and services.
(b) The Merger Consideration has been calculated based upon several
factors, including the assumption that the net worth of the Company, calculated
in accordance with generally accepted accounting principles ("GAAP")
consistently applied, is not less than $5,400,000 (the "Net Worth Target") as
of the Closing.
(c) If, on the Closing Financial Certificate (as defined in Section 8.9),
the Certified Closing Net Worth (as defined in Section 8.9) is less than the Net
Worth Target, then the Merger Consideration to be delivered to the Stockholder
may, at USFloral's election, be reduced either (i) at the Closing, or (ii) after
completion of the Post-Closing Audit (as defined in Section 3.1), by the
difference between the Net Worth Target and the Certified Closing Net Worth set
forth on the Closing Financial Certificate (which reduction shall be pro rata in
cash and in USFloral Common Stock valued at the Merger Price in the same
proportions as the cash and USFloral Common Stock components of the Merger
Consideration as provided in Section 2.2(a)).
2.3 Exchange of Certificates and Payment of Cash.
(a) USFloral to Provide Cash and Common Stock. In exchange for the
outstanding shares of capital stock of the Company, USFloral shall cause to be
made available to the Stockholder the Merger Consideration (including cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
1.2(d)), as adjusted pursuant to Section 2.2 and Section 3.1. The certificates
evidencing the USFloral Common Stock component of the Merger Consideration shall
bear appropriate legends pursuant to the terms of this Agreement, and USFloral
shall be entitled to issue appropriate stop transfer instructions to its
transfer agent consistent with the terms of this Agreement. Upon written
request of the Stockholders, USFloral agrees to remove or cause the transfer
agent to remove any restrictive legend or stop order as to any shares of
USFloral Common Stock that are transferred in accordance with the provisions of
Section 7.9 hereof.
(b) Certificate Delivery Requirements. At the Effective Time, the
Stockholder shall deliver to USFloral the certificates (the "Certificates")
representing Company Common Stock, accompanied by blank stock powers duly
executed by the Stockholder and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholder's expense, affixed and canceled.
The Stockholder shall promptly cure any deficiencies with respect to the stock
powers accompanying such Certificates. The Certificates so delivered shall
forthwith be canceled. Until delivered as
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contemplated by this Section 2.3(b), each Certificate shall be deemed at any
time after the Effective Time to represent the right to receive upon such
surrender the number of shares of USFloral Common Stock and the amount of cash
as provided by this Article 2 and the applicable provisions of the Florida
Business Corporation Act.
(c) No Further Ownership Rights in Capital Stock of the Company. All
USFloral Common Stock and cash to be delivered (including USFloral Common Stock
delivered pursuant to Section 3.2(b) but withheld) upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and following the Effective
Time the Certificates shall have no further rights to, or ownership in, shares
of capital stock of the Company. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 2.3.
(d) Lost, Stolen or Destroyed Certificates. If any certificates evidencing
shares of Company Common Stock shall have been lost, stolen or destroyed, then
USFloral shall cause payment to be made in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of USFloral Common Stock and cash as provided in
Section 2.1; provided, however that USFloral may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
USFloral with respect to the certificates alleged to have been lost, stolen or
destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this Section
2.3, none of the Surviving Corporation or any party hereto shall be liable to a
holder of shares of Company Common Stock for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 Post-Closing Adjustment.
(a) The Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 3.1.
(b) Within ninety (90) days following the Effective Time, USFloral shall
cause Price Waterhouse LLP ("USFloral's Accountant") to audit the Surviving
Company's books to determine the accuracy of the information set forth on the
Closing Financial Certificate (the "Post-Closing Audit"). The parties
acknowledge and agree that for purposes of determining the net worth of the
Company as of the Closing Date, the value of the assets of the Company shall,
except with the prior written consent of USFloral, be calculated as provided in
the last paragraph of Section 8.9.
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The Stockholder shall cooperate and shall use his reasonable efforts to cause
the officers and employees of the Company to cooperate with USFloral and
USFloral's Accountant after the Closing Date in furnishing information,
documents, evidence and other assistance to USFloral's Accountant to facilitate
the completion of the Post-Closing Audit within the aforementioned time period.
Without limiting the generality of the foregoing, within two weeks after the
Closing the Stockholder shall provide USFloral's Accountant with the information
and/or documents requested on the Post-Closing Audit Checklist set forth as
Schedule 3.1 hereto. In the event that USFloral's Accountant determines that the
actual Company net worth as of the Closing Date was less than the Certified
Closing Net Worth, USFloral shall deliver a written notice (the "Financial
Adjustment Notice") to the Stockholder setting forth (i) the determination made
by USFloral's Accountant of the actual Company net worth (the "Actual Company
Net Worth"), (ii) the amount of the Merger Consideration that would have been
payable at Closing pursuant to Section 2.2(c) had the Actual Company Net Worth
been reflected on the Closing Financial Certificate instead of the Certified
Closing Net Worth, and (iii) the amount by which the number of shares issued as
the Merger Consideration would have been reduced at Closing had the Actual
Company Net Worth been used in the calculations pursuant to Section 2.2(c) (the
"Merger Consideration Adjustment"). The Merger Consideration Adjustment shall
take account of the reduction, if any, to the Merger Consideration already taken
pursuant to Section 2.2(c)(i).
(c) The Stockholder shall have thirty (30) days from the receipt of the
Financial Adjustment Notice to notify USFloral if the Stockholder disputes such
Financial Adjustment Notice. If USFloral has not received notice of such a
dispute within such 30-day period, USFloral shall be entitled to receive from
the Stockholder (which may, at USFloral's sole discretion, be from the Pledged
Assets as defined in Section 3.2) the Merger Consideration Adjustment. If,
however, the Stockholder has delivered notice of such a dispute to USFloral
within such 30-day period, then USFloral's Accountant shall select an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years to review the Surviving Corporation's books,
Closing Financial Certificate and Financial Adjustment Notice (and related
information) to determine the amount, if any, of the Merger Consideration
Adjustment. Such independent accounting firm shall be confirmed by the
Stockholder and USFloral within five (5) days of its selection, unless there is
an actual conflict of interest. The independent accounting firm shall be
directed to consider only those agreements, contracts, commitments or other
documents (or summaries thereof) that were either (i) delivered or made
available to USFloral's Accountant in connection with the transactions
contemplated hereby, or (ii) reviewed by USFloral's Accountant during the course
of the Post-Closing Audit. The independent accounting firm shall make its
determination of the Merger Consideration Adjustment, if any, within thirty (30)
days of its selection. The determination made by the independent accounting firm
shall be final and binding on the parties hereto, and upon such determination,
USFloral shall be entitled to receive from the Stockholder (which may, at
USFloral's sole discretion, be from the Pledged Assets as defined in Section
3.2) the Merger Consideration Adjustment. The costs of the independent
accounting firm shall be borne by the party (either USFloral or the Stockholder)
whose determination of the Company's net worth at Closing was further from the
determination of the independent accounting firm, or equally by USFloral and the
Stockholder in the event that the determination by the
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independent accounting firm is equidistant between the Certified Closing Net
Worth and the Actual Company Net Worth.
3.2 Pledged Assets.
(a) As collateral security for the payment of any post-Closing adjustment
to the Merger Consideration under Section 3.1, or any indemnification
obligations of the Stockholder pursuant to Article 10, the 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 (the
"Pledged Assets"):
(i) at Closing, cash equal to five percent (5%) of the Closing Date
Consideration and that number of shares of USFloral Common Stock with a value,
based on the Merger Price, equal to five percent (5%) of the Closing Date
Consideration as the same may have been adjusted pursuant to Section 2.2 or
Section 3.1 hereof; upon determination of the Earn-Out Consideration, cash equal
to five percent (5%) of the Earn-Out Consideration and that number of shares of
USFloral Common Stock, valued at the Earn-Out Price, equal to five percent (5%)
of the Earn-Out Consideration; and the certificates and instruments, if any,
representing or evidencing such Pledged Assets;
(ii) all securities hereafter delivered to the Stockholder with respect to
or in substitution for the Pledged Assets, all certificates and instruments
representing or evidencing such securities, and all cash and non-cash dividends
and other property at any time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof; and in the event the
Stockholder receives any such property, the Stockholder shall hold such property
in trust for USFloral and shall immediately deliver such property to USFloral to
be held hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing property and
all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property.
(b) Each certificate, if any, evidencing the Pledged Assets issued in the
Stockholder's name in the Merger shall be delivered to USFloral directly by the
transfer agent, such certificate bearing no restrictive or cautionary legend
other than those imprinted by the transfer agent at USFloral's request. The
Stockholder shall, at the Closing, deliver to USFloral, for each such
certificate, a stock power duly signed in blank by him. Any cash comprising the
Pledged Assets shall be withheld by USFloral from distribution to the
Stockholder and shall be subject to the terms of the Escrow Agreement, which
shall be substantially in the form attached hereto as Annex I.
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(c) The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Merger Consideration pursuant to Section 3.1 and any
indemnification obligations of the Stockholder pursuant to Article 10 until the
date which is one year after the Effective Time (the "Release Date"). Promptly
following the Release Date, USFloral shall return or cause to be returned to the
Stockholder the Pledged Assets, less Pledged Assets having an aggregate value
equal to the
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amount of (i) any post-Closing adjustment to the Merger Consideration under
Section 3.1, (ii) any pending claim for indemnification made by any Indemnified
Party (as defined in Article 10), and (iii) any indemnification obligations of
the Stockholder pursuant to Article 10. For purposes of the preceding sentence
and Article 10, the USFloral Common Stock held as Pledged Assets shall be valued
at (x) the Merger Price with respect to any post-Closing adjustment to the
Merger Consideration under Section 3.1 and (y) the average of the closing price
on the Nasdaq National Market per share of USFloral Common Stock for the five
trading days prior to the satisfaction of an indemnification obligation (the
"Market Value") with respect to indemnification obligations pursuant to Article
10.
4. CLOSING
4.1 Location and Date. The consummation of the Merger and the other
transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Morgan, Lewis & Bockius LLP, on January 27, 1998, providing that all
conditions to Closing shall have been satisfied or waived, or at such other time
and date as USFloral, the Company and the Stockholder may mutually agree, which
date shall be referred to as the "Closing Date."
4.2 Effect. On the Closing Date, the articles of merger, certificate of
merger, or other appropriate documents executed in accordance with the Florida
Business Corporation Act (the "Merger Documents"), together with any required
officers' certificates, shall be filed with the Secretary of the State of
Florida in accordance with the provisions of the Florida Business Corporation
Act. The Merger shall become effective upon such filings or at such later time
as may be specified in such filings (the "Effective Time").
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
To induce USFloral and Newco to enter into this Agreement and consummate
the transactions contemplated hereby, each of the Company and the Stockholder,
jointly and severally, represents and warrants to USFloral and Newco as follows
(for purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
Stockholder and the directors and officers of the Company, including facts of
which the directors and officers, in the reasonably prudent exercise of their
duties, should be aware):
5.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted except where the failure to be so authorized,
qualified or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition,
8
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financial or otherwise, of the Company ("Material Adverse Effect"). Schedule 5.l
hereto contains a list of all jurisdictions in which the Company is authorized
or qualified to do business. The Company is in good standing as a foreign
corporation in each jurisdiction it which it does business. The Company has
delivered to USFloral true, complete and correct copies of the Articles of
Incorporation and Bylaws of the Company. Such Articles of Incorporation and
Bylaws are collectively referred to as the "Charter Documents." The Company is
not in violation of any Charter Documents. The minute books of the Company have
been made available to USFloral (and have been delivered, along with the
Company's original stock ledger and corporate seal, to USFloral) and are correct
and, except as set forth in Schedule 5.1, complete in all material respects.
5.2 Authorization; Validity. The Company has all requisite corporate power
and authority to enter into and perform its obligations pursuant to the terms of
this Agreement. The Company has the full legal right, corporate power and
authority to enter into this Agreement and the transactions contemplated hereby.
The Stockholder has the full legal right and authority to enter into this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the performance by the Company of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of the Company and the Stockholder and this Agreement has
been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of the Company and the
Stockholder, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which the Company or the
Stockholder is a party or by which the Company or the Stockholder is bound, or
result in the creation or imposition of any lien, charge or encumbrance on any
of the Company's properties pursuant to (i) any law or regulation to which the
Company or the Stockholder or any of their respective property is subject, or
(ii) any judgment, order or decree to which the Company or the Stockholder is
bound or any of their respective property is subject;
(c) result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of the Company; or
(d) violate any law, order, judgment, rule, regulation, decree or ordinance
to which the Company or the Stockholder is subject or by which the Company or
the Stockholder is bound including, without limitation, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), together with all rules and
regulations promulgated thereunder.
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5.4 Capital Stock of the Company. The authorized capital stock of the
Company consists of 100 shares of common stock, $1.00 par value, of which 100
shares are issued and outstanding. All of the issued and outstanding shares of
the capital stock of the Company have been duly authorized and validly issued,
are fully paid and nonassessable and are owned of record and beneficially by the
Stockholder free and clear of all Liens (defined below). All of the issued and
outstanding shares of the capital stock of the Company were offered, issued,
sold and delivered by the Company in compliance, as necessary, with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares was issued in violation of any preemptive rights.
There are no voting agreements or voting trusts with respect to any of the
outstanding shares of the capital stock of the Company. For purposes of this
Agreement, "Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge, preference, priority or other security agreement, option, warrant,
attachment, right of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than restrictions imposed by
federal and state securities laws), or preferential arrangement of any kind or
nature whatsoever (including any restriction on the transfer of any assets, any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
5.5 Transactions in Capital Stock. No option, warrant, call, subscription
right, conversion right or other contract or commitment of any kind exists of
any character, written or oral, which may obligate the Company to issue, sell or
otherwise cause to become outstanding any shares of capital stock. The Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. As a result of the
Merger, no person or entity, other than USFloral, will be the record and
beneficial owner of any outstanding capital stock of the Surviving Corporation
or any rights to acquire capital stock of the Surviving Corporation.
5.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 5.6(a), the Company has no
subsidiaries.
(b) Except as set forth on Schedule 5.6(b), the Company does not presently
own, of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity, nor is the Company, directly or
indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
(c) Except as set forth on Schedule 5.6(c), there are no promissory notes
that have been issued to, or are held by, the Company.
5.7 Predecessor Status. Schedule 5.7 sets forth a list of all names of
all predecessor companies of the Company, including the names of any entities
from the Company previously
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acquired significant assets. The Company has never been a subsidiary or
division of another corporation, nor has it been a part of an acquisition that
was later rescinded.
5.8 Absence of Claims Against the Company. The Stockholder has no claims
against the Company, except for those to be satisfied prior to the Closing Date.
5.9 Company Financial Conditions.
(a) The Company's net worth (i) as of December 31, 1996 was not less than
$5.4 million, and (ii) as of the Closing will not be less than the Net Worth
Target. For purposes of this Section 5.9(a), calculation of amounts as of the
Closing shall be made in accordance with the last paragraph of Section 8.9.
(b) The Company's earnings before interest and taxes (after the addition of
"add-backs" set forth on Schedule 5.9(b)) for its most recent fiscal year was
not less than $3,648,000.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete and
correct copies of the Company's balance sheet as of December 31, 1996, and
income statement for the year then ended (collectively, the "Financials") and
(b) true, complete and correct copies of the Company's unaudited balance sheet
(the "Interim Balance Sheet") as of September 30, 1997 (the "Balance Sheet
Date") and income statement, for the nine-month period then ended (collectively,
the "Interim Financials," and together with the Financials, the "Company
Financial Statements"). Except as noted on the report accompanying the
Financials, the Company Financial Statements have been prepared in accordance
with GAAP consistently applied, subject to, in the case of the Interim
Financials, (i) normal year-end audit adjustments, which individually or in the
aggregate will not be material, (ii) the exceptions stated on Schedule 5.10, and
(iii) the omission of footnote information. Each balance sheet included in the
Company Financial Statements presents fairly the financial condition of the
Company as of the date indicated thereon, and each of the income statements
included in the Company Financial Statements presents fairly the results of its
operations for the periods indicated thereon. Since the dates of the Company
Financial Statements, there have been no material changes in the Company's
accounting policies other than as requested by USFloral to conform the Company's
accounting policies to GAAP.
5.11 Liabilities and Obligations.
(a) The Company is not liable for or subject to any liabilities except for:
(i) those liabilities reflected on the Interim Balance Sheet and not
previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its business
consistent with past practice under any contract, commitment or agreement
specifically disclosed on any
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Schedule to this Agreement or not required to be disclosed thereon because of
the term or amount involved or otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practice, which liabilities are
not, individually or in the aggregate, material.
(b) The Company has delivered to USFloral, in the case of those liabilities
which are not fixed or are contested, a reasonable estimate of the maximum
amount which may be payable.
(c) Schedule 5.11(c) also includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the Company
or the Surviving Corporation would require additional material expenditures of
capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall include
without limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent, mature, unmatured or
otherwise and whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured. Schedule 5.11(d) contains a
complete list of all indebtedness of the Company.
5.12 Accounts and Notes Receivable. The Company has delivered to USFloral
a complete and accurate list, as of a date not more than two (2) business days
prior to the date hereof, of the accounts and notes receivable of the Company
(including without limitation receivables from and advances to employees and the
Stockholder), which includes an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories (collectively, the "Accounts
Receivable"). On the Closing Date, the Company will deliver to USFloral a
complete and accurate list, as of a date not more than two (2) business days
prior to the Closing Date, of the Accounts Receivable. All Accounts Receivable
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. The Accounts Receivable
are current and collectible net of any respective reserves shown on the
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves, each of the Accounts
Receivable will be collected in full, without any set-off, within ninety (90)
days after the day on which it first became due and payable. There is no
contest, claim, or right of set-off, other than rebates and returns in the
ordinary course of business, under any contract with any obligor of an Account
Receivable relating to the amount or validity of such Account Receivable.
5.13 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
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5.14 Permits. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises reasonably necessary for
the continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in the Permits and other applicable orders, approvals,
variances, rules and regulations and is not in violation of any of the
foregoing. The transactions contemplated by this Agreement will not result in a
default under, or a breach or violation of, or adversely affect the rights and
benefits afforded to the Company by, any Permit.
5.15 Real Property.
(a) For purposes of this Agreement, "Real Property" means all interests in
real property including, without limitation, fee estates, leaseholds and
subleaseholds, purchase options, easements, licenses, rights to access, and
rights of way, and all buildings and other improvements thereon, owned or used
by the Company, together with any additions thereto or replacements thereof.
(b) Schedule 5.15(b) contains a complete and accurate description of all
Real Property (including street address, legal description (where known), owner,
and Company's use thereof) and, to the Company's knowledge, any Liens. Schedule
5.15(b) indicates whether the Real Property is owned or leased. The Real
Property listed on Schedule 5.15 includes all interests in real property
necessary to conduct the business and operations of the Company.
(c) Except as set forth in Schedule 5.15(c):
(i) The Real Property and all present uses and operations of the Real
Property substantially comply with all applicable statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments, decrees, awards or
restrictions of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Laws"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property. The
Company has obtained all approvals of governmental authorities (including
licenses and permits) required in connection with the use, occupation and
operation of the Real Property.
(ii) There are no pending or, to the Company's knowledge, threatened
condemnation, fire, health, safety, building, zoning or other land use
regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters
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which do or may adversely effect the current use, occupancy or value thereof,
nor has the Company or the Stockholder received notice of any pending or
threatened special assessment proceedings affecting any portion of the Real
Property.
(iii) Except as set forth on Schedule 5.15(c), there are no parties other
than the Company in possession of any of the Real Property or any portion
thereof, and there are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the Real Property or any portion thereof.
(iv) All real property taxes and assessments that are due and payable with
respect to the Real Property have been paid or will be paid prior to becoming
delinquent.
(v) All oral or written leases, subleases, licenses, concession agreements
or other use or occupancy agreements pursuant to which the Company leases from
any other party any real property, including all amendments, renewals,
extensions, modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively, the "Leases") are valid
and in full force and effect. The Company has provided USFloral with true and
complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
operation granted to such party under such Lease. Except as set forth on
Schedule 5.15(c), the Leases and the Company's interests thereunder are free of
all Liens.
(vi) None of the Leases requires the consent or approval of any party
thereto in connection with the consummation of the transactions contemplated
hereby.
5.16 Personal Property.
(a) Schedule 5.16(a) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by the Company with a current book value in excess of
$10,000 both (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date, including in each case true, complete and correct copies of
leases for material equipment and an indication as to which assets are currently
owned, or were formerly owned, by the Stockholder or business or personal
affiliates of the Stockholder or of the Company.
(b) The Company currently owns or leases all personal property necessary to
conduct the business and operations of the Company as they are currently being
conducted.
(c) All of the trucks and other material machinery and equipment of the
Company, including those listed on Schedule 5.16(a), are in good working order
and condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.16(a) are in full force and effect and constitute valid and binding agreements
of the Company, and the Company is not in breach of
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any of their terms. All fixed assets used by the Company that are material to
the operation of its business are either owned by the Company or leased under an
agreement listed on Schedule 5.16(a).
5.17 Intellectual Property.
(a) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks listed on Schedule 5.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Company now owns or
uses in connection with its business. Except with respect to those Marks shown
as licensed on Schedule 5.17(a), the Company owns all of the registered and
unregistered trademarks, service marks, and trade names that it uses. The Marks
listed on Schedule 5.17(a) will not cease to be valid rights of the Company by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. For purposes of this
Section 5.17, the term "Mark" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names now held
by the Company, including any registration or application for registration of
any trademarks and services marks in the PTO or the equivalent thereof in any
state of the United States or in any foreign country, as well as any
unregistered marks used by the Company, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by the Company in the United States or any foreign country.
(b) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on Schedule 5.17(b)(i) and in the Copyright registrations listed on
Schedule 5.17(b)(ii). Such Patents and Copyrights constitute all of the Patents
and Copyrights that the Company now owns or is licensed to use. The Company
owns or is licensed to practice under all patents and copyright registrations
that the Company now owns or uses in connection with its business. For purposes
of this Section 5.17, the term "Patent" shall mean any United States or foreign
patent to which the Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by the Company;
the term "Copyright" shall mean any United States or foreign copyright owned by
the Company as of the date of this Agreement, including any registration of
copyrights, in the United States Copyright Office or the equivalent thereof in
any foreign county, as well as any application for a United States or foreign
copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "Other Rights") listed on
Schedule 5.17(c). Those Other Rights constitute all of the Other Rights that
the Company now owns or is licensed to use. The Company owns or is licensed to
practice under all trade secrets, franchises or similar rights that it owns,
uses or practices under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on Schedules
5.17(a), 5.17(b)(i), 5.17(b)(ii), and 5.17(c) are referred to collectively
herein as the "Intellectual Property." The Intellectual Property owned by the
Company is referred to herein collectively as the "Company
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Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third Party Intellectual Property." Except as indicated on
Schedule 5.17(d), the Company has no obligations to compensate any person for
the use of any Intellectual Property nor has the Company granted to any person
any license, option or other rights to use in any manner any Intellectual
Property, whether requiring the payment of royalties or not.
(e) The Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder, in
violation of any Third Party Intellectual Property license, sublicense or
agreement described in Schedule 5.17(a), (b), or (c). No claims with respect to
the Company Intellectual Property or Third Party Intellectual Property are
currently pending or, to the knowledge of the Company, are threatened by any
person, nor, to the Company's knowledge, do any grounds for any claims exist:
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by the Company
infringes on any copyright, patent, trademark, service mark or trade secret;
(ii) against the use by the Company of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in the Company's business as currently conducted by the
Company; (iii) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property or other trade secret material to the Company;
or (iv) challenging the Company's license or legally enforceable right to use of
the Third Party Intellectual Property. To the Company's knowledge, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party. Neither the Company nor any of its
subsidiaries (x) has been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim or infringement of
trade secrets, any patents, trademarks, service marks, or copyrights and which
has not been finally terminated or been informed or notified by any third party
that the Company may be engaged in such infringement or (y) has knowledge of any
infringement liability with respect to, or infringement by, the Company or any
of its subsidiaries of any trade secret, patent, trademark, service mark, or
copyright of another.
(f) All Intellectual Property in the form of computer software that is
utilized by the Company in the operation of its business has the capacity to
process date data between and within the twentieth and twenty-first centuries.
5.18 Material Contracts and Commitments.
(a) Schedule 5.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) to which the Company and any affiliate of the Company or any
officer, director or stockholder of the Company are parties ("Related Party
Agreements"); or (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, $10,000, or that may generate
revenues or income exceeding, during the
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current term thereof, $10,000 (collectively with the Related Party Agreements,
the "Material Contracts"). The Company has delivered to USFloral true, complete
and correct copies of the Material Contracts. The Company has complied with all
of its commitments and obligations and is not in default under any of the
Material Contracts, and no notice of default has been received with respect to
any thereof, and there are no Material Contracts that were not negotiated at
arm's length.
(b) Each Material Contract, except those terminated pursuant to Section
7.4, is valid and binding on the Company and is in full force and effect and is
not subject to any default thereunder by any party obligated to the Company
pursuant thereto. The Company [has obtained/will obtain prior to the Closing
Date] all necessary consents, waivers and approvals of parties to any Material
Contracts that are required in connection with any of the transactions
contemplated hereby, or are required by any governmental agency or other third
party or are advisable in order that any such Material Contract remain in effect
without modification after the Merger and without giving rise to any right to
termination, cancellation or acceleration or loss of any right or benefit
("Third Party Consents"). All Third Party Consents are listed on Schedule
5.18(b).
(c) The outstanding balance on all loans or credit agreements either (i)
between the Company and any Person in which the Stockholder owns a material
interest, or (ii) guaranteed by the Company for the benefit of any Person in
which the Stockholder owns a material interest, are set forth in Schedule
5.18(c).
(d) The pledge, hypothecation or mortgage of all or substantially all of
the Company's assets (including, without limitation, a pledge of the Company's
contract rights under any Material Contract) will not, except as set forth on
Schedule 5.18(d), (i) result in the breach or violation of, (ii) constitute a
default under, (iii) create a right of termination under, or (iv) result in the
creation or imposition of (or the obligation to create or impose) any lien upon
any of the assets of the Company (other than a lien created pursuant to the
pledge, hypothecation or mortgage described at the start of this Section
5.18(d)) pursuant to any of the terms and provisions of, any Material Contract
to which the Company is a party or by which the property of the Company is
bound.
5.19 Government Contracts.
(a) Except as set forth on Schedule 5.19, the Company is not a party to any
government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company, has any suspension or debarment action been threatened or commenced.
There is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
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(c) Except as set forth in Schedule 5.19, the Company has not been, nor is
it now being, audited, or investigated by any government agency, or the
inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened.
(d) The Company has no dispute pending before a contracting office of, nor
any current claim (other than the Accounts Receivable) pending against, any
agency or instrumentality of the United States Government or any state or local
government, relating to a contract.
(e) The Company has not, with respect to any government contract, received
a cure notice advising the Company that it is or was in default or would, if it
failed to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or misleading
cost or pricing data, certification, bid, proposal, report, claim, or any other
information relating to a contract to any agency or instrumentality of the
United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate of the
Company is in receipt or possession of any competitor or government proprietary
or procurement sensitive information related to the Company's business under
circumstances where there is reason to believe that such receipt or possession
is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued, awarded or
novated to the Company in the Company's name.
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate list of
all insurance policies carried by the Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. The
Company has delivered to USFloral true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Company is
otherwise in full compliance with the terms of such policies. Such policies of
insurance are of the type and in amounts customarily carried by persons
conducting businesses similar to that of the Company. The insurance carried by
the Company with respect to its properties, assets and business is, to the
Company's knowledge, with financially sound insurers. To the knowledge of the
Company, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
5.21 Labor and Employment Matters. With respect to employees of and
service providers to the Company:
(a) the Company is and has been in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration
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Reform and Control Act, and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there been, any
unfair labor practice complaint against the Company pending or, to the Company's
knowledge, threatened, before the National Labor Relations Board or any other
comparable authority;
(c) there is not now, nor within the past three years has there been, any
labor strike, slowdown or stoppage actually pending or, to the Company's
knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization effort
exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been represented by
any labor union, and no collective bargaining agreement is binding and in force
against the Company or currently being negotiated by the Company; and
(g) all persons classified by the Company as independent contractors do
satisfy and have satisfied the requirements of law to be so classified, and the
Company has fully and accurately reported their compensation on IRS Forms 1099
when required to do so.
5.22 Employee Benefit Plans. Attached hereto as Schedule 5.22 are
complete and accurate copies of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multi-employer plans and
all multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), which are currently maintained and/or sponsored by
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 5.22 sets forth all of the Plans that have been terminated
within the past three years.
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
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
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with respect to each such Qualified Plan or employee welfare benefit plan and
most recent trustee or custodian report, are included as part of Schedule 5.22.
To the extent that any Qualified Plans have not been amended to comply with
applicable law, the remedial amendment period permitting retroactive amendment
of such Qualified Plans has not expired and will not expire within 120 days
after the Closing Date. All reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or tax returns) have been
timely filed or distributed. None of: (i) the Stockholder; (ii) any Plan; or
(iii) the Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company does not currently have (nor at the
Closing Date will have) any direct or indirect liability whatsoever (including
being subject to any statutory lien to secure payment of any such liability), to
the Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Plan
under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty; and neither the Company nor any member of a "controlled group" (as
defined in ERISA Section 4001(a)(14)) currently has (or at the Closing Date will
have) any obligation whatsoever to contribute to any "multi-employer pension
plan" (as defined in ERISA Section 4001(a)(14), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further:
(a) there have been no terminations, partial terminations or discontinuance
of contributions to any Qualified Plan without notice to and approval by the
Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of ERISA has
been terminated;
(c) there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(d) the valuation of assets of any Qualified Plan, as of the Closing Date,
shall exceed the actuarial present value of all accrued pension benefits under
any such Qualified Plan in accordance with the assumptions contained in the
Regulations of the PBGC governing the funding of terminated defined benefit
plans;
(e) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), 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 no (and will incur no) direct
or indirect liability and is not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect failure
by the Company or the Stockholder, at any time prior to the Closing Date, to
comply with any such federal
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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;
(f) the Company is not now nor has it been within the past five years a
member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the Company's knowledge, there is
no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(h) the Financial Statements as of the Balance Sheet Date reflect the
approximate total pension, medical and other benefit expense for all Plans, and
no material funding changes or irregularities are reflected thereon which would
cause such Financial Statements to be not representative of most prior periods;
and
(i) the Company has not incurred liability under Section 4062 of ERISA.
5.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 5.23(a), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing which might have a
Material Adverse Effect on the Company.
(b) The Stockholder has not, at any time: (i) committed any criminal act
(except for minor traffic violations, if any); (ii) engaged in acts of fraud,
dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy or Chapter 11 protection.
(c) Except as set forth on Schedule 5.23(c), there are no claims, actions,
suits or proceedings, pending or, to the knowledge of the Company, threatened
against or affecting the Company at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it and no notice of
any claim, action, suit or proceeding, whether pending or threatened, has been
received. There are no judgments, orders, injunctions, decrees, stipulations or
awards (whether rendered by a court or administrative agency or by arbitration)
against the Company or against any of its properties or business.
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5.24 Taxes.
(a)
(i) The Company has timely filed all Tax Returns due on or before the
Closing Date and all such Tax Returns are true, correct and complete in all
material respects.
(ii) The Company has paid in full on a timely basis all Taxes owed by it,
whether or not shown on any Tax Return.
(iii) The amount of the Company's liability for unpaid Taxes as of the
Balance Sheet Date did not exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) shown on the Interim Balance
Sheet, and the amount of the Company's liability for unpaid Taxes for all
periods or portions thereof ending on or before the Closing Date will not exceed
the amount of the current liability accruals for Taxes (excluding reserves for
Deferred Taxes) as such accruals are reflected on the books and records of the
Company on the Closing Date.
(iv) There are no ongoing examinations or claims against the Company for
Taxes, and no notice of any audit, examination or claim for Taxes, whether
pending or threatened, has been received.
(v) The Company has a taxable year ended on December 31, 1996.
(vi) The Company currently utilizes the accrual method of accounting for
income Tax purposes and such method of accounting has not changed in the past 12
years. The Company has not agreed to, and is not and will not be required to,
make any adjustments under Code Section 481(a) as a result of a change in
accounting methods.
(vii) The Company has withheld and paid over to the proper governmental
authorities all Taxes required to have been withheld and paid over, and complied
with all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid to any employee, independent contractor, creditor or third party.
(viii) Copies of (A) any Tax examinations, (B) extensions of statutory
limitations for the collection or assessment of Taxes and (C) the Tax Returns of
the Company for the last five fiscal years have been delivered to USFloral.
(ix) There are (and as of immediately following the Closing there will be)
no Liens on the assets of the Company relating to or attributable to Taxes.
(x) To the Company's knowledge, there is no basis for the assertion of any
claim relating to or attributable to Taxes which, if adversely determined, would
result in any Lien on the assets of the Company or otherwise have an adverse
effect on the Company or its business.
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(xi) There are no contracts, agreements, plans or arrangements, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of the Company that, individually or collectively, could give
rise to any payment (or portion thereof) that would not be deductible pursuant
to Sections 280G, 404 or 162 of the Code.
(xii) The Company is not, and has not been at any time, a party to a tax
sharing, tax indemnity or tax allocation agreement, and except as set forth on
Schedule 5.24(a)(xii), the Company has not assumed the tax liability of any
other person under contract.
(xiii) The Company's tax basis in its assets for purposes of determining
its future amortization, depreciation and other federal income tax deductions is
accurately reflected on the Company's tax books and records.
(b)
(i) The Company has, since June, 1986, been an S corporation within the
meaning of Section 1361 of the Code.
(ii) The Company does not have a net recognized built-in gain within the
meaning of Section 1374 of the Code
(c) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental charge,
impost or levy (including without limitation income taxes, franchise taxes,
transfer taxes or fees, sales taxes, use taxes, gross receipt taxes, value added
taxes, employment taxes, excise taxes, ad valorem taxes, property taxes,
withholding taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or interest imposed
by the United States or any state, county, local or foreign government or
subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any information
return), report, statement, schedule, notice, form, estimate or declaration of
estimated tax relating to or required to be filed with any governmental
authority in connection with the determination, assessment, collection or
payment of any tax.
(d) The Stockholder represents and warrants that he has, and as of the
Effective Time will have, no present plan, intention or arrangement to sell,
transfer or otherwise dispose of a number of shares of USFloral Common Stock
(whether received in the Merger or otherwise acquired, held or disposed of by
the Stockholder) in excess of the lesser of (i) 50% or more of the number of
shares of USFloral Common Stock to be received by the Stockholder in the Merger
(including shares to be issued as Earn-Out Consideration) or (ii) that number of
shares of USFloral Common Stock to be received in the Merger (including shares
to be issued as Earn-Out Consideration) that would reduce the Stockholder's
ownership of USFloral Common Stock to a number of shares having a value, as of
the date of the Merger, of less than 50% of the value of all
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of the all of the issued and outstanding Company Common Stock immediately prior
to the Effective Time.
5.25 Absence of Changes. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on Schedule 5.25, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(b) any damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in respect
of the capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers
directors, Stockholder, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with past
practice;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation the Stockholder and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to the Company, including without limitation any indebtedness
or obligation of the Stockholder and their affiliates, provided that the Company
may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of the assets, property or rights of the
Company or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
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(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of business;
(n) any capital commitment by the Company, either individually or in the
aggregate, exceeding $50,000;
(o) any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements which are not material and
liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
$50,000;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company, threat
of commencement, of any lawsuit or proceeding against, or investigation of, the
Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with USFloral and its representatives regarding the
transactions contemplated by this Agreement).
5.26 Deposit Accounts; Powers of Attorney. Schedule 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company has any
account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
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(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding a
general or special power of attorney from the Company and a description of the
terms of such power.
5.27 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 5.27(a), no
underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "Hazardous Material"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased. Schedule 5.27(a) identifies all underground and
aboveground storage tanks, and the capacity, age, and contents of such tanks,
located on Real Property owned or leased by the Company.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of or released, or exposed its employees or
others to, Hazardous Materials in violation of any law in effect on or before
the Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively, "Company
Hazardous Materials Activities") in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. The
Company (A) is in compliance in all material respects with all terms and
conditions of the Environmental Permits and (B) is in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the laws of all Governmental Entities relating to pollution or protection of the
environment or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder. To
the Company's knowledge, there are no circumstances that may prevent or
interfere with such compliance in the future. Schedule 5.27(d) includes a
listing and description of all Environmental Permits currently held by the
Company.
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(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of the Company, threatened concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity. There are no
past or present actions, activities, circumstances, conditions, events, or
incidents that could involve the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law) in any environmental litigation, or impose upon the Company (or any
person or entity whose liability the Company has retained or assumed, either by
contract or operation of law) any environmental liability including, without
limitation, common law tort liability.
5.28 Relations with Governments. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office, nor has it otherwise taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. The Company has delivered to USFloral and Newco true and
complete copies of each material agreement, contract, commitment or other
document (or summaries thereof) that is referred to in the Schedules or that has
been requested by USFloral. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If the
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of the Stockholder in this Agreement or any
representation made on behalf of 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 as of the Closing date, shall be
a precondition to the consummation of this transaction.
5.30 USFloral Prospectus; Securities Representations. The Stockholder has
received and reviewed a copy of the prospectus dated November 18, 1997 including
all supplements thereto (as supplemented, the "USFloral Prospectus") contained
in USFloral's shelf registration statement on Form S-1 (File No. 333-39969). The
Stockholder (a) has such knowledge, sophistication and experience in business
and financial matters that they are capable of evaluating the merits and risks
of an investment in the shares of USFloral Common Stock, (b) fully understands
the nature, scope, and duration of the limitations on transfer contained herein,
in the Affiliate Agreement (if applicable), and under applicable law, and (c)
can bear the economic risk of any investment in the shares of USFloral Common
Stock and can afford a complete loss of such investment. The Stockholder has had
an adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to its satisfaction) from the officers of
USFloral concerning the business, operations and financial condition of
USFloral. The Stockholder has no contract,
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undertaking, agreement or arrangement, written or oral, with any other person to
sell, transfer or grant participation in any shares of USFloral Common Stock to
be acquired by the Stockholder in the Merger. The Stockholder acknowledges and
agrees that USFloral has not and will not provide the Stockholder or any other
party with a prospectus for the Stockholder's use in selling USFloral Common
Stock.
5.31 Affiliates. The Stockholder is the only person who is, in the
reasonable judgment of the Company and the Stockholder, an affiliate of the
Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the 1933 Act.
5.32 Location of Chief Executive Offices. Schedule 5.32 sets forth the
location of the Company's chief executive offices.
5.33 Location of Equipment and Inventory. All Inventory and Equipment
held on the date hereof by the Company is located at one of the locations shown
on Schedule 5.33. For purposes of this Agreement, (a) the term "Inventory"
shall mean any "inventory" as such term is defined in the Uniform Commercial
Code as in effect on October 16, 1997 in the State of New York (the
"N.Y.U.C.C.") owned by the Company as of the date hereof, and, in any event,
shall include, but shall not be limited to, all merchandise, inventory and
goods, and all additions, substitutions and replacements thereof, wherever
located, together with all goods, supplies, incidentals, packaging materials,
labels, materials and any other items used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production, and all
proceeds therefrom; and (b) the term "Equipment" shall mean any "equipment" as
such term is defined in the N.Y.U.C.C. owned by the Company as of October 16,
1997, and, in any event, shall include, but shall not be limited to, all
machinery, equipment, furnishings, fixtures and vehicles owned by the Company,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.
6. REPRESENTATIONS OF USFLORAL AND NEWCO
To induce the Company and the Stockholder to enter into this Agreement and
consummate the transactions contemplated hereby, each of USFloral and Newco
represents and warrants to the Company and the Stockholder as follows:
6.1 Due Organization. Each of USFloral and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted, except where the failure to be so authorized, qualified or licensed
would not have a Material Adverse Effect. Copies of the Certificate of
Incorporation and the Bylaws, each as amended, of USFloral and Newco
(collectively, the "USFloral Charter Documents") have been made available to the
Company. Neither USFloral nor Newco is in violation of any USFloral Charter
Document.
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6.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Stockholder at the Effective Time, when delivered in
accordance with the terms of this Agreement, will be valid and legally issued
shares of USFloral capital stock, fully paid and nonassessable.
6.3 Authorization; Validity of Obligations. The representatives of
USFloral and Newco executing this Agreement have all requisite corporate power
and authority to enter into and bind USFloral and Newco to the terms of this
Agreement. USFloral and Newco have the full legal right, power and corporate
authority to enter into this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by USFloral and Newco and the
performance by each of USFloral and Newco of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of USFloral and Newco, and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of each of USFloral and Newco enforceable in accordance
with its terms.
6.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and its
lenders, conflict with, or result in a default (or would constitute a default
but for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which either USFloral or Newco is a party, or
result in the creation or imposition of any lien, charge or encumbrance on any
of USFloral's or Newco's properties pursuant to (i) any law or regulation to
which either USFloral or Newco or any of their respective property is subject,
or (ii) any judgment, order or decree to which USFloral or Newco is bound or any
of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(d) violate any law, order, judgment, rule, regulation, decree or ordinance
to which USFloral or Newco is subject, or by which USFloral or Newco is bound,
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
6.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 9,594,050 shares were outstanding on November 19, 1997. The
authorized capital stock of Newco consists of 1,000 shares of Common Stock, of
which 100 shares are outstanding. All of the issued and outstanding shares of
Newco are owned beneficially, and of record by USFloral. All of the shares of
USFloral Common Stock to be issued to the Stockholder in accordance herewith
will be offered,
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issued, sold and delivered by USFloral in compliance with all applicable state
and federal laws concerning the issuance of securities and none of such shares
was or will be issued in violation of the preemptive rights of any stockholder
of USFloral.
7. COVENANTS
7.1 Tax Matters.
(a) The following provisions shall govern the allocation of responsibility
as between the Stockholder, on the one hand, and the Surviving Corporation, on
the other, for certain tax matters following the Closing Date:
(i) The Stockholder shall prepare or cause to be prepared and file or cause
to be filed, within the time and in the manner provided by law, all Tax Returns
of the Company for all periods ending on or before the Closing Date that are due
after the Closing Date. The Stockholder shall pay to the Surviving Corporation
on or before the due date of such Tax Returns the amount of all Taxes shown as
due on such Tax Returns to the extent that such Taxes are not reflected in the
current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date. Such Returns
shall be prepared and filed in accordance with applicable law and in a manner
consistent with past practices and shall be subject to review and approval by
USFloral. To the extent reasonably requested by the Stockholder or required by
law, USFloral and the Surviving Corporation shall participate in the filing of
any Tax Returns filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns for Tax periods which begin before the
Closing Date and end after the Closing Date. The Stockholder shall pay to the
Surviving Corporation within fifteen (15) days after the date on which Taxes are
paid with respect to such periods an amount equal to the portion of such Taxes
which relates to the portion of such taxable period ending on the Closing Date
to the extent such Taxes are not reflected in the current liability accruals for
Taxes (excluding reserves for deferred Taxes) shown on the Company's books and
records as of the Closing Date. For purposes of this Section 7.1, in the case
of any Taxes that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the portion of such
Tax which relates to the portion of such taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date. Any credits relating to a taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Surviving Corporation.
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(iii) USFloral and the Surviving Corporation on one hand and the
Stockholder on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 7.1 and any audit, litigation or other proceeding with
respect to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating Tax matters pertinent to the
Company that is in their possession or under their control until the expiration
of any applicable statute of limitations or extensions thereof.
(iv) The Stockholder shall timely pay all transfer, documentary, sales,
use, stamp, registration and other Taxes and fees arising from or relating to
the transactions contemplated by this Agreement, and the Stockholder shall, at
his own expense, file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration, and
other Taxes and fees. If required by applicable law, USFloral and the Surviving
Corporation will join in the execution of any such Tax Returns and other
documentation.
(b) The Company shall, prior to the Closing, maintain its status as an S
Corporation for federal and state income tax purposes.
7.2 Title Insurance and Surveys.
(a) With respect to each fee estate included in the Real Property, the
Stockholder will obtain and deliver to USFloral (i) as soon as practicable after
the date of this Agreement, a title commitment disclosing the condition of title
to such fee estate and all easements, rights of way, and restrictions of record
with respect thereto, as of a date not earlier than the date of this Agreement,
accompanied by copies of all instruments evidencing the scope and extent of all
such easements, rights of way, and restrictions of record (the "Title
Commitment"), and (ii) at or prior to Closing, an ALTA Owner's Policy of Title
Insurance on a form customarily used in the state in which the Real Property is
located, issued by a title insurer satisfactory to USFloral, in an amount equal
to the fair market value of the Real Property (as reasonably determined by
USFloral), insuring title to such property to be in the name of the party
designated by USFloral on Schedule 7.3, subject only to Permitted Encumbrances
(each a "Title Policy").
(b) Each Title Policy obtained and delivered to USFloral pursuant to this
Agreement shall, except to the extent that title insurers in the state in which
the applicable property is located are not lawfully permitted to issue such
policies, (i) insure title to the property described in the policy and all
recorded easements benefitting such property, (ii) contain an "extended coverage
endorsement" or similar modification insuring over or otherwise eliminating the
general exceptions customarily contained in title policies, (iii) contain an
endorsement insuring that the property described in the policy is the same real
estate shown in the survey delivered with respect to such property, (iv) contain
a "contiguity" endorsement with respect to any property consisting of more than
one record parcel, (v) provide full coverage against mechanics' and
materialmen's liens arising out of the construction, repair or alteration of any
of the Real Property, (vi) contain any special
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endorsements reasonably required by USFloral, including, without limitation, an
endorsement insuring that the improvements included in the Real Property are a
permitted use under the zoning designation applicable to the Real Property, and
(vii) not be subject to any survey exception.
(c) With respect to each Real Property interest as to which a Title Policy
is to be procured pursuant to this Agreement, the Stockholder will obtain and
deliver to USFloral as soon as practicable after the date of this Agreement a
current survey of the relevant parcel, prepared and certified to USFloral and to
the title insurer of such Real Property interest by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters customarily shown on such surveys,
and showing access affirmatively to public streets and roads.
(d) The Stockholder shall be responsible for all costs associated with
obtaining the title commitments and surveys described above, and USFloral shall
be responsible for the costs of purchasing the Title Policies described above.
7.3 Related Party Agreements. The Company and/or the Stockholder, as the
case may be, shall terminate any Related Party Agreements which USFloral
requests the Company or Stockholder to terminate.
7.4 Cooperation.
(a) The Company, the Stockholder, USFloral and Newco shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such instruments as the other may
reasonably request for the purpose of carrying out this Agreement. In connection
therewith, if required, the president or chief financial officer of the Company
shall execute any documentation reasonably required by USFloral's independent
public accountants (in connection with such accountants' audit of the Company)
or the Nasdaq National Market.
(b) The Stockholder and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with USFloral on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby
(d) The Company, the Stockholder and USFloral shall file all notices and
other information and documents required under the HSR Act (as defined in
Section 5.3) as promptly as practicable after the date hereof.
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7.5 Conduct of Business Pending Closing. Between the date hereof and the
Effective Time, the Company will (except as requested or agreed by USFloral):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve its
business organization intact, retain its present officers and key employees and
maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new or
amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except for ordinary and customary bonuses and salary increases for employees
(other than the Stockholder) in accordance with past practice.
7.6 Access to Information. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of the Company and (ii) such additional financial and operating data
and other information as to the business and properties of the Company as
USFloral may from time to time reasonably request, including without limitation,
access upon reasonable request to the Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or knowledge
obtained in any investigation pursuant to this Section 7.7 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
7.7 Prohibited Activities. Between the date hereof and the Effective
Time, the Company will not, without the prior written consent of USFloral:
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(a) make any change in its Articles of Incorporation or Bylaws, or
authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance, delivery or
sale of any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind, or authorize or propose any
change in its equity capitalization, or issue or authorize the issuance of any
debt securities;
(c) declare or pay any dividend, or make any distribution (whether in cash,
stock or property) in respect of its stock whether now or hereafter outstanding,
or split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or purchase, redeem or otherwise
acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of $10,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any officer,
director, Stockholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or encumbrance upon
any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business consistent with
past practice;
(h) acquire or negotiate for the acquisition of (by merger, consolidation,
purchase of a substantial portion of assets or otherwise) any business or the
start-up of any new business, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to the Company;
(i) merge or consolidate or agree to merge or consolidate with or into any
other corporation;
(j) waive any material rights or claims of the Company, provided that the
Company may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material agreement,
permit, license or other right;
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(l) enter into any other transaction (i) that is not negotiated at arm's
length with a third party not affiliated with the Company or any officer,
director or Stockholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of business and
consistent with past practice, change any tax election, adopt any tax accounting
method other than in the ordinary course of business and consistent with past
practice, change any tax accounting method, file any Tax Return (other than any
estimated tax returns, payroll tax returns or sales tax returns) or any
amendment to a Tax Return, enter into any closing agreement, settle any tax
claim or assessment, or consent to any tax claim or assessment, without the
prior written consent of USFloral; or
(p) take, or agree (in writing or otherwise) to take, any of the actions
described in Sections 7.8(a) through (o) above, or any action which would make
any of the representations and warranties of the Company and the Stockholder
contained in this Agreement untrue or result in any of the conditions set forth
in Articles 8 and 9 not being satisfied.
7.8 Notice to Bargaining Agents. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by USFloral, and shall provide USFloral with proof that any required notice has
been sent.
7.9 Sales of USFloral Common Stock.
(a) The Stockholder will not, directly or indirectly, offer, sell, contract
to sell, pledge or otherwise dispose of the shares of USFloral Common Stock to
be received by the Stockholder in the Merger prior to the date that is, (i) with
respect to one-third of the shares, eighteen months from the Closing Date, (ii)
with respect to two-thirds of the shares, twelve months from the Closing Date
and (iii) with respect to all of the shares, six months from the Closing Date.
(b) The Stockholder acknowledges and agrees that USFloral will not provide
the Stockholder with a prospectus for the Stockholder's use in selling the
shares of USFloral Common Stock to be received by the Stockholder in the Merger,
and agrees to sell such shares only in accordance with the requirements, if any,
of Rule 145(d) promulgated under the 1933 Act. USFloral acknowledges that the
provisions of this Section 7.9(b) will be satisfied as to any sale by the
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Stockholder of the USFloral Common Stock the Stockholder may acquire pursuant to
the Merger pursuant to Rule 145(d) under the Securities Act, by a broker's
letter and a letter from the Stockholder with respect to that sale stating that
the applicable requirements of Rule 145(d)(1) have been met or are inapplicable
by virtue of Rule 145(d)(2) or Rule 145(d)(3) provided, however, that USFloral
has no reasonable basis to believe that such sales were not made in compliance
with such provisions of Rule 145(d) and subject to any changes in Rule 145 after
the date of this Agreement.
(c) The certificate or certificates evidencing the shares of USFloral
Common Stock to be delivered to the Stockholder in the Merger will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON **, PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN
OF REORGANIZATION, DATED AS OF JANUARY 20, 1998, AMONG THE ISSUER AND THE
STOCKHOLDER OF XL GROUP, INC., A FLORIDA CORPORATION. PRIOR TO THE
EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OR ASSIGNMENT. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING
PERIOD HAS EXPIRED.
** Certificates representing one-third of the shares of USFloral Common Stock
issued will read "July 20, 1998," one-third will read "January 20, 1999" and
one-third will read "July 20, 1999."
7.10 USFloral Stock Options. As soon as practicable after the Closing
but in no event later than six (6) months from the Closing Date, options to
purchase such number of shares of USFloral Common Stock as shall have a fair
market value as of the Closing Date equal to 6.25% of the Closing Date
Consideration provided for in Section 2.2 above shall be available for issuance
to Jay Aldrich, Kelle Cantafio and Jose Concepcion, 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. As soon as practicable after the determination of the 1998 EBIT
pursuant to Section 2.2, options to
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purchase such number of shares of USFloral Common Stock as shall have a fair
market value as of August 31, 1998 equal to 6.25% of the Earn-Out Consideration
provided for in Section 2.2 above (other than any portion of the Earn-Out
Consideration paid in respect of the 1997 Shortfall) 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.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO
The obligation of USFloral and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Stockholder and the Company contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Company and the Stockholder on or before the Closing Date shall have been duly
complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed on behalf of the Company and by each
of the Stockholder shall have been delivered to USFloral.
8.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit claim or proceeding of any nature
pending or threatened against USFloral, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the Company.
8.3 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company, taken as a whole, since the Balance Sheet Date;
and USFloral shall have received a certificate signed by the Stockholder dated
the Closing Date to such effect.
8.4 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholder of the transactions contemplated
hereby, shall have been obtained and made. Any
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waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated, and no action by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
8.5 Opinion of Counsel. USFloral shall have received an opinion from
counsel to the Company and the Stockholder, dated the Closing Date, in a form
reasonably satisfactory to USFloral.
8.6 Charter Documents. USFloral shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company, and such documents shall be in form
and substance reasonably acceptable to USFloral.
8.7 Quarterly Financial Statements. USFloral shall have received from the
Company completed quarterly financial statements in a form reasonably
satisfactory to USFloral, and the Merger shall have been approved by USFloral's
lenders.
8.8 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. USFloral shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
8.9 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company and by the Stockholder, setting
forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the
"Certified Closing Net Worth");
(c) the earnings of the Company before interest and taxes (after the
addition of "add-backs" set forth on Schedule 5.9(b)(i)) for the most recent
fiscal year preceding the Closing Date (the "Certified Year-End EBIT"); and
(d) a statement that all of the Company financial conditions set forth
in Section 5.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth and the Certified Closing EBIT, the Company shall not take
account of any increase in intangible
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assets (including without limitation goodwill, franchises and intellectual
property) accounted for after December 31, 1996.
8.10 FIRPTA Compliance. The Stockholder shall have delivered to USFloral a
properly executed statement in a form reasonably acceptable to USFloral for
purposes of satisfying USFloral's obligations under Treas. Reg. (S) 1.1445-2(b).
8.11 Employment Agreements. Peter F. Ullrich, Jay L. Aldrich, Kelle
Cantafio and Jose Concepcion shall have each entered into an employment
agreement with the Company in a form reasonably satisfactory to USFloral.
8.12 Stockholder's Release. The Stockholder shall have delivered to
USFloral an instrument dated the Closing Date releasing the Company from any and
all claims of such Stockholder against the Company.
8.13 Related Party Agreements. The Company shall have delivered to
USFloral:
(a) an executed Flower Supply Agreement, in the form of Annex II
--------
attached hereto, between the Company and those farms in which the Stockholder
has an interest which are listed on Schedule 8.14(a) attached hereto; and
----------------
[(b) an executed Lease, in the form of Annex III attached hereto,
---------
between the Company and Peter Ullrich [providing for rental of the real property
owned by Peter Ullrich and utilized in the Company's business at an annual
rental rate and with other terms mutually agreed upon by USFloral and Peter
Ullrich].]
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER
The obligation of the Stockholder and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
9.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by USFloral and Newco on
or before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of USFloral shall have been
delivered to the Company and the Stockholder.
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9.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened, against USFloral, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the USFloral and its subsidiaries taken as a
whole.
9.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action by
the Department of Justice or Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby shall be
pending.
9.4 Employment Agreements. The Company shall have afforded each of Peter
F. Ullrich, Jay L. Aldrich, Kelle Cantafio and Jose Concepcion an opportunity to
enter into an employment agreement with the Company in a form reasonably
satisfactory to USFloral.
10. INDEMNIFICATION
10.1 General Indemnification by the Stockholder. The Stockholder covenants
and agrees to indemnify, defend, protect and hold harmless USFloral, Newco and
the Surviving Corporation and their respective officers, directors, employees,
stockholders, assigns, successors and affiliates (individually, an "Indemnified
Party" and collectively, "Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the Stockholder or
the Company set forth in this Agreement or any Schedule or certificate,
delivered by or on behalf of the Stockholder or the Company in connection
herewith; or
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(ii) any nonfulfillment of any covenant or agreement by the
Stockholder or, prior to the Effective Time, the Company, under this Agreement;
or
(iii) the business, operations or assets of the Company prior
to the Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters, if any, disclosed on Schedules 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 10.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
$260,000 (the "Indemnification Threshold"); provided, however, that the
Indemnification Threshold shall not apply to (i) adjustments to the Merger
Consideration as set forth in Sections 2.2 and 3.1; (ii) Damages arising out of
any breaches of the covenants of the Stockholder set forth in this Agreement or
representations and warranties made in Sections 5.4 (capital stock of the
Company), 5.5 (transactions in capital stock), 5.9 (Company financial
conditions), 5.18 (material contracts and commitments), 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters), or (iii) Damages
described in Section 10.1(a)(iv);
(b) the aggregate amount of the Stockholder's liability under this
Article 10 shall not exceed the Merger Consideration; provided, however, that
the Stockholder's liability for Damages arising out of any breaches of the
representations made in Sections 5.24 (taxes) or 5.27 (environmental matters) or
Damages described in Section 10.1(a)(ii) and Section 10.1(a)(iv) shall not be
subject to such limitation;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.2(c):
(i)
(1) except as to representations, warranties, and covenants specified
in clause (i)(2) of this Section 10.2(c), the first anniversary of the Closing
Date, or
(2) with respect to representations and warranties contained in
Sections 5.22 (employee benefit plans), 5.24 (taxes), 5.27 (environmental
matters), and the indemnification set forth in Section 10.1(a)(ii), (iii) or
(iv), on (A) the date that is six (6) months after the expiration of the longest
applicable federal or state statute of limitation (including
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extensions thereof), or (B) if there is no applicable statute of limitation, (x)
ten (10) years after the Closing Date if the Claim is related to the cost of
investigating, containing, removing, or remediating a release of Hazardous
Material into the environment, or (y) five (5) years after the Closing Date for
any other Claim covered by clause (i)(2)(B) of this Section 10.2(c); or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 10.2(c) (such claims
referred to as "Pending Claims").
10.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 10.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholder of such Claim, specifying the
nature of such Claim and the amount or the estimated amount thereof to the
extent then feasible (the "Claim Notice"). If the Stockholder does not notify
the Indemnified Party within thirty days after the date of delivery of the Claim
Notice that the Indemnifying Party disputes such Claim, with a detailed
statement of the basis of such position, the amount of such Claim shall be
conclusively deemed a liability of the Indemnifying Party hereunder. In case an
objection is made in writing in accordance with this Section 10.3(a), the
Indemnified Party shall respond in a written statement to the objection within
thirty days and, for sixty days thereafter, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims (and,
if the parties should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party (a "Third Party Claim"), the Indemnified Party shall
deliver a Claim Notice to the Stockholder. The Stockholder shall have thirty
days from the date of delivery of the Claim Notice to notify the Indemnified
Party (A) whether the Indemnifying Party disputes liability to the Indemnified
Party hereunder with respect to the Third Party Claim, and, if so, the basis for
such a dispute, and (B) if such party does not dispute liability, whether or not
the Indemnifying Party desires, at the sole cost and expense of the Indemnifying
Party, to defend against the Third Party Claim, provided that the Indemnified
Party is hereby authorized (but not obligated) to file any motion, answer or
other pleading and to take any other action which the Indemnified Party shall
deem necessary or appropriate to protect the Indemnified Party's interests.
(ii) In the event that the Stockholder timely notifies the Indemnified
Party that the Indemnifying Party does not dispute the Indemnifying Party's
obligation to indemnify with respect to the Third Party Claim, the Indemnifying
Party shall defend the Indemnified Party against such Third Party Claim by
appropriate proceedings, provided that, unless the Indemnified Party otherwise
agrees in writing, the Indemnifying Party may not settle any Third Party Claim
(in whole or in part) if such settlement does not include a complete and
unconditional release of the
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Indemnified Party. If the Indemnified Party desires to participate in, but not
control, any such defense or settlement the Indemnified Party may do so at its
sole cost and expense. If the Indemnifying Party elects not to defend the
Indemnified Party against a Third Party Claim, whether by failure of such party
to give the Indemnified Party timely notice as provided herein or otherwise,
then the Indemnified Party, without waiving any rights against such party, may
settle or defend against such Third Party Claim in the Indemnified Party's sole
discretion and the Indemnified Party shall be entitled to recover from the
Indemnifying Party the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the Indemnified Party with
respect thereto, including interest from the date such costs and expenses were
incurred.
(iii) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Stockholder, any Third
Party Claim seeks material prospective relief which could have an adverse effect
on any Indemnified Party or the Surviving Corporation or any subsidiary, the
Indemnified Party shall have the right to control or assume (as the case may be)
the defense of any such Third Party Claim and the amount of any judgment or
settlement and the reasonable costs and expenses of defense shall be included as
part of the indemnification obligations of the Indemnifying Party hereunder. If
the Indemnified Party elects to exercise such right, the Indemnifying Party
shall have the right to participate in, but not control, the defense of such
Third Party Claim at the sole cost and expense of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 10.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 10.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
10.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the Stockholder,
USFloral and Newco in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Stockholder will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 10.2. The
representations of USFloral and
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Newco will survive the Closing and will remain in effect until, and will expire
upon the first anniversary of the Closing date.
10.5 Remedies Cumulative. The remedies set forth in this Article 10 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
10.6 Right to Set Off. USFloral shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 10.3 to be owed to USFloral by the Stockholder
under Section 10.1 hereof, so long as the pledge is in effect.
10.7 Liability. Nothing in this Article 10 shall be construed to impose
any liability on either the Stockholder or the Company for claims or damages not
attributable to acts or omissions prior to the Closing Date.
11. NONCOMPETITION
11.1 Prohibited Activities. The Stockholder agrees that for a period of
two years following the Closing Date, he shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with the Surviving
Corporation or USFloral, including without limitation the importing, brokerage,
manufacture, assembly, packaging, distribution, shipping or marketing of floral
products (including, without limitation, hardgoods), or any business engaging in
the consolidation of the floral industry within the United States of America
(the "Territory");
(b) call upon any person who is, at that time, within the Territory,
an employee of USFloral or any subsidiary of USFloral in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of USFloral or such subsidiary;
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of USFloral or any
subsidiaries of USFloral, the Company within the Territory for the purpose of
soliciting or selling floral products within the Territory;
(d) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon by
any of them or for which any of them made an acquisition analysis for themselves
or USFloral or any subsidiaries of USFloral, the Company; or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
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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,
(iii) performing his duties as an officer and employee of the Surviving
Corporation, or (iv) engaging in business on behalf of [list entities] to the
same extent the Stockholder engaged in such business prior to the Closing Date.
11.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFloral and the Surviving Corporation for which they would
have no other adequate remedy, the Stockholder agrees that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporation by, without limitation, injunctions and
restraining orders.
11.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the 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 businesses of the Company).
11.4 Severability; Reformation. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 Independent Covenant. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the 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 any Stockholder is in violation of any provision of this
Article 11 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
the Surviving Corporation seeks to enforce the agreements and covenants of the
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.
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11.6 Materiality. The Company and the Stockholder hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 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 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 the
Stockholder can show that such information has become known to the public
generally through no fault of the Stockholder. In the event of a breach or
threatened breach by the Stockholder of the provisions of this Article 12,
USFloral and the Surviving 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.
12.2 USFloral. USFloral recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. USFloral agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the Stockholder. In the event of
a breach or threatened breach by USFloral of the provisions of this Article 12,
the Stockholder shall be entitled to an injunction restraining USFloral from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting the Stockholder from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Surviving 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.
13. GENERAL
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
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(a) by mutual consent of the boards of directors of USFloral and the
Company; or
(b) by the Stockholder and the Company as a group, on the one hand, or
by USFloral, on the other hand, if the Closing shall not have occurred on or
before January 31, 1998, provided that the right to terminate this Agreement
under this Section 13.1(b) shall not be available to either party (with the
Stockholder and the Company deemed to be a single party for this purpose) whose
material misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Stockholder and the Company as a group, on the one hand, or
by USFloral, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholder and the Company deemed to be a single party for this purpose) of any
of the representations and warranties contained herein or in the due and timely
performance and satisfaction of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made or
shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholder and the Company as a group, on the one hand, or
by USFloral, on the other hand, if there shall be a final nonappealable order of
a federal or state court in effect preventing consummation of the Merger; or
there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
governmental entity which would make the consummation of the Merger illegal.
13.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 13 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
13.1(c) above, then notwithstanding the provisions of Section 13.7 below, the
breaching party (with the Stockholder and the Company deemed to be a single
party for purposes of this Article 13), shall be liable to the other party to
the extent of the expenses incurred by such other party in connection with this
Agreement and the transactions contemplated hereby, as well as any damages in
accordance with applicable law.
13.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Stockholder.
13.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part
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hereof. Any and all previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement. This Agreement shall not be amended or modified
except by a written instrument duly executed by each of the parties hereto, or
in accordance with Section 11.4. Any extension or waiver by any party of any
provision hereto shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 Brokers and Agents. USFloral and Newco (as a group) and the Company
and each Stockholder (as a group) each represents and warrants to the other that
it has not employed any broker or agent in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
13.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and Newco and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement. The Stockholder (and not the Company) has and will pay the fees,
expenses and disbursements of the Stockholder, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
13.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to USFloral, Newco or the Surviving Corporation to:
U.S.A. Floral Products, Inc.
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1025 Thomas Jefferson Street, N.W.
Suite 600 West
Washington DC 20007
Attn: Robert J. Poirier
Chairman, President and Chief Executive Officer
(Telefax: (202) 333-0803)
with a required copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre
Thirty-Second Floor
Pittsburgh, PA 15219
Attn: David A. Gerson, Esquire
(Telefax: (412) 560-3399)
If to the Stockholder to:
Peter F. Ullrich
1800 N.W. 89th Place
Miami, Florida 33172
(Telefax: (305) 592-7512)
with a required copy to:
John Immer, Esquire
Kelley, Drye & Warren LLP
Suite 2400, 201 S. Biscayne Blvd.
Miami, Florida 33131
(Telefax: (305) 372-2490)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
13.10 Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Delaware, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction.
13.11 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof,
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and the application of such provision to such person or circumstances in any
other jurisdiction, shall not be affected thereby, and to this end the
provisions of this Agreement shall be severable. The preceding sentence is in
addition to and not in place of the severability provisions in Section 11.4.
13.12 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
13.13 Further Representations. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
13.14 Accounting Terms. Except as otherwise expressly provided herein
or in the Schedules, all accounting terms used in this Agreement shall be
interpreted, and all financial statements, Schedules, certificates and reports
as to financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
[Execution Page Following]
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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.
/s/ Robert J. Poirier
By:__________________________________
Robert J. Poirier
Chairman, President & CEO
XLG ACQUISITION CORP.
/s/ Robert J. Poirier
By:__________________________________
Robert J. Poirier
President
XL GROUP, INC.
/s/ Peter F. Ullrich
By:__________________________________
Peter F. Ullrich
President
STOCKHOLDER:
/s/ Peter F. Ullrich
__________________________________
Peter F. Ullrich
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