EXHIBIT 2.11 - Agreement and Plan of
Reorganization by and among
U.S.A. Floral Products, Inc., EFI
Acquisition Corp., EFM Acquisition
Corp., Everflora, Inc., Everflora
Miami, Inc. and the Stockholder
named therein dated January 16,
1998.
AGREEMENT AND PLAN OF REORGANIZATION
by and among
U.S.A. Floral Products, Inc.,
EFI Acquisition Corp.,
EFM Acquisition Corp.,
Everflora, Inc.,
Everflora Miami, Inc.
and
The Stockholder Named Herein,
Dated January 16, 1998
Table of Contents
Page
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1. THE MERGERS.............................................................. 1
1.1 The Mergers..................................................... 1
1.2 Articles of Incorporation; Bylaws, Directors and Officers....... 2
1.3 Effects of the Mergers.......................................... 2
2. CONVERSION AND EXCHANGE OF STOCK......................................... 3
2.1 Manner of Conversion............................................ 3
2.2 Merger Consideration............................................ 4
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 COMPANIES 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 Companies.................................. 10
5.5 Transactions in Capital Stock .................................. 10
5.6 Subsidiaries, Stock, and Notes.................................. 11
5.7 Predecessor Status.............................................. 11
5.8 Absence of Claims Against the Companies......................... 11
5.9 Companies' Financial Conditions................................. 11
5.10 Financial Statements............................................ 11
5.11 Liabilities and Obligations..................................... 12
5.12 Accounts and Notes Receivable................................... 13
5.13 Books and Records............................................... 13
5.14 Permits......................................................... 13
5.15 Real Property................................................... 14
5.16 Personal Property............................................... 16
5.17 Intellectual Property........................................... 17
5.18 Material Contracts and Commitments.............................. 19
5.19 Government Contracts............................................ 20
5.20 Insurance....................................................... 20
5.21 Labor and Employment Matters.................................... 20
5.22 Employee Benefit Plans.......................................... 21
5.23 Conformity with Law; Litigation................................. 23
5.24 Taxes........................................................... 24
5.25 Absence of Changes.............................................. 26
5.26 Deposit Accounts; Powers of Attorney............................ 28
5.27 Environmental Matters........................................... 28
5.28 Relations with Governments...................................... 29
5.29 Disclosure...................................................... 29
5.30 USFloral Prospectus; Securities Representations................. 30
5.31 Affiliates...................................................... 30
5.32 Location of Chief Executive Offices............................. 30
5.33 Location of Equipment and Inventory............................. 30
6. REPRESENTATIONS OF USFLORAL AND THE NEWCO................................ 31
6.1 Due Organization................................................ 31
6.2 USFloral Common Stock........................................... 31
6.3 Authorization; Validity of Obligations.......................... 31
6.4 No Conflicts.................................................... 32
6.5 Capitalization of USFloral and Ownership of
USFloral Stock.................................................. 32
7. COVENANTS................................................................ 32
7.1 Tax Matters...................................................... 32
7.2 Accounts Receivable.............................................. 34
7.3 Related Party Agreements and Personal Vehicles................... 34
7.4 Cooperation...................................................... 34
7.5 Conduct of Business Pending Closing.............................. 35
7.6 Access to Information............................................ 36
7.7 Prohibited Activities............................................ 36
7.8 Notice to Bargaining Agents...................................... 38
7.9 Sales of USFloral Common Stock................................... 38
7.10 USFloral Stock Options........................................... 39
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USFLORAL AND THE NEWCO........ 39
8.1 Representations and Warranties; Performance of Obligations....... 39
8.2 No Litigation.................................................... 40
8.3 No Material Adverse Change....................................... 40
8.4 Consents and Approvals........................................... 40
8.5 Opinion of Counsel............................................... 40
8.6 Charter Documents................................................ 40
8.7 Quarterly Financial Statements................................... 40
8.8 Due Diligence Review............................................. 41
8.9 Delivery of Closing Financial Certificate........................ 41
8.10 FIRPTA Compliance................................................ 41
8.11 Employment Agreements............................................ 41
8.12 Stockholder's Release............................................ 41
8.13 Leases........................................................... 42
8.14 Related Entities................................................. 42
8.15 Flower Supply Agreement.......................................... 42
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANIES AND THE
STOCKHOLDER.............................................................. 42
9.1 Representations and Warranties; Performance of Obligations....... 42
9.2 No Litigation.................................................... 42
9.3 Consents and Approvals............................................ 43
9.4 Employment Agreements............................................. 43
9.5 Existing Credit Facilities........................................ 43
10. INDEMNIFICATION.......................................................... 43
10.1 General Indemnification by the Stockholder....................... 43
10.2 Limitation and Expiration........................................ 44
10.3 Indemnification Procedures....................................... 45
10.4 Survival of Representations Warranties and Covenants............. 47
10.5 Remedies Cumulative.............................................. 47
10.6 Right to Set Off................................................. 47
11. NONCOMPETITION........................................................... 47
11.1 Prohibited Activities............................................ 47
11.2 Damages.......................................................... 48
11.3 Reasonable Restraint............................................. 48
11.4 Severability; Reformation........................................ 49
11.5 Independent Covenant............................................. 49
11.6 Materiality...................................................... 49
12. NONDISCLOSURE OF CONFIDENTIAL INFORMATION................................ 49
12.1 Stockholder...................................................... 49
12.2 USFloral......................................................... 50
12.3 Damages.......................................................... 50
13. GENERAL.................................................................. 50
13.1 Termination...................................................... 50
13.2 Effect of Termination............................................ 51
13.3 Successors and Assigns........................................... 51
13.4 Entire Agreement; Amendment; Waiver.............................. 51
13.5 Counterparts..................................................... 52
13.6 Brokers and Agents............................................... 52
13.7 Expenses......................................................... 52
13.8 Specific Performance; Remedies................................... 52
13.9 Notices.......................................................... 52
13.10 Governing Law.................................................... 53
13.11 Severability..................................................... 53
13.12 Absence of Third Party Beneficiary Rights........................ 54
13.13 Further Representations.......................................... 54
13.14 Accounting Terms................................................. 54
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into this 16th day of January, 1998, by and among U.S.A. Floral
Products, Inc., a Delaware corporation ("USFloral"), EFI Acquisition Corp., a
New Jersey corporation and EFM Acquisition Corp., a Florida corporation, each a
newly-formed, wholly-owned subsidiary of USFloral (hereinafter referred to
individually as "Newco" and collectively as "Newcos"), Everflora, Inc., a New
Jersey corporation and Everflora Miami, Inc., a Florida corporation (hereinafter
referred to individually as a "Company" and collectively as the "Companies") and
Xxxxx Xxxxxxxxxxx, (the "Stockholder").
BACKGROUND
WHEREAS, the respective Boards of Directors of the Newcos and the
Companies (which entities 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 Everflora, Inc. merge with
and into EFI Acquisition Corp. with EFI Acquisition Corp. being the surviving
corporation following such merger and that Everflora Miami, Inc. merge with and
into EFM Acquisition Corp. with EFM Acquisition Corp. being the surviving
corporation following such merger (each such merger a "Merger," and together the
"Mergers") pursuant to this Agreement, the Plans of Merger (defined below) and
the applicable provisions of the laws of the respective states of incorporation
of the Newcos and the Companies (the "State Corporation Laws").
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 MERGERS
1.1 The Mergers. At the Effective Time (as defined in Section 4.2), each
Company shall be merged with and into its corresponding Newco, as described
above, pursuant to this Agreement and according to the respective plans of
merger (the "Plans of Merger") substantially in the forms attached as Schedule
1.1 hereto, with the respective Newcos being the surviving corporations
following such Mergers and with the separate corporate existence of each Company
ceasing thereupon. Each Newco, as it exists from and after the Effective Time,
is sometimes
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referred to individually as a "Surviving Corporation" and collectively with the
other such Newco as it exists from and after the Effective Time as the
"Surviving Corporations."
1.2 Articles of Incorporation; Bylaws, Directors and Officers. At the
Effective Time:
(a) The Articles of Incorporation or the Certificate of Incorporation,
as the case may be, ("Articles of Incorporation") of each Newco shall, from and
after the Effective Time and as amended thereupon to change the name of such
Newco to be the name of its corresponding Company, be the Articles of
Incorporation of the respective Surviving Corporation until thereafter amended
in accordance with the provisions therein and as provided by the applicable
provisions of the State Corporation Laws.
(b) The Bylaws of each Newco in effect immediately prior to the
Effective Time shall, from and after the Effective Time, be the Bylaws of the
respective Surviving Corporation, continuing until thereafter amended in
accordance with their terms and the Articles of Incorporation of such Surviving
Corporation and as provided by the State Corporation Laws.
(c) The initial director of each Surviving Corporation shall be Xxxxxx
X. Xxxxxxx until his successor is elected and qualified, and the initial
officers of each Surviving Corporation shall be the officers of the respective
Company immediately prior to the Effective Time, with the addition of Xxxxxx X.
Xxxxxxx as Assistant Secretary of each Surviving Corporation, in each case until
their successors are duly elected and qualified.
1.3 Effects of the Mergers. The Mergers shall have the effects provided
therefor by the relevant State Corporation Laws. 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 each Company or each Newco shall be taken and deemed to be transferred
to, and vested in, each respective 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 each Surviving Corporation, as they were of each Company and each Newco, and
(ii) all debts, liabilities, duties and obligations of each Company and each
Newco, subject to the terms hereof, shall become the debts, liabilities and
duties of the respective Surviving Corporation and each Surviving Corporation
shall thenceforth be responsible and liable for all the debts, liabilities,
duties and obligations of the respective Company and the respective Newco and
neither the rights of creditors nor any liens upon the property of such Company
or such Newco shall be impaired by the Mergers, and may be enforced against the
respective Surviving Corporation.
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2. CONVERSION AND EXCHANGE OF STOCK
2.1 Manner of Conversion. At the Effective Time, by virtue of the Mergers
and without any action on the part of USFloral, the Newcos, the Companies or the
Stockholder, the shares of capital stock of each of the Constituent Corporations
shall be converted as follows:
(a) Capital Stock of the Newcos. Each issued and outstanding share of
capital stock of each Newco shall continue to be issued and outstanding as one
share of validly issued, fully paid and non-assessable Common Stock of the
respective Surviving Corporation. The stock certificates of each Newco
evidencing ownership of any such shares shall evidence ownership of the shares
of capital stock of the respective Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the Companies.
All shares of capital stock of each Company that are owned directly or
indirectly by such 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 Companies. Subject to Section
2.1(d), and Sections 2.2, 3.1 and 3.2, all of the issued and outstanding shares
of common stock of the Companies ("Company Common Stock") (other than shares to
be canceled pursuant to Section 2.1(b)), that are 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 Stockholder
thereof, into the right of Stockholder, as the sole shareholder in the
Companies, to receive (i) the cash portion of the Merger Consideration 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). 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 the Stockholder shall cease to have
any rights with respect thereto, except the right to receive the consideration
therefor upon the surrender of such certificates 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 the Stockholder shall be aggregated, so that
the Stockholder shall not receive cash in an amount greater than the value of
one full share of USFloral Common Stock.
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2.2 Merger Consideration.
(a) For purposes of this Agreement, the "Merger Consideration" shall
be $8.0 million adjusted pursuant to this Section 2.2 and Section 3.1. Of the
Merger Consideration, $4.0 million shall be paid in cash at Closing in
immediately available funds. The remaining $4.0 million of the Merger
Consideration shall be paid in shares of USFloral Common Stock valued at $16.217
per share (the "Merger Price"). The 246,654 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").
(b) The Merger Consideration has been calculated based upon several
factors, including the assumption that the combined net worth of the Companies,
calculated in accordance with generally accepted accounting principles ("GAAP")
consistently applied, is equal to or greater than $3.2 million (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 Companies, 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
2.1(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.
(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 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
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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 State Corporation Laws.
(c) No Further Ownership Rights in Capital Stock of the Companies.
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 either Company. There shall be no further registration of
transfers on the stock transfer books of the respective 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 Corporations 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 Corporations 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 one hundred twenty (120) days following the Effective Time,
USFloral shall cause Price Waterhouse LLP ("USFloral's Accountant") to audit
each of 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
Companies as of the Closing Date, the value of the assets of the
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Companies shall, except with the prior written consent of USFloral, be
calculated as provided in the last paragraph of Section 8.9. The Stockholder
shall cooperate and shall use his reasonable efforts to cause the officers and
employees of each 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
as well as any other information requested by USFloral's Accountant related to
such Post-Closing Audit. In the event that USFloral's Accountant determines that
the actual combined net worth of the Companies 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 combined net worth of
the Companies as of the Closing Date (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 Corporations' 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
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Consideration Adjustment. The costs of the independent accounting firm shall be
borne by the party (either USFloral or the Stockholder) whose determination of
the combined net worth of the Companies 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 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) that number of shares of USFloral Common Stock with a value,
based on the Merger Price, equal to ten percent (10%) of the Stockholder's share
of the Merger Consideration as the same may have been adjusted pursuant to
Section 2.2 or Section 3.1 hereof, and the certificates and instruments, if any,
representing or evidencing the Stockholder's Pledged Assets;
(ii) all securities hereafter delivered to the Stockholder with
respect to or in substitution for the Stockholder's Pledged Assets, all
certificates and instruments representing or evidencing such securities, and all
cash and non-cash dividends and other property at any time received, receivable
or otherwise distributed in respect of or in exchange for any or all thereof;
and in the event 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 Stockholder's Pledged
Assets issued in his name in a 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.
(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
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or cause to be returned to the Stockholder the Pledged Assets, less Pledged
Assets having an aggregate value equal to the 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 Mergers and the other
transactions contemplated by this Agreement (the "Closing") shall take place on
January 20, 1998, providing that all conditions to Closing shall have been
satisfied or waived, or at such other time and date as USFloral, the Companies
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 State
Corporation Laws for each of the Mergers (the "Merger Documents"), together with
any required officers' certificates, shall be filed with the Secretary of State
of the applicable state of incorporation of each Newco and each Company and in
accordance with the provisions of the State Corporation Laws. The Mergers 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 COMPANIES AND THE STOCKHOLDER
To induce USFloral and each Newco to enter into this Agreement and
consummate the transactions contemplated hereby, each of the Companies and the
Stockholder, jointly and severally, represents and warrants to USFloral and each
Newco as follows (for purposes of this Agreement, the phrases "knowledge of the
Companies," "such Company's knowledge" or "the Companies' knowledge," or words
of similar import, mean the knowledge of the Stockholder and the directors and
officers of either Company, including facts of which the directors and officers,
in the reasonably prudent exercise of their duties, should be aware):
5.1 Due Organization. Each Company is a corporation duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and is duly authorized, qualified and licensed
under all applicable laws, regulations, ordinances and orders of public
authorities to own, operate and lease their respective properties and to carry
on
8
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 on the business, operations, properties, assets
or condition, financial or otherwise, of such Company ("Material Adverse
Effect"). Schedule 5.l hereto contains a list of all jurisdictions in which each
Company is authorized or qualified to do business. Each Company is in good
standing as a foreign corporation in each jurisdiction in which it does
business. Each Company has delivered to USFloral true, complete and correct
copies of its respective Articles of Incorporation and Bylaws. Such Articles of
Incorporation and Bylaws are collectively referred to as the "Charter
Documents." Neither Company is in violation of any Charter Documents. The minute
books of each Company have been made available to USFloral (and have been
delivered, along with each 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. Each Company has all requisite corporate
power and authority to enter into and perform its respective obligations
pursuant to the terms of this Agreement. Each 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 capacity to
enter into this Agreement and the transactions contemplated hereby. The
execution and delivery of this Agreement by each Company and the performance by
each Company of the transactions contemplated herein have been duly and validly
authorized by each Company's respective Board of Directors and the Stockholder
and this Agreement has been duly and validly authorized by all necessary
corporate action of each Company. This Agreement is a legal, valid and binding
obligation of each Company and the Stockholder, enforceable in accordance with
its terms except to the extent such enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws relating to creditors' rights generally and to general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
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 either Company or
the Stockholder is a party or by which either Company or the Stockholder is
bound, or result in the creation or imposition of any lien, charge or
encumbrance on any of either Company's properties pursuant to (i) any law or
regulation to which either Company or the Stockholder or any of their respective
property is subject, or (ii) any judgment, order or decree to which either
Company or the Stockholder is bound or any of their respective property is
subject;
9
(c) result in termination or any impairment of any permit, license,
franchise, contractual right or other authorization of either Company; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which either Company or the Stockholder is subject or by which
either Company or the Stockholder is bound including, without limitation, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 0000 (xxx "XXX Xxx"), together
with all rules and regulations promulgated thereunder.
5.4 Capital Stock of the Companies. The authorized capital stock of
Everflora, Inc. consists of 2,500 shares of common stock, no par value, of which
97 shares are issued and outstanding. The authorized capital stock of Everflora
Miami, Inc. consists of 3,500 shares of common stock, $10.00 par value, of which
3,255 shares are issued and outstanding. All of the issued and outstanding
shares of the capital stock of each Company have been duly authorized and
validly issued, are fully paid and nonassessable and are owned of record and
beneficially by the Stockholder in the amounts set forth in Schedule 5.4 free
and clear of all Liens (defined below). All of the issued and outstanding
shares of the capital stock of each Company were offered, issued, sold and
delivered by such Company in compliance 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 either 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 either Company to issue, sell
or otherwise cause to become outstanding any shares of its capital stock.
Neither Company has any obligation (contingent or otherwise) to purchase, redeem
or otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. As a result of
the Mergers, USFloral will be the record and beneficial owner of all outstanding
capital stock of each Company and rights to acquire capital stock of each
Company.
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5.6 Subsidiaries, Stock, and Notes.
(a) Except as set forth on Schedule 5.6(a), neither Company has any
subsidiaries.
(b) Except as set forth on Schedule 5.6(b), neither Company presently
owns, of record or beneficially, or controls, directly or indirectly, any
capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity, nor is either
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, either Company.
5.7 Predecessor Status. Schedule 5.7 sets forth a list of all names of
all predecessor companies of each Company, including the names of any entities
from which either Company previously acquired significant assets. Neither
Company has ever been a subsidiary or division of another corporation, nor has
either Company been a part of an acquisition that was later rescinded.
5.8 Absence of Claims Against the Companies. No Stockholder has any
claims against either Company.
5.9 Companies' Financial Conditions.
(a) The Companies' combined net worth (i) as of the end of its most
recent fiscal year was not less than $2.7 million, and (ii) as of the Closing
will not be less than the Net Worth Target. If the Companies' combined net
worth as of the Closing is less than the Net Worth Target, then USFloral's sole
remedies shall be to either offer an adjustment to the Merger Consideration
pursuant to Section 2.2(c), receive a post closing adjustment to the Merger
Consideration pursuant to Section 3 or terminate this Agreement pursuant to
Section 13.1(e). 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 Companies' combined earnings before interest and taxes (after
the addition of "add-backs" set forth on Schedule 5.9(b)) for the 10-month
period ended October 31, 1997, was not less than $1,067,000.
5.10 Financial Statements. Schedule 5.10 includes (a) true, complete and
correct copies, in accordance with GAAP, of the unaudited consolidated balance
sheet of the Companies as of December 31,1996 (the end of its most recently
completed fiscal year), and consolidated income statement for the year ended
December 31, 1996 (collectively, the "Unaudited Financials") and (b) true,
complete and correct copies, in accordance with GAAP, of the
11
unaudited consolidated balance sheet of the Companies (the "Interim Balance
Sheet") as of October 31, 1997 (the "Balance Sheet Date") and unaudited
consolidated income statements, for the 10-month period then ended
(collectively, the "Interim Financials," and together with the Unaudited
Financials, the "Company Financial Statements"). Except as noted on the
auditors' report accompanying the Unaudited 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 consolidated balance sheet included in the Company Financial
Statements presents fairly the financial condition of the Companies as of the
date indicated thereon, and each of the consolidated income statements included
in the Company Financial Statements presents fairly the results of their
operations for the periods indicated thereon. Since the dates of the Company
Financial Statements, there have been no material changes in either Company's
accounting policies other than as requested by USFloral to conform such
Company's accounting policies to GAAP.
5.11 Liabilities and Obligations.
(a) Neither Company is 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 such
Company's business consistent with past practice under any contract, commitment
or agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since the Balance Sheet Date in
the ordinary course of business consistent with past practice, which liabilities
are not, individually or in the aggregate, material to such Company.
(b) Each 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 either Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by such
Company or such Surviving Corporation would require additional material
expenditures of capital.
12
(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, xxxxxx or
inchoate, liquidated or unliquidated, secured or unsecured. Schedule 5.11(d)
contains a complete list of all indebtedness of each Company.
5.12 Accounts and Notes Receivable. Each 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 such 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, each 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 such
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Except as disclosed in Schedule 5.12 (which
sets forth Accounts Receivable not reasonably expected to be collected within
one hundred twenty (120) days), subject to such reserves, each of the Accounts
Receivable will be collected in full, without any set-off, within one hundred
twenty (120) 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. Each Company has made and kept books and records
and accounts, which, in reasonable detail, accurately and fairly reflect the
activities of such Company. Neither Company has 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.
5.14 Permits. Each 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 necessary for the
continued operation of its business as it is currently being conducted (the
"Permits"). The Permits are valid, and neither Company has received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
either 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. Each Company has conducted and is
conducting its business in compliance with the requirements, standards, criteria
and conditions set forth in the Permits and other applicable orders, approvals,
variances, rules and regulations
13
and is not in violation of any of the foregoing. The transactions contemplated
by this Agreement will not result in a default under, or a breach or violation
of, or adversely affect the rights and benefits afforded to either 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 either 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 such Company's use thereof) and, to the Companies' knowledge, any
Liens. Schedule 5.15(b) indicates whether the Real Property is owned or leased.
Neither Company owns any of the Real Property listed on Schedule 5.15(b).
(c) Except as set forth in Schedule 5.15(c):
(i) All structures and all structural, mechanical and other
physical systems thereof that constitute part of the Real Property, including
but not limited to the walls, roofs and structural elements thereof and the
heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer,
waste water, storm water, paving and parking equipment, systems and facility
included therein, and other material items at the Real Property (collectively,
the "Tangible Assets"), are free of defects and in good operating condition and
repair. For purposes of this Section, a defect shall mean a condition relating
to the structures or any structural, mechanical or physical system which
requires an expenditure of more than $2,000 to correct. No maintenance or repair
to the Real Property, Structures or any Tangible Asset has been unreasonably
deferred. There is no water, chemical or gaseous seepage, diffusion or other
intrusion into said buildings, including any subterranean portions, that would
impair beneficial use of the Real Property, Structures or any Tangible Asset.
(ii) All water, sewer, gas, electric, telephone and drainage
facilities, and all other utilities required by any applicable law or by the use
and operation of the Real Property in the conduct of each Company's respective
business are installed to the property lines of the Real Property, are connected
pursuant to valid permits to municipal or public utility services or proper
drainage facilities, are fully operable and are adequate to service the Real
Property in the operation of the each Company's respective business and to
permit full compliance with the requirements of all laws in the operation of
such business. No fact or condition exists which could result in the
termination or material reduction of the current access from the Real Property
to existing roads or to sewer or other utility services presently serving the
Real Property.
14
(iii) The Real Property and all present uses and operations of
the Real Property comply with all applicable statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments, decrees, awards or
restrictions of any government entity having jurisdiction over any portion of
the Real Property (including, without limitation, applicable statutes, rules,
regulations, orders and restrictions relating to zoning, land use, safety,
health, employment and employment practices and access by the handicapped)
(collectively, "Laws"), covenants, conditions, restrictions, easements,
disposition agreements and similar matters affecting the Real Property. Each
Company has obtained all approvals of governmental authorities (including
certificates of use and occupancy, licenses and permits) required in connection
with the construction, ownership, use, occupation and operation of the Real
Property.
(iv) Except as set forth on the surveys previously made
available to USFloral, none of the Structures, the appurtenances thereto or the
equipment therein or the operation or maintenance thereof, or the conduct of
such Company's business, violates any restrictive covenant or encroaches on any
property owned by others or any easement, right of way or other Lien or
restriction affecting such Real Property in any respect. The Real Property and
its continued use, occupancy and operation as used, occupied and operated in the
conduct of such Company's business does not constitute a nonconforming use and
is not the subject of a special use permit under any applicable Law.
(v) There are no pending or, to the Companies' knowledge,
threatened condemnation, fire, health, safety, building, zoning or other land
use regulatory proceedings, lawsuits or administrative actions relating to any
portion of the Real Property or any other matters which do or may adversely
affect the current use, occupancy or value thereof, nor has either Company or
the Stockholder received notice of any pending or threatened special assessment
proceedings affecting any portion of the Real Property.
(vi) No portion of the Real Property or the Structures has
suffered any damage by fire or other casualty which has not heretofore been
completely repaired and restored to its original condition.
(vii) There are no parties other than the Companies 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.
(viii) There are no outstanding options or rights of first
refusal to purchase the Real Property, or any portion thereof or interest
therein. Neither Company has transferred any air rights or development rights
relating to the Real Property.
(ix) There are no service contracts or other agreements relating
to the use or operation of the Real Property.
15
(x) No portion of the Real Property which is currently used in the
operation of each Company's respective business is located in a wetlands area,
as defined by Laws, or in a designated or recognized flood plain, flood plain
district, flood hazard area or area of similar characterization. No commercial
use of any portion of the Real Property which is currently used in the operation
of each Company's respective business will violate any requirement of the United
States Corps of Engineers or Laws relating to wetlands areas.
(xi) All real property taxes and assessments that are due and payable
with respect to the Real Property have been paid or will be paid at or prior to
Closing.
(xii) All oral or written leases, subleases, licenses, concession
agreements or other use or occupancy agreements pursuant to which either 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. Each 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. The Leases and each Company's
respective interests thereunder are free of all Liens.
(xiii) 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 either 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 either Company.
(b) Each Company currently owns or leases all personal property
necessary to conduct the business and operations of such Company as they are
currently being conducted.
(c) All of the trucks and other material machinery and equipment of
each 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 each Company, and neither Company is in breach of any of their
terms. All fixed assets used by either Company that are material to the
16
operation of its business are either owned by such Company or leased under an
agreement listed on Schedule 5.16(a).
5.17 Intellectual Property.
(a) Each Company is the true and lawful owner of, or is licensed or
otherwise possesses legally enforceable rights to use, its respective 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 each Company now owns or
uses in connection with its business. Except with respect to those Marks shown
as licensed on Schedule 5.17(a), each 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 such 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 "Xxxx" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names now held
by either 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 either Company, and any trade dress (including logos,
designs, company names, business names, fictitious names and other business
identifiers) used by either Company in the United States or any foreign country.
(b) Each 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 each Company now owns or is licensed to use. Each Company
owns or is licensed to practice under all patents and copyright registrations
that such 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 such Company has title as of the date of this Agreement,
as well as any application for a United States or foreign patent made by such
Company; the term "Copyright" shall mean any United States or foreign copyright
owned by such 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 such Company.
(c) Each 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
such Company now owns or is licensed to use. Each Company owns or is licensed
to practice under all trade secrets, franchises or similar rights that it owns,
uses or practices under.
17
(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 Companies is referred to herein collectively as the "Company
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), neither Company has any obligations to compensate any person
for the use of any Intellectual Property nor has either 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) Neither Company is, 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 either Company, are threatened by any
person, nor, to the Companies' knowledge, do any grounds for any claims exist:
(i) to the effect that the manufacture, sale, licensing or use of any product as
now used, sold or licensed or proposed for use, sale or license by either
Company infringes on any copyright, patent, trademark, service xxxx or trade
secret; (ii) against the use by either Company of any trademarks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in such Company's business as currently conducted
by such Company; (iii) challenging the ownership, validity or effectiveness of
any of the Company Intellectual Property or other trade secret material to
either Company; or (iv) challenging either Company's license or legally
enforceable right to use of the Third Party Intellectual Property. To the
Companies' knowledge, there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party.
Neither Company nor any of their subsidiaries (x) has been sued or charged in
writing as a defendant in any claim, suit, action or proceeding which involves a
claim or infringement of trade secrets, any patents, trademarks, service marks,
or copyrights and which has not been finally terminated or been informed or
notified by any third party that such Company may be engaged in such
infringement or (y) has knowledge of any infringement liability with respect to,
or infringement by, either Company or any of their subsidiaries of any trade
secret, patent, trademark, service xxxx, or copyright of another.
(f) All Intellectual Property in the form of computer software that is
utilized by either Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first centuries
except that the TITAN software base package (Version 11.7) in current use is not
so capable. The Companies existing agreement with TBS, as well as its proposed
replacement agreement with INTRIX Systems Group, Inc. provide that the TITAN
software will be upgraded to a year 2000 compliant version, which is scheduled
to be available for general release on July 1, 1998. Modifications will be
required to integrate the current base package with the new upgraded Version
20.7. The estimated cost of such modifications is approximately $10,000. The
cost of the new version itself is already included in the existing maintenance
contract.
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5.18 Material Contracts and Commitments.
(a) Except for verbal commitments for the purchase and sale of floral
products entered into in the ordinary course of business consistent with past
practice and not in excess of $50,000, Schedule 5.18(a) contains a complete and
accurate list of all contracts, commitments, leases, instruments, agreements,
licenses or permits, written or oral, to which either Company is a party or by
which such Company 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 both (y) either of the Companies, and
(z) any affiliate of either Company or any officer, director or stockholder of
either 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 current
term thereof, $10,000 (collectively with the Related Party Agreements, the
"Material Contracts"). The Companies have delivered to USFloral true, complete
and correct copies of the Material Contracts. Each Company has complied with all
of its respective commitments and obligations and neither Company is in default,
other than an immaterial technical default, under any of the Material
Contracts, and no notice of default has been received with respect to any
thereof, and except as identified on Schedule 5.18(a) there are no Material
Contracts that were not negotiated at arm's length.
(b) Each Material Contract, except those terminated pursuant to
Section 7.3, is valid and binding on the respective Company and is in full force
and effect and is not subject to any default thereunder by any party obligated
to such Company pursuant thereto. Each Company has obtained 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 Mergers 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 as of the date of this Agreement on all
loans or credit agreements either (i) between either Company and any Person in
which the Stockholder owns a material interest, or (ii) guaranteed by either
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 either Company's assets (including, without limitation, a pledge of either
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 either Company (other than a lien created
pursuant to the pledge,
19
hypothecation or mortgage described at the start of this Section 5.18(d))
pursuant to any of the terms and provisions of, any Material Contract to which
either Company is a party or by which the property of either Company is bound.
5.19 Government Contracts.
(a) Neither Company is a party to any government contracts.
(b) Neither Company has been suspended or debarred from bidding on
contracts or subcontracts for any agency or instrumentality of the United States
Government or any state or local government, nor, to the Companies' knowledge,
has any suspension or debarment action been threatened or commenced. To the
knowledge of the Companies, there is no valid basis for either 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.
(c) Except as set forth in Schedule 5.19, neither Company has 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 Companies' knowledge, has such audit or
investigation been threatened.
(d) No employee, agent, consultant, representative, or affiliate of
either Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to such Company's
business under circumstances where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
5.20 Insurance. Schedule 5.20 sets forth a complete and accurate list of
all insurance policies carried by each Company and all insurance loss runs or
workmen's compensation claims received for the past two policy years. Each
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 each Company is
otherwise in full compliance with the terms of such policies. The insurance
carried by each Company with respect to its properties, assets and business is,
to such Company's knowledge, with financially sound insurers. To the knowledge
of each 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 Companies:
(a) each 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
20
Reform and Control Act, and occupational safety and health requirements, and has
not and is not engaged in any unfair labor practice;
(b) there is not now, nor within the past three years has there been,
any unfair labor practice complaint against either Company pending or, to the
Companies' 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 Companies'
knowledge, threatened, against or directly affecting such Company;
(d) to the Companies' 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 Companies' knowledge, no
claims therefor exist or have been threatened;
(f) the employees of either Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against either Company or currently being negotiated by
either Company; and
(g) all persons classified by either Company as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and each 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 either
Company, or to which either Company currently contributes, or has an obligation
to contribute in the future (including, without limitation, employment
agreements and any other agreements containing "golden parachute" provisions and
deferred compensation agreements), together with copies of any trusts related
thereto and a classification of employees covered thereby (collectively, the
"Plans"). Schedule 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
21
determined by the Internal Revenue Service to be so qualified, and copies of the
current plan determination letters, most recent actuarial valuation reports, if
any, most recent Form 5500, or, as applicable, Form 5500-C/R filed with respect
to each such Qualified Plan or employee welfare benefit plan and most recent
trustee or custodian report, are included as part of Schedule 5.22. To the
extent that any Qualified Plans have not been amended to comply with applicable
law, the remedial amendment period permitting retroactive amendment of such
Qualified Plans has not expired and will not expire within 120 days after the
Closing Date. All reports and other documents required to be filed with any
governmental agency or distributed to plan participants or beneficiaries
(including, but not limited to, annual reports, summary annual reports,
actuarial reports, PBGC-1 Forms, audits or tax returns) have been timely filed
or distributed. None of: (i) the Stockholder; (ii) any Plan; or (iii) either
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 neither Company currently has (nor at the Closing
Date will have) any direct or indirect liability whatsoever (including being
subject to any statutory lien to secure payment of any such liability), to the
Pension Benefit Guaranty Corporation ("PBGC") with respect to any such Plan
under Title IV of ERISA or to the Internal Revenue Service for any excise tax or
penalty; and neither 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 Companies and the Stockholder have complied (and on the Closing
Date will have complied), in all respects with all
22
reporting, disclosure, notice, election and other benefit continuation
requirements imposed thereunder as and when applicable to such plans, and
neither Company has (nor will it incur) direct or indirect liability and is not
(and will not be) subject to any loss, assessment, excise tax penalty, loss of
federal income tax deduction or other sanction, arising on account of or in
respect of any direct or indirect failure by either Company or the Stockholder,
at any time prior to the Closing Date, to comply with any such federal or state
benefit continuation requirement, which is capable of being assessed or asserted
before or after the Closing Date directly or indirectly against either Company
or the Stockholder with respect to such group health plans;
(f) neither Company is now nor has it been within the past five years
a member of a "controlled group" as defined in ERISA Section 4001(a)(14);
(g) there is no pending litigation, arbitration, or disputed claim,
settlement or adjudication proceeding, and to the Companies' 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) neither Company has incurred liability under Section 4062 of
ERISA.
5.23 Conformity with Law; Litigation.
(a) Except as set forth on Schedule 5.23(a), neither Company is in
violation of any law or regulation or under any order of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality having jurisdiction which violation would have a
Material Adverse Effect on such Company. Each Company has conducted and is
conducting its business in substantial compliance with the requirements,
standards, criteria and conditions set forth in applicable federal, state and
local statutes, ordinances, permits, licenses, orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing which
violation might have a Material Adverse Effect on such Company.
(b) No Stockholder has, at any time: (i) committed any criminal act
(except for minor traffic violations); (ii) engaged in acts of fraud,
dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
shareholder of a company that filed for bankruptcy or Chapter 11 protection.
23
(c) Except as set forth on Schedule 5.23(c), there are no claims,
actions, suits or proceedings, pending or, to the knowledge of either Company,
threatened against or affecting such 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 either Company or against any of its properties or
business.
5.24 Taxes.
(a)
(i) Each 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 respects.
(ii) Each 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 Companies' combined 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 Companies' combined 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 Companies on the Closing Date.
(iv) There are no ongoing examinations or claims against either
Company for Taxes, and no notice of any audit, examination or claim for Taxes,
whether pending or threatened, has been received.
(v) Each Company has a taxable year ended on December 31.
(vi) Each Company currently utilizes the accrual method of
accounting for income Tax purposes and such method of accounting has not changed
in the past five years. Neither Company has agreed to, and neither Company is or
will be required to, make any adjustments under Code Section 481(a) as a result
of a change in accounting methods.
(vii) Each 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.
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(viii) Copies of (A) any Tax examinations, (B) extensions of
statutory limitations for the collection or assessment of Taxes and (C) the Tax
Returns of each 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 either Company relating to or
attributable to Taxes.
(x) To the Companies' knowledge, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of either Company or
otherwise have an adverse effect on such Company or its business.
(xi) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of either 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) Neither Company is, or has been at any time, a party to a
tax sharing, tax indemnity or tax allocation agreement, and neither Company has
assumed the tax liability of any other person under contract.
(xiii) Each 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 such Company's tax books and records.
(b)
(i) Everflora, Inc. has, since January 1, 1990, been an S
corporation within the meaning of Section 1361 of the Code.
(ii) Everflora Miami, Inc. has, since November 19, 1986, been
an S corporation within the meaning of Section 1361 of the Code.
(iii) Neither Company has 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
25
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.
5.25 Absence of Changes. From the Balance Sheet Date to the date of this
Agreement, each Company has conducted its business in the ordinary course
consistent with past practice and, except as contemplated herein or as set forth
on Schedule 5.25, there has not been:
(a) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of either Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of either Company;
(c) any change in the authorized capital of either Company or in its
respective outstanding securities or any change in its respective 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 either Company;
(e) any increase in the compensation, bonus, sales commissions or fee
arrangements payable or to become payable by either Company to any of its
respective officers directors, Stockholder, employees, consultants or agents,
except for ordinary and customary bonuses and salary increases for employees
generally 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 either 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 either Company, including without limitation any
indebtedness or obligation of the Stockholder and their affiliates, provided
that each Company may negotiate and adjust
26
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 either 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 either Company;
(k) any waiver of any material rights or claims of either Company;
(l) any breach, amendment or termination of any material contract,
agreement, license, permit or other right to which either Company is a party;
(m) any transaction by either Company outside the ordinary course of
business;
(n) any capital commitment by either Company, either individually or
in the aggregate of both Companies, exceeding $25,000;
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by either Company or
the revaluation by either Company of any of its assets;
(p) any creation or assumption by either 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 either Company of any contract, lease transaction, commitment or
other right or obligation requiring aggregate payments by such Company in excess
of $20,000, except in the ordinary course of business consistent with past
practice;
(r) any loan by either Company to any person or entity, incurring by
either Company, of any indebtedness, guaranteeing by either Company of any
indebtedness, issuance or sale of any debt securities of either Company or
guaranteeing of any debt securities of others;
27
(s) the commencement or notice or, to the knowledge of the Companies,
threat of commencement, of any lawsuit or proceeding against, or investigation
of, either Company or any of its affairs; or
(t) negotiation or agreement by either Company or any respective
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 each Company has
any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(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 either 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 either 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 either Company.
28
(b) Hazardous Materials Activities. Neither Company has transported,
stored, used, manufactured, disposed of or released, or exposed its employees or
others to, Hazardous Materials in violation of any law in effect on or before
the Closing Date, nor has either 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. Each Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company Hazardous Material Activities
and other business of such Company as such activities and business are currently
being conducted. All Environmental Permits are in full force and effect. Each
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 Companies' 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 each
Company.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Companies' knowledge, 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 either Company (or any person or entity whose liability
either Company has retained or assumed, either by contract or operation of law)
in any environmental litigation, or impose upon either Company (or any person or
entity whose liability either 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. Neither Company has 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 such Company to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. Each Company has delivered to USFloral and the respective
Newco true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is referred to in the Schedules or that has
been requested by USFloral in writing. 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
29
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 either Company, the Stockholder shall
immediately give notice of such fact or circumstance to USFloral. However, such
notification shall not relieve either Company or the Stockholder of their
respective obligations under this Agreement.
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
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,
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 Mergers. 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 persons who is, in the
reasonable judgment of each Company and the Stockholder, affiliates of either
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 each of the Companies' chief executive offices.
5.33 Location of Equipment and Inventory. All Inventory and Equipment held
on the date hereof by either 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 either 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
30
proceeds therefrom; and (b) the term "Equipment" shall mean any "equipment" as
such term is defined in the N.Y.U.C.C. owned by either 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 either
Company, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
6. REPRESENTATIONS OF USFLORAL AND THE NEWCOS
To induce the Companies and the Stockholder to enter into this Agreement
and consummate the transactions contemplated hereby, each of USFloral and Newco
represents and warrants to the Companies and the Stockholder as follows:
6.1 Due Organization. USFloral and each Newco is a corporation duly
organized, validly existing and in good standing under the laws of its
respective state of incorporation, 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
each Newco (collectively, the "USFloral Charter Documents") have been made
available to the Companies. Neither USFloral nor either Newco is in violation
of any USFloral Charter Document.
6.2 USFloral Common Stock. The shares of USFloral Common Stock to be
delivered to the Stockholder at the Effective Time shall be registered under the
1933 Act and, 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, and prior to the time such shares may be transferred in
accordance with the provisions of Section 7.9 hereof, will be approved for
quotation on the Nasdaq National Market.
6.3 Authorization; Validity of Obligations. The representatives of
USFloral and each Newco executing this Agreement have all requisite corporate
power and authority to enter into and bind USFloral and each Newco to the terms
of this Agreement. USFloral and each 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 each Newco and the performance by USFloral and each Newco of the
transactions contemplated herein have been duly and validly authorized by the
respective Boards of Directors of USFloral and each Newco, and this Agreement
has been duly and validly authorized by all necessary corporate action. This
Agreement is a legal, valid and binding obligation of USFloral and each Newco
enforceable in accordance with its terms.
31
6.4 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions herein contemplated hereby and
the fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the USFloral
Charter Documents;
(b) subject to compliance with any agreements between USFloral and its
lenders, conflict with, or result in a default (or would constitute a default
but for a requirement of notice or lapse of time or both) under any document,
agreement or other instrument to which either USFloral or either Newco is a
party, or result in the creation or imposition of any lien, charge or
encumbrance on any of USFloral's or of the Newcos' properties pursuant to (i)
any law or regulation to which either USFloral or either Newco or any of their
respective property is subject, or (ii) any judgment, order or decree to which
USFloral or either Newco is bound or any of their respective property is
subject;
(c) result in termination or any impairment of any material permit,
license, franchise, contractual right or other authorization of USFloral or
either Newco; or
(d) violate any law, order, judgment, rule, regulation, decree or
ordinance to which USFloral or either Newco is subject, or by which USFloral or
either Newco is bound, (including, without limitation, the HSR Act, together
with all rules and regulations promulgated thereunder).
6.5 Capitalization of USFloral and Ownership of USFloral Stock. The
authorized capital stock of USFloral consists of 100,000,000 shares of Common
Stock, of which 9,594,050 shares were outstanding on November 19, 1997. The
authorized capital stock of each Newco consists of 1,000 shares of Common Stock,
of which each Newco has 100 shares outstanding. All of the issued and
outstanding shares of each 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, 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
Corporations, on the other, for certain tax matters following the Closing Date:
32
(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 each Company for all periods ending on or before the Closing
Date that are due after the Closing Date. The Stockholder shall pay to the
respective 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 respective 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 each respective Surviving
Corporation shall participate in the filing of any Tax Returns filed pursuant to
this paragraph.
(ii) Each 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 each 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
each respective 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 each Surviving Corporation.
(iii) USFloral and each 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
either Company for all periods ending prior to or including the Closing Date;
and (C) preserve information, records or documents relating Tax matters
pertinent to either Company that is in their possession or under their control
until the expiration of any applicable statute of limitations or extensions
thereof.
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(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 respective Surviving Corporation will join in the execution of any such
Tax Returns and other documentation.
(b) Each Company shall, prior to the Closing, maintain its status as
an S Corporation for federal and state income tax purposes.
7.2 Accounts Receivable. Each Surviving Corporation shall use timely and
commercially reasonable efforts to collect the Accounts Receivable within one
hundred twenty (120) days after Closing. In the event that all Accounts
Receivable are not collected in full (net of reserves specified in Section 5.12)
within one hundred twenty (120) days after the Closing then, at the request of
either Surviving Corporation, the Stockholder shall pay such Surviving
Corporation an amount equal to the Accounts Receivable not so collected, and
upon receipt of such payment such Surviving Corporation shall assign to the
Stockholder making the payment all of its rights with respect to the uncollected
Accounts Receivable giving rise to the payment and shall also thereafter
promptly remit any excess collections received by it with respect to such
assigned Accounts Receivable. The Surviving Corporation shall apply amounts
collected from account debtors first toward unpaid Accounts Receivable before
applying same to accounts receivable incurred after the Effective Date.
7.3 Related Party Agreements and Personal Vehicles. Each Company and/or
the Stockholder, as the case may be, shall terminate any Related Party
Agreements which USFloral requests such Company or Stockholder to terminate
except for those Related Party Agreements listed in Schedule 7.3. The
Stockholder shall also purchase any personal vehicles owned by either Company at
a value equal to the greater of such vehicle's net book value or the outstanding
indebtedness against such vehicle.
7.4 Cooperation.
(a) The Companies, the Stockholder, USFloral and each 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
each Company shall execute any documentation reasonably required by USFloral's
independent public accountants (in connection with such accountants' audit of
such Company) or the Nasdaq National Market.
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(b) The Stockholder and each Company shall cooperate and use their
reasonable efforts to have the present officers, directors and employees of such
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) Each 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.
7.5 Conduct of Business Pending Closing. Between the date hereof and the
Effective Time, each 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
35
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, each Company will afford to the officers and authorized
representatives of USFloral access to (i) all of the sites, properties, books
and records of such Company and (ii) such additional financial and operating
data and other information as to the business and properties of such Company as
USFloral may from time to time reasonably request, including without limitation,
access upon reasonable request to such Company's employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or knowledge
obtained in any investigation pursuant to this Section 7.6 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 Mergers.
7.7 Prohibited Activities. Between the date hereof and the Effective
Time, neither Company will, without the prior written consent of USFloral:
(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; provided,
however, the Companies may make a distribution to the Stockholder for the sole
purpose of paying income taxes attributable to the Companies' S Corporation
earnings, so long as such combined distribution to the Stockholder shall not
exceed $330,000 in the aggregate;
(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
36
amend any Company Plan or Company Benefit Arrangement; or grant any severance or
termination pay except as permitted in this Agreement;
(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 such
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 such Company, provided that
such 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;
(l) enter into any other transaction (i) that is not negotiated at
arm's length with a third party not affiliated with such Company or any officer,
director or Stockholder of such 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
37
(p) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 7.7(a) through (o) above, or any action which
would make any of the representations and warranties of either 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, each 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 Mergers 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) Each 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
Mergers, 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 Stockholder of the USFloral Common Stock the Stockholder may
acquire pursuant to the Mergers pursuant to Rule 145(d) under the 1933 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 Mergers 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.
38
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 16, 1998, AMONG
THE ISSUER, THE STOCKHOLDER OF EVERFLORA, INC., A NEW JERSEY CORPORATION
AND THE STOCKHOLDER OF EVERFLORA MIAMI, 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 "six months after Effective Time", one-third will read "one
year after Effective Time" and the remaining one-third will read "18 months
after Effective Time."
7.10 USFloral Stock Options. As soon as practicable after the Closing,
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 Merger
Consideration provided for in Section 2.2 above shall be available for issuance
to the key employees of each Surviving Corporation after the Closing, as
determined by each Surviving Corporation's President (or other officer or
director designated by such 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 THE NEWCOS
The obligation of USFloral and each Newco to effect the Mergers 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 each 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 except as contemplated or permitted by this
Agreement; all of the terms, covenants, agreements and conditions of this
Agreement to be complied with, performed or satisfied by each Company and the
Stockholder on or before the Closing Date shall have been duly complied with,
performed or
39
satisfied; and a certificate to the foregoing effects dated the Closing Date and
signed on behalf of such Company and by 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 either Company, or limiting or restricting
USFloral's conduct or operation of the business of either Company (or its own
business) following the Mergers shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending. There shall be no action, suit claim or proceeding of any nature
pending or threatened against USFloral, either Newco or either Company, their
respective properties or any of their respective officers or directors, that
could materially and adversely affect the business, assets, liabilities,
financial condition, results of operations or prospects of either 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 either 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 each Company and the Stockholder of the transactions
contemplated hereby, shall have been obtained and made. Any waiting period
applicable to the consummation of the Mergers 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 each 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 each Company certified by an appropriate authority
in the state of its incorporation and (b) a copy of the Bylaws of each Company
certified by the Secretary of such Company, and such documents shall be in form
and substance reasonably acceptable to USFloral.
8.7 Quarterly Financial Statements. USFloral shall have received from
each Company completed quarterly financial statements in a form reasonably
satisfactory to USFloral, and the Mergers shall have been approved by USFloral's
lenders.
40
8.8 Due Diligence Review. Each 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, 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 each 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 each Company and by the Stockholder, setting
forth:
(a) the combined net worth of the Companies as of the last day of its
most recent fiscal year (the "Certified Year-End Net Worth");
(b) the combined net worth of the Companies as of the Closing Date
(the "Certified Closing Net Worth");
(c) the combined earnings of the Companies 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");
(d) the combined earnings of the Companies before interest and taxes
(after the addition of "add-backs" set forth on Schedule 5.9(b)(ii)) for the 10
month period ending on October 31, 1997 (the "Certified Closing EBIT"); and
(e) a statement that all of the Companies' 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 Companies shall not take
account of any increase in intangible 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. Xxxxx Xxxxxxxxxxx shall have entered into an
employment agreement with Everflora, Inc. 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 Companies from any
and all claims of the Stockholder against the Companies.
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8.13 Leases. Everflora, Inc. shall have entered into a lease, upon terms
satisfactory to USFloral, for the Real Property located in New Jersey currently
leased by such Company, at a rental rate that is $1.00 less per square foot than
the current rental rate, and Everflora Miami, Inc. shall have entered into a
lease, upon terms satisfactory to USFloral, for the Real Property located in
Florida currently leased by such Company, at the same rental rate that such
Company is currently paying. The leases entered into pursuant to this Section
shall be for a term of five years with an option to renew for an additional five
years, and shall contain such other terms satisfactory to USFloral as the
parties shall mutually agree.
8.14 Related Entities. USFloral shall have received an executed agreement,
in a form acceptable to USFloral, granting USFloral a right of first refusal to
acquire the shares of Greens Only Europe Import/Export BV owned by the
Shareholder upon terms satisfactory to USFloral but not less favorable to
USFloral than those set forth in a bona fide written offer from a third party
---- ----
seeking to purchase such stock.
8.15 Flower Supply Agreement. Certain of the Related Entities shall have
executed and delivered Flower Supply Agreements with USFloral in the form
attached hereto as Exhibit A.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANIES AND THE
STOCKHOLDER
The obligation of the Stockholder and each Company to effect the Mergers
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 each 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 either
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 each Company and the Stockholder.
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 either Company, or limiting or restricting
USFloral's conduct or operation of the business of either Company (or its own
business) following the Mergers shall be in effect, nor shall any proceeding
brought by
42
an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending.
There shall be no action, suit, claim or proceeding of any nature pending or
threatened, against USFloral, either Newco or either 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 each Newco of the transactions contemplated herein, shall have
been obtained and made. Any waiting period applicable to the consummation of
the Mergers 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. Everflora, Inc. shall have afforded Xxxxx
Xxxxxxxxxxx an opportunity to enter into an employment agreement with Everflora,
Inc. in a form reasonably satisfactory to USFloral.
9.5 Existing Credit Facilities. USFloral shall have arranged for
termination and replacement of the credit facilities maintained by the Companies
with Summit Bank and First Union Bank and the release of the Stockholder's
guarantee of the First Union Bank Credit Facility.
10. INDEMNIFICATION
10.1 General Indemnification by the Stockholder. The Stockholder covenants
and agrees to indemnify, defend, protect and hold harmless USFloral, each Newco
and each 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:
43
(i) any breach of any representation or warranty of the
Stockholder or either Company set forth in this Agreement or any Schedule or
certificate, delivered by or on behalf of the Stockholder or either Company in
connection herewith; or
(ii) any nonfulfillment of any covenant or agreement by the
Stockholder or, prior to the Effective Time, either Company, under this
Agreement; or
(iii) the business, operations or assets of either Company
prior to the Closing Date or the actions or omissions of either 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) any transaction by the Stockholder involving the Company
Common Stock;
(v) the matters disclosed on Schedules 5.23 (conformity with
law; litigation), 5.24 (taxes), and 5.27 (environmental matters); or
(vi) technical defaults referred to in the last sentence of
Section 5.18(a); 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 then solely to the extent that, the aggregate amount of Damages
exceeds $160,000 (the "Indemnification Exclusion"); provided, however, that the
Indemnification Exclusion 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
Companies), 5.5 (transactions in capital stock), 5.9 (the Companies financial
conditions), 5.18 (material contracts and commitments), 5.23 (conformity with
law; litigation), 5.24 (taxes), or 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 5.22 (employee benefit plans), 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;
44
(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 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 Agreement ("Claims") shall be asserted and resolved as follows:
(a) In the event that any Indemnified Party has a Claim against any
party obligated to provide indemnification pursuant to Section 10.1 hereof (the
"Indemnifying Party") which does not involve a Claim being asserted against or
sought to be collected by a third party, the Indemnified Party shall with
reasonable promptness notify the 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
45
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 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 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 either 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.
46
(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. The
representations of each 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 each 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 except that the indemnification
obligations set forth in this Article 10 shall be the sole and exclusive remedy
of USFloral and either Newco for claims based upon breach of contract or breach
of representation or warranty, unless such claim is founded in fraud.
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.
11. NONCOMPETITION
11.1 Prohibited Activities. The Stockholder agrees that for a period of
two years following the Merger Effective 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 either Surviving
Corporation or USFloral, including without limitation the importing, brokerage,
manufacture, assembly, packaging, distribution, shipping or marketing of floral
products (including, without limitation, hard goods), or any business engaging
in the consolidation of the floral industry within the United States of America
(the "Territory"), except that Stockholder may continue to conduct activities on
behalf of Greens Only Europe
47
Import/Export BV, Greens Only USA, The Australian Flower Company, Alfaflora,
Inc., Wesflora, Inc. and Flower Alliance, L.L.C. (the "Related Entities") to the
same, and no greater, extent that the Stockholder currently conducts such
activities, so long as the conduct of such activities does not otherwise violate
the provisions of Sections 11(b) through (e) below;
(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, any
subsidiaries of USFloral, or either Company within the Territory for the purpose
of soliciting or selling floral products within the Territory unless such
customer was a customer of any of the Related Entities prior to the date of this
Agreement;
(d) call upon any prospective acquisition candidate, on his own behalf
or on behalf of any competitor, which candidate was either called upon by the
Stockholder or for which the Stockholder made an acquisition analysis for
himself, USFloral, any subsidiaries of USFloral or either Company; or
(e) disclose customers, whether in existence or proposed, of either
Company to any person, firm, partnership, corporation or business for any reason
or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit the Stockholder from (i) acquiring as an investment not more than one
percent of the capital stock of a competing business, whose stock is traded on a
national securities exchange or in the over-the-counter market; or (ii) engaging
in any activity to which USFloral shall have provided its prior written consent.
11.2 Damages. Because of the difficulty of measuring economic losses to
USFloral and each 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 each Surviving Corporation for which they would
have no other adequate remedy, the Stockholder agrees that, in the event of a
breach by him of the foregoing covenant, the covenant may be enforced by
USFloral or either 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 each Surviving
Corporation (as successors to the businesses of the Companies).
48
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 either Company, either Surviving Corporation or USFloral, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. It is specifically agreed that the period of two
years stated above, shall be computed by excluding from such computation any
time during which the Stockholder is in violation of any provision of this
Article 11 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action USFloral or
either 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.
11.6 Materiality. Each 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 they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of each Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of each Company and such 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 each Surviving Corporation shall be entitled to an injunction
restraining the Stockholder from disclosing, in whole or in part, such
confidential information. Nothing herein
49
shall be construed as prohibiting USFloral and either 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 each Company, such as lists of customers,
operational policies, pricing and cost policies that are valuable, special and
unique assets of such 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, each 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:
(a) by mutual consent of the boards of directors of USFloral and each
Company; or
(b) by the Stockholder and the Companies 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 15, 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 Companies 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 Companies 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 Companies deemed to be a single
50
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;
(d) by the Stockholder and the Companies 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 Mergers; or
there shall be any action taken, or any statute, rule regulation or order
enacted, promulgated or issued or deemed applicable to the Mergers by any
governmental entity which would make the consummation of the Mergers illegal; or
(e) by the Stockholder and the Companies as a group, on the one hand,
or by USFloral, on the other hand, if any of the financial conditions set forth
in Section 5.9 of this Agreement have not been met.
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;
(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 Companies 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; and (iv) in the event of termination of this Agreement by
the Stockholder and the Companies, as a group, pursuant to Section 13.1(e)
above, the Companies shall pay $20,000 to USFloral.
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 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
51
party of any provision hereto shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
13.5 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
13.6 Brokers and Agents. USFloral and the Newcos (as a group) and the
Companies and the 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 each Newco and their agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement. The Stockholder (and not the Companies) has and will pay the fees,
expenses and disbursements of the Stockholder, each 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, either Newco or either Surviving Corporation to:
U.S.A. Floral Products, Inc.
0000 Xxxxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000 Xxxx
Xxxxxxxxxx XX 00000
52
Attn: Xxxxxx X. Xxxxxxx
Chairman, President and Chief Executive Officer
(Telefax: (000) 000-0000)
with a required copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
(Telefax: (000) 000-0000)
If to the Stockholder to:
Xxxxx Xxxxxxxxxxx
000 Xxxxxxxx
Xxxxxxxxx, XX 00000
(Telefax: (000) 000-0000)
with a required copy to:
Schenk, Price, Xxxxx & King
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxxx
(Telefax: (000) 000-0000)
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, 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
53
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]
54
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
U.S.A. FLORAL PRODUCTS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxx
Chairman, President and Chief Executive
Officer
EFI ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxx
President
EFM ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Xxxxxx X. Xxxxxxx
President
EVERFLORA, INC.
By: /s/ Xxxxx Xxxxxxxxxxx
--------------------------------------------
Xxxxx Xxxxxxxxxxx
President
EVERFLORA MIAMI, INC.
By: /s/ Xxxxx Xxxxxxxxxxx
--------------------------------------------
Xxxxx Xxxxxxxxxxx
President
55
STOCKHOLDER:
/s/ Xxxxx Xxxxxxxxxxx
----------------------------------------------
Xxxxx Xxxxxxxxxxx
56
EXHIBITS
EXHIBIT A [Flower Supply Agreement]
SCHEDULES
SCHEDULE 1.1 [Forms of Plans of Merger]
SCHEDULE 3.1 [Stockholders Post-Closing Audit Checklist]
SCHEDULE 5.1 [Jurisdictions in which Companies are Qualified to Do
Business]
SCHEDULE 5.4 [Issued and Outstanding Stock of each Company free of
Liens]
SCHEDULE 5.6(a) [List of Subsidiaries]
SCHEDULE 5.6(b) [List of Other Securities Owned]
SCHEDULE 5.6(c) [List of Promissory Notes]
SCHEDULE 5.7 [List of Predecessor Companies]
SCHEDULE 5.9(b) [Add-backs]
SCHEDULE 5.10 [Balance Sheets and Income Statements]
SCHEDULE 5.10 [Exceptions to GAAP]
SCHEDULE 5.11(c) [Description of all plans or projects involving opening
new operations]
SCHEDULE 5.11(d) [List of all Indebtedness]
SCHEDULE 5.12 [Excepted Accounts Receivable]
SCHEDULE 5.15(b) [List of Real Property owned or leased]
SCHEDULE 5.15(c) [List of Real Property with Liens]
SCHEDULE 5.15(c)(i) [Permitted Encumbrances]
SCHEDULE 5.16(a) [List of all Personal Property included on Interim
Balance Sheet]
SCHEDULE 5.17(a) [Registered and Unregistered Marks]
SCHEDULE 5.17(b)(i) [Patents]
SCHEDULE 5.17(b)(ii) [Copyright Registrations]
SCHEDULE 5.17(c) [Other Rights]
SCHEDULE 5.17(d) [Compensation Obligations]
SCHEDULE 5.18(a) [Contracts]
SCHEDULE 5.18(b) [Third Party Consents]
SCHEDULE 5.18(c) [Outstanding Balance on Loans and Credit Agreements]
SCHEDULE 5.18(d) [Default Pledge, Hypothecation or Mortgage]
SCHEDULE 5.19 [Audit investigations]
SCHEDULE 5.20 [Insurance Policies]
SCHEDULE 5.22 [Employee Benefit Plans]
SCHEDULE 5.23(a) [Material Adverse Effect]
SCHEDULE 5.23(c) [Litigation]
SCHEDULE 5.25 [Absence of Changes]
57
SCHEDULE 5.26 [Deposit Accounts; Powers of Attorney]
SCHEDULE 5.27(a) [Hazardous Material]
SCHEDULE 5.27(d) [Environmental Permits]
SCHEDULE 5.32 [Location of Chief Executive Offices]
SCHEDULE 5.33 [Location of Equipment and Inventory]
SCHEDULE 7.3 [Related Party Agreements not terminated]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.11 to the Commission supplementally upon request
therefor.
58
