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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, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-23121
U.S.A. FLORAL PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
1025 Thomas Jefferson Street, N.W.,
Suite 300 East, Washington, D.C.
(Address of Principal Executive Offices)
52-2030697
(I.R.S. Employer Identification No.)
20007
(Zip Code)
Registrant's telephone number, including area code: (202) 333-0800
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class Name of Each Exchange on Which Registered
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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 No
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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. [ ]
As of March 29, 2000, 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, was
$ 24,390,473 (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 30, 2000 was 16,443,614.
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 2000 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 Manufacturing. For revenue, income and asset information about each of
these segments, see our Consolidated Financial Statements included elsewhere in
this Form 10-K.
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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 traditional and Internet floral fulfillment services to non-store
retailers; and
. provide in-store merchandising services to certain supermarkets and mass-
market retailers.
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 102 facilities in 18
countries located on five continents. Our revenues for the year ended December
31, 1999 were approximately $924.8 million, and our operating income was
approximately $13.8 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 1998
(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 1998,
Switzerland's per-capita consumption of flowers was $85, the highest in the
world. While the United States per-capita consumption grew from $20 in 1990 to
$25 in 1998, U.S. consumption is significantly lower than that of most European
and developed Asian countries. We believe that the shorter distribution
channels, especially in Europe, 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 in Europe, Africa, the
Middle East, and to a lesser extent Australia 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 including all types, but primarily consist of roses,
carnations and chrysanthemums, each of which is imported in a number of
varieties. Importers of floral products,
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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.
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 exceeded $15 billion
in 1998, and that almost half 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.
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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.
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 new Chief Executive Officer, Michael
Broomfield, was hired January 3, 2000 and was previously the Chief Operating
Officer for Giant Foods Inc., a supermarket distribution company owned by
Koninklijke Ahold NV. Dwight Ferguson, our President and Chief Operating
Officer, was formerly the President and Chief Operating Officer of Florimex
Worldwide Inc. ("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. Mr. Robert Poirier, our former
Chairman, President and Chief Executive Officer, resigned on March 1, 2000.
International Presence. We operate as importers, exporters, wholesale
distributors and bouquet companies throughout Europe and Asia. We have sourcing
and export facilities in Holland, Colombia, Ecuador 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
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.
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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 almost 50% of
total flower sales in the United States in 1998 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 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, approximately 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 Fulfillment Initiative. Through our Internet Fulfillment
Department, 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.
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 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 continue to
increase as 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.
International Operations
Our International division, commonly referred to as Florimex, operates through
approximately 47 offices located in countries throughout the world, including
Austria, China, Colombia, the Czech Republic, Ecuador, France, Germany, Holland,
Italy, Japan, Poland, South Africa, Spain, Sweden, Switzerland, and the United
Kingdom. Florimex buys flowers from sources throughout the world and transports
them, typically by air, to distribution facilities for resale to wholesale
distributors and retailers. Florimex imports flowers through 47 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.
Florimex provides the Company with certain strategic benefits, including:
. a significant international presence in the floral products industry;
. 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;
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. 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; and
. a significant presence at the world's largest flower auctions.
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.
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.
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 a large array of fresh flowers, including roses,
carnations and chrysanthemums, from abroad, principally from Colombia and
Ecuador in South America, Holland in Europe, Africa, the Middle East, and to a
lesser extent Australia 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.
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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.
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 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
We believe we are well-positioned to provide fulfillment services to on-line
retailers of floral products with our bouquet making operations in Miami, FL.
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. Through our Internet
Fulfillment department, we 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 and
New Zealand in the Pacific Rim. We have had increased access to flowers grown
throughout the world through our acquisition of Florimex. The International
division has created an opportunity for our domestic 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.
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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 1999 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.
Employees
As of March 30, 2000, we employed approximately 3,700 people. We believe that
our relations with our employees are satisfactory.
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 is to be more profitable and to continue
to expand our net revenues. Our ability to increase net revenues 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 Internet fulfillment initiative;
. our ability to successfully enter new markets; and
. availability of sufficient capital to meet our internal growth strategy.
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Some 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. Our Internet fulfillment 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
We operate as importers, exporters, wholesale distributors and bouquet
companies throughout Europe and Asia. 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;
. 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;
. political and economic instability;
. availability of sufficient capital; and
. potentially adverse tax consequences.
In addition to dollars, our international revenues are denominated in local
currencies, predominately the Euro. 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.
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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.
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.
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
11
<PAGE>
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 Michael
W. Broomfield, our Chief Executive Officer, Dwight Ferguson, our President,
Chief Operating Officer and President of the International Division, the other
members of our management team and senior management of our operating
subsidiaries. While we have entered into employment agreements with Mr.
Broomfield, Mr. Ferguson, 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.
Amortization of Intangible Assets
Approximately $267.6 million, or 55.0%, of our total assets as of December 31,
1999 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 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.
12
<PAGE>
As importers of perishable floral products, we were previously subject to the
imposition of anti-dumping duties. "Dumping" occured when importers sold
flowers in the United States at prices below the flowers' home market value. The
U.S. Commerce Department ("DOC") investigated claims of dumping made by domestic
growers and if the DOC determined that a farm sold flowers to a U.S. importer
for a price less than the home market value, it imposed an anti-dumping duty
upon the importer. The DOC previously conducted anti-dumping reviews related to
the sales of certain flowers imported from South America. The DOC has undertaken
eleven reviews, the most recent being for the period ended February 28, 1998.
On May 20, 1999, a settlement was reached whereby all open review periods
through February 28, 1997 (periods 5, 6, 7, 9 and 10) were finalized at the cash
deposit rate. That is, the Company did not owe any additional antidumping
duties ("ADD") for those periods. On July 20, 1999, the DOC revoked the
Antidumping Order on fresh cut flowers from Colombia retroactive to March 1,
1997, the beginning of period 11. Further, the DOC stated that, as a result of
the retroactive revocation, the DOC has terminated its reviews of periods 11 and
12 and that the DOC intends to refund any ADD collected on or after March 1,
1997. Therefore, as a result of the final determinations by the DOC regarding
open review periods and the DOC's retroactive revocation of the Antidumping
Order, the Company has no liability for antidumping at the end of 1999. 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.
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, former president of our American Florist Supply, Inc. operating
subsidiary ("American Florist"), current president of our North American
Wholesale division, and a former director, has an ownership interest in a rose
farm, Meadow Flowers, located in Ecuador, from which American Florist purchases
roses. Jeffrey E. Brothers, former president of our Monterey Bay Bouquet, Inc.
operating subsidiary ("Monterey Bay"), former president of our West Coast
Bouquet operations in North America, and a former director, has a 50% interest
in Brothers Floral Associates, a vendor to Monterey Bay. Mr. Brothers resigned
from the Company effective February 29, 2000. 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 30, 2000, our executive officers and directors beneficially owned
an aggregate of approximately 19.5% 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
13
<PAGE>
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 30, 2000, 16,443,614 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, 2,083,590 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 715,265 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 6,953,140 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 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
5,546,860 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.
14
<PAGE>
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 determined that
we were 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 believed that with these modifications or replacements of
existing software and certain hardware, we mitigated the Year 2000 Issue.
However, 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. To date,
USAFP achieved the rollover to the new millennium without experiencing any
significant Year 2000 related issues.
Executive Officers of the Registrant
The following table sets forth certain information concerning each of the
executive officers of the Company as of March 30, 2000:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Michael W. Broomfield..... 58 Chief Executive Officer
Dwight Ferguson........... 43 President / Chief Operating Officer/President of International Division
G. Andrew Cooke.......... 37 Interim Chief Financial Officer / Vice President of Finance and Controller
</TABLE>
Michael W. Broomfield was hired as the Chief Executive Officer on January 3,
2000, and was previously the Chief Operating Officer for Giant Foods Inc., a
supermarket distribution company owned by Koninklijke Ahold NV.
Dwight Ferguson has been appointed as the President and Chief Operating
Officer on March 24, 2000. He also serves as our President of our International
Division effective October 1, 1998, the date we acquired Florimex. For five
years prior to joining USA Floral, Mr. Ferguson was employed with Florimex
Worldwide GmbH, most recently as President and Chief Operating Officer.
G. Andrew Cooke is our interim Chief Financial Officer and has been our Vice
President of Finance and Controller since January, 1998. For 12 years prior to
January, 1998, Mr. Cooke was an employee of Price Waterhouse, most recently as a
senior manager in the Washington, D.C. office.
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, we either lease or own distribution,
sales and bouquet making facilities in 26 states and 18 countries.
We believe that our facilities are adequate for our current operations.
15
<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.
16
<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 29, 2000, the last sale
price of our common stock was $1.531 per share. As of March 30, 2000, there
were approximately 543 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.................................................. $17.625 $ 5.500
Second Quarter................................................. $ 8.063 $ 6.125
Third Quarter.................................................. $ 7.500 $ 1.438
Fourth Quarter................................................. $ 4.375 $ 1.938
2000
First Quarter (January 1, 2000 to March 29, 2000).............. $ 3.031 $ 0.750
</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
None
17
<PAGE>
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 occured 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.
<TABLE>
<CAPTION>
April 22, 1997 Year Year
Through Ended Ended Year Ended
December 31, 1997 December 31, 1998 December 31, 1998 December 31, 1999
(Actual) (Actual) (Pro Forma) (Actual)
--------------------- ------------------- -------------------- -------------------
(in thousands except per share data)
Statement of Operations:
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue.............................. $37,380 100.0% $589,034 100.0% $999,793 100.0% $924,847 100.0%
Cost of sales............................ 26,685 71.4% 429,012 72.8% 758,744 75.9% 686,659 74.2%
------- ----- -------- ----- -------- ----- -------- -----
Gross margin............................. 10,695 28.6% 160,022 27.2% 241,049 24.1% 238,188 25.8%
Selling, general and administrative
expenses............................... 9,791 26.2% 129,551 22.0% 198,157 19.8% 218,058 23.6%
Goodwill amortization.................... 275 0.7% 4,768 0.8% 6,755 0.7% 7,086 0.8%
Integration charges (credits)............ -- 0.0% 3,361 0.6% 6,333 0.6% (712) (0.1)%
Write-off of deferred financing fees..... -- 0.0% 1,606 0.3% -- 0.0% -- 0.0%
------- ----- -------- ----- -------- ----- -------- -----
Income from operations................... 629 1.7% 20,736 3.5% 29,804 3.0% 13,756 1.5%
Interest expense......................... (8) 0.0% (8,040) (1.4)% (16,054) (1.6)% (16,088) (1.7)%
Interest income.......................... 248 0.7% 1,883 0.3% 2,627 0.2% 1,922 0.2%
Other income............................. 37 0.0% 449 0.1% 988 0.1% 375 0.0%
------- ----- -------- ----- -------- ----- -------- -----
Income (loss) before income taxes
and minority interest.................. 906 2.4% 15,028 2.5% 17,365 1.7% (35) 0.0%
Provision for income taxes............... 490 1.3% 7,255 1.2% 8,095 0.8% 3,013 0.3%
------- ----- -------- ----- -------- ----- -------- -----
Income (loss) before minority interest... 416 1.1% 7,773 1.3% 9,270 0.9% (3,048) (0.3)%
Minority interest........................ -- 0.0% (30) 0.0% (78) 0.0% (18) 0.0%
------- ----- -------- ----- -------- ----- -------- -----
Net (loss) income........................ $ 416 1.1% $ 7,743 1.3% $ 9,192 0.9% $ (3,066) (0.3)%
------- ----- -------- ----- -------- ----- -------- -----
Net income (loss) per share:
Basic.................................. $ 0.09 $ 0.54 $ 0.58 $ (0.19)
Diluted................................ $ 0.09 $ 0.52 $ 0.56 $ (0.19)
Shares used in computing net income
(loss) per share:
Basic.................................. 4,734 14,376 15,919 16,349
Diluted................................ 4,824 14,789 16,395 16,509
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1997 1998 1999
------------ ----------- ------------
(in thousands)
Balance Sheet Data:
<S> <C> <C> <C>
Working Capital.............. $ 21,454 $ 40,643 $ 68,647
Total assets................. 107,248 494,034 486,810
Short-term debt.............. 290 5,005 4,919
Total long-term debt......... 309 194,668 195,914
Stockholders' equity......... 86,165 185,625 200,577
</TABLE>
18
<PAGE>
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;
. provide traditional floral and Internet fulfillment services to non-store
retailers; and
. provide in-store merchandising services to certain supermarkets and mass-
market retailers.
Increasingly, we provide higher value-added services including bouquet and
arrangement making and marketing support to retailers. 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
102 facilities in 18 countries located on five continents. Our revenues for the
year ended December 31, 1999 were approximately $924.8 million, and our
operating income was approximately $13.8 million.
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 1999. 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 1999.
We recognize net revenues 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 (in thousands)
The following discussion should be read in conjunction with Item 6--Selected
Financial Data and our Consolidated Financial Statements and 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 18 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.
19
<PAGE>
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.
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 revenues 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 revenues.
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 $0.5
million for the period ended December 31, 1997 on pre-tax income of $0.9 million
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 $0.5 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
20
<PAGE>
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.
In the fourth quarter of 1998, we recorded an integration charge of
approximately $3.4 million (see Note 12 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 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
$8.0 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, 1999 (Actual) versus 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, 1999 were $924.8
million. Revenues decreased
21
<PAGE>
from $999.8 million for the year ended December 31, 1998. Revenues for the North
America Division were $567.5 million, or 61.4% of the consolidated revenues and
revenues for the International Division were $357.4 million, or 38.6% of the
consolidated revenues. Revenues for the International Division consisted
primarily of revenues from Germany, the Netherlands, Italy and Japan. In 1998,
62.2% of the revenues were generated by the North America Division and the 37.8%
were generated by the International Division. The Company experienced a
reduction in revenues for the year ended December 31, 1999, when compared to the
1998 revenues due primarily to the following: Industry wide North American
import demand from South America was weak for the first two months of 1999 as
compared to the same period in 1998, particularly since Valentine's Day fell on
a Sunday of a Holiday weekend. Industry wide Dutch exports were down
approximately 10% for the first two months of 1999, as compared to the same
period in 1998 and average unit sales prices fell approximately 10% from the
prior year. The Company derives nearly 40% of its revenue internationally,
primarily from Europe, and estimates that the stronger U.S. dollar versus the
Euro negatively impacted reported international revenues by approximately 5%.
Gross Margin. Gross margin for the years ended December 31, 1999 and 1998
were $238.2 million (including approximately $2.2 million from the final
determination of antidumping duties) and $241.0 million, respectively. Gross
margin as a percentage of net revenues was 25.8% (25.6% excluding the effect of
the final determination of antidumping duties), for the year ended December 31,
1999 and 24.1% for the year ended December 31, 1998. The increase in the gross
margin is mainly attributable to improved intercompany sales in the North
American division and stronger margin performance in the International division.
The International Division historically operates at a lower gross margin and
therefore, reduces the consolidated gross margin of the Company. For the year
ended December 31, 1999, the gross margin of the International Division was
22.3% as compared to 18.9% for the year ended December 31, 1998. The North
America Division gross margin was 27.9% (27.5%, excluding the effect of the
final determination of antidumping duties) for the year ended December 31, 1999
as compared to 28.1% for the year ended December 31, 1998.
Selling, General and Administrative. Selling, general and administrative
expenses were $218.1 million for the year ended December 31, 1999, or 23.6% of
net revenues and $198.2 million in the year ended December 31, 1998, or 19.8% of
net revenues. The increase in the 1999 selling, general and administrative
expense is primarily the result an increase in selling expenses associated with
higher revenues in the North America West Coast Bouquet operations; an increase
in expense associated with building an infrastructure for a publicly held multi-
national corporation; start-up cost associated with the Company's Blytheville,
Arkansas operations and Internet fulfillment department; and Year 2000
remediation and system conversion costs.
Integration charge. As part of our increased focus on operational matters, we
have pursued 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.
In the fourth quarter of 1998, we recorded an integration charge of
approximately $3.4 million related to an integration plan to integrate certain
warehouse and distribution facilities principally associated with our import and
bouquet operations in Miami, Florida. This charge principally related 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 related to employees who were notified during the fourth quarter
of 1998 that their positions were being eliminated. The integration of the
warehouses and distribution facilities began in November 1998 and was
substantially completed by December 31, 1999. The cost of implementing the
November 1998 integration plan was less than anticipated and accordingly $0.7
million was reversed into income in the fourth quarter of 1999. During 1999,
the Company experienced approximately $5.0 million of cost savings, principally
in the third and fourth quarters and expects to realize annual costs savings of
approximately $8.0 million.
22
<PAGE>
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 was completed by December 31,
1999.
Income from operations. Income from operations was $13.8 million, or 1.5% of
net revenues, for the year ended December 31, 1999 and $29.8 million or 3.0% of
net revenues for the year ended December 31, 1998.
Interest expense. For the year ended December 31, 1999, interest expense was
approximately $16.1 million as compared to $16.1 million for the year ended
December 31, 1998. Our outstanding debt primarily relates to our amended and
restated credit agreement. The Company's average borrowing rate for the years
ended December 31, 1999 and 1998 was 8.1% and 8.0% respectively, based on the
Company's weighted average outstanding debt balance.
Provision for income taxes. The provision for income taxes as $3.0 million
for the year ended December 31, 1999 on a pre-tax loss of $35 and $8.1 million
for the year ended December 31, 1998 on pre-tax income of $17.4 million. The
effective income tax rate is higher than the statutory rate primarily due to the
non-deductibility of certain goodwill amortization. The effective tax rate for
1999 is not a meaningful calculation, as there is a pre-tax loss of $35, and the
effective tax rate for 1998 is 46.6%. The effect of the non-deductibility of
certain goodwill amortization is much more pronounced with the lower base of
income before provision for taxes.
Net income or loss. As a result of the factors discussed above, the Company
had net loss of $3.1 million for the year ended December 31, 1999, or $0.19 per
basic and diluted share. The Company had net income of $9.2 million for the
year ended December 31, 1998, or $0.58 per basic share and $0.56 per diluted
share.
For the year ended December 31, 1999 (Actual) versus December 31, 1998 (Actual)
Net Revenues. Net revenues for the year ended December 31, 1999 were $924.8
million. Revenues increased from $589.0 million for the year ended December 31,
1998. This increase was primarily due to the acquisition of the International
Division which was completed during the fourth quarter of 1998 coupled with the
impact in 1999 of a full nine months of operations of the January 1998 Class,
and April 1998 Class, and July 1998 Class of acquisitions. Revenues for the
North America Division were $567.5 million, or 61.4% of the consolidated
revenues and revenues for the International Division were $357.4 million, or
38.6% of the consolidated revenues. Revenues for the International Division
consisted primarily of revenues from Germany, the Netherlands, Italy and Japan.
In 1998, 81.6% of the revenues were generated by the North America Division
since there was no International Division during the first nine months of 1998.
The Company experienced a reduction in revenues for the year ended December 31,
1999, due primarily to the following: Industry wide North American import
demand from South America was weak for the first two months of 1999 as compared
to the same period in 1998, particularly since Valentine's Day fell on a Sunday
of a Holiday weekend. Industry wide Dutch exports were down approximately 10%
for the first two months of 1999, as compared to the same period in 1998 and
average unit sales prices fell approximately 10% from the prior year. The
Company derives nearly 40% of its revenue internationally, primarily from
Europe, and estimates that the stronger U.S. dollar versus the Euro negatively
impacted reported international revenues by approximately 5%.
Gross Margin. Gross margin for the year ended December 31, 1999 and 1998 were
$238.2 million (including approximately $2.2 million from the final
determination of antidumping duties) and $160.0 million, respectively. Gross
margin as a percentage of net revenue were 25.8% (25.6% excluding the effect of
the final determination of antidumping duties), for the year ended December 31,
1999 and 27.2% for the year ended December 31, 1998. The decline in the gross
margin is mainly attributable to the inclusion of the International Division for
a full year in 1999. The International Division historically operates at a
lower gross margin and therefore, reduces the consolidated gross margin of the
Company. For the year ended December 31, 1999, the gross margin of the
23
<PAGE>
International Division was 22.3%. The North America Division gross margin was
27.9% (27.5%, excluding the effect of the final determination of antidumping
duties) for the year ended December 31, 1999 as compared to 28.1% for the year
ended December 31, 1998.
Selling, General and Administrative. Selling, general and administrative
expenses were $218.1 million for the year ended December 31, 1999, or 23.6% of
net revenues and $129.6 million in the year ended December 31, 1998, or 22.0% of
net revenues. The increase in the 1999 selling, general and administrative
expense is primarily the result of the acquisition of 18 floral businesses in
1998 and an increase in selling expenses associated with higher revenues in the
North America West Coast Bouquet operations; an increase in expense associated
with building an infrastructure for a publicly held multi-national corporation;
start-up cost associated with the Company's Blytheville, Arkansas operations and
Internet fulfillment department; and Year 2000 remediation and system conversion
costs.
Integration charge. As part of our increased focus on operational matters, we
have pursued 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.
In the fourth quarter of 1998, we recorded an integration charge of
approximately $3.4 million related to an integration plan to integrate certain
warehouse and distribution facilities principally associated with our import and
bouquet operations in Miami, Florida. This charge principally related 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 related to employees who were notified during the fourth quarter
of 1998 that their positions were being eliminated. The integration of the
warehouses and distribution facilities began in November 1998 and was
substantially completed by December 31, 1999. The cost of implementing the
November 1998 integration plan was less than anticipated and accordingly $0.7
million was reversed into income in the fourth quarter of 1999. During 1999,
the Company experienced approximately $5.0 million of cost savings, principally
in the third and fourth quarters and expects to realize annual costs savings of
approximately $8.0 million.
Income from operations. Income from operations was $13.8 million, or 1.5% of
net revenues, for the year ended December 31, 1999 and $20.7 million or 3.5% of
net revenues for the year ended December 31, 1998.
Interest expense. For the year ended December 31, 1999, interest expense was
approximately $16.1 million as compared to $8.0 million for the year ended
December 31, 1998 an increase of $8.1 million. The increase in interest expense
is primarily the result of borrowings used to fund the cash portion of the total
consideration for the acquisition of the 18 floral businesses completed during
1998. Our outstanding debt primarily relates to our amended and restated credit
agreement. The Company's average borrowing rate for the year ended December 31,
1999 was 8.1%, based on the Company's weighted average outstanding debt balance.
Provision for income taxes. The provision for income taxes as $3.0 million
for the year ended December 31, 1999 on a pre-tax loss of $35 and $7.3 million
for the year ended December 31, 1998 on pre-tax income of $15.0 million. The
effective income tax rate is higher than the statutory rate primarily due to the
non-deductibility of certain goodwill amortization. The effective tax rate for
1999 is not a meaningful calculation, as there is a pre-tax loss of $35, and the
effective tax rate for 1998 is 48.3%. The effect of the non-deductibility of
certain goodwill amortization is much more pronounced with the lower base of
income before provision for taxes.
Net income. As a result of the factors discussed above, the Company had net
loss of $3.1 million for the year ended December 31, 1999, or $0.19 per basic
and diluted share. The Company has net income of $7.7 million for the year
ended December 31, 1998, or $0.54 per basic share and $0.52 per diluted share.
24
<PAGE>
Liquidity and Capital Resources
Historical. Historically, the Company's primary sources of liquidity have
been cash from operations and borrowings under our credit facility. The
Company's principal uses of liquidity will be to provide working capital, to
meet debt service requirements and finance the Company's strategic plans. For
fiscal 1999, quarterly net revenues as a percentage of total revenues were
approximately 29%, 26%, 21%, and 24%, respectively, for the first through fourth
quarters of the fiscal year. In addition, for fiscal 1999 quarterly income from
operations as a percentage of revenue for the fiscal year 1999 were
approximately 4%, 3%, (2)%, and (1)%, respectively for the first through fourth
quarters of the fiscal year. The Company's need for cash has historically been
greater in its first and second quarters when cash generated from operating
activities coupled with draw-downs from bank lines have been invested in
receivables and to a lesser extent inventories. The Company experiences higher
levels of sales in the first two quarters of the year due to the traditional
flower giving holidays, Valentine's Day in February and Mother's Day in May.
For the year ended December 31, 1999 the Company used $10.1 million cash on hand
and $8.2 million in proceeds from borrowings to invest $11.4 million in capital
expenditures, pay $7.5 million in earnout arrangements, and fund working capital
for operating activities.
In the year ended December 31, 1999, operating activities used $1.4 million of
net cash compared to $2.4 million of cash provided from operations in the same
period last year. The decrease is principally attributable to $10.8 million
lower net income partially offset by $9.4 million increase in non-cash expenses
(such as depreciation and goodwill amortization) and $2.4 million decrease in
the use of cash for working capital and other assets and liabilities. The use
of cash for working capital purposes in the 1999 compared unfavorably to 1998
due principally to the acquisition of 18 floral business. As a result of the
acquisition of 18 floral businesses the Company's investment in working capital,
particularly accounts payable, accrued expenses, and inventory at December 31,
1999 increased significantly over the same period last year.
Our capital expenditures for the year ended December 31, 1999 were
approximately $11.4 million. These capital expenditures were primarily for
vehicles, machinery, office equipment and computer equipment and software,
building additions, facility upgrades and our Year 2000 project (see below) to
remediate existing systems and replace non-compliant systems. Although we
currently do not have any commitments to make significant capital expenditures,
we expect to expend approximately $6.0 million for capital expenditures in the
next twelve months in the normal course of business.
Financing. Our existing credit agreement is with a syndicate of lenders for
which Bankers Trust Company serves as agent (the "Credit Agreement"). Pursuant
to the terms of the Credit Agreement as of October 2, 1998, the amount of our
revolving credit facility 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. 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 facility. Borrowings under the
revolving credit facility bear interest, at our option, at (a) Bankers Trust
Company's base rate plus an applicable margin of up to 1.25% or (b) a Eurodollar
rate plus an applicable margin of up to 2.50%. Borrowings under the term loan
bear interest at the inter-bank rate for Deutsche Marks plus an applicable
margin of up to 2.50%. For the execution of the Amended Credit Agreement the
Company paid aggregate financing fees of approximately $3.9 million, which has
been deferred and is being amortized over the term of the Credit Agreement. In
addition, a commitment fee of up to 0.50% is being charged on the unused portion
of the revolving credit facility on a quarterly basis. Both the revolving credit
facilities and the term loan mature five years from the closing date. At
December 31, 1999 outstanding borrowings under our Credit Agreement aggregated
$197.9 million. The Company does not have any required repayments of term loans
until December 31, 2000.
As of December 31, 1999, the Company was not in compliance with applicable
financial covenants, including the leverage ratio. Pursuant to the terms of the
Credit Agreement, non-compliance with one or more financial covenants permits
for the lenders to terminate the commitment and declare the principal balance
and any accrued interest on all loans and obligations immediately due
25
<PAGE>
and payable. The Company obtained a waiver on all financial covenants at
December 31, 1999 and on March 24, 2000, the financial covenants, including the
leverage ratio and consolidated interest coverage ratio, were amended under the
Amended Credit Agreement. Further, the Company is required to maintain minimum
EBITDA levels, as defined in the Amended Credit Agreement. Additionally, the
amendment limits the level of the Company's total outstanding borrowings to
$224.0 million and at March 24, 2000, the aggregate outstanding borrowings were
approximately $208.5 million. In consideration for the amendment, the Company
agreed to pay a financing fee of $1.75 million on March 31, 2001 and issue
approximately 820,000 warrants to purchase common stock of the Company at an
exercise price of $0.25 per share. The warrants issued are exercisable anytime
after March 31, 2001 and expire March 31, 2010. Both the financing fee and the
fair value of the warrants issued will be deferred and amortized over the
remaining term of the Amended Credit Agreement.
The Company is subject to the risk that it will not achieve the objectives of
its 2000 operating plan and therefore, not comply with the amended covenants of
its credit facility. If the Company is unable to comply with the amended
covenants, obtain waivers or obtain adequate alternative sources of financing,
it will have a material adverse effect on the Company.
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 operations and amounts available 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
USAFP achieved the rollover to the new millennium without experiencing any
significant Year 2000 related issues. Essential IT and non-IT systems Company-
wide have functioned normally since January 1, 2000. Only a handful of very
minor isolated Year 2000 issues occurred, and these were all remedied promptly
without any impact to the business. At the present time, no significant Year
2000 issues with any vendor or customer are known.
The total cost of USAFP's Year 2000 effort was $2.5 million. This cost
excludes the cost of implementing and converting a number of systems at
individual companies since, despite being a critical component of the USAFP Year
2000 remediation effort, these projects were already planned and was not
accelerated due to Year 2000 issues. This amount also excludes internal costs,
principally the payroll costs, of IT personnel not solely devoted to the Year
2000 remediation effort. No material IT or non-IT projects were delayed due to
the USAFP Year 2000 remediation effort.
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.
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.
26
<PAGE>
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 for the year ended December 31, 1998 and our actual results of
operations on a quarterly basis for the years ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 Quarter
-----------------------------------------------------
Consolidated--Actual First Second Third Fourth Total
--------- --------- --------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Net revenues......................................... $271,343 $239,041 $189,402 $225,061 $924,847
Percentage of annual revenues........................ 29.3% 25.8% 20.6% 24.3% 100.0%
Operating income (loss).............................. $ 10,831 $ 8,328 $ (3,389) $ (2,014) $ 13,756
<CAPTION>
1998 Quarter
-----------------------------------------------------
Consolidated--Pro Forma (1) First Second Third Fourth Total
--------- --------- --------- --------- ---------
(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
-----------------------------------------------------
Consolidated--Actual (2) First Second Third Fourth Total
-------- -------- -------- -------- --------
(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 Company is exposed to foreign exchange rate fluctuations as the financial
results of foreign subsidiaries are translated into U.S. dollars in
consolidation. As exchange rates vary, those results, when translated, may vary
from expectations and adversely impact overall expected profitability. The
cumulative translation effects for subsidiaries 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, 1999 and 1998;
Consolidated Statement of Operations for the years ended December 31,
1999 and 1998 and for the period April 22, 1997 (inception) to December
31, 1997;
Consolidated Statement of Cash Flows for the years ended December 31,
1999 and 1998 and for the period April 22, 1997 (inception) to December
31, 1997; and
Consolidated Statement of Stockholder's equity at December 31, 1999,
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.
<TABLE>
<CAPTION>
Exhibit
- --------
Number Description
- -------- ---------------------------------------------------------------------------------------------------------
<S> <C>
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/
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
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/
2.16 Purchase and Sale Agreement by and between Atlantic Bouquet Company, Limited and Atlas Flowers, Inc.
d/b/a Golden Flowers, dated September 29, 1999./6/
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
3.01 Certificate of Incorporation of U.S.A. Floral Products, Inc., as amended. (Exhibit 3.01)/5/
3.02 Second Amended Bylaws of U.S.A. Floral Products, Inc. /6/
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./5/
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/
4.01(d) Third Amendment 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 dated March 30, 1999./6/
4.01(e) Fourth Amendment 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 dated March 24, 2000./6/
4.01(f) Waiver 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 dated October 7, 1999./6/
4.01(g) Waiver 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 dated as of November 9, 1999./6/
</TABLE>
32
<PAGE>
<TABLE>
<S> <C>
4.01(h) Waiver among USA Floral Products, Inc., USA Floral Products GmbH and 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,
dated December 23, 1999./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 Alpine Gem Flower Shippers, Inc. and John Q. Graham, Jr., dated October 16,
1997./5/*
10.06 Employment Agreement between USA Floral Products, Inc. and Dwight Ferguson, dated August 12, 1998./6/*
10.11 Sublease Agreement by and between Blytheville-Gosnell Regional Airport Authority and Floral
Distributors, Inc., dated December 16, 1998./5/*
10.12 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/
10.19 Employment Agreement between USA Floral Products, Inc. and John T. Dickinson, dated
February 1, 1999./6/*
10.20 Employment Agreement between USA Floral Products, Inc. and Michael W. Broomfield, dated November 24,
1999./6/*
10.22 Separation Agreement between USA Floral Products, Inc. and Robert J. Poirier, dated February 13,
2000./6/*
21.01 Subsidiaries of the Registrant/6/
23.01 Consent of PricewaterhouseCoopers LLP/6/
27.01 Financial Data Schedule/6/
</TABLE>
33
<PAGE>
- ----------------
* 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) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
filed with the Commission on March 31, 1999.
(6) Filed herewith.
(b) Reports on Form 8-K
During the quarter ended December 31, 1999, USA Floral filed the following
Report on Form 8-K:
None.
* * * * * *
34
<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.................................. 36
Consolidated Balance Sheet......................................... 37
Consolidated Statement of Operations............................... 38
Consolidated Statement of Stockholders' Equity..................... 39
Consolidated Statement of Cash Flows............................... 40
Notes to Consolidated Financial Statements......................... 41
</TABLE>
35
<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 subsidiaries (the "Company") at December 31, 1999
and 1998, and the results of their operations and their cash flows for the years
ended December 31, 1999 and 1998 and the period April 22, 1997 (inception)
through December 31, 1997, in conformity with accounting principles generally
accepted in the United States. 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 auditing standards generally accepted in the
United States 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
Washington, D.C.
March 20, 2000, except for Note 7
as to which the date is March 24, 2000
36
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except par value)
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,048 $ 20,196
Accounts receivable, net 102,524 97,769
Inventory 24,569 18,577
Prepaid expenses and other assets 14,444 12,259
Deferred income tax assets 2,931 3,376
---------- ---------
Total current assets 154,516 152,177
Property and equipment, net 53,357 59,636
Goodwill, net 267,590 267,763
Restricted cash 3,834 3,672
Deferred financing costs 2,971 3,477
Other assets 4,542 7,309
---------- ---------
Total assets $ 486,810 $ 494,034
========== =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 4,919 $ 5,005
Accounts payable 60,574 58,033
Accrued expenses 15,770 29,919
Due to stockholders 2,278 15,350
Income taxes payable 2,328 3,227
---------- ---------
Total current liabilities 85,869 111,534
Long-term debt 195,914 194,668
Deferred income tax liabilities 3,469 1,784
Other liabilities 618 -
---------- ---------
Total liabilities 285,870 307,986
---------- ---------
Minority interests in subsidiaries 363 423
---------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 100,000 shares
authorized; 16,266 and 14,850 shares issued,
respectively 16 15
Treasury stock (14 shares) (287) (287)
Additional paid-in capital 193,477 178,130
Retained earnings 5,093 8,159
Accumulated other comprehensive income (loss) 2,278 (392)
---------- ---------
Total stockholders' equity 200,577 185,625
---------- ---------
Total liabilities and stockholders' equity $ 486,810 $ 494,034
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
37
<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 Year Ended (inception) to
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net revenues $ 924,847 $ 589,034 $ 37,380
Cost of sales 686,659 429,012 26,685
---------- ---------- ---------
Gross margin 238,188 160,022 10,695
Selling, general and administrative expenses 218,058 129,551 9,791
Goodwill amortization 7,086 4,768 275
Integration charges (credits) (712) 3,361 -
Write-off of deferred financing fees - 1,606 -
---------- ---------- ---------
Income from operations 13,756 20,736 629
Other income (expense):
Interest expense (16,088) (8,040) (8)
Interest income 1,922 1,883 248
Other 375 449 37
---------- ---------- ---------
Income (loss) before income taxes and minority interests (35) 15,028 906
Provision for income taxes 3,013 7,255 490
---------- ---------- ---------
Income (loss) before minority interests (3,048) 7,773 416
Minority interests (18) (30) -
---------- ---------- ---------
Net income (loss) $ (3,066) $ 7,743 $ 416
========== ========== =========
Net income (loss) per share:
Basic $ (0.19) $ 0.54 $ 0.09
Diluted $ (0.19) $ 0.52 $ 0.09
Weighted average shares outstanding:
Basic 16,349 14,376 4,734
Diluted 16,509 14,789 4,824
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
38
<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 (loss) 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
----------------------------------------------------------------------------------
Balances 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 adjustment (392)
Total comprehensive income 7,351
----------------------------------------------------------------------------------
Balances at December 31, 1998 14,836 15 (287) 178,130 8,159 (392) 185,625
Exercise of stock options 7 87 87
Issuance of common stock for
business acquisitions 1,277 1 14,937 14,938
Issuance of common stock 132 323 323
Net loss (3,066)
Foreign currency adjustment 2,670
Total comprehensive loss (396)
----------------------------------------------------------------------------------
Balances at December 31, 1999 16,252 $ 16 $ (287) $193,477 $ 5,093 $ 2,278 $200,577
==================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
39
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Period April 22, 1997
Year Ended Year Ended (inception) to
December 31, 1999 December 31, 1998 December 31, 1997
---------------- ----------------- ----------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,066) $ 7,743 $ 416
Adjustments to reconcile net income(loss) to cash
provided by (used in) operating activities:
Depreciation 9,748 5,660 290
Amortization of goodwill 7,086 4,768 275
Amortization of deferred financing costs 773 468 73
Gain (loss) on disposal of property and equipment (452) 15 (9)
Write-off of deferred financing fees - 1,606 -
Income applicable to minority interests 18 30 -
Deferred income taxes 2,555 (2,205) 43
Changes in operating assets and liabilities,
exclusive of acquired companies:
Accounts receivable (7,563) 10,522 (214)
Inventory (6,550) 1,700 1,299
Due from related parties - 5,747 781
Prepaid expenses and other current assets (293) (709) (112)
Other assets 324 (650) 238
Income taxes payable (898) (2,360) (312)
Accounts payable 7,320 (26,096) -
Accrued expenses (6,427) (5,202) (3,495)
Other liabilities (2,283) (1,577) (53)
Integration reserve (1,714) 2,924 -
--------- --------- ----------
Net cash provided by (used in) operating activities (1,422) 2,384 (780)
Cash flows from investing activities:
Purchases of property and equipment (11,383) (5,861) (543)
Proceeds from sale of property and equipment 3,975 - -
Payment for business acquisitions, net of cash acquired (813) (139,943) (39,819)
Payments to stockholders (7,500) - -
Increase in restricted cash (162) (3,599) -
Deferred acquisition costs - - (647)
--------- --------- ----------
Net cash used in investing activities (15,883) (149,403) (41,009)
Cash flows from financing activities:
Proceeds from and repayments of debt 8,164 155,620 (5,700)
Increase in deferred financing costs (267) (3,855) (1,769)
Proceeds from issuance of common stock 323 131 400
Proceeds from exercise of stock options 87 - 1,430
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
--------- --------- ----------
Net cash provided by financing activities 8,307 151,596 57,371
Effect of exchange rates on cash (1,150) 37 -
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents (10,148) 4,614 15,582
Cash and cash equivalents - beginning of the period 20,196 15,582 -
--------- --------- ----------
Cash and cash equivalents - end of the period $ 10,048 $ 20,196 $ 15,582
========= ========= ==========
</TABLE>
See Note 16 for supplemental cash flow information
The accompanying notes are an integral part of these consolidated financial
statements.
40
<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.
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.
41
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Inventory
Inventory is stated at the lower of cost or market. Cost is determined on a
first-in, first-out basis.
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:
Buildings and improvements 30 years
Furniture fixtures and office equipment 3 to 7 years
Vehicles 5 years
Machinery and equipment 5 to 7 years
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, 1999 and 1998 was $12,129 and $5,043, respectively.
Deferred Financing Costs
Financing fees associated with the credit facility and the amendment thereof are
amortized over the term of the related credit facility.
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.
42
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Income Taxes
The Company accounts for income taxes under the liability method. Certain
expenses are recognized in different periods for financial reporting than for
Federal income tax 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.
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, if
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", 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 14).
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 (loss)
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 earn-out agreements as if the earn-out
period had ended as of the date of the financial statements.
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 (loss) in a separate component of
stockholders' equity.
Internal Use Software Costs
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 costs, including general and administrative costs and
training costs, are expensed as incurred.
43
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
Derivatives
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") 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. In June 1999,
the Financial Accounting Standards Board issued SFAS No. 137 which deferred the
effective date for SFAS No. 133 to all fiscal years beginning after June 15,
2000. Therefore, SFAS No. 133 will be effective for the Company on January 1,
2001, the beginning of fiscal year 2001. 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.
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. ("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)
$1,204 in shares of Common Stock related to an earn-out arrangement for XL
Group,
44
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
which was based on adjusted earnings before interest and taxes, as defined, for
the twelve months ended December 31, 1998, (f) $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) $4,658 in cash and $3,135 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, (h) $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,
(i) $187 in shares of Common Stock related to an earn-out arrangement for
AlphaFlora, which was based on adjusted earnings before interest and taxes, as
defined, for the twelve months ended December 31, 1998, (j) $1,468 in shares of
Common Stock related to an earn-out arrangement for DL Jones, which was based on
adjusted earnings before interest and taxes, as defined, for the twelve months
ended February 28, 1999, (k) $2,702 in cash and $2,702 in shares of Common Stock
related to an earn-out arrangement for Allan Stanley, which was based on
adjusted earnings before interest and taxes, as defined, for the twelve months
ended March 31, 1999, and (l) $1,061 in shares of Common Stock related to an
earn-out arrangement for Channel Islands, which was based on adjusted earnings
before interest and taxes, as defined, for the eighteen months ended December
31, 1999. The contingent consideration related to earn-out arrangements included
in the definitive agreements for H&H Flowers, Rose City 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.
A number of the earn-out arrangements are contingent on the acquired company
maintaining the same adjusted earnings before interest and taxes, as defined in
the agreement, for the same period subsequent to the earn-out period. The earn-
out consideration is adjusted down to the consideration calculated using the
subsequent period's adjusted earnings before interest and taxes if lower than
the adjusted earnings before interest and taxes used in calculating the earn-out
arrangement. Pursuant to the terms of the purchase agreement, contingent
consideration in the amount of $4,304, originally paid to the former
shareholders of Maxima will be returned to the Company as a result of their 1999
adjusted earnings before interest and taxes being lower than the 1998 adjusted
earnings before interest and taxes. This reduction is reflected in the purchase
price in the accompanying table. The subsequent period's adjusted earnings
before interest and taxes for all other acquired companies with earn-out
arrangements were in excess of the initial earnings before interest used to
calculate the earn-out consideration and therefore there is no adjustment to
their earn-out consideration.
45
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
<TABLE>
<CAPTION>
Shares of Value of Total Net Assets
Acquisitions Cash Common 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 Florist1........... 4,800 141,749 2,400 7,200 249 6,951
Monterey Bay1............... 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 Group1................... 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
UltraFlora1................. 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 Jones1................... 2,183 282,014 5,444 7,627 1,275 6,352
Florafresh.................. 3,945 172,928 3,945 7,890 (1,069) 8,959
Sabana1..................... 659 164,784 3,453 4,112 949 3,163
Maxima1..................... 5,300 233,419 5,300 10,600 2,677 7,923
Selecta..................... 2,500 112,007 2,500 5,000 308 4,692
Rose City................... 133 10,634 240 373 (156) 529
Allan Stanley1.............. 4,627 321,116 4,627 9,254 (59) 9,313
Channel Islands1............ 1,550 503,833 2,611 4,161 467 3,694
Petals...................... 50 6,204 100 150 (441) 591
AlphaFlora1................. -- 49,167 758 758 (194) 952
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's1.................... 789 222,879 2,825 3,614 726 2,888
First Distributors.......... 400 24,323 400 800 218 582
Southern Rainbow1........... 6,201 399,927 4,537 10,738 808 9,930
Florimex.................... 66,072 --- --- 66,072 6,925 59,147
-------- --------- -------- -------- ------- --------
Total 1998 Acquisitions $157,212 6,331,914 $100,661 $257,873 $30,711 $227,162
-------- --------- -------- -------- ------- --------
Grand Total $200,892 7,970,882 $123,117 $324,009 $44,290 $279,719
======== ========= ======== ======== ======= ========
</TABLE>
1The purchase price includes consideration related to earn-out arrangement
described above.
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, 1998. 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
46
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
operations would actually have been if such transactions had occurred on January
1, 1998 and are not necessarily representative of USA Floral's results of
operations for any 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)
December 31, 1998
-----------------
(unaudited)
<S> <C>
Net revenue....................................... $999,793
Operating income.................................. 29,804
Net income........................................ 9,192
Net income per share - basic...................... 0.58
Net income per share - diluted.................... 0.56
</TABLE>
(1) The pro forma 1998 results of operations include integration charges of
$6,333.
NOTE 4 - ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 7,944 $ 599 $ -
Balances acquired through business acquisitions - 7,043 711
Charged to costs and expenses 2,948 1,309 49
Write-offs (2,490) (1,007) (161)
Currency conversion (628) - -
------------- ------------ ------------
Balance at December 31 $ 7,774 $ 7,944 $ 599
============= ============ ============
</TABLE>
NOTE 5 - INVENTORY
Inventory consists of the following finished goods at December 31:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Perishables $ 4,781 $ 3,003
Hardgoods, net of allowance 19,788 15,574
------------ ------------
$24,569 $18,577
============ ============
</TABLE>
<TABLE>
<CAPTION>
Hardgoods inventory allowance: 1999 1998 1997
------------- ------------ -----------
<S> <C> <C> <C>
Balance at beginning of period $ 376 $ 149 $ -
Balances acquired through business acquisitions - 178 149
Charged to costs and expenses 458 126 -
Write-offs (192) (77) -
------------- ------------ -----------
Ending balance $ 642 $ 376 $ 149
============= ============ ===========
</TABLE>
47
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Buildings $19,507 $21,392
Leasehold improvements 4,130 4,196
Furniture, fixtures, and office equipment 10,260 8,961
Vehicles 3,926 7,081
Machinery & equipment 7,419 11,941
------------- ------------
45,242 53,571
Accumulated depreciation and amortization (1,255) (5,951)
------------- ------------
43,987 47,620
Land 9,370 12,016
------------- ------------
$53,357 $59,636
============= ============
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1999
and 1998 and for the period April 22, 1997 to December 31, 1997 was $9,748,
$5,660, and $290 respectively.
NOTE 7 - 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 1.25% or
(b) a Eurodollar rate plus an applicable margin of up to 2.50%. Borrowings under
the term loan bear interest at the interbank rate for Deutsche Marks plus an
applicable margin of up to 2.50%. The Company paid aggregate financing fees of
approximately $3.9 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 in
the next four years are: 2000 - $2.5 million, 2001 - $12.5 million, 2002 - $20
million and 2003 - $15 million. At December 31, 1999, the aggregate outstanding
indebtedness under both the revolving credit facilities and the term loan was
approximately $197.9 million and the effective interest rate was approximately
6.58% on the revolving credit facility and approximately 8.88% on the term loan.
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
48
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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, 1999, the Company was not in compliance with applicable
financial covenants, including the leverage ratio. Pursuant to the terms of the
Credit Agreement, non-compliance with one or more financial covenants permits
for the lenders to terminate the commitment and declare the principal balance
and any accrued interest on all loans and obligations immediately due and
payable. The Company obtained a waiver on all financial covenants at December
31, 1999 and on March 24, 2000, the financial covenants, including the leverage
ratio and consolidated interest coverage ratio, were amended under the Amended
Credit Agreement. Further, the Company is required to achieve minimum EBITDA
levels, as defined in the Amended Credit Agreement. Additionally, the amendment
limits the level of the Company's total outstanding borrowings to $224.0 million
and at March 24, 2000, the aggregate outstanding borrowings were approximately
$208.5 million. In consideration for the amendment, the Company agreed to pay a
financing fee of $1.75 million on March 31, 2001 and issue approximately 820,000
warrants to purchase common stock of the Company at an exercise price of $0.25
per share. The warrants issued are exercisable anytime after March 31, 2001 and
expire March 31, 2010. Both the financing fee and the fair value of the warrants
issued will be deferred and amortized over the remaining term of the Amended
Credit Agreement.
NOTE 8 - 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, 1999, the Company was a fixed rate payor of 5.89% and received a
variable rate of 6.12% on notional amounts of $10,000. The fair values at
December 31, 1999, as estimated by a dealer, were favorable $66.
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, 1999 in the
aggregate of $4.5 million. Such contracts had an unrealized loss of $29 at
December 31, 1999.
49
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
The Company is exposed to foreign exchange rate fluctuations as the financial
results of foreign subsidiaries are translated into U.S. dollars in
consolidation. As exchange rates vary, those results, when translated, may vary
from expectations and adversely impact overall expected profitability. The
cumulative translation effects for subsidiaries using functional currencies
other than the U.S. dollar are included in the cumulative translation adjustment
in stockholders' equity.
NOTE 9 - INCOME TAXES
The components of income (loss) before income taxes were as follows:
<TABLE>
<CAPTION>
For the year For the year For the period
ended ended April 22, 1997 to
December 31, December 31, December 31,
1999 1998 1997
------- ------- -----
<S> <C> <C> <C>
Domestic $(3,298) $12,915 $ 906
Foreign 3,263 2,113 ---
------- ------- -----
$ (35) $15,028 $ 906
======= ======= =====
</TABLE>
The components of income tax expense (benefit) are:
<TABLE>
<CAPTION>
For the period April
22, 1997 to
December 31, December 31, December 31,
1999 1998 1997
------- ------- -----
<S> <C> <C> <C>
Current:
Federal $(2,257) $ 7,588 $ 450
State 827 1,576 80
Foreign 1,888 296 -
----------------------------------------------------------------
458 9,460 530
----------------------------------------------------------------
Deferred:
Federal 2,310 (1,939) (34)
State 262 (774) (6)
Foreign (17) 508 -
----------------------------------------------------------------
2,555 (2,205) (40)
----------------------------------------------------------------
Total provision $ 3,013 $ 7,255 $ 490
================================================================
</TABLE>
50
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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>
1999 1998
----------------------------- -----------------------------
Short-term Long-term Short-term Long-term
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Deferred income tax assets:
Allowance for doubtful accounts $ 913 $ - $ 567 $ -
Inventory capitalization 436 - 130 -
Anti-dumping accrual 25 - 1,177 -
Restructuring reserves 239 - 1,364 -
Inventory reserves 159 - 138 -
Accrued compensation and pension 697 884 - 1,152
Deferred financing cost - 505 - 610
State tax net operating losses - 2,014 - 534
Foreign net operating losses - 3,498 - 3,410
Other 462 - - 1,219
------------------------------ ------------------------------
Total deferred income tax assets 2,931 6,901 3,376 6,925
Less: valuation allowance - (4,901) - (3,410)
------------------------------ ------------------------------
Net deferred income tax assets 2,931 2,000 3,376 3,515
------------------------------ ------------------------------
Deferred income tax liabilities:
Accumulated depreciation - 2,609 - 3,660
Accumulated amortization on goodwill
related to acquisition of partnership
interests - 2,000 - 939
Other - 860 - 700
------------------------------ ------------------------------
Total deferred income tax
liabilities - 5,469 - 5,299
------------------------------ ------------------------------
Net deferred income tax assets (liabilities) $2,931 $(3,469) $3,376 $(1,784)
============================== ==============================
</TABLE>
At December 31, 1999 the Company has state net operating losses of
approximately $25.0 million to offset future years state taxable income in
certain states. A valuation allowance has been recorded against the majority of
the state net operating losses because, in management's opinion, realization of
these tax benefits was not "more likely than not". These state net operating
loss carryforwards begin to expire starting 2003. In addition, the Company also
has foreign net operating losses of $10.2 million from 5 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
loss, $7.2 million can be carried forward indefinitely and $3.0 million will
begin to expire starting in 2000. 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 than likely than not". If and when realized, such tax
benefits will be recorded as a reduction of goodwill on the related acquistion.
51
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
A reconciliation between the statutory federal income tax rate and the effective
rate of income tax expense follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------- ---------- ----------
<S> <C> <C> <C>
Pre-tax income (loss) $ (35) $15,028 $ 906
----------- ------------ ------------
Federal tax at statutory rate (12) 5,260 308
State tax (net of federal benefit) 708 601 54
Goodwill amortization 1,942 1,202 109
Other 375 192 19
----------- ------------ ------------
Provision for income taxes $3,013 $ 7,255 $ 490
=========== ============ ============
</TABLE>
The effective income tax rate for 1999 is not a meaningful calculation, as
there is a pre-tax loss of $35. The effective tax rate for 1998 and 1997 is 48%
and 54%, respectively.
Retained earnings at December 31, 1999 includes undistributed earnings of
$15.4 million of certain foreign subsidiaries which are not subject to
additional foreign income tax nor considered to be subject to United States
income taxes unless remitted as dividends. The Company intends to permanently
reinvest these undistributed earnings; accordingly, no provision has been made
for United States taxes on such earnings.
NOTE 10 - 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 4% and 25% of the cost of sales in 1999 and
1998, 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 years ended
December 31, 1999 and 1998 and for the period April 22, 1997 to December 31,
1997 was approximately $1,158, $4,159 and $219, respectively.
52
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases warehouse and office facilities in a number of locations
under non-cancelable operating leases. The aggregate future minimum rentals
(exclusive of real estate taxes and expenses) are as follows:
<TABLE>
<CAPTION>
Year ending December 31, Related Other
Parties Parties
-------------- --------------
<S> <C> <C>
2000 $419 $ 7,784
2001 265 5,118
2002 260 6,361
2003 3 3,147
2004 - 2,258
Thereafter - 6,156
-------------- --------------
$947 $30,824
============== ==============
</TABLE>
Rent expense for the years ended December 31, 1999, 1998 and for the period
April 22, 1997 to December 31, 1997 was $14,851, $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
Beginning in 1986, the U.S. Department of Commerce (the "DOC") imposed an
anti-dumping duty deposit ("ADD") on the importation of certain flowers (the
"Anti-dumping Order") from Colombia. Such anti-dumping duty is subject to
change based upon annual reviews of the flower growers' margins. On May 20,
1999, a settlement was reached whereby all open review periods through February
28, 1997 (periods 5, 6, 7, 9 and 10) were finalized at the cash deposit rate.
That is, the Company does not owe any additional anti-dumping duties for those
periods. On July 20, 1999, the DOC revoked the Anti-dumping Order on fresh cut
flowers from Colombia retroactive to March 1, 1997, the beginning of period 11.
Further, the DOC stated that, as a result of the retroactive revocation, the DOC
has terminated its reviews of periods 11 and 12 and that the DOC intends to
refund any ADD collected on or after March 1, 1997. Therefore, as a result of
the final determinations by the DOC regarding open review periods and the DOC's
retroactive revocation of the Anti-dumping Order, the Company released
approximately $2.2 million in anti-dumping reserves during the second quarter of
1999. The release of the reserves was recorded as a reduction to cost of sales.
Further, due to the uncertainty of the amount and the timing of the ADD refunds
related to periods subsequent to March 1, 1997, such refunds, if any, will be
recorded as a reduction to cost of sales at the time of the receipt of such
refunds.
53
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
NOTE 12 - INTEGRATION PLANS
In November 1998, in connection with management's plan to reduce costs and
improve operating efficiencies, the Company announced an integration plan that
was expected to result in a charge of approximately $3.8 million. Approximately
$3.4 million of the charge was recorded in the fourth quarter of 1998 and an
additional $40 was recorded in the first quarter of 1999. As a result of the
finalization of estimated amounts and changes in the original plan, the Company
has recorded $752 as an integration credit in the quarter ended December 31,
1999.
In connection with the integration plan, the Company integrated certain
warehouse and distribution facilities, principally those associated with the
Company's import and bouquet manufacturing operations in Miami, Florida. The
integration 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 was completed in December 1999.
The major components of the integration charge as originally estimated are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Severance and related costs $ 800
Write down of property and equipment 2,100
Lease termination costs 400
Professional fees and other costs 500
-----------
$3,800
===========
</TABLE>
During the integration plan a total of 179 employees were terminated resulting
in severance payments of $922. Approximately $1.4 million of property and
equipment were written down. The realized losses on the sale of property and
equipment and actual lease termination costs were less than the estimated amount
originally included in the integration charge.
As of December 31, 1999, this plan has been substantially completed with only
two entities not fully implemented. A restructuring reserve of $269 remains at
December 31, 1999 for severance, write-down assets and other cash outflows.
54
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
A summary of the integration plan activity is presented below:
<TABLE>
<S> <C>
Balance established on November 3, 1998 $3,361
1998 Activity:
Non cash write-down of property
and equipment (247)
Lease-termination cash payments (20)
Reduction in workforce and other
cash outflows (170)
----------
Balance at December 31, 1998 2,924
1999 Activity:
Increase in accrual 40
Non cash write-down of property
and equipment (941)
Lease-termination cash payments (250)
Reduction in workforce and
other cash outflows (752)
Integration credit (752)
----------
Balance at December 31, 1999 $ 269
==========
</TABLE>
In connection with the Company's acquisition of Florimex, the Company assumed
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 $2.6 million related 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 was
completed in December of 1999.
During the integration plan a total of 21 employees were terminated resulting
in a severance payment of $1,986. During the year ended December 31, 1999, the
Company recorded a credit adjustment to goodwill in the amount of $259
representing the difference between the actual restructuring costs incurred and
the original restructuring amount recorded at the date of the Florimex
acquisition. A summary of the integration plan activity is presented below:
<TABLE>
<S> <C>
Date of Florimex acquisition (October 1, 1998) $2,700
Integration Activity:
Reduction in workforce cash outflows 1,986
Goodwill adjustment 259
Other cash outflows 455
------------
Balance at December 31, 1999 $ -
============
</TABLE>
55
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
NOTE 13 - 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, income from operations, and return on assets employed.
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
Year Ended Year Ended April 22, 1997
Revenues - external customers December 31, December 31, to December 31,
1999 1998 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
North America Division
Import/Export $208,567 $189,034 $13,398
Wholesale Distribution 190,601 166,217 21,240
Bouquet Manufacturers 168,293 125,625 2,742
- -----------------------------------------------------------------------------------------
Total North America Division 567,461 480,876 37,380
- -----------------------------------------------------------------------------------------
International Division
Import/Export 238,141 73,166 -
Wholesale Distribution 66,311 19,085 -
Bouquet Manufacturers 52,934 15,907 -
- -----------------------------------------------------------------------------------------
Total International Division 357,386 108,158 -
- -----------------------------------------------------------------------------------------
Consolidated
Import/Export 446,708 262,200 13,398
Wholesale Distribution 256,912 185,302 21,240
Bouquet Manufacturers 221,227 141,532 2,742
- -----------------------------------------------------------------------------------------
Total Consolidated $924,847 $589,034 $37,380
- -----------------------------------------------------------------------------------------
</TABLE>
56
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
<TABLE>
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997
Revenues - intercompany December 31, December 31, to December 31,
1999 1998 1997
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
North America Division
Import/Export $ 43,076 $28,198 $ -
Wholesale Distribution 3,422 - -
Bouquet Manufacturers 7,509 - -
- ------------------------------------------------------------------------------------------
Total North America Division 54,007 28,198 -
- ------------------------------------------------------------------------------------------
International Division
Import/Export 72,002 23,503 -
Wholesale Distribution 137 38 -
Bouquet Manufacturers 665 154 -
- ------------------------------------------------------------------------------------------
Total International Division 72,804 23,695 -
- ------------------------------------------------------------------------------------------
Consolidated
Import/Export 115,078 51,701 -
Wholesale Distribution 3,559 38 -
Bouquet Manufacturers 8,174 154 -
- ------------------------------------------------------------------------------------------
Total Consolidated $126,811 $51,893 $ -
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997
Gross Margin December 31, December 31, to December 31,
1999 1998 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
North America Division
Import/Export $ 64,357 $ 56,913 $ 3,086
Wholesale Distribution 60,520 53,844 7,146
Bouquet Manufacturers 33,493 24,540 463
- -----------------------------------------------------------------------------------------
Total North America Divsion 158,370 135,297 10,695
- -----------------------------------------------------------------------------------------
International Division
Import/Export 52,848 16,337 -
Wholesale Distribution 16,807 4,953 -
Bouquet Manufacturers 10,163 3,435 -
- -----------------------------------------------------------------------------------------
Total International Divsion 79,818 24,725 -
- -----------------------------------------------------------------------------------------
Consolidated
Import/Export 117,205 73,250 3,086
Wholesale Distribution 77,327 58,797 7,146
Bouquet Manufacturers 43,656 27,975 463
- -----------------------------------------------------------------------------------------
Total Consolidated $238,188 $160,022 $10,695
- -----------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
<TABLE>
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997
Depreciation and Amortization December 31, December 31, to December 31,
1999 1998 1997
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
North America Division
Import/Export $ 4,726 $4,093 $188
Wholesale Distribution 3,161 2,527 334
Bouquet Manufacturers 2,306 1,884 44
- -----------------------------------------------------------------------------------------
Total North America Division 10,193 8,504 566
- -----------------------------------------------------------------------------------------
International Division
Import/Export 2,150 609 -
Wholesale Distribution 1,710 521 -
Bouquet Manufacturers 979 315 -
- -----------------------------------------------------------------------------------------
Total International Division 4,839 1,445 -
- -----------------------------------------------------------------------------------------
Consolidated
Import/Export 6,876 4,702 188
Wholesale Distribution 4,871 3,048 334
Bouquet Manufacturers 3,285 2,199 44
- -----------------------------------------------------------------------------------------
Total Consolidated $15,032 $9,949 $566
- -----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997
Integration Charge December 31, December 31, to December 31,
1999 1998 1997
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------
North America Division
Import/Export $(712) $1,658 $-
Wholesale Distribution 40 558 -
Bouquet Manufacturers (40) 1,145 -
- ------------------------------------------------------------------------------------------
Total North America Division (712) 3,361 -
- ------------------------------------------------------------------------------------------
International Division
Import/Export - - -
Wholesale Distribution - - -
Bouquet Manufacturers - - -
- ------------------------------------------------------------------------------------------
Total International Division - - -
- ------------------------------------------------------------------------------------------
Consolidated
Import/Export (712) 1,658 -
Wholesale Distribution 40 558 -
Bouquet Manufacturers (40) 1,145 -
- ------------------------------------------------------------------------------------------
Total Consolidated $(712) $3,361 $-
- ------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
<TABLE>
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997
Income from Operations December 31, December 31, to December 31,
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America Division
Import/Export $16,899 $18,127 $ 514
Wholesale Distribution 2,092 5,746 789
Bouquet Manufacturers 1,056 1,187 28
- ------------------------------------------------------------------------------------------
Total North America 20,047 25,060 1,332
Division
- ------------------------------------------------------------------------------------------
International Division
Import/Export 6,214 2,229 -
Wholesale Distribution (184) 398 -
Bouquet Manufacturers 1,415 231 -
- ------------------------------------------------------------------------------------------
Total International 7,445 2,858 -
Division
- ------------------------------------------------------------------------------------------
Consolidated
Import/Export 23,113 20,356 514
Wholesale Distribution 1,908 6,144 789
Bouquet Manufacturers 2,471 1,418 28
- ------------------------------------------------------------------------------------------
Total Consolidated $27,492 $27,918 $1,332
- ------------------------------------------------------------------------------------------
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997
Total Assets December 31, December 31, to December 31,
1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America Division
Import/Export $158,870 $143,171 $31,687
Wholesale Distribution 102,306 95,167 54,098
Bouquet Manufacturers 71,896 69,780 7,080
- ------------------------------------------------------------------------------------------
Total North America 333,072 308,118 92,865
Division
- -----------------------------------------------------------------------------------------
International Division
Import/Export 61,634 65,010 -
Wholesale Distribution 17,431 21,298 -
Bouquet Manufacturers 12,225 18,653 -
- ------------------------------------------------------------------------------------------
Total International 91,290 104,961 -
Division
- -----------------------------------------------------------------------------------------
Consolidated
Import/Export 220,504 208,181 31,687
Wholesale Distribution 119,737 116,465 54,098
Bouquet Manufacturers 84,121 88,433 7,080
- ------------------------------------------------------------------------------------------
Total Consolidated Division $424,362 $413,079 $92,865
- -----------------------------------------------------------------------------------------
</TABLE>
59
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
<TABLE>
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997
Capital Expenditures December 31, December 31, to December 31,
1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
North America Division
Import/Export $ 4,779 $1,041 $129
Wholesale Distribution 2,653 2,058 96
Bouquet Manufacturers 1,850 871 71
- -----------------------------------------------------------------------------------------
Total North America Division 9,282 3,970 296
- -----------------------------------------------------------------------------------------
International Division
Import/Export 853 1,067 -
Wholesale Distribution 812 367 -
Bouquet Manufacturers 651 313 -
- -----------------------------------------------------------------------------------------
Total International Division 2,316 1,747 -
- -----------------------------------------------------------------------------------------
Consolidated
Import/Export 5,632 2,108 129
Wholesale Distribution 3,465 2,425 96
Bouquet Manufacturers 2,501 1,184 71
- -----------------------------------------------------------------------------------------
Total Consolidated $11,598 $5,717 $296
- -----------------------------------------------------------------------------------------
</TABLE>
A reconciliation of total segment sales to total consolidated sales and total
segment income from operations to total consolidated income before income is as
follows:
<TABLE>
<CAPTION>
For the period
Year Ended Year Ended April 22, 1997 to
Income from Operations December 31, December 31, December 31,
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total segment income from operations $ 27,492 $27,918 $1,332
Interest income 1,922 1,883 248
Interest expense (16,088) (8,040) (8)
Other income 375 449 37
Write-off of deferred financing fees - (1,606) -
Unallocated corporate S,G&A expenses (12,247) (5,211) (703)
Unallocated goodwill amortization (1,489) (365) -
--------------------------------------------------------
Total consolidated income (loss) before
Income taxes $ (35) $15,028 $ 906
========================================================
</TABLE>
A reconciliation of total segment assets to consolidated total assets is as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
Total Assets December 31, 1999 December 31, 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Total segment assets $424,362 $413,079
Elimination of intercompany receivable (592) (6,464)
Goodwill not allocated to segments 54,200 70,462
Other assets 8,840 16,957
---------------------------------------
Total consolidated assets $486,810 $494,034
=======================================
</TABLE>
60
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
The following table presents sales information by geographic area. 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.
<TABLE>
<CAPTION>
For the period
Year Ended December Year Ended December April 22, 1997 to
Sales 31, 1999 31, 1998 December 31, 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $534,039 $470,312 $37,380
Germany 110,681 30,768 -
Netherlands 135,472 32,064 -
Other foreign countries 144,655 55,890 -
------------------------------------------------------------------
Total $924,847 $589,034 $37,380
==================================================================
</TABLE>
The following table presents long-lived assets information by geographic area:
Year Ended December Year Ended December
Long-lived assets 31, 1999 31, 1998
- ------------------------------------------------------------------------------
United States $230,503 $240,425
Germany 72,734 61,488
Netherlands 7,681 17,419
Other foreign countries 21,376 22,525
--------------------------------------------
Total $332,294 $341,857
============================================
NOTE 14 - STOCK OPTION PLANS
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. During 1999, two
key employees with options resigned. These options were terminated and 100,000
were removed from the dilutive shares calculation. Compensation expense is
being recorded over the four year vesting period for the options issued at a
discount.
61
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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, 1999, options to purchase 625,000 shares were
issued, including 30,000 options issued to directors after the annual meeting of
the Company's stockholders in May 1999. 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 non-employee 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 non-employee director resignation from the Board of
Directors.
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, 1998 and 1999 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
Granted 625 8.76 5,474
Exercised (7) 16.35 (109)
Forfeited (734) 13.94 (10,243)
- --------------------------------------------------------------------------------------------------------------
Shares under option at December 31, 1999 2,549 $13.13 $ 33,469
==============================================================================================================
</TABLE>
Approximately 715,000 and 486,000 outstanding options were exercisable at
December 31, 1999, and 1998, respectively. No options were exercisable at
December 31, 1997.
All outstanding options are qualified options with the exception of 200,000
granted to the Company's new Chief Executive Officer. Compensation expense of
$94, $156, $36 for the years ended December 31, 1999, 1998 and 1997,
respectively, were recognized related to stock options issued below the market
price
62
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- --------------------------------------
Weighted
Number Weighted Average Average
Range of Outstanding (in Contractual Exercise Number Exercisable Weighted Average
Exercise Price thousands) Period in Years Price (in thousands) Exercise Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2 - $5 200 9.1 $ 2.68 - $ -
5 - 7 210 8.3 6.08 45 5.85
7 - 10 50 7.8 7.66 19 7.77
10 - 14 1,114 7.9 12.68 398 12.91
14 - 19 659 8.8 18.12 174 18.09
19 - 23 316 8.9 19.79 79 19.79
- ---------------------------------------------------------------------------------------------------------------
$2 - $23 2,549 8.4 $13.13 715 $14.35
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Subsequent to December 31, 1999, options to purchase 150,000 shares were
granted to the Company's new Chief Executive Officer at $2.50 per share, the
market price prevailing at the date of grant. In addition, options to purchase
345,000 shares were granted to the Company's management at prices ranging from
$1.56 to $2.89 per share, the market prices prevailing at the date of the grant.
At December 31, 1999 and 1998 approximately 2,548,590 and 2,205,000,
respectively, 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 would have been anti-dilutive for the periods presented.
The shares used in computing net income (loss) per share are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Period ended
(in thousands) December 31, December 31, April 22, 1997 to
1999 1998 December 31, 1997
--------------- --------------- --------------------
<S> <C> <C> <C>
Weighted average shares outstanding - basic $16,349 $14,376 $4,734
Dilution attributable to option 75 392 90
Dilution attributable to earnouts 85 21 ---
------- ------- ------
Weighted average shares outstanding - diluted $16,509 $14,789 $4,824
======= ======= ======
</TABLE>
Pro forma information regarding net income (loss) 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
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Risk-free interest rate 6.00% 5.00% 6.00%
Dividend yield 0.00% 0.00% 0.00%
Volatility factor 89% 82.0% 40.0%
Weighted average expected life 7.5 Years 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
63
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
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 (loss) and income (loss) per share under Statement 123 for the
years ended December 31, 1999 and 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 (loss) and net income (loss) 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>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income (loss) - as reported ($3,066) $7,743 $ 416
Net income (loss) - pro forma ($3,649) $4,262 $ 95
Income (loss) per share - as reported, basic ($.19) $ 0.54 $0.09
Income (loss) per share - pro forma, basic ($.22) $ 0.30 $0.02
Income (loss) per share - as reported, diluted ($.19) $ 0.52 $0.09
Income (loss) per share - pro forma, diluted ($.22) $ 0.29 $0.02
Weighted average fair value of options granted during the year $ 1.52 $ 8.71 $9.55
</TABLE>
NOTE 15 - PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS
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>
<CAPTION>
For the period
Change in benefit obligation: Year Ended December October 1, 1998 to
31, 1999 December 31, 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Benefit obligation beginning of period $2,872 $2,822
Service cost 86 26
Interest cost 117 44
Plan participants' contributions - -
Plan amendments - -
Actuarial gain (781) -
Foreign currency exchange rate changes (368) -
Acquisition - -
Benefits paid (91) (20)
-----------------------------------------------
Benefit obligation at end of period $1,835 $2,872
===============================================
</TABLE>
64
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
The following tables set forth the Plan's fair value, funded status and weighted
average assumptions.
<TABLE>
<CAPTION>
For the period
Year Ended December October 1, 1998 to
Change in Plan assets: 31, 1999 December 31, 1998
-----------------------------------------------
<S> <C> <C>
Fair value of Plan at beginning of period $ - $ -
Actual return on plan assets - -
Employer contribution 91 19
Acquisition - (19)
Plan participants' contributions - -
Benefits paid (91) -
-----------------------------------------------
Fair value of Plan assets at end of period $ - $ -
Funded Status of Plan:
Funded status of Plan $(1,835) $(2,872)
Unrecognized actuarial gain (729) -
Foreign currency translation 41 -
Unrecognized prior service cost - -
Unrecognized net transition obligation - -
-----------------------------------------------
Accrued benefit cost $(2,523) $(2,872)
===============================================
Amounts recognized in the statement of
financial position consist of:
Prepaid benefit cost $ - $ -
Accrued benefit liability (2,603) (2,872)
Intangible asset - -
Accumulated other comprehensive income 80 -
-----------------------------------------------
Net amount recognized $(2,523) $(2,872)
===============================================
<CAPTION>
Weighted Average Assumptions 1999 1998
--------------------------------- ----------------------------------
Austria Germany Italy Austria Germany Italy
<S> <C> <C> <C> <C> <C> <C>
Discount rate 6.00% 6.00% 6.50% 6.00% 6.00% 6.50%
Expected return on assets n/a n/a n/a n/a n/a n/a
Rate of compensation increase 4.00% n/a 3.50% 4.00% n/a 3.50%
</TABLE>
The components of net periodic benefit cost included in net income for the
year ended December 31, 1999 and 1998, are as follows:
<TABLE>
<CAPTION>
For the period
Year Ended December October 1, 1998 to
Components of net periodic benefit: 31, 1999 December 31, 1998
-----------------------------------------------
<S> <C> <C>
Service cost $ 86 $26
Interest cost 117 44
Expected return on Plan assets - -
Amortization of prior service cost - -
Actuarial gain amortization (52) -
Transition amount amortization - -
-----------------------------------------------
Net periodic benefit cost $151 $70
===============================================
</TABLE>
65
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
401 (k) Plan
Effective January 1, 1999, the Company offered its qualified employees the
opportunity to participate in its defined contribution retirement plan
qualifying under the provision of Section 401(k) of the Internal Revenue Code
("IRS"). Each employee may contribute on a tax deferred basis a portion of
annual earnings not to exceed IRS limits. Employees' eligible contributions are
matched by the Company at established rates. Expenses recorded by the Company
relating to its 401 (k) plan were $621 in 1999.
NOTE 16 - SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the period
Year ended Year ended April 22, 1997 to
December 31, 1999 December 31, 1998 December 31, 1997
------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the period for interest $18,328 $ 5,863 $ 100
======= ======== =======
Cash paid during the period for income taxes $ 6,443 $ 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>
During the year ended December 31, 1999, the Company satisfied its obligations
under certain earn-out arrangements through aggregate cash payments of $7,500
and through the issuance of common stock in the aggregate amount of $14,938.
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>
66
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share data)
<TABLE>
<CAPTION>
1999
-------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $271,343 $239,041 $189,402 $225,061
Gross margin 66,574 63,194 51,027 57,393
Net income (loss) 4,012 1,734 (5,478) (3,334)
Net income (loss) per share, basic (2) 0.25 0.11 (0.33) (0.20)
Net income (loss) per share, diluted (2) 0.24 0.11 (0.33) (0.20)
</TABLE>
(1) The results for the fourth quarter of 1998 are after pre-tax charges
aggregating $5 million (after-tax of approximately $0.19 per diluted share)
and the results of the fourth quarter of 1999 are after pre-tax income
aggregating $0.7 million (after tax of approximately $0.03 per diluted
share) relating to the cost of the November 1998 Integration Plan being
less than anticipated.
(2) Earnings per share are computed independently for each of the quarters
presented. Therefore, the sum of the quarterly earnings per share in may
not equal the total computed for the year.
NOTE 18 - SUBSEQUENT EVENT
Restructuring Plan
In March 2000, the Company recorded a restructuring charge of approximately
$11.0 million before income taxes ($6.6 million after income taxes). The Company
will discontinue several strategic initiatives, close under performing and
unprofitable business locations and re-focus on the core business operations.
The charge principally relates to the write-down of assets, including property
and equipment, goodwill, severance payments and lease termination costs
associated with the discontinuance of strategic initiatives, the closure of two
wholesale companies and the closure of two branch locations of two other
wholesale companies. The closure of the unprofitable locations has begun and is
expected to be completed by June 30, 2000. The Company will reduce the number of
employees by 85 or approximately 3% of the North American workforce.
67
<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, 2000.
U.S.A. FLORAL PRODUCTS, INC.
By: /s/ Michael W. Broomfield
------------------------------
Michael W. Broomfield
Chief Executive Officer
Each person whose signature appears below hereby appoints Michael W.
Broomfield and G. Andrew Cooke, 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 herewith, 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 purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their 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:
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Michael W. Broomfield Chief Executive Officer March 30, 2000
- ------------------------------
Michael W. Broomfield (Principal Executive Officer)
/s/ G. Andrew Cooke Interim Chief Financial Officer, March 30, 2000
- ------------------------------
G. Andrew Cooke Vice President of Finance and Controller
(Principal Financial and Accounting Officer)
/s/ Vincent W. Eades Director March 30, 2000
- ------------------------------
Vincent W. Eades
/s/ Aaron J. Gellman Director March 30, 2000
- ------------------------------
Aaron J. Gellman
/s/ Ann Torre Grant Director March 30, 2000
- ------------------------------
Ann Torre Grant
/s/ Edward J. Mathias Director March 30, 2000
- ------------------------------
Edward J. Mathias
/s/ Peter Roy Director March 30, 2000
- ------------------------------
Peter Roy
</TABLE>
68
<PAGE>
Exhibit 2.16
PURCHASE AND SALE AGREEMENT
7980 NW 33rd Street
Miami, Florida
1. PARTIES: Atlantic Bouquet Company, Limited, a Florida Limited Partnership,
("Seller") agrees to sell and convey to:
A. Atlas Flowers, Inc., d/b/a Golden Flowers, a Florida corporation,
("Purchaser") and Purchaser agrees to buy from Seller the Property (as
defined in Section 2. below) for the consideration and upon and subject to
the terms, provisions, and conditions set forth in this Purchase and Sale
Agreement (the "Agreement").
2. PROPERTY: A tract of land situated in the City of Miami, Dade County,
Florida, legally described in Exhibit A attached hereto and made a part
---------
hereof located at 7980 NW 33rd Street, together with all buildings,
improvements, and fixtures owned by the Seller and located on or attached
to or used in conjunction with the Property; and all privileges and
appurtenances specifically set forth herein and Seller's interest in any
service, maintenance, management or other contracts relating to the
ownership or operation of the Property, all equipment, appliances, goods
and other personal property listed on the attached Exhibit B (the "Personal
---------
Property"), and Seller's interest in any freely assignable warranties or
guaranties relating to the Property and Personal Property; all of the
foregoing property being hereinafter collectively referred to as the
"Property".
7980 NW 33rd Street
Page 1
<PAGE>
3. PURCHASE PRICE:
A. Purchase Price $1,417,437 (the "Purchase Price') payable in U.S.
dollars by Purchaser as follows:
(a) Earnest Money: Simultaneously with the execution of this
Agreement, Purchaser shall deposit the sum of $100,000 payable in the
form of certified or cashier's check payable in the form of a
certified or cashier's check made payable to the order of Bruce Jay
Toland Trust Account ("Escrow Agent") (the "Earnest Money"), the
receipt of which is hereby acknowledged. Earnest money shall be held
by the Escrow Agent in an interest bearing account with the interest
for the benefit of the Purchaser.
(b) The balance of the Purchase Price, equal to the Purchase Price
less Earnest Money (if the extent paid prior to Closing), plus or
minus prorations, and closing adjustments, if any, made under this
Agreement, is due at the closing of this transaction ("Closing") and
shall be paid by Purchaser's certified check, Escrow Agent's Trust
Account or cashier's check from a bank, made payable to the direct
order of Seller or such other payee(s) as Seller may hereafter
designate in writing. All checks shall be made payable directly to the
order of the payee, as directed by the Seller; no checks may be
endorsed. Third party checks are not acceptable. In lieu of accepting
checks, Seller reserves the right to require Purchaser to pay the
balance of the Purchase Price by wire transfer to a bank account
designated by Seller.
B. Cash Purchase:
This is an all-cash sale and purchase and it is NOT contingent upon
obtaining financing even though Purchaser may apply to a lending
institution of Purchaser's choice for a mortgage loan. Purchaser
understands and agrees that neither its receipt of a commitment from
such a lending institution, its acceptance of such a commitment, nor
its satisfaction or failure to satisfy any condition set forth in such
a commitment, shall in any way be conditions to or excuse the
performance of Purchaser's obligations under this Agreement.
3.5 INSPECTION/INSPECTION CONTINGENCY: Seller agrees to make the Property
available to Purchaser for the period of September 7, 1999, to
September 24, 1999, so that Purchaser may conduct any and all
inspections without limitation including environmental and engineering
studies and any other inspections in studies it may reasonably request
(the "Inspection
7980 NW 33rd Street
Page 2
<PAGE>
Period"). In the event of an unsatisfactory inspection, as determined
by Purchaser its sole discretion, Purchaser, by delivery Notice to
Seller within two days of the termination of the Inspection Period,
may declare this Agreement null and void, in which case Purchaser's
Earnest Money, plus any interest, shall be refunded in full. In the
event that Notice is not given by the Purchaser as provided for above,
this contingency shall automatically expire and the Agreement shall
remain in full force and effect. Upon delivery of Notice to Seller in
accordance with the terms of this provision, neither party shall have
any further obligation to the other regarding any matter related to or
arising out of this Agreement.
3.6 ASSIGNMENT OF PARKING LEASE: In the event Seller is unable to obtain
the consent of Sanford and Betty Susman (the "Landlord") to assign all
of its rights and obligations in that certain land lease, dated June
1, 1988, for property located between 7980 and 8000 N.W. 33rd Street,
Miami, Florida (the "Land Lease") to Purchaser, on or before the
Closing Date, the Purchaser may declare this Agreement null and void,
in which case Purchaser's Earnest Money, plus any interest, shall be
refunded in full and neither party shall have any further obligation
to the other regarding any matter related to or arising out of this
Agreement. Upon receipt of Landlord's consent, Purchaser agrees to
consent to the assignment of the Land Lease and to assume each and
every obligation of Seller thereunder.
4. CLOSING: The Closing of the sale shall take place at the offices of Bruce
Jay Toland, 801 Brickell Avenue, Suite 1501, Miami, Florida 33131 or at
such other location as the parties may mutually agree in writing. The
Closing Date (the "Closing Date") shall be on or before September 29,
1999, unless such date is changed in writing by Seller and Purchaser.
A. At the Closing, Seller shall deliver to Purchaser, at Seller's sole
cost and expense, the following:
(1) A duly executed and acknowledged Warranty Deed (the "Deed")
conveying good, marketable and insurable title in fee simple to
all of the Property, free and clear of any and all liens,
encumbrances, conditions, easements, assessments, reservations
and restrictions, except for those set forth in the Title Policy
and Exhibit C, referenced in paragraph 4.A.2 below.
(2) A title commitment and, subsequent to Closing, an owner's policy
of title insurance (the "Title Policy") issued by a title
insurance company licensed to operate in the State of Florida and
designated by Purchaser (the "Title Company") in the full amount
of the Purchase Price insuring Purchaser's fee
7980 NW 33rd Street
Page 3
<PAGE>
simple title to the Property subject only to the Permitted Title
Exceptions set forth and incorporated by this reference as
Exhibit C, and the standard printed exceptions and additional
exceptions contained in the usual form of Owner's Title Policy
(issued at the minimum promulgated statutory rate). Following
receipt of the Title Policy, Purchaser shall three (3) business
days to examine and raise any objections (other than Permitted
Title Exceptions and those standard printed exceptions and
additional exceptions contained in the Title Policy) Thereafter,
Seller shall have 120 days to cure such objections and monetary
objections, such as liens, judgments and easements, but in no
event shall be required to bring any legal action or an
administrative proceeding to satisfy the terms of this
provisions;
(3) A duly executed Bill of Sale conveying the Personal Property;
(4) Certified resolutions of the board of directors of Seller
authorizing all the transactions contemplated by this Agreement;
and
(5) All other documents that are reasonably necessary to close this
transaction, or that are required by the Title Company in order
to vest title to the Property in Purchaser subject to the
Permitted Title Exceptions in form and substance reasonably
satisfactory to Seller's counsel.
B. At the Closing, Purchaser shall:
(1) Pay the cash portion of the Purchase Price including prorations
and adjustments, if any;
(2) If Purchaser is a corporation or a limited liability company,
deliver to Seller:
(a) Certified resolutions of Purchaser's Board of Directors or
members as applicable authorizing all the transactions
contemplated by this Agreement, in form and substance
acceptable to Seller;
(b) Intentionally Deleted.
(c) Certificate of Good Standing for Purchaser from the
Secretary of State or other appropriate governmental office
of the state in which the Purchaser is organized and if
Purchaser is organized in a state other than Florida, a
certificate of authority to transact business from the
Florida Secretary of State.
7980 NW 33rd street
Page 4
<PAGE>
(3) Intentionally deleted.
(4) Execute all other documents reasonably necessary to close this
transaction, in form and in substance reasonably satisfactory to
Seller's counsel.
5. POSSESSION: The possession of the Property shall be delivered to
Purchaser at Closing.
6. SALES EXPENSES TO BE PAID IN CASH AT OR PRIOR TO CLOSING:
A. SELLER'S EXPENSES: All costs of releasing and recording the release of
any mortgage of Seller in the Property; title search fees, lien search
fees; title premium for the Title Policy and endorsements at the
minimum promulgated statutory rate; preparation of Deed; Documentary
Stamp Taxes due on the Deed; Dade County Surtax; Real Estate Brokerage
fees payable to Mohr Partners pursuant to the written agreement
between Mohr Partners and Seller and other expenses stipulated to be
paid by Seller under provisions of this Agreement. Both parties
acknowledge that Mohr Partners may have an obligation to pay another
broker to which neither parties hereto are obligated in any manner
whatsoever or contractually liable for.
B. PURCHASER'S EXPENSES: All recording costs of the Deed, any mortgage
obtained by the Purchaser (the "Mortgage") and the collateral
documents, expense of ALTA Mortgagee Title Policy and endorsements at
the minimum promulgated statutory rate; the cost of documentary tax
stamps on the Mortgage, intangibles tax on the Mortgage, and expenses
stipulated to be paid by Purchaser under any other provisions of this
Agreement.
7. PRORATIONS AND ADJUSTMENTS: The following shall be prorated and adjusted
between Seller and Purchaser as of the time of Closing, as applicable,
except as otherwise expressly provided herein:
(a) Water, electricity, sewer, gas, telephone and other utility charges
based, to extent practicable, on final meter readings and/or final
invoices.
(b) Intentionally Deleted.
(c) General real estate taxes and assessments for the year of closing
shall be prorated as of the time of Closing. If such bills are not
available, then such taxes shall be prorated on the basis of the most
recent tax bills. Following receipt of a bill for real estate taxes
and assessments for the year of closing, the parties agree to again
prorate the taxes to the extent the bill for the year of
7980 NW 33rd street
Page 5
<PAGE>
closing differs from the most recent tax bills. Any tax prorations
will be calculated assuming the maximum discounts available for early
payment.
(d) Such other items that are customarily prorated in transactions of
this nature shall be ratably prorated as of the time of Closing.
Except as expressly provided herein, all prorations shall be final.
(e) Intentionally deleted.
(f) As of Closing, Purchaser shall be responsible for the transfer of
accounts and establishment of all utility services to the Property to
the name of Purchaser, including the making of any new utility
deposits with the utility providers. Seller shall be entitled to
receive a refund of utility service deposits, if any, covering the
period prior to the Closing Date from Purchaser if such utility
service deposits made by Seller are transferred to Purchaser by any
utility providers; otherwise, Seller's entitlement to any utility
service deposits shall be determined by the respective utility
company.
8. SELLER'S TITLE FAILURE: If the status of title to the Property at Closing
is not in accordance with the title provisions of Paragraph 4.A.1 or
Seller is unable to cure those title objections in accordance with
Paragraph 4.A.2, Purchaser may elect to accept such title as Seller
conveys without a credit against the Purchase Price. If title is
defective as set forth in the foregoing sentence, notwithstanding
Seller's attempt to effectuate the requirements set forth in Paragraph
4.A.2, and Purchaser shall not elect to close, this Agreement shall be
terminated and the sole remedy of Purchaser in the absence of Seller's
fraud, shall be to cause the refund of the Earnest Money and accrued
interest thereon, if any, to Purchaser. Seller shall not be required to
bring any action or proceeding or to incur any expense to cure any
unpermitted title defect, but the foregoing shall not permit Seller to
refuse to pay off existing mortgages or judgment liens which are
unpermitted title exceptions.
9. DEFAULT:
A. Unless otherwise provided for herein, if Purchaser fails to comply
with the terms and conditions hereof, Seller may terminate this
Agreement, in which event the Earnest Money, shall be due and payable
to Seller as its sole liquidated damages. Purchaser shall be liable
for payment of the Earnest Money if not previously paid. The parties
agree that actual damages in the event of default are difficult to
ascertain and further agree that the amount set forth as liquidated
damages is a reasonable estimate of the damages to Seller in
7980 NW 33rd street
Page 6
<PAGE>
the event of Purchaser's default. Such sum is intended to be
liquidated damages, and not a penalty.
B. If Seller defaults for any reason other than for a permitted title
defect as provided for in Section 8 above, Purchaser shall have one of
two options: (i) the right to receive back its Earnest Money deposit
as liquidated damages; or (ii) the right to sue Seller for specific
performance. Purchaser acknowledges and agrees that under no
circumstances shall Seller be liable for Purchaser's damages, whether
consequential, actual, punitive, special speculative, loss of profits
or otherwise.
10. ESCROW: The Earnest Money is deposited with the Escrow Agent with the
understanding that the Escrow Agent (a) does not assume or have any
liability for performance or non-performance of any party and (b) has the
right to require in writing from all signatories (i) a written release of
liability of the Escrow Agent, except for gross negligence, willful
misconduct or fraud and (ii) authorization to disburse the Earnest Money
at Closing as such disbursement is provided for herein. At Closing,
Earnest Money shall be applied to payment of the Purchase Price. Any
refund or payment of the Earnest Money under this Agreement pursuant to a
default shall be reduced by the amount of any actual expenses properly
incurred by Escrow Agent arising out of the acceptance and distribution
of funds pursuant to a determination as to which party is entitled to
such funds. In the event there is a dispute between the parties regarding
entitlement to such Earnest Money, the Escrow Agent shall as soon as
reasonably practicable file an Interpleader action in the Circuit Court
in Miami, Dade County. The parties shall reimburse the Escrow Agent for
all reasonable fees and costs incurred by the Escrow Agent in the event
of such dispute.
11. RIGHT TO CURE: Purchaser and Seller hereby agree that in the event either
party (the "Non-Defaulting Party") notifies Escrow Agent that the other
party (the "Defaulting Party") has breached this Agreement for any reason
set forth in this Agreement, the Escrow Agent shall notify the Defaulting
Party as to the same. Following receipt of such notification, the
Defaulting Party shall have five (5) days to cure said default. In the
event the Defaulting Party fails to cure said default within the time
period designated above, the Escrow Agent is hereby authorized by
Purchaser and Seller to remit the Earnest Money plus interest thereon
less any Escrow Agent expenses to the Non-Defaulting Party. In the event
the Defaulting Party disputes, in writing, the alleged default within
five (5) days of receipt of notification of the default from the Escrow
Agent, the Escrow Agent, shall not remit the Earnest Money to either
party and shall as soon as reasonably practicable file an Interpleader
action in the Circuit Court in Dade County. The parties shall reimburse
the Escrow Agent for all reasonable fees and costs incurred by the
7980 NW 33rd street
Page 7
<PAGE>
Escrow Agent in the event of such dispute, including its attorney's fees,
paralegal costs and appeals costs.
Purchaser and Seller hereby agree to indemnify, save harmless and agree
to defend Escrow Agent from and against any claims, demand, costs or
damages (including reasonable attorney's fees) incurred by Escrow Agent
and arising from or out of or with respect to Escrow Agent's complying
with such demand by the Non-Defaulting Party.
12. REPRESENTATION, WARRANTIES AND COVENANTS OF SELLER:
A. Seller hereby represents and warrants to Purchaser as a condition to
Purchaser's obligation to close the purchase of the Property such
representation and warranties shall be true and correct in all
material respects as of the Closing Date:
(1) Seller has all requisite power and authority to consummate the
transaction contemplated by this Agreement and has by proper
proceedings duly authorized the execution and delivery of this
Agreement and the consummation of the transaction contemplated
hereby;
(2) This Agreement when executed and delivered by Seller and
Purchaser, will constitute the valid and binding agreement of
Seller enforceable against Seller in accordance with its terms;
(3) To Seller's knowledge, neither the execution and delivery of this
Agreement nor the consummation of the transaction contemplated
hereby will violate or be in conflict with any agreement or
instrument to which Seller is a party or which Seller is bound;
(4) Seller has not received any notice of any actions, suits, claims
or other proceedings pending or, contemplated or threatened
against the Property that could materially adversely affect
Seller's ability to perform its obligations under this Agreement;
(5) Seller has received no written notice of the commencement of any
lawsuit against Seller for the damaging, taking or acquiring of
all or any part of the Property, either temporarily or
permanently, by condemnation or by exercise of the right of
eminent domain; and
7980 NW 33rd street
Page 8
<PAGE>
(6) To the best of Seller's knowledge, there are no leases for the
Property, which are currently in effect, and no one is legally
entitled to possession of the Property.
(7) Intentionally Deleted.
(8) Intentionally Deleted.
B. From the effective date of this Agreement until the Closing Date or
earlier termination of this Agreement, Seller covenants to:
(1) Advise Purchaser promptly of any litigation, arbitration,
administrative hearing, or legislation before any governmental
body or agency of which Seller is notified, in writing,
concerning or affecting the Property which is instituted after
the date hereof.
(2) Not take or omit to take any action within its reasonable control
that would have the effect of violating in any material respect
any of the representations, warranties, covenants, and agreements
of Seller contained in this Agreement.
(3) Not enter into any new written or oral service agreement or other
lease agreement with respect to the Property that will not be
fully performed by Seller on or before Closing, or that may not
be canceled by Purchaser, without liability, at Closing without
the prior written consent of the Purchaser.
13. REPRESENTATION, WARRANTIES AND COVENANTS OF PURCHASER:
A. Purchaser represents, warrants and covenants to Seller as follows, as
of the Closing Date:
(1) Except as otherwise stated herein, Purchaser is purchasing the
Property in its "AS IS, WHERE IS" condition with no warranties by
Seller as to merchantability, suitability or fitness for any
particular use, or otherwise, it being understood and agreed that
Purchaser is relying solely on its own inspections, environmental
and engineering studies and reports, economic and feasibility
studies and examinations of the Property and Purchaser's own
determination of the condition of the Property, and Purchaser has
had substantial access to the Property and all documents and
information related thereto for the purposes of such inspections,
studies and examinations;
7980 NW 33rd street
Page 9
<PAGE>
(2) Purchaser has had the opportunity to inspect the Property and
perform its own inspections, environmental and engineering
studies and reports.
(3) Purchaser has all requisite power and authority to consummate the
transaction contemplated by this Agreement and has by proper
proceedings duly authorized the execution and delivery of this
Agreement and the consummation of the transaction contemplated
hereby;
(4) This Agreement when executed and delivered by Purchaser and
Seller, will constitute the valid and binding agreement of
Purchaser enforceable against Purchaser in accordance with its
terms;
(5) To Purchaser's knowledge, neither the execution and delivery of
this Agreement nor the consummation of the transaction
contemplated hereby will violate or be in conflict with (i) any
applicable provisions of law, (ii) any order of any court or
government agency having jurisdiction over the Purchaser, or
(iii) any agreement or instrument to which Purchaser is a party
or which Purchaser is bound;
(6) To the best of Purchaser's knowledge, there are no actions,
suits, claims or other proceedings pending or, contemplated or
threatened against Purchaser that could affect Purchaser's
ability to perform its obligations under this Agreement;
(7) Purchaser has sufficient funds available to consummate the
Closing of the transaction described in this Agreement; and
(8) Except for those representations, warranties and covenants set
forth in Sections 4(a) and 12 above, Purchaser has received no
written or oral representations or warranties regarding the
Property.
B. From the date of this Agreement, Purchaser covenants to Seller that,
in addition to the acts and deeds recited herein and contemplated to
be performed, executed, and delivered by Purchaser, Purchaser shall
perform, execute, and deliver or cause to be performed, executed, and
delivered at, prior to, or after the Closing, any and all further
reasonable acts, deeds, and assurances as Seller or the Title Company
may reasonably require in order to consummate the transactions
contemplated herein and further effectuate the intent of this
Agreement. This covenant shall survive the Closing.
7980 NW 33rd street
Page 10
<PAGE>
14. CONDEMNATION: If, prior to the Closing Date, any condemnation or eminent
domain lawsuit is filed against any material portion of the Property
(except for road widening), Purchaser may, at its option, terminate this
Agreement by written notice to Seller within ten (10) days after Purchaser
is advised of the filing of such lawsuit and the Earnest Money shall be
refunded to Purchaser, or Purchaser shall have the right to proceed to
consummate the purchase of the Property, in which event Purchaser may
appear and defend any such condemnation proceedings, and any award in
condemnation of the Property shall become the property of Purchaser and the
Purchase Price shall not be reduced.
15. CONDITION OF AND DAMAGE TO PROPERTY. The Property shall be conveyed in its
present condition and broom cleaned, ordinary wear and tear excepted. To
the extent Seller has removed any personal property from the Property prior
to Closing, Seller agrees to restore the Property to the condition in which
it was in immediately prior to the removal, ordinary wear and tear
excepted.
16. BROKER'S COMMISSION. Seller shall cause to be paid a broker's commission to
Mohr Partners ("Broker"). Both parties acknowledge that Mohr Partners may
have an obligation to pay another broker to which neither parties hereto
are obligated in any manner whatsoever or contractually liable for. Each
party hereto agrees to indemnify the other party and all those parties
claiming through them from and against any claims by any other broker other
than Mohr Partners and its authorized subagent with whom the indemnifying
party may have dealt.
17. CONSULT YOUR ATTORNEY: THIS IS INTENDED TO BE A LEGALLY BINDING AGREEMENT.
READ IT CAREFULLY. NO REPRESENTATION OR RECOMMENDATION IS MADE BY SELLER,
BROKER OR THEIR AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS DOCUMENT OR THE TRANSACTION RELATING
THERETO OTHER THAN AS EXPRESSLY SET FORTH HEREIN. THESE ARE QUESTIONS FOR
YOUR ATTORNEY. CONSULT YOUR ATTORNEY BEFORE SIGNING. NEITHER THE SELLER,
THE SELLER'S COUNSEL NOR THE BROKER HAS GIVEN OR WILL BE DEEMED TO HAVE
GIVEN PURCHASER ANY LEGAL ADVICE.
18. DISCLAIMER:
A. SELLER HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED AS TO THE MERCHANTABILITY, QUANTITY, QUALITY,
PHYSICAL CONDITION OR OPERATION OF THE PROPERTY, ZONING, THE
SUITABILITY OR FITNESS
7980 NW 33rd Street
Page 11
<PAGE>
OF THE PROPERTY OR ANY IMPROVEMENTS THEREON, IF ANY, FOR ANY SPECIFIC
OR GENERAL USE OR PURPOSE, THE AVAILABILITY OF WATER, SEWER OR OTHER
UTILITY SERVICE, OR ANY OTHER MATTER AFFECTING OR RELATING TO THE
PROPERTY'S COMPLIANCE WITH ANY ENVIRONMENTAL LAWS. NEITHER PARTY IS
RELYING ON ANY STATEMENT OR REPRESENTATIONS MADE BY THE OTHER NOT
EMBODIED HEREIN. PURCHASER HEREBY EXPRESSLY ACKNOWLEDGES THAT NO SUCH
WARRANTIES AND REPRESENTATIONS HAVE BEEN MADE, EXCEPT AS EXPRESSLY SET
FORTH IN THE AGREEMENT; THAT IT SHALL BE PURCHASER'S OBLIGATION TO
OBTAIN AND PAY FOR ALL COMMITMENTS FOR WATER, SEWER AND OTHER
UTILITIES AND TO PAY THE COMMITMENT, IMPACT, TAP IN OR OTHER FEES AND
CHARGES THEREFORE, IF, ANY (NO SUCH FEES HAVE BEEN PAID BY SELLER).
PURCHASER ACKNOWLEDGES THAT THE PROVISIONS OF THIS AGREEMENT FOR
INSPECTION AND INVESTIGATION OF THE PROPERTY ARE ADEQUATE TO ENABLE
PURCHASER TO MAKE PURCHASER'S OWN DETERMINATION WITH RESPECT TO
MERCHANTABILITY, QUANTITY QUALITY, PHYSICAL CONDITION OR OPERATION OF
THE PROPERTY, ZONING, SUITABILITY OR FITNESS OF THE PROPERTY OR ANY
IMPROVEMENTS THEREON, IF ANY, FOR ANY SPECIFIC OR GENERAL USE OR
PURCHASE, THE AVAILABILITY OF WATER, SEWER OR OTHER UTILITY SERVICE,
OR ANY OTHER MATTER AFFECTING OR RELATING TO THE PROPERTY, ITS
DEVELOPMENT OR USE, INCLUDING WITHOUT LIMITATION, THE PROPERTY'S
COMPLIANCE WITH ANY ENVIRONMENTAL LAWS. PURCHASER FURTHER
ACKNOWLEDGES, AS OF THE CLOSING, IT WILL HAVE INSPECTED THE PROPERTY
OR WILL HAVE CAUSED SUCH INSPECTION TO BE MADE AND WILL BE MADE AND
WILL BE THOROUGHLY SATISFIED THEREWITH, AND AGREES TO TAKE THE
PROPERTY IN ITS PHYSICAL CONDITION "AS-IS, WHERE IS, WITH ALL FAULTS"
AS OF THE DATE OF CLOSING, SUBJECT TO THE EXPRESS CONDITIONS OF THIS
AGREEMENT. SELLER SHALL NOT BE LIABLE OR BOUND IN ANY MANNER BY ANY
VERBAL OR WRITTEN STATEMENT, REPRESENTATION OR ANY INFORMATION GIVEN
BY ANYONE PERTAINING TO THE PROPERTY, UNLESS SPECIFICALLY SET FORTH IN
THIS AGREEMENT. IN PARTICULAR, BUT WITHOUT LIMITING THE FOREGOING,
PURCHASER HEREBY RELEASES SELLER FROM ANY AND ALL RESPONSIBILITY,
LIABILITY AND CLAIMS FOR OR ARISING OUT OF THE PRESENCE ON OR ABOUT
THE PROPERTY (INCLUDING IN THE SOIL, AIR, STRUCTURES AND SURFACE AND
SUBSURFACE WATER) OF MATERIALS, WASTES, OR SUBSTANCES THAT ARE OR
BECOME
7980 NW 33rd Street
Page 12
<PAGE>
REGULATED UNDER OR THAT ARE OR BECOME CLASSIFIED AS TOXIC OR HAZARDOUS
UNDER ANY ENVIRONMENTAL LAW, INCLUDING WITHOUT LIMITATION, PETROLEUM,
OIL, GASOLINE, OR ANY OTHER PETROLEUM, BYPRODUCTS, OR WASTE. AS USED
HEREIN, "ENVIRONMENTAL LAW" SHALL MEAN, AS AMENDED AND IN EFFECT FROM
TIME TO TIME, ANY FEDERAL, STATE, OR LOCAL STATUTE, ORDINANCE, RULE,
REGULATION, JUDICIAL DECISION, OR THE JUDGEMENT OR DECREE OF A
GOVERNMENTAL AUTHORITY, ARBITRATOR OR OTHER PRIVATE ADJUDICATOR BY
WHICH PURCHASE OR THE PROPERTY IS BOUND, PERTAINING TO THE
ENVIRONMENT, INCLUDING, WITHOUT LIMITATION, THE COMPREHENSIVE
ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY ACT OF 1980, AS
AMENDED, HAZARDOUS MATERIALS TRANSPORTATION ACT AS AMENDED, THE
RESOURCE CONSERVATION ACT AS AMENDED, THE CLEAN AIR ACT, AS AMENDED,
AND THE STATUTES TOGETHER WITH THE RULES ADOPTED AND GUIDELINES
PROMULGATED PURSUANT THERETO, AND ALL SIMILAR STATUTES TOGETHER WITH
RULES ADOPTED AND GUIDELINES PROMULGATED PURSUANT TO THE FOREGOING.
B. PURCHASER ACKNOWLEDGES THAT HAVING BEEN GIVEN A SUFFICIENT OPPORTUNITY
TO INSPECT THE PROPERTY, PURCHASER IS RELYING SOLELY ON ITS OWN
INVESTIGATION OF THE PROPERTY AND FINANCIAL ANALYSIS OF THE REVENUE
AND EXPENSES THAT MAY BE RECEIVED OR INCURRED IN ARRIVING AT ITS
DECISION TO PURCHASE THE PROPERTY AND THAT PURCHASER IS PURCHASING THE
PROPERTY IN ITS PRESENT CONDITION, "AS IS, WHERE IS", AND SELLER HAS
NO OBLIGATION TO CONSTRUCT ANY IMPROVEMENTS THEREON, OR TO PERFORM ANY
OTHER ACT REGARDING THE PROPERTY, EXCEPT AS EXPRESSLY PROVIDED HEREIN.
C. ANY FACTUAL INFORMATION SUCH AS PROPERTY DIMENSIONS, SQUARE FOOTAGE,
OR SKETCHES SHOWN TO PURCHASER OR SET FORTH HEREIN ARE OR MAY BE
APPROXIMATE AND PURCHASER REPRESENTS TO SELLER THAT THEY HAVE
INSPECTED AND VERIFIED THE FACTS AND INFORMATION PRIOR TO THE
EXECUTION OF THIS AGREEMENT. NO LIABILITY FOR ANY INACCURACIES, ERRORS
OR OMISSIONS IS ASSUMED BY THE SELLER, SELLER'S COUNSEL, THE BROKER OR
OTHER AGENTS.
D. INTENTIONALLY DELETED.
7980 NW 33rd Street
Page 13
<PAGE>
19. NOTICES: All notices, elections, consents, demands and communications
(collectively called "Notices" or individually called "Notice") shall be in
writing and delivered personally or by registered or certified mail return
receipt requested, postage prepaid, express mail or overnight courier, or
facsimile with confirmation received by sender, and, if sent to Purchaser,
addressed to Purchaser at Purchaser's address and, if sent to the Seller,
addressed to the Seller at Seller's address each stated on the signature
page of this Agreement with a copy to the Broker whose address is stated on
signature page of the Agreement. Copies of Notices shall be sent to the
attorneys for the respective parties, at the following addresses:
SELLER: 1025 THOMAS JEFFERSON STREET
SUITE 300 EAST
WASHINGTON, DC
ATTN: GENERAL COUNSEL
PURCHASER: 801 BRICKELL AVENUE
SUITE 1501
MIAMI, FL 33131
ATTN: BRUCE JAY TOLAND, ESQUIRE
Either party may, by written notice to the other, change the address to which
notices are to be sent. Unless otherwise provided herein, all notices shall be
deemed given when personal delivery is effected or delivery is refused by the
addressee or its agent.
20. NO RECORDING: Neither this Agreement nor any type of memorandum thereof
shall be recorded with the office of the Register of Deeds, Public Records
or with any other governmental agency, and any purported recordation or
filing hereof by Purchaser shall constitute a default on the part of
Purchaser.
21. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement between
the parties as to the subject matter hereof and supersedes all prior
understandings and agreements. There are no representations, agreements
arrangements or understandings oral or written between the parties relating
to the
7980 NW 33rd Street
Page 14
<PAGE>
subject matter contained in this Agreement which is not fully expressed or
referred to herein.
22. SUCCESSORS AND ASSIGNS: The provisions of this Agreement shall bind and
inure to the benefit of Purchaser and Purchaser's heirs, legal
representatives, successors and permitted assigns and shall bind and inure
to the benefit of the Seller and its successors and assigns. This Agreement
may not be assigned by Purchaser without prior written consent of Seller.
23. JOINT PURCHASERS: The term "Purchaser" shall be read as "Purchasers" if
more than one person is the Purchaser of the Property, in which case their
obligations shall be joint and several.
24. FURTHER ASSURANCES: Either party shall execute, acknowledge and deliver to
the other party such instruments and take such other actions, in addition
to the instruments and actions specifically provided for herein at any time
and from time to time after execution of this Agreement whether before or
after the Closing, as such other party may reasonably request in order to
effectuate the provisions of this Agreement or to confirm or perfect any
right to be created or transferred hereunder, provided that neither party
shall be required to incur any material expense or additional liability in
connection therewith.
25. SEVERABILITY: If any clause or provision of this Agreement is held to be
invalid or unenforceable by any court of competent jurisdiction as against
any person or under any circumstances, the remainder of this Agreement and
the applicability of any such clause or provision to other persons or
circumstances shall not be affected thereby. All other clauses or
provisions of this Agreement, not found invalid or unenforceable shall be
and remain valid and enforceable.
26. TIME: Time is of the essence of this Agreement.
27. STRICT COMPLIANCE/WAIVER: Any failure by either party to insist upon strict
performance by the other party of any of the provisions of this Agreement
shall not be deemed a waiver of any of the provisions hereof, irrespective
of the number of violations or breaches that may occur, and each party,
notwithstanding any such failure, shall have the right thereafter to insist
upon strict performance by the other of any and all of the provisions of
this Agreement.
28. GOVERNING LAW: The provisions of this Agreement and all questions with
respect to the construction and enforcement thereof and the rights and
liabilities of the parties hereto shall be governed by, and construed and
enforced in accordance with, the laws of the State of Florida.
7980 NW 33rd Street
Page 15
<PAGE>
29. ATTORNEYS FEES: A party to this Agreement who is the prevailing party in
any legal proceeding against any other party brought under or with respect
to this Agreement or the transaction contemplated hereby shall be
additionally entitled to recover all costs and reasonable legal fees
(including paralegal costs and appeal costs) from the non-prevailing party.
30. GENDER: A reference in this Agreement to any one gender, masculine,
feminine or neuter, includes the other two, and the singular includes the
plural, and vice versa, unless the context requires otherwise.
31. CERTAIN REFERENCES: The term "herein", "hereof" or "hereunder" or similar
terms used in this Agreement refer to this entire Agreement and not to the
particular provision in which the term is used. Unless otherwise stated,
all references herein to paragraphs, subparagraphs or other provisions are
references to paragraphs, subparagraphs or other provisions of this
Agreement.
32. CAPTIONS: The captions in this Agreement are for convenience and reference
only and in no way define, limit or describe the scope of this Agreement or
the intent of any provision hereof.
33. NO ORAL CHANGES: This Agreement cannot be changed or any provision waived
orally. ANY CHANGES OR ADDITIONAL PROVISIONS OR WAIVERS SHALL BE SET FORTH
IN A RIDER ATTACHED HERETO OR IN A SEPARATE WRITTEN AGREEMENT SIGNED BY THE
PARTIES.
34. EXHIBITS: All Exhibits described herein and attached hereto are
incorporated herein by this reference for all purposes.
35. DATE OF PERFORMANCE: If any date for performance hereunder falls on a
Saturday, Sunday or other day which is a holiday under Federal law or under
the State law where the Property is located, the date for such performance
shall be the next succeeding business day.
36. COUNTERPARTS: This Agreement may be executed in multiple counterparts all
of which when taken together shall constitute one Agreement.
37. COUNTERPART FACSIMILE EXECUTION: For purposes of executing this Agreement,
a document signed and transmitted by facsimile machine shall be treated as
an original document. The signature of any party thereon shall be
considered as an original signature, and the document transmitted shall be
considered to have the same binding legal effect as an original signature
on an original document. At the request of either party, any facsimile
document shall be re-executed by both parties in original form. No party
hereto may raise the use of
7980 NW 33rd Street
Page 16
<PAGE>
a facsimile machine or the fact that any signature was transmitted through
the use of a facsimile machine as a defense to the enforcement of this
Agreement or any amendment executed in compliance with this paragraph. This
paragraph does not supersede the requirements of the "Notices" paragraph.
38. Intentionally Deleted.
39. Intentionally Deleted.
40. RADON GAS:RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN IT HAS
ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH
RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT
EXCEED FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN
FLORIDA. ADDITIONAL INFORMATION REGARDING RADON AND RADON TESTING MAY BE
OBTAINED FROM YOUR COUNTY PUBLIC HEALTH UNIT.
41. IRREVOCABLE OFFER: Purchaser further acknowledges that this Agreement is
executed and delivered by Purchaser pursuant to a real estate marketing
plan executed on behalf of Seller. In consideration of the following: (a)
preserving the integrity of the sales process and assuring that all offers
are made in conformity therewith and in reliance thereon; (b) the monies
spent by Seller to arrange for the sale; (c) the opportunity of the
Purchaser to place an offer to purchase the Property; (d) the promise by
the Seller to sell the Property to Purchaser if this Agreement is accepted
by Seller as hereinafter provided and (e) for other good and valuable
consideration, the receipt and adequacy of which is expressly acknowledged
by Purchaser, including the mutual promises made by each party, this
Agreement constitutes an offer to purchase by Purchaser in accordance with
this Agreement which shall be deemed irrevocable until and cannot be
revoked by Purchaser prior to 5:00 p.m. EST on the third business day after
the date hereof, except as set forth in Section 3.5 above, and cannot be
revoked at any time after being executed by Seller.
Such offer to purchase shall not be deemed accepted by Seller until
executed by Seller or Seller's duly authorized agent prior to revocation
thereof. Notice from Seller or its duly authorized agent to accept or
reject Purchaser's offer under this Paragraph may be given pursuant to the
notice provision in Section 19. Failure of Seller or its duly authorized
agent to notify Purchaser on or prior to the Irrevocable Deadline that
Seller accepts or rejects Purchaser's offer shall not constitute acceptance
or rejection by Seller of Purchaser's offer, but Purchaser's irrevocable
offer shall thereafter become revocable. In the event Seller rejects this
7980 NW 33rd Street
Page 17
<PAGE>
Offer, the Earnest Money shall be returned to Purchaser and the parties
shall have no further obligation under this Agreement.
IN WITNESS HEREOF, Purchaser and Seller agree that the Date of this
Agreement shall be the date the Seller executes this Agreement.
PURCHASER:
Atlas Flowers, Inc., d/b/a Golden Flowers,
a Florida Corporation
BY: /s/ J. Ribero
------------------------------------------------------------
For Gabriel Becerra under Power of Attorney
ITS: President
ATTEST: /s/ J. Ribero
--------------------------------------------------------
Jorge Ribero for Gabriel Becerra under Power of Attorney
---------------------------------------------------------
(Print Name)
Purchaser's address: 2750 N.W. 79th Avenue
Miami, Florida 33122
Purchaser's phone: (305) 599-0193
Facsimile (305) 477-0616
Taxpayer ID number of Purchaser:
----------------------------------------
Date Executed:
----------------------------------------
Purchaser's attorney: Bruce Jay Toland
Attorney's address: 801 Brickell Avenue
Suite 1501
7980 NW 33rd Street
Page 18
<PAGE>
This Instrument Was Prepared By:
Bruce Jay Toland, Esq.
BRUCE JAY TOLAND, P.A.
801 Bricknell Avenue, Suite 1501
Miami, Florida 33131
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS:
That GABRIEL BECERRA, as President and Secretary of Atlas Flowers, Inc.,
d/b/a Golden Flowers, a Florida corporation, has made, constituted and
appointed, and by these presents does make, constitute and appoint JORGE RIBERO,
true and lawful attorney for him and in his name, place and stead with full
power and authority to execute any and all documents for the closing of the
purchase of the property located at 7980 N.W. 33rd Street, Miami, Florida 33122
(the "Property") and lease of the adjacent property, giving and granting unto
said attorney full power and authority to do and perform all and every act and
thing whatsoever requisite and necessary to be done in and about the premises as
fully, to all intents and purposes, as he might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that said attorney or his substitute shall lawfully do or cause
to be done by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the 27 day of
September, 1999.
Sealed and delivered
in the presence of
Atlas Flowers, Inc., d/b/a Golden
Flowers, a Florida corporation
/s/ Victor Arras By: /s/ Gabriel Becerra
- ---------------------------- ------------------------------
Gabriel Becerra, President and
/s/ Martha Montalvo Secretary
- ----------------------------
STATE OF FLORIDA )
)
COUNTY OF MIAMI-DADE )
I HEREBY CERTIFY that on this day before me, an officer duly authorized in
the State aforesaid and in the County aforesaid to take acknowledgments,
personally appeared Gabriel Becerra, as President and Secretary of Atlas
Flowers, Inc., d/b/a Golden Flowers, a Florida corporation, who is personally
known to me or has produced ___________________ as identification and who did
take an oath and be acknowledged before me that he executed the same.
WITNESS my hand and official seal in the County and State last aforesaid
this 27 day of September, 1999.
[SIGNATURE]
------------------------------
NOTARY PUBLIC
(Printed Notary Signature)
OFFICIAL NOTARY SEAL
LISEL MANSEN
NOTARY PUBLIC STATE OF FLORIDA
COMMISSION NO. CC520531
MY COMMISSION EXP. JAN. 6, 2000
Page 19
<PAGE>
offer, the Earnest Money shall be returned to Purchaser and the parties
shall have no further obligation under this Agreement.
IN WITNESS HEREOF, Purchaser and Seller agree that the Date of this
Agreement shall be the date the Seller executes this Agreement.
PURCHASER:
Atlas Flowers, Inc., d/b/a Golden Flowers,
a Florida Corporation
BY:
-------------------------------------------------------
Gabriel Becerra
ITS: President
ATTEST:
---------------------------------------------------
---------------------------------------------------
(Print Name)
Purchaser's address: 2750 N.W. 79th Avenue
Miami, Florida 33122
Purchaser's phone: (305) 599-0193
Facsimile (305) 477-0616
Taxpayer ID number of Purchaser:
--------------------------
Date Executed:
--------------------------
Purchaser's attorney: Bruce Jay Toland
Attorney's address: 801 Brickell Avenue
Suite 1501
7980 NW 33rd Street
Page 20
<PAGE>
Miami, Florida 33131
Phone: (305) 381-7999
Fax: (305) 373-5691
SELLER:
Atlantic Bouquet Company, Limited, a Florida Limited
Partnership
General Partners: Continental Farms Management, Inc.
By: /s/ James Teper, President
----------------------------------
Its: President
---------------------------------
Limited Partners: Continental Farms Limited
By: /s/ James Teper, President
----------------------------------
Its: President
---------------------------------
Seller's address: 2020 NW 89th Place
Miami, Florida 33172
ATTN: W. Michael Kipphut
Phone: (305) 463-6226
Fax: (305) 463-6229
Seller's attorney: Julie Waters
ADDRESS: 1025 Thomas Jefferson
Suite 300 East
Washington, D.C. 20007
Phone: (202) 295-6808
Fax: (202) 333-5794
7980 NW 33rd Street
Page 21
<PAGE>
Miami, Florida 33131
Phone: (305) 381-7999
Fax: (305) 373-5691
SELLER:
Atlantic Bouquet Company, Limited, a Florida Limited
Partnership
General Partners: Continental Farms Management, Inc.
By; /s/ James Teper, President
------------------------------------
Its: President
-----------------------------------
Limited Partners: Continental Farms Limited
By: /s/ James Teper,
------------------------------------
Its: President
-----------------------------------
Seller's address: 2020 NW 89th Place
Miami, Florida 33172
ATTN: W. Michael Kipphut
Phone: (305) 463-6226
Fax: (305) 463-6229
Seller's attorney: Julie Waters
ADDRESS: 1025 Thomas Jefferson
Suite 300 East
Washington, D.C. 20007
Phone: (202) 295-6808
Fax: (202) 333-5794
7980 NW 33rd Street
Page 22
<PAGE>
Miami, Florida 33131
Phone: (305) 381-7999
Fax: (305) 373-5691
SELLER:
Atlantic Bouquet Company, Limited, a Florida Limited
Partnership
General Partners: Continental Farms Management, Inc.
By: /s/ James Teper, President
-------------------------------------
Its: President
------------------------------------
Limited Partners: Continental Farms Limited
By: /s/ James Teper, President
-------------------------------------
Its: President
------------------------------------
Seller's address: 2020 NW 89th Place
Miami, Florida 33172
ATTN: W. Michael Kipphut
Phone: (305) 463-6226
Fax: (305) 463-6229
Seller's attorney: Julie Waters
ADDRESS: 1025 Thomas Jefferson
Suite 300 East
Washington, D.C. 20007
Phone: (202) 295-6808
Fax: (202) 333-5794
7980 NW 33rd Street
Page 23
<PAGE>
Miami, Florida 33131
Phone: (305) 381-7999
Fax: (305) 373-5691
SELLER:
Atlantic Bouquet Company, Limited, a Florida Limited
Partnership
General Partners: Continental Farms Management, Inc.
By:
-------------------------------------
Its:
------------------------------------
Limited Partners: Continental Farms Limited
By:
-------------------------------------
Its:
------------------------------------
Seller's address: 2020 NW 89th Place
Miami, Florida 33172
ATTN: W. Michael Kipphut
Phone: (305) 463-6226
Fax: (305) 463-6229
Seller's attorney: Julie Waters
ADDRESS: 1025 Thomas Jefferson
Suite 300 East
Washington, D.C. 20007
Phone: (202) 295-6808
Fax: (202) 333-5794
7980 NW 33rd Street
Page 24
<PAGE>
DATE SELLER EXECUTES THIS AGREEMENT: , 1999. ("Date of
--------
Agreement")
BROKER: Mohr Partners
710 S. Howard Avenue
Tampa, FL 33606
LIST OF EXHIBITS:
Exhibit A Legal Descriptions
Exhibit B Personal Property
Exhibit C Title Exceptions
7980 NW 33rd Street
Page 25
<PAGE>
Exhibit A - Real Property Description
-------------------------------------
Lots 3 and 4, Block 1, CASWELL SQUARE SECTION ONE according to the Plat
thereof, as recorded in Plat Book 113 at page 57 of the Public Records of
Miami-Dade County, Florida.
7980 NW 33rd Street
Page 26
<PAGE>
Exhibit B
. Cooler racks for approximately 30 pallet positions
. Warehouse racks for approximately 30 pallet positions
. 4 x 8-ft bulk preparation table
. 2 rose stripper machines
. 2 foot pedal staplers
. 1 stem-cutter with electric motor
. Bucket conveyor, approx. 110 ft. long
. Table top chain conveyor, approx. 30 ft long
. 4 x 8-ft maintenance table
. 3 metal cabinets with misc. mechanical parts
. Approx. 50 5-gallon plastic buckets
. 5 office desks and 6 chairs
. 16 cafeteria tables 2-6 x 5 ft. with 53 folding chairs
. Water fountain
. File cabinet
. Approx. 20 fire extinguishers
. Operating burglar alarm with control panel and keypad
. Operating fire alarm with control panel and keypad
. Fire extinguisher and emergency light system -- Exit lights, etc.
. All illumination lamps, bulbs, and electrical switches and outlets
. Humidifier system in the coolers and production room
. Plastic curtains, two sets
. All loading platforms to load trucks (2)
. Loading lights (to light the trailers when loading)
. Outside lights, and timer, over the ramp and outside the building
Page 27
<PAGE>
Exhibit C - Permitted Title Exceptions
--------------------------------------
Easements and Restrictions as set forth in Plat, filed in Plat Book 113, Page
57, of the Public Records of Dade County, Florida.
Unity of Title filed September 30, 1982, in Official Records Book 11572, Page
750, of the office aforesaid.
Declaration of Restrictions filed April 30, 1979, in Official Records Book
10377, Page 1504, of the office aforesaid.
Easement to Florida Power and Light Company, filed January 5, 1983, in Official
Records Book 11659, Page 1097, of the office aforesaid.
Covenant Running with the Land filed December 2, 1976, in Official Records Book
13494, Page 1853, of the office aforesaid.
7980 NW 33rd Street
Page 28
<PAGE>
ASSIGNMENT, ASSUMPTION AGREEMENT
--------------------------------
AND SECOND AMENDMENT TO LAND LEASE
----------------------------------
This Assignment, Assumption and Second Amendment To Land Lease
("Agreement") made and entered into the __ day of September, 1999, by and
between Atlantic Bouquet Company a/k/a Atlantic Bouquet Co. ("Lessee" and/or
"Assignor"), Atlas Flowers, Inc. d/b/a Golden Flowers, a Florida corporation
("Assignee"), and Sanford Susman and Betty Susman ("Lessor"). Assignor/Lessee,
Assignee and Lessor are sometimes hereinafter referred to individually as a
"party" and or collectively as the "parties".
WHEREAS, Lessor and Lessee have entered into a written land lease
having an effective date of June 1, 1988, a true and correct copy of which is
incorporated herein and attached hereto as Exhibit "A" ("Land Lease"), where the
Lessor has leased to Lessee, and the Lessee has leased from Lessor certain
unimproved real property consisting of approximately 46,720 square feet more or
less located between 7980 and 8000 N.W 33rd Street, Miami, Miami-Dade County,
Florida, as more particularly described in the attached Exhibit "B" (the
"Premises"), and
WHEREAS, Lessor and Lessee have executed a First Amendment to Land
Lease dated March, 1990, a true and correct copy of which is incorporated herein
and attached hereto as Exhibit "C" ("First Amendment"), and
WHEREAS, the Land Lease and First Amendment, are hereinafter
collectively referred to as the "Lease Documents", and
WHEREAS, Assignor wishes to assign all of its right, title and interest
in and to the Lease" Documents to Assignee and, Assignee wishes to accept such
assignment and has agreed to assume each and every obligation set forth therein
(the "Assignment"). Landlord hereby approves such Assignment and agrees to the
following additional terms and conditions which shall become a part of the Lease
Documents, as set forth herein,
NOW, THEREFORE, for and in consideration of the representations and
warranties set forth herein above, which shall be deemed an integral part of
this Agreement and not merely as recitals thereto, and for Ten Dollars ($10.00)
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by each party to the other, the parties agree as follows:
1. Assignment. Assignor hereby assigns to Assignee all of its right
----------
title and interest in and to the Lease Documents and Lessor hereby approve and
accept same. Assignee hereby accepts such Assignment and agrees to be bound by
the terms and conditions of such Lease Documents and has agreed to assume each
and every obligation set forth therein.
Page 29
<PAGE>
2. Estoppel Information. Assignor and Lessor hereby represent and
--------------------
warrant that the current monthly rent under the Lease Documents payable to the
Lessor is equal to One Thousand Five Hundred Sixty Three Dollars and 74/100
($1,563.74) per month, payable on the first day of each month, which includes
6.5% sales tax (the "Rent"), that the Rent is paid in full through and including
September 30, 1999, that there is no security deposit being held by Lessor for
and on behalf of Lessee, that there is no advanced rent paid by Lessee or being
held by Lessor, that the Lessee doesn't owe any monies to the Lessor, that the
Lease Documents are in full force and effect, that the current term expires
October 31, 2000 and, that the Lessee is not in default under the Lease
Documents in any way whatsoever (see Estoppel Letter, a copy of which is
incorporated herein and attached hereto as Exhibit "D").
3. Additional Terms and Conditions. The following additional terms and
-------------------------------
conditions shall modify the Lease Documents and are herein agreed to by and
between the parties:
a. Term. The original term ran from June 1998 through October
----
31, 1990, at 11:59 p.m. Additionally, the Land Lease contained the option to
renew for three (3) consecutive terms of five (5) years each, the first renewal
period commencing at 12:00 0'clock p.m. on October 31, 1990. The parties
hereto acknowledge and agree that the first two (2) options have been exercised
and there remains a third option to be exercised. The current expiration date of
the term, including the current second option, is 11:59 p.m. on October 31,
2000. Lessor hereby grants Assignee, in addition to the current third option,
the additional options to renew the Land Lease for three (3) additional
consecutive terms of five (5) years.
b. Rental. On each anniversary date, October 31, the current
------
monthly rent in the amount of $1,468.32, shall be increased by three (3%)
percent. This rental increase is in place of any and all other rental increases
which may be otherwise stated in the Lease Documents and, is not in addition to
such other rental increases.
c. Water. If rain water flow from the Premises becomes an
-----
unreasonable hazard to the existing property bordering the western side of the
Premises (which property is owned by the Lessor), then in such event, Lessee
shall take whatever reasonable steps are necessary to correct such situation.
d. Use. The Premises shall be continuously used and occupied
---
during the term (including all options) for no other purposes than as a storage
lot and/or parking lot for vehicles. Lessor hereby represents and warrants that
there are no individuals or entities other than Assignee with any right to use
of the Premises (except FP&L in accordance with their rights of record).
e. Notices. All notices to Assignee shall be sent to Assignee
-------
at the following address: Attention: Gabriel Becerra, Atlas Flowers, Inc. d/b/a
Golden Flowers, 2750 N.W, 79th Avenue, Miami, Florida 33122, Telephone: (305)
599-0193 and Facsimile: (305) 477-0616, with a copy to Assignee's counsel,
Bruce Jay Toland, Esq., Bruce Jay Toland, P.A., 801 Brickell Avenue, Suite
1501, Miami, Florida 33131, Telephone: (305) 381-7999 and Facsimile: (305)
373-5691.
Page 30
<PAGE>
f. Right of First Refusal To Purchase. Landlord hereby
----------------------------------
acknowledges and agrees that the right of first refusal as set forth in Article
VII on pages 18 and 19 of the Land Lease remains in full force and effect at all
times during the term, including all renewal options, including the renewal
options granted in this Agreement.
g. Parking for Lessor. Lessee hereby grants to Lessor the use
------------------
of eight (8) parking spaces on the Premises for the remaining term of the Land
Lease, the location to be designated by Lessee.
4. Conflict. If there exists any conflict between this Agreement and
--------
the Lease Documents, this Agreement shall control.
5. Ratification. The parties hereto hereby ratify and confirm all
------------
other terms and conditions of the Lease Documents which have not been modified
by this Agreement.
6. Lessor Consent. Lessor hereby agrees and consents to the Assignment
--------------
and all terms and conditions of this Agreement and hereby completely and fully
releases Lessee from any further obligations related to or arising out of the
Lease Documents as of the date acknowledged below.
7. Facsimile. This Agreement may be executed by facsimile signature
---------
and in any number of counterparts, which facsimile shall he considered an
original and all counterparts shall be considered one document.
8. Attorney's Fees. If any party to this Agreement brings any
---------------
legal action or proceeding to enforce the terms and conditions hereof, then the
prevailing party in such legal action or proceeding shall be entitled to
recovery from the non-prevailing party of all its court costs, reasonable
attorney's fees and related paralegal fees incurred, including all appeals.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
Atlantic Bouquet Company, a/k/a Atlantic
Bouquet Co., Assignor/Lessee
By: /s/ L. James Teper, President
-------------------------------
L. James Teper President
Page 31
<PAGE>
Atlas Flowers, Inc. d/b/a Golden
Flowers, a Florida corporation, Assignee
By:
------------------------------------
Gabriel Becerra, President
Accepted and Agreed to as of this ____ day
of __________, 1999. Sanford Susman and
Betty Susman, Lessor
By:
------------------------------------
Sanford Susman
By:
------------------------------------
Betty Susman
Page 32
<PAGE>
Exhibit 3.02
U.S.A. FLORAL PRODUCTS, INC.
(a Delaware corporation)
__________________________________
AMENDED AND RESTATED BYLAWS
__________________________________
As adopted by the Board of Directors as of May 5, 1999.
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
U.S.A. FLORAL PRODUCTS, INC.
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the Corporation
shall be at Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle, State of Delaware 19805.
Section 2. ADDITIONAL OFFICES. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE. A meeting of stockholders for any purpose may be
held at such time and place, within or without the State of Delaware, as the
Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. Annual meetings of stockholders, commencing with
the year 1998, shall be held on April 15, if not a legal holiday, or, if a legal
holiday, then on the next secular day following, at 2 P.M., or at such other
date and time as shall, from time to time, be designated by the Board of
Directors and stated in the notice of the meeting. At such annual meeting, the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual meeting,
stating the place, date and time thereof, shall be given to each stockholder
entitled to vote at such meeting not less than 10 (unless a longer period is
required by law) nor more than 60 days prior to the meeting.
Section 4. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of the stockholders owning a majority of the shares of capital stock of
the Corporation issued and
<PAGE>
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 5. NOTICE OF SPECIAL MEETING. Written notice of a special meeting,
stating the place, date and time thereof and the purpose or purposes for which
the meeting is called, shall be given to each stockholder entitled to vote at
such meeting not less than 10 (unless a longer period is required by law) nor
more than 60 days prior to the meeting.
Section 6. LIST OF STOCKHOLDERS. The officer in charge of the stock ledger
of the Corporation or the transfer agent shall prepare and make, at least 10
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, at a place within the city
where the meeting is to be held, which place, if other than the place of the
meeting, shall be specified in the notice of the meeting. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present in person
thereat.
Section 7. PRESIDING OFFICER; ORDER OF BUSINESS.
(a) Meetings of stockholders shall be presided over by the Chairman
of the Board, if any, or, if he is not present (or, if there is none), by the
President, or, if he is not present, by a Vice President, or, if he is not
present, by such person who may have been chosen by the Board of Directors, or,
if none of such persons is present, by a chairman to be chosen by the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting and who are present
in person or represented by proxy. The Secretary of the Corporation, or, if he
is not present, an Assistant Secretary, or, if he is not present, such person as
may be chosen by the Board of Directors, shall act as secretary of meetings of
stockholders, or, if none of such persons is present, the stockholders owning a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy shall choose any person present to act as secretary of the
meeting.
(b) The following order of business, unless otherwise ordered at
the meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the notice of the
meeting and, if the meeting is a special meeting, the call
thereof.
3. Presentation of proxies.
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<PAGE>
4. Announcement that a quorum is present.
5. Reading and approval of the minutes of the previous
meeting.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual meeting
or a meeting called for that purpose.
8. Consideration of the specific purpose or purposes for
which the meeting has been called (other than the election
of directors), if the meeting is a special meeting.
9. Transaction of such other business as may properly come
before the meeting.
10. Adjournment.
Section 8. QUORUM; ADJOURNMENTS. The holders of a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall be necessary to, and
shall constitute a quorum for, the transaction of business at all meetings of
the stockholders, except as otherwise provided by statute or by the Certificate
of Incorporation. If, however, a quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken, until a quorum shall be present or represented. Even if a quorum shall be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
the power to adjourn the meeting from time to time for good cause, without
notice of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken, until a date which is not more
than 30 days after the date of the original meeting. At any such adjourned
meeting, at which a quorum shall be present in person or represented by proxy,
any business may be transacted which might have been transacted at the meeting
as originally called. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote thereat.
Section 9. VOTING.
(a) At any meeting of stockholders, every stockholder having the
right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
of record shall be entitled to one vote for each share of capital stock
registered in his name on the books of the Corporation.
3
<PAGE>
(b) All elections shall be determined by a plurality vote, and,
except as otherwise provided by law or the Certificate of Incorporation, all
other matters shall be determined by a vote of a majority of the shares present
in person or represented by proxy and voting on such other matters.
Section 10. ACTION BY CONSENT. Any action required or permitted by law or
the Certificate of Incorporation to be taken at any meeting of stockholders may
be taken without a meeting, without prior notice and without a vote, if a
written consent, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present or represented by proxy and
voted. Such written consent shall be filed with the minutes of meetings of
stockholders. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not so consented in writing thereto.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS; NUMBER; TENURE. The business of the Corporation
shall be managed by its Board of Directors, which may exercise all powers of the
Corporation and perform all lawful acts and things which are not by law, the
Certificate of Incorporation or these Bylaws directed or required to be
exercised or performed by the stockholders. Within the limits specified in this
Section 1, the number of directors within each Class (as defined in the
Certificate of Incorporation) shall be determined by the Board of Directors,
except that if no such determination is made, the number of directors in each
Class shall, subject to Section 2(b) of this Article, be one (1), but the total
number of directors in all Classes taken together may never be less than the
number otherwise permitted by law. The directors shall be elected at the annual
meeting of the stockholders in accordance with the provisions of the Certificate
of Incorporation, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and shall
qualify or as provided in the Certificate of Incorporation. Directors need not
be stockholders.
Section 2. VACANCIES.
(a) If any vacancies occur in the Board of Directors, or if any new
directorships are created, they may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Each director so chosen shall hold office until the next annual
meeting of stockholders, or as provided in the Certificate of Incorporation and
until his successor is duly elected and shall qualify. If there are no
directors in office, any officer or stockholder may call a special meeting of
stockholders in accordance with the provisions of the Certificate of
Incorporation or these Bylaws, at which meeting such vacancies shall be filled.
4
<PAGE>
(b) In the event that fewer than three (3) directors are elected, then
Class I will be eliminated and at least two (2) directors shall be elected, one
(1) of whom shall be designated a Class II director and one (1) of whom shall be
designated a Class III director.
Section 3. REMOVAL; RESIGNATION.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director, directors or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
(b) Any director may resign at any time by giving written notice to
the Board of Directors, the Chairman of the Board, the President or the
Secretary of the Corporation. Unless otherwise specified in such written
notice, a resignation shall take effect upon delivery thereof to the Board of
Directors or the designated officer. It shall not be necessary for a
resignation to be accepted before it becomes effective.
Section 4. PLACE OF MEETINGS. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. ANNUAL MEETING. The annual meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. REGULAR MEETINGS. Additional regular meetings of the Board of
Directors may be held without notice, at such time and place as may from time to
time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the Chairman of the Board, the President or by 2 or more directors
on at least 2 days' notice to each director, if such notice is delivered
personally or sent by telegram, or on at least 3 days' notice if sent by mail.
Special meetings shall be called by the Chairman of the Board, President,
Secretary or 2 or more directors in like manner and on like notice on the
written request of one-half or more of the number of directors then in office.
Any such notice need not state the purpose or purposes of such meeting except as
provided in Article XI.
Section 8. QUORUM; ADJOURNMENTS. At all meetings of the Board of Directors,
a majority of the directors then in office shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
5
<PAGE>
Section 9. COMPENSATION. Directors shall be entitled to such compensation
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if a
written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of its proceedings.
Section 11. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. The Board of
Directors may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person by such director at such meeting.
ARTICLE IV
COMMITTEES
Section 1. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of not more than 5 directors, one of whom shall be designated as
Chairman of the Executive Committee. Each member of the Executive Committee
shall continue as a member thereof until the expiration of his term as a
director, or his earlier resignation, unless sooner removed as a member or as a
director.
Section 2. POWERS. Unless circumscribed by resolution of the Board
appointing the Executive Committee or except as otherwise provided by law, the
Executive Committee shall have and may exercise all of the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation including, without limitation, the power and authority to declare a
dividend in cash, property or its own shares and to authorize the issuance of
any shares of capital stock of the Corporation of any class now or hereafter
authorized, and any options or warrants for, and rights to subscribe to, such
shares, and any securities convertible into or exchangeable for such shares.
Section 3. PROCEDURE; MEETINGS. The Executive Committee shall fix its own
rules of procedure and shall meet at such times and at such place or places as
may be provided by such rules or as the members of the Executive Committee shall
provide. The Executive Committee shall keep regular minutes of its meetings and
deliver such minutes to the Board of Directors.
6
<PAGE>
The Chairman of the Executive Committee, or, in his absence, a member of
the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as secretary of the Executive
Committee.
Section 4. QUORUM. A majority of the Executive Committee shall constitute a
quorum for the transaction of business, and the affirmative vote of a majority
of the members of the Executive Committee shall be required for any action of
the Executive Committee; provided, however, that when an Executive Committee of
one member is authorized under the provisions of Section 1 of this Article, such
one member shall constitute a quorum.
Section 5. OTHER COMMITTEES. The Board of Directors, by resolutions adopted
by a majority of the whole Board, may appoint such other committee or committees
as it shall deem advisable and with such functions and duties as the Board of
Directors shall prescribe.
Section 6. VACANCIES; CHANGES; DISCHARGE. The Board of Directors shall have
the power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
Section 7. COMPENSATION. Members of any committee shall be entitled to such
compensation for their services as members of any such committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any member
may waive compensation for any meeting. Any committee member receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
Section 8. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
Section 9. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. The members of
any committee designated by the Board of Directors may participate in a meeting
of such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in such meeting can hear
each other and participation in such meeting shall constitute presence in person
at such meeting.
7
<PAGE>
ARTICLE V
NOTICES
Section 1. FORM; DELIVERY. Whenever, under the provisions of law, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid. Such notices
shall be deemed to be given at the time they are deposited in the United States
mail. Notice to a director may also be given personally or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. WAIVER. Whenever any notice is required to be given under the
provisions of law, the Certificate of Incorporation or these Bylaws, a written
waiver thereof, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person, or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting, at the
commencement of the meeting, such lack of notice, shall be conclusively deemed
to have waived notice of such meeting.
ARTICLE VI
OFFICERS
Section 1. DESIGNATIONS. The officers of the Corporation shall be chosen by
the Board of Directors. The Board of Directors may choose a Chairman of the
Board, a Vice Chairman, a President, a Chief Operating Officer, a Chief
Financial Officer, a Vice President or Vice Presidents, a Secretary, one or more
Assistant Secretaries and other officers and agents as it shall deem necessary
or appropriate. All officers of the Corporation shall exercise such powers and
perform such duties as shall from time to time be determined by the Board of
Directors. Any number of offices may be held by the same person, unless the
Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. TERM OF OFFICE; REMOVAL. The Board of Directors at its annual
meeting after each annual meeting of stockholders shall choose a President, a
Chief Financial Officer and a Secretary. The Board of Directors may also choose
a Chairman of the Board, a Vice Chairman, a Chief Operating Officer, , a Vice
President or Vice Presidents, one or more Assistant Secretaries, and such other
officers and agents as it shall deem necessary or appropriate. Each officer of
the Corporation shall hold office until his successor is chosen and shall
qualify. Any officer elected or appointed by the Board of Directors may be
removed, with or without cause, at any time by the affirmative vote of a
majority of the directors then in office. Such removal shall not prejudice the
8
<PAGE>
contract rights, if any, of the person so removed. Any vacancy occurring in any
office of the Corporation may be filled for the unexpired portion of the term by
the Board of Directors.
Section 3. COMPENSATION. The salaries of all officers of the Corporation
shall be fixed from time to time by the Board of Directors and no officer shall
be prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation.
Section 4. THE CHAIRMAN OF THE BOARD
The Chairman of the Board, if any, shall be an officer of the
Corporation and, subject to the direction of the Board of Directors, shall
perform such executive, supervisory and management functions and duties as may
be assigned to him or her from time to time by the Board of Directors. The
Chairman of the Board shall, if present, preside at all meetings of stockholders
and of the Board of Directors.
Section 5. THE PRESIDENT.
(a) The President shall be the chief executive officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its other officers and agents. In general, he shall
perform all duties incident to the office of President and shall see that all
orders and resolutions of the Board of Directors are carried into effect. In
addition to and not in limitation of the foregoing, the President shall be
empowered to authorize any change of the registered office or registered agent
(or both) of the Corporation in the State of Delaware.
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations in
which the Corporation may hold securities. At such meeting the President shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities which the Corporation might have possessed and exercised if
it had been present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
Section 6. THE CHIEF OPERATING OFFICER. The Chief Operating Officer will be
responsible for forming the structure of the organization as it grows through
mergers and acquisitions, as well as internal expansion. The Chief Operating
Officer will also be responsible for the day to day operations of the
Corporation, and will report to the Chief Executive Officer to plan for the
future of the organization.
Section 7. THE VICE PRESIDENTS. The Vice President, if any (or in the
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election), shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President
9
<PAGE>
and perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 8. THE SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all votes and the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix the same to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 9. THE ASSISTANT SECRETARY. The Assistant Secretary, if any (or
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 10. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
be responsible for formulating financial policy and plans for the corporation
and for allocating and safeguarding corporate assets. He shall manage and
provide direction for controller function, investment options, risk management
and financial management information systems that support these functions. He
shall ensure that financial transactions, policies and procedures meet corporate
short and long term objectives and regulatory body requirements.
ARTICLE VII
INDEMNIFICATION OF
DIRECTORS AND OFFICERS
Section 1. NATURE OF INDEMNITY. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a Director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party
10
<PAGE>
or is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; except
that in the case of an action or suit by or in the right of the Corporation to
procure a judgment in its favor (a) such indemnification shall be limited to
expenses (including attorneys' fees) actually and reasonably incurred by such
person in the defense or settlement of such action or suit, and (b) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. SUCCESSFUL DEFENSE. To the extent that a Director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
of this Article VII or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a Director or officer of the Corporation under Section 1 of
this Article VII (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the Director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the Corporation under Section 1 (unless ordered by a court) may be
made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1. Any such determination
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or proceeding,
or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested Directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
11
<PAGE>
Section 4. ADVANCE PAYMENT OF EXPENSES. Unless the Board of Directors
otherwise determines in a specific case, expenses incurred by a Director or
officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article VII.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the corporation is a party to such action, suit or proceeding.
Section 5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a contract right may not be
modified retroactively without the consent of such Director, officer, employee
or agent.
The indemnification provided by this Article VII shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys' fees, that my change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article VII.
Section 6. SEVERABILITY. If this Article VII or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article VII that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Section 7. SUBROGATION. In the event of payment of indemnification to a
person described in Section 1 of this Article VII, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the
12
<PAGE>
Corporation may deem necessary or desirable to perfect such right of recovery,
including the execution of such documents necessary to enable the Corporation
effectively to enforce any such recovery.
Section 8. NO DUPLICATION OF PAYMENTS. The Corporation shall not be
liable under this Article VII to make any payment in connection with any claim
made against a person described in Section 1 of this Article VII to the extent
such person has otherwise received payment (under any insurance policy, bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.
ARTICLE VIII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 1. AFFILIATED TRANSACTIONS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(a) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or
(b) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders.
Section 2. DETERMINING QUORUM. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
13
<PAGE>
ARTICLE IX
STOCK CERTIFICATES
Section 1. FORM; SIGNATURES.
(a) Every holder of stock in the Corporation shall be entitled to
have a certificate, signed by the Chairman of the Board or the President and the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Corporation, exhibiting the number and class (and series, if any) of
shares owned by him. Such signatures may be facsimile. A certificate may be
manually signed by a transfer agent or registrar other than the Corporation or
its employee but may be a facsimile. In case any officer who has signed, or
whose facsimile signature was placed on, a certificate shall have ceased to be
such officer before such certificate is issued, it may nevertheless be issued by
the Corporation with the same effect as if he were such officer at the date of
its issue.
(b) All stock certificates representing shares of capital stock
which are subject to restrictions on transfer or to other restrictions may have
imprinted thereon such notation to such effect as may be determined by the Board
of Directors.
Section 2. REGISTRATION OF TRANSFER. Upon surrender to the Corporation or
any transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation or its transfer agent to issue
a new certificate to the person entitled thereto, to cancel the old certificate
and to record the transaction upon its books.
Section 3. REGISTERED STOCKHOLDERS.
(a) Except as otherwise provided by law, the Corporation shall be
entitled to recognize the exclusive right of a person who is registered on its
books as the owner of shares of its capital stock to receive dividends or other
distributions, to vote as such owner, and to hold liable for calls and
assessments any person who is registered on its books as the owner of shares of
its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to or interest in such shares on the part of any other
person.
(b) If a stockholder desires that notices and/or dividends shall
be sent to a name or address other than the name or address appearing on the
stock ledger maintained by the Corporation (or by the transfer agent or
registrar, if any), such stockholder shall have the duty to notify the
Corporation (or the transfer agent or registrar, if any) in writing, of such
desire. Such written notice shall specify the alternate name or address to be
used.
Section 4. RECORD DATE. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution, or to make a
14
<PAGE>
determination of the stockholders of record for any other proper purpose, the
Board of Directors may, in advance, fix a date as the record date for any such
determination. Such date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to the date of any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting
taken pursuant to Section 8 of Article II; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 5. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of Directors
may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
ARTICLE X
GENERAL PROVISIONS
Section 1. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. RESERVES. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation. The Board of Directors, in its sole
discretion, may fix a sum which may be set aside or reserved over and above the
paid-in capital of the Corporation for working capital or as a reserve for any
proper purpose, and may, from time to time, increase, diminish or vary such fund
or funds.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 4. SEAL. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its incorporation and the words "Corporate Seal"
and "Delaware"
15
<PAGE>
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power to make, alter and repeal these
Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of the
whole Board, provided that notice of the proposal to make, alter or repeal these
Bylaws, or to adopt new bylaws, must be included in the notice of the meeting of
the Board of Directors at which such action takes place.
16
<PAGE>
Exhibit 4.01(c)
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.
WITNESSETH:
-----------
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 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 DV 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;
<PAGE>
NOW, THEREFORE, it is agreed:
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 Baruma 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.
<PAGE>
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 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:
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
----------------------------------------
Title:
BAYERISCHE HYPO-UND VEREINSBANX AG,
Individually and as Syndication Agent
By
----------------------------------------
Title:
By
----------------------------------------
Title:
BANKBOSTON, N,A,, Individually and as
Documentation Agent
By
----------------------------------------
Title:
<PAGE>
LA SALLE NATIONAL BANK
By
----------------------------------------
Title:
FLEET NATIONAL BANK
By
----------------------------------------
Title:
NATIONAL BANK OF CANADA
By
----------------------------------------
Title:
By
----------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By
----------------------------------------
Title:
<PAGE>
SCHMIDT BANK
By
----------------------------------------
Title:
<PAGE>
Exhibit 4.01(d)
THIRD AMENDMENT AND WAIVER
--------------------------
THIRD AMENDMENT AND WAIVER (this "Amendment"), dated as of March 30, 1999,
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
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"); and
WHEREAS, subject to the terms and conditions of this Amendment, the parties
hereto agree as follows;
NOW, THEREFORE, it is agreed:
1. The Banks hereby agree that each reference to the number "150" appearing
in Sections 7.11(a), (b), (c), (d), (g) and (i) shall be deleted and the number
"270" shall in each case be inserted in lieu thereof
2. Notwithstanding anything to the contrary contained in Section 7.0 1(h)
of the Credit Agreement, the US Borrower shall not be required to deliver an
audit in respect of the Permitted Acquisition of the Acquired Business
constituting Southern Rainbow until 270 days after the closing of such Permitted
Acquisition.
3. This Amendment shall become effective on the date (the "Third Amendment
Effective Date") when 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.
4. 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
<PAGE>
Third Amendment Effective Date, after giving effect to this Amendment and (ii)
there exists no Default or Event of Default on the Third Amendment Effective
Date, after giving effect to this Amendment,
5. 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.
6. 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.
7. 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.
8. From and after the Third Amendment Effective Dare, 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>
LA SALLE NATIONAL BANK
By
----------------------------------------
Title:
FLEET NATIONAL BANK
By
----------------------------------------
Title:
NATIONAL BANK OF CANADA
By
----------------------------------------
Title:
By
----------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By
----------------------------------------
Title:
SCHMIDT BANK
By
----------------------------------------
Title:
<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/
----------------------------------------
Title: CFO
U.S.A. FLORAL PRODUCTS GERMANY GMBH
& CO. KG
By
----------------------------------------
Title:
FLORIMEX WORLDWIDE B V.
By
----------------------------------------
Title:
BANKERS TRUST COMPANY,
Individually and as Agent
By
----------------------------------------
Title:
BAYERISCHE HYPO-UND VEREINSBANK AG,
Individually and as Syndication Agent
By
----------------------------------------
Title:
By
----------------------------------------
Title:
BANKBOSTON, NA., Individually and as
Documentation Agent
By
----------------------------------------
Title:
<PAGE>
Exhibit 4.01(e)
FOURTH AMENDMENT AND WAIVER
---------------------------
FOURTH AMENDMENT AND WAIVER (this "Amendment"), dated as of March 24,
2000, 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 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 Borrowers, the Banks, the Syndication Agent, the
Documentation and the Administrative Agent wish to modify the Credit Agreement
as herein provided; and
WHEREAS, subject to terms and conditions of this Amendment, the parties
hereto agree as follows;
NOW, THEREFORE, it is agreed:
1. The Banks hereby waive any Default or Event of Default which may
arise solely as a result of the Borrowers failing to comply with any of Sections
7.11(c), (d), (g) and/or (i) of the Credit Agreement by April 1, 2000 with
respect to the security to be granted pursuant to the Dutch Pledge Agreement and
the Dutch Security Agreement and the guaranties to be provided by the Dutch
Credit Parties, so long as the Borrowers shall be in such compliance with each
such Section referred to above by May 31, 2000; provided, however, (x) if the
-------- -------
Borrowers have not complied with each such Section by May 31, 2000, an Event of
Default under the Credit Agreement shall be deemed to have occurred on such date
and (y) the security interests to be granted in favor of the Collateral Agent
in the assets of the Dutch Credit Parties shall not include those receivables
that have been pledged to secure the Rabobank Revolver as permitted under
Section 8.04(g) of the Credit Agreement.
<PAGE>
2. Section 1.01(B)(a) of the Credit Agreement is hereby amended by
(i) deleting the comma appearing at the end of sun-clause (v)(x) thereof and
inserting the word "and" in lieu thereof and (ii) deleting the following text
appearing in such sub-clause (v) thereof:
"and (z) the aggregate principal amount of all Foreign Subsidiary Third Party
Borrowings (for this purpose, using the Dollar Equivalent of Foreign
Subsidiary Third Party Borrowings incurred in a currency other than Dollars)
then outstanding".
3. Section 101(D)(a) of the Credit Agreement is hereby amended by
(i) deleting the comma appearing at the end of sub-clause (iv)(x) thereof and
inserting the word "and" in lieu thereof and (ii) deleting the following text
appearing in such sub-clause (iv):
"and (z) the aggregate principal amount of all Foreign Subsidiary Third Party
Borrowings (for this purpose, using the Dollar Equivalent of Foreign
Subsidiary Third Party Borrowings incurred in a currency other than Dollars)
then outstanding".
4. Section 1 of the Credit Agreement id hereby amended by inserting
the following new Sections 1.14 and 1.15 at the end thereof:
"1.14 Certain Additional Limitations on Loans and Letters of Credit.
-------------------------------------------------------------
(a) Notwithstanding anything to the contrary contained in Sections 1.01 and
2.01(b) of this Agreement, until such time as the Required Banks otherwise
agree, the US Borrower will not permit the aggregate amount of all Dollar
Outstandings at any time to exceed the lesser of (i) the Dollar
Outstandings Cap and (ii) the Total Dollar Revolving Loan Commitment at
such time.
(b) Notwithstanding anything to the contrary contained in this Agreement
(including Sections 1.01(c) and 2.01), until such time as the Required
Banks otherwise agree, the Foreign Borrowers will not be permitted to incur
or have outstanding any Foreign Revolving Loans or have any additional
Foreign Letters of Credit issued for their account, although the Foreign
Borrowers will be permitted to keep outstanding any Foreign Letters of
Credit that are outstanding on March 17, 2000 (as such Foreign Letters of
Credit may be extended or renewed (but not increased) from time to time in
accordance with the terms hereof and thereof).
1.15 Additional Base Rate Borrowings. Notwithstanding anything to
-------------------------------
the contrary contained in this Agreement, if on any date set forth below the
aggregate amount of all Dollar Outstandings on such date exceeds the amount
set forth opposite such date set forth below, then all Dollar Revolving Loans
which are outstanding on such date in excess of the amount set forth opposite
such date shall thereafter bear interest at the interest rate otherwise
applicable to Dollar Revolving Loans that are maintained as Base Rate Loans
irrespective of the interest rate then applicable to such Dollar Revolving
Loans:
Date Amount
---- ------
March 31, 2000 $170,000,000
-2-
<PAGE>
June 30, 2000 $160,000,000
September 30, 2000 $160,000,000
December 31, 2000 $160,000,000
March 31, 2001 $170,000,000
5. Section 2.01(b) of the Credit Agreement is hereby amended by (i)
deleting the text "(I)" appearing in sub-clause (i)(y) thereof and (ii) deleting
the following text appearing in such sub-clause (i)(y) thereof:
"and (II) the aggregate principal amount of all Foreign Subsidiary Third
Party Borrowings (for this purpose, using the Dollar Equivalent of Foreign
Subsidiary Third Party Borrowings incurred in a currency other than Dollars)
then outstanding".
6. Section 3.01 of the Credit Agreement is hereby amended by
inserting the following new clauses (j) and (k) at the end thereof:
"(j) No later than April 30, 2000, the US Borrower agrees to deliver
to the Administrative Agent for the pro rata distribution to each Bank (based
--- ----
on their respective "percentages" used in determining the Required Banks at
such time (determined as if there were no Defaulting Banks)) warrants to
purchase up to 5% of the common stock of the US Borrower calculated on a
fully diluted basis, which warrants (i) shall have an exercise price of
$0.25, (ii) shall be exercisable for a period of up to 10 years, provided,
--------
that such warrants shall not be exercisable until March 31, 2001, and (iii)
----
shall otherwise be in form and substance satisfactory to the Administrative
Agent (including satisfactory anti-dilution protection); and
(k) In the event that the Borrowers have not repaid DM Term Loans
and/or permanently reduced the commitments under the Total Dollar Revolving
Loan Commitment and/or the Total Foreign Revolving Loan Commitment in an
aggregate amount for all such repayments and/or commitment reductions of at
least $50,000,000 by March 31, 2001 (exclusive of the Scheduled Repayments
that are due on December 31, 2000 and March 31, 2001), then the US Borrower
agrees to pay in Dollars to the Administrative Agent for the pro rata
--- ----
distribution to each Bank (based on their respective "percentages" used in
determining the Required Banks at such time (determined as if there were no
Defaulting Banks)) within one Business Day thereafter a fee equal to
$1,750,000."
7. Section 4.02(A)(a)(i) of the Credit Agreement is hereby deleted
in its entirety and the following new Section 4.02(A)(a)(i) is inserted in lieu
thereof:
"(a)(i) If on any date the sum of (x) the aggregate outstanding
principal amount of Dollar Revolving Loans (after giving effect to all other
repayments thereof on such date) plus (y) the aggregate outstanding principal
amount of all Swingline Loans (after giving effect to all other repayments
thereof on such date) plus (z) the US Letter of Credit Outstandings on such
date exceeds the lesser of (A) the Total Dollar Revolving
-3-
<PAGE>
Commitment as then in effect and (B) the Dollar Outstandings Cap, the US
Borrower shall repay on such date the aggregate principal amount of Swingline
Loans and, after all Swingline Loans have been repaid in full or if no
Swingline Loans are outstanding, Dollar Revolving Loans in an amount equal to
such excess. If, after giving effect to the prepayment of all outstanding
Swingline Loans and Dollar Revolving Loans, the US Letter of Credit
Outstandings exceeds the lesser of (A) the Total Dollar Revolving Commitment
as then in effect and (B) the Dollar Outstandings Cap, the US Borrower agrees
to pay the Administrative Agent on such date an amount in cash and/or Cash
Equivalents equal to such excess and the Administrative Agent shall hold such
payment as security for the obligations of the US Borrower hereunder pursuant
to a cash collateral agreement to be entered into in form and substance
satisfactory to the Administrative Agent (which shall permit certain
investments in Cash Equivalents satisfactory to the Administrative Agent
until the proceeds are applied to the secured obligations). All repayments of
Dollar Revolving Loans pursuant to this Section 4.02(A)(a)(i) shall be
applied to Acquisition Loans and Working Capital Loans in proportion to their
respective outstanding amounts."
8. Section 7.01(d) of the Credit Agreement is hereby amended by
deleting the reference to "Sections 8.05, 8.09 and 8.10" appearing therein and
inserting the text "Sections 8.05, 8.09, 8.10 and 8.13" in lieu thereof.
9. Section 7.01 of the Credit Agreement is hereby further amended
by inserting the following new clauses (j) and (k) at the end thereof:
"(j) Monthly Financial Statements; etc.. (A) Within 30 days after the
----------------------------------
end of each fiscal month of the US Borrower (commencing with its fiscal month
ending on March 31, 2000), the consolidated statements of operations of the
U.S. Borrower and its Subsidiaries for such fiscal month and for the elapsed
portion of the fiscal year ended with the last day of such fiscal month and
setting forth comparative figures for related periods in the immediately
preceding fiscal year and comparative figures for the current fiscal year
budget delivered pursuant to Section 7.01(c), all of which shall be in
reasonable detail and certified by the chief financial officer or other
Authorized Officer of the US Borrower that such statements fairly present the
results of their operations for the periods indicated.
(B) Within seven days after the end of each fiscal month of the US
Borrower (commencing with its fiscal month ending on March 31, 2000), a
rolling thirteen week cash flow forecast for the US Borrower's North American
operations, which cash flow forecast shall be substantially in the same form
as that delivered to the Banks prior to March 17, 2000.
(k) Weekly Cash Flow Statements. Within seven days after the end of
---------------------------
each week, an actual cash flow statement for the US Borrower's North American
operations for such week, together with a comparison against the forecasted
cash flows for such week as set forth in the respective cash flow forecast
delivered pursuant to clause (j)(B) of this Section 7.01"
-4-
<PAGE>
10. Section 8.02(e) of the Credit Agreement is hereby amended by
deleting the reference to "$7,500,000" appearing therein and inserting the
amount "$3,000,000" in lieu thereof.
11. Section 8.02(f) of the Credit Agreement is hereby amended by (i)
inserting the text "with the prior written consent of the Administrative Agent
and the Required Banks," immediately prior to the first word of such Section and
(ii) deleting each reference to "Sections 8.09 and 8.10" appearing therein and
inserting the text "Sections 8.09, 8.10 and 8.13" in lieu thereof in each such
place.
12. The text of Section 8.05(b) of the Credit Agreement is hereby
deleted in its entirety and the following new text is inserted in lieu thereof:
"Intentionally Omitted."
13. Section 8.09(a) of the Credit Agreement is hereby amended by
deleting the chart appearing therein and inserting the following new chart in
lieu thereof:
Period Ratio
------ -----
March 31, 2000 to and including
December 30, 2000 7.95:1.00
December 31, 2000 to and
including March 31, 2001 6.95:1.00
April 1, 2001 to and including
September 30, 2001 4.00:1.00
October 1, 2001 and thereafter 3.75:1.00".
14. Section 8.09(b) of the Credit Agreement is hereby amended by
deleting the chart appearing therein and inserting the following new chart in
lieu thereof:
Period Ratio
------ -----
March 31, 2000 to and including
December 30, 2000 7.95:1.00
December 31, 2000 to and
including March 31, 2001 6.95:1.00
April 1, 2001 to and including
September 30, 2001 4.00:1.00
October 1, 2001 and thereafter 3.75:1.00".
-5-
<PAGE>
15. Section 8.10 of the Credit Agreement is hereby deleted in
its entirety and the following new Section 8.10 is inserted in lieu thereof:
"8.10 Consolidated Interest Coverage Ratio. The US Borrower will
------------------------------------
not permit the Consolidated Interest Coverage Ratio of the US Borrower for
any Test Period ending on the last day of a fiscal quarter of the US
Borrower set forth below to be less than the ratio set forth opposite such
fiscal quarter below:
Fiscal Quarter Ending Ratio
--------------------- -----
March 31, 2000 1.75:1.00
June 30, 2000 1.75:1.00
September 30, 2000 1.75:1.00
December 31, 2000 1.90:1.00
March 31, 2001
and the last day of the each
fiscal quarter of the US
Borrower ending thereafter 2.00:1.00"
16. Section 8 of the Credit Agreement is hereby further
amended by inserting the following new Sections 8.13 and 8.14 at the end
thereof:
"8.13 Consolidated EBITDA. The US Borrower will not permit the
-------------------
Consolidated EBITDA of the US Borrower for any Test Period ending on the last
day of a fiscal quarter of the US Borrower set forth below to be less than the
amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ending Amount
--------------------- ------
March 31, 2000 $11,500,000
June 30, 2000 $12,750,000
September 30, 2000 $1,250,000
December 31, 2000 $8,000,000
March 31, 2001 $14,000,000
December 31, 2001 $40,000,000
December 31, 2002 $50,000,000
8.14 Certain Additional Restrictions on the Transfers of Funds.
----------------------------------------------------------
(a) Notwithstanding anything to the contrary contained in this Agreement
(including Sections 8.02, 8.04, 8.06, 8.07 and 8.08), until April 1, 2001
no Foreign Subsidiary of the US Borrower's Domestic Subsidiaries, whether
in the form of an intercompany loan, a cash capital contribution, a
Dividend or otherwise; provided that, thereafter, Foreign Subsidiaries of
--------
the US Borrower may transfer cash to the US Borrower or any of the US
-6-
<PAGE>
Borrower's Domestic Subsidiaries in accordance with the other provisions of
this Agreement
(b) Notwithstanding anything to the contrary contained in this
Agreement (including Sections 8.02, 8.04, 8.06, 8.07 and 8.08), until April
1, 2001 neither the US Borrower nor any of its Domestic Subsidiaries shall
be permitted to transfer any cash to any Foreign Subsidiaries of the US
Borrower, whether in the form of an intercompany loan, a cash capital,
contribution, a Dividend or otherwise; provided that, thereafter, the US
--------
Borrower and its Domestic Subsidiaries may transfer cash to their Foreign
Subsidiaries in accordance with the other provisions of this Agreement."
17. The definition of "Capital Expenditure Amount" appearing
in Section 10 of the Credit Agreement is hereby deleted in its entirety and the
following new definition of "Capital Expenditure Amount" is inserted in lieu
thereof:
"Capital Expenditure Amount" shall mean, for any period listed in
Section 8.05(a)(y), $6,000,000."
18. The definition of "Consolidated EBITDA" appearing in
Section 10 of the Credit Agreement is hereby amended by (i) deleting the word
"and" appearing immediately prior to clause (ii) in the first sentence of such
definition and inserting a comma in lieu thereof and (ii) inserting the
following text immediately after clause (ii) in the first sentence of such
definition:
"and (iii) from the computation of Consolidated EBITDA for the US Borrower
and its Subsidiaries, up to $12,000,000 in restructuring charges recorded
from the US Borrower's fiscal quarter ended on December 31, 1999 through
the US Borrower's fiscal year ending on December 31, 2000 otherwise
included in such computation for such period".
19. The definition of "Test Period" appearing in Section 10 of
the Credit Agreement is hereby deleted in its entirety and the following new
definition of "Test Period" is inserted in lieu thereof:
"Test Period" shall mean, with respect to any Person, a period of
four consecutive fiscal quarters of such Person ended on the last day of the
then most recently ended fiscal quarter of such Person; provided, however, for
-------- -------
purposes of determining compliance with Section 8.13 for any fiscal quarter
ending on or prior to March 31, 2001, each such Test Period shall instead mean
the fiscal quarter of such Person ended on the last day of the then most
recently ended fiscal quarter of such Person.
20. The definition of "Total Indebtedness" appearing in
Section 10 of the Credit Agreement is hereby amended by (i) inserting the text
"(1)" immediately following the text "any Indebtedness incurred pursuant to any"
appearing therein and (2) inserting the new following clause (2) at the end of
said definition:
"and (2) borrowings under the ABN Revolver are supported by letters of
credit, the lesser of the Indebtedness pursuant to such ABN Revolver and
the stated amount of such letters
-7-
<PAGE>
of credit shall be excluded from the determination of Total Indebtedness
for the purposes of compliance with Section 8.09".
21. Section 10 of the Credit Agreement is hereby further
amended by inserting the following new definitions in the appropriate
alphabetical order:
"Dollar Outstanding" shall mean, at any time, the sum of (I) the
aggregate principal amount of all outstanding Dollar Revolving Loans at such
time plus (II) the aggregate principal amount of all outstanding Swingline Loans
at such time plus (III) the aggregate amount of all US Letter of Credit
Outstandings at such time.
"Dollar Outstanding Cap" shall mean $174,000,000.
22. This Amendment shall become effective on the date (the
"Fourth Amendment Effective Date") when the Borrowers and the Required Banks
shall have signed a counterpart hereof (whether the same different counterparts)
and shall have delivered (including by way of facsimile transmission) the same
to the Administrative Agent at the Notice Office.
23. 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 Fourth Amendment
Effective Date, after giving effect to this Amendment, and (ii) there exists no
Default of Event of Default on the Fourth Amendment Effective Date, after giving
effect to this Amendment.
24. 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.
25. This Amendment may 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 Borrowers and the Administrative Agent.
26. 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.
27. From and after the Fourth Amendment Effective Date, all
references in the Credit Agreement and in the other Credit Documents to the
Credit Agreement shall be deemed to references to the Credit Agreement as
modified hereby.
* * *
-8-
<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
----------------------------------
Title:
U.S.A. FLORAL PRODUCTS GERMANY GMBH
& CO. KG
By
----------------------------------
Title:
FLORIMEX WORLDWIDE B.V.
By
----------------------------------
Title:
BANKERS TRUST COMPANY,
Individual and as Administrative Agent
By
----------------------------------
Title:
BAYERISCHE HYPO-UND VEREINSBANK AG
By
----------------------------------
Title:
By
----------------------------------
Title:
<PAGE>
LASALLE BANK NATIONAL ASSOCIATION
By
----------------------------------
Title:
FLEET NATIONAL BANK
By
----------------------------------
Title:
NATIONAL BANK OF CANADA
By
----------------------------------
Title:
By
----------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By
----------------------------------
Title:
SCHMIDT BANK
By
----------------------------------
Title:
<PAGE>
Exhibit 4.01(f)
WAIVER
------
WAIVER (this "Waiver"), dated as of October 7, 1999, 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 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"); and
WHEREAS, subject to the terms and conditions of this Waiver, the parties
hereto agree as follows;
NOW, THEREFORE, it is agreed:
1. The Banks hereby waive any Default or Event of Default which may have
arisen or may arise solely as a result of the Borrowers failing to comply with
any of Sections 7.11(c), (d), (g), (i) or 8.09 of the Credit Agreement during
the period from October 1, 1999 through November 14, 1999, provided, however (i)
-------- -------
that the Borrowers shall be required to be in such compliance with each such
Section referred to above on and after November 15, 1999 and (ii) if the
Borrowers have not complied with the aforementioned requirements by November 15,
1999, an Event of Default under the Credit Agreement shall be deemed to have
occurred on such date.
2. Notwithstanding anything to the contrary contained in the Credit
Agreement, until such time as the Required Banks otherwise agree in writing, the
US Borrower shall not be permitted to (x) incur and have outstanding Dollar
Revolving Loans and/or Swingline Loans in an amount in excess, when added to the
aggregate amount of US Letter of Credit Outstandings arising from the issuance
of US Letters of Credit on or after the date hereof, of $154,786,700 or (y) have
any US Letters of Credit issued under the Credit Agreement on or after the date
hereof the Stated Amount of which, when added to the aggregate amount of Dollar
Revolving Loans then outstanding and Swingline Loans then outstanding, exceeds
$154,786,700 (such Dollar Revolving Loans, Swingline Loans and US Letters of
Credit herein referred to as
<PAGE>
"Extension of Credit"), provided that after October 22, 1999 the US Borrower
--------
shall be permitted to incur and have outstanding Extensions of Credit in an
aggregate amount in excess of $154,786,700 but no more than $156,756,700 so long
as the US Borrower has theretofore delivered to the Administrative Agent a
budget in form and substance satisfactory to the Administrative Agent
demonstrating, to the Administrative Agent's satisfaction, the US Borrower's
and/or its Subsidiaries' need for additional Extensions of Credit in excess of
$154,786,700.
3. Notwithstanding anything to the contrary contained in the Credit
Agreement, until such time as the Required Banks otherwise agree in writing, the
Borrowers shall not be permitted to incur any Foreign Revolving Loans on or
after the date hereof or have any Foreign Letters of Credit issued under the
Credit Agreement on or after the date hereof, provided that either Foreign
--------
Borrower may incur Foreign Revolving Loans in an amount necessary to reimburse
the Letter of Credit Issuer for any payment by it in respect of any Foreign
Letters of Credit issued prior to the date hereof for such Foreign Borrower's
account.
4. Notwithstanding anything to the contrary contained in the Credit
Agreement, until such time as the Required Banks otherwise agree in writing, on
any date on which the sum of (i) the aggregate principal amount of all Dollar
Revolving Loans then outstanding plus (ii) the aggregate principal amount of all
Swingline Loans then outstanding plus (iii) the US Letter of Credit Outstanding
exceeds $151,786,700 (such excess, the "Excess Extensions of Credit"), then the
US Borrower shall be required on each such date to apply any and all cash and
Cash Equivalents in excess of (x) $1,000,000 deposited in (or credited to) its
U.S. corporate headquarters bank account and (y) $1,000,000 in the aggregate
deposited in (or credited to) each of (1) the U.S. Borrower's Domestic
Subsidiaries' U.S. bank accounts relating to their importer operations, (2) the
U.S. Borrower's Domestic Subsidiaries' U.S. bank accounts relating to their
wholesale operations or (3) the U.S. Borrower's Domestic Subsidiaries' U.S. bank
account relating to their bouquet operations, in each case to such Excess
Extensions of Credit as provided in the immediately succeeding sentence. Any
application of cash and Cash Equivalents required by the immediately preceding
sentence shall be applied (i) first, to repay outstanding Swingline Loans, (ii)
second, to the extent all outstanding Swingline Loans have been repaid in full,
to repay outstanding Dollar Revolving Loans and (iii) third, to the extent all
outstanding Swingline Loans and all Dollar Revolving Loans have been repaid in
full, to cash collateralize any outstanding US Letters of Credit.
5. Notwithstanding anything to the contrary contained in Section 1.09 (vii)
of the Credit Agreement, the Banks hereby agree that the Borrower may continue
that certain Borrowing of Dollar Revolving Loans having an Interest Period
ending on October 7, 1999 as a Eurodollar Loan and may elect a new Interest
Period of two months in respect of such Borrowing, which Interest Period shall
commence on October 7, 1999.
6. This Waiver shall become effective on the date (the "Waiver Effective
Date") when 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.
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
2
<PAGE>
Waiver Effective Date, after giving effect to this Waiver, and (ii) there exists
no Default or Event of Default on the Waiver Effective Date, after giving effect
to this Waiver.
8. This Waiver 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 Waiver 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 WAIVER 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 Waiver 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.
* * *
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Waiver as of the date first above written.
U.S.A. FLORAL PRODUCTS, INC
By /s/ Robert J. Poirier
----------------------------------------
Title:
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:
4
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Arranger and
Administrative Agent
By /s/ David Bell
----------------------------------------
Title: DAVID BELL
PRINCIPAL
5
<PAGE>
BAYERISCHE HYPO- UND VEREINSBANK AG,
Individually and as Syndication Agent
By /s/ Erich Ebner v. Esehenbach
----------------------------------------
Title: Erich Ebner v. Esehenbach
Managing Director
By /s/ Sylvia K. Cheng
----------------------------------------
Title: Sylvia K. Cheng
Director
6
<PAGE>
BANKBOSTON. N. A., Individually and as
Documentation Agent
By /s/ Pamela Kuong
----------------------------------------
Title: Vice President
7
<PAGE>
FLEET BANK, N.A.
By /s/ Thomas J. Levy
----------------------------------------
Title: Vice President
8
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By /s/ J. Wililam Bloore
----------------------------------------
Title: J. Wililam Bloore
Vice President
9
<PAGE>
NATIONAL BANK OF CANADA
By /s/
----------------------------------------
Title: VP/Manager
By /s/
----------------------------------------
Title: VP
10
<PAGE>
Exhibit 4.01(g)
WAIVER
------
WAIVER (this "Waiver"), dated as of November 9, 1999, 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"), BAYERISCHEUND 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"); and
WHEREAS, subject to the terms and conditions of this Waiver, the
parties hereto agree as follows;
NOW, THEREFORE, it is agreed:
1. The Banks hereby waive any Default or Event of Default which may
have arisen or may arise solely as a result of the Borrowers failing to comply
with any of Sections 7.11(c), (d), (g), (i) or 8.09 of the Credit Agreement
during the period from October 1, 1999 through December 31, 1999, provided,
---------
however (i) that the Borrowers shall be required to be in such compliance with
- -------
each such Section referred to above on and after January 1, 1999 and (ii) if the
Borrowers have not complied with the aforementioned requirements by January 1,
1999, an Event of Default under the Credit Agreement shall be deemed to have
occurred on such date.
2. Notwithstanding anything to the contrary contained in the Credit
Agreement or in paragraph numbered 2 of that certain Waiver, dated as of October
7, 1999, among the Borrowers, the Banks, the Syndication Agent, the
Documentation Agent and the Administration Agent, until such time as the
Required Banks otherwise agree in writing, the US Borrower shall not be
permitted to (x) incur and have outstanding Dollar Revolving Loans and/or
Swingline Loans in an amount in excess, when added to the aggregate amount of US
Letter of Credit Outstandings arising from the issuance of US Letters of Credit
on or after the date hereof, of (i) on or prior to November 14, 1999,
$156,786,000 and (ii) thereafter $159,000,000 or (y) have any US Letters of
Credit issued under the Credit Agreement on or after the date hereof the Stated
Amount of which, when added to the aggregate amount of Dollar Revolving Loans
then
<PAGE>
outstanding and Swingline Loans then outstanding, exceeds (i) on or prior to
November 14, 1999, $156,786,000 and (ii) thereafter, $159,000,000.
3. This Waiver shall become effective on the date (the "Waiver
Effective Date") when (i) 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 and (ii) the US Borrower shall have
retained a financial advisory firm reasonably satisfactory to the Administrative
Agent.
4. In order to induce the Banks to enter into this Waiver, 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 Waiver Effective Date, after
giving effect to this Waiver, and (ii) there exists no Default or Event of
Default on the Waiver Effective Date, after giving effect to this Waiver.
5. This Waiver 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.
6. This Waiver 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.
7. THIS WAIVER 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.
8. From and after the Waiver 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.
* * *
2
<PAGE>
WITNESS WHEREOF the parties hereto have caused their duly
authorized officers to execute and deliver this Waiver as of the date first
above written.
U.S.A. FLORAL PRODUCTS, INC.
By /s/ Robert J. Poirier
----------------------------------
Title:
U.S.A. FLORAL PRODUCTS GERMANY GMBH
& CO. KG
By /s/ Robert J. Poirier
----------------------------------
Title:
FLORIMEX WORLDWIDE B.V.
By /s/ Robert J. Poirer
----------------------------------
Title:
BANKERS TRUST COMPANY
Individually and as Arranger and
Administrative Agent
By /s/ David Bell
----------------------------------
Title: David Bell
Principal
BAYERISCHE HYPO-UND VEREINSBANK AG,
Individually and as Syndication Agent
By /s/ Erich Ebner V. Eschenbach
----------------------------------
Title: Erich Ebner V. Eschenbach
By /s/ Sylvia Cheng
----------------------------------
Title: Sylvia Cheng
Director
3
<PAGE>
LA SALLE BANK NATIONAL ASSOCIATION
By /s/ John C. Thurston
----------------------------------
Title: Vice President
4
<PAGE>
NATIONAL BANK OF CANADA
By
---------------------------------
Title: VP/MANAGER
By
----------------------------------
Title: VP
5
<PAGE>
Exhibit 4.01(h)
WAIVER
------
WAIVER (this "Waiver"), dated as of December 23, 1999, 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.
WITNESSETH:
----------
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"); and
WHEREAS, subject to the terms and conditions of this Waiver, the
parties hereto agree as follows;
NOW, THEREFORE, it is agreed:
1. The Banks hereby waive any Default or Event of Default which may
have arisen or may arise solely as a result of the Borrowers failing to comply
with any of Sections 7.11(c), (d), (g), (i) or 8.09 of the Credit Agreement
during the period from October 1, 1999 through March 31, 2000, provided, however
-------- -------
(i) that the Borrowers shall be required to be in such compliance with each such
Section referred to above on and after April 1, 2000 and (ii) if the Borrowers
have not complied with the aforementioned requirements by April 1, 2000, an
Event of Default under the Credit Agreement shall be deemed to have occurred on
such date.
2. Notwithstanding anything to the contrary contained in the Credit
Agreement or in paragraph numbered 2 of that certain Waiver, dated as of
November 9, 1999, among the Borrowers, the Banks, the Syndication Agent, the
Documentation Agent and the Administration Agent, until such time as the
Required Banks otherwise agree in writing, prior to January 15, 2000 the US
Borrower shall not be permitted to incur and have outstanding Dollar Revolving
Loans or Swingline Loans, or issue any US Letters of Credit on or after the date
hereof in an aggregate amount in excess of $164,000,000 (the sum of the
principal amount and/or Stated Amount of such Dollar Revolving Loans, Swingline
Loans and US Letters of Credit is hereinafter referred to as "Dollar
Outstandings"). From and after January 15, 2000, the US Borrower shall not be
permitted to incur and have outstanding Dollar Outstandings in an aggregate
amount in excess of $164,000,000 unless the US Borrower has theretofore
delivered to the Administrative Agent a written report from Policano & Manzo
demonstrating to the Administrative Agent's
<PAGE>
satisfaction that the US Borrower requires additional liquidity in a minimum
amount acceptable to the Administrative Agent, in which case the US Borrower
shall be permitted to have Dollar Outstandings in an aggregate amount up to, but
(until such time as the Required Banks otherwise agree in writing) no more than,
$174,000,000.
3. This Waiver shall become effective on the date (the "Waiver
Effective Date") when 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.
4. In order to induce the Banks to enter into this Waiver, 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 Waiver Effective Date, after
giving effect to this Waiver, and (ii) there exists no Default or Event of
Default on the Waiver Effective Date, after giving effect to this Waiver.
5. This Waiver 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.
6. This Waiver 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.
7. THIS WAIVER 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.
8. From and after the Waiver 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.
* * *
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Waiver as of the date first above written.
U.S.A. FLORAL PRODUCTS, INC.
By /s/ Robert J. Poirier
--------------------------------------
Title:
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 Arranger and
Administrative Agent
By
--------------------------------------
Title: Director
BAYERISCHE HYPO-UND VEREINSBANK AG,
Individually and as Syndication Agent
By Erich Ebner V. Eschenbach
--------------------------------------
Title: Erich Ebner V. Eschenbach
Managing Director
By Sylvia Cheng
--------------------------------------
Title: Sylvia Cheng
Director
3
<PAGE>
BANKBOSTON, N.A., Individually and as
Documentation Agent
By /s/ Pamela A. Kuong
--------------------------------------
Title: Vice President
4
<PAGE>
NATIONAL BANK OF CANADA
By /s/
--------------------------------------
Title: VP/MANAGER
By /s/
--------------------------------------
Title: VP
5
<PAGE>
FLEET BANK, N.A.
By /s/ Thomas J. Levy
--------------------------------------
Title: Vice President
6
<PAGE>
UNION BANK OF CALIFORNIA, N.A.
By /s/ J. William Bloore
--------------------------------------
Title: J. William Bloore
Vice President
7
<PAGE>
SCHMIDT BANK
By /s/ Gunter Jungnickl
--------------------------------------
Title: Gunter Jungnickl
Vice President
8
<PAGE>
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of this 1st day of February 1999, is
by and between U.S.A. Floral Products, Inc. ("USA Floral"), a Delaware
corporation, and John T. Dickinson ("Employee").
RECITALS
USA Floral desires to continue to employ Employee and to have the benefit
of his skills and services, and Employee desires to continue employment with USA
Floral, 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. USA Floral hereby employs Employee to perform the
----------------
duties described herein, and Employee hereby accepts employment with USA Floral,
for a term beginning on the date indicated herein and continuing for a period
of two years (the "Term").
2. Position and Duties. USA Floral hereby employs Employee as President
-------------------
of the Wholesale Division. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of the President of a
Division. Employee will report directly to the Chief Executive Officer and the
Board of Directors of USA Floral (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 USA Floral. Employee shall faithfully adhere to, execute, and
fulfill all policies established by USA Floral.
3. Compensation. For all services rendered by Employee, USA Floral shall
------------
compensate Employee as follows:
(a) Base Salary. Effective on the date hereof, the base salary payable to
Employee shall be $225,000 per year, payable on a regular basis in accordance
with USA Floral's standard payroll procedures, but not less than monthly. On at
least an annual basis, the Board will review Employee's performance and may make
increases to such base salary if, in its sole discretion, any such increase is
warranted.
(b) Incentive Bonus. During the Term, Employee shall be eligible to
receive an incentive bonus up to the amount, based upon the criteria, and
payable at such times as are, specified in Exhibit A attached hereto. The
amount, manner of payment, and form of consideration, if any, shall be
determined by the Board, in its sole and absolute discretion, and such
determination shall be binding and final. To the extent that such bonus is to
be determined in light of financial performance during a specified fiscal period
and this Agreement commences
<PAGE>
on a date after the start of such fiscal period, any bonus payable in respect of
such fiscal period's results may be prorated. In addition, if the period of
Employee's employment hereunder expires before the end of a fiscal period, and
if Employee is eligible to receive a bonus at such time (such eligibility being
subject to the restrictions set forth in Section 6 below), any bonus payable in
respect of such fiscal period's results may be prorated.
(c) Perquisites, Benefits, and Other Compensation. During the Term,
Employee shall be entitled to receive all perquisites and benefits as are
customarily provided by USA Floral to its employees, subject to such changes,
additions, or deletions as USA Floral may make generally from time to time, as
well as such other perquisites or benefits as may be specified from time to time
by the Board.
4. Expense Reimbursement. USA Floral shall reimburse Employee for (or,
---------------------
at USA Floral'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 USA Floral'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 USA Floral to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or a change in duties and
responsibilities. In such event, if Employee agrees to relocate, USA Floral
will provide Employee with a relocation allowance, in an amount determined by
USA Floral, 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 USA Floral, in light of
prevailing USA Floral policy at the time.
6. Termination; Rights on Termination. Employee's employment may be
----------------------------------
terminated in any one of the followings ways, prior to the expiration of the
Term:
(a) Death. The death of Employee shall immediately terminate the Term, and
no Severance Compensation (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 essential
functions of his position, with or without reasonable accommodation, 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 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), USA Floral 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, USA Floral shall continue to
pay Employee his base salary at the then-current rate for the lesser of (i)
three months from the effective date of termination, or (ii) whatever time
period is remaining under the then-current
<PAGE>
period of the Term (without regard to renewals thereof). Such payments shall be
made in accordance with USA Floral's regular payroll cycle.
(c) Termination by USA Floral "For Cause." USA Floral 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 USA Floral'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 USA Floral, and that in the judgment
of USA Floral materially and adversely affects the operations or reputation of
USA Floral; (iv) Employee's conviction of a felony or other crime involving
moral turpitude; or (v) Employee's abuse of alcohol or drugs (legal or illegal)
that, in USA Floral's judgment, materially impairs Employee's ability to perform
his duties hereunder. In the event of a termination "for cause," as enumerated
above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment, USA
Floral may, without cause, terminate the Term and Employee's employment,
effective 30 days after written notice is provided to Employee. Should
Employee be terminated by USA Floral without cause or in the event of a change
of control in ownership (which shall be defined as a situation 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 50% of the then outstanding
shares of stock), Employee shall receive from USA Floral accelerated vesting of
options to purchase shares of Common Stock then held by him, as well as his base
salary plus benefits for 12 months. Payment of Employee's base salary shall be
in accordance with USA Floral's current payroll practices.
(e) Payment Through Termination. Upon termination of Employee's
employment 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 USA Floral) 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 USA Floral under Section 6(b) or 6(d), Employee shall be entitled
to receive incentive bonus compensation through the end of USA Floral's fiscal
year in which termination occurs, calculated as if Employee had remained
employed by USA Floral 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 USA Floral, and Employee under this Agreement
shall cease as of the effective date of termination, except that Employee's
obligations
<PAGE>
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, 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, USA Floral shall have
the right to reduce the amounts to be paid hereunder by the amount of Employee's
earnings from such other employment.
7. Restriction on Competition.
--------------------------
(a) During the Term, and thereafter, if Employee continues to be employed
by USA Floral and/or any other entity owned by or affiliated with USA Floral 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, USA Floral, 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 USA Floral including
without limitation the importing, brokerage, shipping or marketing of floral
products, or any business engaging in the consolidation of the floral industry
within the United States of America (the "Territory");
(ii) call upon any Person who is, at that time, within the Territory,
an employee of USA Floral for the purpose or with the intent of enticing such
employee away from or out of the employ of USA Floral;
(iii) call upon any Person who or that is, at that time, or has been,
within one year prior to that time, a customer of USA Floral within the
Territory for the purpose of soliciting or selling products or services in
direct competition with USA Floral 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 USA Floral was either
called upon by USA Floral as a prospective acquisition candidate or was the
subject of an acquisition analysis conducted by USA Floral.
(b) The foregoing covenants shall not be deemed to prohibit Employee from
acquiring as an investment not more than one percent of the capital stock of a
competing business, whose stock is traded on a national securities exchange or
through the automated quotation system of a registered securities association;
(II) engaging in any activity to which USA Floral shall have provided its prior
written consent; or (iii) maintaining his position with the Meadow Flower, S.A.,
rose farm, located in Ecuador.
<PAGE>
(c) It is further agreed that, in the event that Employee shall cease to
be employed by USA Floral and enters into a business or pursues other activities
that, at such time, are not in competition with USA Floral, Employee shall not
be chargeable with a violation of this Section 7 if USA Floral subsequently
enters the same (or a similar) competitive business or activity. In addition, if
Employee has no actual knowledge that his actions violate the terms of this
Section 7, Employee shall not be deemed to have breached the restrictive
covenants contained herein if, promptly after being notified by USA Floral of
such breach, Employee ceases the prohibited actions.
(d) For purposes of this Section 7, references to "USA Floral" shall mean
U.S.A. Floral Products, Inc., together with its subsidiaries and affiliates.
(e) The covenants in this Section 7 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. If any provision of this 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 USA Floral,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by USA Floral of such covenants; provided, that upon
--------
the failure of USA Floral to make any payments required under this Agreement,
Employee may, upon 30 days' prior written notice to USA Floral, 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 USA Floral 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 USA Floral, and their respective officers,
directors, employees, and stockholders. It is further agreed
<PAGE>
that USA Floral and Employee intend that such covenants be construed and
enforced in accordance with the changing activities, business, and locations of
USA Floral throughout the term of these covenants.
8. Confidential Information. Employee hereby agrees to hold in strict
------------------------
confidence and not to disclose to any third party any of the valuable,
confidential, and proprietary business, financial, technical, economic, sales,
and/or other types of proprietary business information relating to USA Floral
(including all trade secrets), in whatever form, whether oral, written, or
electronic (collectively, the "Confidential Information"), to which Employee
has, or is given (or has had or been given), access as a result of his
employment by USA Floral. It is agreed that the Confidential Information is
confidential and proprietary to USA Floral because such Confidential Information
encompasses technical know-how, trade secrets, or technical, financial,
organizational, sales, or other valuable aspects of USA Floral's business and
trade, including, without limitation, technologies, products, processes, plans,
clients, personnel, operations, and business activities. This restriction shall
not apply to any Confidential Information that (a) becomes known generally to
the public through no fault of 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 USA Floral
- --------
reasonable advance written notice of the Confidential Information intended to be
disclosed and the reasons and circumstances surrounding such disclosure, in
order to permit USA Floral to seek a protective order or other appropriate
request for confidential treatment of the applicable Confidential Information.
9. Inventions. Employee shall disclose promptly to USA Floral any and
----------
all significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
year thereafter, and that are directly related to the business or activities of
USA Floral and that Employee conceives as a result of his employment by USA
Floral, 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 USA Floral or its nominee. Whenever requested to do so
by USA Floral, Employee shall execute any and all applications, assignments, or
other instruments that USA Floral shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect USA Floral's interest therein.
10. Return of USA Floral Property. Promptly upon termination of
-----------------------------
Employee's employment by USA Floral for any reason or no reason, Employee or
Employee's personal representative shall return to USA Floral (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 USA Floral, or their respective
representatives, vendors, or customers that pertain to the business of USA
Floral, whether in paper, electronic, or other form; and (c) all keys, credit
cards, vehicles, and other property of USA Floral. Employee shall not retain or
cause to be retained any copies of the foregoing.
<PAGE>
Employee hereby agrees that all of the foregoing shall be and remain the
property of USA Floral, as the case may be, and be subject at all times to their
discretion and control.
11. No Prior Agreements. Employee hereby represents and warrants to USA
-------------------
Floral that the execution of this Agreement by Employee, his employment by USA
Floral, 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 USA Floral 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 USA Floral 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 USA Floral, this Agreement shall automatically
supersede such agreement or understanding, and upon execution of this Agreement
by Employee and USA Floral, such prior agreement or understanding automatically
shall be deemed to have been terminated and shall be null and void.
12. Assignment; Binding Effect. Employee understands that he has been
--------------------------
selected for employment by USA Floral 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 USA Floral without the prior
written consent of Employee. Subject to the preceding two sentences, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives,
successors, and assigns. Notwithstanding the foregoing, if Employee accepts
employment with a subsidiary or affiliate of USA Floral other than USA Floral,
unless Employee and his new employer agree otherwise in writing, this Agreement
shall automatically be deemed to have been assigned to such new employer (which
shall thereafter be an additional or substitute beneficiary of the covenants
contained herein, as appropriate), with the consent of Employee, such assignment
shall be considered a condition of employment by such new employer, and
references to the "USA Floral" in this Agreement shall be deemed to refer to
such new employer. If USA Floral is merged with or into another subsidiary or
affiliate of USA Floral, such action shall not be considered to cause an
assignment of this Agreement, and the surviving or successor entity shall become
the beneficiary of this Agreement and all references to the "USA Floral" shall
be deemed to refer to such surviving or successor entity.
13. Complete Agreement; Waiver; Amendment. This Agreement is not a
-------------------------------------
promise of future employment. Employee has no oral representations,
understandings, or agreements with USA Floral 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 USA Floral 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 USA Floral 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.
<PAGE>
14. Notice. Whenever any notice is required hereunder, it shall be given
------
in writing addressed as follows:
To USA Floral:
U.S.A. Floral Products, Inc.
1025 Thomas Jefferson Street, N.W.
Suite 300 East
Washington, DC 20007
Attention: Robert J. Poirier
To Employee: John T. Dickinson
18 Wheeler Road
Lincoln, MA 01773
Notice shall be deemed given and effective three days after the deposit in the
U.S. mail of a writing addressed as above and sent first class mail, certified,
return receipt requested, or, if sent by express delivery, hand delivery, or
facsimile, when actually received. Either party may change the address for
notice by notifying the other party of such change in accordance with this
Section 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 USA Floral as a result of a breach of the restrictive covenants set
forth in Sections 7, 8, 9 and 10, and because of the immediate and irreparable
damage that would be caused to USA Floral for which monetary damages would not
be a sufficient remedy, it is hereby agreed that in addition to all other
remedies that may be available to USA Floral at law or in equity, USA Floral
shall be entitled to specific performance and any injunctive or other equitable
relief as a remedy for any breach or threatened breach of the aforementioned
restrictive covenants.
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
<PAGE>
final and binding. Judgement may be entered on the arbitrators' award in any
court having jurisdiction. The direct expense of any arbitration proceeding
shall be borne by USA Floral. Each party shall bear its own counsel fees. The
arbitration proceeding shall be held in the city where the principal office of
USA Floral is located. Notwithstanding the foregoing, USA Floral shall be
entitled to seek injunctive or other eguitable 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 principals.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be duly
executed as of the date written above.
USA FLORAL PRODUCTS,INC.
By: /s/ Robert J. Poirier
Name:
Title:
EMPLOYEE:
/S/ John T. Dickinson
----------------------
<PAGE>
EXHIBIT A
---------
Effective February 1, 1999, under USAFP's Incentive Bonus Plan, Employee will be
eligible to earn up to 75% of Employee's base salary in bonus compensation,
payable out of a bonus pool determined by the Board of Directors of USAFP or a
compensation committee thereof, in their sole discretion, and payable in the
form of cash, stock options, or other non-cash awards, in such proportions, and
in such forms, as are determined in the sole discretion by the Board of
Directors of USAFP or a compensation committee thereof. Employee's prior
employment contract shall govern for year 1999.
<PAGE>
EXHIBIT 10.20
EXECUTION COPY
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into,
effective for all purposes and in all respects as of the 24th day of November,
1999, by and between U.S.A. FLORAL PRODUCTS, INC., a Delaware corporation (the
"Company"), and MICHAEL W. BROOMFIELD ("Employee").
R E C I T A L S
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 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, effective as of January 3, 2000 or such later date to which the
Company and the Employee mutually agree ("Employment Commencement Date"). As
such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a chief executive officer 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 reasonable efforts to cause Employee to
be elected to the Board throughout the Employment Period (as defined below) 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 (as defined below).
(c) Employee shall faithfully adhere to, execute and fulfill all
policies reasonably established by the Company.
(d) Employee shall not, during the Employment Period, be engaged in
any other business activity pursued for gain, profit or other pecuniary
advantage if such activity materially interferes with Employee's duties and
responsibilities hereunder, provided that, with
<PAGE>
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 for-profit companies
or organizations, which in the Board's judgment, will not present any conflict
of interest with the Company or its Subsidiaries, or materially interfere with
Employee's duties and responsibilities pursuant to this Agreement. The Company
consents to Employee's continuing to serve on those boards of directors for
which Employee is currently serving as disclosed in writing to the Company on
the date hereof. However, the foregoing limitations shall not be construed as
prohibiting Employee from serving on the boards of civic, non-profit or
charitable organizations or 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,
materially interfere with his responsibilities and duties hereunder, 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 (reduced by any applicable
required tax withholdings):
(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 Four Hundred Twenty Five Thousand Dollars ($425,000), 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 beginning January 1, 2001, the Board
will consider increases (but not decreases) to Employee's base salary.
(b) Signing Bonus. In addition to any other amounts due Employee
-------------
hereunder, on January 3, 2000 the Company shall pay Employee a bonus ("Signing
Bonus") equal to Two hundred Thousand Dollars ($200,000). In the event (i)
Employee terminates his employment with the Company other than by reason of
death, disability or "good reason" (as defined below), or (ii) the Company
terminates Employee's employment with the Company with "cause" (as defined
below), in either case prior to the expiration of the Term. Employee shall pay
to the Company, within 30 days of the date of termination, that amount of the
Signing Bonus as is proportionate to the period of time remaining in the Term,
calculated on a monthly basis. Amounts payable under this paragraph 2(b) shall
not be included in the computation of base salary for purposes of paragraph
2(c).
(c) Incentive Bonus. For each calendar year that ends during the
---------------
Employment Period, beginning with the 2000 calendar year, the Company shall pay
Employee an annual bonus of no less than 50% of Employee's base salary then in
effect, if the Company's Operating Income (as defined below) for such year
(after reduction for all annual bonuses paid or payable with respect to that
year) equals or exceeds the budgeted figure for Operating Income established or
approved by the Board in advance for such year reduced for all budgeted bonuses
(or as Employee and the Board otherwise agree). Additionally, for each calendar
year that ends during the Employment Period, beginning with the 2000 calendar
year, the Company shall pay
-2-
<PAGE>
Employee an additional annual bonus equal to 50% of Employee's base salary then
in effect based upon the achievement of reasonable annual or multi-year Company
and/or individual performance goals to be set by the Board or its Compensation
Committee in advance of each calendar year and communicated to the Employee at
such time (which bonus may be paid on a graduated scale of 0% to 50% depending
upon the range of achievement of the performance goals). For the 2000 calendar
year, the performance goal and bonus in the preceding sentence will consist of
an additional 10% of base salary for each $1 million of Operating Income
(reduced as provided above for bonuses) in excess of the budgeted figure for
Operating Income to a maximum of 50% of base salary. Notwithstanding anything
contained in this Agreement to the contrary (including paragraph 7 hereof), if
Employee's employment hereunder has terminated for any reason including death
and disability (but excluding termination by the Company for "cause" (as defined
below) or by Employee voluntarily without "good reason") prior to the end of a
given calendar year, Employee shall receive (at the time bonuses are normally
paid) the annual incentive bonus, if any, that would have been paid for such
calendar year had Employee remained employed until the end of such year,
multiplied by e fraction, the numerator of which is the number of complete
months of such calendar year during which Employee was employed with the
Company, and the denominator of which is twelve. The Company shall pay Employee
the annual incentive payments described in this paragraph 2 within two weeks
after receipt of final audited financial statements for the calendar year
covered by the bonus or, if sooner, within 90 days of the end of the calendar
year.
3. Stock Options. As provided below, the Company shall grant Employee two
-------------
stock options to purchase a total of 350,000 shares of Company 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
("LTIP"), except as provided herein, including Section 7(g)(i) of the LTIP. The
options will vest at the rate of 25% as of the Employment Commencement Date and
an additional 6.25% on the last day of each succeeding calendar quarter
beginning as of March 31, 2000. The options will have an exercise price equal to
the closing sale price of Company common stock on their respective dates of
grant. The option for 200,000 shares shall be a nonqualified stock option and
shall have a date of grant as of the date hereof, and the option for 150,000
shares shall be an incentive stock option under Section 422 of the Internal
Revenue Code (the "Code") if and to the extent the tax rules permit such
treatment and shall have a date of grant as of the employment Commencement Date.
Absent the Company's consent, if Employee does not begin work for the Company on
or before January 10, 2000, any options described in this Agreement shall be
void and have no effect on either party. Employee may be eligible to receive
additional grants or awards under 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. In addition, Employee
shall be granted stock options or other awards during the Employment Period
pursuant to the LTIP 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 Employee for "good reason"
pursuant to paragraph 7(b)(v). all outstanding unvested options held by Employee
shall become fully vested on the date of termination and all options will remain
-3-
<PAGE>
exercisable for the term provided under paragraph 6(b)(iv) of the LTIP. Upon
Employee's termination of employment pursuant to paragraph 7(b)(v) without "good
reasons," the Employee's termination as a result of the conditions described in
paragraph 7(b)(vi), or, notwithstanding paragraph 6(b)(iv) of the LTIP, 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 term provided under paragraph 6(b)(iv) of the LTIP (without
regard to the immediate termination for cause otherwise provided in that
subparagraph). 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 on the date of termination and notwithstanding paragraph 6(b)(iv) of the
LTIP, 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), (D) or (E) 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. Notwithstanding the foregoing, no option may be
exercisable beyond expiration of the term of such option. Upon a Change in
Control (as defined below), all outstanding unvested options held by Employee
shall become fully vested unless Section 7(g)(i) of the LTIP applies.
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 Employee with executive perquisites as
may be available to or deemed appropriate for Employee by the Company and
participation in all 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 Board and Employee.
(b) 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. 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.
(c) 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 (except as provided under paragraph 5(h) below) for a period
equal to one (l) year following the termination of his employment under this
Agreement for any reason (or, if greater,
-4-
<PAGE>
for the period during which Employee continues to receive 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 (other
than Employee's personal secretary);
(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 three percent (3%) of the capital stock
of a competing business, whose stock is traded on a national securities exchange
or on an over-the-counter market. Employee represents that he does not own more
than one percent (1%) of the capital stock of a competing business as of the
date hereof.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
covenant, in addition to and not in limitation of any other rights, remedies or
damages available to the Company at law, in equity or under this Agreement, may
be enforced by the Company in the event of the breach or threatened breach by
Employee, by injunctions and/or restraining orders.
-5-
<PAGE>
(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 on the date of the execution
of this Agreement and the current plans of the Company.
(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.
(g) For purposes of this paragraph 5, references to "the Company",
shall mean U.S.A. Floral Products, Inc., together with its Subsidiaries.
(h) The parties agree that this paragraph 5 shall cease to apply if
the Company, its successor or assigns (or its or their designate) fails to pay
amounts due under paragraph 7(b)(iv) or (v) within 15 days after a written
demand by Employee for such payment
6. Place of Performance. During the Term, Employee's principal place of
--------------------
employment shall he located in the greater Washington, D.C. metropolitan area.
-6-
<PAGE>
7. Term: Termination; Rights on Termination.
---------------------------------------
(a) This Agreement shall have a term of three years, commencing as of
January 3,2000 and ending on January 2, 2003. 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 following ways:
(i) Death. Upon death of Employee, with no severance
-----
compensation due to Employee's estate. Company shall pay Employee's estate
all accrued but unpaid base salary and accrued but unused vacation through
the date of death.
(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 ten (10) days
after written notice to Employee (which notice may be given only after the
end of such four (4) month period), the Company may terminate Employee's
employment hereunder, provided than 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 accrued but unused vacation 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.
(iii) 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 breach of this Agreement (continuing for thirty (30)
days after receipt of written notice specifying in reasonable detail the
basis for the notice and of the need to cure), that has a material adverse
effect on the Company; (B) Employee's gross negligence in the performance
or intentional nonperformance (continuing for thirty (30) days after
receipt of written notice specifying in reasonable detail the basis for the
notice and of need to cure) of any of Employee's material duties and
responsibilities hereunder that has a material adverse
-7-
<PAGE>
effect on the Company; (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 (with respect to which all appeals have
been exhausted) of a crime involving moral turpitude or a felony; or (E)
chronic alcohol use by Employee that impairs the performance of his duties
under this Agreement or illegal drug abuse. In the event of a termination
for "cause," as enumerated above, Employee shall have no right to any
severance compensation; provided; however, that Company shall pay all
accrued but unpaid base salary and accrued but unused vacation through the
date of termination.
(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," Employee shall receive from the Company, within five (5)
days after termination, a lump sum payment equal to accrued hut unused
vacation and fifty percent (50%) of the base salary at the rate then in
effect at the time of such termination for the period remaining in the Term
or one (l) year, whichever is greater, with an additional fifty percent
(50%) of the Employee's base salary at the rate then in effect at the time
of termination to be paid in regular installments according to the payroll
payment schedule then in effect at the time of such termination over the
period remaining in the Term or one (1) year, whichever is greater, and
coverage under Company-provided benefit and 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 (l) year, whichever
is greater; provided, however, should such termination occur within a two
year period following a Change in Control (as defined below, 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
-----------
Employer 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," the Company shall pay and/or provide Employee with
the amounts of severance compensation and benefits as if his employment
were terminated without "cause" pursuant to paragraph 7(b)(iv) and
according to the schedule set forth in that paragraph, (or, if Employee
terminates his employment for "good reason" within the two (2) year period
following a change in Control, a lump sum payment within five (5) days of
the termination 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-
-8-
<PAGE>
provided benefit and 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 specifying
in reasonable detail the basis for such notice and of need to cure)
including, but not by way of limitation, a substantial diminution in, or
assignment to Employee of any duties, responsibilities or reporting
relationship that are substantially inconsistent with the nature or status
of Employee's duties, responsibilities or functions from those in effect at
the commencement of the Term.
(vi) Residency. The Employee represents that he is able to work
---------
legally in the United States under his immigration status as of the date of
this Agreement and as of the Employment Commencement Date. If he ceases for
any reason related to his immigration status to be able to work legally in
the United States and he is absent from his full-time duties hereunder at
the Company's principal headquarters for two (2) consecutive months because
of or in connection with such cessation, then ten (10) days after written
notice to Employee (which notice may be given only after the end of such
two (2) month period), the Company may terminate Employee's employment
hereunder, provided that Employee is unable to resume his full-time duties
legally in the United States at the conclusion of such notice period. If
the Employee's employment is terminated as a result of his inability for
any reason related to his immigration status to work legally in the United
States, Employee shall be treated as though he had resigned voluntarily and
without "good reason."
(c) Upon expiration of the Term, Employee agrees that he is not
eligible to receive any severance.
(d) Upon termination of the Employee's employment for any reason
provided above, the Company shall pay Employee no later than the end of the next
regularly scheduled payroll period beginning after such termination all
compensation earned (including but not limited to accrued but unused vacation)
and all benefits due and reimbursements for expenses incurred 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 3, 7 and
11 herein and Employee's obligations under paragraphs 5, 7, 8, 9 and 10 herein
shall survive such termination in accordance with such terms.
(e) The Company agrees that, if the Employee's employment by the
Company is terminated during the Term, the Employee is not required to seek
other employment, or to attempt in any way to reduce any amounts payable to the
Employee 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 Employee as the result
-9-
<PAGE>
of employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Employee to the Company, for any breach or
alleged breach of any covenant contained in this or any other agreement, or
otherwise.
(f) The Employee acknowledges that continuing benefit coverage as set
forth in this Agreement may not be legally or contractually possible if he
ceases to provide services to the Company or may violate the Code relating to
nondiscrimination in benefits and agrees, if such legal or contractual
prohibition exists or coverage would be inconsistent with the Code, to accept in
lieu of all such coverage (i) payment by the Company when due of the premiums
for the benefit continuation periods indicated above on individual insurance
policies either the Employee or the Company obtains that provide substantially
equivalent benefits or (ii) if the Employee is unable to obtain such coverage
(because he is uninsurable at commercially reasonable rates or, as with
disability, because coverage may be unavailable if he is not working), one or
more payments totaling 150% of the average monthly premium cost the Company paid
on his behalf in 2000 (or in the immediately preceding calendar year with
respect to employment termination after December 31, 2001) for any of those
coverages under which he cannot participate after employment ends times the
number of months of benefits continuation, with the payments under clause (ii)
due within 30 days after the Employee notifies the Company that he is unable to
obtain such coverage. Nothing in this paragraph 7(f) waives or extends any
rights the Employee may have to continuation health coverage under Section 4980B
of the Code.
8. Return of Company Property. All records, designs, patents, business
--------------------------
plans, financial statements not filed with the Securities and Exchange
Commission, manuals, memoranda, lists and other property delivered to or
compiled by Employee by or on behalf of the Company (including the respective
Subsidiaries thereof) or their representatives, vendors or customers which
pertain to the business of the Company (including the respective Subsidiaries
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 Employment Period 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 company or so otherwise protect the Company's interest therein.
-10-
<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 Subsidiaries, 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 Subsidiaries, 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 Subsidiaries; any and all of such information are trade secrets
and constitute the valuable goodwill of the Company and its Subsidiaries.
Employee agrees that he will not, during 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, except as may be required by law.
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 or the fact that he is or was performing services
under this Agreement or otherwise resulting from this Agreement or Employee's
position as an employee, officer, shareholder and/or director of the Company
and/or any of its Subsidiaries, then the Company shall indemnify Employee
against all expenses (including reasonable attorneys' fee), 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 an actual or potential 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. Employee shall
not be 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 confirms that he has fully disclosed to
-------------------
the Company, to the best of his knowledge, all circumstances under which he, his
spouse, and other persons who reside in his household have or may have a
conflict of interest with the Company. Employee further agrees to fully disclose
to the Company any such circumstances that might arise during his employment
upon his becoming aware of such circumstances. Employee agrees to fully comply
with, the Company's policy and practices relating to conflicts of interest,
Employee hereby represents and warrants to the Company that the execution of
this Agreement by Employee and his employment by the Company and the performance
of his duties hereunder or thereunder will, not violate or be a breach of any
written agreement with any employer, client or any other person or entity.
Further, Employee agrees to indemnify the Company for any claim, including, but
not limited to, reasonable attorneys' fees and expenses o 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
-11-
<PAGE>
secrecy agreement between Employee and such third party which was in existence
as of the day before the Employment Commencement Date.
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 or the
Employee may terminate this Agreement at any time, with or without "cause,"
subject to the parties' obligations described herein. 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 patty waiving the
benefit of such term.
15. No Improper Payments. Employee will neither pay nor permit payment of
--------------------
any remuneration to or on behalf of any governmental official other than
payments required or permitted by applicable law. Employee will comply fully
with the Foreign Corrupt Practices Act of 1 977, as amended. Employee will not,
directly or indirectly, make or permit any contribution, gift, bribe, rebate,
payoff, influence payment, kickback, or other payment to any person or entity,
private or public, regardless of what form, whether in money, property or
services to obtain favorable treatment for business secured, to pay for
favorable treatment for business secured, to obtain special concessions or for
special concessions already obtained, or in violation of any legal requirement,
or establish or maintain any fund or asset related to the Company that is not
recorded in the Company's books and records, or take any action that would
violate (or would be part of a series of actions that would violate) any U.S.
law relating to international trade or commerce, including those laws relating
to trading with the enemy, export control, and boycotts of Israel or Israeli
products.
16. 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
-12-
<PAGE>
With a copy to: Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, DC 20037
Attn: George P. Stamas
To Employee: Michael W. Broomfield
1611 31st Street, N.W
Washington, DC 20007
With a copy to: Kelley Drye & Warren LLP
1200 19th Street, N.W.
Suite 500
Washington, D.C. 20036
Attn: Joseph B. Hoffman
Notice shall he 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 actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 16.
17. 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 any part hereof.
18. Arbitration. Except to the extent necessary for the Company to
-----------
avail itself of its remedies pursuant to paragraph S, 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), in the event the arbitrators
determine that Employee was terminated without disability or "cause," as defined
in paragraphs 7(b)(ii) and 7(b)(ii), 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.
-13-
<PAGE>
19. Defined Terms. The following terms are defined as follows:
-------------
"Change of Control" shall have the meaning set forth in the Company's
-----------------
1997 Long Term Incentive Plan as in effect on the date hereof, except that such
term shall not include the financial alternatives under consideration by the
Board of Directors (as described in writing to the Employee) as of the date
hereof to the extent they are consummated within six months from the date
hereof.
"Operating Income" shall mean the Company's earnings for financial
----------------
statement purposes before interest and taxes.
"Person" shall mean an individual, partnership, limited liability
------
company, corporation, joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision or
agency thereof.
"Subsidiaries" shall mean each partnership, limited liability company,
------------
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity in which the Company owns or controls, directly or
indirectly, capital stock or other equity interests representing at least 20% of
the outstanding voting stock or other equity interests,
20. Governing Law. This Agreement shall in all respects be governed by
-------------
and construed in accordance with the laws of the State of Delaware.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
[signature page follows]
-14-
<PAGE>
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/ Robert J. Poirier (SEAL)
- ------------------------- --------------------------
WITNESS: EMPLOYEE
/s/ M. W. Broomfield (SEAL)
- ------------------------- -----------------------------
Michael W. Broomfield
-15-
<PAGE>
EXHIBIT 10.22
SEPARATION AGREEMENT
U.S.A. Floral Products, Inc. ("USA Floral" or "Company") and Robert J.
Poirier (the "Employee") enter into this Separation Agreement ("Agreement") on
February 13, 2000, in order to reach a mutually satisfactory compromise of any
and all claims which could be made arising out of or relating to the Employee's
employment with the Company. The parties, in consideration of the promises and
of the mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, agree as follows:
1. Separation. Effective on and as of March 1, 2000, (the "Separation
Date"), the Employee's employment as Chairman of the Company shall terminate. As
of the Separation Date, Employee shall, in writing, relinquish (i) his seat on
the Company's Board, (ii) his seat on the Company's subsidiaries' boards, (iii)
and his position as Chairman of the Board.
2. Payments and Benefits.
(a) Within fifteen (15) days of the Separation Date, the Employee shall be
entitled to receive a lump sum payment of $1,250,000, less applicable
federal, state, local and other applicable withholdings.
(b) The Company further agrees to reimburse Employee for all business expenses
due through the Separation Date. Such payment shall be made within seven
(7) days of the Company's receipt of Employee's reimbursement request and
appropriate documentation in accordance with the Company's current business
expense reimbursement plan.
(c) The Company agrees to pay Employee for five (5) weeks of unused vacation.
Such payment shall be made within seven (7) days from the execution of this
Agreement.
(d) The Company additionally agrees to continue Employee's welfare benefits, at
its sole expense, until December 31, 2001, subject to changes made to the
welfare plans from time to time. Such welfare benefits currently include
the USAFP CareFirst BlueCross BlueShield Preferred health plan, the
Guardian Life and Disability Program, and Employee's individual Life
Insurance Policy in the amount of $5,000,000.
3. Release.
(a) In consideration of the payments and benefits provided in Section 2, the
Employee waives and releases unconditionally, for himself and his heirs:
(i) any and all rights, claims, demands, causes of action,
obligations and liabilities known or unknown, arising from the beginning of time
to the date of execution of this Agreement that the Employee may have against
USA Floral or its officers, employees, directors, stockholders or agents,
related to or arising out of the parties relationship; and
<PAGE>
(ii) any and all rights, claims, demands, causes of action,
obligations and liabilities known or unknown, arising from the beginning of time
to the date of execution of this Agreement, that he may have against the Company
or its officers, employees, directors, stockholders or agents involving his
relationship with the Company and/or any affiliate or associate of the Company,
whether such claims arise from common law, ordinance or statute, and
particularly, but without limitation of the foregoing terms, claims concerning
or relating in any way to his employment relationship with the Company, such as
claims which may arise from or under discrimination laws or otherwise, including
without limitation, the Age Discrimination in Employment Act, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, or any other law, rule,
ordinance or regulation, that he may have against the Company or its officers,
employees, directors, stockholders or agents.
(b) Such releases expressly exclude any and all claims arising under this
Agreement.
(c) The Company hereby releases Employee from any and all rights, claims,
demands, causes of action, obligations and liabilities known or unknown, arising
from the beginning of time to the Separation Date that the Company may have
against Employee related to or arising out of the parties relationship or
arising out of Employee's employment with the Company, except for those claims
that may arise with respect to this Agreement.
4. Disparaging Statements.
(a) In further consideration of the payments and benefits received in Section
2, Employee agrees, unless otherwise required by law or legal process that for a
period of two years from the Separation Date that he shall in no way disparage
USA Floral, its subsidiaries, affiliates, or their officers, directors,
employees or agents, or otherwise act, speak or conduct himself or his business
in a manner that is or could be injurious to the name, reputation or goodwill of
USA Floral, its subsidiaries, affiliates, or their officers, directors,
employees or agents.
(b) Unless otherwise required by law or legal process, the Company agrees that
it shall in no way disparage the Employee and shall exercise its good faith and
take commercially reasonable steps to ensure that its affiliates and employees
do not act, speak or conduct themselves in a manner that is or could be
injurious to the name or reputation of Employee., including without limitation,
administering its Internet Policy and Email Policy, which prohibits the
Company's employees from using the Company's computer network to disparage or
defame others.
5. No Admission. The Employee agrees that this Agreement is not and shall not
be construed to be an admission of any violation of any federal, state or local
statute, ordinance or regulation or of any duty owed the Employee by the USA
Floral.
<PAGE>
6. Employee Acknowledgment.
(a) The Employee acknowledges that the Employee (i) has read this Agreement,
(ii) has had the opportunity to consider this Agreement, (iii) has been advised
by this document to seek legal counsel if he chooses, (iv) understands this
Agreement and all of its terms, (v) signs this Agreement voluntarily and without
duress, and (vi) signs this Agreement in exchange for payments and benefits
described in Section 2, which the Employee acknowledges are adequate and
satisfactory.
(b) The Employee acknowledges that he was given at least twenty-one (21) days in
which to consider whether to execute this Agreement before being required to
make a decision. The Employee further acknowledges that he may revoke the
Agreement for a period of seven (7) days from the date that he executed the
Agreement.
7. Employment Agreement Terminated. Employee acknowledges that the Employee's
obligations to the Company under Sections 5 (Non-Compete), 7 (Rights on
Termination), 8 (Return of Company Property), 9 (Inventions) and 10 (Trade
Secrets) of the Employment Agreement remain in full force and effect as the
binding obligations of the parties to the Employment Agreement, enforceable in
accordance with their terms. The Company hereby acknowledges that its
obligations to Employee under Sections 7 (Rights on Termination) and 11
(Indemnification) of the Employment Agreement remain in full force and effect
as the binding obligations of the parties to the Employment Agreement,
enforceable in accordance with their terms. Company hereby acknowledges that is
Indemnification obligations to Employee, as set forth in the Employment
Agreement, shall apply to any legal action or proceeding that may be brought
against Employee in connection with this Agreement.
8. Options. As of the Separation Date, all unvested options of Employee shall
immediately terminate. In consideration for the payments and benefits received
in Section 2, Employee agrees that, as of the Separation Date, all vested
options will immediately terminate. Notwithstanding the foregoing, this
provision shall not apply to the options for 60,000 of shares of stock granted
to Employee on the first anniversary of the Company's initial public offering,
as such options shall remain subject to its original terms.
9. Regular Pay. Employees final regular paycheck shall include all wages
earned by Employee up to the Separation Date and shall be paid to Employee in
accordance with customary payroll practices.
10. Executive Perquisites and Incentive Bonus. As of April 15, 2000, the
automobile provided for Employee's use shall be returned to the Company and any
automobile allowances provided shall cease. In the alternative, Employee may be
permitted to assume the Company's lease of the automobile after April 15, 2000,
if the lease company agrees to such transfer. Thereafter, Employee shall be
responsible for all obligations concerning such lease. In addition, Employee
shall not be entitled to receive any annual bonus for the Company's 1999 fiscal
year.
11. Confidentiality. Unless otherwise required by applicable law or legal
process and subject to disclosures that must be made by the Company in
connection with its SEC filings, neither party shall disclose the terms and
conditions set forth herein to any third party.
<PAGE>
12. Press Release. Within ten (10) days of the Separation Date, the Company
and Employee agree to issue a mutually acceptable press release announcing
Employee's separation from the Company.
13. 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 4 and 7, and because of the immediate and irreparable damage that would
be caused to the Company or Employee for which monetary damages would not be a
sufficient remedy, it is hereby agreed that in addition to all other remedies
that may be available to the Company at law or in equity, the Company shall be
entitled to specific performance and any injunctive or other equitable relief as
a remedy for any breach or threatened breach of the aforementioned restrictive
covenants.
14. Attorney's Fees. In the event either party is required to bring action to
enforce any provision contained herein, the prevailing party shall be entitled
to its reasonable attorneys fees and costs.
15. Entire Agreement; Binding Effect and Attorney's Fees. This Agreement sets
forth the entire agreement among the Employee and USA Floral related to the
Employee's separation from employment with the Company. The Employee and USA
Floral intend this Agreement to be legally binding and inure to the benefit of
themselves and their respective heirs, administrators, executors, successors and
assigns. In the event any action is brought to enforce the terms set forth in
this Agreement, Delaware law shall apply.
IN WITNESS WHEREOF, the Employee, and USA Floral have executed this
Agreement on the date first written above.
EMPLOYEE WITNESSES
/s/ Robert J. Poirier 2/13/00
- ----------------------------- -------------------------------
Robert J. Poirier
U.S.A. FLORAL PRODUCTS, INC. -------------------------------
By: /s/ M. W. BROOMFIELD
--------------------------
Name: BROOMFIELD
Title: CEO
<PAGE>
EXHIBIT 21.01
STATE/COUNTRY
SUBSIDIARY OF D/B/A
INCORPORATION
1. Alpine Gem Flower Shippers, Inc. Montana
2. American Florist Supply, Inc. Massachusetts Bay State and
Johnsons
3. CFX, Inc. Florida
4. Flower Trading Corporation Florida
5. Monterey Bay Bouquet, Inc. California
6. The Roy Houff Company Illinois
7. United Wholesale Florists, Inc. Arkansas
8. H&H Flowers, Inc. Florida USA Floral
Products
Bouquet
Division
9. Koehler & Dramm, Inc. Delaware
10. Koehler & Dramm of Kansas City, Inc. Missouri
11. Everflora, Inc. New Jersey
12. Everflora Miami, Inc. Florida
13. CFL Acquisition Corp. Delaware
14. ABCL Acquisition Corp. Delaware
15. XL Group, Inc. Florida
16. Selecta Farms, Inc. Florida
17. Maxima Farms, Inc. Florida
18. EFTA Acquisition Corp. Florida Elite Farms,
Inc.
19. ASG Acquisition Corp. Delaware Allan Stanley
Greenhouses,
Inc.
20. David L. Jones Wholesale Ltd. British
Columbia,
Canada
21. Petals Distributing, Inc. Delaware
22. Floramark, Inc. Colorado
23. AlphaFlora Imports, Inc. Illinois
24. Channel Islands Floral, Inc. Delaware
25. Tommy's Wholesale Florist, Inc. Delaware
26. Sandlake Farms, Inc. Florida
27. Evergreen Wholesale Florist, Inc. Washington
28. Floral Distributors, Inc. Delaware
29. ABC Floral Inc. Delaware
30. 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
31. Florimex Canada, Inc. Ontario, Canada
32. 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.
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
<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 March 20, 2000, except for Note 7 as to which the date is
March 24, 2000 appearing on page 36 of this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
Washington, D.C.
March 30, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 10,048 20,196
<SECURITIES> 0 0
<RECEIVABLES> 110,298 105,713
<ALLOWANCES> 7,774 7,944
<INVENTORY> 24,569 18,577
<CURRENT-ASSETS> 154,516 152,177
<PP&E> 53,357 59,636
<DEPRECIATION> 9,748 5,660
<TOTAL-ASSETS> 486,810 494,034
<CURRENT-LIABILITIES> 85,869 111,534
<BONDS> 0 0
0 0
0 0
<COMMON> 16 15
<OTHER-SE> 200,561 185,610
<TOTAL-LIABILITY-AND-EQUITY> 486,810 494,034
<SALES> 924,847 589,034
<TOTAL-REVENUES> 924,847 589,034
<CGS> 686,659 429,012
<TOTAL-COSTS> 225,144 134,319
<OTHER-EXPENSES> (712) 4,967
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 16,088 8,040
<INCOME-PRETAX> (35) 15,028
<INCOME-TAX> 3,013 7,255
<INCOME-CONTINUING> (3,066) 7,743
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,066) 7,743
<EPS-BASIC> (0.19) 0.54
<EPS-DILUTED> (0.19) 0.52
</TABLE>
