U S A FLORAL PRODUCTS INC, 10-K405, 1999-03-31

U S A FLORAL PRODUCTS INC
10-K405, 1999-03-31
MISCELLANEOUS NONDURABLE GOODS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 1998

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-23121

U.S.A. FLORAL PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)

Delaware 52-2030697
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

20007
1025 Thomas Jefferson Street, N.W., (Zip Code)
Suite 300 East, Washington, D.C.
(Address of Principal Executive
Offices)

Registrant's telephone number, including area code: (202) 333-0800

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<S> <C>
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
None Not applicable
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Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.001 per share
(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

As of March 15, 1999, the aggregate market value of voting common stock held
by non-affiliates of the registrant, based upon the last reported sale price
for the registrant's Common Stock on the Nasdaq National Market on such date,
as reported in The Wall Street Journal, was $152,278,379 (calculated by
excluding shares owned beneficially by directors and executive officers as a
group from total outstanding shares solely for the purpose of this response).

The number of shares of the registrant's Common Stock outstanding as of the
close of business on March 15, 1999 was 15,939,538.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the definitive Proxy Statement of U.S.A. Floral
Products, Inc. to be used in connection with the 1999 Annual Meeting of
Stockholders (the "Proxy Statement") are incorporated by reference into Part
III of this Annual Report on Form 10-K to the extent provided herein. Except
as specifically incorporated by reference herein, the Proxy Statement is not
to be deemed filed as part of this Annual Report on Form 10-K.
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PART I

Item 1. Business

In this Annual Report on Form 10-K ("Form 10-K"), "USA Floral," "we," "us,"
and "our" refer to U.S.A. Floral Products, Inc. and its subsidiaries, unless
the context otherwise requires. This Form 10-K contains (or incorporates by
reference) certain "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements generally
can be identified by the use of forward-looking terminology such as "may,"
"will," "intend," "estimate," "anticipate," "believe," "expect," or "continue"
or variations thereon or similar terminology. We have based these forward-
looking statements on our current expectations and projections about future
events. These forward-looking statements are subject to risks, uncertainties
and assumptions about USA Floral, including among other things:

. general economic and business conditions;

. changes in, or failure to maintain, current pricing levels;

. changes in political, social and economic conditions and local
regulations, particularly in Central America and South America;

. currency and interest rate exposure;

. changes in, or failure to comply with, government regulations;

. demographic changes;

. change in our sales mix;

. our ability to obtain floral products during periods of peak demand;

. any reduction in sales to or loss of any significant customers;

. competition;

. changes in our business strategy or development;

. availability of sufficient capital to meet our needs or on terms or at
times acceptable to us; and

. availability of qualified personnel.

We undertake no obligation to update publicly or to revise any forward-
looking statements, whether as a result of new information, future events or
otherwise. Because of these risks, uncertainties and assumptions, the forward-
looking events discussed in this Form 10-K might not occur.

Overview

USA Floral is the largest integrated distributor of floral products in the
world. We are organized into two divisions, an International Division and a
North American Division. Within each of these divisions, we have three
reportable operating segments: Importing/Exporting, Wholesale Distribution and
Bouquet Making. For revenue, income and asset information about each of these
segments, see our Consolidated Financial Statements included elsewhere in this
Form 10-K.

Through these divisions, we:

. import, export and distribute floral products and floral-related
hardgoods;

. engage in brokerage and shipping services for wholesale distributors of
both international and domestic cut flowers;

. provide floral fulfillment services to non-store retailers; and

. provide in-store merchandising services to certain supermarkets and
mass-market retailers.

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Increasingly, we provide higher value-added services including bouquet and
arrangement making, product branding, marketing support to retailers and
freshness dating. Our customers are retail florists, supermarkets, other mass-
market retailers and Internet and catalog retailers, as well as wholesale
distributors and bouquet and arrangement makers. We do not own or operate
growing operations or retail florists. We operate from 120 facilities in 21
countries located on five continents. On a pro forma combined basis, our
revenues for the year ended December 31, 1998 were approximately $1.0 billion,
and our pro forma operating income (before non-recurring charges of $6.3
million) was approximately $36.1 million.

Industry Overview

The worldwide floriculture industry, which, according to industry
statistics, had total revenues at the retail level of approximately $60.0
billion in 1997 (compared to less than $45.0 billion in 1990), produces,
distributes and markets fresh-cut flowers and greens, potted plants and
floral-related hardgoods, such as vases, glassware, foam and other supplies.
Industry participants include growers, retailers and distributors.
Distributors include importers, exporters, wholesale distributors and bouquet
companies. Distributors move flowers from growing regions throughout the
United States and in countries around the world to retail florists,
supermarkets, discount stores and other mass-market retailers, and Internet
and catalog retailers; USA Floral is a distributor.

World per-capita consumption of fresh-cut flowers varies widely by country,
according to statistics published by the Flower Council of Holland. In 1997,
Switzerland's per-capita consumption of flowers was $120, the highest in the
world. While the United States per-capita consumption grew from $20 in 1990 to
$25 in 1997, U.S. consumption is significantly lower than that of most
European and developed Asian countries. We believe that the shorter
distribution channel in Europe and Asia results in fresher, longer-lasting
products, which in turn significantly contributes to the higher per-capita
consumption.

Fresh flowers are grown commercially at farms in most countries around the
world. The three primary consumption markets for floral products in the world
are Europe, North America and Japan. Principal sources of worldwide supply are
growers in Colombia and Ecuador in South America, Holland, France and Italy in
Europe, East Africa, Israel, and to a lesser extent Australia, Thailand and
New Zealand in the Pacific Rim. Holland, however, is by far the largest
supplier of floral products in the world. South America is the predominant
source of supply for flowers imported into the United States. Domestic sources
of supply include growing operations in Florida, California and the Pacific
Northwest, as well as Hawaii for tropical varieties. The principal
international source of supply is flower auctions which are located primarily
in Holland. The majority of flowers sold at the flower auctions are grown in
Holland by small, family-owned businesses. While a limited number of growers
operate large, integrated growing operations, both international and domestic
growers are typically small businesses operating in a highly fragmented
environment. USA Floral is not a grower.

Distribution Channels

In the North American market, flowers grown abroad arrive at United States
ports of entry, principally Miami, Florida, by air each day. Flowers imported
into the United States primarily consist of roses, carnations and
chrysanthemums, each of which is imported in a number of varieties. Importers
of floral products, including USA Floral, receive these flowers, generally on
consignment, and facilitate their passage through United States customs
inspection and clearance procedures. Typically, flowers spend one or two days
in customs clearance.

Importers match the available flower supply with demand from wholesale
distributors and bouquet companies, break down shipments into lots sized to
meet customer requirements, and then ship the flowers primarily in
refrigerated trucks. The flowers are shipped from importers' facilities at
ports of entry, most of which are located in Miami, or from domestic growers
on refrigerated trucks, usually arriving at the wholesale distributor,
including USA Floral, within one to three days from the date of order. The
wholesale distributors then market and supply fresh flowers and floral-related
hardgoods to traditional retail florists and mass-market retailers, as well as
to bouquet companies.

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Bouquet companies employ mass-production techniques in order to replicate
cost-effectively a particular floral arrangement for widespread distribution.
They wrap cut flowers in plastic sleeves and produce floral arrangements,
which are packaged in shipping containers, for sale through mass-market
retailers such as supermarkets, discount retailers and chain stores.

Floral products are generally sold at retail to consumers through
traditional retail florists which are typically small, family-owned
businesses, supermarkets and other mass-market retailers. According to
statistics published by the Society of American Florists, there are
approximately 40,000 traditional retail florists, with average annual revenues
of $250,000. Wire services such as Florists' Transworld Delivery Association
("FTD") and order aggregators such as 1-800-FLOWERS rely upon traditional
retail florists to fulfill their orders. Increasingly, Internet and catalog
retailers are selling floral products to retail consumers. The Internet and
catalog retailers generally rely upon wholesale distributors and bouquet
companies to fulfill their orders.

The distribution channel for our international operations and our North
American operations are similar, except that our international operations:

. rely upon the flower auctions for supply rather than direct
relationships with growers; and

. include export companies.

Exporters purchase the majority of their flowers on a daily basis from
flower auctions located primarily in Holland. Our exporters also purchase a
small percentage of their flowers directly from growers. After purchasing
flowers, exporters process the flowers (i.e., cut, hydrate, re-bunch and
package for shipment). Exporters then sell the flowers and arrange and
coordinate outbound freight to ship the flowers to importers throughout Europe
and Asia. The European and Asian importers and wholesale distributors purchase
the flowers upon physical receipt, rather than take the flowers on consignment
as is typical for our North American importers.

The distribution channel in the floriculture industry is highly fragmented
and consists mainly of small, family-owned firms that operate from a single
location or from a small number of outlets in a single region. While floral
products have historically been sold at retail through a large number of
traditional florists, who continue to serve the majority of consumers, we
believe, based upon the experience of our management, that changes in consumer
buying habits are causing more consumers to seek floral products from mass-
market retailers such as supermarkets, discount retailers and chain stores. We
believe that sales in the United States retail segment of the floriculture
industry totaled approximately $15 billion in 1997, and that approximately 47%
of retail sales in the United States and 15% of international retail sales
were generated by mass-market retailers. We believe that the growing consumer
preference for more convenient floral products retailers, together with the
potential efficiencies to be achieved from operating floral products
businesses on a large scale, provide an attractive opportunity for us to
continue to build an integrated floral products distributor that can serve the
growing mass-market while continuing to meet the needs of the traditional
florists for high quality products and services.

Competitive Strengths

Market Leader. We should be able to leverage our position as the largest
integrated distributor of floral products in the world to increase revenues
and achieve cost savings. We have hundreds of sources of supply located
throughout the world and more points of distribution than any of our
competitors. Our size and international presence allow us to better serve
large mass-market retailers with diverse geographic locations. In addition, we
believe that our size gives us significant buying power with growers and
hardgoods suppliers and allows us to realize savings on transportation and
handling costs of fresh flowers as compared to some of our competitors.

Ability to Manage National and International Account Fulfillment
Programs. Our size and multiple sources of supply and distribution give us the
unique ability to enter into and service national and international floral
account programs with large mass-marketers and Internet and catalog retailers.

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Experienced Management. Our senior management team has extensive experience
in the floral distribution industry, the integration of businesses and the
distribution of products to retailers. Our Chairman and Chief Executive
Officer, Robert J. Poirier, has over 23 years of experience in the
floriculture industry. Mr. Poirier has served as an executive at 1-800-
FLOWERS, where his emphasis was on retail operations, and at FTD, where he
focused on network operations. Dwight Ferguson, our Vice Chairman, was
formerly the President and Chief Operating Officer of Florimex Worldwide GmbH
("Florimex"), an international importer, exporter and wholesale distributor of
fresh-cut flowers which we acquired on September 30, 1998. Prior to joining
Florimex, Mr. Ferguson was a division vice president at Chiquita Brands
International with responsibility for sales, marketing and operations in the
southern United States. Christopher Wilson, our Chief Operating Officer, was
formerly a division president at a nationwide distributor of products to
convenience stores, mass-market retailers and fast food restaurants. W.
Michael Kipphut, our Chief Financial Officer, was formerly the Vice President
and Treasurer of Evenflo & Spalding, a global manufacturer and licensor of
branded consumer products.

International Presence. Since our acquisition of Florimex, we have been
operating as importers, exporters, wholesale distributors and bouquet
companies throughout Europe and Asia. We have sourcing and export facilities
in Holland, Colombia, Ecuador, Thailand and South Africa. Our significant
international presence gives us access to the worldwide production of flowers
and floral products and the opportunity for our domestic operations to
purchase flowers from our international operations.

Business Strategy

Streamline Distribution Channel. The traditional North American distribution
channel can take from eight to seventeen days to move flowers from growers to
consumers and requires that the flowers are handled numerous times during that
period. At each stage of the distribution chain, the pricing of cut flowers
varies with quality and freshness. As days pass from the time of first
cutting, fresh products that remain unsold decline in price, until they are
ultimately sold or discarded. Because the freshest, highest-quality flowers
command the highest prices, the distribution system effectively rewards the
growers that produce the best flowers, the importers and brokers that clear
and match flowers with buyers most efficiently, and the wholesale distributors
and bouquet companies that store and preserve flowers most effectively and
bring the best products to market most quickly.

This traditional North American distribution channel is slow and
inefficient. The international distribution channel is much shorter; it moves
flowers from growers to consumers in three to fourteen days. We believe that
there are several reasons for the more efficient international distribution
channel. First, the majority of flowers sold at the auctions are grown locally
in Holland. Second, floral products are not stored at the growers or exporters
as is often the case with flowers exported from South America into the United
States. Finally, there are not the customs clearance delays associated with
importing flowers into the United States. Because some of these differences in
the marketplace are beyond our control, we cannot replicate the international
distribution channel in North America. However, we believe that we can reduce
the time that fresh flowers are in the North American distribution channel by
up to 75% and thereby provide higher quality, fresher products and increase
consumer demand. We believe that we are well-positioned to accomplish this
goal because of our size, relationships with growers and our numerous sourcing
and distribution facilities located throughout the world. In addition to
reducing the time that flowers are in the distribution channel, we believe
that we can reduce the number of times that flowers are handled while in that
channel. We recently leased a new distribution facility in Blytheville,
Arkansas, which will give us a centralized distribution facility with better
access to United States markets. We are also working with overnight delivery
services to bring a fresher product to the consumer faster. We believe that,
because of our size and infrastructure, we are the first floral distributor to
be in a position to re-engineer the distribution channel in North America.

Focus on Mass-Market Opportunities. The growth in flower sales by mass-
market retailers and supermarkets has significantly exceeded the growth of
flower sales generally. Mass-market flower sales have increased to 47% of
total flower sales in the United States in 1997 from 31% in the mid 1980s. We
believe that our national presence will increase our opportunities to be the
distributor of choice for national mass-market

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retailers. We plan to leverage our national presence and our local
distribution capabilities, in-store floral management initiatives and customer
service to become the preferred provider of floral products to mass-market
retailers, discount stores and supermarkets. With our acquisition of Florimex
and its operating subsidiary, Sierafor B.V., we have expanded our
international bouquet and arrangement making and distribution business, and we
believe we are well-positioned to participate in the anticipated growth of
European and Asian mass-market flower sales. Although per-capita consumption
of floral products in Europe and Asia is greater than per- capita consumption
in the United States, at present, only 15% of total flower sales in Europe and
less than 10% of total flower sales in Asia are sold through the mass market.

Pursue Internet Commerce Initiative. Through our recently established
Interactive Services Division, we will offer expanded Internet-based services
to our traditional and non-traditional customers. We plan to offer a
comprehensive line of bulk floral products from our International and North
American Divisions, utilizing the Internet and e-commerce to streamline the
distribution channel and provide better customer service. We also plan to
offer non-traditional customers that choose to ship direct to consumers via
next day delivery services a complete line of floral products, packaging,
shipping and fulfillment services. As more consumers turn to the Internet for
retail and gift purchases, we believe we are well-positioned to provide
fulfillment services to a wide range of on-line retailers that service this
demand.

Employ Branding Strategy. Because of our size and international presence, we
have the ability to privately label, repackage and distribute floral products.
By utilizing our contacts with growers and leveraging our distribution
capabilities, we believe that we can establish specifications for fresh
flowers and control product quality at each step in the distribution process,
thereby building a brand identification that will command a premium price. In
October 1998, we entered into an exclusive licensing arrangement with Sunkist
Growers to market flowers in supermarkets under the Sunkist brand name. We
plan to begin testing the Sunkist program, which will feature fresh flowers
with guaranteed vase-life as well as cards, ribbons and other supplies, in
selected North American supermarkets in the Spring of 1999 and in selected
international supermarkets later in 1999. Our association with Sunkist is the
first effort to brand products in the floral industry; we intend to pursue
similar opportunities to create other high-quality branded products.

Improve Operating Margins. As we seek to streamline the distribution
channel, we plan to continue to integrate our operations and eliminate costs.
Our North American operations attempt to minimize the risk of spoilage at the
import level, and thereby improve operating margins, by purchasing the
majority of floral products from growers on a consignment basis. We believe
that over time we will be able to develop and market high value-added products
and services, such as branded flowers and bouquets specifically identified
with quality and consistency. To a limited extent, our subsidiary companies
have been suppliers to and customers of each other. We expect these
relationships to increase and, with our acquisition of Florimex, our domestic
operations now have the opportunity to purchase flowers from our international
operations as well. We expect intercompany purchases to improve our operating
margins.

Pursue Selective Strategic Acquisitions. We believe that opportunities to
add key distribution points to our North American Division continue to exist.
We plan to continue to make selected acquisitions of established, high-quality
local companies in targeted geographic areas to enhance our nationwide
presence. Additional acquisitions will complement our distribution
capabilities and our ability to provide local service to our national
customers. We also plan to acquire selected bouquet companies located outside
of the United States to enhance our International Division's bouquet making
capabilities.

International Operations

On September 30, 1998, we significantly expanded our international
operations with the acquisition of Florimex. To acquire the Florimex
businesses, we paid approximately $66.1 million in cash. Florimex operates
through approximately 60 offices located in countries throughout the world,
including Austria, Canada, China, Colombia, the Czech Republic, Ecuador,
France, Germany, Holland, Italy, Japan, Poland, South Africa, Spain, Sweden,
Switzerland, Thailand, the United Kingdom and the United States. Florimex buys
flowers from sources

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throughout the world and transports them, typically by air, to distribution
facilities for resale to wholesale distributors and retailers. Florimex
imports flowers through 60 locations covering all major floral consumption
markets. Florimex conducts export operations primarily through one of its
operating subsidiaries, Baardse B.V., which is Holland's third largest cut
flower export company. Baardse B.V. is headquartered in Aalsmeer, Holland, at
the site of the world's largest flower auction facilities. In addition to the
Aalsmeer auction, Florimex routinely acquires flowers from all principal Dutch
flower auctions. Florimex's exporting operations sell and ship products
directly to other USA Floral subsidiaries as well as to other wholesale
distributors and bouquet companies. Florimex conducts wholesale operations
throughout Europe from its headquarters in Nuremberg, Germany and Prague,
Czech Republic.

Our acquisition of Florimex provides us with certain strategic benefits,
including:

. an immediate and significant international presence in the floral
products industry;

. the addition of multiple sourcing operations located throughout the
world;

. opportunities to capitalize on the anticipated growth in flower sales by
the mass-market segment in Europe and Asia;

. intercompany opportunities for sourcing floral products as well as
opportunities to source and service our domestic operations;

. an ability to leverage intercompany opportunities to improve our
operating margins;

. an opportunity to be on the leading edge of e-commerce and Internet-
based sales initiatives throughout Europe and Asia;

. opportunities to capitalize on the existence of international flower-
giving holidays such as All Saint's Day that fall in the fourth quarter
and thereby decrease our reliance upon sales of floral products in the
first and second quarter;

. a significant presence at the world's largest flower auctions; and

. the opportunity to advance operational and administrative integration in
Holland and Germany.

Distribution

The majority of floral products distributed throughout the United States are
distributed through facilities located in Miami, Florida. We are the leading
distributor of floral products out of Miami. To a limited extent, we also
distribute products out of facilities located in Dallas, Texas.

In December 1998, we began to lease a distribution facility in Blytheville,
Arkansas, at the site of the former Eaker Air Force Base. We plan to use this
facility not only as a distribution center for our North American Wholesale
Distribution operations but also as a production hub where we will process
incoming flowers (i.e., break bulk, hydrate, re-cut stems and re-package to
suit customer demand) to facilitate distribution of flowers and hardgoods to
retail florists, mass-market retailers, wholesale distributors and Internet-
based marketers throughout North America. The 80,000 square-foot facility is
60 miles north of Memphis, the location of one of the largest overnight
carriers in the United States. We expect this facility to be fully operational
in the second quarter of 1999. We also have the capability to significantly
expand this facility should the need arise. Our Blytheville location will give
us a centralized distribution facility with better access to United States
markets. We think that the geographic location of the Blytheville facility can
lead to transportation efficiencies with overnight and other carriers. We are
also exploring the possible use of the Blytheville, Arkansas Aeroplex for
importing flowers in the future directly from Colombia and Ecuador.

Most of the floral products that we distribute throughout Europe and Asia
are distributed through facilities located in Holland in close proximity to
the flower auctions which provide the majority of our international supply.

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Company Products and Services

Our company is organized primarily on a geographic basis with an
International Division and a North American Division and secondarily based
upon products and services that we offer. Each division operates in three
segments: import/export; wholesale; and bouquet companies.

Importing. We import fresh flowers, including roses, carnations and
chrysanthemums, from abroad, principally from Colombia and Ecuador in South
America, Holland in Europe, Africa, Israel, and to a lesser extent Australia,
Thailand and New Zealand in the Pacific Rim. Most of the flowers we import
into the United States arrive at the U.S. port of entry in Miami, Florida. Our
domestic importers assist in clearing shipments through United States customs,
transferring the flowers to our facilities for pre-cooling and then acting as
intermediaries to link the available flowers with the needs of wholesale
distributors and bouquet companies throughout the country.

Exporting. Through our international operations, we export fresh flowers.
Our exporters purchase the majority of their flowers on a daily basis from
flower auctions located principally in Holland. Our exporters also purchase a
small percentage of their flowers directly from growers. After purchasing
flowers, exporters process the flowers (i.e., cut, hydrate, re-bunch and
package for shipment), then sell the flowers and arrange and coordinate
outbound freight to ship the flowers to importers throughout Europe and Asia.
The European and Asian importers and wholesale distributors purchase the
flowers upon physical receipt, rather than take the flowers on consignment as
is typical for our North American importers.

Wholesale Distribution. We sell imported and domestic perishable floral
products and floral-related hardgoods directly to thousands of retail florists
and mass-market retailers. We have wholesale operations throughout much of the
United States, Germany, the Czech Republic and in the Western Provinces of
Canada. Our wholesale distributors process incoming flowers (i.e., break bulk,
hydrate, re-cut stems and re-package to suit customer demand) to facilitate
further distribution to retail florists and mass-market retailers. Our
wholesale distributors make deliveries to retailers on a daily basis, assist
mass-market retailers with the presentation of floral products and prepare
specific arrangements to meet customer needs. We also serve as a broker for
domestic flowers, linking flowers grown primarily in California with wholesale
distributors and bouquet companies throughout the United States.

Bouquet Making, Distribution and Other Value-Added Activities. We take fresh
flowers obtained from growers or importers and create pre-packaged bouquets
and arrangements which are sold by mass-market retailers, discount chains, and
supermarkets throughout the United States, Europe and Japan. We also have
programs with mass-market retailers where we provide marketing materials and
maintain floral displays for these retailers to ensure attractive presentation
and maintenance of high-quality flowers and arrangements.

Sales and Marketing

We have an international sales force to market floral products directly to
entities at the next level of the distribution chain. Sales and marketing are
conducted primarily on a one-to-one basis by telephone calls to established
accounts. Our salespeople are generally compensated on a commission basis or
through other incentive-based compensation programs that encourage employees
to build existing business as well as generate new customer relationships. In
addition, our wholesale distributors typically maintain limited "showroom"
space for walk-in business from trade customers in which hardgoods, such as
vases and ribbons, are displayed for sale. Trade customers can also examine
and select fresh flowers from on-site coolers.

In addition to our exclusive licensing arrangement with Sunkist Growers, we
have also established programs with mass-market retailers where our personnel
maintain floral displays for these retailers, to ensure attractive
presentation and maintenance of high-quality flowers.

We believe that our size and international presence will create
opportunities to promote other high-quality, brand-name products, principally
through direct sales techniques and retail promotions. In addition, we intend
to

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seek corporate account opportunities to market products to selected audiences
of employees and corporate purchasing personnel. We also have the ability to
privately label, repackage and distribute floral products, along with other
giftable products, on behalf of Internet and other retailers.

Internet Commerce

With the addition of our Blytheville distribution facility, we believe we
are well-positioned to provide fulfillment services to on-line retailers of
floral and other giftable products. Internet retailers, who have the capacity
to market flowers directly to customers, do not have the capabilities
necessary to buy the flowers and distribute them to the consumer. We, however,
have the ability to privately label, repackage and distribute floral products,
along with other giftable products, on behalf of these Internet retailers. In
February 1999, we established our Interactive Services Division. Raymond C.
Anderson, our Chief Information Officer, was appointed President of the
Interactive Services Division. Through this division, we plan to offer a
comprehensive line of floral products, packaging, shipping and fulfillment
services to a wide range of on-line retailers. We also have the ability to
work with and assist on-line retailers in implementing electronic data
interchange transaction sets to enable us to accept, process and distribute
orders in an efficient manner.

Sources of Supply

Principal sources of our supply are growers in Colombia and Ecuador in South
America, Holland in Europe, Africa, Israel, and to a lesser extent Australia,
Thailand and New Zealand in the Pacific Rim. Since we acquired Florimex on
September 30, 1998, we have had increased access to flowers grown throughout
the world. In addition, the acquisition of Florimex has created an opportunity
for our importers and wholesale distributors to buy flowers from our own
exporters and preferred suppliers around the world. Such intercompany
purchases should improve our operating margins.

Although we do not generally enter into contracts with our suppliers, we
actively manage relationships with a large number of growers, importers and
brokers to obtain high-quality flowers in amounts and at times needed. In
addition, when appropriate, we enter into standing order arrangements with
certain importers, which provide for fixed quantity purchases on a fixed price
basis throughout the year with higher quantities at that price during peak
demand periods, to ensure an adequate supply of flowers during periods of peak
demand. We buy our hardgood products from a number of suppliers. We believe
that we have good relationships with our suppliers and that alternative
sources of supply are readily available if necessary.

Customers

We have thousands of customers, consisting of other wholesale distributors
and bouquet companies, traditional florists, mass-market retailers and
Internet and catalog retailers. Certain other participants in the floriculture
industry, including wire services such as FTD and order aggregators such as 1-
800-FLOWERS (both of which rely upon traditional retail florists to fulfill
their orders), are also indirect customers for our products through the demand
that their orders generate at retail florists. We generally do not enter into
long-term sales contracts with our customers. We typically use purchase orders
and other sales documentation that apply only to the specific sale. No single
customer accounted for more than 5% of our actual or pro forma 1998 revenues.
To a limited extent, our subsidiary companies have historically been suppliers
to and customers of each other; we expect that these relationships will
continue in the future and may expand.

Competition

The distribution segment of the floriculture industry is highly competitive,
with numerous distributors in each market. We, however, are the only company
presently engaged in the vertical integration of floral products distribution
on an international scale. We compete regionally with other importers,
exporters, brokers, wholesale distributors and bouquet companies based upon
price, credit terms, breadth of product offerings, product quality, customer
service and location.

9
<PAGE>

Employees

As of March 15, 1999, we employed approximately 4,300 people. We believe
that our relations with all of our employees are good.

Factors Affecting Our Prospects

Our prospects may be affected by a number of factors, including the matters
discussed below:

Risks Related to Our Internal Growth Strategy

Key elements of our growth strategy are to become more profitable and to
continue to expand our net revenues. Our ability to increase net sales will be
affected by many factors, including:

. demand for, and pricing and availability of, floral products;

. prices and demand for our floral products;

. our ability to expand the range of products and services offered;

. the continued growth in flower sales by mass-market retailers and
supermarkets;

. implementation of our branding strategy and Internet commerce
initiative; and

. our ability to successfully enter new markets.

Many of these factors are beyond our control, and our strategies may not be
successful, or we may be unable to generate cash flows adequate for our
operations and to support internal growth. For example, while we believe that
we can build a brand identification that will command a premium price, our
branding strategy is unique to the floriculture industry and is still
untested. There is no guarantee that consumers will be willing to pay a
premium for branded products and that competition may result in downward
pressure on prices.

Likewise, our Internet commerce initiative is still in its infancy. Our
programs with Internet retailers may not be successful for several reasons,
including:

. quality control and return/refund issues;

. problems associated with direct shipping;

. risks related specifically to individual website providers such as
inadequate or ineffective advertising on their websites; and

. our inability to implement, and technical problems with, computer
hardware and software that is required for us to accept, process and
distribute electronic orders for products.

Risks Associated with Our International Sales and Operations

Since our acquisition of the businesses of Florimex on September 30, 1998,
we have been operating as importers, exporters, wholesale distributors and
bouquet companies throughout Europe and Asia. We may experience substantial
costs, delays or other operational difficulties in connection with integrating
the Florimex business. In addition, international operations are subject to
certain inherent risks, including:

. impact of recessions in economies outside the United States;

. prices and demand for our floral products;

. difficulty in accounts receivable collection and longer collection
periods;

. cost of enforcement of contractual obligations;

. difficulties and costs of managing international and decentralized
operations;

. limited protection for intellectual property rights in some countries;

. currency exchange rate fluctuations;

10
<PAGE>

. political and economic instability; and

. potentially adverse tax consequences.

In addition to dollars, our international revenues are denominated in local
currencies, predominately Deutsche Marks and Guilders. We currently engage in
limited currency hedging activities for the purpose of hedging payments and
receipts of foreign currencies related to the purchase and sale of goods
overseas. Future fluctuations in currency exchange rates may adversely affect
our revenues and operating income from international sales.

Risks Related to Operating Strategies

We have experienced extremely rapid growth. We believe that in order for us
to integrate effectively our acquired companies we must implement uniform
company-wide accounting and management information systems. Our implementation
of such systems is not yet complete. If we do not implement proper overall
business controls, our operating strategy could result in inconsistent,
inadequate or incorrect operating and financial practices at our current and
subsequently acquired operating subsidiaries, which could materially and
adversely affect our business, financial condition, results of operations and
cash flows.

Competition

The distribution segment of the floriculture industry is highly competitive,
with numerous distributors in each market. We compete with other importers,
exporters, brokers, wholesale distributors and bouquet companies, based upon
price, credit terms, breadth of product offerings, product quality, customer
service and location. To the extent that we are unable to compete successfully
against our existing and future competitors, our business, operating results,
financial condition and cash flows will be materially adversely affected.
While we believe that we compete effectively within our industry, additional
competitors with greater resources may enter the industry and compete
effectively against us. Also, if our customers do not accept our vertical
integration strategy, they have numerous alternative sources of supply.

We have several large competitors both in the United States and
internationally, and we may not be able to compete effectively with one or
more of our competitors. In addition, although in most regions throughout the
world the floriculture industry is highly fragmented and consists mainly of
small, family-owned firms, the industry has been changing and in certain
regions some of our large competitors have already established dominant market
share. For example, one of our competitors, an exporter/bouquet maker based in
Holland, presently provides the majority of the flowers to the supermarkets in
the United Kingdom. We may not be able to penetrate certain markets and, if we
are able to do so, we may not be able to compete effectively against our
established competitors.

We also may compete with other companies for suitable acquisition
candidates. We are aware of at least one other publicly traded company which
engages in a similar line of business and which has an acquisition strategy
that seems to be similar to ours. The existence of this competitor (or any
other company with a similar acquisition strategy) may result in increased
competition for suitable acquisition candidates and cause us to pay more for
companies we wish to acquire or to decide not to acquire certain companies
based upon price.

Seasonality

Our business is seasonal, with peak sales concentrated in the first and
second calendar quarters as a result of holidays such as Valentine's Day and
Mother's Day. In particular, a large portion of our annual revenues is derived
from sales of floral products for Valentine's Day, one of the largest flower-
giving holidays in the world. Historically, Valentine's Day sales have been
relatively lower in years in which the holiday falls on a Saturday or Sunday.
The past two years' Valentine's Day has fallen on the weekend.

11
<PAGE>

Weather and Other Factors

The supply of perishable floral products is significantly dependent on
weather conditions where the products are grown.

. Severe weather, including unexpected cold weather, may affect the
available supply of flowers at times of peak demand. For example, in
order for a sufficient supply of roses to be available for sale on
Valentine's Day, rose-growing regions must not suffer freezes or other
harsh conditions in the weeks leading up to the holiday.

. Aberrations in weather patterns, such as those attributed to El Nino may
also affect the available supply of flowers.

In addition to weather conditions, other factors, such as widespread disease
affecting plants, may also impact the available supply of flowers. Shortages
or disruptions in the supply of fresh flowers or our inability to purchase
such materials from alternate sources at acceptable prices in a timely manner
could lead to the loss of customers, which in turn could result in a material
adverse effect on our business, financial condition, results of operations and
cash flows.

Cyclicality

We believe that the floriculture industry is influenced by general economic
conditions and particularly by the level of personal discretionary spending,
and thus that the industry tends to experience periods of decline and
recession during economic downturns. The industry may experience sustained
periods of sales declines in the future, and any such decline may have a
material adverse effect on USA Floral.

We have in the past experienced quarterly variations in revenues, operating
income (including operating losses), net income (including net losses) and
cash flows. Certain of our operating subsidiaries have experienced net losses,
and negative fluctuations have been particularly pronounced in the third and
fourth calendar quarters. We expect to continue to experience such quarterly
fluctuations in operating results (including possible net losses). We believe
that, in addition to the factors mentioned above, such fluctuations may be due
to:

. an oversupply, or reduced price, of commodity floral products;

. the loss of a major customer; and

. additional selling, general and administrative expenses to acquire and
support new business and the timing and magnitude of required capital
expenditures.

We plan our operating expenditures based on revenue forecasts, and a revenue
shortfall below such forecasts in any quarter would likely adversely affect
our operating results for that quarter.

Dependence on Key Personnel

We believe our success will depend upon the efforts and abilities of Robert
J. Poirier, our co-founder, Chairman of the Board, President and Chief
Executive Officer, the other members of our management team and senior
management of our operating subsidiaries. While we have entered into
employment agreements with Mr. Poirier, other executive officers and senior
management of our operating subsidiaries, we cannot assure that such
individuals will remain with us throughout the terms of the agreements or
thereafter. If we lose the services of one or more of these key employees
before we are able to attract and retain qualified replacement personnel, our
business could be adversely affected.

Risks Related to Acquisition Financing

Because we intend to make selective strategic acquisitions, a portion of our
resources may be used for acquisitions. We cannot predict the timing, size,
success or cost of acquisition efforts. We currently intend to

12
<PAGE>

finance any future acquisitions by using our common stock, cash or a
combination of common stock and cash. However, if our stock price is low or if
potential acquisition candidates are unwilling to accept our stock as part of
the consideration, we may be required to use cash to complete acquisitions. If
we do not have sufficient cash resources, we will not be able to complete
acquisitions. We may not be able to obtain additional financing we may need
for our acquisition program on terms that we deem acceptable. In addition, if
we use our common stock for all or a portion of the consideration to be paid
for future acquisitions, our existing stockholders may experience dilution.

Amortization of Intangible Assets

Approximately $267.8 million, or 54%, of our total assets as of December 31,
1998 consists of goodwill. Goodwill is an intangible asset that represents the
difference between the aggregate purchase price for the net assets we have
acquired and the fair value of such assets. We are required to amortize the
goodwill from our acquisitions of our operating subsidiaries over a period of
time, with the amount amortized in a particular period constituting an expense
that reduces our net income for that period. In most cases, however, the
amount amortized will not give rise to a deduction for tax purposes. In
addition, we will be required to amortize the goodwill, if any, from any
future acquisitions. A reduction in net income resulting from the amortization
of goodwill may have an adverse impact upon the market price of our common
stock.

Risks Associated with Imported Products; Anti-dumping Liability

The majority of the perishable floral products that we distribute are of
foreign origin. These products are imported from suppliers located in more
than 60 countries on five continents. We import fresh flowers, including
roses, carnations and chrysanthemums, from abroad, principally from Colombia
and Ecuador in South America, Holland in Europe, Africa, Israel, and to a
lesser extent Australia, Thailand and New Zealand in the Pacific Rim. Civil or
political unrest in any of these countries could impact our ability to obtain
floral products at periods of peak demand or to obtain products at favorable
prices. We are subject to foreign currency exchange rate risk to the extent
that our purchases are denominated in currencies other than the currency in
which the products will be resold. We are also subject to the import and
export restrictions of various jurisdictions and are dependent to some extent
upon general economic conditions in and political relations with a number of
foreign countries. Although such restrictions and conditions have not had a
material impact on our operations to date, there can be no assurance that such
restrictions and conditions will not have a material adverse effect on our
business, financial condition, results of operations and cash flows.

As importers of perishable floral products, we are subject to the imposition
of anti-dumping duties. "Dumping" occurs when importers sell flowers in the
United States at prices below the flowers' home market value. The U.S.
Commerce Department investigates claims of dumping made by domestic growers.
If the U.S. Commerce Department determines that an importer sold flowers for a
price less than the home market value, it will impose an anti-dumping duty
upon the importer. The U.S. Commerce Department is currently conducting anti-
dumping reviews related to the sales of certain flowers imported from South
America. The U.S. Commerce Department has undertaken eleven reviews, the most
recent being for the period ended February 28, 1998. As a result of such
reviews, certain of our operating subsidiaries that import flowers have been
subject to anti-dumping duties. Although we do not own any operating
subsidiaries that grow flowers, certain of our operating subsidiaries that
import flowers impose a surcharge upon sales of flowers and maintain accruals
to offset any final duty that may be imposed. The surcharge is imposed
because, although "dumping" is an activity that is purportedly engaged in by
growers, not importers, any final duty assessed is paid by importers. In
effect, the surcharge helps our importers generate the cash necessary to pay
any finally- determined duties. However, the accrued balance maintained by
these operating subsidiaries may not be adequate to satisfy any duty that is
assessed. In addition, the U.S. Commerce Department may initiate additional
reviews at any time, and duties may be imposed on sales of flowers for which
our importers have not maintained accruals.

13
<PAGE>

Absence of Contractual Relationships with Our Customers

Companies in the floral products industry generally do not enter into sales
contracts that require customers to make purchases over any specific term.
Instead, sales are generally evidenced by purchase orders or similar
documentation limited to specific sales. As a result of these practices, our
customers generally have the right to terminate their relationships with us
without penalty and with little or no notice. Accordingly, a customer from
which we generate substantial revenue in one period may not be a substantial
source of revenue in a subsequent period. If our customers elect to reduce or
discontinue purchases from us, our business, financial condition, results of
operations and cash flows would be materially and adversely affected.

Potential Conflicts of Interest

We are subject to risks associated with potential conflicts of interest that
may arise out of the interrelationships among certain of our directors or
officers of our operating subsidiaries and related third-party entities with
which the operating subsidiaries conduct business transactions. John T.
Dickinson, President of our American Florist Supply, Inc. operating subsidiary
("American Florist") and a director, has an ownership interest in a rose farm,
Meadow Flowers, located in Ecuador, from which American Florist purchases
roses. Jeffrey E. Brothers, President of our Monterey Bay Bouquet, Inc.
operating subsidiary ("Monterey Bay") and a director, has a 50% interest in
Brothers Floral Associates, a vendor to Monterey Bay. Other such ownership
interests and potential conflicts may arise.

While we intend to conduct all related-party transactions on terms no less
favorable than those that we could negotiate with an unrelated third party, the
interests of such persons in their capacities with related third-party entities
may come into conflict with the interests of such persons in their capacities
with USA Floral. We believe that additional related-party transactions may
arise in connection with any future acquisitions.

Potential Influence of Executive Officers and Directors

As of March 15, 1999, our executive officers and directors beneficially owned
an aggregate of approximately 20.0% of the outstanding shares of our common
stock. Accordingly, if our executive officers and directors act together, they
may be able to exercise significant control over the election of directors and
matters requiring the approval of our stockholders. This concentration of
ownership may also have the effect of delaying or preventing a change in
control of our company and thus adversely affect the market price of our common
stock.

Shares Eligible for Future Sale

As of March 15, 1999, 15,939,538 shares of our common stock were outstanding.
The 5,750,000 shares we sold in our initial public offering ("IPO") are freely
tradeable without restriction or further registration under the Securities Act
of 1933, as amended (the "Securities Act"), unless acquired by an "affiliate"
of ours, as that term is defined in Rule 144 promulgated under the Securities
Act ("Rule 144"); shares held by affiliates will be subject to resale
limitations of Rule 144. Further, all of the 4,162,984 shares of common stock
issued to our co-founders and initial investors and to the stockholders of our
founding operating subsidiaries are currently available for resale, subject to
compliance with Rule 144. Of such 4,162,984 shares, 2,100,000 may be included
in certain registration statements that may be filed by us, in accordance with
piggyback registration rights granted to Messrs. Ledecky and Poirier, our co-
founders. Further, 2,913,520 shares of our common stock are issuable upon the
exercise of stock options that have been granted as of the date of this Form
10-K, of which options to purchase 659,957 shares are currently exercisable. We
have filed a registration statement on Form S-8 to register the issuance of our
shares of common stock issuable upon the exercise of certain of such options.
In addition, we have filed a registration statement on Form S-1 to register the
issuance of 12,500,000 shares from time to time in connection with merger or
acquisition transactions entered into by us; since our IPO, we have issued
approximately 5,676,234 of these shares to non-affiliates in connection with
the acquisitions of our operating subsidiaries. These shares may be sold in
accordance with the provisions of Rule 145 promulgated under the

14
<PAGE>

Securities Act subject to contractual lock-up periods contained in the
acquisition agreements for the acquisitions of our operating subsidiaries
subsequent to our IPO. The 6,823,766 shares of common stock which remain
available to be offered under that registration statement generally will be
freely tradeable after their issuance by persons not affiliated with USA
Floral, subject to compliance with Rule 145 under the Securities Act and any
contractual lock-up restrictions. Sales, or the availability for sale, of
substantial amounts of our common stock in the public market could adversely
affect prevailing market prices and our ability to raise equity capital and to
complete acquisitions in which all or a portion of the consideration is our
common stock.

Possible Volatility of Our Stock Price

The trading price of our common stock could be subject to significant
fluctuations in response to several factors, including our activities or our
competitors' activities, variations in our quarterly operating results,
changes in market conditions and other events or factors. Such other factors
may include, without limitation, the public markets' reaction (favorable or
unfavorable) to our announcements of a proposed acquisition or series of
acquisitions. Moreover, the stock market in the past has experienced
significant price and value fluctuations. The volatility of the market could
adversely affect the market price of our common stock and our ability to raise
equity in the public markets.

Certain Antitakeover Provisions

Certain provisions of our certificate of incorporation and bylaws and
Delaware law may make a change in the control of our company more difficult to
effect, even if a change in control were in our stockholders' interest. Under
our certificate of incorporation and bylaws, our board of directors is divided
into three classes of directors elected for staggered three-year terms. In
addition, we are subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibit us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
"interested stockholder," unless the business combination is approved in a
prescribed manner.

Year 2000 Issue

The Year 2000 Issue arises because certain computer programs were written
using two digits rather than four digits to define the applicable year. These
programs may not be able to process date information from and after January 1,
2000, or between years ending prior to December 31, 1999 and years commencing
on or after January 1, 2000. For example, date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations causing disruptions of
operations, including, among others, a temporary inability to process
transactions, send invoices or engage in similar ordinary business activities.
We have determined that we will be required to modify or replace significant
portions of our software and certain hardware so that those systems will
properly utilize dates beyond December 31, 1999. We believe that with
modifications or replacements of existing software and certain hardware, we
can mitigate the Year 2000 Issue. However, if such modifications and
replacements are not made, or are not completed timely, the Year 2000 Issue
could have a material impact on our operations. Additionally, even if our plan
to address the Year 2000 Issue is fully implemented, known or unknown Year
2000 Issues may have a material adverse effect on our business, financial
condition, results of operations and cash flows.

15
<PAGE>

Executive Officers of the Registrant

The following table sets forth certain information concerning each of the
executive officers of the Company as of March 15, 1999:

<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Robert J. Poirier....... 47 Chairman of the Board, President and Chief Executive Officer
Dwight Ferguson......... 42 Vice Chairman and President of our International Division
Christopher E. Wilson... 36 Chief Operating Officer
W. Michael Kipphut...... 45 Chief Financial Officer
Raymond C. Anderson..... 33 Vice President, Chief Information Officer, and President
of our Interactive Services Division
</TABLE>

Robert J. Poirier co-founded USA Floral in April 1997 and has since served
as our Chairman of the Board, President and Chief Executive Officer. Mr.
Poirier served as Vice President of 1-800-FLOWERS from 1993 until March 1997,
and was most recently responsible for that company's florist network
operations, consisting of 2,500 independent retail florists. From 1989 to
1993, Mr. Poirier served as Group Director of FTD. Mr. Poirier has been
employed in the floral products industry for 23 years, and has extensive
experience at all levels of the floral distribution channel.

Dwight Ferguson has served as our Vice Chairman and President of our
International Division since we acquired Florimex on September 30, 1998. For
five years prior to joining USA Floral, Mr. Ferguson was associated with
Florimex Worldwide GmbH, most recently as President and Chief Operating
Officer.

Christopher E. Wilson has served as our Chief Operating Officer since July
1998. Mr. Wilson oversees our North American operations. From 1994 to July
1998, Mr. Wilson served as the Division President of McLane Company, a
national distributor of products to convenience stores, mass merchandisers and
fast food restaurants and a subsidiary of WalMart Stores, Inc. From 1991 to
1994, Mr. Wilson served as a Business Manager and Regional Distribution
Manager of PepsiCo, Inc.

W. Michael Kipphut has been our Chief Financial Officer since October 1998.
From September 1994 to October 1998, Mr. Kipphut served as the Vice President
and Treasurer of Evenflo & Spalding, a global manufacturer and licensor of
branded consumer products. For 17 years prior to September 1994, Mr. Kipphut
was associated with Tyler Corporation, a multi-national, diversified holding
company, most recently as Vice President and Treasurer.

Raymond C. Anderson has been our Chief Information Officer and Vice
President since October 1998 and the President of our Interactive Services
Division since its inception in February 1999. From July 1997 to October 1998,
Mr. Anderson was our Chief Financial Officer. From May 1997 until September
1997, Mr. Anderson served as the President and Chief Operating Officer of The
Roy Houff Company, one of our operating subsidiaries. From April 1995 until
May 1997, Mr. Anderson served as the Vice President-Finance of The Roy Houff
Company. From 1991 until April 1995, Mr. Anderson was associated with the Tax
Division of Arthur Andersen & Co.

Item 2. Properties

Our corporate offices are located in leased space in Washington, D.C. at
1025 Thomas Jefferson Street, N.W., Suite 300 East, Washington, D.C. 20007.
The telephone number of our principal executive offices is (202) 333-0800.

In addition to our corporate offices and our facility in Blytheville,
Arkansas, we either lease or own distribution, sales and bouquet making
facilities in 26 states and 21 countries.

We believe that our facilities are adequate for our current operations.

16
<PAGE>

Item 3. Legal Proceedings

USA Floral and its subsidiaries are from time to time parties to lawsuits
arising out of our respective operations. We believe that any pending
litigation to which we or our subsidiaries are parties will not have a
material adverse effect upon our consolidated financial position or results of
operations.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

17
<PAGE>

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Market for Our Common Stock

Our common stock has been trading publicly on the Nasdaq National Market
under the symbol "ROSI" since October 10, 1997. On March 15, 1999, the last
sale price of our common stock was $11.938 per share. As of March 15, 1999,
there were approximately 400 holders of record of our common stock. The
following table sets forth the range of high and low bid prices for our common
stock for the periods indicated. Such over-the-counter market quotations
reflect inter- dealer prices, without retail mark-up, mark-down or commission,
and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1997
Fourth Quarter (October 10, 1997 to December 31, 1997)........ $21.000 $13.000
1998
First Quarter................................................. $24.563 $15.125
Second Quarter................................................ $23.813 $15.125
Third Quarter................................................. $19.313 $ 5.813
Fourth Quarter................................................ $12.563 $ 4.875
1999
First Quarter (January 1, 1999 to March 15, 1999)............. $17.625 $10.938
</TABLE>

We have never paid cash dividends on our common stock, nor do we anticipate
doing so in the foreseeable future because we intend to retain any earnings to
finance the expansion of our business and for general corporate purposes. Any
payment of future dividends will be at the discretion of our board of
directors and will depend upon, among other factors, our earnings, financial
condition, capital requirements, level of indebtedness, contractual
restrictions with respect to the payment of dividends and other considerations
that our board of directors deems relevant. In addition, our credit agreement
includes restrictions on our ability to pay dividends without the consent of
Bankers Trust Company, the agent for the various lenders under our credit
facility.

Recent Sales of Unregistered Securities

On February 27, 1998, we issued 141,750 shares of our Common Stock to John
T. Dickinson pursuant to an earn-out arrangement provided for in an Agreement
and Plan of Contribution with American Florist Supply, Inc., AFS Acquisition
Corp. and John T. Dickinson, dated as of August 5, 1997. The transaction was
intended to be exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof.

On February 27, 1998, we issued an aggregate of 177,187 shares of our Common
Stock to Jeffrey Brothers, Philip Buran and Douglas Anderson pursuant to an
earn-out arrangement provided for in an Amended and Restated Agreement and
Plan of Contribution with Monterey Bay Bouquet, Inc., Bay Area Bouquets, Inc.,
USA Floral Acquisition Co. and Jeffrey Brothers, Philip Buran and Douglas
Anderson, dated as of August 5, 1997. The transaction was intended to be
exempt from the registration requirements of the Securities Act by virtue of
Section 4(2) thereof.

On August 28, 1998, we granted Tanya Tolpegin an option to purchase 25,000
shares of Common Stock at an exercise price of $7.3125. The transaction was
intended to be exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof.

18
<PAGE>

On September 4, 1998, we granted Michael Brodsky an option to purchase
10,000 shares of Common Stock at an exercise price of $8.0000. The transaction
was intended to be exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof.

On September 4, 1998, we granted Paul Smith an option to purchase 5,000
shares of Common Stock at an exercise price of $8.0000. The transaction was
intended to be exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof.

On September 8, 1998, we granted Jill Henderson an option to purchase 5,000
shares of Common Stock at an exercise price of $9.2500. The transaction was
intended to be exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof.

On October 5, 1998, we granted Peter Kertesz an option to purchase 15,000
shares of Common Stock at an exercise price of $5.7500. The transaction was
intended to be exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof.

Item 6. Selected Financial Data

We acquired eight U.S. businesses in the floral industry (the "Founding
Companies") simultaneously with our IPO in October 1997. Since that time, we
acquired six U.S. businesses in January 1998 (the "January 1998 Class"), eight
businesses in April 1998 (the "April 1998 Class") and nine businesses in July
1998 (the "July 1998 Class"), and on October 1, 1998 acquired the businesses
of Florimex (the acquisitions of the Founding Companies, the January 1998
Class, the April 1998, the July 1998 Class and Florimex are referred to
collectively as the "Acquisitions"). The selected data (actual) include the
results of operations of USA Floral and the Founding Companies, the January
1998 Class, the April 1998 Class, the July 1998 Class and Florimex subsequent
to their acquisitions. The 1998 pro forma data presents our combined results
of operations as if the 1998 acquisitions had occurred on January 1, 1998. The
pro forma amounts give effect to certain adjustments, including amortization
of intangible assets, interest expense on incremental financing, reduction in
salary, bonuses and benefits in connection with the 1998 acquisitions.

19
<PAGE>

<TABLE>
<CAPTION>
April 22, 1997 Year Year
through Ended Ended
December 31, December 31, December 31,
1997 1998 1998
(Actual) (Actual) (Pro Forma)
-------------- ------------ ------------
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations:
Net revenue............. $37,380 100.0% $589,034 100.0% $999,793 100.0%
Cost of sales........... 26,685 71.4% 429,012 72.8% 758,744 75.9%
------- ----- -------- ----- -------- -----
Gross margin............ 10,695 28.6% 160,022 27.2% 241,049 24.1%
Selling, general and
administrative
expenses............... 9,791 26.2% 129,551 22.0% 198,157 19.8%
Goodwill amortization... 275 0.7% 4,768 0.8% 6,755 0.7%
Integration charges..... -- 0.0% 3,361 0.6% 6,333 0.6%
Write-off of deferred
financing fees......... -- 0.0% 1,606 0.3% -- 0.0%
------- ----- -------- ----- -------- -----
Income from operations.. 629 1.7% 20,736 3.5% 29,804 3.0%
Interest expense ....... (8) 0.0% (8,040) (1.4)% (16,054) (1.6)%
Interest income......... 248 0.7% 1,883 0.3% 2,627 0.2%
Other income............ 37 0.0% 449 0.1% 988 0.1%
------- ----- -------- ----- -------- -----
Income before income
taxes
and minority interest.. 906 2.4% 15,028 2.5% 17,365 1.7%
Provision for income
taxes.................. 490 1.3% 7,255 1.2% 8,095 0.8%
------- ----- -------- ----- -------- -----
Income before minority
interest............... 416 1.1% 7,773 1.3% 9,270 0.9%
Minority interest....... -- 0.0% (30) 0.0% (78) 0.0%
------- ----- -------- ----- -------- -----
Net income.............. $ 416 1.1% $ 7,743 1.3% $ 9,192 0.9%
------- ----- -------- ----- -------- -----
Net income per share:
Basic................. $ 0.09 $ 0.54 $ 0.58
Diluted............... $ 0.09 $ 0.52 $ 0.56
Shares used in computing
net income per share:
Basic................. 4,734 14,376 15,919
Diluted............... 4,824 14,789 16,395
</TABLE>

<TABLE>
<CAPTION>
December 31, December 31,
1997 1998
------------ ------------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Working capital....................................... $ 21,454 $ 40,643
Total assets.......................................... 107,248 494,034
Short-term debt....................................... 290 5,005
Total long-term debt.................................. 309 194,668
Stockholders' equity.................................. 86,165 185,625
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

General

USA Floral is the largest integrated distributor of floral products in the
world. We:

. import, export and distribute floral products and floral-related
hardgoods;

. engage in brokerage and shipping services for wholesale distributors of
both international and domestic cut flowers;

20
<PAGE>

. provide floral fulfillment services to non-store retailers; and

. provide in-store merchandising services to certain supermarkets and
mass-market retailers.

We derive our revenues from the sale of perishable floral products and
floral-related hardgoods. Sales of perishable products, which include cut
flowers, bouquets and potted plants, accounted for approximately 95% of our
actual revenues in 1998. Sales of floral-related hardgoods, which include
vases and glassware, foam for flower arranging, tools and other supplies,
accounted for approximately 5% of our actual revenues in 1998.

We recognize net sales upon the shipment of products to our customers. Cost
of sales generally includes the cost of perishable products and floral-related
hardgoods plus the cost of in-bound freight. In addition, the cost of sales
for bouquet companies also includes production costs. Although we generally do
not enter into long-term contracts with our suppliers, we do conduct business
on a fixed-price "standing order" basis with certain importers in order to
insure an adequate supply of flowers during periods of peak demand. In
general, our operating subsidiaries have been able to pass on most of their
direct price increases to customers, however, this may not be the case in the
future. Our selling, general and administrative expenses include warehouse and
customer delivery expenses, employee salaries and benefits, telephone
expenses, advertising and promotional expenses, depreciation and occupancy
costs.

Results of Operations (shares in thousands)

The following discussion should be read in conjunction with Item 6--Selected
Financial Data and the our Consolidated Financial Statements the related notes
thereto appearing elsewhere in this Form 10-K.

From our inception on April 22, 1997 until our IPO and the acquisition of
our Founding Companies on October 16, 1997, we had minimal corporate activity.
Thus, our 1997 results of operations only contain two and one half months of
activity in a quarter with historically low revenues due to lack of flower
giving holidays in that period. In 1998, we acquired 24 additional businesses
with worldwide operations in 19 countries. Consequently, comparisons between
actual 1998 and actual 1997 results would not be meaningful and therefore are
not discussed below as typically provided in the MD&A. Instead, we discuss the
major components of our operations that have been significantly impacted by
our acquisition and integration strategy.

We acquired Florimex, a company with full year pro forma 1998 revenues of
approximately $412 million, on September 30, 1998. The acquisition was
accounted for using the purchase method of accounting and therefore Florimex's
results from operations are only included in our 1998 actual results from
October 1, 1998 to December 31, 1998. As a result, it would not be meaningful
to compare pro forma 1998 and actual 1998 results. With the Florimex
acquisition, we established an International Division and organized USA Floral
into two major segments: the International Division and the North America
Division. Since the Florimex acquisition did not occur until 1998 there were
no International Division operations in 1997. As such, comparisons on a
segment basis would not be meaningful between years.

For the period April 22, 1997 (inception) to December 31, 1997 (Actual)

Net Revenues. Net revenues for the period from inception (April 22, 1997)
through December 31, 1997 were $37.4 million. The Company had no significant
revenues until October 16, 1997, the date of the Founding Company mergers.

21
<PAGE>

Cost of Sales. Cost of sales for the period ended December 31, 1997 was
$26.7 million. Cost of sales as a percentage of net sales was 71.4%, resulting
in a gross profit margin of 28.6%.

Selling, General and Administrative. Selling, general and administrative
expenses were $9.8 million for the period ended December 31, 1997. Selling,
general and administrative expenses for the period were 26.2% as a percentage
of net sales.

Income from Operations. Income from operations was $0.6 million for the
period from inception through December 31, 1997. Income from operations was
negatively impacted by the additional expense of being a public company.

Interest Expense. Substantially all lines of credit and other bank debt
assumed by the Company in connection with the acquisition of the Founding
Companies were repaid in full concurrent with the IPO. As a result, the
Company incurred only minimal interest expense for the period ended December
31, 1997.

Provision for Income Taxes. The provision of for income taxes was $490
thousand for the period ended December 31, 1997 on pre-tax income of $906
thousand for the period. The 1997 effective income rate of 54% is higher than
the statutory primarily due to the non-deductibility of goodwill amortization.

Net Income. The Company had net income of $0.4 million for the period from
inception to December 31, 1997, or $0.09 per share based upon 4,734 weighted
average shares (basic) outstanding and $0.09 per share based upon 4,824
weighted average shares (diluted) outstanding. The Company believes that net
income for the period is not meaningful because the Company had no significant
revenues until October 16, 1997. The Company believes that net income per
share data for the period is also not meaningful as it reflects a weighted
average of shares outstanding over the period which is significantly less than
the number of shares outstanding on December 31, 1997.

For the year ended December 31, 1998 (Actual)

Net Revenues. Net revenues for the year ended December 31, 1998 were $589.0
million. Revenues increased from $37.4 million in 1997. This increase was
primarily due to the acquisition of 24 floral businesses completed during
1998, all of which were accounted for under the purchase method of accounting,
coupled with the impact of a full year of operations of the Founding
Companies. Revenues for the North America Division were $480.9 million, or
81.6%, of the consolidated revenues and revenues for the International
Division were $108.1 million, or 18.4%. Revenues for the International
Division consisted primarily of revenues from Germany, the Netherlands, Italy
and Japan.

Cost of Sales. Cost of sales for the year ended December 31, 1998 was $429
million. Cost of sales as a percentage of net revenues was 72.8%, resulting in
a gross profit margin of 27.2%.

Selling, General and Administrative. Selling, general and administrative
expenses were $130 million for the year ended December 31, 1998. Selling,
general and administrative expenses for the period were 22% as a percentage of
net revenues.

Integration charge. As part of our increased focus on operational matters,
we are pursuing cost reduction measures including the elimination of
duplicative facilities, the consolidation of certain operating functions and
the deployment of common information systems. In implementing these cost
reduction measures, we have incurred, and may incur in the future, certain
integration charges associated with such cost reduction measures.

22
<PAGE>

obsolete or redundant, severance, and lease termination costs due to the
decision to merge certain facilities. The severance cost relates to employees
who were notified during the fourth quarter that their positions were being
eliminated. The integration of the warehouses and distribution facilities
began in November 1998 and is expected to be completed by September 30, 1999.
We expect to realize annualized cost savings of approximately $7.0 million, of
which $5.5 million will be realized in 1999, principally in the third and
fourth quarters.

Write-off of deferred financing fees. We recorded a charge of approximately
$1.6 million in the fourth quarter of 1998 to write-off the unamortized
portion of the financing fee related to our original credit agreement, which
was amended and restated in October 1998.

Income from operations. Income from operations was $20.7 million, or 3.5% of
net revenues, for the year ended December 31, 1998. Income from operations
before integration charges and the write-off of deferred financing fees was
$25.7 million, or 4.4% of net revenues, for the year ended December 31, 1998.

Interest Expense. Substantially all lines of credit and other bank debt
assumed by us in connection with the acquisitions consummated in 1998 were
paid in full. Our outstanding debt primarily relates to our amended and
restated credit agreement. For the year ended December 31, 1998, interest
expense was approximately $8 million. The amount of interest expense is
consistent with the timing of the draw downs on the credit facility to
facilitate our acquisition strategy.

Provision for Income Taxes. The provision for income taxes was $7.2 million
for the year ended December 31, 1998 on pre-tax income of $15.0 million for
the period. The 1998 effective income rate of 48% is higher than the statutory
rate primarily due to the non-deductibility of goodwill amortization.

Net Income. We had net income of $7.7 million for the year ended December
31, 1998, or $0.54 per share based upon weighted average shares (basic)
outstanding and $0.52 per share based upon weighted average shares (diluted)
outstanding.

For the year ended December 31, 1998 (Pro Forma)

During 1998, we consummated the acquisitions of 24 floral businesses,
including the acquisition of Florimex.

The following discusses the 1998 pro forma information of our combined
results of operations as if the 1998 acquisitions had occurred on January 1,
1998. The pro forma amounts give effect to certain adjustments, including
amortization of intangible assets, interest expense on incremental financing,
reduction in salary, bonuses and benefits in connection with the 1998
acquisitions.

Net Revenues. Net revenues for the year ended December 31, 1998 were $999.8
million.

Cost of Sales. Cost of sales for the year ended December 31, 1998 was $758.7
million. Cost of sales as a percentage of net sales was 75.9%, resulting in a
gross profit margin of 24.1%.

Selling, General and Administrative. Selling, general and administrative
expenses were $198.2 million for the year ended December 31, 1998. Selling,
general and administrative expenses for the period were 19.8% as a percentage
of net sales.

Integration charges. As part of our increased focus on operational matters,
we are pursuing cost reduction measures including the elimination of
duplicative facilities, the consolidation of certain operating functions and
the deployment of common information systems. In implementing these cost
reduction measures, we have incurred, and may incur in the future, certain
integration charges associated with such cost reduction measures.

23
<PAGE>

In the fourth quarter of 1998, we recorded an integration charge of
approximately $3.4 million (see Note 13 of the Notes to the Consolidated
Financial Statements). During the fourth quarter, we initiated an integration
plan to integrate certain warehouse and distribution facilities principally
associated with our import and bouquet operations in Miami, Florida. This
charge principally relates to the write-down to fair value of equipment made
obsolete or redundant, severance, and lease termination costs due to the
decision to merge certain facilities. The severance cost relates to employees
who were notified during the fourth quarter that their positions were being
eliminated. The integration of the warehouses and distribution facilities
began in November 1998 and is expected to be completed by September 30, 1999.
We expect to produce annualized cost savings of approximately $7.0 million, of
which $5.5 million will be realized in 1999, principally in the third and
fourth quarters.

In June 1998, prior to our acquisition of Florimex, the management of
Florimex put into place an integration plan to integrate certain operations,
warehouse and distribution facilities. The integration plan principally
involved certain operations, warehouse and distribution facilities associated
with Florimex's operations in Germany and the Netherlands. Florimex incurred
approximately a $3.0 million pre-tax charge principally related to severance
costs due to the decision to merge and integrate certain facilities. The
integration of the operations, warehouses and distribution facilities is
expected to be completed by September 30, 1999.

Write-off of deferred financing fees. This charge would not have existed on
a pro forma basis, which assumes that the Amended Credit Agreement (see
below), necessary to fund the 1998 acquisitions, was in place on January 1,
1998.

Income from operations. Income from operations was $29.8 million, or 3.0% of
net revenues, for the year ended December 31, 1998. Income from operations
before integration charges was $36.1 million, or 3.6% of net revenues, for the
year ended December 31, 1998.

Provision for Income Taxes. The pro forma provision for income taxes was
$8.1 million for the year ended December 31, 1998 on pre-tax income of $17.4
million for the period. The 1998 effective income rate of 47% is higher than
the statutory rate primarily due to the non-deductibility of goodwill
amortization.

Net Income. We had pro forma net income of $9.2 million for the year ended
December 31, 1998, or $0.58 per share based upon weighted average shares
(basic) outstanding and $0.56 per share based upon weighted average shares
(diluted) outstanding.

Liquidity and Capital Resources

Our principal sources of liquidity have historically been cash flows from
operating activities and borrowings. To date, approximately $197 million has
been used to fund the cash portion of the consideration paid in connection
with the Acquisitions.

Effective October 2, 1998, we amended and restated our existing credit
agreement with a syndicate of lenders for which Bankers Trust Company serves
as agent (the "Amended Credit Agreement"). Pursuant to the terms of the
Amended Credit Agreement, the amount of our revolving credit facilities was
increased to $200 million, of which the sub-limit for permitted acquisitions
is $180 million and the sub-limit for working capital purposes and letters of
credit is $20 million. In addition, of the $200 million in revolving credit
facilities, up to $15 million has been designated to be a revolving loan which
is available to certain of our foreign subsidiaries in either Deutsche Marks
or Guilders. Finally, a new $50 million, Deutsche Mark denominated term loan
was created as an additional source of borrowings in excess of the $200
million revolving credit facilities. Borrowings under the revolving credit
facilities bear interest, at our option, at (a) Bankers Trust Company's base
rate plus an

24
<PAGE>

applicable margin of up to 1.0% or (b) a Eurodollar rate plus an applicable
margin of up to 2.25%. Borrowings under the term loan bear interest at the
interbank rate for Deutsche Marks plus an applicable margin of up to 2.25%. We
paid on closing a financing fee of approximately $3.6 million, which has been
deferred and will be amortized over the term of the Amended Credit Agreement.
In addition, a commitment fee of 0.50% will be charged on the unused portion of
the revolving credit facilities on a quarterly basis. Both the revolving credit
facilities and the term loan mature five years from the closing date.

The entire $50 million proceeds of the new term loan and $54.1 million of the
borrowings available under the revolving credit facilities were used to finance
the aggregate purchase price of approximately $90 million (including the
repayment of indebtedness) and related transactional expenses for the purchase
of the businesses of Florimex and a for a working capital infusion for USA
Floral. In addition, on October 2, 1998, we rolled over approximately $86.5
million in outstanding borrowings, accrued interest and related fees under our
existing revolving credit facility, so that the aggregate indebtedness under
both the revolving credit facilities and the term loan was approximately $190
million. The proceeds of the outstanding borrowings under the revolving credit
facility prior to its amendment on October 2, 1998 were used to finance
acquisitions and fund related working capital requirements.

Our capital expenditures for the year ended December 31, 1998 were
approximately $5.9 million. These capital expenditures were primarily for
vehicles, machinery, office equipment and computer equipment and software,
building additions and facility upgrades. Although we currently do not have any
commitments to make significant capital expenditures, we expect to expend
approximately $8 million for capital expenditures in the next twelve months in
the normal course of business and $6 million for our Year 2000 project (see
below) to remediate existing systems and replace non-compliant systems.
Additionally, we are exploring opportunities to significantly enlarge our
Blytheville, Arkansas facility to accommodate the importation and distribution
of flowers throughout North America.

Excluding capital requirements for future acquisitions, if any, which we
cannot currently predict, we believe that funds generated from operations,
together with borrowings under the Amended Credit Agreement, should be
sufficient to finance our current operations and planned capital expenditure
requirements for at least the next twelve months; thereafter, we do not
currently perceive needs for cash (other than future acquisitions, if any, that
we may choose to finance in whole or in part with cash) that would exceed
anticipated sources of cash from operation and under credit facilities
currently in place. To the extent that we are successful in consummating future
acquisitions, if any, it may be necessary to finance such acquisitions through
the issuance of additional equity securities, incurrence of indebtedness, or a
combination of both. Such additional equity issuances or incurrences of
indebtedness may not be possible, or if possible may not be available on terms
acceptable to us.

Year 2000

We have been conducting a comprehensive review of our computer systems to
identify those systems that could be adversely affected by the "Year 2000
Issue" (which refers to the inability of many computer systems to process
accurately dates later than December 31, 1999), and are executing a plan to
remediate or replace affected systems.

Our Year 2000 compliance project includes four phases: (1) evaluation of our
owned or leased systems and equipment to identify potential Year 2000
compliance issues; (2) remediation or replacement of any systems and equipment
determined to be non-compliant (and testing of remediated systems before
returning them to production); (3) inquiry regarding Year 2000 readiness of
material business partners and other third parties on whom our business is
dependent; and (4) development of contingency plans, where feasible, to address
potential third party non-compliance or failure of any of our material systems.

The initial phase of Year 2000 compliance project included the evaluation of
all software, hardware and equipment we own or license, and identification of
those systems and equipment requiring Year 2000 remediation. Analysis of all
material software and hardware has been completed and of those systems
requiring

25
<PAGE>

remediation or replacement, approximately 35% (or 50% of all system users)
have already been replaced by Year 2000 compliant hardware and software. We
anticipate that all remaining material systems will be remediated or replaced
by October 1999.

The costs and timing for replacement of certain of our systems that were not
Year 2000 compliant have been anticipated as part of our planned information
systems spending. We estimate that the total additional cost of managing our
Year 2000 project, remediating existing systems and replacing non-compliant
systems will be approximately $6.0 million of which approximately $0.3 million
will be expensed as incurred, and $5.7 million will be capitalized. Our
efforts on Year 2000 compliance issues did not result in material expenditures
during 1998. Although we believe our Year 2000 compliance efforts with respect
to our systems will be successful, any failure or delay could cause actual
costs and timing to differ materially from that presently contemplated. We
intend to develop a contingency plan to permit our primary operations to
continue if modifications and conversions of our systems are not successfully
completed on a timely basis, but the foregoing cost estimates do not take into
account any expenditures associated with such contingencies. Our cost
estimates also do not include time or costs that may be incurred as a result
of third parties not becoming Year 2000 compliant on a timely basis.

We are communicating with our business partners, including the key
suppliers, vendors, banks and other third parties with whom we do business, to
obtain information regarding their state of readiness with respect to the Year
2000 issue. Failure of third parties to remediate Year 2000 issues affecting
their respective businesses on a timely basis, or to implement contingency
plans sufficient to permit uninterrupted continuation of their businesses in
the event of a failure of their systems, could have a material adverse effect
on our business and results of operations. Assessment of third party Year 2000
readiness is expected to be substantially completed by May 1999. We will not
be able to determine our most reasonably likely worse case scenario until the
assessment of third parties' Year 2000 compliance is completed.

Our Year 2000 compliance project includes development of a contingency plan
designed to support critical business operations in the event of the
occurrence of systems failures or the occurrence of reasonably likely worst
case scenarios. We anticipate that contingency plans will be substantially
developed by July 1999.

We may not be able to compensate adequately for business interruption caused
by certain third parties. Potential risks include suspension or significant
curtailment of service or significant delays by banks, utilities or common
carriers, or at U.S. and international ports of entry and export. Our business
also could be materially adversely affected by the failure of governmental
agencies to address Year 2000 issues affecting our operations. For example, a
significant amount of our merchandise is grown outside the United States, and
we are dependent upon the issuance by foreign governmental agencies of export
visas for, and upon the U.S. Custom Service to process and permit entry into
the United States of, such merchandise. If failures in government systems
result in the suspension or delay of these agencies' services, we could
experience significant interruption or delays in our product flow.

The costs and timing for completion of our Year 2000 compliance,
modification and testing processes are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, the success of third parties'
Year 2000 compliance efforts and other factors. There can be no assurance that
these assumptions will be realized or that actual results will not vary
materially.

Seasonality and Cyclicality; Fluctuations in Quarterly Operating Results

Unit sales of floral products have historically been seasonal, concentrated
primarily in the first and second calendar quarters as a result of holidays
such as Valentine's Day and Mother's Day. In particular, a significant portion
of our annual revenues is derived from sales of floral products for
Valentine's Day, one of the largest flower-giving holidays in the world.

26
<PAGE>

We believe that the floriculture industry is influenced by general economic
conditions and particularly by the level of personal discretionary spending
and that the industry tends to experience periods of decline and recession
during economic downturns. The industry may experience sustained periods of
sales declines in the future, and any such decline may have a material adverse
effect on us.

Our operating subsidiaries have historically experienced quarterly
variations in revenues, operating income (including operating losses), net
income (including net losses) and cash flows. Certain of our operating
subsidiaries have experienced net losses and negative fluctuations have been
particularly pronounced in the third and fourth calendar quarters. We expect
to continue to experience such quarterly fluctuations in operating results
(including possible net losses) due to the factors discussed above, and we may
also experience quarterly fluctuations as a result of other factors, including
an oversupply of, or diminishing sales price of, commodity floral products,
the loss of a major customer, additional selling, general and administrative
expenses to acquire and support new business and the timing and magnitude of
required capital expenditures. Our operating expenditures are planned based on
revenue forecasts, and a revenue shortfall below such forecasts in any quarter
would likely adversely affect our operating results for that quarter.

The following table sets forth selected pro forma combined results of
operations and our actual results of operations on a quarterly basis for the
year ended December 31, 1998:

<TABLE>
<CAPTION>
1998 Quarter
------------------------------------------------
First Second Third Fourth Total
Consolidated--Pro Forma (1) -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues................. $288,966 $268,359 $198,528 $243,940 $999,793
Percentage of annual
revenues.................... 28.9% 26.8% 19.9% 24.4% 100.0%
Operating income (loss)
before integration charges.. $ 14,875 $ 14,093 $ (186) $ 7,355 $ 36,137
Operating income (loss)...... $ 14,875 $ 11,121 $ (186) $ 3,994 $ 29,804
<CAPTION>
1998 Quarter
------------------------------------------------
First Second Third Fourth Total
Consolidated--Actual (2) -------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues................. $100,520 $133,775 $110,799 $243,940 $589,034
Percentage of annual
revenues.................... 17.1% 22.7% 18.8% 41.4% 100.0%
Operating income before
integration charges and
write-off of deferred
financing fees.............. $ 7,178 $ 9,955 $ 1,215 $ 7,355 $ 25,703
Operating Income............. $ 7,178 $ 9,955 $ 1,215 $ 2,388 $ 20,736
</TABLE>
- --------
(1) The 1998 pro forma data presents our combined results of operations as if
the 1998 acquisitions had occurred on January 1, 1998. The pro forma
amounts give effect to certain adjustments, including amortization of
intangible assets, interest expense on incremental financing, reduction
in salary, bonuses and benefits in connection with the 1998 acquisitions.

(2) The selected data (actual) include the results of operations of USA
Floral, the Founding Companies, the January 1998 Class, the April 1998
Class, the July 1998 Class and Florimex subsequent to their acquisitions.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We use derivative financial instruments for the purpose of reducing our
exposure to adverse fluctuations in interest and foreign exchange rates. While
these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures
being hedged. We are not a party to leveraged derivatives and do not hold or
issue financial instruments for speculative purposes.

27
<PAGE>

We utilize interest rate swaps to reduce the impact on interest expense of
fluctuating interest rates on our variable rate debt. Under our interest rate
swap agreement, we agreed with the counterparty to exchange, at quarterly
intervals, the difference between our fixed pay rate and the counterparty's
variable pay rate of three-month LIBOR.

We use foreign currency forwards and options, which typically expire within
30 days, to hedge payments and receipts of foreign currencies related to the
purchase and sale of goods overseas. Realized gains and losses on these
contracts are recognized in the same period as the hedged transactions.

The U.S. dollar is the functional currency for substantially all of our
consolidated operations. For these operations, all gains and losses from
currency transactions are included in income currently. For certain foreign
equity investments, the functional currency is the local currency. The
cumulative translation effects for equity investments using functional
currencies other than the U.S. dollar are included in the cumulative
translation adjustment in stockholders' equity.

Item 8. Financial Statements and Supplementary Data

The information set forth under the caption "Financial Statements and
Supplementary Data" under Item 14 of Part IV of this Annual Report on Form 10-
K is incorporated herein by reference in response to this Item 8.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

Not applicable.

28
<PAGE>

PART III

Item 10. Directors and Executive Officers of the Registrant

The information set forth under the captions "Election of Directors" and
"Other Matters" in the Proxy Statement, and the information set forth in Item
1, "Business--Executive Officers of the Registrant" is incorporated herein by
reference in response to this Item 10.

Item 11. Executive Compensation

The information set forth under the caption "Executive Compensation,"
"Compensation Committee Report on Executive Compensation," and "Performance
Graph" in the Proxy Statement is incorporated herein by reference in response
to this Item 11.

Item 12. Security Ownership of Certain Beneficial Owners and Management

The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated
herein by reference in response to this Item 12.

Item 13. Certain Relationships and Related Transactions

The information set forth under the subcaption "Executive Compensation--
Compensation Committee Interlocks and Insider Participation" and "Certain
Relationships and Related Party Transactions" in the Proxy Statement is
incorporated herein by reference in response to this Item 13.

29
<PAGE>

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1) Financial Statements and Supplementary Data. The following Financial
Statements of the Company are filed with this Form 10-K:

Report of Independent Accountants;

Consolidated Balance Sheet at December 31, 1998 and 1997;

Consolidated Statement of Operations for the year ended December 31,
1998 and for the period April 22, 1997 (inception) to December 31,
1997;

Consolidated Statement of Cash Flows for the year ended December 31,
1998 and for the period April 22, 1997 (inception) to December 31,
1997; and

Consolidated Statement of Stockholder's equity at December 31, 1998
and 1997.

(a)(2) Financial Statement Schedules. All financial statement schedules are
omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto listed above in
Item 14(a)(1).

(a)(3) Exhibits. The Exhibits listed below are filed or incorporated by
reference as part of this Form 10-K. Where so indicated by footnote,
exhibits which were previously filed are incorporated by reference.
For exhibits incorporated by reference, the location of the exhibit in
the previous filing is indicated parenthetically.

2.02 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. (Exhibit 2.2)/1/

2.03 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., EFI Acquisition Corp., EFM Acquisition Corp.,
Everflora, Inc., Everflora Miami, Inc. and the Stockholder named
therein dated January 16, 1998. (Exhibit 2.11)/2/

2.04 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., LF Acquisition Corp., H&H Flowers, Inc. and the
Stockholders named therein made effective as of January 16, 1998.
(Exhibit 2.12)/2/

2.05 Agreement and Plan or Reorganization by and among U.S.A. Floral
Products, Inc., UF Acquisition Corp., UltraFlora Corporation and the
Stockholders named therein made effective as of January 16, 1998.
(Exhibit 2.13)/2/

2.06 Agreement and Plan or Reorganization by and among U.S.A. Floral
Products, Inc., KDI Acquisition Corp., Koehler & Dramm, Inc. and the
Stockholders named therein made effective as of January 16, 1998.
(Exhibit 2.14)/2/

2.07 Stock Purchase Agreement by and among U.S.A. Floral Products, Inc.,
Maxima Farms, Inc., Maxima Farms, Ltd. and the principal beneficial
owner of Maxima Farms, Ltd. made effective as of April 3, 1998.
(Exhibit 2.15)/3/

</TABLE>

30
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.08 Share Purchase Agreement by and among U.S.A. Floral Products, Inc.,
David L. Jones Wholesale, Ltd. and the Shareholders named therein
made effective as of April 3, 1998. (Exhibit 2.16)/3/

2.09 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., EFTA Acquisition Corp., Elite Farms, Talent, Inc.,
Anvacu, Inc., the Stockholders named therein and the beneficial
owners named therein made effective as of April 3, 1998. (Exhibit
2.17)/3/

2.10 Stock Purchase Agreement by and among U.S.A. Floral Products, Inc.,
Selecta Farms, Inc., Saint Ann Trading Corporation, Juecla Investment
Corporation and persons named therein made effective as of April 3,
1998. (Exhibit 2.18)/3/

2.11 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., SAB Acquisition Corp., Master Flowers Inc. and the
Stockholders named therein made effective April 3, 1998. (Exhibit
2.19)/3/

2.12 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., FFI Acquisition Corp., Edfrancar, Inc. and the
Stockholders named therein made effective as of April 3, 1998.
(Exhibit 2.20)/3/

2.13 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., ASG Acquisition Corp., AFB Marketing, Inc. and the
Stockholders named therein made effective as of April 3, 1998.
(Exhibit 2.21)/3/

2.14 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., PFW Acquisition Corp., RCF Acquisition Corp., Pacific
Floral Wholesale, Inc., Rose City Floral, Inc. and the Stockholder
named therein made effective as of April 3, 1998. (Exhibit 2.22)/3/

2.15 Stock and Asset Purchase Agreement by and between DIMON Incorporated
and Florimex Worldwide GmbH, and U.S.A. Floral Products, Inc.
(Exhibit 2.1)/4/

3.01 Certificate of Incorporation of U.S.A. Floral Products, Inc., as
amended. (Exhibit 3.01)/5/

3.02 Amended and Restated Bylaws of U.S.A. Floral Products, Inc. (Exhibit
3.02)/5/

4.01 Credit Agreement among U.S.A. Floral Products, Inc., U.S.A. Floral
Products Germany GmbH & Co. KG, Florimex Worldwide B.V., Various
Lending Institutions, Bayerische Hypo-Und Vereinsbank AG, as
Syndication Agent, BankBoston, N.A., as Documentation Agent, and
Bankers Trust Company, as Arranger and Administrative Agent, dated as
of October 16, 1997 and Amended and Restated as of October 2, 1998.
(Exhibit 4.1)/4/

4.01(a) Consent to Credit Agreement among U.S.A. Floral Products, Inc.,
various Lending Institutions and Bankers Trust Company, as Agent,
dated as of January 26, 1998. (Exhibit 4.01(a))/2/
4.01(b) First Amendment to Credit Agreement, dated as of November 2, 1998,
among U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co.
KG, Florimex Worldwide B.V., the lenders party to the Credit
Agreement, Bayerische Hypo-Und Vereinsbank AG, as Syndication Agent,
BankBoston, N.A., as Documentation Agent, and Bankers Trust Company
as Arranger and Administrative Agent./6/

4.01(c) Second Amendment and consent, dated as of December 29, 1998, among
U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co. KG,
Florimex Worldwide B.V., the lenders party to the Credit Agreement,
Bayerische Hypo-Und Vereinsbank AG, as Syndication Agent, BankBoston,
N.A. as Documentation Agent, and Bankers Trust Company, as Arranger
and Administrative Agent./6/

10.01 U.S.A. Floral Products, Inc. 1997 Long-Term Incentive Plan. (Exhibit
10.10)/5/*

10.02 U.S.A. Floral Products, Inc. 1997 Non-Employee Directors' Stock Plan.
(Exhibit 10.11)/5/*

10.03 U.S.A. Floral Products, Inc. 1997 Employee Stock Purchase Plan.
(Exhibit 10.12)/5/

10.04 Employment Agreement between U.S.A. Floral Products, Inc. and Robert
Poirier, dated as of December 1, 1998/6/*

</TABLE>

31
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.05 Employment Agreement between U.S.A. Floral Products, Inc. and Raymond
C. Anderson, dated October 9, 1997. (Exhibit 10.13)/5/*

10.06 Employment Agreement between The Roy Houff Company and Roy O. Houff,
dated October 16, 1997. (Exhibit 10.14)/5/*

10.07 Employment Agreement between CFX, Inc. and Dwight Haight, dated
October 16, 1997. (Exhibit 10.15)/5/*

10.08 Employment Agreement between Bay State Florist Supply, Inc. and
William W. Rudolph, dated October 16, 1997. (Exhibit 10.16)/5/*

10.09 Employment Agreement between Monterey Bay Bouquet, Inc. and Jeffrey
Brothers, dated October 16, 1997. (Exhibit 10.17)/5/*

10.10 Employment Agreement between Alpine Gem Flower Shippers, Inc. and John
Q. Graham, Jr., dated October 16, 1997. (Exhibit 10.18)/5/*

10.11 Employment Agreement between United Wholesale Florists, Inc. and
Raymond R. Ashmore, dated October 16, 1997. (Exhibit 10.19)/5/*

10.12 Employment Agreement between American Florist Supply, Inc. and John T.
Dickinson, dated October 16, 1997. (Exhibit 10.20)/5/*

10.13 Employment Agreement between Flower Trading Corporation and Gustavo
Moreno, dated October 16, 1997. (Exhibit 10.21)/5/*

10.14 Employment Agreement between U.S.A. Floral Products, Inc. and
Christopher E. Wilson, dated August 4, 1998/6/*

10.15 Employment Agreement between U.S.A. Floral Products, Inc. and Dwight
Ferguson, dated August 12, 1998/6/*

10.16 Employment Agreement between U.S.A. Floral Products, Inc. and W.
Michael Kipphut, dated September 28, 1998/6/*

10.17 Sublease Agreement by and between Blytheville-Gosnell Regional Airport
Authority and Floral Distributors, Inc., dated December 16, 1998/6/

10.18 Registration Rights Agreement, dated as of July 25, 1997, among U.S.A.
Floral Products, Inc. and certain stockholders named therein. (Exhibit
10.22)/5/

21.01 Subsidiaries of the Registrant/6/

23.01 Consent of PricewaterhouseCoopers LLP/6/

27.01 Financial Data Schedule/6/
</TABLE>
- --------
* Management contract or compensatory plan or arrangement.

(1) Incorporated by reference. Previously filed as an exhibit to the Company's
Current Report on Form 8-K filed with the Commission on February 9, 1998.

(2) Incorporated by reference. Previously filed as an exhibit to the Company's
Post-Effective Amendment No. 1 to the Registration Statement on Form S-1
(Registration Statement No. 333-39969) filed with the Commission on March
6, 1998.

(3) Incorporated by reference. Previously filed as an Exhibit to the Company's
Post-Effective Amendment No. 2 to the Registration Statement on Form S-1
(Registration Statement No. 333-39969) filed with the Commission on May 8,
1998.

(4) Incorporated by reference. Previously filed as an Exhibit to the Company's
Current Report on Form 8-K filed with the Commission on October 15, 1998.

(5) Incorporated by reference. Previously filed as an exhibit to Amendment No.
1 to the Company's Registration Statement on Form S-1 (Registration No.
333-33131) filed with the Commission on September 18, 1997.

(6) Filed herewith.

32
<PAGE>

(b) Reports on Form 8-K

During the quarter ended December 31, 1998, USA Floral filed the following
Report on Form 8-K:

Form 8-K dated September 29, 1998 and filed with the Commission on
October 15, 1998 (and Amendment No. 1 filed with the Commission on
December 14, 1998), reporting information under Items 2, 5, and 7.

* * * * * *

33
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
U.S.A. FLORAL PRODUCTS, INC. Page
- ---------------------------- ----
<S> <C>
Report of Independent Accountants......................................... 35
Consolidated Balance Sheet................................................ 36
Consolidated Statement of Operations...................................... 37
Consolidated Statement of Stockholders' Equity............................ 38
Consolidated Statement of Cash Flows...................................... 39
Notes to Consolidated Financial Statements................................ 40
</TABLE>

34
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
and Stockholders of
U.S.A. Floral Products, Inc.

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of
U.S.A. Floral Products, Inc. and its subsidiaries (the "Company") at December
31, 1998 and 1997, and the results of their operations and their cash flows
for the year ended December 31, 1998 and the period April 22, 1997 (inception)
through December 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Washington, D.C.
February 22, 1999

35
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

CONSOLIDATED BALANCE SHEET
(in thousands, except par value)

<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 20,196 $ 15,582
Accounts receivable, net.................. 97,769 18,505
Inventory................................. 18,577 4,937
Due from related parties.................. -- 1,153
Prepaid expenses and other assets......... 12,259 1,011
Deferred income tax assets................ 3,376 394
-------- --------
Total current assets..................... 152,177 41,582
Property and equipment, net................ 59,636 8,726
Due from related parties................... -- 994
Goodwill, net.............................. 267,763 52,569
Restricted cash............................ 3,672 --
Deferred financing costs................... 3,477 1,696
Other assets............................... 7,309 1,681
-------- --------
Total assets............................. $494,034 $107,248
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt........................... $ 5,005 $ 290
Accounts payable.......................... 58,033 9,824
Accrued expenses.......................... 29,919 2,910
Due to stockholders....................... 15,350 6,096
Income taxes payable...................... 3,227 1,008
-------- --------
Total current liabilities................ 111,534 20,128
Long-term debt............................. 194,668 309
Deferred income tax liabilities............ 1,784 97
Other...................................... -- 549
-------- --------
Total liabilities........................ 307,986 21,083
-------- --------
Minority interest in subsidiaries.......... 423 --
-------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 100,000
shares authorized; 14,850 and 9,594
shares issued, respectively.............. 15 9
Treasury stock (14 shares)................ (287) --
Additional paid-in capital................ 178,130 85,740
Retained earnings......................... 8,159 416
Accumulated other comprehensive income.... (392) --
-------- --------
Total stockholders' equity............... 185,625 86,165
-------- --------
Total liabilities and stockholders'
equity.................................. $494,034 $107,248
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

36
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
Period April 22, 1997
Year Ended (inception) to
December 31, 1998 December 31, 1997
----------------- ---------------------
<S> <C> <C>
Net revenues........................... $589,034 $37,380
Cost of sales.......................... 429,012 26,685
-------- -------
Gross margin.......................... 160,022 10,695
Selling, general and administrative
expenses.............................. 129,551 9,791
Goodwill amortization.................. 4,768 275
Integration charge..................... 3,361 --
Write-off of deferred financing fees... 1,606 --
-------- -------
Income from operations................ 20,736 629
Other income (expense):
Interest expense...................... (8,040) (8)
Interest income....................... 1,883 248
Other................................. 449 37
-------- -------
Income before income taxes and minority
interest.............................. 15,028 906
Provision for income taxes............. 7,255 490
-------- -------
Income before minority interest........ 7,773 416
Minority interest...................... (30) --
-------- -------
Net income............................. $ 7,743 $ 416
======== =======
Net income per share:
Basic................................. $ 0.54 $ 0.09
======== =======
Diluted............................... $ 0.52 $ 0.09
======== =======
Weighted average shares outstanding:
Basic................................. 14,376 4,734
======== =======
Diluted............................... 14,789 4,824
======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

37
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)

<TABLE>
<CAPTION>
Common Stock Accumulated
-------------- Additional Other Total
Treasury Paid-in Retained Comprehensive Stockholders'
Shares Amount Stock Capital Earnings Income Equity
------ ------ -------- ---------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
for initial
capitalization of the
Company................ 2,400 $ 2 $ -- $ 398 $ -- $ -- $ 400
Issuance of common stock
in initial public
offering............... 5,750 6 -- 66,571 -- -- 66,577
Issuance of common stock
for business
acquisitions........... 1,334 1 -- 17,341 -- -- 17,342
Exercise of stock
options................ 110 -- -- 1,430 -- -- 1,430
Net income.............. -- -- -- -- 416 -- 416
------ --- ----- -------- ------ ----- --------
Balance at December 31,
1997................... 9,594 9 -- 85,740 416 -- 86,165
Issuance of common stock
for business
acquisitions........... 5,256 6 -- 92,390 -- -- 92,396
Treasury stock acquired. (14) -- (287) -- -- -- (287)
Net income.............. -- -- -- -- 7,743 -- --
Foreign currency
translation adjustment. -- -- -- -- -- (392) --
Total comprehensive
income................. -- -- -- -- -- -- 7,351
------ --- ----- -------- ------ ----- --------
Balance at December 31,
1998................... 14,836 $15 $(287) $178,130 $8,159 $(392) $185,625
====== === ===== ======== ====== ===== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

38
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Period April 22, 1997
Year Ended (inception) to
December 31, 1998 December 31, 1997
----------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income............................ $ 7,743 $ 416
Adjustments to reconcile net income to
cash provided by operating
activities:
Depreciation and amortization........ 5,660 290
Amortization of goodwill............. 4,768 275
Amortization of deferred financing
costs............................... 468 73
Gain (loss) on disposal of property
and equipment....................... 15 (9)
Write-off of deferred financing fees. 1,606 --
Integration charge................... 2,924 --
Foreign currency translation losses.. (29) --
Income applicable to minority
interests........................... 30 --
Deferred income taxes................ (2,205) 43
Changes in operating assets and
liabilities, exclusive of acquired
companies:
Accounts receivable................. 10,522 (214)
Inventory........................... 1,700 1,299
Due from related parties............ 5,747 781
Prepaid expenses and other current
assets............................. (709) (112)
Other assets........................ (621) 238
Income taxes payable................ (2,360) (312)
Other liabilities................... (1,577) (53)
Accounts payable.................... (26,096) --
Accrued expenses.................... (5,202) (3,495)
--------- --------
Net cash provided (used in) by
operating activities............... 2,384 (780)
--------- --------
Cash flows from investing activities:
Purchases of property and equipment... (5,861) (543)
Payment for business acquisitions, net
of cash acquired..................... (139,943) (39,819)
Increase in restricted cash........... (3,599) --
Deferred acquisition costs............ -- (647)
--------- --------
Net cash used in investing
activities......................... (149,403) (41,009)
--------- --------
Cash flows from financing activities:
Proceeds from and repayments of long-
term debt............................ 155,620 (5,700)
Increase in deferred financing costs.. (3,855) (1,769)
Proceeds from issuance of common
stock................................ 131 400
Return of capital..................... 656 --
Stock issuance costs.................. (956) --
Payments to stockholders.............. -- (3,679)
Increase in due to stockholders....... -- 659
Repayments of notes payable........... -- (547)
Proceeds from initial public offering,
net.................................. -- 66,577
Proceeds from exercise of stock
options.............................. -- 1,430
--------- --------
Net cash provided by financing
activities......................... 151,596 57,371
--------- --------
Effect of exchange rates on cash....... 37 --
--------- --------
Net increase in cash and cash
equivalents........................... 4,614 15,582
Cash and cash equivalents--beginning of
the period............................ 15,582 --
--------- --------
Cash and cash equivalents--end of the
period................................ $ 20,196 $ 15,582
========= ========
See Note 16 for supplemental cash flow
information.
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

39
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)

NOTE 1--BUSINESS AND ORGANIZATION

U.S.A. Floral Products, Inc., a Delaware corporation ("USA Floral" or the
"Company"), was founded in April 1997 and since then has grown to become a
worldwide distributor of floral products. USA Floral acquired eight U.S.
businesses in the floral industry (the "Founding Companies") simultaneously
with the initial public offering ("IPO") of its Common Stock in October 1997,
acquired six U.S. businesses in the floral industry in January 1998 (the
"January 1998 Class"), acquired eight businesses in the floral industry in
April 1998 (the "April 1998 Class"), acquired nine businesses in the floral
industry in July 1998 (the "July 1998 Class"), and on October 1, 1998 acquired
the business of Florimex Worldwide GmbH and related entities ("Florimex"), an
international distributor of floral products headquartered in Nuremberg,
Germany (together, the "Acquisitions"). These financial statements include the
results of operations of USA Floral and the Founding Companies, the January
1998 Class, the April 1998 Class, the July 1998 Class and Florimex subsequent
to their acquisitions. The Company intends to continue to acquire, through
merger or purchase, similar companies to expand its domestic and international
operations.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of USA Floral and
its subsidiary companies, all of which are substantially wholly owned.
Minority interest represents minority stockholders' proportionate share of the
equity in certain foreign subsidiaries. All significant intercompany profits,
transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenue is recognized upon shipment of product.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.

Restricted Cash

Restricted cash comprises cash pledged as collateral in the closing of a
business acquisition and is classified as restricted cash on the balance
sheet.

Inventory

Inventory is stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.

40
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Property and Equipment

Property and equipment are carried at cost. Depreciation is provided for
using straight-line and accelerated methods over the estimated useful lives of
the related assets. Leasehold improvements are amortized over the shorter of
their respective lease terms or estimated useful lives. The useful lives,
based on the Company's estimate of service life of the classes of property,
are as follows:

<TABLE>
<S> <C>
Buildings and improvements................................... 30 years
Furniture fixtures and office equipment...................... 3 to 7 years
Vehicles..................................................... 5 years
Machinery and equipment...................................... 5 to 7 years
</TABLE>

Goodwill

Goodwill, which represents costs in excess of the fair value of net assets
of businesses acquired, is being amortized over forty years using the
straight-line method. The Company continually reviews goodwill to assess
recoverability from estimated future results of operations, using estimates of
undiscounted cash flows of the acquired businesses. Any required provisions
for impairment would be made in the period the impairment is first determined,
and would be based on the fair value of the related businesses. Accumulated
amortization at December 31, 1998 and 1997 was $5,043 and $275, respectively.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, accounts
receivable/payable and short-term debt approximates fair value because of the
short-term nature of these instruments. The estimated fair value of non-
current debt approximates its carrying value due to its stated interest rate
approximating market rates for debt with similar terms and maturities.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Receivables
are not collateralized and accordingly, the Company performs ongoing credit
evaluations of its customers to reduce the risk of loss.

Concentration of Supply Risk

The supply of perishable floral products is significantly dependent on
weather conditions where the products are grown. The Company currently
purchases the majority of its perishable floral products from farms located in
South America, principally Colombia and Ecuador, Africa, principally Kenya and
Morocco, and the Netherlands. Shortages or disruptions in the supply of fresh
flowers or the inability of the Company to procure such material from
alternative sources at acceptable prices in a timely manner could lead to loss
of customers.

Income Taxes

The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences between
such income and that recognized for tax return purposes. The Company and its
eligible subsidiaries file a consolidated U.S. federal income tax return.
Certain subsidiaries which are consolidated for financial reporting are not
eligible to be included in the consolidated U.S. federal income tax return and
separate provisions for income taxes have been determined for these entities.

41
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
Stock-based Compensation

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recorded. In the event that stock options are issued at an exercise price
below the market price, compensation expense is recorded ratably over the
vesting period for the options issued at a discount. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation"
("Statement 123"), requires the company to make certain disclosures as if the
fair value based method of accounting had been applied to the Company's stock
option grants (see Note 4).

Earnings Per Share

Basic earnings per share is determined by dividing income available to
common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is determined by
dividing income available to common stockholders by the weighted average
number of common shares outstanding during the period plus the incremental
shares that would have been outstanding upon the assumed exercise of dilutive
stock options and an estimate of contingent consideration payable under
earnout agreements as if the earnout period had ended as of the date of the
financial statements.

Comprehensive Income

Effective January 1, 1998, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") Statement No. 130, "Reporting
Comprehensive Income." This statement establishes standards for reporting and
display of comprehensive income and its components. Comprehensive income
consists of net income and foreign currency translation adjustments and is
presented in the Consolidated Statement of Stockholders' Equity.

Foreign Currency Translation

Assets and liabilities of the Company's international subsidiaries are
translated using the exchange rate in effect at the balance sheet date.
Revenue and expense accounts for these subsidiaries are translated using the
average exchange rate during the period. Foreign currency translation
adjustments are reported as other comprehensive income in a separate component
of stockholders' equity.

Internal Use Software Costs

Effective January 1, 1998, the Company adopted the provisions of Statement
of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". External direct costs of materials
and services consumed in developing internal-use computer software, payroll
and related costs and interest cost are capitalized as a long-lived asset and
amortized over the useful life of the software. Overhead, including general
and administrative costs and training costs, are expensed as incurred. The
adoption of the SOP did not have a material impact on the Company's results of
operations or financial condition.

Segment Reporting

Effective January 1, 1998, the Company adopted FASB Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("FAS
131"). FAS 131 supersedes FAS 14, "Financial Reporting for Segments of a
Business Enterprise", replacing the industry segment approach with the
management

42
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
approach. This management approach designates the internal organization that
is used by management for making operation decisions and assessing performance
as the source of the Company's reportable segments. FAS 131 also requires
disclosures about products and services, geographic areas, and major
customers. The adoption of FAS 131 did not affect results of operations or
financial position of the Company but did affect the disclosures of segment
information (see Note 14).

Retirement Benefits

Effective January 1, 1998, the Company adopted FASB Statement No. 132,
"Employers' Disclosures about Pensions and Other Post Retirement Benefits"
("FAS 132"), which revises and standardizes the disclosure requirements for
pensions and other postretirement benefits. FAS 132 also requires additional
information on changes in benefit obligations and fair values of plan assets
and supersedes the disclosure requirements of FASB Statement No. 87,
"Employers' Accounting for Pensions" ("FAS 87"), although it does not alter
the quantitative methodology of determining pension liabilities established
under FAS 87.

Derivatives

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments. It requires an entity to recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. This statement is
effective for fiscal years beginning after June 15, 1999, although early
adoption is permitted. Due to the Company's minimal use of derivatives, the
Company does not expect that the adoption of the new standard will have a
material impact on the results of operations or financial condition of the
Company.

Reclassifications

Certain reclassifications have been made to prior year financial statements
to conform to the 1998 financial statement presentation.

NOTE 3--ACQUISITIONS

In October 1997, USA Floral acquired The Roy Houff Company ("Roy Houff"),
CFX, Inc. ("CFX"), Bay State Florist Supply, Inc. ("Bay State"), Flower
Trading Corporation ("Flower Trading"), United Wholesale Florist, Inc. and
United Wholesale Florists of America, Inc. ("United Wholesale"), American
Florist Supply, Inc. ("American Florist"), Monterey Bay Bouquet, Inc. and Bay
Area Bouquets, Inc. ("Monterey Bay") and Alpine Gem Flower Shippers, Inc.
("Alpine Gem"). In January 1998, USA Floral acquired Continental Farms Limited
and Atlantic Bouquet Company Limited ("Continental"), XL Group, Inc. ("XL
Group"), Koehler & Dramm, Inc. ("Koehler & Dramm"), Everflora, Inc. and
Everflora Miami, Inc. ("Everflora"), H&H Flowers, Inc. d/b/a La Fleurette
("H&H Flowers") and UltraFlora Corporation ("UltraFlora"). In April 1998, USA
Floral acquired Elite Farms ("Elite"), David L. Jones Wholesale, Ltd. ("DL
Jones"), Edfrancar, Inc. d/b/a Florafresh International ("Florafresh"), Master
Flowers, Inc. d/b/a Sabana Farms ("Sabana"), Maxima Farms, Inc. ("Maxima"),
Selecta Farms, Inc. and Saint Ann Trading Corporation ("Selecta"), Pacific
Floral Wholesale, Inc. and Rose City Floral, Inc. ("Rose City") and AFB
Marketing, Inc. d/b/a Allan Stanley Greenhouses ("Allan Stanley"). In July
1998, USA Floral acquired Channel Islands Floral ("Channel Islands"), Petals
Distributing Company, Inc. ("Petals"), AlphaFlora Imports, Inc.
("AlphaFlora"), Sandlake Farms, Inc. and affiliated companies, Sabal
International, Inc. and Continental Artistry, Inc. ("Sandlake"), Floramark,
Inc. ("Floramark"), Evergreen Wholesale Florist, Inc. ("Evergreen"), Tommy's
Wholesale Florist, Inc.

43
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
("Tommy's"), First Distributors, Inc. ("First Distributors"), and Southern
Rainbow Corporation ("Southern Rainbow"). In October 1998, USA Floral acquired
Florimex GmbH, Florimex USA, Inc. and Florimex Canada, Inc. ("Florimex"). All
of the above business combinations were accounted for under the purchase
method of accounting.

The following table sets forth the consideration paid in cash and in shares
of Common Stock to the former owners of each of these businesses, the
allocation of the total purchase consideration to net assets acquired and the
resulting goodwill.

The purchase price includes contingent consideration of (a) $2,400 in shares
of Common Stock related to an earn-out arrangement for American Florist, which
was based on adjusted earnings before interest and taxes, as defined, for the
twelve month period ended December 31, 1997, (b) $500 in cash and $3,000 in
shares of Common Stock related to an earn-out arrangement for Monterey Bay,
which was based on adjusted earnings before interest and taxes, as defined,
for the twelve month period ended December 31, 1997, (c) $5,892 in shares of
Common Stock related to an earn-out arrangement for UltraFlora, which was
based on adjusted earnings before interest and taxes, as defined, for the
twelve month period ended December 31, 1997, (d) $1,465 in shares of Common
Stock related to an earn-out arrangement for Sabana, which was based on
adjusted earnings before interest and taxes, as defined, for the twelve months
ended May 31, 1998, (e) approximately $1,204 in shares of Common Stock related
to an earn-out arrangement for XL Group, which was based on adjusted earnings
before interest and taxes, as defined, for the twelve months ended December
31, 1998, (f) approximately $4,304 in shares of Common Stock related to an
earn-out arrangement for Maxima, which was based on adjusted earnings before
interest and taxes, as defined, for the twelve months ended December 31, 1998,
(g) approximately $3,337 in cash and $3,337 in shares of Common Stock related
to an earn-out arrangement for Southern Rainbow, which was based on adjusted
earnings before interest and taxes, as defined, for the twelve months ended
December 31, 1998, and (h) approximately $1,550 in shares of Common Stock
related to an earn-out arrangement for Tommy's, which was based on adjusted
earnings before interest and taxes, as defined, for the twelve months ended
December 31, 1998. The contingent consideration related to earn-out
arrangements included in the definitive agreements for H&H Flowers, Rose City,
AlphaFlora and Sandlake has not been included in the purchase consideration
since these companies did not achieve sufficient adjusted earnings before
interest and taxes, as defined, to warrant additional earn-out consideration.
Further, the total purchase consideration does not reflect contingent
consideration related to earn-out arrangements included in the definitive
agreements for DL Jones, Allan Stanley and Channel Islands. These earn-out
arrangements provide for the Company to pay additional consideration based on
adjusted earnings before interest and taxes, as defined, for the twelve months
ending February 28, 1999 for DL Jones, for the twelve months ending March 31,
1999 for Allan Stanley and for the eighteen months ending December 31, 1999
for Channel Islands.

44
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
<TABLE>
<CAPTION>
Shares of
Common Value of Total Net Assets
Acquisitions Cash Stock Shares Consideration Acquired Goodwill
- ------------ -------- --------- -------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Roy Houff............... $ 11,006 -- $ -- $ 11,006 $ 3,454 $ 7,552
CFX..................... 6,521 250,000 3,250 9,771 1,229 8,542
Bay State............... 6,045 481,531 6,155 12,200 4,156 8,044
Flower Trading.......... 5,920 160,000 2,080 8,000 1,273 6,727
United Wholesale........ 4,788 268,500 3,491 8,279 2,298 5,981
American Florist........ 4,800 141,749 2,400 7,200 249 6,951
Monterey Bay............ 3,000 177,188 3,000 6,000 705 5,295
Alpine Gem.............. 1,600 160,000 2,080 3,680 215 3,465
-------- --------- -------- -------- ------- --------
Total 1997
Acquisitions......... $ 43,680 1,638,968 $ 22,456 $ 66,136 $13,579 $ 52,557
-------- --------- -------- -------- ------- --------
Continental Farms....... $ 27,500 1,642,672 $ 27,500 $ 55,000 $ 4,806 $ 50,194
XL Group................ 11,250 773,817 12,204 23,454 5,611 17,843
Koehler & Dramm......... 5,000 298,596 5,000 10,000 3,544 6,456
Everflora............... 4,000 246,654 4,000 8,000 2,889 5,111
H&H Flowers............. 1,600 -- -- 1,600 (710) 2,310
UltraFlora.............. 2,750 522,768 8,642 11,392 1,557 9,835
Elite................... 3,700 184,907 3,700 7,400 796 6,604
DL Jones................ 2,183 179,020 3,976 6,159 1,275 4,884
Florafresh.............. 3,945 172,928 3,945 7,890 (1,069) 8,959
Sabana.................. 659 164,784 3,453 4,112 949 3,163
Maxima.................. 5,300 637,042 9,604 14,904 2,677 12,227
Selecta................. 2,500 112,007 2,500 5,000 308 4,692
Rose City............... 133 10,634 240 373 (156) 529
Allan Stanley........... 1,925 84,638 1,925 3,850 (59) 3,909
Channel Islands......... 1,550 95,484 1,550 3,100 467 2,633
Petals.................. 50 6,204 100 150 (441) 591
AlphaFlora.............. -- 31,650 571 571 (194) 765
Sandlake................ 1,104 72,315 1,375 2,479 (182) 2,661
Floramark............... -- 56,211 1,000 1,000 (213) 1,213
Evergreen............... 5,899 30,739 500 6,399 179 6,220
Tommy's................. 789 222,879 2,825 3,614 726 2,888
First Distributors...... 400 24,323 400 800 218 582
Southern Rainbow........ 4,880 418,814 4,738 9,618 2,525 7,093
Florimex................ 66,072 -- -- 66,072 7,187 58,885
-------- --------- -------- -------- ------- --------
Total 1998
Acquisitions......... $153,189 5,989,086 $ 99,748 $252,937 $32,690 $220,247
-------- --------- -------- -------- ------- --------
Grand Total............. $196,869 7,628,054 $122,204 $319,073 $46,269 $272,804
======== ========= ======== ======== ======= ========
</TABLE>

The following unaudited pro forma summary presents the combined results of
operations of the Company as if the Acquisitions and USA Floral's IPO occurred
on January 1, 1997. The pro forma amounts give effect to certain adjustments
including amortization of intangibles, interest expense on incremental
financing, reductions in salary, bonuses and benefits in connection with the
transactions, anticipated compensation of USA Floral's management, associated
costs of being a public company and income taxes. The pro forma summary does
not purport to represent what USA Floral's results of operations would
actually have been if such transactions had occurred on January 1, 1997 and
are not necessarily representative of USA Floral's results of operations for
any

45
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
future period. Since the acquired businesses were not under common control or
management, historical combined results may not be comparable to, or indicative
of, future performance.

<TABLE>
<CAPTION>
Year Ended (1) Year Ended (2)
December 31, 1998 December 31, 1997
----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales............................ $999,793 $930,315
Operating income..................... 29,804 33,109
Net income........................... 9,192 10,971
Net income per share--basic.......... 0.58 0.69
Net income per share--diluted........ 0.56 0.68
</TABLE>
- --------
(1) The pro forma 1998 results of operations include integration charges of
$6,333.

(2) The pro forma 1997 results of operations does not include the effects of
Florimex' acquisition of Sierafor B.V., a bouquet manufacturer and
distributor to mass marketers in Europe, in January 1998. Sierafor B.V.'s
revenues for the year ended December 31, 1997 were approximately $50
million.

NOTE 4--STOCKHOLDERS' EQUITY

Stock Option Plans

The Company's Board of Directors has adopted and the Company's stockholders
have approved the Company's 1997 Long-Term Incentive Plan (the "Incentive
Plan"). The maximum number of shares of Common Stock that may be subject to
outstanding awards may not be greater than that number of shares equal to
fifteen percent (15%) of the outstanding shares from time to time, which number
of shares is reserved for issuance. The terms of the option awards were
established by the Compensation Committee of the Company's Board of Directors
(the "Committee") and awards may be settled in cash, shares, other awards or
other property, as determined by the Committee.

Under the Incentive Plan, the Company granted stock options to purchase
approximately 875,000 shares of Common Stock to key employees of the Company at
the initial public offering price upon consummation of the IPO and options to
purchase 125,000 shares of Common Stock to other key employees at the greater
of $8.00 per share or 60% of the initial public offering price. Compensation
expense is being recorded over the four year vesting period for the options
issued at a discount.

The Company's Board of Directors has adopted and the Company's stockholders
have approved the 1997 Non-Employee Directors' Stock Plan (the "Directors'
Plan"), which provides for the automatic grant to each nonemployee director of
an option to purchase 21,000 shares on the date elected or on the effective
date of the IPO. Thereafter nonemployee directors will receive an option to
purchase 6,000 shares on the day after each annual meeting of the Company's
stockholders. A total of 300,000 shares are reserved for issuance under the
Directors' Plan. During the year ended December 31, 1998, options to purchase
102,000 shares were issued; 18,000 options issued after the annual meeting of
the Company's stockholders in May 1998 and 84,000 options issued to new
nonemployee directors elected to the board of directors in December 1998. Also
during 1998, 3,000 options to purchase shares were terminated as a result of a
nonemployee director resignation from the Board of Directors. In the period
ended December 31, 1997, options to purchase 63,000 shares were issued on the
date of the IPO.

At December 31, 1998 approximately 2,205,000 options to purchase shares that
could potentially dilute future earnings per share were not included in the
computation of diluted earnings per share because to do so

46
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
would have been anti-dilutive for the periods presented. There were no anti-
dilutive options to purchase shares at December 31, 1997.

Options granted under the Directors' Plan will have an exercise price per
share equal to the fair market value of a share at the date of grant. Options
will expire at the earlier of 10 years from the date of grant or one year
after termination of service as a director. Options will vest and become
exercisable in two equal installments. The first installment shall become
exercisable six months from the date the option is granted and the second
installment shall become exercisable one year from the date the option is
granted. In the event of a change in control of the Company or death of a
participant prior to normal vesting, all options not already exercisable would
become fully vested and exercisable.

The Incentive Plan and the Directors' Plan provide for the granting of
either incentive stock options or nonqualified stock options to purchase
shares of the Company's Common Stock and for other stock-based awards to
officers, directors and key employees responsible for the direction and
management of the Company and to non-employee consultants and independent
contractors.

Information relating to stock options during 1997 and 1998 follows:

<TABLE>
<CAPTION>
Weighted
Options average Total
(in thousands) exercise price Consideration
-------------- -------------- -------------
<S> <C> <C> <C>
Granted............................ 1,225 $12.68 $15,538
Exercised.......................... (110) 13.00 (1,430)
Forfeited.......................... (3) 13.00 (38)
----- ------ -------
Shares under option at December 31,
1997.............................. 1,112 12.65 14,070
Granted............................ 1,669 15.75 26,298
Exercised.......................... --
Forfeited.......................... (116) 17.39 (2,021)
----- ------ -------
Shares under option at December 31,
1998.............................. 2,665 $14.39 $38,347
===== ====== =======
Shares exercisable at December 31,
1998.............................. 486 $12.13 $ 5,901
===== ====== =======
Shares exercisable at December 31,
1997.............................. -- $ -- $ --
===== ====== =======
</TABLE>

All outstanding options are nonqualified options. Compensation expense of
$156 for the year ended December 31, 1998 and $36 for the period ended
December 31, 1997 was recognized related to stock options issued below the
market price on the date of the grant. Generally, the Company issues stock
options at exercise prices equal to fair market value of the common stock on
the date of grant.

Summary information about the Company's stock options outstanding and
exercisable as of December 31, 1998:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- -----------------------------
Weighted Weighted
Number Average Average Number Weighted
Range of Outstanding Contractual Exercise Exercisable Average
Exercise Price (in thousands) Period in Years Price (in thousands) Exercise Price
- -------------- -------------- --------------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 5--$ 7 230 9.8 $ 5.66 60 $ 6.00
7-- 10 170 9.2 7.94 31 8.00
10-- 14 1,072 9.3 12.77 -- --
14-- 19 791 9.1 17.88 395 13.38
19-- 23 402 9.1 19.89 -- --
----- --- ------ --- ------
$ 5--$23 2,665 9.2 $14.39 486 $12.13
----- --- ------ --- ------
</TABLE>

47
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)

Subsequent to December 31, 1998, options to purchase 375,000 shares were
granted to the Company's management at prices ranging from $12.25-$14.25 per
share, the market prices prevailing at the date of grant.

Pro forma information regarding net income and earnings per share is required
by Statement 123, and has been determined as if the Company accounted for its
employee stock options under the fair value method of Statement 123. The fair
value for these options was estimated at the date of grant using a Black-
Scholes option pricing model with the following weighted average assumptions
for 1998 and 1997:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Risk-free interest rate..................................... 5.00% 6.00%
Dividend yield.............................................. 0.00% 0.00%
Volatility factor........................................... 82.0% 40.0%
Weighted average expected life.............................. 7.5 years 7.5 years
</TABLE>

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma net income and income per share under Statement 123 for the year
ended December 31, 1998 and the period April 22, 1997 to December 31, 1997 are
shown below. These pro forma disclosures are not representative of the effects
on reported net income and net income per share for future years, because the
Company's first option grants were made in the fourth quarter of 1997, the
options vest over four years and additional awards may be granted in future
years.

<TABLE>
<CAPTION>
1998 1997
------ -----
<S> <C> <C>
Net income--as reported............................................ $7,743 $ 416
Net income--pro forma.............................................. $4,262 $ 95
Income per share--as reported (basic).............................. $ 0.54 $0.09
Income per share--pro forma (basic)................................ $ 0.30 $0.02
Income per share--as reported (diluted)............................ $ 0.52 $0.09
Income per share--pro forma (diluted).............................. $ 0.29 $0.02
Weighted average fair value of options granted during the year..... $ 8.71 $9.55
</TABLE>

NOTE 5--ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
1998 1997
------- -----
<S> <C> <C>
Opening balance.......................................... $ 599 $ --
Balances acquired through business acquisitions.......... 7,043 711
Charged to costs and expenses............................ 1,309 49
Write-offs............................................... (1,007) (161)
------- -----
Ending balance........................................... $ 7,944 $ 599
======= =====
</TABLE>

48
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
NOTE 6--INVENTORY

Inventory consists of the following finished goods at December 31:

<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Perishables............................................... $ 3,003 $ 523
Hardgoods................................................. 15,574 4,414
------- ------
$18,577 $4,937
======= ======
</TABLE>

NOTE 7--PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31:

<TABLE>
<CAPTION>
1998 1997
------- ------
<S> <C> <C>
Buildings............................................... $21,392 $2,121
Leasehold improvements.................................. 4,196 1,188
Furniture, fixtures, and office equipment............... 8,961 3,152
Vehicles................................................ 7,081 321
Machinery & equipment................................... 11,941 1,674
------- ------
53,571 8,456
Accumulated depreciation and amortization............... (5,951) (291)
------- ------
47,620 8,165
Land.................................................... 12,016 561
------- ------
$59,636 $8,726
======= ======
</TABLE>

Depreciation and amortization expense for the year ended December 31, 1998
and for the period April 22, 1997 to December 31, 1997 was $5,660 and $291,
respectively.

NOTE 8--CREDIT FACILITY

Effective October 2, 1998, the Company amended and restated its existing
credit agreement with a syndicate of lenders for which Bankers Trust Company
serves as agent (the "Amended Credit Agreement"). Pursuant to the terms of the
Amended Credit Agreement, the amount of the Company's revolving credit
facilities was increased to $200 million, of which the sub-limit for permitted
acquisitions is $180 million and the sub-limit for working capital purposes
and letters of credit is $20 million. In addition, of the $200 million in
revolving credit facilities, up to $15 million has been designated to be a
revolving loan, which is available to certain foreign subsidiaries of USA
Floral in either Deutsche Marks or Guilders. Further, a new $50 million,
Deutsche Mark denominated term loan was created as an additional source of
borrowings in excess of the $200 million revolving credit facilities.
Borrowings under the revolving credit facilities bear interest, at the
Company's option, at (a) Bankers Trust Company's base rate plus an applicable
margin of up to 1.0% or (b) a Eurodollar rate plus an applicable margin of up
to 2.25%. Borrowings under the term loan bear interest at the interbank rate
for Deutsche Marks plus an applicable margin of up to 2.25%. The Company paid
on closing a financing fee of approximately $3.6 million, which has been
deferred and will be amortized over the term of the Amended Credit Agreement.
In addition, a commitment fee of 0.50% will be charged on the unused portion
of the revolving credit facilities on a quarterly basis. Both the revolving
credit facilities and the term loan mature five years from the closing date.
The installments of the term loan maturing in the next five years are: 1999--
zero, 2000--$2.5 million, 2001-- $12.5 million, 2002--$20 million and 2003--
$15 million. At December 31, 1998, the aggregate outstanding indebtedness
under both the revolving credit facilities and the term loan was approximately
$200 million and the effective interest rate was approximately 8.5% on the
revolving credit facility and approximately 6.0% on the term loan.

49
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)

The entire $50 million proceeds of the new term loan and $54.1 million of
the borrowings available under the revolving credit facilities were used to
finance the aggregate purchase price of approximately $90 million (including
the repayment of indebtedness) and related transactional expenses for the
purchase of the business of Florimex and a working capital infusion for the
Company. In addition, on October 2, 1998, the Company rolled over
approximately $86.5 million in outstanding borrowings, accrued interest and
related fees under its existing revolving credit facility. The proceeds of the
outstanding borrowings under the revolving credit facility prior to its
amendment on October 2, 1998, were used to finance acquisitions and fund
related working capital requirements.

As a result of the amendment and restatement of the credit facility and
termination of the original credit agreement, the Company recorded a charge
before income taxes of $1,606 in October 1998, to write off the unamortized
portion of the deferred financing fees related to the original credit
agreement.

Borrowings under the Amended Credit Agreement are collateralized by
receivables, inventories, equipment and certain real property. Under the terms
of the Amended Credit Agreement, the Company is required to maintain certain
financial ratios and other financial and non-financial conditions. The Amended
Credit Agreement prohibits the Company from incurring additional indebtedness,
limits certain investments, advances or loans and restricts substantial asset
sales, capital expenditures and cash dividends. As of December 31, 1998, the
Company was in compliance with all applicable financial covenants. The Company
obtained a waiver letter from the Bank with respect to certain non-financial
covenants under the Amended Credit Agreement in order to effect certain
acquisitions.

NOTE 9--FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments for the purpose of
reducing its exposure to adverse fluctuations in interest and foreign exchange
rates. While these hedging instruments are subject to fluctuations in value,
such fluctuations are generally offset by the value of the underlying
exposures being hedged. The Company is not a party to leveraged derivatives
and does not hold or issue financial instruments for speculative purposes.

The Company utilizes interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt. Under the
Company's interest rate swap agreement, the Company agreed with the
counterparty to exchange, at quarterly intervals, the difference between the
Company's fixed pay rate and the counterparty's variable pay rate of three-
month LIBOR. At December 31, 1998, the Company was a fixed rate payor of 5.89%
and received a variable rate of 5.24% on notional amounts of $10,000. The fair
values at December 31, 1998, as estimated by a dealer, were unfavorable $16.

The U.S. dollar is the functional currency for substantially all of the
Company's consolidated operations. For these operations, all gains and losses
from currency transactions are included in income currently. For certain
foreign equity investments, the functional currency is the local currency. The
cumulative translation effects for equity investments using functional
currencies other than the U.S. dollar are included in the cumulative
translation adjustment in stockholders' equity.

The Company uses foreign currency forwards and options, which typically
expire within 30 days, to hedge payments and receipts of foreign currencies
related to the purchase and sale of goods overseas. Realized gains and losses
on these contracts are recognized in the same period as the hedged
transactions. The Company had open foreign exchange forward contracts at
December 31, 1998 to buy German Marks, Netherlands Guilders, and the British
Pound, in the aggregate of $4.1 million. Such contracts had an unrealized loss
of $7 at December 31, 1998.

50
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)

NOTE 10--INCOME TAXES

The components of income tax expense (benefit) are:

<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Current:
Federal.......................................... $ 7,588 $450
State............................................ 1,576 80
Foreign.......................................... 296 --
------- ----
9,460 530
------- ----
Deferred:
Federal.......................................... (1,939) (34)
State............................................ (774) (6)
Foreign.......................................... 508 --
------- ----
(2,205) (40)
------- ----
Total provision.................................... $ 7,255 $490
======= ====
</TABLE>

Deferred income tax assets and liabilities reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred income tax assets and
liabilities as of December 31 are as follows:

<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
Short-term Long-term Short-term Long-term
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Deferred income tax assets:
Allowance for doubtful accounts. $ 567 $ -- $189 $ --
Inventory capitalization........ 130 -- 54 --
Anti-dumping accrual............ 1,177 -- 64 --
Restructuring reserves.......... 1,364 -- -- --
Inventory reserves.............. 138 -- 52 --
Accrued compensation and
pension........................ -- 1,152 -- --
Deferred financing cost......... -- 610 -- --
State tax net operating losses.. -- 534 -- --
Foreign net operating losses.... -- 3,410 --
Other........................... -- 1,219 35 --
------ ------- ---- ----
Total deferred income tax
assets....................... 3,376 6,925 394 --
Less: valuation allowance..... (3,410) -- --
------ ------- ---- ----
Net deferred income tax
assets..................... 3,376 3,515 394 --
------ ------- ---- ----
Deferred income tax liabilities:
Accumulated depreciation........ -- 3,660 -- 97
Goodwill, related to acquisition
of partnership interests....... -- 939 -- --
Other........................... -- 700 -- --
------ ------- ---- ----
Total deferred income tax
liabilities.................. -- 5,299 -- 97
------ ------- ---- ----
Net deferred income tax assets
(liabilities).................... $3,376 $(1,784) $394 $(97)
====== ======= ==== ====
</TABLE>

51
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)

At December 31, 1998, the Company has state net operating losses of
approximately $8.9 million available to offset future years' state taxable
income. These state net operating loss carryforwards begin to expire in 2013.
In addition, the Company also has foreign net operating losses of $10.2
million from seven different countries. These foreign losses can be carried
forward and used to offset future year's foreign taxable income. Of the total
$10.2 million of foreign net operating losses, $8.8 million can be carried
forward indefinitely and $1.4 million will begin to expire in 1999. A full
valuation allowance for the entire tax benefit relating to the foreign net
operating loss has been provided. A valuation allowance was established for
the tax benefits attributable to foreign net operating losses because, in
management's opinion, realization of these tax benefits was not "more likely
than not." If and when realized, such tax benefits will be recorded as a
reduction of goodwill on the related acquisition.

A reconciliation between the statutory federal income tax rate and the
effective rate of income tax expense follows:

<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Statutory federal income tax rate.................................. 35% 34%
Increase in taxes resulting from:
State tax, net of federal benefit................................ 4% 6%
Non-deductible goodwill amortization............................. 8% 12%
Other............................................................ 1% 2%
--- ---
48% 54%
=== ===
</TABLE>

Retained earnings at December 31, 1998 include undistributed earnings of
$7.3 million of certain foreign subsidiaries which are not subject to
additional foreign income tax nor considered to be subject to U.S. income
taxes unless remitted as dividends. The Company intends to permanently
reinvest these undistributed earnings; accordingly, no provision has been made
for U.S. taxes on such earnings.

NOTE 11--RELATED PARTY TRANSACTIONS

The Company receives and purchases flowers from farms owned or partially
owned by, and/or persons related to, directors and senior management of USA
Floral and its subsidiaries. Approximately 25% and 13% of the cost of sales in
1998 and 1997, respectively, represented purchases from related entities
intended by the parties to be representative of market rates. Included in the
cost of sales are representative fees to related entities for flowers shipped
from Colombia. These related entities ensure that the Company has a reliable
source of fresh-cut flowers in Colombia. The entities also provide each of the
Company's suppliers with technical expertise to improve and maintain the
yield, quality and durability of fresh-cut flowers. In addition, due to the
large number of suppliers in Colombia, the Company requires the service of the
entities to consolidate the shipments of flowers with a common carrier, and
generate the paperwork necessary to complete the shipment of flowers.

The Company leases offices and warehouse facilities from entities owned
and/or related to directors and senior management of USA Floral and its
subsidiaries. All such transactions are conducted at rates intended by the
parties to be representative of market rates. Rent under such leases for the
year ended December 31, 1998 and for the period April 22, 1997 to December 31,
1997 was approximately $4,159 and $219, respectively.

52
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
NOTE 12--COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases warehouse and office facilities in a number of locations
under noncancelable operating leases. The aggregate future minimum rentals
(exclusive of real estate taxes and expenses) are as follows:

<TABLE>
<CAPTION>
Related Other
Year ending December 31, Parties Parties
------------------------ ------- -------
<S> <C> <C>
1999....................................................... $2,547 $ 6,202
2000....................................................... 1,939 4,823
2001....................................................... 1,206 3,957
2002....................................................... 3,237 3,199
2003....................................................... 539 1,739
Thereafter................................................. 505 6,299
------ -------
$9,973 $26,219
====== =======
</TABLE>

Rent expense for the year ended December 31, 1998 and for the period April
22, 1997 to December 31, 1997 was $10,429 and $417, respectively.

Legal Matters

The Company is involved in various legal matters in the normal course of
business. In the opinion of the Company's management, these matters are not
anticipated to have a material adverse effect on the financial position or
results of operations of the Company.

Anti-Dumping

Since 1986, the U.S. Department of Commerce (the "DOC") imposes an
antidumping-duty deposit ("ADD") ranging from 1% to 50% on the importation of
certain flowers, pending the imposition of a final duty rate based on annual
reviews of the flower growers' margins. At December 31, 1998, the DOC had
eight open reviews, the last one for the period ending February 28, 1998. As a
result of those reviews, the Company's importation of flowers from its
suppliers has been subject to antidumping duties. The ADDs from the fourth
review are awaiting final liquidation from the DOC. Final determinations have
been published for the fifth through seventh reviews but judicial appeals are
pending. The eighth review was liquidated at the cash deposit rate. The ninth
and tenth reviews are pending final determination and the eleventh review is
in process. The antidumping duty is subject to change upon the DOC's final
review of all open antidumping periods as well as various legal appeals. The
Company believes its accrual to be adequate, but cannot presently determine
the effect, if any, of an adverse determination by the DOC regarding the ADDs.

NOTE 13--INTEGRATION PLANS

In November 1998, in connection with management's plan to reduce costs and
improve operating efficiencies, the Company announced an integration plan
which is expected to result in a charge of approximately $3.8 million.

In connection with the integration plan, the Company will integrate certain
warehouse and distribution facilities, principally those associated with the
Company's import and bouquet manufacturing operations in Miami, Florida.
Approximately $3.4 million of the charge was recorded in the fourth quarter of
1998, with the

53
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
balance of the charge to be recorded in the first three quarters of 1999. The
charge principally relates to the write-down to fair value of equipment made
obsolete or redundant, severance related to the termination of 180 employees,
and lease termination costs due to the decision to merge certain facilities.
The integration of the warehouses and distribution facilities began in
November 1998 and is expected to be complete by September 30, 1999.

The major components of the integration charge are as follows:

<TABLE>
<S> <C>
Severance and related costs...................................... $ 800
Write down of property, plant and equipment...................... 2,100
Lease termination costs.......................................... 400
Professional fees and other costs................................ 500
------
$3,800
======
</TABLE>

At December 31, 1998, $2.9 million of the integration charge remained in
accrued liabilities and 21 employees have been terminated. The balance is
comprised of $700 for the reduction of approximately 159 employees in North
America to be completed in 1999, $380 for closing excess facilities and $1,850
for non-cash write downs of recorded assets. A summary of the integration
activity is presented below:

<TABLE>
<S> <C>
Balance at November 3, 1998...................................... $3,361
1998 Activity:
Non cash write-down of property, plant and equipment........... (247)
Lease-termination cash payments................................ (20)
Reduction in workforce and other cash outflows................. (170)
------
Balance at December 31, 1998..................................... $2,924
======
</TABLE>

In connection with the Company's acquisition of Florimex, the Company
acquired approximately $2.7 million in reserves for a restructuring of the
German Wholesale Operation and a plan to integrate certain operations,
warehouses and distribution facilities, principally those associated with the
International Division of the Company's operations in the Netherlands. Of the
reserves, approximately $2.575 million relates to severance payments for 25
employees and the balance of approximately $125 relates to the write down of
assets. The integration of the operations, warehouses and distribution
facilities is expected to be complete by September 30, 1999.

At December 31, 1998, $2.4 million of the integration charge remained in
accrued liabilities and 5 employees had been terminated. The balance was
comprised of $2.3 million for the reduction of approximately 20 employees in
the International Division to be completed in 1999, and $100 for non-cash
write-downs of recorded assets. A summary of the integration activity is
presented below:

<TABLE>
<S> <C>
Date of Florimex acquisition (October 1, 1998)................... $2,700
1998 Activity
Reduction in workforce cash outflows........................... (307)
Other cash outflows............................................ (26)
------
Balance at December 31, 1998..................................... $2,367
======
</TABLE>

54
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
NOTE 14--GEOGRAPHIC REGION AND BUSINESS SEGMENT INFORMATION

Segment information has been provided for each of the years presented in the
Company's statement of operations. The Company is organized primarily on a
geographic basis with an International Division and a North America Division
and secondarily based on the products and services that it offers. Each
division has three segments: import/export, wholesale distribution and bouquet
manufacturers. The import/export segment purchases flowers from farms located
primarily in South America, Africa and Europe and sells them to wholesalers
and bouquet manufacturers. The wholesale distribution segment purchases
perishable flowers and floral related hardgoods from growers,
importer/exporters and brokers and sells them to retail florists and mass
marketers. The bouquet manufacturers segment procures and produces fresh cut
floral bouquets for distribution primarily to mass markets, broadly defined as
supermarkets and discount retailers. The Company's reportable divisions and
segments are strategic business units that offer different floral related
products and services. They are managed separately because each business
division and segment requires different marketing and management strategies.
The Company evaluates segment performance and allocates resources to them
based on gross margin and income from operations.

The accounting policies of the segments are the same as those described in
Note 1, "Summary of Significant Accounting Policies". Segment data includes
intersegment sales and transfers which the Company accounts for as if the
sales or transfers were to third parties, that is, at current market prices.

The following tables present information about reported segments:

<TABLE>
<CAPTION>
For the period April 22, 1997 (inception) to
December 31, 1997
-----------------------------------------------------
Import/ Wholesale Bouquet
Export Distribution Manufacturers Total
----------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
North America Division
Revenues--external
customers.............. $ 13,398 $ 21,240 $ 2,742 $ 37,380
Revenues--intercompany.. -- -- -- --
Gross margin............ 3,086 7,146 463 10,695
Depreciation and
amortization........... 188 334 44 566
Integration charge...... -- -- -- --
Income from operations.. 514 789 28 1,332
Total assets............ 31,687 54,098 7,080 92,865
Expenditures for assets. 129 96 71 296
</TABLE>

There was no International Division in 1997.

<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
--------------------------------------------
Import/ Wholesale Bouquet
Export Distribution Manufacturers Total
-------- ------------ ------------- --------
<S> <C> <C> <C> <C>
North America Division
Revenues--external customers.... $189,034 $166,217 $125,625 $480,876
Revenues--intercompany.......... 28,198 -- -- 28,198
Gross margin.................... 56,913 53,844 24,540 135,297
Depreciation and amortization... 4,093 2,527 1,884 8,504
Integration charge.............. 1,658 558 1,145 3,361
Income from operations.......... 18,127 5,746 1,187 25,060
Total assets.................... 143,171 95,167 69,780 308,118
Expenditures for assets......... 1,041 2,058 871 3,970
</TABLE>

55
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
-------------------------------------------
Import/ Wholesale Bouquet
Export Distribution Manufacturers Total
------- ------------ ------------- --------
<S> <C> <C> <C> <C>
International Division
Revenues--external customers..... $73,166 $19,085 $15,907 $108,158
Revenues--intercompany........... 23,503 38 154 23,695
Gross margin..................... 16,337 4,953 3,435 24,725
Depreciation and amortization.... 609 521 315 1,445
Integration charge............... -- -- -- --
Income from operations........... 2,229 398 231 2,858
Total assets..................... 65,010 21,298 18,653 104,961
Expenditures for assets.......... 1,067 367 313 1,747
</TABLE>

<TABLE>
<CAPTION>
For the Year Ended December 31, 1998
--------------------------------------------
Import/ Wholesale Bouquet
Export Distribution Manufacturers Total
-------- ------------ ------------- --------
<S> <C> <C> <C> <C>
Consolidated
Revenues--external customers.... $262,200 $185,302 $141,532 $589,034
Revenues--intercompany.......... 51,701 38 154 51,893
Gross margin.................... 73,250 58,797 27,975 160,022
Depreciation and amortization... 4,702 3,048 2,199 9,949
Integration charge.............. 1,658 558 1,145 3,361
Income from operations.......... 20,356 6,144 1,418 27,918
Total assets.................... 208,181 116,465 88,433 413,079
Expenditures for assets......... 2,108 2,425 1,184 5,717
</TABLE>

A reconciliation of total segment sales to total consolidated sales, total
segment income from operations to total consolidated income before income taxes
and total segment assets to consolidated total assets is as follows:

<TABLE>
<CAPTION>
For the period
April 22, 1997
Year Ended (inception) to
December 31, December 31,
1998 1997
------------ --------------
<S> <C> <C>
Income from Operations
Total segment income from
operations............... $ 27,918 $ 1,332
Interest income........... 1,883 248
Interest expense.......... (8,040) (8)
Other income.............. 449 37
Write-off of deferred
financing fees........... (1,606) --
Unallocated corporate
S,G&A expenses........... (5,211) (703)
Unallocated goodwill
amortization............. (365) --
-------- --------
Total consolidated
income before income
taxes.................. $ 15,028 $ 906
======== ========
Total Assets
Total segment assets...... $413,079 $92,865
Elimination of
intercompany receivable.. (6,464) --
Goodwill not allocated to
segments................. 70,462 --
Other assets.............. 16,957 14,383
-------- --------
Total consolidated
assets................. $494,034 $107,248
======== ========
</TABLE>

56
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
The following table presents sales and long-lived asset information by
geographic area:

<TABLE>
<CAPTION>
For the period April 22,
Year Ended 1997 (inception) to
December 31, 1998 December 31, 1997
----------------- ---------------------------
Long-
lived Long-lived
Sales Assets Sales Assets
-------- -------- ------------ --------------
<S> <C> <C> <C> <C>
United States.................. $470,312 $240,425 $ 37,380 $ 65,666
Germany........................ 30,768 36,495 -- --
Netherlands.................... 32,064 42,412 --
Other foreign countries........ 55,890 22,525 -- --
-------- -------- ------------ ------------
Total........................ $589,034 $341,857 $ 37,380 $ 65,666
======== ======== ============ ============
</TABLE>

Sales are based on the country in which the sale originates (i.e., where the
legal subsidiary is domiciled) and does not include intercompany sales.

NOTE 15--RETIREMENT BENEFITS

Due to the acquisition of Florimex on October 1, 1998, the Company assumed
and maintains several unfunded defined benefit plans in Austria, Germany, and
Italy (the "Plan"), which cover substantially all full-time employees of the
Company employed in these countries. The Plan provides for benefits to be paid
to eligible employees at retirement based primarily upon years of service or
career average pay. Annual provisions for accrued pension cost are based upon
independent actuarial valuations.

The change in benefit obligation is presented in the following tables.

<TABLE>
<S> <C>
Change in benefit obligation:
Benefit obligation at October 1, 1998............................. $2,822
Service cost...................................................... 26
Interest cost..................................................... 44
Plan participants' contributions.................................. --
Plan amendments................................................... --
Actuarial gain (loss)............................................. --
Acquisition....................................................... --
Benefits paid..................................................... (20)
------
Benefit obligation at December 31, 1998........................... $2,872
======
</TABLE>

57
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
The following tables set forth the Plan's fair value, funded status and
weighted average assumptions.

<TABLE>
<S> <C> <C> <C>
Change in Plan assets:
Fair value of Plan at October 1, 1998............ $ --
Actual return on plan assets..................... --
Employer contribution............................ 19
Acquisition...................................... (19)
Plan participants' contributions................. --
Benefits paid.................................... --
-------
Fair value of Plan assets at December 31, 1998... $ --
=======
Funded status of Plan............................ $(2,872)
Unrecognized actuarial gain (loss)............... --
Unrecognized prior service cost.................. --
Unrecognized net transition obligation........... --
-------
Accrued benefit cost............................. $(2,872)
=======
Amounts recognized in the statement
of financial position consist of:
Prepaid benefit cost............................. $ --
Accrued benefit liability........................ (2,872)
Intangible asset................................. --
Accumulated other comprehensive income........... --
-------
Net amount recognized............................ $(2,872)
=======
Weighted average assumptions as of
October 1, 1998 and December 31, 1998 Austria Germany Italy
Discount rate.................................... 6.00% 6.00% 6.50%
Expected return on assets........................ n/a n/a n/a
Rate of compensation increase.................... 4.00% n/a 3.50%
</TABLE>

The components of net periodic benefit cost included in net income for the
year ended December 31, 1998, are as follows:

<TABLE>
<CAPTION>
Components of net periodic benefit cost
for the year ended December 31, 1998
<S> <C>
Service cost......................................................... $26
Interest cost........................................................ 44
Expected return on Plan assets....................................... --
Amortization of prior service cost................................... --
Actuarial gain (loss)................................................ --
Transition amount amortization....................................... --
---
Net periodic benefit cost............................................ $70
===
</TABLE>

58
<PAGE>

U.S.A. FLORAL PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(in thousands, except share data)
NOTE 16--SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosure of cash flow information:

<TABLE>
<CAPTION>
For the period
Year Ended April 22, 1997 to
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
Cash paid during the period for interest... $ 5,863 $ 100
======== =======
Cash paid during the period for income
taxes..................................... $ 10,155 $ 225
======== =======
Supplemental disclosure of non-cash
transactions:
Business acquisitions:
Cash paid for business acquisitions.... $153,189 $43,679
Less: cash acquired.................... 10,536 3,861
-------- -------
Cash paid for business acquisitions,
net................................... 142,653 39,818
Issuance of common stock for business
acquisitions.......................... 99,461 22,743
-------- -------
242,114 62,561
Fair value of net assets acquired, net
of cash............................... 22,154 9,717
-------- -------
$219,960 $52,844
======== =======
</TABLE>

NOTE 17--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the unaudited quarterly financial data for the
quarters ended after the Company's IPO on October 15, 1997:

<TABLE>
<CAPTION>
1997 1998
------- -----------------------------------
Fourth First Second Third Fourth
Quarter Quarter Quarter Quarter Quarter
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenues...................... $37,380 $100,520 $133,775 $110,799 $243,940
Gross margin...................... 10,695 26,464 37,109 31,518 64,931
Net income (loss) (1)............. 526 3,952 4,963 81 (1,253)
Net income (loss) per share, basic
(2).............................. 0.06 0.32 0.35 0.01 (0.08)
Net income (loss) per share,
diluted (2)...................... 0.06 0.31 0.34 0.01 (0.08)
</TABLE>

(1) The results for the fourth quarter of 1998 are after pre-tax non-recuring
charges aggregating $5 million (approximately $0.19 per diluted share).

(2) Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share in 1998
and 1997 may not equal the total computed for the year.

59
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of
Washington, District of Columbia on March 30, 1999.

U.S.A. FLORAL PRODUCTS, INC.

By: /s/ Robert J. Poirier
-------------------------------
Robert J. Poirier
Chairman of the Board, President
and
Chief Executive Officer

Each person whose signature appears below hereby appoints Robert J. Poirier
and W. Michael Kipphut, and both of them, either of whom may act without the
joinder of the other, as his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
this Annual Report on Form 10-K, and to file the same, with all exhibits
thereto and all other documents in connection therewith, with the Commission,
granting unto said attorneys-in-fact and agents full power and authority to
perform each and every act and thing appropriate or necessary to be done, as
fully and for all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

Signature Capacity Date

<TABLE>
<S> <C>
/s/ Robert J. Poirier Chairman of the Board, March 30, 1999
- ------------------------------- President and
Robert J. Poirier Chief Executive Officer and a
Director (Principal Executive
Officer)

/s/ W. Michael Kipphut Chief Financial Officer March 30, 1999
- ------------------------------- (Principal
W. Michael Kipphut Financial and Accounting
Officer)

/s/ Vincent W. Eades Director March 30, 1999
- -------------------------------
Vincent W. Eades

/s/ Aaron J. Gellman Director March 30, 1999
- -------------------------------
Aaron J. Gellman

/s/ Ann Torre Grant Director March 30, 1999
- -------------------------------
Ann Torre Grant

/s/ Jonathan J. Ledecky Director March 30, 1999
- -------------------------------
Jonathan J. Ledecky
</TABLE>

60
<PAGE>

Signature Capacity Date

<TABLE>
<S> <C>
/s/ Theodore J. Leonsis Director March 30, 1999
- -------------------------------
Theodore J. Leonsis

/s/ Edward J. Mathias Director March 30, 1999
- -------------------------------
Edward J. Mathias

/s/ Peter Roy Director March 30, 1999
- -------------------------------
Peter Roy

/s/ Jeffrey Brothers Director March 30, 1999
- -------------------------------
Jeffrey Brothers

/s/ John T. Dickinson Director March 30, 1999
- -------------------------------
John T. Dickinson

/s/ Gustavo Moreno Director March 30, 1999
- -------------------------------
Gustavo Moreno
</TABLE>

61
<PAGE>

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
2.01 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. (Exhibit 2.1)(1)
2.02 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. (Exhibit 2.2)(1)
2.03 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., EFI Acquisition Corp., EFM Acquisition Corp.,
Everflora, Inc., Everflora Miami, Inc. and the Stockholder named
therein dated January 16, 1998. (Exhibit 2.11)(2)
2.04 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., LF Acquisition Corp., H&H Flowers, Inc. and the
Stockholders named therein made effective as of January 16, 1998.
(Exhibit 2.12).(2)
2.05 Agreement and Plan or Reorganization by and among U.S.A. Floral
Products, Inc., UF Acquisition Corp., UltraFlora Corporation and the
Stockholders named therein made effective as of January 16, 1998.
(Exhibit 2.13)(2)
2.06 Agreement and Plan or Reorganization by and among U.S.A. Floral
Products, Inc., KDI Acquisition Corp., Koehler & Dramm, Inc. and the
Stockholders named therein made effective as of January 16, 1998.
(Exhibit 2.14)(2)
2.07 Stock Purchase Agreement by and among U.S.A. Floral Products, Inc.,
Maxima Farms, Inc., Maxima Farms, Ltd. and the principal beneficial
owner of Maxima Farms, Ltd. made effective as of April 3, 1998.
(Exhibit 2.15)(3)
2.08 Share Purchase Agreement by and among U.S.A. Floral Products, Inc.,
David L. Jones Wholesale, Ltd. and the Shareholders named therein made
effective as of April 3, 1998. (Exhibit 2.16)(3)
2.09 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., EFTA Acquisition Corp., Elite Farms, Talent, Inc.,
Anvacu, Inc., the Stockholders named therein and the beneficial owners
named therein made effective as of April 3, 1998. (Exhibit 2.17)(3)
2.10 Stock Purchase Agreement by and among U.S.A. Floral Products, Inc.,
Selecta Farms, Inc., Saint Ann Trading Corporation, Juecla Investment
Corporation and persons named therein made effective as of April 3,
1998. (Exhibit 2.18)(3)
2.11 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., SAB Acquisition Corp., Master Flowers Inc. and the
Stockholders named therein made effective April 3, 1998.
(Exhibit 2.19)(3)
2.12 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., FFI Acquisition Corp., Edfrancar, Inc. and the
Stockholders named therein made effective as of April 3, 1998.
(Exhibit 2.20)(3)
2.13 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., ASG Acquisition Corp., AFB Marketing, Inc. and the
Stockholders named therein made effective as of April 3, 1998.
(Exhibit 2.21)(3)
2.14 Agreement and Plan of Reorganization by and among U.S.A. Floral
Products, Inc., PFW Acquisition Corp., RCF Acquisition Corp., Pacific
Floral Wholesale, Inc., Rose City Floral, Inc. and the Stockholder
named therein made effective as of April 3, 1998. (Exhibit 2.22)(3)
2.15 Stock and Asset Purchase Agreement by and between DIMON Incorporated
and Florimex Worldwide GmbH, and U.S.A. Floral Products, Inc. (Exhibit
2.1)(4)
</TABLE>

62
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
-------- -----------
<C> <S>
3.01 Certificate of Incorporation of U.S.A. Floral Products, Inc., as
amended. (Exhibit 3.01)(5)
3.02 Amended and Restated Bylaws of U.S.A. Floral Products, Inc. (Exhibit
3.02)(5)
4.01 Credit Agreement among U.S.A. Floral Products, Inc., U.S.A. Floral
Products Germany GmbH & Co. KG, Florimex Worldwide B.V., Various
Lending Institutions, Bayerische Hypo-Und Vereinsbank AG, as
Syndication Agent, BankBoston, N.A., as Documentation Agent, and
Bankers Trust Company, as Arranger and Administrative Agent, dated as
of October 16, 1997 and Amended and Restated as of October 2, 1998.
(Exhibit 4.1)(4)
4.01(a) Consent to Credit Agreement among U.S.A. Floral Products, Inc.,
various Lending Institutions and Bankers Trust Company, as Agent,
dated as of January 26, 1998. (Exhibit 4.01(a))(2)
4.01(b) First Amendment to Credit Agreement, dated as of November 2, 1998,
among U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co.
KG, Florimex Worldwide B.V., the lenders party to the Credit
Agreement, Bayerische Hypo-Und Vereinsbank AG, as Syndication Agent,
BankBoston, N.A., as Documentation Agent, and Bankers Trust Company
as Arranger and Administrative Agent.(6)
4.01(c) Second Amendment and consent dated as of December 29, 1998, among
U.S.A. Floral Products, Inc., U.S.A. Floral Products GmbH & Co. KG,
Florimex Worldwide B.V., the lenders party to the Credit Agreement,
Bayerische Hypo-Und Vereinsbank AG, as Syndication Agent, BankBoston,
N.A. as Documentation Agent, and Bankers Trust Company, as Arranger
and Administrative Agent.(6)
10.01 U.S.A. Floral Products, Inc. 1997 Long-Term Incentive Plan. (Exhibit
10.10)(5)*
10.02 U.S.A. Floral Products, Inc. 1997 Non-Employee Directors' Stock Plan.
(Exhibit 10.11)(5)*
10.03 U.S.A. Floral Products, Inc. 1997 Employee Stock Purchase Plan.
(Exhibit 10.12)(5)
10.04 Employment Agreement between U.S.A. Floral Products, Inc. and Robert
Poirier, dated as of December 1, 1998.(6)*
10.05 Employment Agreement between U.S.A. Floral Products, Inc. and Raymond
C. Anderson, dated October 9, 1997. (Exhibit 10.13)(5)*
10.06 Employment Agreement between The Roy Houff Company and Roy O. Houff,
dated October 16, 1997. (Exhibit 10.14)(5)*
10.07 Employment Agreement between CFX, Inc. and Dwight Haight, dated
October 16, 1997. (Exhibit 10.15)(5)*
10.08 Employment Agreement between Bay State Florist Supply, Inc. and
William W. Rudolph, dated October 16, 1997. (Exhibit 10.16)(5)*
10.09 Employment Agreement between Monterey Bay Bouquet, Inc. and Jeffrey
Brothers, dated October 16, 1997. (Exhibit 10.17)(5)*
10.10 Employment Agreement between Alpine Gem Flower Shippers, Inc. and
John Q. Graham, Jr., dated October 16, 1997. (Exhibit 10.18)(5)*
10.11 Employment Agreement between United Wholesale Florists, Inc. and
Raymond R. Ashmore, dated October 16, 1997. (Exhibit 10.19)(5)*
10.12 Employment Agreement between American Florist Supply, Inc. and John
T. Dickinson, dated October 16, 1997. (Exhibit 10.20)(5)*
10.13 Employment Agreement between Flower Trading Corporation and Gustavo
Moreno, dated October 16, 1997. (Exhibit 10.21)(5)*
</TABLE>

63
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.14 Employment Agreement between U.S.A. Floral Products, Inc. and
Christopher E. Wilson, dated August 4, 1998.(6)*
10.15 Employment Agreement between U.S.A. Floral Products, Inc. and Dwight
Ferguson, dated August 12, 1998.(6)*
10.16 Employment Agreement between U.S.A. Floral Products, Inc. and W.
Michael Kipphut, dated September 28, 1998.(6)*
10.17 Sublease Agreement by and between Blytheville-Gosnell Regional Airport
Authority and Floral Distributors, Inc., dated December 16, 1998.(6)
10.18 Registration Rights Agreement, dated as of July 25, 1997, among U.S.A.
Floral Products, Inc. and certain stockholders named therein. (Exhibit
10.22)(5)
21.01 Subsidiaries of the Registrant.(6)
23.01 Consent of PricewaterhouseCoopers LLP.(6)
27.01 Financial Data Schedule.(6)
</TABLE>
- --------
* Management contract or compensatory plan or arrangement.

(1) Incorporated by reference. Previously filed as an exhibit to the Company's
Current Report on Form 8-K filed with the Commission on February 9, 1998.

(4) Incorporated by reference. Previously filed as an Exhibit to the Company's
Current Report on Form 8-K filed with the Commission on October 15, 1998.

(6) Filed herewith.

<PAGE>

Exhibit 4.01B

FIRST AMENDMENT
----------------

FIRST AMENDMENT (this "Amendment"), dated as of November 12, 1998,
among U.S.A. FLORAL PRODUCTS, INC., a Delaware corporation (the "US Borrower"),
U.S.A. FLORAL PRODUCTS GMGH & CO. KG, a partnership organized under the laws of
the Federal Republic of Germany (the "German Borrower"), FLORIMEX WORLDWIDE
B.V., a company organized under the laws of the Netherlands (the "Dutch
Borrower" and, together with the German Borrower and the US Borrower, the
"Borrowers", and each a "Borrower"), the lenders party to the Credit Agreement
referred to below (the "Banks"), BAYERISCHE HYPO-UND VEREINSBANK AG, as
Syndication Agent (in such capacity the "Syndication Agent"), BANKBOSTON, N.A.,
as Documentation Agent (in such capacity the "Documentation Agent"), and BANKERS
TRUST COMPANY, as Arranger and Administrative Agent (the "Administrative
Agent"). Unless otherwise defined herein, all capitalized terms used herein and
defined in the Credit Agreement are used herein as so defined.

W I T N E S S E T H:
-------------------

WHEREAS, the Borrowers, the Banks, the Syndication Agent, the
Documentation Agent and the Administrative Agent are parties to a Credit
Agreement, dated as of October 16, 1997 and amended and restated as of October
2, 1998 (as further amended, modified or supplemented to, but not including, the
date hereof, the "Credit Agreement");

WHEREAS, the parties hereto wish to further amend the Credit Agreement
as herein provided; and

WHEREAS, subject to the terms and conditions of this Amendment, the
parties hereto agree as follows;

NOW, THEREFORE, it is agreed:

1. The definition of "ABN Revolver" appearing in Section 10 of the
Credit Agreement is hereby amended by deleting said definition in its entirety
and inserting the following new definition for "ABN Revolver" in lieu thereof:

"ABN Revolver" shall mean that certain existing revolving credit
facility provided by ABN Amro Bank N.V. to the Dutch Borrower and certain
other Dutch Credit Parties for working capital and general corporate
purposes and any successor or replacement credit facility thereof having
substantially the same terms and conditions as such existing credit
facility, and in form and substance satisfactory to the Administrative
Agent, it being understood and agreed that, in any event, such successor or
replacement facility (x) shall not increase the total amount of
Indebtedness that may incurred thereunder, (y) shall be unsecured and (z)
shall not be guaranteed by the US Borrower or any of its Subsidiaries
(other than any Dutch Credit Party) or provide for any other type of credit
support other than Letters of Credit issued in accordance with the terms of
this Agreement.
<PAGE>

2. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when each Borrower and the Required Banks shall have
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by way of facsimile transmission) the same to
the Administrative Agent at the Notice Office.

3. In order to induce the Banks to enter into this Amendment, each
Borrower hereby represents and warrants that (i) the representations, warranties
and agreements contained in Section 6 of the Credit Agreement are true and
correct in all material respects on and as of the First Amendment Effective
Date, both before and after giving effect to this Amendment and (ii) there
exists no Default or Event of Default on the First Amendment Effective Date,
both before and after giving effect to this Amendment.

4. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.

5. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the US Borrower and the Administrative Agent.

6. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.

7. From and after the First Amendment Effective Date, all references
in the Credit Agreement and in the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as modified
hereby.

* * *
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.

U.S.A. FLORAL PRODUCTS, INC.

By /s/ W. Michael Kipphut
________________________________
Title: Chief Financial Officer

U.S.A. FLORAL PRODUCTS GERMANY GMBH & CO. KG

By /s/ Robert J. Poirier
________________________________
Title:

FLORIMEX WORLDWIDE B.V.

By /s/ Robert J. Poirier
________________________________
Title:

BANKERS TRUST COMPANY,
Individually and as Agent

By /s/ David Bell
________________________________
Title: Vice President

BAYERISCHE HYPO-UND VEREINSBANK AG,
Individually and as Syndication Agent

By /s/ Sylvia K. Cheng
________________________________
Title: Vice President

By /s/ Hans Dide
________________________________
Title: Director

BANKBOSTON, N.A., Individually and as
Documentation Agent

By /s/ Pamela Kuong
________________________________
Title: Vice President
<PAGE>

LA SALLE NATIONAL BANK

By /s/ Bernado Lacayo
__________________________________
Title: Commercial Loan Officer

FLEET BANK, N.A.

By /s/ Thomas Levy
__________________________________
Title: Vice President

NATIONAL BANK OF CANADA

By /s/ Richard Brown
________________________________
Title: Vice President

By________________________________
Title:

UNION BANK OF CALIFORNIA, N.A.

By /s/ J. William Bloore
________________________________
Title: Vice President

<PAGE>

Exhibit 4.01C

SECOND AMENDMENT AND CONSENT
----------------------------

SECOND AMENDMENT AND CONSENT (this "Amendment"), dated as of December
29, 1998, among U.S.A. FLORAL PRODUCTS, INC., a Delaware corporation (the "US
Borrower"), U.S.A. FLORAL PRODUCTS GERMANY GMBH & CO. KG, a partnership
organized under the laws of the Federal Republic of Germany (the "German
Borrower"), FLORIMEX WORLDWIDE B.V., a company organized under the laws of the
Netherlands (the "Dutch Borrower" and, together with the German Borrower and the
US Borrower, the "Borrowers", and each a "Borrower"), the lenders party to the
Credit Agreement referred to below (the "Banks"), BAYERISCHE HYPO-UND
VEREINSBANK AG, as Syndication Agent (in such capacity the "Syndication Agent"),
BANKBOSTON, N.A., as Documentation Agent (in such capacity the "Documentation
Agent"), and BANKERS TRUST COMPANY, as Arranger and Administrative Agent (the
"Administrative Agent"). Unless otherwise defined herein, all capitalized terms
used herein and defined in the Credit Agreement are used herein as so defined.

W I T N E S S E T H:
-------------------

WHEREAS, the Borrowers, the Banks, the Syndication Agent, the
Documentation and the Administrative Agent wish to modify the Credit Agreement
to clarify certain transactions which occurred thereunder on the Initial
Borrowing Date;

WHEREAS, the Borrowers, the Banks, the Syndication Agent, the
Documentation Agent and the Administrative Agent hereby acknowledge that on the
Initial Borrowing Date, the German Borrower had instructed the Administrative
Agent to fund to Holdings GmbH, on behalf of the German Borrower, DM31,859,200
of the DM Term Loans originally incurred by the German Borrower on such date;

WHEREAS, Florimex USA, Inc., a domestic Wholly-Owned Subsidiary of the
US Borrower, intends to create a new Dutch holding company named BV Van Herk
Beheer II ("New Holdco BV") which will acquire (the "Acquisition") all of the
outstanding capital stock of the Dutch Borrower currently held by Holdings GmbH,
the consideration for which will be the issuance by New Holdco BV to Holdings
GmbH of an intercompany note in a principal amount equal to $29,190,254;

WHEREAS, the Borrowers have requested certain modifications to the
Credit Agreement to permit the aforementioned transactions; and

WHEREAS, subject to the terms and conditions of this Amendment, the
parties hereto agree as follows;

NOW, THEREFORE, it is agreed:
<PAGE>

1. Notwithstanding anything to the contrary contained in Section 8.06
of the Credit Agreement, the Banks hereby agree that the US Borrower may (x)
forgive that certain Intercompany Loan in the principal amount of $14,844,478
made by it to Holdings GmbH on the Initial Borrowing Date and (y) convert same
into a cash equity contribution to Holdings GmbH in a like amount.

2. Notwithstanding anything to the contrary contained in Sections
8.02 and 8.06 of the Credit Agreement, the Banks hereby agree that the US
Borrower may contribute to the capital of Holdings GmbH the receivables owed to
the US Borrower in respect of that certain Intercompany Loan in the principal
amount of $27,852,255 made by it to the German Borrower on the Initial Borrowing
Date.

3. Notwithstanding anything to the contrary contained in Sections
8.02 and 8.06 of the Credit Agreement, the Banks hereby agree that New Holdco BV
and Holdings GmbH may consummate the Acquisition on the terms provided herein.

4. The Banks hereby agree that each reference to the number "90"
appearing in Sections 7.11(a), (b), (c), (d), (e), (g) and (i) shall be deleted
and the number "150" shall in each case be inserted in lieu thereof.

5. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when each of the following conditions have been met:

a. the Borrowers and the Required Banks shall have signed a
counterpart hereof (whether the same or different counterparts) and shall
have delivered (including by way of facsimile transmission) the same to the
Administrative Agent at the Notice Office;

b. New Holdco BV shall have executed and delivered to the
Administrative Agent a counterpart of the Foreign Guaranty;

c. the Administrative Agent shall have received from Buruma Maris,
counsel to the Credit Parties, an opinion addressed to the Administrative
Agent, the Documentation Agent and each of the Banks, and dated the Second
Amendment Effective Date, in form and substance satisfactory to the
Administrative Agent, and covering such matters incident to this Amendment
and the transactions contemplated herein and as the Administrative Agent
may reasonably request; and

d. The Administrative Agent shall have received for the account of
each Bank which has executed a counterpart hereof and delivered the same to
the Administrative Agent at the Notice Office by 5:00 p.m. (New York time)
on December 29, 1998 an amendment fee equal to 0.05% of the sum of such
Bank's (x) Dollar Revolving Loan Commitment, (y) outstanding DM Term Loans
and (z) Foreign Revolving Loan Commitment, in each case on such date.

6. Notwithstanding anything to the contrary contained in this
Amendment or in the Credit Agreement, the Borrower, the Banks, the Syndication
Agent, the Documentation Agent and the Administrative Agent hereby acknowledge
and agree that upon the effectiveness of this Amendment in accordance with
paragraph 5 above and the consummation of the
<PAGE>

transactions contemplated in this Amendment, all such transactions shall be
deemed to have retroactively occurred on the Initial Borrowing Date.

7. In order to induce the Banks to enter into this Amendment, each
Borrower hereby represents and warrants that (i) the representations, warranties
and agreements contained in Section 6 of the Credit Agreement are true and
correct in all material respects on and as of the Second Amendment Effective
Date, both before giving effect to this Amendment (without giving effect to the
transactions contemplated hereby) and after giving effect to this Amendment (and
the transactions contemplated hereby) and (ii) there exists no Default or Event
of Default on the Second Amendment Effective Date, both before giving effect to
this Amendment (without giving effect to the transactions contemplated hereby)
and after giving effect to this Amendment (and the transactions contemplated
hereby).

8. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.

9. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the US Borrower and the Administrative Agent.

10. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.

11. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and in the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
modified hereby.

* * *
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.

U.S.A. FLORAL PRODUCTS, INC.

By /s/ W. Michael Kipphut
________________________________
Title: Chief Financial Officer

U.S.A. FLORAL PRODUCTS GERMANY GMBH & CO. KG

By /s/ Robert J. Poirier
________________________________
Title:

FLORIMEX WORLDWIDE B.V.

By /s/ Robert J. Poirier
________________________________
Title:

BANKERS TRUST COMPANY,
Individually and as Agent

By /s/ David Bell
________________________________
Title: Vice President

BAYERISCHE HYPO-UND VEREINSBANK AG, Individually
and as Syndication Agent

By /s/ Sylvia K. Cheng
________________________________
Title: Vice President

By /s/ E. Ebner V. Eschenbach
________________________________
Title: Vice President

BANKBOSTON, N.A., Individually and as
Documentation Agent

By /s/ Pamela Kuong
________________________________
Title: Vice President
<PAGE>

LA SALLE NATIONAL BANK

By /s/ Bernado Lacayo
________________________________
Title: Commercial Loan Officer

FLEET NATIONAL BANK

By /s/ Thomas Levy
________________________________
Title: Vice President

NATIONAL BANK OF CANADA

By /s/ Richard Brown
________________________________
Title: Vice President

By________________________________
Title:

UNION BANK OF CALIFORNIA, N.A.

By /s/ J. William Bloorp
________________________________
Title: Vice President
<PAGE>

SCHMIDT BANK

By /s/ Hubertus Van Berlepsch
________________________________
Title: General Manager

<PAGE>
Exhibit 10.04

EMPLOYMENT AGREEMENT
--------------------

THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into,
effective for all purposes and in all respects as of the 1st day of December,
1998, by and between U.S.A. FLORAL PRODUCTS, INC., a Delaware corporation (the
"Company"), and ROBERT POIRIER ("Employee").

R E C I T A L S

A. Employee is currently employed in the capacity as Chief Executive
Officer, President and Chairman of the Board of the Company, under the terms and
conditions of an Employment Agreement, dated as of April 22, 1997, between the
parties, which agreement was amended on August 6, 1997 (the "Prior Agreement").

B. The parties desire to continue the employ of the Employee in such
capacity under the terms and conditions set forth in this Agreement, which
Agreement supersedes the Prior Agreement in its entirety.

NOW, THEREFORE, in consideration of the foregoing, of the mutual promises
herein contained and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:

1. Employment and Duties.
---------------------

(a) The Company hereby employs Employee as Chief Executive Officer of
the Company. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of a chief executive officer,
president and chairman of the board and will report directly to the Board of
Directors of the Company (the "Board") or such committee as may be designated by
the Board. Employee hereby accepts this employment upon the terms and
conditions herein contained and agrees to devote his time, attention and efforts
to promote and further the business of the Company.

(b) The Company shall use its best efforts to cause Employee to be
elected to the Board and serve as its Chairman throughout the Term and shall
include him in the management slate for election as a director at every
stockholders' meeting at which his term as a director would otherwise expire.
If requested by the Board, Employee shall serve as a member of the board of
directors of any one or more subsidiaries of the Company.

(d) Employee shall not, during the Term of his employment hereunder,
be engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder; provided that,
<PAGE>

with the approval of the Board (which approval shall not unreasonably be
withheld), from time to time, Employee may serve, or continue to serve, on the
board of directors of, and hold any other offices or positions, in companies or
organizations, which in the Board's judgment, will not present any conflict of
interest with the Company, its subsidiaries or affiliates, or materially
adversely affect the performance of Employee's duties pursuant to this
Agreement.. However, the foregoing limitations shall not be construed as
prohibiting Employee from making and managing personal investments in such form
or manner as will neither require his services in the operation or affairs of
the companies or enterprises in which such investments are made, nor violate the
terms of paragraph 5 hereof.

2. Cash Compensation. For all services rendered by Employee hereunder,
-----------------
the Company shall compensate Employee as follows:

(a) Base Salary. Effective as of the date hereof, the base salary
-----------
payable to Employee during the Employment Period shall be at the per annum rate
--- -----
of Five Hundred Thousand Dollars ($500,000), payable on a regular basis in
accordance with the Company's standard payroll procedures, but not less than
monthly. On at least an annual basis, the Company will consider increases (but
not decreases) to Employee's base salary. In considering such increases, the
Company shall take into account the William M. Mercer Executive Compensation
Survey for the most recently available year.

(b) Incentive Bonus. For the Company's 1998 fiscal year, the Company
---------------
shall determine, in its discretion, the annual bonus, if any, that shall be
payable in respect of the performance of the Company and Employee in 1998. For
each fiscal year thereafter that ends during the Term, Employee shall be
entitled to receive an annual bonus of no less than 50% of Employee's base
salary then in effect, if the Company's consolidated earnings per share for such
year (after giving effect to all annual bonuses) equals or exceed analysts'
consensus estimates (as provided by First Call) for such year as an in effect on
January 1 of such year. Additionally, at the sole discretion of the Company,
Employee may be considered for an additional annual bonus based upon the
achievement of annual Company and/or individual performance goals to be set by
the Company. Notwithstanding anything contained in this Agreement to the
contrary (including paragraph 7 hereof), if (A) Employee's employment hereunder
has terminated for any reason, except by the Company for cause (as defined
below) or by Employee voluntarily without good reason (as defined below) prior
to the end of a given fiscal year, or (B) if Employee's employment terminates
for any reason at the expiration of the Term of this Agreement, Employee shall
receive (at the time bonuses are normally paid) the annual incentive bonus, if
any, that would have been paid for such fiscal year had Employee remained
employed until the end of such year, multiplied by a fraction, the numerator of
which is the number of complete months of such fiscal year during which Employee
was employed with the Company, and the denominator of which is twelve.

3. Stock Options. Employee shall be granted stock options or other
-------------
awards during the Employment Period pursuant to the Company's 1997 Long Term
Incentive Plan as determined in the discretion of the Compensation Committee.
Upon a termination of Employee's employment by the Company without cause
pursuant to paragraph 7(b)(iv) or by the

2
<PAGE>

Employee for good reason pursuant to paragraph 7(b)(v), all outstanding unvested
options held by Employee shall become fully vested and all options will remain
exercisable for the three year period following such termination. Upon
Employee's termination of employment pursuant to paragraph 7(b)(v) without good
reason, or if Employee's employment is terminated by the Company for cause under
circumstances described in clause (A) or (B) of paragraph 7(b)(iii), all
unvested options shall immediately terminate and all vested options will remain
exercisable for the 180-day period following such termination. If Employee's
termination is by reason of death or disability pursuant to paragraph 7(b)(i) or
(ii), all unvested options shall become fully vested and all options will remain
exercisable for the one year period following such termination. Upon termination
of Employee's employment for cause under circumstances described in clause (C)
or (D) of paragraph 7(b)(iii), all outstanding options, whether or not vested,
shall immediately terminate. All exercisable options may be exercised through a
broker-assisted "cashless" exercise arrangement to be made available by the
Company. Notwithstanding the foregoing, no option may be exercisable beyond
expiration of the term of such option. Upon a Change in Control (as defined in
the Company's 1997 Long Term Incentive Plan), all outstanding unvested options
held by Employee shall become fully vested unless Section 7(g)(i) of such plan
applies. This Section 3 shall not apply to the option for 60,000 shares of stock
granted to Employee on the first anniversary of the Company's initial public
offering, as such option shall remain subject to its original terms.

4. Benefits, Executive Perquisites and Expense Reimbursement. During
---------------------------------------------------------
the Employment Period, Employee shall be entitled to receive additional benefits
from the Company in such form and to such extent as specified below.

(a) The Company shall provide an automobile for Executive's use, such
automobile to be of a make and model that is appropriate for Employee's position
and status with the Company.

(b) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by the
Company and participation in all other Company-wide employee benefits as
available from time to time. Supplemental insurance coverages (i.e., life and
disability) shall be provided at such levels as shall be agreed between the
Company and Employee.

(c) The Company shall reimburse Employee for all business travel and
other out-of-pocket expenses reasonably incurred by Employee in the performance
of his services pursuant to this Agreement. In addition, the Company shall
reimburse Employee up to $25,000 for the reasonable legal fees and disbursements
of not more than one counsel in connection with the negotiation and execution of
this Agreement. All reimbursable expenses shall be appropriately documented in
reasonable detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense reporting
policy.

3
<PAGE>

(d) The benefits, payments or reimbursements provided for in this
paragraph 4 shall be subject to informational reporting and standard withholding
deductions as required by law as determined by the Company in its reasonable
discretion.

5. Non-Competition Agreement.
-------------------------

(a) Employee will not, during the period of his employment by or with
the Company, and, for a period equal to one (1) year following the termination
of his employment under this Agreement or upon its expiration pursuant to
paragraph 7(c) (or, if greater, for the period during which Employee is entitled
to continuing payment of base salary pursuant to paragraph 7(b)), for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation, business,
group, or other entity (each, a "Person"):

(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in
any business selling any products or services in direct competition with
the Company including without limitation the importing, brokerage, shipping
or marketing of floral products, or any business engaging in the
consolidation of the floral industry, within the United States of America
or the European Community (the "Territory");

(ii) call upon any Person who is, at that time, within the
Territory, an employee of the Company for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company;

(iii) call upon any Person who is, at that time, or has been,
within one year prior to that time, a customer of the Company within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company within the Territory; or

(iv) on Employee's own behalf or on behalf of any competitor,
call upon any Person who during the one-year period prior to that time was
either called upon by the Company as a prospective acquisition candidate or
was the subject of an acquisition analysis conducted by the Company.

No provision of this paragraph 5(a) shall be deemed to prohibit Employee from
acquiring as an investment not more than one percent (1%) of the capital stock
of a competing business, whose stock is traded on a national securities exchange
or on an over-the-counter market.

(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
covenant, in addition to and not in limitation of any other rights, remedies or
damages available to the Company at law, in equity or under this Agreement,

4
<PAGE>

may be enforced by the Company in the event of the breach or threatened breach
by Employee, by injunctions and/or restraining orders.

(c) It is agreed by the parties that the covenants contained in
paragraphs 5(a) and 5(b) hereof impose a reasonable restraint on Employee in
light of the activities and business of the Company (including the Company's
affiliates) on the date of the execution of this Agreement and the current plans
of the Company (including the Company's affiliates).

(d) The covenants in this paragraph 5 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth
herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent that such court deems reasonable,
and the Agreement shall thereby be reformed to reflect the same.

(e) All of the covenants in this paragraph 5 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period stated in paragraph 5(a) hereof, during which the
agreements and covenants of Employee made in this paragraph 5 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 5.

(f) Notwithstanding any of the foregoing, if any applicable law,
judicial ruling or order shall reduce the time period during which Employee
shall be prohibited from engaging in any competitive activity described in
paragraph 5(a) hereof, the period of time for which Employee shall be prohibited
pursuant to paragraph 5(a) hereof shall be the maximum time permitted by law.
However, in the event that the time period specified by paragraph 5(a) hereof
shall be so reduced, then, notwithstanding the provisions of paragraph 7(b)(iv)
hereof, Employee shall be entitled to receive from the Company his base salary
at the rate then in effect solely for the time period during which the
provisions of paragraph 5(a) hereof shall be enforceable under the provisions of
such applicable law, ruling or order.

(g) For purposes of this Section 5, references to "the Company" shall
mean U.S.A. Floral Products, Inc., together with its subsidiaries and
affiliates.

(h) Notwithstanding anything contained herein to the contrary, upon
Employee's termination of employment for any reason that occurs within a two
year period following a Change in Control (as defined in the Company's 1997 Long
Term Incentive Plan), this Section 5 shall cease to apply.

6. Place of Performance. During the Term, Employee's principal offices
--------------------
shall be located in the greater Washington, D.C. metropolitan area.

5
<PAGE>

7. Term; Termination; Rights on Termination.
----------------------------------------

(a) This Agreement shall have a term of three years, commencing as of
the date hereof and ending on the third anniversary of the date hereof. Such
three year period is referred to herein as the "Term", and the period during the
Term, prior to termination of the Employee's employment pursuant to paragraph
7(b), is referred to herein as the "Employment Period".

(b) The Employee's employment hereunder may be terminated during the
Term in any one of the followings ways:

(i) Death. Upon death of Employee, no severance compensation due
-----
to Employee's estate.

(ii Disability. If, as a result of incapacity due to physical
----------
or mental illness or injury, Employee shall have been absent from his full-
time duties hereunder for four (4) consecutive months, then thirty (30)
days after written notice to Employee (which notice may occur before or
after the end of such four (4) month period, but which shall not be
effective earlier than the last day of such four (4) month period), the
Company may terminate Employee's employment hereunder, provided that
Employee is unable to resume his full-time duties at the conclusion of such
notice period. Also, Employee may terminate his employment hereunder if
his health should become impaired to an extent that makes the continued
performance of his duties hereunder hazardous to his physical or mental
health or his life, provided that Employee shall have furnished the Company
with a written statement from a qualified doctor to such effect, and
provided, further, that, at the Company's request made within thirty (30)
days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably
acceptable to Employee or Employee's doctor and such doctor shall have
concurred in the conclusion of Employee's doctor. In the event the
Employee's employment is terminated as a result of Employee's disability,
Employee shall receive from the Company the base salary, at the rate then
in effect, and the additional benefits and requirements described in
paragraph 4, for whatever time period is remaining under the Term, payable
over the remaining period of the Term and otherwise in accordance with the
provisions of this Agreement.

(ii Cause. Employee's employment shall terminate thirty (30)
-----
days after written notice to Employee specifying "cause" therefor. For
purposes of this Agreement, the term "cause" shall mean and refer to: (A)
Employee's willful and material breach of this Agreement (continuing for
thirty (30) days after receipt of written notice of need to cure); (B)
Employee's gross negligence in the performance or intentional
nonperformance (continuing for thirty (30) days after receipt of written
notice of need to cure) of any of Employee's material duties and
responsibilities hereunder; (C) Employee's willful dishonesty, fraud or
misconduct with respect to the business or affairs of the Company which
materially and adversely affects the operations or reputation of the
Company; (D) Employee's conviction of a felony or other crime involving
moral

6
<PAGE>

turpitude; or (E) chronic alcohol or illegal drug abuse by Employee.
For purposes of this definition of "cause," no act, or failure to act, on
Employees's part shall be deemed "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's act, or failure to act, was in the best interest of the Company.
In the event of a termination for cause, as enumerated above, Employee
shall have no right to any severance compensation.

(iv Without Cause. The Company may, without cause, terminate
-------------
the Employee's employment, effective thirty (30) days after written notice
is provided to Employee. Should Employee be terminated by the Company
without cause, subject to paragraph 5(f) hereof, Employee shall receive
from the Company the base salary, at the rate then in effect at the time of
such termination, and coverage under Company -provided insured welfare
arrangements on the same basis as such benefits were provided at the time
of such termination for the period remaining in the Term or one (1) year,
whichever is greater; provided, however, should such termination occur
-------- -------
within a two year period following a Change in Control (as defined in the
Company's 1997 Long Term Incentive Plan as in effect on the date hereof,
unless any change in the definition is more advantageous to Employee), in
lieu of the amount to be provided above, the Employee shall receive, within
five (5) days of such termination, a lump sum payment equal to three (3)
times Employee's annual base salary in effect at the time of such
termination or at the time of the Change in Control, whichever is greater,
plus coverage under Company -provided insured welfare arrangements on the
same basis as such benefits were provided at the time of such termination
for three (3) years.

(v) Resignation. The Employee may resign at any time. If
-----------
Employee resigns or otherwise terminates his employment without "good
reason"pursuant to this paragraph 7(b)(v), Employee shall receive no
severance compensation. If the Employee's resignation or other termination
is for good reason, then Employee shall be entitled to the amounts and
benefits as if his employment were terminated without cause pursuant to
paragraph 7(b)(iv) (including, if Employee terminates his employment for
good reason within a two (2) year period following a Change in Control, a
lump sum payment equal to three (3) times Employee's annual base salary in
effect at the time of such termination or at the time of the Change in
Control, whichever is greater, plus coverage under Company-provided insured
welfare arrangements on the same basis as such benefits were provided at
the time of such termination for three (3) years). For purposes of this
Agreement, good reason shall mean and refer to the Company's material
breach of any provision of this Agreement (continuing for thirty (30) days
after receipt of written notice of need to cure) including, but not by way
of limitation, a diminution in, or assignment to Employee of any duties,
responsibilities or reporting relationship that are inconsistent with the
nature or status of Employee's duties, responsibilities or functions from
those in effect at the commencement of the Term, which shall include his
status as the Chairman of the Board.

(c) If, upon expiration of the Term, the Company terminates Employee's
employment, or Employee resigns because the Company fails to offer Employee
continued employment on at least as favorable terms and conditions as were in
effect immediately prior to

7
<PAGE>

such expiration (without regard to the length of the original term), then
Employee shall be entitled to the amounts and benefits as if his employment were
terminated without cause immediately prior to the expiration of the Term
pursuant to paragraph 7(b)(iv).

(d) Upon termination of the Employee's employment for any reason
provided above, Employee shall be entitled to receive all compensation earned
and all benefits and reimbursements due through the effective date of
termination. Additional compensation subsequent to termination, if any, will be
due and payable to Employee only to the extent and in the manner expressly
provided above. All other rights and obligations of the Company and Employee
under this Agreement shall cease as of the effective date of termination, except
that the Company's obligations under paragraphs 7 and 10 herein and Employee's
obligations under paragraphs 5, 7, 8, 9 and 11 herein shall survive such
termination in accordance with their terms.

(e) The Company agrees that, if the Executive's employment by the
Company is terminated during the Term, the Executive is not required to seek
other employment, or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to paragraph 7(b). Further, the amount of any
payment or benefit provided for in such paragraph 7(b) shall not be reduced by
any compensation or benefits earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, for any breach or alleged
breach of any covenant contained in this or any other agreement, or otherwise.
Notwithstanding the foregoing, continued payments and benefits pursuant to
paragraph 7(b)(iv) shall be subject to Employee's compliance with paragraph
5(a).

8. Return of Company Property. All records, designs, patents, business
--------------------------
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company (including
the respective affiliates thereof) or their representatives, vendors or
customers which pertain to the business of the Company (including the respective
affiliates thereof) shall be and remain the property of the Company, and be
subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of the
Company which is collected by Employee or otherwise in Employee's possession or
control shall be delivered promptly to the Company, without request by the
Company, upon termination of Employee's employment hereunder.

9. Inventions. Employee shall disclose promptly to the Company any and
----------
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company and which are
conceived as a result of his employment by the Company. Employee hereby assigns
and agrees to assign all of his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.

8
<PAGE>

10. Trade Secrets. Employee is employed hereunder by the Company in a
-------------
confidential relationship wherein Employee, in the course of his employment with
the Company, has and will continue to become familiar with and aware of
information as to the Company and its affiliates, customers, relationships or
agreements with their respective vendors or customers, specific manner of doing
business, including the processes, techniques and trade secrets utilized by the
Company and its affiliates, and future plans with respect thereto, all of which
has been and will be established and maintained at great expense to the Company
and its affiliates; any and all of such information are trade secrets and
constitute the valuable goodwill of the Company and its affiliates. Employee
agrees that he will not, during or after the Term, disclose any of such
information and/or trade secrets, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.

11. Indemnification. In the event Employee is made a party to any
---------------
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then the Company shall indemnify Employee against all
expenses (including reasonable attorneys' fees), judgments, fines and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made
a party to the same third-party action, complaint, suit or proceeding, the
Company agrees to engage competent legal representation, and Employee agrees to
use the same representation, provided that if counsel selected by the Company
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and the Company shall pay all
attorneys' fees of such separate counsel. Further, while Employee is expected
at all times to use his best efforts to faithfully discharge his duties under
this Agreement, Employee cannot be held liable to the Company for errors or
omissions made in good faith where Employee has not exhibited gross, willful or
wanton negligence or misconduct or performed criminal or fraudulent acts which
materially damage the business of the Company.

12. No Prior Agreements. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement or the Prior Agreement by Employee
and his employment by the Company and the performance of his duties hereunder or
thereunder will not violate or be a breach of any written agreement with a
former employer, client or any other person or entity. Further, Employee agrees
to indemnify the Company for any claim, including, but not limited to,
attorneys' fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against the Company based
upon or arising out of any written noncompetition agreement, invention or
secrecy agreement between Employee and such third party which was in existence
as of the date of this Agreement or the Prior Agreement. The Company agrees to
indemnify Employee for the cost and expense of any claim, including, but not
limited to, attorneys' fees and expenses of investigation, brought by Employee's
former employer against Employee based upon or arising out of the Company's
employment of Employee and not otherwise related, directly or indirectly, to any
written agreement between Employee and his former employer.

9
<PAGE>

13. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two (2) sentences, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.

14. Complete Agreement. This Agreement is not a promise of future
------------------
employment. Employee is and shall be an employee at-will and the Company may
terminate this Agreement at any time, with or without cause, subject to the
Company's obligations under paragraph 7 above. Employee has no oral
representations, understandings or agreements with the Company or any of its
officers or representatives covering the same subject matter as this Agreement.
This written Agreement may not be later modified except by a further writing
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by writing signed by the party waiving the
benefit of such term.

15. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:

To the Company: U.S.A. Floral Products, Inc.
1025 Thomas Jefferson Street, N.W.
Suite 600 West
Washington, D.C. 20007

Attn: Chief Financial Officer

With a copy to: Morgan, Lewis & Bockius LLP
One Oxford Centre
301 Grant Street
Pittsburgh, PA 15219

Attn: David Gerson

To Employee: Robert Poirier
4920 Rockwood Parkway
Washington, DC 20016

With a copy to: Rogers & Wells LLP
200 Park Avenue
New York, New York 10166

Attn: John Dadakis

Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first-class mail,
certified, return-receipt requested, or when

10
<PAGE>

actually received. Either party may change the address for notice by notifying
the other party of such change in accordance with this paragraph 14.

16. Severability; Headings. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.

17. Arbitration. Except to the extent necessary for the Company to avail
-----------
itself of its remedies pursuant to paragraph 5, any unresolved dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall not have
the authority to add to, detract from, or modify any provision hereof, nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon, in the event the
arbitrators determine that Employee was terminated without disability or cause,
as defined in paragraphs 7(b)(ii) and 7(b)(iii), respectively, or Employee
resigned for good reason as defined in paragraph 7(b)(v), or that the Company
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by the Company. The arbitration
proceeding shall be held in the city where the Company's corporate headquarters
is located.

18. Governing Law. This Agreement shall in all respects be governed by
-------------
and construed in accordance with the laws of the State of Delaware.

IN WITNESS WHEREOF, the Company and Employee have executed this Agreement
as of the date first above written.

ATTEST: COMPANY:
-------

U.S.A. FLORAL PRODUCTS, INC.,
a Delaware corporation

By: /s/ Edward J. Mathias
_____________________________ _____________________________
Edward J. Mathias

By: /s/ Jonathan J. Ledecky
_____________________________ _____________________________
Jonathan J. Ledecky

11
<PAGE>

WITNESS: EMPLOYEE:
--------

/s/ ROBERT POIRIER
_____________________________ ________________________________(SEAL)
ROBERT POIRIER

<PAGE>
Exhibit 10.14

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, dated as of this 4th day of August, 1998, is by
and between U.S.A. Floral Products, Inc., a Delaware corporation (the "Company"
or "USA Floral") and Christopher E. Wilson ("Employee").

RECITALS

The Company desires to obtain and have the benefit of the skills and
services of Employee, and Employee desires to make his skills and services
available to the Company, on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual promises, terms, covenants
and conditions set forth herein, and the performance of each, the parties
hereto, intending legally to be bound, hereby agree as follows:

AGREEMENTS

1. EMPLOYMENT; TERM. The Company hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with the
Company, for a term beginning on the date hereof and continuing for a period of
two years (the "Term").

2. POSITION AND DUTIES. The Company hereby employs Employee as Chief
-------------------
Operating Officer. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of the chief operating officer of
the Company. Employee will report directly to the Chief Executive Officer or the
Board of Directors of the Company (the "Board"). Employee hereby accepts this
employment upon the terms and conditions herein contained and agrees to devote
all of his professional time, attention, and efforts to promote and further the
business of the Company. Employee shall faithfully adhere to, execute, and
fulfill all policies established by the Company.

3. COMPENSATION. For all services rendered by Employee, the Company
------------
shall compensate Employee as follows:

(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $160,000 per year, payable on a regular basis in accordance
with the Company's standard payroll procedures for executive officers, but not
less than monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its sole
discretion, any such increase is warranted.

during a specified fiscal period and this Agreement commences on a date after
the start of such fiscal period, any bonus payable in respect of such fiscal
period's results may be prorated. In addition, if the period of Employee's
employment hereunder expires before the end of a fiscal period, and if Employee
is eligible to receive a bonus at such time (such eligibility being subject to
the restrictions set forth in Section 6 below), any bonus payable in respect of
such fiscal period's results may be prorated.

(c) Stock Options. Upon execution of this Agreement, USA Floral shall
grant Employee non-qualified stock options, pursuant to the USA Floral 1997
Long-Term Incentive Plan, to purchase 50,000 shares of USA Floral common stock,
which shall vest at the rate of 25% per year, commencing one year from the date
of grant. The options will have an exercise price equal to the closing sale
price of USA Floral common stock on the date hereof.

(d) Initial Relocation Assistance. The Company shall pay or reimburse
Employee for all relocation expenses reasonably incurred by Employee and his
immediate family upon their relocation to the Washington D.C. area, including
payment of Employee's "seller's" and "buyer's" closing costs and related fees.
The Company shall also provide Employee with an initial relocation allowance up
to an amount equal to Ten Thousand Dollars ($10,000) for other related
relocation and household reestablishment expenses as shall be mutually agreed
upon by the Company and Employee.

4. EXPENSE REIMBURSEMENT. The Company shall reimburse Employee for (or,
---------------------
at the Company's option, pay) all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
hereunder during the Term. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy, as well as applicable federal and state tax record keeping
requirements.

5. PLACE OF PERFORMANCE. Employee understands that he may be requested
--------------------
by the Company to relocate from his initial relocation residence to another
geographic location in order to more efficiently carry out his duties and
responsibilities under this Agreement or as part of a promotion or a change in
duties and responsibilities. In such event, if Employee agrees to relocate, the
Company will provide Employee with a relocation allowance, in an amount
determined by the Company, to assist Employee in covering the costs of moving
himself, his immediate family, and their personal property and effects. The
total amount and type of costs to be covered shall be determined by the Company,
in light of prevailing Company policy at the time.

2
<PAGE>

6. TERMINATION; RIGHTS ON TERMINATION. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:

(a) Death. The death of Employee shall immediately terminate the Term, and
no Severance Compensation (as defined below) or other compensation shall be owed
to Employee's estate.

(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been unable to perform the material
duties of his position on a full-time basis for a period of four consecutive
months, or for a total of four months in any six-month period, then 30 days
after written notice to the Employee (which notice may be given before or after
the end of the aforementioned periods, but which shall not be effective earlier
than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) 12 months from the effective date of termination, or (ii)
whatever time period is remaining under the then-current period of the Term
(without regard to renewals thereof). Such payments shall be made in accordance
with the Company's regular payroll cycle.

(c) Termination by the Company "For Cause." The Company may terminate the
Term 10 days after written notice to Employee "for cause," which shall be: (i)
Employee's material breach of this Agreement, which breach is not cured within
10 days of receipt by Employee of written notice from the Company specifying the
breach; (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company, and that in the judgment
of the Company materially and adversely affects the operations or reputation of
the Company; (iv) Employee's conviction of a felony or other crime involving
moral turpitude; or (v) Employee's abuse of alcohol or drugs (legal or illegal)
that, in the Company's judgment, materially impairs Employee's ability to
perform his duties hereunder. In the event of a termination "for cause," as
enumerated above, Employee shall have no right to any Severance Compensation or
other compensation.

3
<PAGE>

automatically vest upon such termination by the Company without cause. If
Employee resigns or otherwise terminates his employment for any reason or for no
reason, other than for disability pursuant to Section 6(b), Employee shall
receive no Severance Compensation or other compensation and no acceleration of
vesting of any stock options held by Employee.

(e) Payment Through Termination. Upon termination of Employee's employment
pursuant to Section 6(a), 6(b), 6(c) or 6(d) above, Employee shall be entitled
to receive all compensation earned and all benefits and reimbursements
(including payments for accrued vacation and sick leave, in each case in
accordance with applicable policies of the Company) due through the effective
date of termination. Additional compensation subsequent to termination, if any,
will be due and payable to Employee only to the extent and in the manner
expressly provided above in this Section 6. With respect to incentive bonus
compensation, Employee shall be entitled to receive any bonus declared but not
paid prior to termination. In addition, in the event of a termination by the
Company under Section 6(b) or 6(d), Employee shall be entitled to receive
incentive bonus compensation through the end of the Company's fiscal year in
which termination occurs, calculated as if Employee had remained employed by the
Company through the end of such fiscal year, and paid in such amounts, at such
times, and in such forms as are determined pursuant to Section 3(b) above and
Exhibit A attached hereto. Except as specified in the preceding two sentences,
Employee shall not be entitled to receive any incentive bonus compensation after
the effective date of termination of his employment. All other rights and
obligations of the Company and Employee under this Agreement shall cease as of
the effective date of termination, except that the Company's obligations under
Section(s) 6(b) and/or 6(d), as applicable, and Employee's obligations under
Sections 7, 8, 9 and 10 below shall survive such termination in accordance with
their terms.

(f) Right to Offset. In the event of any termination of Employee's
employment under this Agreement, the Employee shall have no obligation to seek
other employment; provided, that in the event that Employee secures employment
--------
or any consulting or other similar arrangement during the period that any
payment is continuing pursuant to the provisions of this Section 6, the Company
shall have the right to reduce the amounts to be paid hereunder, other than
compensation, benefits, bonus and reimbursements earned and accrued through the
effective date of termination and prior to commencement of any such other
employment, by the amount of Employee's earnings from such other employment.

7. RESTRICTION ON COMPETITION.
--------------------------

(a) During the Term, and thereafter, if Employee continues to be employed
by the Company and/or any other entity owned by or affiliated with the Company
on an "at will" basis, for the duration of such period, and thereafter for a
period equal to the longer of (x) two years, or (y) the period during which
Employee is receiving any Severance Compensation from the Company, Employee
shall not, directly or indirectly, for himself or on behalf of or in conjunction
with any other person, company, partnership, corporation, business, group, or
other entity (each, a "Person"):

4
<PAGE>

Company including without limitation the importing, brokerage, shipping or
marketing of floral products, or any business engaging in the consolidation of
the floral industry within the United States of America (the "Territory");

(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of the Company within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company within the Territory; or

(iv) on Employee's own behalf or on behalf of any competitor, call
upon any Person that, during Employee's employment by the Company was either
called upon by the Company as a prospective acquisition candidate or was the
subject of an acquisition analysis conducted by the Company.

(b) The foregoing covenants shall not be deemed to prohibit Employee from
acquiring as an investment not more than one percent of the capital stock of a
competing business, whose stock is traded on a national securities exchange or
through the automated quotation system of a registered securities association.

(c) It is further agreed that, in the event that Employee shall cease to
be employed by the Company and enters into a business or pursues other
activities that, at such time, are not in competition with the Company, Employee
shall not be chargeable with a violation of this Section 7 if the Company
subsequently enters the same (or a similar) competitive business or activity. In
addition, if Employee has no actual knowledge that his actions violate the terms
of this Section 7, Employee shall not be deemed to have breached the restrictive
covenants contained herein if, promptly after being notified by the Company of
such breach, Employee ceases the prohibited actions.

(d) For purposes of this Section 7, references to "the Company" shall mean
U.S.A. Floral Products, Inc., together with its subsidiaries and affiliates.

(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this Section 7 relating to the time period
or geographic area of the restrictive covenants shall be declared by a court of
competent jurisdiction to exceed the maximum time period or geographic area, as
applicable, that such court deems reasonable and enforceable, said time period
or geographic area shall be deemed to be, and thereafter shall become, the
maximum time period or largest geographic area that such court deems reasonable
and enforceable and this Agreement shall automatically be considered to have
been amended and revised to reflect such determination.

(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of

5
<PAGE>

Employee against the Company, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of such
covenants; provided, that upon the failure of the Company to make any payments
--------
required under this Agreement, the Employee may, upon 30 days' prior written
notice to the Company, waive his right to receive any additional compensation
pursuant to this Agreement and engage in any activity prohibited by the
covenants of this Section 7. It is specifically agreed that the period of two
years stated at the beginning of this Section 7, during which the agreements and
covenants of Employee made in this Section 7 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this Section 7.

(g) If the time period specified by this Section 7 shall be reduced by law
or court decision, then, notwithstanding the provisions of Section 6 above,
Employee shall be entitled to receive from the Company his base salary at the
rate then in effect solely for the longer of (i) the time period during which
the provisions of this Section 7 shall be enforceable under the provisions of
such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above.

(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and reasonable restraint on Employee and are reasonably
required to protect the interests of the Company, and its respective officers,
directors, employees, and stockholders. It is further agreed that the Company
and Employee intend that such covenants be construed and enforced in accordance
with the changing activities, business, and locations of the Company throughout
the term of these covenants.

8. CONFIDENTIAL INFORMATION. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to the Company
(including all trade secrets), in whatever form, whether oral, written, or
electronic (collectively, the "Confidential Information"), to which Employee
has, or is given (or has had or been given), access as a result of his
employment by the Company. It is agreed that the Confidential Information is
confidential and proprietary to the Company because such Confidential
Information encompasses technical know-how, trade secrets, or technical,
financial, organizational, sales, or other valuable aspects of the Company's
business and trade, including, without limitation, technologies, products,
processes, plans, clients, personnel, operations, and business activities. This
restriction shall not apply to any Confidential Information that (a) becomes
known generally to the public through no fault of the Employee; (b) is required
by applicable law, legal process, or any order or mandate of a court or other
governmental authority to be disclosed; or (c) is reasonably believed by
Employee, based upon the advice of legal counsel, to be required to be disclosed
in defense of a lawsuit or other legal or administrative action brought against
Employee; provided, that in the case of clauses (b) or (c), Employee shall give
--------
the Company reasonable advance written notice of the Confidential Information
intended to be disclosed and the reasons and circumstances surrounding such
disclosure, in order to permit the Company to seek a protective order or other
appropriate request for confidential treatment of the applicable Confidential
Information.

6
<PAGE>

9. INVENTIONS. Employee shall disclose promptly to the Company any and
----------
all significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
year thereafter, and that are directly related to the business or activities of
the Company and that Employee conceives as a result of his employment by the
Company, regardless of whether or not such ideas, inventions, or improvements
qualify as "works for hire." Employee hereby assigns and agrees to assign all
his interests therein to the Company or its nominee. Whenever requested to do
so by the Company, Employee shall execute any and all applications, assignments,
or other instruments that the Company shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company's interest therein.

10. RETURN OF COMPANY PROPERTY. Promptly upon termination of Employee's
--------------------------
employment by the Company for any reason or no reason, Employee or Employee's
personal representative shall return to the Company (a) all Confidential
Information; (b) all other records, designs, patents, business plans, financial
statements, manuals, memoranda, lists, correspondence, reports, records, charts,
advertising materials, and other data or property delivered to or compiled by
Employee by or on behalf of the Company or its respective representatives,
vendors, or customers that pertain to the business of the Company, whether in
paper, electronic, or other form; and (c) all keys, credit cards, vehicles, and
other property of the Company. Employee shall not retain or cause to be
retained any copies of the foregoing. Employee hereby agrees that all of the
foregoing shall be and remain the property of the Company, as the case may be,
and be subject at all times to its discretion and control.

11. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the
-------------------
Company that the execution of this Agreement by Employee, his employment by the
Company, and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other Person.
Further, Employee agrees to indemnify and hold harmless the Company and its
officers, directors, and representatives for any claim, including, but not
limited to, reasonable attorneys' fees and expenses of investigation, of any
such third party that such third party may now have or may hereafter come to
have against the Company or such other persons, based upon or arising out of any
non-competition agreement, invention, secrecy, or other agreement between
Employee and such third party that was in existence as of the date of this
Agreement. To the extent that Employee had any oral or written employment
agreement or understanding with the Company, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and the Company, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void, provided,
--------
however, that any such termination shall in no way prejudice Employee's right to
- -------
receive any accrued salary, benefits or other remuneration under any prior
agreement or arrangement with the Company.

7
<PAGE>

written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns.

13. COMPLETE AGREEMENT; WAIVER; AMENDMENT. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement and
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.

14. NOTICE. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:

To the Company: U.S.A. Floral Products, Inc.
1025 Thomas Jefferson Street, N.W.
Suite 300 East
Washington, DC 20007
Attention: Robert J. Poirier

To Employee: Christopher E. Wilson
12233 Vista Crest Drive
Yucaipa, CA 92399

Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 14.

15. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
----------------------
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. This
severability provision shall be in addition to, and not in place of, the
provisions of Section 7(e) above. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.

16. EQUITABLE REMEDY. Because of the difficulty of measuring economic
----------------
losses to the Company as a result of a breach of the restrictive covenants set
forth in Sections 7, 8, 9 and 10, and because of the immediate and irreparable
damage that would be caused to the Company for which monetary damages would not
be a sufficient remedy, it is hereby agreed that in addition to all other
remedies that may be available to the Company at law or in equity, the Company
shall be entitled

8
<PAGE>

to specific performance and any injunctive or other equitable relief as a remedy
for any breach or threatened breach of the aforementioned restrictive covenants.

17. ARBITRATION. Any unresolved dispute or controversy arising under or
-----------
in connection with this Agreement shall be settled exclusively by arbitration
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the principal office of
the Company is located. Notwithstanding the foregoing, the Company shall be
entitled to seek injunctive or other equitable relief, as contemplated by
Section 16 above, from any court of competent jurisdiction, without the need to
resort to arbitration.

18. GOVERNING LAW. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Delaware, without regard to its conflict
of laws principles.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

9
<PAGE>

IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.

U.S.A. FLORAL PRODUCTS, INC.

By: /s/ Robert J. Poirier
_______________________________________
Name: Robert J. Poirier
Title: President and CEO

EMPLOYEE:

/s/ Christopher E. Wilson
_______________________________________
Christopher E. Wilson

10
<PAGE>

EXHIBIT A
---------

Under USA Floral's Incentive Bonus Plan, Employee will be eligible to earn
up to 100% of Employee's base salary in bonus compensation, payable out of a
bonus pool determined by the Compensation Committee of the Board of Directors of
USA Floral, based upon exceptional performance in excess of specified targets
and goals and payable in the form of cash, stock options, or other non-cash
awards, in such proportions, and in such forms, as are determined by the
Compensation Committee. Bonuses under the Incentive Bonus Plan will be
determined by measuring Employee's performance and USA Floral's performance
based on criteria established by the Compensation Committee, weighted as
determined by the Compensation Committee, and measured against target
performance levels established by the Compensation Committee.

<PAGE>
Exhibit 10.15

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, dated as of this 12th day of August, 1998, is by
and between U.S.A. Floral Products, Inc., a Delaware corporation (the "Company"
or "USA Floral") and Dwight Ferguson ("Employee").

RECITALS

AGREEMENTS

1. EMPLOYMENT; TERM.
----------------

(a) Initial Term. The Company hereby agrees to employ Employee to
perform the duties described herein, and Employee hereby accepts employment with
the Company, for a term beginning on the date of consummation of the
transactions contemplated by that certain Stock and Assets Purchase Agreement
among DIMON Incorporated, Florimex Worldwide GmbH and the Company (the
"Commencement Date") and continuing until the second anniversary of the
Commencement Date (the "Initial Term").

(b) Renewal Terms. Upon the second anniversary of the Commencement
Date, and upon each successive anniversary thereafter, the this Agreement shall
renew for an additional one-year term (each, a "Renewal Term") beginning on such
anniversary, unless either party has given the other written notice of its
------
intention not to renew not less than one month prior to the commencement of such
Renewal Term. The Initial Term and all Renewal Terms are referred to
collectively as the "Term."

(c) Commencement Date. If the Commencement Date does not occur on or
before December 31, 1998, then this Agreement shall be null and void and of no
further force or effect, and neither party shall have any obligation or
liability to the other whatsoever arising out of or related to this Agreement.

2. POSITION AND DUTIES. The Company hereby employs Employee as Vice
-------------------
Chairman. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of the deputy chief executive officer of the
Company. Employee will report directly to the Chief Executive Officer or, at
the direction of the Board of Directors of the Company (the "Board"), to the
Board itself. Employee hereby accepts this employment upon the terms and
conditions herein
<PAGE>

contained and agrees to devote all of his professional time, attention, and
efforts to promote and further the business of the Company. Employee shall
faithfully adhere to, execute, and fulfill all policies established by the
Company.

3. COMPENSATION. For all services rendered by Employee, the Company
------------
shall compensate Employee as follows:

(a) Base Salary. Effective on the date hereof, the base salary
payable to Employee shall be $220,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures for executive
officers, but not less than monthly. On at least an annual basis, the Board or
its Compensation Committee will review Employee's performance and may make
increases to such base salary if, in its sole discretion, any such increase is
warranted.

(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board, in its sole and absolute discretion, and such
determination shall be binding and final. To the extent that such bonus is to
be determined in light of financial performance during a specified fiscal period
and this Agreement commences on a date after the start of such fiscal period,
any bonus payable in respect of such fiscal period's results may be prorated.
In addition, if the period of Employee's employment hereunder expires before the
end of a fiscal period, and if Employee is eligible to receive a bonus at such
time (such eligibility being subject to the restrictions set forth in Section 6
below), any bonus payable in respect of such fiscal period's results may be
prorated.

(c) Stock Options. Upon execution of this Agreement, USA Floral shall
grant Employee, subject to distribution to the Employee upon the Commencement
Date, non-qualified stock options, equivalent in all material respects to
options that would be available for grant pursuant to the USA Floral 1997 Long-
Term Incentive Plan, to purchase 50,000 shares of USA Floral common stock, which
shall vest at the rate of 25% per year, commencing one year from the date of
grant. The options will have an exercise price equal to the closing sale price
of USA Floral common stock on the date hereof. Employee shall be eligible to
participate in the Company's stock option plans and programs to the extent that
grants or awards thereunder are made to Employee by the Compensation Committee
of the Board in its discretion.

(d) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board.

(e) Car Allowance. The Company shall pay for or reimburse Employee
monthly in an amount equal to the lesser of (i) Employee's actual monthly
expenses incurred by Employee for his use of an automobile in connection with
his employment with the Company and (ii) $500.00 per month.

2
<PAGE>

5. PLACE OF PERFORMANCE.
--------------------

(a) Initial Place of Performance. Employee shall perform his duties
and responsibilities from the Company's headquarters location in Washington,
D.C. The Company understands that Employee's expenses of relocating to
Washington, D.C. shall be reimbursed to the extent eligible under the
reimbursement policies of DIMON Incorporated as part of Employee's conclusion of
employment with DIMON on or prior to the Commencement Date, and accordingly the
Company will not be providing Employee with any compensation or reimbursement
for expenses incurred in relocating to Washington, D.C. or its environs.

(b) Subsequent Relocations. Employee understands that he may be
requested by the Company to relocate from Washington, D.C. to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will provide Employee with a relocation allowance, in an amount determined by
the Company, to assist Employee in covering the costs of moving himself, his
immediate family, and their personal property and effects. The total amount and
type of costs to be covered shall be determined by the Company, in light of
prevailing Company policy at the time.

6. TERMINATION; RIGHTS ON TERMINATION. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:

(a) Death. The death of Employee before any termination hereunder
shall immediately terminate the Term, and no Severance Compensation (as defined
below) or other compensation shall be owed to Employee's estate.

(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been unable to perform the
material duties of his position on a full-time basis for a period of four
consecutive months, or for a total of four months in any six-month period, then
30 days after written notice to the Employee (which notice may be given before
or after the end of the aforementioned periods, but which shall not be effective
earlier than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) 12 months from the effective date of termination, or (ii)
whatever time period is remaining under the

3
<PAGE>

then-current period of the Term (without regard to renewals thereof). Such
payments shall be made in accordance with the Company's regular payroll cycle.

(c) Termination by the Company "For Cause." The Company may terminate
the Term 10 days after written notice to Employee "for cause," which shall be:
(i) Employee's material breach of this Agreement, which breach is not cured
within 10 days of receipt by Employee of written notice from the Company
specifying the breach; (ii) Employee's gross negligence in the performance of
his duties hereunder, intentional nonperformance or mis-performance of such
duties, or refusal to abide by or comply with the directives of the Board, his
superior officers, or the Company's policies and procedures, which actions
continue for a period of at least 10 days after receipt by Employee of written
notice of the need to cure or cease; (iii) Employee's willful dishonesty, fraud,
or misconduct with respect to the business or affairs of the Company, and that
in the judgment of the Company materially and adversely affects the operations
or reputation of the Company; (iv) Employee's conviction of a felony or other
crime involving moral turpitude; or (v) Employee's abuse of alcohol or drugs
(legal or illegal) that, in the Company's judgment, materially impairs
Employee's ability to perform his duties hereunder. In the event of a
termination "for cause," as enumerated above, Employee shall have no right to
any Severance Compensation or other compensation.

(d) Without Cause. At any time after the commencement of employment,
the Company may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, subject to Section 6(f)
below, Employee shall receive from the Company compensation ("Severance
Compensation") equal to the base salary at the rate then in effect for 12 months
from the effective date of termination. Such payments shall be made in
accordance with the Company's regular payroll cycle. In addition, all stock
options held by Employee, whether granted pursuant to this Agreement or
otherwise, shall automatically vest upon such termination by the Company without
cause. If Employee resigns or otherwise terminates his employment for any
reason or for no reason, other than for disability pursuant to Section 6(b),
Employee shall receive no Severance Compensation or other compensation and no
acceleration of vesting of any stock options held by Employee. The Employee's
death subsequent to termination under this Section 6(d) shall not terminate any
theretofore vested right to receive Severance Compensation.

4
<PAGE>

to Section 3(b) above and Exhibit A attached hereto. Except as specified in the
preceding two sentences, Employee shall not be entitled to receive any incentive
bonus compensation after the effective date of termination of his employment.
All other rights and obligations of the Company and Employee under this
Agreement shall cease as of the effective date of termination, except that the
Company's obligations under Section(s) 6(b) and/or 6(d), as applicable, and
Employee's obligations under Sections 7, 8, 9 and 10 below shall survive such
termination in accordance with their terms.

(f) Executive Outplacement. Upon termination of Employee's employment
by the Company other than pursuant to Section 6(d), the Company shall provide to
Employee, at the Company's expense, reasonable executive outplacement counseling
and services for up to 90 days after the Employee's termination date.

7. RESTRICTION ON COMPETITION.
--------------------------

(a) During the Term, and thereafter, if Employee continues to be
employed by the Company and/or any other entity owned by or affiliated with the
Company on an "at will" basis, for the duration of such period, and thereafter
for a period equal to the longer of (x) two years, or (y) the period during
which Employee is receiving any Severance Compensation from the Company,
Employee shall not, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation, business,
group, or other entity (each, a "Person"):

(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
business selling any products or services in direct competition with the Company
including without limitation the importing, brokerage, shipping or marketing of
floral products, or any business engaging in the consolidation of the floral
industry, within the United States of America or the European Community (the
"Territory");

(iii) call upon any Person who or that is, at that time, or has
been, within one year prior to that time, a customer of the Company within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company within the Territory; or

(iv) on Employee's own behalf or on behalf of any competitor,
call upon any Person that, during Employee's employment by the Company was
either called upon by the Company as a prospective acquisition candidate or was
the subject of an acquisition analysis conducted by the Company.

(b) The foregoing covenants shall not be deemed to prohibit Employee
from acquiring as an investment not more than one percent of the capital stock
of a competing business,

5
<PAGE>

whose stock is traded on a national securities exchange or through the automated
quotation system of a registered securities association.

(c) It is further agreed that, in the event that Employee shall cease
to be employed by the Company and enters into a business or pursues other
activities that, at such time, are not in competition with the Company, Employee
shall not be chargeable with a violation of this Section 7 if the Company
subsequently enters the same (or a similar) competitive business or activity.
In addition, if Employee has no actual knowledge that his actions violate the
terms of this Section 7, Employee shall not be deemed to have breached the
restrictive covenants contained herein if, promptly after being notified by the
Company of such breach, Employee ceases the prohibited actions.

(d) For purposes of this Section 7, references to "the Company" shall
mean U.S.A. Floral Products, Inc., together with its subsidiaries and
affiliates.

(e) The covenants in this Section 7 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. If any provision of this Section 7 relating to the time
period or geographic area of the restrictive covenants shall be declared by a
court of competent jurisdiction to exceed the maximum time period or geographic
area, as applicable, that such court deems reasonable and enforceable, said time
period or geographic area shall be deemed to be, and thereafter shall become,
the maximum time period or largest geographic area that such court deems
reasonable and enforceable and this Agreement shall automatically be considered
to have been amended and revised to reflect such determination.

(f) All of the covenants in this Section 7 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants; provided, that upon
--------
the failure of the Company to make any payments required under this Agreement,
the Employee may, upon 30 days' prior written notice to the Company, waive his
right to receive any additional compensation pursuant to this Agreement and
engage in any activity prohibited by the covenants of this Section 7. It is
specifically agreed that the period of two years stated at the beginning of this
Section 7, during which the agreements and covenants of Employee made in this
Section 7 shall be effective, shall be computed by excluding from such
computation any time during which Employee is in violation of any provision of
this Section 7.

(g) If the time period specified by this Section 7 shall be reduced
by law or court decision, then, notwithstanding the provisions of Section 6
above, Employee shall be entitled to receive from the Company his base salary at
the rate then in effect solely for the longer of (i) the time period during
which the provisions of this Section 7 shall be enforceable under the provisions
of such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above.

(h) Employee has carefully read and considered the provisions of this
Section 7 and, having done so, agrees that the restrictive covenants in this
Section 7 impose a fair and

6
<PAGE>

reasonable restraint on Employee and are reasonably required to protect the
interests of the Company, and its respective officers, directors, employees, and
stockholders. It is further agreed that the Company and Employee intend that
such covenants be construed and enforced in accordance with the changing
activities, business, and locations of the Company throughout the term of these
covenants.

7
<PAGE>

keys, credit cards, vehicles, and other property of the Company. Employee shall
not retain or cause to be retained any copies of the foregoing. Employee hereby
agrees that all of the foregoing shall be and remain the property of the
Company, as the case may be, and be subject at all times to its discretion and
control.

12. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been
--------------------------
selected for employment by the Company on the basis of his personal
qualifications, experience, and skills. Employee agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement. This
Agreement may not be assigned or transferred by the Company without the prior
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns.

14. NOTICE. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:

8
<PAGE>

To the Company: U.S.A. Floral Products, Inc.
1025 Thomas Jefferson Street, N.W.
Suite 300 East
Washington, DC 20007
Attention: Robert J. Poirier

To Employee: Dwight Ferguson
_____________________________
_____________________________

18. GOVERNING LAW. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Delaware, without regard to its conflict
of laws principles.

9
<PAGE>

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

10
<PAGE>

IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.

U.S.A. FLORAL PRODUCTS, INC.

By: /s/ Robert J. Poirier
_______________________________________
Name: Robert J. Poirier
Title: President and CEO

EMPLOYEE:

/s/ Dwight Ferguson
______________________________
Dwight Ferguson

11
<PAGE>

EXHIBIT A
---------

Under the Company's Incentive Bonus Plan, Employee will be eligible to earn
bonus compensation, payable out of a bonus pool determined by the Compensation
Committee of the Board of Directors of the Company. Such bonus shall be payable
as follows:

(a) for the period from the Commencement Date through December 31, 1998, a
cash bonus equal to 50% of the Employee's base salary multiplied by a fraction,
---------- --
the numerator of which is the number of calendar days between the Commencement
Date and December 31, 1998, inclusive, and the denominator of which is 365 (the
product of such calculation being the "Prorated Amount"), shall be payable
promptly after public announcement by the Company of the Company's consolidated
results of operations for the year ending December 31, 1998, provided that the
--------
Company's consolidated earnings per share for such year equal or exceed
analysts' consensus estimates (as reported by First Call) for such year, and
provided further, that if the earnings of the Florimex business of the Company
- -------- -------
for the period from July 1, 1998 through December 31, 1998 equal or exceed the
Company's budget therefor, then Employee shall be eligible to receive a bonus in
the discretion of the Compensation Committee in an amount not to exceed the
Prorated Amount even if the Company's consolidated earnings per share for the
year ending December 31, 1998 do not equal or exceed analysts' consensus
estimates (as reported by First Call) for such year;

(b) for the period January 1, 1999 through December 31, 1999:

(i) a cash bonus equal to 50% of the Employee's base salary shall be
guaranteed and payable promptly after public announcement by the Company of the
Company's consolidated results of operations for the year ending December 31,
1999, provided that the Company's consolidated earnings per share for such year
equal or exceed analysts' consensus estimates (as reported by First Call) for
such year; and

(ii) an additional bonus, payable in the form of cash, stock options,
or other non-cash awards, in such proportions and in such forms as may be
determined by the Compensation Committee of the Board, of up to 50% of the
Employee's base salary shall be payable promptly after public announcement by
the Company of the Company's consolidated results of operations for the year
ending December 31, 1999, if and only if the Company's consolidated earnings per
share for such year dramatically exceed (in the judgment of the Compensation
Committee) analysts' consensus estimates (as reported by First Call) for such
year; and

(c) for periods from and after January 1, 2000, such bonus payable in the
form of cash, stock options, or other non-cash awards, in such proportions and
in such forms as may be determined by the Compensation Committee of the Board.

<PAGE>
Exhibit 10.16

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT, dated as of this 28th day of September, 1998,
is by and between U.S.A. Floral Products, Inc., a Delaware corporation (the
"Company" or "USA Floral") and W. Michael Kipphut ("Employee").

RECITALS

AGREEMENTS

1. EMPLOYMENT; TERM.
----------------

(a) Initial Term. The Company hereby agrees to employ Employee to
perform the duties described herein, and Employee hereby accepts employment with
the Company for a term beginning on October 19, 1998 (the "Commencement Date")
and continuing until the second anniversary of the Commencement Date (the
"Initial Term").

(b) Renewal Terms. Upon the second anniversary of the Commencement
Date, and upon each successive anniversary thereafter, this Agreement shall
renew for an additional one-year term (each, a "Renewal Term") beginning on such
anniversary, unless either party has given the other written notice of its
------
intention not to renew not less than sixty days prior to the commencement of
such Renewal Term. The Initial Term and all Renewal Terms are referred to
collectively as the "Term."

2. POSITION AND DUTIES. The Company hereby employs Employee as Chief
-------------------
Financial Officer. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of the chief financial officer of
a publicly-traded company. Employee will report directly to the Chief Executive
Officer or, at the direction of the Board of Directors of the Company (the
"Board"), to the Board itself. Employee hereby accepts this employment upon the
terms and conditions herein contained and agrees to devote all of his
professional time, attention, and efforts to promote and further the business of
the Company. Employee shall faithfully adhere to, execute, and fulfill all
policies established by the Company.

3. COMPENSATION. For all services rendered by Employee, the Company
------------
shall compensate Employee as follows:
<PAGE>

(a) Base Salary. Effective on the date hereof, the base salary
payable to Employee shall be $200,000 per year, payable on a regular basis in
accordance with the Company's standard payroll procedures for executive
officers, but not less than monthly. On at least an annual basis, the Board or
its Compensation Committee will review Employee's performance and may make
increases to such base salary if, in its sole discretion, any such increase is
warranted.

(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board, in its sole and absolute discretion, and such
determination shall be binding and final. If the period of Employee's
employment hereunder expires before the end of a fiscal period, and if Employee
is eligible to receive a bonus at such time (such eligibility being subject to
the restrictions set forth in Section 6 below), any bonus payable in respect of
such fiscal period's results may be prorated.

(c) Stock Options. On the Commencement Date, USA Floral shall grant
Employee non-qualified stock options to purchase 50,000 shares of USA Floral
common stock pursuant to, or equivalent in all material respects to options that
would be available for grant pursuant to, the USA Floral 1997 Long-Term
Incentive Plan. The options will vest at the rate of 25% per year, commencing
one year from the date of grant. The options will have an exercise price equal
to the closing sale price of USA Floral common stock on the Commencement Date.
Employee shall be eligible to participate in the Company's stock option plans
and programs to the extent that grants or awards thereunder are made to Employee
by the Compensation Committee of the Board in its discretion.

(d) 401(k) Plan. Employee shall be entitled to participate in
Company's 401(k) Plan, when operational, to the extent permitted by law and
subject to prevailing Company policies.

(e) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by the Company to its employees, subject to such changes,
additions, or deletions as the Company may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board. Employee and, as applicable, Employee's family, shall be entitled
to participate in all of the Company's employee benefit plans and programs which
are generally available to the Company's executive management, including group
and/or individual medical plans.

(f) Car Allowance. The Company shall pay for or reimburse Employee
monthly in an amount equal to $500.00 per month.

2
<PAGE>

5. PLACE OF PERFORMANCE.
--------------------

(a) Initial Place of Performance. Employee shall perform his duties
and responsibilities from the Company's headquarters location in Washington,
D.C. The Company shall reimburse Employee's reasonable expenses of relocating
to the Washington, D.C. area. Such expenses may include, by way of example, but
are not limited to, pre-move visits to search for a new residence; temporary
lodging and living costs prior to moving to a new permanent residence; duplicate
home carrying costs; closing costs on the sale of Employee's present residence
and on the purchase of a comparable residence in the new location; and
additional income taxes that Employee may incur if any relocation costs are not
deductible for tax purposes. Such reimbursement is provided to assist Employee
in covering the cost of moving himself, his immediate family and their personal
property and effects.

6. TERMINATION; RIGHTS ON TERMINATION. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:

(b) Disability. If, as a result of incapacity due to physical or
mental illness or injury, Employee shall have been unable to perform the
material duties of his position on a full-time basis for a period of four
consecutive months, or for a total of four months in any six-month period, then
30 days after written notice to the Employee (which notice may be given before
or after the end of the aforementioned periods, but which shall not be effective
earlier than the last day of the applicable period), the Company may terminate
Employee's employment hereunder if Employee is unable to resume his full-time
duties at the conclusion of such notice period. Subject to Section 6(f) below,
if Employee's employment is terminated as a result of Employee's disability, the
Company shall continue to pay Employee his base salary at the then-current rate
for the lesser of (i) 12 months from the effective date of termination, or (ii)
whatever time period is remaining under the then-current period of the Term
(without regard to renewals thereof). Such payments shall be made in accordance
with the Company's regular payroll cycle.

3
<PAGE>

written notice from the Company specifying the breach; provided, if such breach
cannot be cured within 10 days, Employee shall have a reasonable period of time
to cure (ii) Employee's gross negligence in the performance of his duties
hereunder, intentional nonperformance or mis-performance of such duties, or
refusal to abide by or comply with the directives of the Board, his superior
officers, or the Company's policies and procedures, which actions continue for a
period of at least 10 days after receipt by Employee of written notice of the
need to cure or cease; (iii) Employee's willful dishonesty, fraud, or misconduct
with respect to the business or affairs of the Company, and that in the judgment
of the Company materially and adversely affects the operations or reputation of
the Company; (iv) Employee's conviction of a felony or other crime involving
moral turpitude; or (v) Employee's abuse of alcohol or drugs (legal or illegal)
that, in the Company's judgment, materially impairs Employee's ability to
perform his duties hereunder. In the event of a termination "for cause," as
enumerated above, Employee shall have no right to any Severance Compensation or
other compensation.

(d) Without Cause. At any time after the commencement of employment,
the Company may, without cause, terminate the Term and Employee's employment,
effective 60 days after written notice is provided to the Employee. Should
Employee be terminated by the Company without cause, Employee shall receive from
the Company compensation ("Severance Compensation") equal to the base salary at
the rate then in effect for 12 months from the effective date of termination.
Such payments shall be made in accordance with the Company's regular payroll
cycle. In addition, all stock options held by Employee, whether granted pursuant
to this Agreement or otherwise, shall automatically vest upon such termination
by the Company without cause. The Employee's death subsequent to termination
under this Section 6(d) shall not terminate any theretofore vested right to
receive Severance Compensation.

(e) Termination by the Employee.

(i) The Employee may terminate the Employee's employment with
the Company hereunder at any time and for any reason. Employee must provide to
the Company written notice of such determination not less than 60 days prior to
the date such termination is to be effective. Upon any termination pursuant to
this Section 6(e)(i), the Employee shall receive no Severance Compensation and
no acceleration of vesting of any options held by Employee; the Employee shall
be entitled to be paid solely the Employee's salary then in effect through the
effective date of termination and any other compensation and benefits as may be
provided in accordance with the terms and provisions of any applicable plans or
programs of the Company, and the Company shall have no further liability or
other obligation of any kind whatsoever to the Employee.

(ii) In addition to the rights to terminate set forth in Section
6(e)(i), the Employee may terminate his employment hereunder for Good Reason, as
defined in this Section 6(e)(ii). For purposes of this Agreement, "Good Reason"
means (A) a diminution in the Employee's title, (B) the assignment to the
Employee of duties or responsibilities materially inferior to his title and
position, (C) any decrease in the base salary of the Employee, or any failure to
pay any compensation when due (other than a failure to pay resulting from mere
technical error or mistake), or (D) a change in ownership control of the Company
in which a controlling shareholder, other than a person or entity who is a
shareholder as of the date of this Agreement, obtains more than

4
<PAGE>

twenty-five percent of the outstanding stock. In all respects and for all
purposes of this Agreement, a termination by the Employee of his employment
hereunder for Good Reason shall have the same effect as, and shall entitle the
Employee to the same rights and benefits as, a termination of the Employee's
employment by the Company without Cause under this Agreement.

(f) Payment Through Termination. Upon termination of Employee's
employment pursuant to Section 6(a), 6(b), 6(c), 6(d) or 6(e) above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements (including payments for accrued vacation and sick leave, in each
case in accordance with applicable policies of the Company) due through the
effective date of termination. Additional compensation subsequent to
termination, if any, will be due and payable to Employee only to the extent and
in the manner expressly provided above in this Section 6. With respect to
incentive bonus compensation, Employee shall be entitled to receive any bonus
declared but not paid prior to termination. In addition, in the event of a
termination by the Company under Section 6(b) or 6(d) or a termination by
Employee pursuant to 6(e)(ii), Employee shall be entitled to receive incentive
bonus compensation through the end of the Company's fiscal year in which
termination occurs, calculated as if Employee had remained employed by the
Company through the end of such fiscal year, and paid in such amounts, at such
times, and in such forms as are determined pursuant to Section 3(b) above and
Exhibit A attached hereto. Except as specified in the preceding two sentences,
Employee shall not be entitled to receive any incentive bonus compensation after
the effective date of termination of his employment. All other rights and
obligations of the Company and Employee under this Agreement shall cease as of
the effective date of termination, except that the Company's obligations under
Section(s) 6(b), 6(d) and/or 6(e), as applicable, and Employee's obligations
under Sections 7, 8, 9 and 10 below shall survive such termination in accordance
with their terms.

7. RESTRICTION ON COMPETITION.
--------------------------

(a) During the Term, and thereafter, if Employee continues to be
employed by the Company and/or any other entity owned by or affiliated with the
Company on an "at will" basis, for the duration of such period, and thereafter
for a period of two years, Employee shall not, directly or indirectly, for
himself or on behalf of or in conjunction with any other person, company,
partnership, corporation, business, group, or other entity (each, a "Person"):

(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant, advisor, or sales representative, in any
business selling any products or services in direct competition with the Company
including without limitation the importing, brokerage, shipping or marketing of
floral products, or any business engaging in the consolidation of the floral
industry, within the United States of America or the European Community (the
"Territory");

5
<PAGE>

(iii) call upon any Person who or that is, at that time, or has
been, within one year prior to that time, a customer of the Company within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company within the Territory; or

(iv) on Employee's own behalf or on behalf of any competitor,
call upon any Person that, during Employee's employment by the Company was
either called upon by the Company as a prospective acquisition candidate or was
the subject of an acquisition analysis conducted by the Company.

(b) The foregoing covenants shall not be deemed to prohibit Employee
from acquiring as an investment not more than one percent of the capital stock
of a competing business, whose stock is traded on a national securities exchange
or through the automated quotation system of a registered securities
association.

(c) It is further agreed that, in the event that Employee shall cease
to be employed by the Company and enters into a business or pursues other
activities that, at such time, are not in competition with the Company, Employee
shall not be chargeable with a violation of this Section 7 if the Company
subsequently enters the same (or a similar) competitive business or activity.
In addition, if Employee has no actual knowledge that his actions violate the
terms of this Section 7, Employee shall not be deemed to have breached the
restrictive covenants contained herein if, promptly after being notified by the
Company of such breach, Employee ceases the prohibited actions.

(d) For purposes of this Section 7, references to "the Company" shall
mean U.S.A. Floral Products, Inc., together with its subsidiaries and
affiliates.

(e) The covenants in this Section 7 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. If any provision of this Section 7 relating to the time
period or geographic area of the restrictive covenants shall be declared by a
court of competent jurisdiction to exceed the maximum time period or geographic
area, as applicable, that such court deems reasonable and enforceable, said time
period or geographic area shall be deemed to be, and thereafter shall become,
the maximum time period or largest geographic area that such court deems
reasonable and enforceable and this Agreement shall automatically be considered
to have been amended and revised to reflect such determination.

6
<PAGE>

effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this Section 7.

(g) If the time period specified by this Section 7 shall be reduced
by law or court decision, then, notwithstanding the provisions of Section 6
above, Employee shall be entitled to receive from the Company his base salary at
the rate then in effect solely for the longer of (i) the time period during
which the provisions of this Section 7 shall be enforceable under the provisions
of such applicable law, or (ii) the time period during which Employee is not
engaging in any competitive activity, but in no event longer than the applicable
period provided in Section 6 above.

7
<PAGE>

its nominee. Whenever requested to do so by the Company, Employee shall execute
any and all applications, assignments, or other instruments that the Company
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect the Company's interest therein.

8
<PAGE>

Agreement. This Agreement is the final, complete, and exclusive statement and
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a further writing signed
by a duly authorized officer of the Company and Employee, and no term of this
Agreement may be waived except by a writing signed by the party waiving the
benefit of such term.

14. NOTICE. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:

To the Company: U.S.A. Floral Products, Inc.
1025 Thomas Jefferson Street, N.W.
Suite 300 East
Washington, DC 20007
Attention: Robert J. Poirier

To Employee: W. Michael Kipphut
850 South Willow Avenue
Tampa, Florida 33606

9
<PAGE>

any injured party. A decision by a majority of the arbitration panel shall be
final and binding. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The direct expense of any arbitration proceeding
shall be borne by the Company. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the principal office of
the Company is located. Notwithstanding the foregoing, the Company shall be
entitled to seek injunctive or other equitable relief, as contemplated by
Section 16 above, from any court of competent jurisdiction, without the need to
resort to arbitration.

18. INDEMNIFICATION. The Company shall provide indemnification to
---------------
Employee in accordance with the provisions of Article VIII of the Company's
bylaws, as the same may be amended from time to time.

19. NO OBLIGATION TO SEEK EMPLOYMENT. Employee shall have no duty to seek
--------------------------------
other employment in order to be entitled to receive the payments, if any,
required to be made to Employee pursuant to this Agreement.

20. GOVERNING LAW. This Agreement shall in all respects be construed
-------------
according to the laws of the State of Delaware, without regard to its conflict
of laws principles.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

10
<PAGE>

IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date first written above.

U.S.A. FLORAL PRODUCTS, INC.

By: /s/ Robert J. Poirier
_______________________________________
Name: Robert J. Poirier
Title: President and CEO

EMPLOYEE:

/s/ W. Michael Kipphut
______________________________
W. Michael Kipphut

11
<PAGE>

EXHIBIT A
---------

(a) for the period from the Commencement Date through December 31, 1998:

(i) a cash bonus equal to $20,275 shall be payable promptly after
public announcement by the Company of the Company's consolidated results of
operations for the year ending December 31, 1998, provided that the Company's
consolidated earnings per share for such year equal or exceed analysts'
consensus estimates (as reported by First Call) for such year; and

(ii) an additional bonus, payable in the form of cash, stock options,
or other non-cash awards, in such proportions and in such forms as may be
determined by the Compensation Committee of the Board, of up to $20,275 shall
be payable promptly after public announcement by the Company of the Company's
consolidated results of operations for the year ending December 31, 1998, if and
only if the Company's consolidated earnings per share for such year dramatically
exceed (in the judgment of the Compensation Committee) analysts' consensus
estimates (as reported by First Call) for such year; and

(b) for the period January 1, 1999 through December 31, 1999:

<PAGE>

Exhibit 10.17

SUBLEASE AGREEMENT
------------------

THIS AGREEMENT entered into this the sixteenth day of December, 1998 by
and between the Blytheville-Gosnell Regional Airport Authority (hereinafter
called SUBLESSOR) and Floral Distributors, Inc. a Delaware corporation and a
wholly owned subsidiary of USA Floral Products, Inc. (hereinafter called
SUBLESSEE).

WITNESSETH:

WHEREAS, SUBLESSOR entered into an Economic Development Conveyance Lease
Agreement with the Secretary of the Air Force dated September 29, 1997, for the
lease of certain real property located at the Arkansas Aeroplex, (former Eaker
Air Force Base), Blytheville, Arkansas, more particularly described in said
Lease Agreement; and,

WHEREAS, SUBLESSEE is in need of facilities for the manufacture,
processing, storage and distribution of flowers, floral supplies and other
consumer products related thereto; and,

WHEREAS, SUBLESSOR has agreed to sublease part of said premises as set
forth hereinafter, which is the subject of the Lease Agreement as aforesaid, to
SUBLESSEE on the same terms and conditions of said Lease Agreement, except as
set forth hereinafter.

NOW, THEREFORE, in consideration of the mutual covenants, considerations,
conditions, and restrictions set forth hereinafter SUBLESSOR and SUBLESSEE
hereby agree as follows:
<PAGE>

1. LEASED PREMISES. The premises which is the subject of this Sublease
-----------------
shall be Buildings 552, 555, 556, and 560 totaling 80,859 square feet, and
parking located at the Arkansas Aeroplex, ( former Eaker Air Force Base), which
is part of the area subject to the Lease Agreement. Exhibit "B" hereto sets
forth the premises and the designated parking area and a copy the floor plan of
said premises is attached hereto as Exhibit "C", both of which are made a part
hereof by reference.

2. USE OF LEASED PREMISES. The leased premises shall be used solely for
----------------------
the manufacture, processing, storage and distribution of flowers, floral
supplies and other consumer products related thereto.

3. TERM. This agreement shall commence on January 1, 1999 and terminate
-----
on December 31, 2003. So long as SUBLESSEE shall not be in default hereunder,
SUBLESSEE shall, upon 6 (six) month's notice prior to the end of the Sublease
term, or any option period, have the right to extend this sublease for four (4)
additional five (5) year periods.

4. RENTAL. SUBLESSEE shall pay monthly rental, in advance, subject to
------
adjustments as set forth hereinafter beginning on the Commencement Date of the
sublease, as follows:

<TABLE>
<CAPTION>
Lease Period Monthly Rent Per Square Foot
- ------------ ------------ ---------------
<S> <C> <C>
1/st/ Lease Year $3,369.13 $.50
2/nd/ Lease Year $4,042.95 $.60
3/rd/ Lease Year $5,053.69 $.75
4/th/ Lease Year $6,536.10 $.97
5/th/ Lease Year $6,536.10 $.97
</TABLE>
<PAGE>

Notwithstanding the foregoing, the first month's rent will be due upon
execution of the lease by both parties. The rent for the next two months will
be abated and regular monthly rental payments will commence on the first day of
the fourth month.

For the sublease extensions provided for in Section 3 the monthly rent
amounts shall be adjusted on each third year anniversary of the lease (including
throughout the option periods) by the increase, if any, in the Consumer Price
Index ("CPI") for the State of Arkansas for the prior three year period. The
monthly rental shall not be reduced unless mutually agreed to by the parties in
writing.

As an example of the foregoing, if the CPI Index for Arkansas at the
commencement of the lease is 100 and on the third anniversary of the
commencement of the lease is 108, the increase is 8% and the monthly rental for
the fourth year will be increased from $6,536.10 to $7,058.99.

5. CONDITION, MAINTENANCE AND IMPROVEMENTS. SUBLESSEE acknowledges that
---------------------------------------
it has inspected the building and rooms which are the subject of this Agreement,
that they are adequate for SUBLESSEE'S purposes, and that SUBLESSOR shall not be
required to make any modifications to the premises. SUBLESSEE is accepting the
premises as is. SUBLESSEE shall be responsible for providing all building and
ground maintenance and repairs, including roof and mechanical maintenance, at no
cost to SUBLESSOR. No alterations to the leased premises shall be made unless
prior approval, in writing, is given by SUBLESSOR. All alterations to the leased
premise shall either remain at the leased premises or be removed by SUBLESSEE at
SUBLESSOR'S request. SUBLESSEE shall be solely responsible for any removal
expense. In the event SUBLESSEE removes said alterations, the leased premises
shall be restored to its condition, reasonable wear and tear excepted at the
time said alterations were made. Notwithstanding the forgoing , any fixtures
and/or chattle affixed to the interior of the structures which may be removed
without causing damage to such structures shall remain the property of the
SUBLESSEE and may be removed at the end of the lease term.
<PAGE>

Ground maintenance areas are indicated on Exhibit "C" to this sublease.
SUBLESSOR shall not be required to perform any repairs or maintenance to the
lease premises.

6. JANITORIAL SERVICES. SUBLESSEE shall be required to provide its own
--------------------
janitorial services for the premises it is occupying.

7. ENVIRONMENTAL INDEMNIFICATION. The SUBLESSEE shall save, indemnify,
-----------------------------
and hold harmless the SUBLESSOR from any costs, expenses, liabilities, fines,
or penalties resulting from discharges, emissions, spills, storage, disposal,
or any other action that is attributable and/or identifiable to SUBLESSEE and
that occurs subsequent to SUBLESSEE'S possession of the leased premises, giving
rise to SUBLESSOR liability, civil or criminal, or responsibility under federal,
state or local environmental laws. This provision shall survive the expiration
or termination of this Sublease. The SUBLESSOR shall, save, indemnify and hold
harmless the SUBLESSEE from any costs, expenses, liabilities, fines, or
penalties resulting from discharges, emissions, spills, storage, disposal, or
any other action that is attributable and/or identifiable to SUBLESSOR
regardless of when it occurred or occurs, giving rise to SUBLESSEE liability,
civil or criminal, or responsibility under federal, state or local environmental
laws. This provision shall survive the expiration or termination of this
Sublease.

8. INCORPORATION OF LEASE AGREEMENT. SUBLESSOR and SUBLESSEE agree and
--------------------------------
understand that the Lease Agreement, previously entered into between SUBLESSOR
and the Secretary of the Air Force which is attached hereto as Exhibit "A" is
hereby incorporated in this Agreement and made a part hereof as though set forth
herein word for word.

9. RIGHTS OF TERMINATION. The failure to comply with any provisions of
---------------------
this Lease, where such failure to comply continues for thirty (30) days after
delivery of written notice thereof by the
<PAGE>

SUBLESSOR to the SUBLESSEE, shall constitute a default, breach and termination
of this Sublease by the SUBLESSEE. In that event, or if the premises shall be
abandoned, deserted, or vacated, the SUBLESSOR, its agents or successors, shall
be authorized to re-enter, repossess the premises, and to evict SUBLESSEE and
any other occupant. In the event SUBLESSOR is required to evict SUBLESSEE or any
other occupant, SUBLESSOR shall be entitled to receive all of its costs, lost
rental and any other damages provided by law, in connection with said eviction
including reasonable attorney fees.

10. INSURANCE. SUBLESSEE shall be responsible for providing property and
---------
casualty insurance for its property and equipment, whether owned or leased by
SUBLESSEE, and located on the Arkansas Aeroplex, (former Eaker Air Force Base).
During the effective term of this Agreement, and any renewal term, the
SUBLESSEE, at its expense, shall maintain a public liability insurance policy in
the amount of at least Five Hundred Thousand Dollars ($500,000.00) with respect
to bodily injury and property damage. All policies or certificates of insurance
issued by the respective insurers for public liability and all-risks property
insurance will name the SUBLESSOR and the federal government as additional
insureds; shall provide that any losses shall be notwithstanding any act or
failure to act or negligence of the SUBLESSOR or the government or any other
person; and shall provide that no cancellation, reduction in amount, or material
change in coverage thereof shall be effective until at least five (5) days after
receipt by the SUBLESSOR of written notice thereof. SUBLESSEE agrees to provide
SUBLESSOR certificates and cover notes verifying said coverage on or before the
effective date of this agreement.

11. UTILITIES. SUBLESSEE shall be responsible for installing, water,
---------
electrical and gas utility meters, at its own expense, and for arranging utility
services with local utility providers.

12. NOTICES. Any notice to be given pursuant to this Agreement shall be
-------
in writing and shall
<PAGE>

be addressed, if to the SUBLESSOR, to: Executive Director, Blytheville-Gosnell
Regional Airport Authority, P.O. Box 166, Blytheville, Arkansas 72316-0166; and
if to the SUBLESSEE, to: USA Floral Products, Inc., 1025 Thomas Jefferson
Street, N.W., Washington, D.C., Attention: President, Distribution Division, or
as may from time to time be directed by the parties in writing. Notice shall be
deemed to have been duly given if and when enclosed in a properly sealed
envelope, correctly addressed, and sent certified mail, return receipt
requested.

13. APPROVALS. Any approvals required hereunder will be granted
---------
expeditiously so long as the request is not inconsistent with this sublease or
the Lease Agreement.

14. ENTRY AND ACCESS. SUBLESSEE agrees and understands that the premises
----------------
which are subject to this Agreement are owned by the United States Government
and are subject to certain regulations in regard to entry and access. SUBLESSEE
agrees that all travel by employees, contractors, subcontractors, and invitees
will use the most direct routes to and from the premises being leased pursuant
to this Agreement. It is understood that access to and use of the airfield by
SUBLESSEE'S suppliers is essential to SUBLESSEE'S use of the premises.

15. RESPONSIBILITY OF THE PARTIES. It is specifically agreed and
-----------------------------
understood that all obligations of SUBLESSOR pursuant to the Lease Agreement
between SUBLESSOR and the Secretary of the Air Force, (Exhibit "A") are
incorporated herein by reference, and shall be assumed by SUBLESSEE to the
extent of the area subleased. SUBLESSEE shall stand in the place and stead of
SUBLESSOR as to all terms of said Lease Agreement as if SUBLESSEE had originally
been a party to said Agreement. In addition, SUBLESSEE shall be responsible for
maintaining the leased premises in as good condition as at the beginning of this
Agreement, less reasonable wear and tear.

16. PARKING. SUBLESSEE agrees to use only the area included in the leased
-------
premises as
<PAGE>

set forth herein above, and designated on Exhibit C, for parking and agrees to
remove any vehicle which shall park in any unauthorized area. Notwithstanding
the foregoing, SUBLESSOR and SUBLESSEE may mutually agree in the future for the
use of additional parking space.

17. SIGNAGE. Any signs which are to be placed by SUBLESSEE must be
-------
approved by SUBLESSOR in advance. Upon termination of this Agreement, SUBLESSEE
shall be required to remove all signs and to make any repairs for damage caused
as a result of their removal.

18. RIGHT OF FIRST REFUSAL. USA Floral Products Inc. is granted a Right-
----------------------
of-First-Refusal for Buildings 105 and 203 to lease or purchase for the purpose
of future expansion. SUBLESSOR shall pay a rate of $1.50 per square foot for
Building 105 and shall pay $1.80 for building 203. If SUBLESSOR chooses to lease
either building prior to SUBLESSOR receiving an offer from a third
party this Right-of-First-Refusal Lease shall be made according to the same
terms and conditions of this Agreement. In the event SUBLESSOR receives an offer
from a third party for the lease or purchase of the property described on
Exhibit "D" during the term of this sublease, SUBLESSOR shall notify SUBLESSEE
of the offer including number of jobs created and rental to be paid and
SUBLESSEE shall have thirty days from receipt of the offer to meet said offer.
If the event SUBLESSEE fails to exercise this right of first refusal it shall be
null and void after the thirty days as set forth above.

19. RIGHT TO UNIMPROVED LAND SUBLESSEE shall have the right to lease a
------------------------
twenty (20) acre parcel of land for construction of a facility adjacent to the
runway as described in Exhibit "D" ("Unimproved Land") as long as SUBLESSEE has
this lease in effect with SUBLESSOR. Such Unimproved Land shall be leased for a
one time cost of one thousand dollars ($1,000) per acre to be paid
<PAGE>

at commencement of construction and one hundred dollars ($100) per acre per year
for the years remaining on the lease between LESSOR and SUBLESSOR pursuant to
Section 8 of this Agreement. Upon transfer of land by deed to SUBLESSOR the
lease payments will continue until the lease is terminated according to Section
8 of this Agreement. In the event SUBLESSEE fails to exercise this First-Right-
of Refusal it shall be null and void after thirty days as set forth above.

20. LANDING FEES AND FUEL CHARGES At no time during the term of this
-----------------------------
Agreement shall SUBLESSOR charge an air landing fee for any traffic related to
SUBLESSEE's business unless said aircraft does not exceed one thousand gallons
and in that event, said aircraft will be assessed a charge of $1.15 per one
thousand gallons of maximum gross take-off weight. SUBLESSEE shall receive not
less than 25% of the difference between the price SUBLESSOR pays for fuel and
the price SUBLESSOR charges for fuel, to traffic related to SUBLESSEE's
business.

21. INDEMNITY. SUBLESSEE agrees to defend, indemnify, and hold harmless
---------
SUBLESSOR against any claim, expense, loss, or liability as a result of any
breach of the terms, covenants, or conditions of this Agreement, or as a result
of the carelessness, negligence, or improper conduct of any of the SUBLESSEE'S
agents, servants, employees, visitors, or licensees.

22. ASSIGNMENT. This Agreement shall not be assigned by SUBLESSEE without
----------
the prior written consent of SUBLESSOR, which consent shall not be unreasonably
withheld.

23. AUTHORIZATION. SUBLESSOR and SUBLESSEE hereby covenant that they have
-------------
authority to enter into this Agreement by proper corporate resolution or
otherwise, and that the individuals executing this Agreement are authorized to
execute the same and to bind the respective parties.
<PAGE>

24. APPLICABLE LAW. SUBLESSOR and SUBLESSEE agree that this Agreement
--------------
shall be governed by the laws of the State of Arkansas.

25. BINDING EFFECT. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto and their successors and assigns.

26. ENTIRE AGREEMENT. This document forms the entire agreement between
-----------------
the parties, and any other arrangements or representations, written or oral, are
hereby rescinded and replaced by this Agreement.

IN WITNESS WHEREOF, the undersigned have hereunto set their hands this
17th day of December, 1998.

BLYTHEVILLE-GOSNELL REGIONAL AIRPORT
AUTHORITY

BY: /s/ Dick Reams
_______________________________

Title: Chairman Blytheville-Gosnell
Regional Airport Authority
______________________________

FLORAL DISTRIBUTORS, INC.

BY: /s/ Christopher E. Wilson
_______________________________

Title: Vice President
______________________________

<PAGE>

EXHIBIT 21.01

<TABLE>
<CAPTION>
STATE/COUNTRY
SUBSIDIARY OF D/B/A
INCORPORATION
<S> <C> <C>

1. Alpine Gem Flower Shippers, Inc. Montana
2. American Florist Supply, Inc. Massachusetts Johnson's Roses
3. Bay State Florist Supply, Inc. Massachusetts
4. CFX, Inc. Florida
5. Flower Trading Corporation Florida
6. Monterey Bay Bouquet, Inc. California
7. The Roy Houff Company Illinois
8. United Wholesale Florists, Inc. Arkansas
9. United Wholesale Florists of America, Arkansas
Inc.
10. UltraFlora Corporation, Inc. Florida
11. H&H Flowers, Inc. Florida La Fleurette
12. Koehler & Dramm, Inc. Delaware
13. Everflora, Inc. New Jersey
14. Everflora Miami, Inc. Florida
15. CFL Acquisition Corp. Delaware
16. ABCL Acquisition Corp. Delaware
17. XL Group, Inc. Florida
18. Selecta Farms, Inc. Florida
19. Master Flowers, Inc. Florida Sabana Farms
20. Maxima Farms, Inc. Florida
21. EFTA Acquisition Corp. Florida Elite Farms, Inc.

</TABLE>
<PAGE>

STATE/COUNTRY
SUBSIDIARY OF D/B/A
INCORPORATION
<S> <C> <C>
22. Pacific Floral Wholesale, Inc. Delaware
23. Rose City Floral Delaware
24. Edfrancar, Inc. Florida Florafresh
International
25. ASG Acquisition Corp. Delaware Allan Stanley
Greenhouses, Inc.
26. David L. Jones Wholesale Ltd. British
Columbia,
Canada
27. Petals Distributing, Inc. Delaware
28. Floramark, Inc. Colorado
29. AlphaFlora Imports, Inc. Illinois
30. Channel Islands Floral, Inc. Delaware
31. Tommy's Wholesale Florist, Inc. Delaware
32. Sandlake Farms, Inc. Florida
33. First Distributors of California, Inc. Delaware
34. Evergreen Wholesale Florist, Inc. Washington
35. Southern Rainbow Corporation Florida
36. Floral Distributors, Inc. Delaware
37. Florimex USA, Inc. Virginia
Subsidiaries of Florimex USA, Inc.
1. Florimex Los Angeles, Inc. Virginia Florimex West,
San Francisco
2. Floramor, Inc. Virginia
3. Floramor sp.zo.o Poland
4. Florimex (Pty.) Ltd. South Africa
5. U.S.A. Floral Products B.V. Netherlands

</TABLE>

2
<PAGE>

STATE/COUNTRY
SUBSIDIARY OF D/B/A
INCORPORATION
<S> <C> <C>
38. Florimex Canada, Inc. Ontario, Canada
39. U.S.A Floral Products Holdings Germany
GmbH
Subsidiaries of U.S.A Floral
Products Holdings GmbH
1. U.S.A. Floral Products
Verwaltungs GmbH Germany
2. U.S.A. Floral Products A German Limited
Germany GmbH & Co. KG Partnership
Subsidiaries of U.S.A. Floral
Products Germany GmbH &
Co. KG
1. Florimex Nuremberg Germany
GmbH
2. Florimex GmbH Germany
3. Kenya Flowers GmbH Germany
3. Florimex
Grundstucksverwaltungsgesell Germany
schaft mbH
4. Agros s.r.l. Italy
5. Florimex Milano s.r.l. Italy
6. Florimex Sanremo s.r.l. Italy
7. Florimex Japan Ltd. Japan
8. Florimex AG Switzerland
9. Florimex Blumenimport Austria
Ges.m.b.H.

</TABLE>

3
<PAGE>

<TABLE>
<CAPTION>
STATE/COUNTRY
SUBSIDIARY OF D/B/A
INCORPORATION
<S> <C> <C>
10. Distribuidora Florimex S.A. Spain
11. Florimex AB Sweden
12. Florimex Bangkok Co. Ltd. Thailand
13. Kero Bangkok Thailand
14. Florimex Colombia Ltda. Colombia
15. Florimex Barcelona S.A. Spain
16. Fleur Expansion Florimex France
S.A.S.
17. Florimex Praha spol. S.r.o. Czech Republic
18. Florimex (UK) Ltd. United Kingdom
19. Florimex Inmobiliaria S.A. Spain
20. Florimex Rungis s.a.r.l. France
21. Florimex Onroerendgoed B.V. Netherlands
22. Florimex Worldwide B.V. Netherlands
Subsidiaries of Florimex
Worldwide B.V.
1. Sierafor B.V. Netherlands
2. Florimex B.V. Netherlands
3. Westcom B.V. Netherlands
4. Baardse B.V. Netherlands
5. Koeltransporten B.V. Netherlands
</TABLE>

<PAGE>

EXHIBIT 23.01

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (SEC File No. 333-39923) of U.S.A. Floral Products, Inc.
of our report dated February 22, 1999 appearing on page 35 of this Annual
Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Washington, D.C.
March 30, 1999

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR OTHER
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 APR-22-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 20,196 15,582
<SECURITIES> 0 0
<RECEIVABLES> 105,713 19,104
<ALLOWANCES> 7,944 599
<INVENTORY> 18,577 4,937
<CURRENT-ASSETS> 152,177 41,582
<PP&E> 65,587 9,017
<DEPRECIATION> 5,951 291
<TOTAL-ASSETS> 494,034 107,248
<CURRENT-LIABILITIES> 111,534 20,128
<BONDS> 194,668 309
0 0
0 0
<COMMON> 15 9
<OTHER-SE> 185,610 86,156
<TOTAL-LIABILITY-AND-EQUITY> 494,034 107,248
<SALES> 589,034 37,380
<TOTAL-REVENUES> 589,034 37,380
<CGS> 429,012 26,685
<TOTAL-COSTS> 134,319 10,066
<OTHER-EXPENSES> 5,416 37
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 6,157 (240)
<INCOME-PRETAX> 15,028 906
<INCOME-TAX> 7,255 490
<INCOME-CONTINUING> 7,743 416
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,743 416
<EPS-PRIMARY> $0.54 $0.09
<EPS-DILUTED> $0.52 $0.09

</TABLE>