Exhibit 2.2
AGREEMENT AND PLAN OF REORGANIZATION
By and Among
U.S.A. Floral Products, Inc.,
XLG Acquisition Corp.,
XL Group, Inc.
and
Peter F. Ullrich
dated as of January 20, 1998
TABLE OF CONTENTS
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1. THE MERGER........................................................ 1
1.1 The Merger................................................. 1
1.2 Articles of Incorporation; Bylaws, Directors and Officers.. 1
1.3 Effects of the Merger...................................... 2
2. CONVERSION AND EXCHANGE OF STOCK.................................. 2
2.1 Manner of Conversion....................................... 2
2.2 Merger Consideration....................................... 3
2.3 Exchange of Certificates and Payment of Cash............... 4
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS........................... 5
3.1 Post-Closing Adjustment.................................... 5
3.2 Pledged Assets............................................. 7
4. CLOSING........................................................... 8
4.1 Location and Date.......................................... 8
4.2 Effect..................................................... 8
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER. 8
5.1 Due Organization........................................... 8
5.2 Authorization; Validity.................................... 9
5.3 No Conflicts............................................... 9
5.4 Capital Stock of the Company............................... 9
5.5 Transactions in Capital Stock.............................. 10
5.6 Subsidiaries, Stock, and Notes............................. 10
5.7 Predecessor Status......................................... 10
5.8 Absence of Claims Against the Company...................... 11
5.9 Company Financial Conditions............................... 11
5.10 Financial Statements....................................... 11
5.11 Liabilities and Obligations................................ 11
5.12 Accounts and Notes Receivable.............................. 12
5.13 Books and Records.......................................... 12
5.14 Permits.................................................... 12
5.15 Real Property.............................................. 13
5.16 Personal Property.......................................... 14
5.17 Intellectual Property...................................... 14
5.18 Material Contracts and Commitments......................... 16
5.19 Government Contracts....................................... 17
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5.20 Insurance.................................................. 18
5.21 Labor and Employment Matters ............................. 18
5.22 Employee Benefit Plans ................................... 19
5.23 Conformity with Law; Litigation........................... 21
5.24 Taxes..................................................... 21
5.25 Absence of Changes........................................ 24
5.26 Deposit Accounts; Powers of Attorney...................... 25
5.27 Environmental Matters..................................... 26
5.28 Relations with Governments................................ 27
5.29 Disclosure................................................ 27
5.30 USFloral Prospectus; Securities Representations........... 27
5.31 Affiliates................................................ 28
5.32 Location of Chief Executive Offices....................... 28
5.33 Location of Equipment and Inventory....................... 28
6. REPRESENTATIONS OF USFLORAL AND NEWCO............................. 28
6.1 Due Organization.......................................... 28
6.2 USFloral Common Stock..................................... 28
6.3 Authorization; Validity of Obligations.................... 29
6.4 No Conflicts.............................................. 29
6.5 Capitalization of USFloral and Ownership of
USFloral Stock......................................... 29
7. COVENANTS......................................................... 30
7.1 Tax Matters............................................... 30
7.2 Title Insurance and Surveys............................... 31
7.3 Related Party Agreements.................................. 32
7.4 Cooperation............................................... 32
7.5 Conduct of Business Pending Closing....................... 32
7.6 Access to Information..................................... 33
7.7 Prohibited Activities..................................... 33
7.8 Notice to Bargaining Agents............................... 35
7.9 Sales of USFloral Common Stock............................ 35
7.10 USFloral Stock Options.................................... 36
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO..... 37
8.1 Representations and Warranties; Performance
of Obligations.......................................... 37
8.2 No Litigation ............................................ 37
8.3 No Material Adverse Change................................ 37
8.4 Consents and Approvals.................................... 37
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8.5 Opinion of Counsel........................................ 38
8.6 Charter Documents......................................... 38
8.7 Quarterly Financial Statements............................ 38
8.8 Due Diligence Review...................................... 38
8.9 Delivery of Closing Financial Certificate ................ 38
8.10 FIRPTA Compliance......................................... 39
8.11 Employment Agreements..................................... 39
8.12 Stockholder's Release..................................... 39
8.13 Related Party Agreements.................................. 39
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDER.................................................... 39
9.1 Representations and Warranties; Performance of
Obligations............................................. 39
9.2 No Litigation............................................. 39
9.3 Consents and Approvals.................................... 40
9.4 Employment Agreements..................................... 40
10. INDEMNIFICATION.................................................. 40
10.1 General Indemnification by the Stockholder................ 40
10.2 Limitation and Expiration................................. 41
10.3 Indemnification Procedures................................ 42
10.4 Survival of Representations Warranties and Covenants...... 43
10.5 Remedies Cumulative....................................... 44
10.6 Right to Set Off.......................................... 44
10.7 Liability................................................. 44
11. NONCOMPETITION................................................... 44
11.1 Prohibited Activities..................................... 44
11.2 Damages................................................... 45
11.3 Reasonable Restraint...................................... 45
11.4 Severability; Reformation ................................ 45
11.5 Independent Covenant...................................... 45
11.6 Materiality............................................... 45
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION........................ 46
12.1 Stockholder............................................... 46
12.2 USFloral.................................................. 46
12.3 Damages................................................... 46
13. GENERAL.......................................................... 46
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13.1 Termination............................................... 46
13.2 Effect of Termination..................................... 47
13.3 Successors and Assigns.................................... 47
13.4 Entire Agreement; Amendment; Waiver....................... 47
13.5 Counterparts.............................................. 48
13.6 Brokers and Agents........................................ 48
13.7 Expenses.................................................. 48
13.8 Specific Performance; Remedies............................ 48
13.9 Notices................................................... 48
13.10 Governing Law............................................. 49
13.11 Severability.............................................. 49
13.12 Absence of Third Party Beneficiary Rights................. 50
13.13 Further Representations................................... 50
13.14 Accounting Terms.......................................... 50
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into this 20th day of January, 1998, by and among U.S.A. Floral
Products, Inc., a Delaware corporation ("USFloral"), XLG Acquisition Corp., a
Delaware corporation and a newly-formed, wholly-owned subsidiary of USFloral
("Newco"), XL Group, Inc., a Florida corporation (the "Company") and Peter F.
Ullrich (the "Stockholder").
BACKGROUND
WHEREAS, the respective Boards of Directors of Newco and the Company
(which together are sometimes referred to as the "Constituent Corporations")
deem it advisable and in the best interests of the Constituent Corporations and
their respective stockholders that the Company merge with and into Newco (the
"Merger") pursuant to this Agreement, the Plan of Merger (defined below) and the
applicable provisions of the laws of the State of Florida.
WHEREAS, the Boards of Directors of each of the Constituent Corporations
have approved and adopted this Agreement as a plan of reorganization within the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 4.2), the
Company shall be merged with and into Newco pursuant to this Agreement and a
plan of merger (the "Plan of Merger") substantially in the form attached as
Schedule 1.1 hereto, and the separate corporate existence of the Company shall
cease. Newco, as it exists from and after the Effective Time, is sometimes
referred to as the "Surviving Corporation."
1.2 Articles of Incorporation; Bylaws, Directors and Officers. At the
Effective Time:
(a) The Articles of Incorporation of the Surviving Corporation from and
after the Effective Time shall be the Articles of Incorporation of Newco until
thereafter amended in accordance with the provisions therein and as provided by
the applicable provisions of the Florida Business Corporation Act.
(b) The Bylaws of the Surviving Corporation from and after the Effective
Time shall be the Bylaws of Newco in effect immediately prior to the Effective
Time, continuing until thereafter amended in accordance with their terms and the
Articles of Incorporation of the Surviving Corporation and as provided by the
Florida Business Corporation Act.
(c) The initial director of the Surviving Corporation shall be Robert J.
Poirier until his successor is elected and qualified, and the initial officers
of the Surviving Corporation shall be the officers of the Company immediately
prior to the Effective Time, with the addition of Robert J. Poirier as Assistant
Secretary of the Surviving Corporation, in each case until their successors are
duly elected and qualified.
1.3 Effects of the Merger. The Merger shall have the effects provided
therefor by the Florida Business Corporation Act. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time (i) all
the rights, privileges, immunities, powers and franchises, of a public as well
as of a private nature, and all property, real, personal and mixed, and all
debts due on whatever account, including without limitation subscriptions to
shares, and all other choses in action, and all and every other interest of or
belonging to or due to the Company or Newco shall be taken and deemed to be
transferred to, and vested in, the Surviving Corporation without further act or
deed; and all property, rights and privileges, immunities, powers and franchises
and all and every other interest shall be thereafter as effectually the property
of the Surviving Corporation, as they were of the Company and Newco, and (ii)
all debts, liabilities, duties and obligations of the Company and Newco, subject
to the terms hereof, shall become the debts, liabilities and duties of the
Surviving Corporation and the Surviving Corporation shall thenceforth be
responsible and liable for all the debts, liabilities, duties and obligations of
the Company and Newco and neither the rights of creditors nor any liens upon the
property of the Company or Newco shall be impaired by the Merger, and may be
enforced against the Surviving Corporation.
2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. At the Effective Time, by virtue of the Merger
and without any action on the part of USFloral, Newco, the Company or any
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of capital
stock of Newco shall continue to be issued and outstanding and shall be
converted into one share of validly issued, fully paid and non-assessable Common
Stock of the Surviving Corporation. Each stock certificate of Newco evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Company. All
shares of capital stock of the Company that are owned directly or indirectly by
the Company shall be canceled and no stock of USFloral or other consideration
shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. Subject to Section 2.1(d),
and Sections 2.2, 3.1 and 3.2, each issued and outstanding share of common stock
of the Company, $1.00 par value per share ("Company Common Stock") (other than
shares to be canceled pursuant to Section 2.1(b)), that is issued and
outstanding immediately prior to the Effective Time shall automatically be
canceled and extinguished and converted, without any action on the part of the
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holder thereof, into the right to receive (i) an amount of cash equal to the
cash portion of the Merger Consideration divided by the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time and
(ii) that number of shares of USFloral common stock, $.001 par value ("USFloral
Common Stock"), valued at the Merger Price (as defined in Section 2.2), that is
equal in value to the USFloral Common Stock portion of the Merger Consideration
(as defined in Section 2.2) divided by the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time. All such shares of
Company Common Stock, when so converted, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the consideration
therefor upon the surrender of such certificate in accordance with Section 2.3
of this Agreement.
(d) Fractional Shares. No fractional shares of USFloral Common Stock shall
be issued, but in lieu thereof each holder of shares of Company Common Stock who
would otherwise be entitled to receive a fraction of a share of USFloral Common
Stock shall receive from USFloral an amount of cash equal to the Merger Price,
as defined in Section 2.2(a), multiplied by the fraction of a share of USFloral
Common Stock to which such holder would otherwise be entitled. The fractional
share interests of each Stockholder shall be aggregated, so that no Stockholder
shall receive cash in an amount greater than the value of one full share of
USFloral Common Stock.
2.2 Merger Consideration.
(a) For purposes of this Agreement, the "Merger Consideration" shall be
$22,000,000 (the "Closing Date Consideration") plus the Earn-Out Consideration
(as defined in this Section 2.2(a)), adjusted pursuant to this Section 2.2 and
Section 3.1. Of the Merger Consideration, $11,000,000 shall be paid in cash at
Closing in immediately available funds and $11,000,000 shall be paid at Closing
in shares of USFloral Common Stock valued at $16.643 per share (the "Merger
Price"). The 660,938 shares of USFloral Common Stock to be issued (subject to
adjustment as provided in this Section 2.2 and Section 3.1) shall be registered
under the Securities Act of 1933, as amended (the "1933 Act"). For each $1.00
by which the combined earnings before interest and taxes ("EBIT") of the Company
and the Surviving Corporation for the year ending December 31, 1997, adjusted
for amounts paid by the Company in respect of those items set forth on Schedule
5.9(b) hereof ("1997 Adjusted EBIT") falls short of $3,050,000 (as determined by
Price Waterhouse LLP), the Stockholder shall remit to USFloral, within 10 days
after notice of such determination by Price Waterhouse LLP, $3.00 in cash and
$3.00 in shares of USFloral Common Stock valued at the Merger Price (the "1997
Shortfall"). For each $1.00 by which the Surviving Corporation's EBIT for the
year ending December 31, 1998 ("1998 EBIT") exceeds the 1997 Adjusted EBIT for
the year ending December 31, 1997 (as determined by Price Waterhouse LLP),
USFloral shall pay to the Stockholder $6.00 (the "Earn-Out Consideration");
provided, that the aggregate Merger Consideration, as adjusted pursuant to this
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Section 2.2, shall in no event exceed $26,000,000. The Earn-Out Consideration
shall be paid (i) to the extent of the 1997 Shortfall, $3.00 in cash and $3.00
in shares of USFloral Common Stock, and (ii) thereafter, in shares of USFloral
Common Stock valued at the average of the closing price per share of USFloral
Common Stock on the Nasdaq National Market for each trading day during the
thirty calendar day period ending December 31,
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1998 (the "Earn-Out Price"). The Earn-Out Consideration, if any, shall be paid
within 30 days of the determination by Price Waterhouse LLP of the 1998 EBIT.
In calculating 1998 EBIT, Price Waterhouse LLP (i) shall add to EBIT any amounts
paid by the Company in respect of those items set forth on Schedule 5.9(b)
hereof during the period beginning on January 1, 1998 and ending on the Closing
Date, and (ii) shall not take into consideration any amount attributable to
charges for corporate overhead imposed upon the Surviving Corporation for any
function or service rendered to the Surviving Corporation by USFloral or any
affiliate in excess of the amounts expended (including, without limitation and
as applicable, salaries, benefits, rent, utilities and other charges, costs and
expenses) by the Company in the fiscal year ended December 31, 1998 for the
corresponding functions and services.
(b) The Merger Consideration has been calculated based upon several
factors, including the assumption that the net worth of the Company, calculated
in accordance with generally accepted accounting principles ("GAAP")
consistently applied, is not less than $5,400,000 (the "Net Worth Target") as
of the Closing.
(c) If, on the Closing Financial Certificate (as defined in Section 8.9),
the Certified Closing Net Worth (as defined in Section 8.9) is less than the Net
Worth Target, then the Merger Consideration to be delivered to the Stockholder
may, at USFloral's election, be reduced either (i) at the Closing, or (ii) after
completion of the Post-Closing Audit (as defined in Section 3.1), by the
difference between the Net Worth Target and the Certified Closing Net Worth set
forth on the Closing Financial Certificate (which reduction shall be pro rata in
cash and in USFloral Common Stock valued at the Merger Price in the same
proportions as the cash and USFloral Common Stock components of the Merger
Consideration as provided in Section 2.2(a)).
2.3 Exchange of Certificates and Payment of Cash.
(a) USFloral to Provide Cash and Common Stock. In exchange for the
outstanding shares of capital stock of the Company, USFloral shall cause to be
made available to the Stockholder the Merger Consideration (including cash in an
amount sufficient for payment in lieu of fractional shares pursuant to Section
1.2(d)), as adjusted pursuant to Section 2.2 and Section 3.1. The certificates
evidencing the USFloral Common Stock component of the Merger Consideration shall
bear appropriate legends pursuant to the terms of this Agreement, and USFloral
shall be entitled to issue appropriate stop transfer instructions to its
transfer agent consistent with the terms of this Agreement. Upon written
request of the Stockholders, USFloral agrees to remove or cause the transfer
agent to remove any restrictive legend or stop order as to any shares of
USFloral Common Stock that are transferred in accordance with the provisions of
Section 7.9 hereof.
(b) Certificate Delivery Requirements. At the Effective Time, the
Stockholder shall deliver to USFloral the certificates (the "Certificates")
representing Company Common Stock, accompanied by blank stock powers duly
executed by the Stockholder and with all necessary transfer tax and other
revenue stamps, acquired at the Stockholder's expense, affixed and canceled.
The Stockholder shall promptly cure any deficiencies with respect to the stock
powers accompanying such Certificates. The Certificates so delivered shall
forthwith be canceled. Until delivered as
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contemplated by this Section 2.3(b), each Certificate shall be deemed at any
time after the Effective Time to represent the right to receive upon such
surrender the number of shares of USFloral Common Stock and the amount of cash
as provided by this Article 2 and the applicable provisions of the Florida
Business Corporation Act.
(c) No Further Ownership Rights in Capital Stock of the Company. All
USFloral Common Stock and cash to be delivered (including USFloral Common Stock
delivered pursuant to Section 3.2(b) but withheld) upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
shall be deemed to have been delivered in full satisfaction of all rights
pertaining to such shares of Company Common Stock, and following the Effective
Time the Certificates shall have no further rights to, or ownership in, shares
of capital stock of the Company. There shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 2.3.
(d) Lost, Stolen or Destroyed Certificates. If any certificates evidencing
shares of Company Common Stock shall have been lost, stolen or destroyed, then
USFloral shall cause payment to be made in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of USFloral Common Stock and cash as provided in
Section 2.1; provided, however that USFloral may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
USFloral with respect to the certificates alleged to have been lost, stolen or
destroyed.
(e) No Liability. Notwithstanding anything to the contrary in this Section
2.3, none of the Surviving Corporation or any party hereto shall be liable to a
holder of shares of Company Common Stock for any amount paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
3. POST CLOSING ADJUSTMENT; PLEDGED ASSETS
3.1 Post-Closing Adjustment.
(a) The Merger Consideration shall be subject to adjustment after the
Closing Date as specified in this Section 3.1.
(b) Within ninety (90) days following the Effective Time, USFloral shall
cause Price Waterhouse LLP ("USFloral's Accountant") to audit the Surviving
Company's books to determine the accuracy of the information set forth on the
Closing Financial Certificate (the "Post-Closing Audit"). The parties
acknowledge and agree that for purposes of determining the net worth of the
Company as of the Closing Date, the value of the assets of the Company shall,
except with the prior written consent of USFloral, be calculated as provided in
the last paragraph of Section 8.9.
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The Stockholder shall cooperate and shall use his reasonable efforts to cause
the officers and employees of the Company to cooperate with USFloral and
USFloral's Accountant after the Closing Date in furnishing information,
documents, evidence and other assistance to USFloral's Accountant to facilitate
the completion of the Post-Closing Audit within the aforementioned time period.
Without limiting the generality of the foregoing, within two weeks after the
Closing the Stockholder shall provide USFloral's Accountant with the information
and/or documents requested on the Post-Closing Audit Checklist set forth as
Schedule 3.1 hereto. In the event that USFloral's Accountant determines that the
actual Company net worth as of the Closing Date was less than the Certified
Closing Net Worth, USFloral shall deliver a written notice (the "Financial
Adjustment Notice") to the Stockholder setting forth (i) the determination made
by USFloral's Accountant of the actual Company net worth (the "Actual Company
Net Worth"), (ii) the amount of the Merger Consideration that would have been
payable at Closing pursuant to Section 2.2(c) had the Actual Company Net Worth
been reflected on the Closing Financial Certificate instead of the Certified
Closing Net Worth, and (iii) the amount by which the number of shares issued as
the Merger Consideration would have been reduced at Closing had the Actual
Company Net Worth been used in the calculations pursuant to Section 2.2(c) (the
"Merger Consideration Adjustment"). The Merger Consideration Adjustment shall
take account of the reduction, if any, to the Merger Consideration already taken
pursuant to Section 2.2(c)(i).
(c) The Stockholder shall have thirty (30) days from the receipt of the
Financial Adjustment Notice to notify USFloral if the Stockholder disputes such
Financial Adjustment Notice. If USFloral has not received notice of such a
dispute within such 30-day period, USFloral shall be entitled to receive from
the Stockholder (which may, at USFloral's sole discretion, be from the Pledged
Assets as defined in Section 3.2) the Merger Consideration Adjustment. If,
however, the Stockholder has delivered notice of such a dispute to USFloral
within such 30-day period, then USFloral's Accountant shall select an
independent accounting firm that has not represented any of the parties hereto
within the preceding two (2) years to review the Surviving Corporation's books,
Closing Financial Certificate and Financial Adjustment Notice (and related
information) to determine the amount, if any, of the Merger Consideration
Adjustment. Such independent accounting firm shall be confirmed by the
Stockholder and USFloral within five (5) days of its selection, unless there is
an actual conflict of interest. The independent accounting firm shall be
directed to consider only those agreements, contracts, commitments or other
documents (or summaries thereof) that were either (i) delivered or made
available to USFloral's Accountant in connection with the transactions
contemplated hereby, or (ii) reviewed by USFloral's Accountant during the course
of the Post-Closing Audit. The independent accounting firm shall make its
determination of the Merger Consideration Adjustment, if any, within thirty (30)
days of its selection. The determination made by the independent accounting firm
shall be final and binding on the parties hereto, and upon such determination,
USFloral shall be entitled to receive from the Stockholder (which may, at
USFloral's sole discretion, be from the Pledged Assets as defined in Section
3.2) the Merger Consideration Adjustment. The costs of the independent
accounting firm shall be borne by the party (either USFloral or the Stockholder)
whose determination of the Company's net worth at Closing was further from the
determination of the independent accounting firm, or equally by USFloral and the
Stockholder in the event that the determination by the
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independent accounting firm is equidistant between the Certified Closing Net
Worth and the Actual Company Net Worth.
3.2 Pledged Assets.
(a) As collateral security for the payment of any post-Closing adjustment
to the Merger Consideration under Section 3.1, or any indemnification
obligations of the Stockholder pursuant to Article 10, the Stockholder shall,
and by execution hereof does hereby, transfer, pledge and assign to USFloral,
for the benefit of USFloral, a security interest in the following assets (the
"Pledged Assets"):
(i) at Closing, cash equal to five percent (5%) of the Closing Date
Consideration and that number of shares of USFloral Common Stock with a value,
based on the Merger Price, equal to five percent (5%) of the Closing Date
Consideration as the same may have been adjusted pursuant to Section 2.2 or
Section 3.1 hereof; upon determination of the Earn-Out Consideration, cash equal
to five percent (5%) of the Earn-Out Consideration and that number of shares of
USFloral Common Stock, valued at the Earn-Out Price, equal to five percent (5%)
of the Earn-Out Consideration; and the certificates and instruments, if any,
representing or evidencing such Pledged Assets;
(ii) all securities hereafter delivered to the Stockholder with respect to
or in substitution for the Pledged Assets, all certificates and instruments
representing or evidencing such securities, and all cash and non-cash dividends
and other property at any time received, receivable or otherwise distributed in
respect of or in exchange for any or all thereof; and in the event the
Stockholder receives any such property, the Stockholder shall hold such property
in trust for USFloral and shall immediately deliver such property to USFloral to
be held hereunder as Pledged Assets; and
(iii) all cash and non-cash proceeds of all of the foregoing property and
all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property.
(b) Each certificate, if any, evidencing the Pledged Assets issued in the
Stockholder's name in the Merger shall be delivered to USFloral directly by the
transfer agent, such certificate bearing no restrictive or cautionary legend
other than those imprinted by the transfer agent at USFloral's request. The
Stockholder shall, at the Closing, deliver to USFloral, for each such
certificate, a stock power duly signed in blank by him. Any cash comprising the
Pledged Assets shall be withheld by USFloral from distribution to the
Stockholder and shall be subject to the terms of the Escrow Agreement, which
shall be substantially in the form attached hereto as Annex I.
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(c) The Pledged Assets shall be available to satisfy any post-Closing
adjustment to the Merger Consideration pursuant to Section 3.1 and any
indemnification obligations of the Stockholder pursuant to Article 10 until the
date which is one year after the Effective Time (the "Release Date"). Promptly
following the Release Date, USFloral shall return or cause to be returned to the
Stockholder the Pledged Assets, less Pledged Assets having an aggregate value
equal to the
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amount of (i) any post-Closing adjustment to the Merger Consideration under
Section 3.1, (ii) any pending claim for indemnification made by any Indemnified
Party (as defined in Article 10), and (iii) any indemnification obligations of
the Stockholder pursuant to Article 10. For purposes of the preceding sentence
and Article 10, the USFloral Common Stock held as Pledged Assets shall be valued
at (x) the Merger Price with respect to any post-Closing adjustment to the
Merger Consideration under Section 3.1 and (y) the average of the closing price
on the Nasdaq National Market per share of USFloral Common Stock for the five
trading days prior to the satisfaction of an indemnification obligation (the
"Market Value") with respect to indemnification obligations pursuant to Article
10.
4. CLOSING
4.1 Location and Date. The consummation of the Merger and the other
transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Morgan, Lewis & Bockius LLP, on January 27, 1998, providing that all
conditions to Closing shall have been satisfied or waived, or at such other time
and date as USFloral, the Company and the Stockholder may mutually agree, which
date shall be referred to as the "Closing Date."
4.2 Effect. On the Closing Date, the articles of merger, certificate of
merger, or other appropriate documents executed in accordance with the Florida
Business Corporation Act (the "Merger Documents"), together with any required
officers' certificates, shall be filed with the Secretary of the State of
Florida in accordance with the provisions of the Florida Business Corporation
Act. The Merger shall become effective upon such filings or at such later time
as may be specified in such filings (the "Effective Time").
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
To induce USFloral and Newco to enter into this Agreement and consummate
the transactions contemplated hereby, each of the Company and the Stockholder,
jointly and severally, represents and warrants to USFloral and Newco as follows
(for purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
Stockholder and the directors and officers of the Company, including facts of
which the directors and officers, in the reasonably prudent exercise of their
duties, should be aware):
5.1 Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and to carry on its business in the places
and in the manner as now conducted except where the failure to be so authorized,
qualified or licensed would not have a material adverse effect on the business,
operations, properties, assets or condition,
8
financial or otherwise, of the Company ("Material Adverse Effect"). Schedule 5.l
hereto contains a list of all jurisdictions in which the Company is authorized
or qualified to do business. The Company is in good standing as a foreign
corporation in each jurisdiction it which it does business. The Company has
delivered to USFloral true, complete and correct copies of the Articles of
Incorporation and Bylaws of the Company. Such Articles of Incorporation and
Bylaws are collectively referred to as the "Charter Documents." The Company is
not in violation of any Charter Documents. The minute books of the Company have
been made available to USFloral (and have been delivered, along with the
Company's original stock ledger and corporate seal, to USFloral) and are correct
and, except as set forth in Schedule 5.1, complete in all material respects.
5.2 Authorization; Validity. The Company has all requisite corporate power
and authority to enter into and perform its obligations pursuant to the terms of
this Agreement. The Company has the full legal right, corporate power and
authority to enter into this Agreement and the transactions contemplated hereby.
The Stockholder has the full legal right and authority to enter into this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the performance by the Company of the
transactions contemplated herein have been duly and validly authorized by the
Board of Directors of the Company and the Stockholder and this Agreement has
been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of the Company and the
Stockholder, enforceable in accordance with its terms.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of, any of the
Charter Documents;
(b) conflict with, or result in a default (or an event that would
constitute a default but for any requirement of notice or lapse of time or both)
under, any document, agreement or other instrument to which the Company or the
Stockholder is a party or by which the Company or the Stockholder is bound, or
result in the creation or imposition of any lien, charge or encumbrance on any
of the Company's properties pursuant to (i) any law or regulation to which the
Company or the Stockholder or any of their respective property is subject, or
(ii) any judgment, order or decree to which the Company or the Stockholder is
bound or any of their respective property is subject;
(c) result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of the Company; or
(d) violate any law, order, judgment, rule, regulation, decree or ordinance
to which the Company or the Stockholder is subject or by which the Company or
the Stockholder is bound including, without limitation, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), together with all rules and
regulations promulgated thereunder.
9
5.4 Capital Stock of the Company. The authorized capital stock of the
Company consists of 100 shares of common stock, $1.00 par value, of which 100
shares are issued and outstanding. All of the issued and outstanding shares of
the capital stock of the Company have been duly authorized and validly issued,
are fully paid and nonassessable and are owned of record and beneficially by the
Stockholder free and clear of all Liens (defined below). All of the issued and
outstanding shares of the capital stock of the Company were offered, issued,
sold and delivered by the Company in compliance, as necessary, with all
applicable state and federal laws concerning the issuance of securities.
Further, none of such shares was issued in violation of any preemptive rights.
There are no voting agreements or voting trusts with respect to any of the
outstanding shares of the capital stock of the Company. For purposes of this
Agreement, "Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge, preference, priority or other security agreement, option, warrant,
attachment, right of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than restrictions imposed by
federal and state securities laws), or preferential arrangement of any kind or
nature whatsoever (including any restriction on the transfer of any assets, any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction).
5.5 Transactions in Capital Stock. No option, warrant, call, subscription
right, conversion right or other contract or commitment of any kind exists of
any character, written or oral, which may obligate the Company to issue, sell or
otherwise cause to become outstanding any shares of capital stock. The Company
has no obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof. As a result of the
Merger, no person or entity, other than USFloral, will be the record and
beneficial owner of any outstanding capital stock of the Surviving Corporation
or any rights to acquire capital stock of the Surviving Corporation.
5.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 5.6(a), the Company has no
subsidiaries.
(b) Except as set forth on Schedule 5.6(b), the Company does not presently
own, of record or beneficially, or control, directly or indirectly, any capital
stock, securities convertible into capital stock or any other equity interest in
any corporation, association or business entity, nor is the Company, directly or
indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
(c) Except as set forth on Schedule 5.6(c), there are no promissory notes
that have been issued to, or are held by, the Company.
5.7 Predecessor Status. Schedule 5.7 sets forth a list of all names of
all predecessor companies of the Company, including the names of any entities
from the Company previously
10
acquired significant assets. The Company has never been a subsidiary or
division of another corporation, nor has it been a part of an acquisition that
was later rescinded.
5.8 Absence of Claims Against the Company. The Stockholder has no claims
against the Company, except for those to be satisfied prior to the Closing Date.
5.9 Company Financial Conditions.
(a) The Company's net worth (i) as of December 31, 1996 was not less than
$5.4 million, and (ii) as of the Closing will not be less than the Net Worth
Target. For purposes of this Section 5.9(a), calculation of amounts as of the
Closing shall be made in accordance with the last paragraph of Section 8.9.
(b) The Company's earnings before interest and taxes (after the addition of
"add-backs" set forth on Schedule 5.9(b)) for its most recent fiscal year was
not less than $3,648,000.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete and
correct copies of the Company's balance sheet as of December 31, 1996, and
income statement for the year then ended (collectively, the "Financials") and
(b) true, complete and correct copies of the Company's unaudited balance sheet
(the "Interim Balance Sheet") as of September 30, 1997 (the "Balance Sheet
Date") and income statement, for the nine-month period then ended (collectively,
the "Interim Financials," and together with the Financials, the "Company
Financial Statements"). Except as noted on the report accompanying the
Financials, the Company Financial Statements have been prepared in accordance
with GAAP consistently applied, subject to, in the case of the Interim
Financials, (i) normal year-end audit adjustments, which individually or in the
aggregate will not be material, (ii) the exceptions stated on Schedule 5.10, and
(iii) the omission of footnote information. Each balance sheet included in the
Company Financial Statements presents fairly the financial condition of the
Company as of the date indicated thereon, and each of the income statements
included in the Company Financial Statements presents fairly the results of its
operations for the periods indicated thereon. Since the dates of the Company
Financial Statements, there have been no material changes in the Company's
accounting policies other than as requested by USFloral to conform the Company's
accounting policies to GAAP.
5.11 Liabilities and Obligations.
(a) The Company is not liable for or subject to any liabilities except for:
(i) those liabilities reflected on the Interim Balance Sheet and not
previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its business
consistent with past practice under any contract, commitment or agreement
specifically disclosed on any
11
Schedule to this Agreement or not required to be disclosed thereon because of
the term or amount involved or otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in the
ordinary course of business consistent with past practice, which liabilities are
not, individually or in the aggregate, material.
(b) The Company has delivered to USFloral, in the case of those liabilities
which are not fixed or are contested, a reasonable estimate of the maximum
amount which may be payable.
(c) Schedule 5.11(c) also includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the Company
or the Surviving Corporation would require additional material expenditures of
capital.
(d) For purposes of this Section 5.11, the term "liabilities" shall include
without limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent, mature, unmatured or
otherwise and whether known or unknown, fixed or unfixed, choate or inchoate,
liquidated or unliquidated, secured or unsecured. Schedule 5.11(d) contains a
complete list of all indebtedness of the Company.
5.12 Accounts and Notes Receivable. The Company has delivered to USFloral
a complete and accurate list, as of a date not more than two (2) business days
prior to the date hereof, of the accounts and notes receivable of the Company
(including without limitation receivables from and advances to employees and the
Stockholder), which includes an aging of all accounts and notes receivable
showing amounts due in 30-day aging categories (collectively, the "Accounts
Receivable"). On the Closing Date, the Company will deliver to USFloral a
complete and accurate list, as of a date not more than two (2) business days
prior to the Closing Date, of the Accounts Receivable. All Accounts Receivable
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. The Accounts Receivable
are current and collectible net of any respective reserves shown on the
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves, each of the Accounts
Receivable will be collected in full, without any set-off, within ninety (90)
days after the day on which it first became due and payable. There is no
contest, claim, or right of set-off, other than rebates and returns in the
ordinary course of business, under any contract with any obligor of an Account
Receivable relating to the amount or validity of such Account Receivable.
5.13 Books and Records. The Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
12
5.14 Permits. The Company owns or holds all licenses, franchises, permits
and other governmental authorizations, including without limitation permits,
titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises reasonably necessary for
the continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in the Permits and other applicable orders, approvals,
variances, rules and regulations and is not in violation of any of the
foregoing. The transactions contemplated by this Agreement will not result in a
default under, or a breach or violation of, or adversely affect the rights and
benefits afforded to the Company by, any Permit.
5.15 Real Property.
(a) For purposes of this Agreement, "Real Property" means all interests in
real property including, without limitation, fee estates, leaseholds and
subleaseholds, purchase options, easements, licenses, rights to access, and
rights of way, and all buildings and other improvements thereon, owned or used
by the Company, together with any additions thereto or replacements thereof.
(b) Schedule 5.15(b) contains a complete and accurate description of all
Real Property (including street address, legal description (where known), owner,
and Company's use thereof) and, to the Company's knowledge, any Liens. Schedule
5.15(b) indicates whether the Real Property is owned or leased. The Real
Property listed on Schedule 5.15 includes all interests in real property
necessary to conduct the business and operations of the Company.
(c) Except as set forth in Schedule 5.15(c):
(i) The Real Property and all present uses and operations of the Real
Property substantially comply with all applicable statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments, decrees, awards or
restrictions of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Laws"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property. The
Company has obtained all approvals of governmental authorities (including
licenses and permits) required in connection with the use, occupation and
operation of the Real Property.
(ii) There are no pending or, to the Company's knowledge, threatened
condemnation, fire, health, safety, building, zoning or other land use
regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters
13
which do or may adversely effect the current use, occupancy or value thereof,
nor has the Company or the Stockholder received notice of any pending or
threatened special assessment proceedings affecting any portion of the Real
Property.
(iii) Except as set forth on Schedule 5.15(c), there are no parties other
than the Company in possession of any of the Real Property or any portion
thereof, and there are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of the Real Property or any portion thereof.
(iv) All real property taxes and assessments that are due and payable with
respect to the Real Property have been paid or will be paid prior to becoming
delinquent.
(v) All oral or written leases, subleases, licenses, concession agreements
or other use or occupancy agreements pursuant to which the Company leases from
any other party any real property, including all amendments, renewals,
extensions, modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively, the "Leases") are valid
and in full force and effect. The Company has provided USFloral with true and
complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
operation granted to such party under such Lease. Except as set forth on
Schedule 5.15(c), the Leases and the Company's interests thereunder are free of
all Liens.
(vi) None of the Leases requires the consent or approval of any party
thereto in connection with the consummation of the transactions contemplated
hereby.
5.16 Personal Property.
(a) Schedule 5.16(a) sets forth a complete and accurate list of all
personal property included on the Interim Balance Sheet and all other personal
property owned or leased by the Company with a current book value in excess of
$10,000 both (i) as of the Balance Sheet Date and (ii) acquired since the
Balance Sheet Date, including in each case true, complete and correct copies of
leases for material equipment and an indication as to which assets are currently
owned, or were formerly owned, by the Stockholder or business or personal
affiliates of the Stockholder or of the Company.
(b) The Company currently owns or leases all personal property necessary to
conduct the business and operations of the Company as they are currently being
conducted.
(c) All of the trucks and other material machinery and equipment of the
Company, including those listed on Schedule 5.16(a), are in good working order
and condition, ordinary wear and tear excepted. All leases set forth on Schedule
5.16(a) are in full force and effect and constitute valid and binding agreements
of the Company, and the Company is not in breach of
14
any of their terms. All fixed assets used by the Company that are material to
the operation of its business are either owned by the Company or leased under an
agreement listed on Schedule 5.16(a).
5.17 Intellectual Property.
(a) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks listed on Schedule 5.17(a). Such schedule lists (i) all of
the Marks registered in the United States Patent and Trademark Office ("PTO") or
the equivalent thereof in any state of the United States or in any foreign
country, and (ii) all of the unregistered Marks, that the Company now owns or
uses in connection with its business. Except with respect to those Marks shown
as licensed on Schedule 5.17(a), the Company owns all of the registered and
unregistered trademarks, service marks, and trade names that it uses. The Marks
listed on Schedule 5.17(a) will not cease to be valid rights of the Company by
reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. For purposes of this
Section 5.17, the term "Mark" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names now held
by the Company, including any registration or application for registration of
any trademarks and services marks in the PTO or the equivalent thereof in any
state of the United States or in any foreign country, as well as any
unregistered marks used by the Company, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by the Company in the United States or any foreign country.
(b) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the Patents
listed on Schedule 5.17(b)(i) and in the Copyright registrations listed on
Schedule 5.17(b)(ii). Such Patents and Copyrights constitute all of the Patents
and Copyrights that the Company now owns or is licensed to use. The Company
owns or is licensed to practice under all patents and copyright registrations
that the Company now owns or uses in connection with its business. For purposes
of this Section 5.17, the term "Patent" shall mean any United States or foreign
patent to which the Company has title as of the date of this Agreement, as well
as any application for a United States or foreign patent made by the Company;
the term "Copyright" shall mean any United States or foreign copyright owned by
the Company as of the date of this Agreement, including any registration of
copyrights, in the United States Copyright Office or the equivalent thereof in
any foreign county, as well as any application for a United States or foreign
copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, all rights in the trade
secrets, franchises, or similar rights (collectively, "Other Rights") listed on
Schedule 5.17(c). Those Other Rights constitute all of the Other Rights that
the Company now owns or is licensed to use. The Company owns or is licensed to
practice under all trade secrets, franchises or similar rights that it owns,
uses or practices under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on Schedules
5.17(a), 5.17(b)(i), 5.17(b)(ii), and 5.17(c) are referred to collectively
herein as the "Intellectual Property." The Intellectual Property owned by the
Company is referred to herein collectively as the "Company
15
Intellectual Property." All other Intellectual Property is referred to herein
collectively as the "Third Party Intellectual Property." Except as indicated on
Schedule 5.17(d), the Company has no obligations to compensate any person for
the use of any Intellectual Property nor has the Company granted to any person
any license, option or other rights to use in any manner any Intellectual
Property, whether requiring the payment of royalties or not.
(e) The Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations hereunder, in
violation of any Third Party Intellectual Property license, sublicense or
agreement described in Schedule 5.17(a), (b), or (c). No claims with respect to
the Company Intellectual Property or Third Party Intellectual Property are
currently pending or, to the knowledge of the Company, are threatened by any
person, nor, to the Company's knowledge, do any grounds for any claims exist:
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by the Company
infringes on any copyright, patent, trademark, service mark or trade secret;
(ii) against the use by the Company of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in the Company's business as currently conducted by the
Company; (iii) challenging the ownership, validity or effectiveness of any of
the Company Intellectual Property or other trade secret material to the Company;
or (iv) challenging the Company's license or legally enforceable right to use of
the Third Party Intellectual Property. To the Company's knowledge, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property by any third party. Neither the Company nor any of its
subsidiaries (x) has been sued or charged in writing as a defendant in any
claim, suit, action or proceeding which involves a claim or infringement of
trade secrets, any patents, trademarks, service marks, or copyrights and which
has not been finally terminated or been informed or notified by any third party
that the Company may be engaged in such infringement or (y) has knowledge of any
infringement liability with respect to, or infringement by, the Company or any
of its subsidiaries of any trade secret, patent, trademark, service mark, or
copyright of another.
(f) All Intellectual Property in the form of computer software that is
utilized by the Company in the operation of its business has the capacity to
process date data between and within the twentieth and twenty-first centuries.
5.18 Material Contracts and Commitments.
(a) Schedule 5.18(a) contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation, joint venture or partnership
agreements, contracts with any labor organizations, employment agreements,
consulting agreements, loan agreements, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements) (i) to which the Company and any affiliate of the Company or any
officer, director or stockholder of the Company are parties ("Related Party
Agreements"); or (ii) that may give rise to obligations or liabilities
exceeding, during the current term thereof, $10,000, or that may generate
revenues or income exceeding, during the
16
current term thereof, $10,000 (collectively with the Related Party Agreements,
the "Material Contracts"). The Company has delivered to USFloral true, complete
and correct copies of the Material Contracts. The Company has complied with all
of its commitments and obligations and is not in default under any of the
Material Contracts, and no notice of default has been received with respect to
any thereof, and there are no Material Contracts that were not negotiated at
arm's length.
(b) Each Material Contract, except those terminated pursuant to Section
7.4, is valid and binding on the Company and is in full force and effect and is
not subject to any default thereunder by any party obligated to the Company
pursuant thereto. The Company [has obtained/will obtain prior to the Closing
Date] all necessary consents, waivers and approvals of parties to any Material
Contracts that are required in connection with any of the transactions
contemplated hereby, or are required by any governmental agency or other third
party or are advisable in order that any such Material Contract remain in effect
without modification after the Merger and without giving rise to any right to
termination, cancellation or acceleration or loss of any right or benefit
("Third Party Consents"). All Third Party Consents are listed on Schedule
5.18(b).
(c) The outstanding balance on all loans or credit agreements either (i)
between the Company and any Person in which the Stockholder owns a material
interest, or (ii) guaranteed by the Company for the benefit of any Person in
which the Stockholder owns a material interest, are set forth in Schedule
5.18(c).
(d) The pledge, hypothecation or mortgage of all or substantially all of
the Company's assets (including, without limitation, a pledge of the Company's
contract rights under any Material Contract) will not, except as set forth on
Schedule 5.18(d), (i) result in the breach or violation of, (ii) constitute a
default under, (iii) create a right of termination under, or (iv) result in the
creation or imposition of (or the obligation to create or impose) any lien upon
any of the assets of the Company (other than a lien created pursuant to the
pledge, hypothecation or mortgage described at the start of this Section
5.18(d)) pursuant to any of the terms and provisions of, any Material Contract
to which the Company is a party or by which the property of the Company is
bound.
5.19 Government Contracts.
(a) Except as set forth on Schedule 5.19, the Company is not a party to any
government contracts.
(b) The Company has not been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the knowledge of the
Company, has any suspension or debarment action been threatened or commenced.
There is no valid basis for the Company's suspension or debarment from bidding
on contracts or subcontracts for any agency of the United States Government or
any state or local government.
17
(c) Except as set forth in Schedule 5.19, the Company has not been, nor is
it now being, audited, or investigated by any government agency, or the
inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened.
(d) The Company has no dispute pending before a contracting office of, nor
any current claim (other than the Accounts Receivable) pending against, any
agency or instrumentality of the United States Government or any state or local
government, relating to a contract.
(e) The Company has not, with respect to any government contract, received
a cure notice advising the Company that it is or was in default or would, if it
failed to take remedial action, be in default under such contract.
(f) The Company has not submitted any inaccurate, untruthful, or misleading
cost or pricing data, certification, bid, proposal, report, claim, or any other
information relating to a contract to any agency or instrumentality of the
United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate of the
Company is in receipt or possession of any competitor or government proprietary
or procurement sensitive information related to the Company's business under
circumstances where there is reason to believe that such receipt or possession
is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued, awarded or
novated to the Company in the Company's name.
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate list of
all insurance policies carried by the Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. The
Company has delivered to USFloral true, complete and correct copies of all
current insurance policies, all of which are in full force and effect. All
premiums payable under all such policies have been paid and the Company is
otherwise in full compliance with the terms of such policies. Such policies of
insurance are of the type and in amounts customarily carried by persons
conducting businesses similar to that of the Company. The insurance carried by
the Company with respect to its properties, assets and business is, to the
Company's knowledge, with financially sound insurers. To the knowledge of the
Company, there have been no threatened terminations of, or material premium
increases with respect to, any of such policies.
5.21 Labor and Employment Matters. With respect to employees of and
service providers to the Company:
(a) the Company is and has been in compliance in all material respects with
all applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration
18
Reform and Control Act, and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there been, any
unfair labor practice complaint against the Company pending or, to the Company's
knowledge, threatened, before the National Labor Relations Board or any other
comparable authority;
(c) there is not now, nor within the past three years has there been, any
labor strike, slowdown or stoppage actually pending or, to the Company's
knowledge, threatened, against or directly affecting the Company;
(d) to the Company's knowledge, no labor representation organization effort
exists nor has there been any such activity within the past three years;
(e) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the Company's knowledge, no
claims therefor exist or have been threatened;
(f) the employees of the Company are not and have never been represented by
any labor union, and no collective bargaining agreement is binding and in force
against the Company or currently being negotiated by the Company; and
(g) all persons classified by the Company as independent contractors do
satisfy and have satisfied the requirements of law to be so classified, and the
Company has fully and accurately reported their compensation on IRS Forms 1099
when required to do so.
5.22 Employee Benefit Plans. Attached hereto as Schedule 5.22 are
complete and accurate copies of all employee benefit plans, all employee welfare
benefit plans, all employee pension benefit plans, all multi-employer plans and
all multi-employer welfare arrangements (as defined in Sections 3(3), (1), (2),
(37) and (40), respectively, of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), which are currently maintained and/or sponsored by
the Company, or to which the Company currently contributes, or has an obligation
to contribute in the future (including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions and
deferred compensation agreements), together with copies of any trusts related
thereto and a classification of employees covered thereby (collectively, the
"Plans"). Schedule 5.22 sets forth all of the Plans that have been terminated
within the past three years.
All Plans are in substantial compliance with all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable laws, and, in all material respects, have been administered, operated
and managed in substantial accordance with the governing documents. All Plans
that are intended to qualify (the "Qualified Plans") under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code") have been determined by
the Internal Revenue Service to be so qualified, and copies of the current plan
determination letters, most recent actuarial valuation reports, if any, most
recent Form 5500, or, as applicable, Form 5500-C/R filed
19
with respect to each such Qualified Plan or employee welfare benefit plan and
most recent trustee or custodian report, are included as part of Schedule 5.22.
To the extent that any Qualified Plans have not been amended to comply with
applicable law, the remedial amendment period permitting retroactive amendment
of such Qualified Plans has not expired and will not expire within 120 days
after the Closing Date. All reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, annual reports, summary annual
reports, actuarial reports, PBGC-1 Forms, audits or tax returns) have been
timely filed or distributed. None of: (i) the Stockholder; (ii) any Plan; or
(iii) the Company has engaged in any transaction prohibited under the provisions
of Section 4975 of the Code or Section 406 of ERISA. No Plan has incurred an
accumulated funding deficiency, as defined in Section 412(a) of the Code and
Section 302(1) of ERISA; and the Company does not currently have (nor at the
Closing Date will have) any direct or indirect liability whatsoever (including
being subject to any statutory lien to secure payment of any such liability), to
the Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Plan
under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty; and neither the Company nor any member of a "controlled group" (as
defined in ERISA Section 4001(a)(14)) currently has (or at the Closing Date will
have) any obligation whatsoever to contribute to any "multi-employer pension
plan" (as defined in ERISA Section 4001(a)(14), nor has any withdrawal liability
whatsoever (whether or not yet assessed) arising under or capable of assertion
under Title IV of ERISA (including, but not limited to, Sections 4201, 4202,
4203, 4204, or 4205 thereof) been incurred by any Plan. Further:
(a) there have been no terminations, partial terminations or discontinuance
of contributions to any Qualified Plan without notice to and approval by the
Internal Revenue Service;
(b) no Plan which is subject to the provisions of Title IV of ERISA has
been terminated;
(c) there have been no "reportable events" (as that phrase is defined in
Section 4043 of ERISA) with respect to any Plan which were not properly
reported;
(d) the valuation of assets of any Qualified Plan, as of the Closing Date,
shall exceed the actuarial present value of all accrued pension benefits under
any such Qualified Plan in accordance with the assumptions contained in the
Regulations of the PBGC governing the funding of terminated defined benefit
plans;
(e) with respect to Plans which qualify as "group health plans" under
Section 4980B of the Internal Revenue Code and Section 607(1) of ERISA and
related regulations (relating to the benefit continuation rights imposed by
"COBRA"), the Company and the Stockholder have complied (and on the Closing Date
will have complied), in all respects with all reporting, disclosure, notice,
election and other benefit continuation requirements imposed thereunder as and
when applicable to such plans, and the Company has no (and will incur no) direct
or indirect liability and is not (and will not be) subject to any loss,
assessment, excise tax penalty, loss of federal income tax deduction or other
sanction, arising on account of or in respect of any direct or indirect failure
by the Company or the Stockholder, at any time prior to the Closing Date, to
comply with any such federal
20
or state benefit continuation requirement, which is capable of being assessed or
asserted before or after the Closing Date directly or indirectly against the
Company or the Stockholder with respect to such group health plans;
(f) the Company is not now nor has it been within the past five years a
member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the Company's knowledge, there is
no threatened litigation, arbitration or disputed claim, settlement or
adjudication proceeding, or any governmental or other proceeding, or
investigation with respect to any Plan, or with respect to any fiduciary,
administrator, or sponsor thereof (in their capacities as such), or any party in
interest thereof;
(h) the Financial Statements as of the Balance Sheet Date reflect the
approximate total pension, medical and other benefit expense for all Plans, and
no material funding changes or irregularities are reflected thereon which would
cause such Financial Statements to be not representative of most prior periods;
and
(i) the Company has not incurred liability under Section 4062 of ERISA.
5.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 5.23(a), the Company is not in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which would have a Material
Adverse Effect on the Company. The Company has conducted and is conducting its
business in substantial compliance with the requirements, standards, criteria
and conditions set forth in applicable federal, state and local statutes,
ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing which might have a
Material Adverse Effect on the Company.
(b) The Stockholder has not, at any time: (i) committed any criminal act
(except for minor traffic violations, if any); (ii) engaged in acts of fraud,
dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy or Chapter 11 protection.
(c) Except as set forth on Schedule 5.23(c), there are no claims, actions,
suits or proceedings, pending or, to the knowledge of the Company, threatened
against or affecting the Company at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over it and no notice of
any claim, action, suit or proceeding, whether pending or threatened, has been
received. There are no judgments, orders, injunctions, decrees, stipulations or
awards (whether rendered by a court or administrative agency or by arbitration)
against the Company or against any of its properties or business.
21
5.24 Taxes.
(a)
(i) The Company has timely filed all Tax Returns due on or before the
Closing Date and all such Tax Returns are true, correct and complete in all
material respects.
(ii) The Company has paid in full on a timely basis all Taxes owed by it,
whether or not shown on any Tax Return.
(iii) The amount of the Company's liability for unpaid Taxes as of the
Balance Sheet Date did not exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) shown on the Interim Balance
Sheet, and the amount of the Company's liability for unpaid Taxes for all
periods or portions thereof ending on or before the Closing Date will not exceed
the amount of the current liability accruals for Taxes (excluding reserves for
Deferred Taxes) as such accruals are reflected on the books and records of the
Company on the Closing Date.
(iv) There are no ongoing examinations or claims against the Company for
Taxes, and no notice of any audit, examination or claim for Taxes, whether
pending or threatened, has been received.
(v) The Company has a taxable year ended on December 31, 1996.
(vi) The Company currently utilizes the accrual method of accounting for
income Tax purposes and such method of accounting has not changed in the past 12
years. The Company has not agreed to, and is not and will not be required to,
make any adjustments under Code Section 481(a) as a result of a change in
accounting methods.
(vii) The Company has withheld and paid over to the proper governmental
authorities all Taxes required to have been withheld and paid over, and complied
with all information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with amounts
paid to any employee, independent contractor, creditor or third party.
(viii) Copies of (A) any Tax examinations, (B) extensions of statutory
limitations for the collection or assessment of Taxes and (C) the Tax Returns of
the Company for the last five fiscal years have been delivered to USFloral.
(ix) There are (and as of immediately following the Closing there will be)
no Liens on the assets of the Company relating to or attributable to Taxes.
(x) To the Company's knowledge, there is no basis for the assertion of any
claim relating to or attributable to Taxes which, if adversely determined, would
result in any Lien on the assets of the Company or otherwise have an adverse
effect on the Company or its business.
22
(xi) There are no contracts, agreements, plans or arrangements, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of the Company that, individually or collectively, could give
rise to any payment (or portion thereof) that would not be deductible pursuant
to Sections 280G, 404 or 162 of the Code.
(xii) The Company is not, and has not been at any time, a party to a tax
sharing, tax indemnity or tax allocation agreement, and except as set forth on
Schedule 5.24(a)(xii), the Company has not assumed the tax liability of any
other person under contract.
(xiii) The Company's tax basis in its assets for purposes of determining
its future amortization, depreciation and other federal income tax deductions is
accurately reflected on the Company's tax books and records.
(b)
(i) The Company has, since June, 1986, been an S corporation within the
meaning of Section 1361 of the Code.
(ii) The Company does not have a net recognized built-in gain within the
meaning of Section 1374 of the Code
(c) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar governmental charge,
impost or levy (including without limitation income taxes, franchise taxes,
transfer taxes or fees, sales taxes, use taxes, gross receipt taxes, value added
taxes, employment taxes, excise taxes, ad valorem taxes, property taxes,
withholding taxes, payroll taxes, minimum taxes or windfall profit taxes)
together with any related penalties, fines, additions to tax or interest imposed
by the United States or any state, county, local or foreign government or
subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including any information
return), report, statement, schedule, notice, form, estimate or declaration of
estimated tax relating to or required to be filed with any governmental
authority in connection with the determination, assessment, collection or
payment of any tax.
(d) The Stockholder represents and warrants that he has, and as of the
Effective Time will have, no present plan, intention or arrangement to sell,
transfer or otherwise dispose of a number of shares of USFloral Common Stock
(whether received in the Merger or otherwise acquired, held or disposed of by
the Stockholder) in excess of the lesser of (i) 50% or more of the number of
shares of USFloral Common Stock to be received by the Stockholder in the Merger
(including shares to be issued as Earn-Out Consideration) or (ii) that number of
shares of USFloral Common Stock to be received in the Merger (including shares
to be issued as Earn-Out Consideration) that would reduce the Stockholder's
ownership of USFloral Common Stock to a number of shares having a value, as of
the date of the Merger, of less than 50% of the value of all
23
of the all of the issued and outstanding Company Common Stock immediately prior
to the Effective Time.
5.25 Absence of Changes. Since the Balance Sheet Date, the Company has
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on Schedule 5.25, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the Company;
(b) any damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in its
outstanding securities or any change in its ownership interests or any grant of
any options, warrants, calls, conversion rights or commitments;
(d) any declaration or payment of any dividend or distribution in respect
of the capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of the capital stock of the Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by the Company to any of its officers
directors, Stockholder, employees, consultants or agents, except for ordinary
and customary bonuses and salary increases for employees in accordance with past
practice;
(f) any work interruptions, labor grievances or claims filed, or any
similar event or condition of any character, which has had a Material Adverse
Effect;
(g) any sale or transfer, or any agreement to sell or transfer, any
material assets property or rights of the Company to any person, including
without limitation the Stockholder and their affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness or other
obligation owing to the Company, including without limitation any indebtedness
or obligation of the Stockholder and their affiliates, provided that the Company
may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(i) any plan, agreement or arrangement granting any preferential rights to
purchase or acquire any interest in any of the assets, property or rights of the
Company or requiring consent of any party to the transfer and assignment of any
such assets, property or rights;
(j) any purchase or acquisition of, or agreement, plan or arrangement to
purchase or acquire, any property, rights or assets outside of the ordinary
course of business of the Company;
24
(k) any waiver of any material rights or claims of the Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course of business;
(n) any capital commitment by the Company, either individually or in the
aggregate, exceeding $50,000;
(o) any change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage, pledge,
security interest or lien or other encumbrance on any asset (other than liens
arising under existing lease financing arrangements which are not material and
liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or non-
renewal by the Company of any contract, lease transaction, commitment or other
right or obligation requiring aggregate payments by the Company in excess of
$50,000;
(r) any loan by the Company to any person or entity, incurring by the
Company, of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others;
(s) the commencement or notice or, to the knowledge of the Company, threat
of commencement, of any lawsuit or proceeding against, or investigation of, the
Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a) through
(s) (other than negotiations with USFloral and its representatives regarding the
transactions contemplated by this Agreement).
5.26 Deposit Accounts; Powers of Attorney. Schedule 5.26 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company has any
account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
25
(d) the name of each person authorized to draw thereon or have access
thereto; and
(e) the name of each person, corporation, firm or other entity holding a
general or special power of attorney from the Company and a description of the
terms of such power.
5.27 Environmental Matters.
(a) Hazardous Material. Other than as set forth on Schedule 5.27(a), no
underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state, local or
other applicable law to be radioactive, toxic, hazardous or otherwise a danger
to health or the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to
the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies properly and safely maintained (a "Hazardous Material"), are
present in, on or under any property, including the land and the improvements,
ground water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased. Schedule 5.27(a) identifies all underground and
aboveground storage tanks, and the capacity, age, and contents of such tanks,
located on Real Property owned or leased by the Company.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of or released, or exposed its employees or
others to, Hazardous Materials in violation of any law in effect on or before
the Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively, "Company
Hazardous Materials Activities") in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities and
other business of the Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. The
Company (A) is in compliance in all material respects with all terms and
conditions of the Environmental Permits and (B) is in compliance in all material
respects with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
the laws of all Governmental Entities relating to pollution or protection of the
environment or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder. To
the Company's knowledge, there are no circumstances that may prevent or
interfere with such compliance in the future. Schedule 5.27(d) includes a
listing and description of all Environmental Permits currently held by the
Company.
26
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
knowledge of the Company, threatened concerning any Environmental Permit,
Hazardous Material or any Company Hazardous Materials Activity. There are no
past or present actions, activities, circumstances, conditions, events, or
incidents that could involve the Company (or any person or entity whose
liability the Company has retained or assumed, either by contract or operation
of law) in any environmental litigation, or impose upon the Company (or any
person or entity whose liability the Company has retained or assumed, either by
contract or operation of law) any environmental liability including, without
limitation, common law tort liability.
5.28 Relations with Governments. The Company has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office, nor has it otherwise taken any action that
would cause the Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. The Company has delivered to USFloral and Newco true and
complete copies of each material agreement, contract, commitment or other
document (or summaries thereof) that is referred to in the Schedules or that has
been requested by USFloral. Without limiting any exclusion, exception or other
limitation contained in any of the representations and warranties made herein,
this Agreement, the schedules hereto and all other documents and information
furnished to USFloral and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein not misleading. If the
Stockholder becomes aware of any fact or circumstance which would change a
representation or warranty of the Stockholder in this Agreement or any
representation made on behalf of the Company, the Stockholder shall immediately
give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve the Company or the Stockholder of their
respective obligations under this Agreement, and at the sole option of USFloral,
the truth and accuracy of any and all warranties and representations of the
Stockholder, at the date of this Agreement and as of the Closing date, shall be
a precondition to the consummation of this transaction.
5.30 USFloral Prospectus; Securities Representations. The Stockholder has
received and reviewed a copy of the prospectus dated November 18, 1997 including
all supplements thereto (as supplemented, the "USFloral Prospectus") contained
in USFloral's shelf registration statement on Form S-1 (File No. 333-39969). The
Stockholder (a) has such knowledge, sophistication and experience in business
and financial matters that they are capable of evaluating the merits and risks
of an investment in the shares of USFloral Common Stock, (b) fully understands
the nature, scope, and duration of the limitations on transfer contained herein,
in the Affiliate Agreement (if applicable), and under applicable law, and (c)
can bear the economic risk of any investment in the shares of USFloral Common
Stock and can afford a complete loss of such investment. The Stockholder has had
an adequate opportunity to ask questions and receive answers (and has asked such
questions and received answers to its satisfaction) from the officers of
USFloral concerning the business, operations and financial condition of
USFloral. The Stockholder has no contract,
27
undertaking, agreement or arrangement, written or oral, with any other person to
sell, transfer or grant participation in any shares of USFloral Common Stock to
be acquired by the Stockholder in the Merger. The Stockholder acknowledges and
agrees that USFloral has not and will not provide the Stockholder or any other
party with a prospectus for the Stockholder's use in selling USFloral Common
Stock.
5.31 Affiliates. The Stockholder is the only person who is, in the
reasonable judgment of the Company and the Stockholder, an affiliate of the
Company within the meaning of Rule 145 (each such person an "Affiliate")
promulgated under the 1933 Act.
5.32 Location of Chief Executive Offices. Schedule 5.32 sets forth the
location of the Company's chief executive offices.
5.33 Location of Equipment and Inventory. All Inventory and Equipment
held on the date hereof by the Company is located at one of the locations shown
on Schedule 5.33. For purposes of this Agreement, (a) the term "Inventory"
shall mean any "inventory" as such term is defined in the Uniform Commercial
Code as in effect on October 16, 1997 in the State of New York (the
"N.Y.U.C.C.") owned by the Company as of the date hereof, and, in any event,
shall include, but shall not be limited to, all merchandise, inventory and
goods, and all additions, substitutions and replacements thereof, wherever
located, together with all goods, supplies, incidentals, packaging materials,
labels, materials and any other items used or usable in manufacturing,
processing, packaging or shipping same; in all stages of production, and all
proceeds therefrom; and (b) the term "Equipment" shall mean any "equipment" as
such term is defined in the N.Y.U.C.C. owned by the Company as of October 16,
1997, and, in any event, shall include, but shall not be limited to, all
machinery, equipment, furnishings, fixtures and vehicles owned by the Company,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto.
6. REPRESENTATIONS OF USFLORAL AND NEWCO
To induce the Company and the Stockholder to enter into this Agreement and
consummate the transactions contemplated hereby, each of USFloral and Newco
represents and warrants to the Company and the Stockholder as follows:
6.1 Due Organization. Each of USFloral and Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and each is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
carry on their respective businesses in the places and in the manner as now
conducted, except where the failure to be so authorized, qualified or licensed
would not have a Material Adverse Effect. Copies of the Certificate of
Incorporation and the Bylaws, each as amended, of USFloral and Newco
(collectively, the "USFloral Charter Documents") have been made available to the
Company. Neither USFloral nor Newco is in violation of any USFloral Charter
Document.
28
6.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Stockholder at the Effective Time, when delivered in
accordance with the terms of this Agreement, will be valid and legally issued
shares of USFloral capital stock, fully paid and nonassessable.
6.3 Authorization; Validity of Obligations. The representatives of
USFloral and Newco executing this Agreement have all requisite corporate power
and authority to enter into and bind USFloral and Newco to the terms of this
Agreement. USFloral and Newco have the full legal right, power and corporate
authority to enter into this Agreement and the transactions contemplated hereby.
The execution and delivery of this Agreement by USFloral and Newco and the
performance by each of USFloral and Newco of the transactions contemplated
herein have been duly and validly authorized by the respective Boards of
Directors of USFloral and Newco, and this Agreement has been duly and validly
authorized by all necessary corporate action. This Agreement is a legal, valid
and binding obligation of each of USFloral and Newco enforceable in accordance
with its terms.
6.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and its
lenders, conflict with, or result in a default (or would constitute a default
but for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which either USFloral or Newco is a party, or
result in the creation or imposition of any lien, charge or encumbrance on any
of USFloral's or Newco's properties pursuant to (i) any law or regulation to
which either USFloral or Newco or any of their respective property is subject,
or (ii) any judgment, order or decree to which USFloral or Newco is bound or any
of their respective property is subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
Newco; or
(d) violate any law, order, judgment, rule, regulation, decree or ordinance
to which USFloral or Newco is subject, or by which USFloral or Newco is bound,
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
6.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 9,594,050 shares were outstanding on November 19, 1997. The
authorized capital stock of Newco consists of 1,000 shares of Common Stock, of
which 100 shares are outstanding. All of the issued and outstanding shares of
Newco are owned beneficially, and of record by USFloral. All of the shares of
USFloral Common Stock to be issued to the Stockholder in accordance herewith
will be offered,
29
issued, sold and delivered by USFloral in compliance with all applicable state
and federal laws concerning the issuance of securities and none of such shares
was or will be issued in violation of the preemptive rights of any stockholder
of USFloral.
7. COVENANTS
7.1 Tax Matters.
(a) The following provisions shall govern the allocation of responsibility
as between the Stockholder, on the one hand, and the Surviving Corporation, on
the other, for certain tax matters following the Closing Date:
(i) The Stockholder shall prepare or cause to be prepared and file or cause
to be filed, within the time and in the manner provided by law, all Tax Returns
of the Company for all periods ending on or before the Closing Date that are due
after the Closing Date. The Stockholder shall pay to the Surviving Corporation
on or before the due date of such Tax Returns the amount of all Taxes shown as
due on such Tax Returns to the extent that such Taxes are not reflected in the
current liability accruals for Taxes (excluding reserves for deferred Taxes)
shown on the Company's books and records as of the Closing Date. Such Returns
shall be prepared and filed in accordance with applicable law and in a manner
consistent with past practices and shall be subject to review and approval by
USFloral. To the extent reasonably requested by the Stockholder or required by
law, USFloral and the Surviving Corporation shall participate in the filing of
any Tax Returns filed pursuant to this paragraph.
(ii) The Surviving Corporation shall prepare or cause to be prepared and
file or cause to be filed any Tax Returns for Tax periods which begin before the
Closing Date and end after the Closing Date. The Stockholder shall pay to the
Surviving Corporation within fifteen (15) days after the date on which Taxes are
paid with respect to such periods an amount equal to the portion of such Taxes
which relates to the portion of such taxable period ending on the Closing Date
to the extent such Taxes are not reflected in the current liability accruals for
Taxes (excluding reserves for deferred Taxes) shown on the Company's books and
records as of the Closing Date. For purposes of this Section 7.1, in the case
of any Taxes that are imposed on a periodic basis and are payable for a taxable
period that includes (but does not end on) the Closing Date, the portion of such
Tax which relates to the portion of such taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
taxable period multiplied by a fraction the numerator of which is the number of
days in the taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant taxable period ended on the
Closing Date. Any credits relating to a taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of the Surviving Corporation.
30
(iii) USFloral and the Surviving Corporation on one hand and the
Stockholder on the other hand shall (A) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns
pursuant to this Section 7.1 and any audit, litigation or other proceeding with
respect to Taxes; (B) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (C)
preserve information, records or documents relating Tax matters pertinent to the
Company that is in their possession or under their control until the expiration
of any applicable statute of limitations or extensions thereof.
(iv) The Stockholder shall timely pay all transfer, documentary, sales,
use, stamp, registration and other Taxes and fees arising from or relating to
the transactions contemplated by this Agreement, and the Stockholder shall, at
his own expense, file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration, and
other Taxes and fees. If required by applicable law, USFloral and the Surviving
Corporation will join in the execution of any such Tax Returns and other
documentation.
(b) The Company shall, prior to the Closing, maintain its status as an S
Corporation for federal and state income tax purposes.
7.2 Title Insurance and Surveys.
(a) With respect to each fee estate included in the Real Property, the
Stockholder will obtain and deliver to USFloral (i) as soon as practicable after
the date of this Agreement, a title commitment disclosing the condition of title
to such fee estate and all easements, rights of way, and restrictions of record
with respect thereto, as of a date not earlier than the date of this Agreement,
accompanied by copies of all instruments evidencing the scope and extent of all
such easements, rights of way, and restrictions of record (the "Title
Commitment"), and (ii) at or prior to Closing, an ALTA Owner's Policy of Title
Insurance on a form customarily used in the state in which the Real Property is
located, issued by a title insurer satisfactory to USFloral, in an amount equal
to the fair market value of the Real Property (as reasonably determined by
USFloral), insuring title to such property to be in the name of the party
designated by USFloral on Schedule 7.3, subject only to Permitted Encumbrances
(each a "Title Policy").
(b) Each Title Policy obtained and delivered to USFloral pursuant to this
Agreement shall, except to the extent that title insurers in the state in which
the applicable property is located are not lawfully permitted to issue such
policies, (i) insure title to the property described in the policy and all
recorded easements benefitting such property, (ii) contain an "extended coverage
endorsement" or similar modification insuring over or otherwise eliminating the
general exceptions customarily contained in title policies, (iii) contain an
endorsement insuring that the property described in the policy is the same real
estate shown in the survey delivered with respect to such property, (iv) contain
a "contiguity" endorsement with respect to any property consisting of more than
one record parcel, (v) provide full coverage against mechanics' and
materialmen's liens arising out of the construction, repair or alteration of any
of the Real Property, (vi) contain any special
31
endorsements reasonably required by USFloral, including, without limitation, an
endorsement insuring that the improvements included in the Real Property are a
permitted use under the zoning designation applicable to the Real Property, and
(vii) not be subject to any survey exception.
(c) With respect to each Real Property interest as to which a Title Policy
is to be procured pursuant to this Agreement, the Stockholder will obtain and
deliver to USFloral as soon as practicable after the date of this Agreement a
current survey of the relevant parcel, prepared and certified to USFloral and to
the title insurer of such Real Property interest by a licensed surveyor and
conforming to current ALTA Minimum Detail Requirements for Land Title Surveys,
disclosing the location of all improvements, easements, party walls, sidewalks,
roadways, utility lines, and other matters customarily shown on such surveys,
and showing access affirmatively to public streets and roads.
(d) The Stockholder shall be responsible for all costs associated with
obtaining the title commitments and surveys described above, and USFloral shall
be responsible for the costs of purchasing the Title Policies described above.
7.3 Related Party Agreements. The Company and/or the Stockholder, as the
case may be, shall terminate any Related Party Agreements which USFloral
requests the Company or Stockholder to terminate.
7.4 Cooperation.
(a) The Company, the Stockholder, USFloral and Newco shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such instruments as the other may
reasonably request for the purpose of carrying out this Agreement. In connection
therewith, if required, the president or chief financial officer of the Company
shall execute any documentation reasonably required by USFloral's independent
public accountants (in connection with such accountants' audit of the Company)
or the Nasdaq National Market.
(b) The Stockholder and the Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of the
Company cooperate with USFloral on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
filing obligations, actions, proceedings, arrangements or disputes of any nature
with respect to matters pertaining to all periods prior to the Closing Date.
(c) Each party hereto shall cooperate in obtaining all consents and
approvals required under this Agreement to effect the transactions contemplated
hereby
(d) The Company, the Stockholder and USFloral shall file all notices and
other information and documents required under the HSR Act (as defined in
Section 5.3) as promptly as practicable after the date hereof.
32
7.5 Conduct of Business Pending Closing. Between the date hereof and the
Effective Time, the Company will (except as requested or agreed by USFloral):
(a) carry on its business in substantially the same manner as it has
heretofore and not introduce any material new method of management, operation or
accounting;
(b) maintain its properties and facilities, including those held under
leases, in as good working order and condition as at present, ordinary wear and
tear excepted;
(c) perform all of its obligations under agreements relating to or
affecting its respective assets, properties or rights;
(d) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(e) use all commercially reasonable efforts to maintain and preserve its
business organization intact, retain its present officers and key employees and
maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it;
(f) maintain compliance with all permits, laws, rules and regulations,
consent orders, and all other orders of applicable courts, regulatory agencies
and similar governmental authorities;
(g) maintain present debt and lease instruments and not enter into new or
amended debt or lease instruments; and
(h) maintain present salaries and commission levels for all officers,
directors, employees, agents, representatives and independent contractors,
except for ordinary and customary bonuses and salary increases for employees
(other than the Stockholder) in accordance with past practice.
7.6 Access to Information. Between the date of this Agreement and the
Closing Date, the Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of the Company and (ii) such additional financial and operating data
and other information as to the business and properties of the Company as
USFloral may from time to time reasonably request, including without limitation,
access upon reasonable request to the Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or knowledge
obtained in any investigation pursuant to this Section 7.7 shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
7.7 Prohibited Activities. Between the date hereof and the Effective
Time, the Company will not, without the prior written consent of USFloral:
33
(a) make any change in its Articles of Incorporation or Bylaws, or
authorize or propose the same;
(b) issue, deliver or sell, authorize or propose the issuance, delivery or
sale of any securities, options, warrants, calls, conversion rights or
commitments relating to its securities of any kind, or authorize or propose any
change in its equity capitalization, or issue or authorize the issuance of any
debt securities;
(c) declare or pay any dividend, or make any distribution (whether in cash,
stock or property) in respect of its stock whether now or hereafter outstanding,
or split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or purchase, redeem or otherwise
acquire or retire for value any shares of its stock;
(d) enter into any contract or commitment or incur or agree to incur any
liability or make any capital expenditures, or guarantee any indebtedness,
except in the ordinary course of business and consistent with past practice in
an amount in excess of $10,000, including contracts to provide services to
customers;
(e) increase the compensation payable or to become payable to any officer,
director, Stockholder, employee, agent, representative or independent
contractor; make any bonus or management fee payment to any such person; make
any loans or advances; adopt or amend any Company Plan or Company Benefit
Arrangement; or grant any severance or termination pay;
(f) create or assume any mortgage, pledge or other lien or encumbrance upon
any assets or properties whether now owned or hereafter acquired;
(g) sell, assign, lease, pledge or otherwise transfer or dispose of any
property or equipment except in the ordinary course of business consistent with
past practice;
(h) acquire or negotiate for the acquisition of (by merger, consolidation,
purchase of a substantial portion of assets or otherwise) any business or the
start-up of any new business, or otherwise acquire or agree to acquire any
assets that are material, individually or in the aggregate, to the Company;
(i) merge or consolidate or agree to merge or consolidate with or into any
other corporation;
(j) waive any material rights or claims of the Company, provided that the
Company may negotiate and adjust bills in the course of good faith disputes with
customers in a manner consistent with past practice;
(k) commit a breach of or amend or terminate any material agreement,
permit, license or other right;
34
(l) enter into any other transaction (i) that is not negotiated at arm's
length with a third party not affiliated with the Company or any officer,
director or Stockholder of the Company or (ii) outside the ordinary course of
business consistent with past practice or (iii) prohibited hereunder;
(m) commence a lawsuit other than for routine collection of bills;
(n) revalue any of its assets, including without limitation, writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business consistent with past practice;
(o) make any tax election other than in the ordinary course of business and
consistent with past practice, change any tax election, adopt any tax accounting
method other than in the ordinary course of business and consistent with past
practice, change any tax accounting method, file any Tax Return (other than any
estimated tax returns, payroll tax returns or sales tax returns) or any
amendment to a Tax Return, enter into any closing agreement, settle any tax
claim or assessment, or consent to any tax claim or assessment, without the
prior written consent of USFloral; or
(p) take, or agree (in writing or otherwise) to take, any of the actions
described in Sections 7.8(a) through (o) above, or any action which would make
any of the representations and warranties of the Company and the Stockholder
contained in this Agreement untrue or result in any of the conditions set forth
in Articles 8 and 9 not being satisfied.
7.8 Notice to Bargaining Agents. Prior to the Closing Date, the Company
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, if requested
by USFloral, and shall provide USFloral with proof that any required notice has
been sent.
7.9 Sales of USFloral Common Stock.
(a) The Stockholder will not, directly or indirectly, offer, sell, contract
to sell, pledge or otherwise dispose of the shares of USFloral Common Stock to
be received by the Stockholder in the Merger prior to the date that is, (i) with
respect to one-third of the shares, eighteen months from the Closing Date, (ii)
with respect to two-thirds of the shares, twelve months from the Closing Date
and (iii) with respect to all of the shares, six months from the Closing Date.
(b) The Stockholder acknowledges and agrees that USFloral will not provide
the Stockholder with a prospectus for the Stockholder's use in selling the
shares of USFloral Common Stock to be received by the Stockholder in the Merger,
and agrees to sell such shares only in accordance with the requirements, if any,
of Rule 145(d) promulgated under the 1933 Act. USFloral acknowledges that the
provisions of this Section 7.9(b) will be satisfied as to any sale by the
35
Stockholder of the USFloral Common Stock the Stockholder may acquire pursuant to
the Merger pursuant to Rule 145(d) under the Securities Act, by a broker's
letter and a letter from the Stockholder with respect to that sale stating that
the applicable requirements of Rule 145(d)(1) have been met or are inapplicable
by virtue of Rule 145(d)(2) or Rule 145(d)(3) provided, however, that USFloral
has no reasonable basis to believe that such sales were not made in compliance
with such provisions of Rule 145(d) and subject to any changes in Rule 145 after
the date of this Agreement.
(c) The certificate or certificates evidencing the shares of USFloral
Common Stock to be delivered to the Stockholder in the Merger will bear
restrictive legends substantially in the following forms:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED PURSUANT TO A REGISTRATION
STATEMENT COVERING THE TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CONTRACTUAL
HOLDING PERIOD EXPIRING ON **, PURSUANT TO THAT CERTAIN AGREEMENT AND PLAN
OF REORGANIZATION, DATED AS OF JANUARY 20, 1998, AMONG THE ISSUER AND THE
STOCKHOLDER OF XL GROUP, INC., A FLORIDA CORPORATION. PRIOR TO THE
EXPIRATION OF SUCH HOLDING PERIOD, SUCH SHARES MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, TRANSFER OR ASSIGNMENT. UPON THE WRITTEN REQUEST OF THE
HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT) WHEN THE HOLDING
PERIOD HAS EXPIRED.
** Certificates representing one-third of the shares of USFloral Common Stock
issued will read "July 20, 1998," one-third will read "January 20, 1999" and
one-third will read "July 20, 1999."
7.10 USFloral Stock Options. As soon as practicable after the Closing
but in no event later than six (6) months from the Closing Date, options to
purchase such number of shares of USFloral Common Stock as shall have a fair
market value as of the Closing Date equal to 6.25% of the Closing Date
Consideration provided for in Section 2.2 above shall be available for issuance
to Jay Aldrich, Kelle Cantafio and Jose Concepcion, the key employees of the
Surviving Corporation after the Closing, as determined by the Surviving
Corporation's President (or other officer or director designated by the
Surviving Corporation and acceptable to USFloral) in accordance with USFloral's
policies, and authorized and issued under the terms of USFloral's 1997 Long-Term
Incentive Plan. As soon as practicable after the determination of the 1998 EBIT
pursuant to Section 2.2, options to
36
purchase such number of shares of USFloral Common Stock as shall have a fair
market value as of August 31, 1998 equal to 6.25% of the Earn-Out Consideration
provided for in Section 2.2 above (other than any portion of the Earn-Out
Consideration paid in respect of the 1997 Shortfall) shall be available for
issuance to the key employees of the Surviving Corporation after the Closing, as
determined by the Surviving Corporation's President (or other officer or
director designated by the Surviving Corporation and acceptable to USFloral) in
accordance with USFloral's policies, and authorized and issued under the terms
of USFloral's 1997 Long-Term Incentive Plan.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND NEWCO
The obligation of USFloral and Newco to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of the Stockholder and the Company contained
in this Agreement shall be true, correct and complete on and as of the Closing
Date with the same effect as though such representations and warranties had been
made on and as of such date; all of the terms, covenants, agreements and
conditions of this Agreement to be complied with, performed or satisfied by the
Company and the Stockholder on or before the Closing Date shall have been duly
complied with, performed or satisfied; and a certificate to the foregoing
effects dated the Closing Date and signed on behalf of the Company and by each
of the Stockholder shall have been delivered to USFloral.
8.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit claim or proceeding of any nature
pending or threatened against USFloral, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the Company.
8.3 No Material Adverse Change. There shall have been no material adverse
changes in the business, operations, affairs, prospects, properties, assets,
existing and potential liabilities, obligations, profits or condition (financial
or otherwise) of the Company, taken as a whole, since the Balance Sheet Date;
and USFloral shall have received a certificate signed by the Stockholder dated
the Closing Date to such effect.
8.4 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party, relating to the
consummation by the Company and the Stockholder of the transactions contemplated
hereby, shall have been obtained and made. Any
37
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated, and no action by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
8.5 Opinion of Counsel. USFloral shall have received an opinion from
counsel to the Company and the Stockholder, dated the Closing Date, in a form
reasonably satisfactory to USFloral.
8.6 Charter Documents. USFloral shall have received (a) a copy of the
Articles of Incorporation of the Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of the Company
certified by the Secretary of the Company, and such documents shall be in form
and substance reasonably acceptable to USFloral.
8.7 Quarterly Financial Statements. USFloral shall have received from the
Company completed quarterly financial statements in a form reasonably
satisfactory to USFloral, and the Merger shall have been approved by USFloral's
lenders.
8.8 Due Diligence Review. The Company shall have made such deliveries as
are called for by this Agreement. USFloral shall be fully satisfied in its sole
discretion with the results of its review of all of the Schedules, whether
delivered before or after the execution hereof, and such deliveries, and its
review of, and other due diligence investigations with respect to, the business,
operations, affairs, prospects, properties, assets, existing and potential
liabilities, obligations, profits and condition (financial or otherwise) of the
Company.
8.9 Delivery of Closing Financial Certificate. USFloral shall have
received a certificate (the "Closing Financial Certificate"), dated as of the
Closing Date, signed on behalf of the Company and by the Stockholder, setting
forth:
(a) the net worth of the Company as of the last day of its most recent
fiscal year (the "Certified Year-End Net Worth");
(b) the net worth of the Company as of the Closing Date (the
"Certified Closing Net Worth");
(c) the earnings of the Company before interest and taxes (after the
addition of "add-backs" set forth on Schedule 5.9(b)(i)) for the most recent
fiscal year preceding the Closing Date (the "Certified Year-End EBIT"); and
(d) a statement that all of the Company financial conditions set forth
in Section 5.9 of the Agreement are satisfied as of the Closing Date.
The parties acknowledge and agree that for purposes of determining the Certified
Closing Net Worth and the Certified Closing EBIT, the Company shall not take
account of any increase in intangible
38
assets (including without limitation goodwill, franchises and intellectual
property) accounted for after December 31, 1996.
8.10 FIRPTA Compliance. The Stockholder shall have delivered to USFloral a
properly executed statement in a form reasonably acceptable to USFloral for
purposes of satisfying USFloral's obligations under Treas. Reg. (S) 1.1445-2(b).
8.11 Employment Agreements. Peter F. Ullrich, Jay L. Aldrich, Kelle
Cantafio and Jose Concepcion shall have each entered into an employment
agreement with the Company in a form reasonably satisfactory to USFloral.
8.12 Stockholder's Release. The Stockholder shall have delivered to
USFloral an instrument dated the Closing Date releasing the Company from any and
all claims of such Stockholder against the Company.
8.13 Related Party Agreements. The Company shall have delivered to
USFloral:
(a) an executed Flower Supply Agreement, in the form of Annex II
--------
attached hereto, between the Company and those farms in which the Stockholder
has an interest which are listed on Schedule 8.14(a) attached hereto; and
----------------
[(b) an executed Lease, in the form of Annex III attached hereto,
---------
between the Company and Peter Ullrich [providing for rental of the real property
owned by Peter Ullrich and utilized in the Company's business at an annual
rental rate and with other terms mutually agreed upon by USFloral and Peter
Ullrich].]
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDER
The obligation of the Stockholder and the Company to effect the Merger are
subject to the satisfaction or waiver, at or before the Effective Time, of the
following conditions and deliveries:
9.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of USFloral and Newco contained in this
Agreement shall be true, correct and complete on and as of the Closing Date with
the same effect as though such representations and warranties had been made as
of such date; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by USFloral and Newco on
or before the Closing Date shall have been duly complied with, performed or
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed by the President or any Vice President of USFloral shall have been
delivered to the Company and the Stockholder.
39
9.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
USFloral's proposed acquisition of the Company, or limiting or restricting
USFloral's conduct or operation of the business of the Company (or its own
business) following the Merger shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit, claim or proceeding of any nature
pending or threatened, against USFloral, Newco or the Company, their respective
properties or any of their officers or directors, that could materially and
adversely affect the business, assets, liabilities, financial condition, results
of operations or prospects of the USFloral and its subsidiaries taken as a
whole.
9.3 Consents and Approvals. All necessary consents of, and filings with,
any governmental authority or agency or third party relating to the consummation
by USFloral and Newco of the transactions contemplated herein, shall have been
obtained and made. Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no action by
the Department of Justice or Federal Trade Commission challenging or seeking to
enjoin the consummation of the transactions contemplated hereby shall be
pending.
9.4 Employment Agreements. The Company shall have afforded each of Peter
F. Ullrich, Jay L. Aldrich, Kelle Cantafio and Jose Concepcion an opportunity to
enter into an employment agreement with the Company in a form reasonably
satisfactory to USFloral.
10. INDEMNIFICATION
10.1 General Indemnification by the Stockholder. The Stockholder covenants
and agrees to indemnify, defend, protect and hold harmless USFloral, Newco and
the Surviving Corporation and their respective officers, directors, employees,
stockholders, assigns, successors and affiliates (individually, an "Indemnified
Party" and collectively, "Indemnified Parties") from, against and in respect of:
(a) all liabilities, losses, claims, damages, punitive damages, causes
of action, lawsuits, administrative proceedings (including informal
proceedings), investigations, audits, demands, assessments, adjustments,
judgments, settlement payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and costs and expenses
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) (collectively, "Damages") suffered,
sustained, incurred or paid by the Indemnified Parties in connection with,
resulting from or arising out of, directly or indirectly:
(i) any breach of any representation or warranty of the Stockholder or
the Company set forth in this Agreement or any Schedule or certificate,
delivered by or on behalf of the Stockholder or the Company in connection
herewith; or
40
(ii) any nonfulfillment of any covenant or agreement by the
Stockholder or, prior to the Effective Time, the Company, under this Agreement;
or
(iii) the business, operations or assets of the Company prior
to the Closing Date or the actions or omissions of the Company's directors,
officers, shareholders, employees or agents prior to the Closing Date, other
than Damages arising from matters expressly disclosed in the Company Financial
Statements, this Agreement or the Schedules to this Agreement; or
(iv) the matters, if any, disclosed on Schedules 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters); and
(b) any and all Damages incident to any of the foregoing or to the
enforcement of this Section 10.1.
10.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under Section 10.1
unless, and solely to the extent that, the aggregate amount of Damages exceeds
$260,000 (the "Indemnification Threshold"); provided, however, that the
Indemnification Threshold shall not apply to (i) adjustments to the Merger
Consideration as set forth in Sections 2.2 and 3.1; (ii) Damages arising out of
any breaches of the covenants of the Stockholder set forth in this Agreement or
representations and warranties made in Sections 5.4 (capital stock of the
Company), 5.5 (transactions in capital stock), 5.9 (Company financial
conditions), 5.18 (material contracts and commitments), 5.23 (conformity with
law; litigation), 5.24 (taxes), 5.27 (environmental matters), or (iii) Damages
described in Section 10.1(a)(iv);
(b) the aggregate amount of the Stockholder's liability under this
Article 10 shall not exceed the Merger Consideration; provided, however, that
the Stockholder's liability for Damages arising out of any breaches of the
representations made in Sections 5.24 (taxes) or 5.27 (environmental matters) or
Damages described in Section 10.1(a)(ii) and Section 10.1(a)(iv) shall not be
subject to such limitation;
(c) the indemnification obligations under this Article 10, or under
any certificate or writing furnished in connection herewith, shall terminate at
the date that is the later of clause (i) or (ii) of this Section 10.2(c):
(i)
(1) except as to representations, warranties, and covenants specified
in clause (i)(2) of this Section 10.2(c), the first anniversary of the Closing
Date, or
(2) with respect to representations and warranties contained in
Sections 5.22 (employee benefit plans), 5.24 (taxes), 5.27 (environmental
matters), and the indemnification set forth in Section 10.1(a)(ii), (iii) or
(iv), on (A) the date that is six (6) months after the expiration of the longest
applicable federal or state statute of limitation (including
41
extensions thereof), or (B) if there is no applicable statute of limitation, (x)
ten (10) years after the Closing Date if the Claim is related to the cost of
investigating, containing, removing, or remediating a release of Hazardous
Material into the environment, or (y) five (5) years after the Closing Date for
any other Claim covered by clause (i)(2)(B) of this Section 10.2(c); or
(ii) the final resolution of claims or demands pending as of the
relevant dates described in clause (i) of this Section 10.2(c) (such claims
referred to as "Pending Claims").
10.3 Indemnification Procedures. All claims or demands for indemnification
under this Article 10 ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 10.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the Stockholder of such Claim, specifying the
nature of such Claim and the amount or the estimated amount thereof to the
extent then feasible (the "Claim Notice"). If the Stockholder does not notify
the Indemnified Party within thirty days after the date of delivery of the Claim
Notice that the Indemnifying Party disputes such Claim, with a detailed
statement of the basis of such position, the amount of such Claim shall be
conclusively deemed a liability of the Indemnifying Party hereunder. In case an
objection is made in writing in accordance with this Section 10.3(a), the
Indemnified Party shall respond in a written statement to the objection within
thirty days and, for sixty days thereafter, attempt in good faith to agree upon
the rights of the respective parties with respect to each of such Claims (and,
if the parties should so agree, a memorandum setting forth such agreement shall
be prepared and signed by both parties).
(b)
(i) In the event that any Claim for which the Indemnifying Party would
be liable to an Indemnified Party hereunder is asserted against an Indemnified
Party by a third party (a "Third Party Claim"), the Indemnified Party shall
deliver a Claim Notice to the Stockholder. The Stockholder shall have thirty
days from the date of delivery of the Claim Notice to notify the Indemnified
Party (A) whether the Indemnifying Party disputes liability to the Indemnified
Party hereunder with respect to the Third Party Claim, and, if so, the basis for
such a dispute, and (B) if such party does not dispute liability, whether or not
the Indemnifying Party desires, at the sole cost and expense of the Indemnifying
Party, to defend against the Third Party Claim, provided that the Indemnified
Party is hereby authorized (but not obligated) to file any motion, answer or
other pleading and to take any other action which the Indemnified Party shall
deem necessary or appropriate to protect the Indemnified Party's interests.
(ii) In the event that the Stockholder timely notifies the Indemnified
Party that the Indemnifying Party does not dispute the Indemnifying Party's
obligation to indemnify with respect to the Third Party Claim, the Indemnifying
Party shall defend the Indemnified Party against such Third Party Claim by
appropriate proceedings, provided that, unless the Indemnified Party otherwise
agrees in writing, the Indemnifying Party may not settle any Third Party Claim
(in whole or in part) if such settlement does not include a complete and
unconditional release of the
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Indemnified Party. If the Indemnified Party desires to participate in, but not
control, any such defense or settlement the Indemnified Party may do so at its
sole cost and expense. If the Indemnifying Party elects not to defend the
Indemnified Party against a Third Party Claim, whether by failure of such party
to give the Indemnified Party timely notice as provided herein or otherwise,
then the Indemnified Party, without waiving any rights against such party, may
settle or defend against such Third Party Claim in the Indemnified Party's sole
discretion and the Indemnified Party shall be entitled to recover from the
Indemnifying Party the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the Indemnified Party with
respect thereto, including interest from the date such costs and expenses were
incurred.
(iii) If at any time, in the reasonable opinion of the Indemnified
Party, notice of which shall be given in writing to the Stockholder, any Third
Party Claim seeks material prospective relief which could have an adverse effect
on any Indemnified Party or the Surviving Corporation or any subsidiary, the
Indemnified Party shall have the right to control or assume (as the case may be)
the defense of any such Third Party Claim and the amount of any judgment or
settlement and the reasonable costs and expenses of defense shall be included as
part of the indemnification obligations of the Indemnifying Party hereunder. If
the Indemnified Party elects to exercise such right, the Indemnifying Party
shall have the right to participate in, but not control, the defense of such
Third Party Claim at the sole cost and expense of the Indemnifying Party.
(c) Nothing herein shall be deemed to prevent the Indemnified Party
from making a Claim, and an Indemnified Party may make a Claim hereunder, for
potential or contingent Damages provided the Claim Notice sets forth the
specific basis for any such potential or contingent claim or demand to the
extent then feasible and the Indemnified Party has reasonable grounds to believe
that such Claim may be made.
(d) Subject to the provisions of Section 10.2, the Indemnified Party's
failure to give reasonably prompt notice as required by this Section 10.3 of any
actual, threatened or possible claim or demand which may give rise to a right of
indemnification hereunder shall not relieve the Indemnifying Party of any
liability which the Indemnifying Party may have to the Indemnified Party unless
the failure to give such notice materially and adversely prejudiced the
Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under this Article 10, provided that no Indemnified
Party shall be obligated to continue pursuing any payment pursuant to the terms
of any insurance policy.
10.4 Survival of Representations Warranties and Covenants. All
representations, warranties and covenants made by the Company, the Stockholder,
USFloral and Newco in or pursuant to this Agreement or in any document delivered
pursuant hereto shall be deemed to have been made on the date of this Agreement
(except as otherwise provided herein) and, if a Closing occurs, as of the
Closing Date. The representations of the Company and the Stockholder will
survive the Closing and will remain in effect until, and will expire upon, the
termination of the indemnification obligations as provided in Section 10.2. The
representations of USFloral and
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Newco will survive the Closing and will remain in effect until, and will expire
upon the first anniversary of the Closing date.
10.5 Remedies Cumulative. The remedies set forth in this Article 10 are
cumulative and shall not be construed to restrict or otherwise affect any other
remedies that may be available to the Indemnified Parties under any other
agreement or pursuant to statutory or common law.
10.6 Right to Set Off. USFloral shall have the right, but not the
obligation, to set off, in whole or in part, against the Pledged Assets, amounts
finally determined under Section 10.3 to be owed to USFloral by the Stockholder
under Section 10.1 hereof, so long as the pledge is in effect.
10.7 Liability. Nothing in this Article 10 shall be construed to impose
any liability on either the Stockholder or the Company for claims or damages not
attributable to acts or omissions prior to the Closing Date.
11. NONCOMPETITION
11.1 Prohibited Activities. The Stockholder agrees that for a period of
two years following the Closing Date, he shall not:
(a) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee, independent
contractor, consultant or advisor, or as a sales representative, in any business
selling any products or services in direct competition with the Surviving
Corporation or USFloral, including without limitation the importing, brokerage,
manufacture, assembly, packaging, distribution, shipping or marketing of floral
products (including, without limitation, hardgoods), or any business engaging in
the consolidation of the floral industry within the United States of America
(the "Territory");
(b) call upon any person who is, at that time, within the Territory,
an employee of USFloral or any subsidiary of USFloral in a managerial capacity
for the purpose or with the intent of enticing such employee away from or out of
the employ of USFloral or such subsidiary;
(c) call upon any person or entity which is, at that time, or which
has been, within one year prior to that time, a customer of USFloral or any
subsidiaries of USFloral, the Company within the Territory for the purpose of
soliciting or selling floral products within the Territory;
(d) call upon any prospective acquisition candidate, on their own
behalf or on behalf of any competitor, which candidate was either called upon by
any of them or for which any of them made an acquisition analysis for themselves
or USFloral or any subsidiaries of USFloral, the Company; or
(e) disclose customers, whether in existence or proposed, of the
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
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Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the Stockholder from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market, (ii) engaging in
any activity to which USFloral shall have provided its prior written consent,
(iii) performing his duties as an officer and employee of the Surviving
Corporation, or (iv) engaging in business on behalf of [list entities] to the
same extent the Stockholder engaged in such business prior to the Closing Date.
11.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and the Surviving Corporation as a result of the breach of the
foregoing covenant, and because of the immediate and irreparable damage that
would be caused to USFloral and the Surviving Corporation for which they would
have no other adequate remedy, the Stockholder agrees that, in the event of a
breach by them of the foregoing covenant, the covenant may be enforced by
USFloral or the Surviving Corporation by, without limitation, injunctions and
restraining orders.
11.3 Reasonable Restraint. It is agreed by the parties that the foregoing
covenants in this Article 11 impose a reasonable restraint on the Stockholder in
light of the activities and business of USFloral on the date of the execution of
this Agreement and the current and future plans of USFloral and the Surviving
Corporation (as successors to the businesses of the Company).
11.4 Severability; Reformation. The covenants in this Article 11 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
11.5 Independent Covenant. All of the covenants in this Article 11 shall
be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholder
against the Company, the Surviving Corporation or USFloral, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
years stated above, shall be computed by excluding from such computation any
time during which any Stockholder is in violation of any provision of this
Article 11 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
the Surviving Corporation seeks to enforce the agreements and covenants of the
Stockholder or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement; provided, however, that if the Stockholder is found not to be in
violation of the agreements or covenants in any such activity the period during
which the action was pending shall not be excluded from such computation.
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11.6 Materiality. The Company and the Stockholder hereby agree that the
covenants set forth in this Article 11 are a material and substantial part of
the transactions contemplated by this Agreement, supported by adequate
consideration.
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
12.1 Stockholder. The Stockholder recognizes and acknowledges that he has
in the past, currently has, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's business. The Stockholder
agrees that he will not disclose any confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of USFloral, unless the
Stockholder can show that such information has become known to the public
generally through no fault of the Stockholder. In the event of a breach or
threatened breach by the Stockholder of the provisions of this Article 12,
USFloral and the Surviving Corporation shall be entitled to an injunction
restraining the Stockholder from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
USFloral and the Surviving Corporation from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
12.2 USFloral. USFloral recognizes and acknowledges that it has in the
past, currently has, and prior to the Closing Date will have, access to certain
confidential information of the Company, such as lists of customers, operational
policies, pricing and cost policies that are valuable, special and unique assets
of the Company and the Company's business. USFloral agrees that it will not
disclose any confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever, prior to the
Closing Date without prior written consent of the Stockholder. In the event of
a breach or threatened breach by USFloral of the provisions of this Article 12,
the Stockholder shall be entitled to an injunction restraining USFloral from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting the Stockholder from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
12.3 Damages. Because of the difficulty of measuring economic losses as a
result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, USFloral, the Surviving Corporation and the Stockholder agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
13. GENERAL
13.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date solely:
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(a) by mutual consent of the boards of directors of USFloral and the
Company; or
(b) by the Stockholder and the Company as a group, on the one hand, or
by USFloral, on the other hand, if the Closing shall not have occurred on or
before January 31, 1998, provided that the right to terminate this Agreement
under this Section 13.1(b) shall not be available to either party (with the
Stockholder and the Company deemed to be a single party for this purpose) whose
material misrepresentation, breach of warranty or failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(c) by the Stockholder and the Company as a group, on the one hand, or
by USFloral, on the other hand, if there is or has been a material breach,
failure to fulfill or default on the part of the other party (with the
Stockholder and the Company deemed to be a single party for this purpose) of any
of the representations and warranties contained herein or in the due and timely
performance and satisfaction of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made or
shall not reasonably be expected to occur before the Closing Date; or
(d) by the Stockholder and the Company as a group, on the one hand, or
by USFloral, on the other hand, if there shall be a final nonappealable order of
a federal or state court in effect preventing consummation of the Merger; or
there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued or deemed applicable to the Merger by any
governmental entity which would make the consummation of the Merger illegal.
13.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, this Agreement shall forthwith become
ineffective, and there shall be no liability or obligation on the part of any
party hereto or its officers, directors or shareholders. Notwithstanding the
foregoing sentence, (i) the provisions of this Article 13 shall remain in full
force and effect and survive any termination of this Agreement; (ii) each party
shall remain liable for any breach of this Agreement prior to its termination;
and (iii) in the event of termination of this Agreement pursuant to Section
13.1(c) above, then notwithstanding the provisions of Section 13.7 below, the
breaching party (with the Stockholder and the Company deemed to be a single
party for purposes of this Article 13), shall be liable to the other party to
the extent of the expenses incurred by such other party in connection with this
Agreement and the transactions contemplated hereby, as well as any damages in
accordance with applicable law.
13.3 Successors and Assigns. This Agreement and the rights of the parties
hereunder may not be assigned (except by operation of law) and shall be binding
upon and shall inure to the benefit of the parties hereto, the successors of
USFloral, and the heirs and legal representatives of the Stockholder.
13.4 Entire Agreement; Amendment; Waiver. This Agreement sets forth the
entire understanding of the parties hereto with respect to the transactions
contemplated hereby. Each of the Schedules to this Agreement is incorporated
herein by this reference and expressly made a part
47
hereof. Any and all previous agreements and understandings between or among the
parties regarding the subject matter hereof, whether written or oral, are
superseded by this Agreement. This Agreement shall not be amended or modified
except by a written instrument duly executed by each of the parties hereto, or
in accordance with Section 11.4. Any extension or waiver by any party of any
provision hereto shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 Brokers and Agents. USFloral and Newco (as a group) and the Company
and each Stockholder (as a group) each represents and warrants to the other that
it has not employed any broker or agent in connection with the transactions
contemplated by this Agreement and agrees to indemnify the other against all
losses, damages or expenses relating to or arising out of claims for fees or
commission of any broker or agent employed or alleged to have been employed by
such party.
13.7 Expenses. USFloral has and will pay the fees, expenses and
disbursements of USFloral and Newco and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement. The Stockholder (and not the Company) has and will pay the fees,
expenses and disbursements of the Stockholder, the Company, and their agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement.
13.8 Specific Performance; Remedies. Each party hereto acknowledges that
the other parties will be irreparably harmed and that there will be no adequate
remedy at law for any violation by any of them of any of the covenants or
agreements contained in this Agreement, including without limitation, the
noncompetition provisions set forth in Article 11 and the confidentiality
obligations set forth in Article 12. It is accordingly agreed that, in addition
to any other remedies which may be available upon the breach of any such
covenants or agreements, each party hereto shall have the right to obtain
injunctive relief to restrain a breach or threatened breach of, or otherwise to
obtain specific performance of, the other parties, covenants and agreements
contained in this Agreement.
13.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to USFloral, Newco or the Surviving Corporation to:
U.S.A. Floral Products, Inc.
48
1025 Thomas Jefferson Street, N.W.
Suite 600 West
Washington DC 20007
Attn: Robert J. Poirier
Chairman, President and Chief Executive Officer
(Telefax: (202) 333-0803)
with a required copy to:
Morgan, Lewis & Bockius LLP
One Oxford Centre
Thirty-Second Floor
Pittsburgh, PA 15219
Attn: David A. Gerson, Esquire
(Telefax: (412) 560-3399)
If to the Stockholder to:
Peter F. Ullrich
1800 N.W. 89th Place
Miami, Florida 33172
(Telefax: (305) 592-7512)
with a required copy to:
John Immer, Esquire
Kelley, Drye & Warren LLP
Suite 2400, 201 S. Biscayne Blvd.
Miami, Florida 33131
(Telefax: (305) 372-2490)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be deemed given only when
actually received by the addressees.
13.10 Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
Delaware, without giving effect to any of the conflicts of laws provisions
thereof that would require the application of the substantive laws of any other
jurisdiction.
13.11 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof,
49
and the application of such provision to such person or circumstances in any
other jurisdiction, shall not be affected thereby, and to this end the
provisions of this Agreement shall be severable. The preceding sentence is in
addition to and not in place of the severability provisions in Section 11.4.
13.12 Absence of Third Party Beneficiary Rights. No provision of this
Agreement is intended, nor will any provision be interpreted, to provide or to
create any third party beneficiary rights or any other rights of any kind in any
client, customer, affiliate, shareholder, employee or partner of any party
hereto or any other person or entity.
13.13 Further Representations. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel. Each
party further represents that it is being independently advised as to the tax
consequences of the transactions contemplated by this Agreement and is not
relying on any representation or statements made by the other party as to such
tax consequences.
13.14 Accounting Terms. Except as otherwise expressly provided herein
or in the Schedules, all accounting terms used in this Agreement shall be
interpreted, and all financial statements, Schedules, certificates and reports
as to financial matters required to be delivered hereunder shall be prepared, in
accordance with GAAP consistently applied.
[Execution Page Following]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
U.S.A. FLORAL PRODUCTS, INC.
/s/ Robert J. Poirier
By:__________________________________
Robert J. Poirier
Chairman, President & CEO
XLG ACQUISITION CORP.
/s/ Robert J. Poirier
By:__________________________________
Robert J. Poirier
President
XL GROUP, INC.
/s/ Peter F. Ullrich
By:__________________________________
Peter F. Ullrich
President
STOCKHOLDER:
/s/ Peter F. Ullrich
__________________________________
Peter F. Ullrich
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