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ASSET PURCHASE AGREEMENT
by and between
GERALD STEVENS, INC. ("GSI"),
GS CALL CENTER CO., FLOWER CLUB INTERNATIONAL, INC., FLORAFAX
FINANCIAL SERVICES CORP., AND WORLDWIDE FLORAL &
GIFTS, INC. ("Sellers")
and
EQUITY RESOURCE PARTNERS, LLC
("Purchaser")
Dated as of February 16, 2001
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINED TERMS..............................................................................1
1.1 Definitions..........................................................................1
1.2 Interpretation.......................................................................7
ARTICLE II CONTEMPLATED TRANSACTIONS..................................................................8
2.1 Purchase of Assets...................................................................8
2.2 Excluded Assets......................................................................8
2.3 Assumption of Liabilities............................................................9
2.4 Procedures for Non-Transferable Assets..............................................10
2.5 Telephone Listing and Telephone Numbers.............................................10
ARTICLE III DEPOSIT; PURCHASE PRICE; SALES TAXES.....................................................11
3.1 Non-refundable Deposit..............................................................11
3.2 Purchase Price......................................................................11
3.3 Sale Taxes..........................................................................12
ARTICLE IV CLOSING; EFFECTIVE TIME...................................................................12
4.1 Closing.............................................................................12
4.2 Closing Date........................................................................12
4.3 Effective Time......................................................................12
ARTICLE V REPRESENTATIONS AND WARRANTIES OF GSI AND THE SELLERS......................................12
5.1 Organization; Qualification.........................................................12
5.2 Authority...........................................................................13
5.3 Consents and Approvals; No Violations...............................................13
5.4 Financial Statements................................................................14
5.5 Undisclosed Liabilities.............................................................14
5.6 Absence of Certain Changes..........................................................14
5.7 Certain Contracts and Arrangements..................................................14
5.8 Litigation..........................................................................15
5.9 Compliance with Applicable Laws.....................................................15
5.10 Employee Matters....................................................................15
5.11 Employee Benefit Plans..............................................................16
5.12 Tax Matters.........................................................................16
5.13 Title...............................................................................16
5.14 Real Property.......................................................................17
5.15 Intellectual Property...............................................................17
5.16 Environmental Matters...............................................................17
5.17 Accounts Receivable.................................................................18
5.18 Inventories.........................................................................18
5.19 Insurance Policies..................................................................19
5.20 Permits and Licenses................................................................19
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5.21 Books and Records...................................................................19
5.22 Brokers and Finders.................................................................19
5.23 Disclaimer of Additional Warranties.................................................19
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...........................................19
6.1 Organization........................................................................19
6.2 Authority...........................................................................20
6.3 Consents and Approvals..............................................................20
6.4 Legal Compliance....................................................................20
6.5 Litigation..........................................................................20
6.5 Brokers and Finders.................................................................20
6.7 No Knowledge of Breach..............................................................21
ARTICLE VII COVENANTS OF THE PARTIES.................................................................21
7.1 Conduct of Business.................................................................21
7.2 Access to Information...............................................................22
7.3 Employees, Consultants and Employee Benefits........................................22
7.4 Filings.............................................................................23
7.5 Consummation of Agreement...........................................................23
7.6 Confidentiality; Public Statements..................................................24
7.7 Notice of Events....................................................................24
7.8 Post-Closing Access.................................................................25
7.9 Accounts Receivable.................................................................25
7.10 Allocation of Purchase Price........................................................25
7.11 Customer Lists......................................................................25
7.12 Non-Compete.........................................................................25
7.13 Non-Soliciation of Employees........................................................26
7.14 No Shopping.........................................................................26
7.15 Change of Name......................................................................26
7.16 Transition of Support Services......................................................26
ARTICLE VIII CLOSING CONDITIONS......................................................................27
8.1 Mutual Conditions...................................................................27
8.2 Conditions to the Obligations of the Sellers........................................27
8.3 Conditions to the Obligations of the Purchaser......................................28
ARTICLE IX SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION..............................................30
9.1 Survival of Representations.........................................................30
9.2 GSI and Sellers' Agreement to Indemnify.............................................30
9.3 Purchaser's Agreement to Indemnify..................................................32
9.4 Remedies............................................................................32
ARTICLE X TERMINATION 32
10.1 Termination.........................................................................32
10.2 Procedure and Effect of Termination or Failure to Close.............................34
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ARTICLE XI MISCELLANEOUS PROVISIONS..................................................................34
11.1 Expenses............................................................................34
11.2 Further Assurances..................................................................34
11.3 Amendment and Modification..........................................................35
11.4 Waiver of Compliance; Consents......................................................35
11.5 Notices.............................................................................35
11.6 Assignment..........................................................................36
11.7 Governing Law.......................................................................36
11.8 Counterparts........................................................................36
11.9 Severability........................................................................36
11.10 Parties in Interest.................................................................36
11.11 Bulk Sales..........................................................................36
11.12 Entire Agreement....................................................................36
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SCHEDULES
Schedule 2.5 Telephone Numbers
Schedule 5.3 Required Consents
Schedule 5.4(a) Financial Statements
Schedule 5.4(b) Certain Financial Information
Schedule 5.7 Certain Contracts and Arrangements
Schedule 5.8 Litigation
Schedule 5.10 Employees
Schedule 5.11 Employee Benefit Plans
Schedule 5.14 Leased Real Property
Schedule 5.15 Intellectual Property
Schedule 5.19 Insurance
Schedule 5.20 Licenses and Permits
Schedule 7.1 Conduct of Business
EXHIBITS
Exhibit A Bill of Sale
Exhibit B Assignment and Assumption Agreement
Exhibit C Escrow Agreement
Exhibit D Florafax Agreement
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of February 16, 2001 (this
"Agreement"), is by and among GERALD STEVENS, INC., a Florida corporation
("GSI"), GS CALL CENTER CO., a Florida corporation ("GSCC"), FLOWER CLUB
INTERNATIONAL, INC., a Florida corporation ("FCI"), FLORAFAX FINANCIAL SERVICES
CORP., a Delaware corporation ("FFS"), and WORLDWIDE FLORAL & GIFTS, INC., a
Florida corporation ("WFG") (GSCC, FCI, FFS and WFG are sometimes hereinafter
each referred to as a "Seller" and collectively as the "Sellers"), and EQUITY
RESOURCE PARTNERS, LLC, a Delaware limited liability company (the "Purchaser");
W I T N E S S E T H :
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WHEREAS, the Sellers are commonly controlled entities which are engaged
in a business consisting primarily of sponsoring corporate floral affinity
programs, acting as a clearinghouse for floral wire service orders, and related
credit card processing, including the business generally known as "Florafax" and
"The Flower Club" (the "Business"); and
WHEREAS, the Sellers now wish to sell, and the Purchaser wishes to
purchase, the assets and operations of the Business, on the terms and conditions
of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINED TERMS
1.1 Definitions. As used in this Agreement, the following terms have
the following meanings:
"Accounts Payable" means any and all amounts due and owing by the
Seller in the operations of the Business in the nature of trade accounts
payable, as such term is understood under GAAP, including any such amounts
described for the Business in the Financial Statements as trade accounts
payable, and any accrued taxes for periods subsequent to the last date through
which returns were required to be filed by the Seller prior to the Closing Date.
"Accounts Receivable" means any and all amounts due and owing to the
Seller or any Seller Affiliate from the operations of the Business, as the term
"accounts receivable" is understood under GAAP, including any such amounts
described for the Business in the Financial Statements as accounts receivable,
notes receivable, trade receivables, employee advances, wire service receivables
and/or charge card receivables, whether or not represented by promissory notes
and including all rights to payment for goods sold or leased or services
rendered, whether billed or unbilled.
"Accrued Expenses" means any and all expenses of the Seller accrued in
the operations of the Business in accordance with GAAP but not paid as of the
date of determination thereof,
including but not limited to accrued compensation and payroll expenses. To the
extent that any liability is included in Accounts Payable, such liability shall
not also be counted as an Accrued Expense.
"Affiliate" means, with reference to a Person, any Person that directly
or indirectly through one or more intermediaries controls or is controlled by or
is under common control with the specified Person. For purposes of this
definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
"Assets" has the meaning given to it in Section 2.1.
"Assignment and Assumption Agreement" means the Assignment and
Assumption Agreement in substantially the form of Exhibit B annexed hereto, to
be executed and delivered by the Seller and the Purchaser to evidence the
assignment and assumption of the Assumed Liabilities as of the Effective Time.
"Assumed Contracts" has the meaning given to it by Section 5.7.
"Assumed Liabilities" has the meaning given to it in Section 2.3(a).
"Bill of Sale" means the Bill of Sale in substantially the form of
Exhibit A annexed hereto, to be executed and delivered by the Seller to evidence
the transfer and assignment of the Assets as of the Effective Time.
"Business" has the meaning given to it in the first "WHEREAS" clause of
this Agreement.
"Business Day" means a day other than a Saturday, Sunday or day on
which commercial banks in Fort Lauderdale, Florida are generally closed for
business.
"Calyx Agreement" means that certain Asset Purchase Agreement dated as
of February 16, 2001 by and between GSI, Calyx & Corolla, Inc. and the
Purchaser, as same may be amended from time to time in accordance therewith.
"Closing" has the meaning given to it in Section 4.1.
"Closing Date" has the meaning given to it in Section 4.2.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, together with the regulations thereunder, in each
case as in effect from time to time.
"Contract" means any legally binding obligation or agreement of the
Business, whether or not reduced to writing, and specifically including, without
limitation, any client or customer agreement, note, bond, mortgage, lease of
real or personal property (including, without
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limitation, automobile, vehicle and other equipment leases), license and other
instrument, but not including Permits.
"Effective Time" has the meaning given to it in Section 4.3.
"Employees" means all persons employed by the Seller in the Business,
including individuals employed on a full time, part-time or temporary basis.
"Employment Agreements" means, collectively, the outstanding employment
agreements between GSI and Beverly Bishop, Peggy O'Neal, James Pagano and David
Rogers, each dated May 1, 1999, between GSCC and Emma Holtzclaw dated April 23,
2000, between GSCC and Rose Marie Stubbs dated May 1, 2000, and between GSCC and
Denise Martin dated June 1, 2000, none of which have been amended or modified in
any manner.
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.ss.ss. 9601, et seq.; the Emergency
Planning and Community Right-to-Know Act of 1986, 42 U.S.C.ss.ss. 11001, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C.ss.ss. 6901, et seq.;
the Toxic Substances Control Act, 15 U.S.C.ss.ss. 26019 et seq.; the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C.ss.ss. 136, et seq.; the
Clean Air Act, 42 U.S.C.ss.ss. 7401 et seq.; the Clean Water Act (Federal Water
Pollution Control Act), 33 U.S.C.ss.ss. 1251 et seq.; the Safe Drinking Water
Act, 42 U.S.C.ss.ss. 300f, et seq.; the Hazardous Materials Transportation Act,
49 U.S.C.ss.ss. 1801, et seq.; as any of the above statutes have been amended as
of the date hereof, all rules and regulations promulgated pursuant to any of the
above statutes, and any other foreign, federal, state or local law, statute,
ordinance, rule or regulation governing environmental matters, as the same have
been amended as of the date hereof.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, together with the regulations
thereunder, in each case as in effect from time to time.
"Escrow Agreement" means the escrow agreement to be entered into at the
Closing by and among GSI, the Purchaser and Doherty, Doherty & Adams, L.L.P., in
the form of Exhibit C annexed hereto, regarding the holding and disposition of
the funds described therein.
"Excluded Assets" has the meaning given to it in Section 2.2.
"Excluded Liabilities" has the meaning given to it in Section 2.3(b).
"Financial Statements" means the separate unaudited statements of
income of each Seller for the Business for the fiscal year ended August 31,
2000, and the separate balance sheets of each Seller for the Business as of
August 31, 2000.
"Fixed Assets" means, collectively, all machinery, equipment (including
point of sale equipment), leasehold improvements, furniture and furnishings,
fixtures, computers, vehicles, tools, parts, accessions and other fixed assets
owned by any of the Sellers or any Seller Affiliate, physically located at any
of the Locations or otherwise, utilized primarily in the Business.
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"Florafax Agreement" means the agreement to be entered into by GSI and
the Purchaser at the Closing, in substantially the form of Exhibit D annexed
hereto, respecting the continued flow of business through the Florafax network
and wire service.
"GAAP" or "generally accepted accounting principles" means generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants, as in effect from time to time, consistently
applied and maintained on a consistent basis for the Seller throughout the
periods indicated.
"Governmental Authority" means any nation, province, state or political
subdivision thereof, and any agency, natural person or other entity exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government.
"GSI" means Gerald Stevens, Inc., a Florida corporation and, through
one or more subsidiaries, the indirect owner of all of the issued and
outstanding capital stock of Sellers.
"Hazardous Material" means any substance or material meeting any one or
more of the following criteria: (a) it is or contains a substance designated as
a hazardous waste, hazardous substance, hazardous material, pollutant,
contaminant or toxic substance under any Environmental Law; (b) its presence at
some quantity requires investigation, notification or remediation under any
Environmental Law; or (c) it contains, without limiting the foregoing, asbestos,
polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived substances
or waste, crude oil or any fraction thereof, nuclear fuel, natural gas or
synthetic gas.
"Interim Financial Statements" means the separate unaudited statements
of income of each Seller for the Business for the three-month period ended
November 30, 2000 and the one-month period ended December 31, 2000, and the
separate unaudited balance sheets of each Seller for the Business as of December
31, 2000.
"Inventory" means all inventories of the Sellers physically located at
any of the Locations or otherwise used or usable in the Business, including
catalogs, wrapping materials, packing materials and supplies, as determined in
accordance with GAAP. To the extent that any inventories of the Business are
held by any Seller Affiliate, such inventories shall nonetheless be included in
the Assets to be transferred at the Closing and in the calculation of Net
Working Capital.
"Intellectual Property" means all patents, copyrights, trademarks,
service marks, trade secrets, know-how, inventions, designs, formulas, and
computer software programs owned by any of the Sellers or any Seller Affiliate
and used primarily in the Business, and any and all applications and/or
registrations for any of the foregoing, including, without limitation, all
rights to the tradenames "Florafax", "The Flower Club" and any variant thereof,
the order entry system software and technology of the Business and the other
Intellectual Property described on Schedule 5.15; provided, however, that the
"Intellectual Property" does not include the "Gerald Stevens" name and logo, any
related service marks utilizing the "Gerald Stevens" name or any variant
thereof, and any designs and trade dress generally utilized by GSI and its
subsidiaries.
"knowledge" and "know" means (a) when referring to the knowledge of the
Sellers, the actual knowledge of John Hall, Thomas W. Hawkins and Wayne Moor (as
executive officers of
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GSI), after reasonable inquiry of the appropriate Employees, and (b) when
referring to the knowledge of the Purchaser, the actual knowledge of Andy
Williams and T. Craig Benson.
"Leased Real Property" means the real properties described on Schedule
5.14.
"Leases" means the leases for the Leased Real Property, as currently in
effect.
"Liabilities" means all liabilities or obligations of any nature
whatsoever, whether absolute or contingent, due or to become due, accrued or
unaccrued, known or unknown, direct or consequential or otherwise, including but
not limited to indebtedness for money borrowed, obligations under Contracts,
accounts payable, liabilities imposed by law and/or Governmental Authorities,
and obligations to remit sales, use and other taxes as and when due.
"Lien" means any mortgage, claim, lien, security interest, pledge,
escrow, charge, right of way, easement or other similar encumbrance.
"Location" means any physical location of the Business, including
without limitation those locations listed or described in Schedule 5.14.
"Material Adverse Effect" means any change or effect (a) that would be
materially adverse to the condition (financial or otherwise), business, assets,
operations or results of operation of the Business, taken as a whole, excluding
changes and effects resulting from general economic and industry conditions not
specific to the Seller, or (b) that would materially impair the ability of any
Seller to consummate the transactions contemplated by this Agreement or perform
its obligations under the Transaction Agreements.
"Net Working Capital" means, as of the Effective Time, the difference
(whether positive or negative), of (a) the sum (excluding any Excluded Assets)
of all Accounts Receivable (net of a reserve for doubtful accounts in an amount
consistent with the historical practice of the Business), Inventory (net of a
reserve for obsolete or slow-moving items in an amount consistent with the
historical practice of the Business) and Prepaid Expenses, minus (b) the sum of
all Assumed Liabilities described in Sections 2.3(a)(i) and 2.3(a)(ii) of this
Agreement (excluding, in each case, Excluded Liabilities).
"Permits" means all licenses, permits, authorizations, registrations,
certificates of occupancy, franchises and approvals of any nature issued by any
Governmental Authority to any Seller in respect of the Business, or otherwise
obtained by any Seller for the Business from any Governmental Authority. To the
extent that the Business currently operates under any license, permit,
authorization, registration or approval held in the name of any Seller
Affiliate, same shall nonetheless be deemed included within the definition of
"Permits" hereunder.
"Permitted Liens" means any of the following Liens: (a) Liens in favor
of carriers, warehousemen, mechanics, landlords and materialmen and other
similar Persons that are incurred in the ordinary course of the Business for
sums not yet due and payable; (b) Liens for current Taxes incurred in the
ordinary course of the Business that are not delinquent or remain payable
without any penalty or are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are maintained; (c)
rights reserved to any Governmental Authority to regulate the affected property;
(d) as to any leased assets or properties, rights of the
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lessors thereof; and (e) Liens incurred or deposits made in the ordinary course
of the Business in connection with workers' compensation and other types of
social security, unemployment insurance, or old age pension programs mandated
under applicable laws or regulations.
"Person" means a corporation, a company, a limited liability company,
an association, a joint venture, a partnership, a limited partnership, an
organization, a business, an individual, a trust, a Governmental Authority or
any other legal entity.
"Plan" means any employee pension, retirement, profit-sharing, bonus,
incentive, deferred compensation, severance, stock option, employee stock
ownership, hospitalization, medical, dental, insurance, or similar employee
benefit plan, whether arrived at through collective bargaining or otherwise,
providing employee benefits (including but not limited to any "employee benefit
plan" as that term is defined in Section 3(3) of ERISA, any employee benefit
plan that is a "cafeteria plan" as described in Section 125 of the Code or any
employee welfare plan) currently maintained or previously maintained by,
sponsored in whole or in part by, or contributed to by any Seller, for the
benefit of employees or retirees of the Business, dependents and spouses of
employees or retirees of the Business, independent contractors of the Business,
or other beneficiaries related to the Business.
"Prepaid Expenses" means any and all prepaid expenses of the Business,
as the term "prepaid expenses" is understood under GAAP.
"Purchase Price" means the aggregate net amount paid by the Purchaser
to the Seller in accordance with Section 3.2.
"Purchaser" has the meaning given to it in the preamble of this
Agreement.
"Purchaser Claims" has the meaning given to it in Section 9.2(c).
"Purchaser Damages" has the meaning given to it in Section 9.2(a).
"Purchaser Indemnitees" has the meaning given to it in Section 9.2(a).
"Seller" and "Sellers" have the meanings given to them in the preamble
of this Agreement.
"Seller Affiliate" means any Affiliate of any Seller.
"Seller Damages" has the meaning given to it in Section 9.3.
"Seller Indemnitees" has the meaning given to it in Section 9.3.
"Tax Return" means any report, return or other information required to
be supplied to or filed with a taxing authority in connection with Taxes.
"Taxes" means any taxes, assessments, duties, fees, levies, imposts, or
other governmental charges of any nature whatsoever imposed by any Governmental
Authority and
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any liabilities with respect thereto, including any penalties, additions to tax,
fines or interest thereon.
"Termination Date" has the meaning given to it in Section 10.1(d).
"Transaction Agreements" means this Agreement, the Escrow Agreement,
the Florafax Agreement, the Bill of Sale, the Assignment and Assumption
Agreement, and any and all other agreements, instruments and other documents
effecting the conveyance, assignment and/or assumption of Assets and/or Assumed
Liabilities hereunder.
1.2 Interpretation. The following provisions shall govern the
interpretation of this Agreement:
(a) The words "herein" and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section, subsection, Exhibit or Schedule; references to this Agreement include
the Exhibits and Schedules to this Agreement; and, unless the context requires
otherwise, references to Exhibits and Schedules refer to the Exhibits and
Schedules to this Agreement.
(b) Headings or captions are for convenience of reference only and
shall not affect the construction or interpretation of this Agreement.
(c) Words importing the singular number only shall include the plural
and vice versa and words importing the masculine gender shall include the
feminine and neuter genders and vice versa and words importing individuals shall
include Persons and vice versa.
(d) The calculation of time within which or following which any act is
to be done or step is to be taken pursuant to this Agreement excludes the date
which is the reference day in calculating such period.
(e) Performance on holidays is not required hereunder. Whenever
anything is required to be done or any action is required to be taken hereunder
on or by a day which is not a Business Day, then such thing may be validly done
and such action may be validly taken on or by the next succeeding day that is a
Business Day.
(f) The term "including" shall be deemed to mean "including without
limitation."
(g) Except as specifically provided otherwise in this Agreement, all
accounting terms used herein that are not specifically defined shall have the
meanings customarily given them in accordance with GAAP.
(h) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event that an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement.
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ARTICLE II
CONTEMPLATED TRANSACTIONS
2.1 Purchase of Assets. At the Closing, upon and subject to the terms
and conditions of this Agreement, the Sellers shall sell to the Purchaser, and
the Purchaser shall purchase from the Sellers, all of the Sellers' right, title
and interest, as of the Effective Time, in and to the following assets, rights
and properties, together with all additions made thereto and excluding all
dispositions thereof after the date hereof made in the ordinary course of
business, in each case excluding the Excluded Assets (such purchased assets are
referred to herein as the "Assets"):
(a) all Accounts Receivable of the Business;
(b) all Inventory;
(c) all Fixed Assets;
(d) all Permits that are transferable under applicable law (and, if
such Permit is held in the name of a Seller Affiliate, such Permit is not
required by any Seller Affiliate for the conduct of any operations other than
the Business);
(e) all Intellectual Property (including all rights to sue for
infringement thereof or otherwise to enforce same, and all royalties which may
be receivable in respect thereof), and the domain name(s) for any website(s)
utilized exclusively in the Business;
(f) all of the Sellers' rights (including rights to security deposits)
under the Leases, the Employment Agreements and the other Contracts, including
without limitation those that are listed on Schedules 5.7 and 5.14;
(g) all of the Sellers' books, files, records, documents, data, plans,
proposals and all other recorded knowledge, whether in written, electronic,
visual or other form, to the extent related to the Business;
(h) all Prepaid Expenses of the Business (other than rights to unearned
insurance premiums), including but not limited to any prepaid rent; and
(i) the Business as a going concern and all of the goodwill associated
with the Business, and all other assets, properties, business and rights used in
the conduct of the Business and not otherwise excluded from the Assets
hereunder.
2.2 Excluded Assets. The Assets shall not include any of the following
assets, rights and properties of the Sellers as of the Effective Time (the
"Excluded Assets"), all of which shall be retained by the Sellers:
(a) any cash, marketable securities, short-term investments of cash,
and other cash equivalents;
8
(b) any and all deferred taxes, rights to tax refunds, net operating
loss carryforwards, and refunds of unearned insurance premiums;
(c) any and all Plans, and any related trust or assets thereof;
(d) any and all Permits which are not included in the Assets;
(e) the rights of the Seller under this Agreement and the other
Transaction Agreements;
(f) rights in or with respect to all insurance policies (other than
claims relating to Assumed Liabilities or to casualty losses affecting the
Assets);
(g) all assets, rights and properties of the Sellers that relate to
their corporate governance and administration, including the Sellers' corporate
minute books, corporate seals and stockholder records;
(h) all of the Sellers' tax records and tax returns; and
(i) all trademarks, service marks, trade names, copyrights,
copyrightable materials, designs and trade dress owned by GSI and/or its
subsidiaries and affiliates (other than the Intellectual Property).
2.3 Assumption of Liabilities.
-------------------------
(a) Assumed Liabilities. On the Closing Date, the Purchaser shall
assume, and shall thereafter timely pay and perform, the following obligations
and liabilities of the Sellers existing as of the Effective Time (the "Assumed
Liabilities"):
(i) To the extent such liabilities are considered in
the calculation of the Net Working Capital and have not been
paid as of the Closing Date, the liabilities of the Business
reflected on the Interim Financial Statements;
(ii) To the extent such liabilities are considered in
the calculation of the Net Working Capital and have not been
paid as of the Closing Date, the liabilities of the Sellers of
a nature required to be shown on the financial statements of
the Business under GAAP arising out of the operation of the
Business in the ordinary course of business that arose after
December 31, 2000.
(iii) The liabilities of the Business for the line
item "Subscription Deposits" in an aggregate amount not to
exceed $52,000; and
(iv) the obligations accruing after the Effective
Time under the Assumed Contracts (including the Leases and the
Employment Agreements, but excluding the Excluded Contracts).
(b) No Other Assumed Liabilities. Except as set forth in Section 2.3(a)
above or as otherwise expressly provided herein, the Purchaser shall not assume
or become liable for (and
9
hereby expressly disclaims any undertaking in respect of) the payment or
performance of any Liabilities of any of the Sellers (or any predecessor of any
Seller), whether in connection with the Business or the Assets or otherwise, of
whatever nature, whether known or unknown, contingent or otherwise, and whether
presently in existence or arising hereafter (collectively, the "Excluded
Liabilities"), including but not limited to the following, to the extent not
assumed under Section 2.3(a): (i) indebtedness for money borrowed, (ii) income
taxes, sales taxes, payroll taxes, withholding taxes, franchise taxes, and other
taxes, (iii) claims, litigation, liabilities or obligations arising out of or
relating to the operations of the Sellers prior to the Effective Time, or
otherwise in connection with any actual or threatened or future action with
respect to any events, actions, occurrences, omissions, circumstances or
conditions relating to the Sellers occurring or existing on or prior to the
Effective Time (and whether asserted prior to, on or after the Effective Time),
other than actions based on the Purchaser's failure to pay or perform any of the
Assumed Liabilities, (iv) liabilities or obligations of any kind in respect of
any past or present stockholders, directors, officers, employees, Affiliates or
consultants of any Seller, whether under any contract or agreement, pursuant to
any pension plan or employee benefit or welfare plan, or otherwise, (v)
liabilities or obligations relating to recapture of any depreciation deduction
or investment tax credit of any Seller, and (vi) the line item "Deferred Gain -
Building and Land."
2.4 Procedures for Non-Transferable Assets. If any Contracts to be
included among the Assets are not assignable or transferable either by virtue of
the provisions thereof or under applicable law without the consent of some other
party or parties, the Purchaser and the subject Seller shall use reasonable
commercial efforts to obtain such consents prior to the Closing Date. If any
such consents cannot be obtained, the parties intend that the Purchaser
nevertheless receive the economic benefits of, and perform the obligations
under, such Contracts as if such Contracts had been assigned to the Purchaser.
Accordingly, if permitted under any such Contracts, the subject Seller agrees to
subcontract such Contracts to the Purchaser at the price specified in each such
Contract without any additional mark-up and on the same terms and conditions,
and the Purchaser shall be responsible for performing the services under such
Contract and for the costs associated with the performance of such Contracts,
and the Purchaser shall be entitled to and shall receive all the revenues from
such Contracts. If subcontracting any such Contract is not permitted, the
subject Seller and the Purchaser shall cooperate with one another in any
reasonable arrangement designed to give to the Purchaser the benefits of and
obligations under such Contract. In any event, the Sellers' obligations and
liabilities under any such Assumed Contracts shall be considered Assumed
Liabilities for the purpose of this Agreement.
2.5 Telephone Listings and Telephone Numbers. From and after the
Closing Date, the Seller shall cooperate with and assist the Purchaser in all
reasonable respects to cause the applicable telephone service providers to
transfer to the Purchaser and to the Purchaser's account all telephone listings,
telephone numbers and telephone accounts of the Business as set forth in
Schedule 2.5 annexed hereto, provided that the Sellers make no representation or
warranty as to the transferability of such items (all of which may be asserted,
by the applicable service providers, to be the property of such service
providers and, as such, transferable only at the discretion of such service
providers).
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ARTICLE III
DEPOSIT; PURCHASE PRICE; SALES TAXES
3.1 Non-Refundable Deposit. In consideration of various foregone
opportunities of GSI and the Sellers, and for other good and valuable
consideration, the Purchaser shall, subject to and simultaneously with the
consummation of the transactions contemplated by the Calyx Agreement, and
regardless of any prior termination of this Agreement under any circumstances
whatsoever, pay to GSI (on behalf of the Sellers), by wire transfer of
immediately available funds to such account as shall have been designated by GSI
for such purpose prior to such date, the sum of $1,500,000, which shall
constitute (a) liquidated damages for the aforesaid foregoing opportunities if
this Agreement has been terminated prior to the date of such payment, or (b) a
non-refundable deposit hereunder if this Agreement has not been terminated prior
to the date of such payment. If the Calyx Agreement shall terminate prior to the
closing of the transactions contemplated thereunder, the Purchaser's obligations
under this Section 3.1 shall terminate. In no event and under no circumstances
whatsoever shall GSI or any of the Sellers be required to repay or refund to the
Purchaser or anyone claiming thereunder any portion of the payment under this
Section 3.1; provided, however, that in the event that and at such time as the
Closing shall take place, the payment under this Section 3.1 shall be credited
to the Purchaser's obligations under Section 3.2(a).
3.2 Purchase Price.
--------------
(a) In consideration of the transfer to the Purchaser of the Assets,
the Purchaser shall, on the Closing Date, pay to the Sellers, by wire transfer
of immediately available funds to such account as shall have been designated by
GSI for such purpose prior to the Closing, an amount equal to (i) $16,500,000,
plus or minus (as the case may be) (ii) the amount by which the Net Working
Capital (as estimated by the Sellers in good faith to the Purchaser and approved
by Purchaser in good faith on the Closing Date) is greater than or less than (as
the case may be) $350,000; provided, however, that of the amount otherwise
payable to the Sellers under this Section 3.2(a), the sum of $200,000 shall be
deducted therefrom and paid instead to the escrow agent under and pursuant to
the Escrow Agreement. Such payments shall be in addition to the Purchaser's
assumption of the Assumed Liabilities.
(b) During the sixty (60) day period following the Closing Date, the
Purchaser may review and contest the Sellers' calculation of the Net Working
Capital utilized to determine the payment pursuant to Section 3.2(a), which
verification procedures shall include a physical inventory as of the Effective
Time to be conducted by the Purchaser, which the Sellers and GSI shall have the
right to observe. To the extent that the Purchaser has any net disagreement with
the Sellers' calculation of Net Working Capital, the Purchaser shall give
written notice thereof to the Seller within sixty (60) days after the Closing
Date, which notice shall specify in reasonable detail the nature of the
disagreement and the basis and supporting evidence for the Purchaser's position
with respect to the disputed item(s). The parties shall attempt in good faith to
resolve any disagreement for a period of fifteen (15) days following the date of
the Purchaser's notice. If the parties are unable to resolve such disagreement
within such period, the parties shall submit the disputed item(s) to a
recognized accounting firm, not then or in the prior two (2) years engaged by
either party or any of its Affiliates (the "Arbitrator"), whose decision with
respect
11
to the disputed item(s) shall be final and binding. The Arbitrator shall be
directed to render its decision with respect to the disputed item(s) within
fifteen (15) days after same are submitted to the Arbitrator (or as promptly
thereafter as practicable), and the Seller and the Purchaser shall each promptly
provide all information and documents in their possession that the Arbitrator
deems necessary in order to make its decision with respect to the disputed
item(s). The fees and expenses of the Arbitrator shall be borne equally by the
Sellers (on the one hand) and the Purchaser (on the other hand). Within five (5)
business days after the parties' receipt of the Arbitrator's determination, any
required payment indicated in the Arbitrator's determination shall be made, in
immediately available funds, by the party required to make such payment to the
party entitled to receive such payment.
3.3 Sales Taxes. Any and all sales or use taxes assessable in respect
of the transactions contemplated by this Agreement shall be payable by the
Purchaser, and the Purchaser shall remit to the appropriate taxing authority any
and all such sales or use taxes as and when same may be payable. Nothing herein
contained shall be deemed to acknowledge whether or to what extent any sales or
use taxes may be payable in respect of any of the transactions contemplated by
this Agreement.
ARTICLE IV
CLOSING; EFFECTIVE TIME
4.1 Closing. The closing of the transactions contemplated herein (the
"Closing") shall take place on the Closing Date by overnight delivery and/or
facsimile transmission to the appropriate parties of the applicable documents,
or at such location or in such other manner as the Purchaser and the Seller may
mutually agree. At the Closing, the parties will execute and deliver all
documents and instruments of conveyance and assumption necessary or appropriate
to effect the transactions contemplated herein.
4.2 Closing Date. The Closing of the transactions contemplated herein
shall occur at 9:00 a.m. Eastern Standard time on March 30, 2001, or such later
date as all conditions precedent hereunder have been satisfied or waived (the
date of the Closing is referred to herein as the "Closing Date"). The parties
agree to use reasonable commercial efforts to cause the Closing to occur on such
Closing Date.
4.3 Effective Time. The effective time of the transfer of the Assets
and assumption of the Assumed Liabilities shall be deemed to be the close of
business of the Business on the Closing Date (the "Effective Time").
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF GSI AND THE SELLERS
GSI and the Sellers, jointly and severally, hereby represent and
warrant to the Purchaser as follows:
5.1 Organization; Qualification. Each Seller (a) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (b) is
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duly qualified and in good standing to do business as a foreign corporation in
each jurisdiction in which the nature of its business or properties requires
such qualification (unless the failure to be so qualified would not have a
Material Adverse Effect), and (c) has all requisite corporate power and
authority to own, lease and operate its assets and to carry on its business as
presently conducted. GSI is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida, is duly qualified and
in good standing to do business as a foreign corporation in all states where the
conduct of its business would require such qualification (except where the
failure to be so qualified would not have a Material Adverse Effect), and has
all requisite corporate power and authority to own, lease and operate its assets
and to carry on its business as presently conducted.
5.2 Authority. GSI and each Seller has the full corporate power and
authority to execute and deliver the Transaction Agreements and to consummate
the transactions contemplated thereby. The execution and delivery by GSI and
Sellers of the Transaction Agreements and the consummation of the transactions
contemplated thereby have been duly and validly authorized and approved by all
necessary corporate action on behalf of GSI and Sellers and no other corporate
proceedings are necessary on the part of GSI and Sellers to authorize the
Transaction Agreements or the consummation of the transactions contemplated
thereby. This Agreement has been duly and validly executed and delivered by GSI
and Sellers, and at the Closing the other Transaction Agreements will be duly
and validly executed by GSI and Sellers. Assuming the Transaction Agreements
constitute or will constitute legal, valid and binding agreements of the
Purchaser, this Agreement and the other Transaction Agreements constitute or,
upon execution, will constitute legal, valid and binding agreements of GSI and
Sellers, enforceable against GSI and Sellers in accordance with their terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and to general principles of equity.
5.3 Consents and Approvals; No Violations.
-------------------------------------
(a) The execution, delivery and performance of the Transaction
Agreements by GSI and Seller and the compliance by GSI and Seller with the terms
thereof will not, except as set forth on Schedule 5.3: (i) conflict with any
provision of the articles or certificate of incorporation or bylaws of GSI or
any Seller; (ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any material Contract to which GSI or any Seller is a party, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained; (iii) violate any statute,
law, rule, regulation, judgment, order, writ, injunction or decree of any
Governmental Authority; or (iv) result in the creation or imposition of any Lien
on any Asset of any Seller being purchased hereunder by the Purchaser.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority or by any other Person, is required by or with
respect to GSI and Sellers in connection with the execution and delivery of the
Transaction Agreements by GSI and Sellers or the consummation of the
transactions contemplated thereby.
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5.4 Financial Statements.
--------------------
(a) True and complete copies of the Financial Statements and the
Interim Financial Statements are annexed hereto as Schedule 5.4(a). Subject to
the qualifications disclosed on Schedule 5.4(a), the Financial Statements and
the Interim Financial Statements fairly present, in all material respects, the
results of operations and financial position of the Business for the periods and
as of the dates set forth therein. The Financial Statements and Interim
Financial Statements have been prepared from the books and records of the
Sellers (which accurately and consistently reflect, in all material respects,
all transactions of the Business) in accordance with GAAP (subject to normal
non-material audit adjustments and the absence of footnote disclosures).
(b) Annexed hereto as Schedule 5.4(b) is a true and correct list and
aging of the Accounts Receivable and Accounts Payable as of January 31, 2001,
and details as to the major items of Prepaid Expenses and Accrued Expenses.
5.5 Undisclosed Liabilities. Except as specifically disclosed in the
Schedules to this Agreement, none of the Sellers has any Liabilities with
respect to the Assets or the Business, except (a) Liabilities of the types and
in the amounts reflected in the Financial Statements, (b) Liabilities incurred
in the ordinary course of business after December 31, 2000, or that are not
required by GAAP to be reflected on the Interim Financial Statements as of the
date thereof, and (c) liabilities and obligations that do not and will not,
individually or in the aggregate, have a Material Adverse Effect.
5.6 Absence of Certain Changes. Since December 31, 2000, none of the
Sellers has: (a) conducted the Business other than in the ordinary course
consistent with past practices, with all reasonable efforts made consistent with
past practices to preserve the goodwill of the Business and such Seller's
relationships with the customers and suppliers and to keep available the
services of its Employees; (b) entered into any Contract, assumed any Liability
or otherwise conducted the Business other than in the ordinary course of
business consistent with past practice; (c) suffered any Material Adverse
Effect, other than changes relating to the industry in general and not
specifically relating to such Seller; (d) suffered any damage, destruction or
loss, whether covered by insurance or not, which has had or would reasonably be
expected to have a Material Adverse Effect; (e) altered in any material respect
the practices of the Business with respect to payment of Accounts Payable,
collection of Accounts Receivable or receiving prepayments for future goods or
services; or (f) done any act or incurred any event that would be or cause a
violation of such Seller's covenants and agreements set forth in Section 7.1
below were such act undertaken or event incurred at any time after the date
hereof but prior to the Closing Date.
5.7 Certain Contracts and Arrangements. All Contracts existing as of
the date hereof are either (a) listed on Schedule 5.7, (b) Contracts for the
purchase or sale of goods or services entered into in the ordinary course of
business and not involving a financial obligation in excess of $25,000, or (c)
licenses for the use of off-the-shelf computer software. Seller has provided to
Purchaser true and complete copies of all Contracts listed on Schedule 5.7. Each
Contract described in the preceding sentence, other than Excluded Contracts
("Assumed Contracts"), including the Leases and the Employment Agreements, is a
legal, valid, and binding obligation
14
of the subject Seller and, to the knowledge of the Sellers, the other party or
parties to such Contract; and each such Contract is, to the Sellers' knowledge,
in full force and effect. None of the Sellers has received any written notice of
any announced changes in the policies and practices of any customers or
suppliers that has had or would reasonably be expected to have a Material
Adverse Effect. None of the Sellers is in breach or default under any such
Contract and, to the knowledge of the Seller, no other party to any such
Contract is in breach or default in any respect thereunder, except, in either
case, any such breaches that, in the aggregate, would not reasonably be expected
to have a Material Adverse Effect. Each Assumed Contract will, upon the Closing,
remain legal, valid, binding and in full force and effect in accordance with its
terms, subject to any required consents which the parties may elect to waive. No
Assumed Contract has been assigned or transferred in whole or in part, or
materially amended, modified, impaired or subcontracted in any manner.
5.8 Litigation. Except as disclosed on Schedule 5.8, there are no
claims, actions, suits, investigations or proceedings pending or, to the
knowledge of the Sellers, threatened against any Seller or any of the Assets, or
in respect of the transactions contemplated by this Agreement, before any
Governmental Authority, court, or arbitration tribunal.
5.9 Compliance with Applicable Laws. Each Seller is in substantial
compliance with all applicable laws, rules and regulations relating to
ownership, leasing and operating of the Assets and carrying on the Business.
None of the Sellers has received any written notice of default or violation
relating to the Business, nor is any Seller in default or violation, with
respect to any judgment, order, writ, injunction, decree, demand or assessment
issued by any Governmental Authority, court or arbitration tribunal with respect
to the Business; and none of the Sellers has been charged or, to the knowledge
of the Sellers, is under investigation with respect to, any violation of any
applicable law, rule or regulation relating to the ownership or operation of any
of the Assets or the Business.
5.10 Employee Matters. None of the Sellers is a party to any collective
bargaining agreement applicable to the Business, nor has any Seller recognized
or received a demand for recognition of any collective bargaining representative
with respect to any Employees of the Business, and since January 1, 1999, there
have been no material labor strikes, disputes or work stoppages in the Business,
and, to the knowledge of the Sellers, no such actions are threatened against the
Business. No union is now certified or has claimed in writing the right to be
certified as a collective bargaining agent to represent any employees of the
Business, and, to the knowledge of the Sellers, there are no organizational
activities pending or threatened relating to any Employees of the Business.
Except for the Employment Agreements, none of the Sellers is party to or bound
by any employment agreement with respect to any employees of the Business. There
are no unfair labor practice claims or charges pending or, to the knowledge of
the Sellers, threatened against any Seller with respect to the Business, and
none of the Sellers has received any written notice, complaint or grievance
relating to any actual or alleged violation of any law, regulation or order
relating to collective bargaining rights of employees, equal opportunity in
employment, sexual harassment in the workplace, or employee health, safety,
welfare, or wages and hours in the Business. A true and complete list of all
Employees of the Business, including current annual compensation or hourly
salary rate and job designation, is attached as Schedule 5.10.
15
5.11 Employee Benefit Plans.
----------------------
(a) Schedule 5.11 contains a complete list of all Plans. True and
complete copies of all Plans, including any trust instruments and insurance
contracts, if any, forming a part thereof, and all amendments thereto, have been
delivered or made available to the Purchaser. Except as required by statute or
governmental regulation, none of the Sellers has any liability (fixed or
contingent) for, or made any undertakings with respect to, health or medical
benefits to any former Employee of the Business. In addition, the most recent
summary plan description, each determination letter issued by the Internal
Revenue Service to any Plan intended to be qualified under Section 401(a) of the
Code, and the Form 5500 with all related schedules filed for the prior two years
with respect to each Plan, as applicable, has been provided to the Purchaser.
(b) None of the Sellers has incurred (nor has any event occurred that
could result in any Seller's incurrence of) any liability in connection with any
existing or previously existing Plan that could become, on or after the Closing
Date, an obligation or liability (whether primary or secondary) of the
Purchaser.
(c) None of the Sellers participates in or contributes to, nor has any
Seller at any time participated in or contributed to, any multiemployer plan, as
defined in Section 3(37) or 4001(a)(3) of ERISA.
(d) None of the Sellers has any commitment to any Employee of the
Business to provide any post-retirement welfare benefit, whether or not under
any Plan, other than liability for coverage mandated under applicable law,
including continued medical coverage required under Section 4980B of the Code,
the premiums for which are borne by such Employee or former Employee.
(e) None of the Employees of the Business will be entitled to an
accelerated payment or immediate vesting (other than any vesting resulting from
the termination of a qualified retirement plan), including parachute payments
described under Section 280G of the Code, under any Plan or agreement as a
result of or arising out of this Agreement or the consummation of the
transactions contemplated hereby.
(f) No act or failure to act has affected the qualified status of any
Seller's 401(k) Plan and its Trust since their adoption, and none of the
transactions contemplated by this Agreement, including the provisions of Section
7.3(e) below, will adversely affect their qualified status.
5.12 Tax Matters. Each Seller has timely filed with the appropriate
Governmental Authority all Tax Returns and reports required to be filed by it
with respect to the Business. All such Tax Returns are correct and complete in
all material respects. Each Seller has timely paid all Taxes (whether or not
shown on any Tax Return) due to any taxing authority with respect to the
Business for all periods prior to the date hereof. There are no tax Liens on any
assets of the Business, except for Permitted Liens. There are no disputes or
claims pending or, to the knowledge of the Sellers, threatened against any
Seller for past due Taxes relating to the Business.
5.13 Title; Condition of Assets. Each Seller owns and has good and
marketable title to all of its Assets, free and clear of all Liens except
Permitted Liens and Liens to be released in
16
connection with the Closing. All Assets and facilities of the Business are in
good operating condition and repair (reasonable wear and tear excepted) and are
adequate for their use in the Business as presently conducted.
5.14 Real Property.
-------------
(a) None of the Sellers owns any real property. The real property
described on Schedule 5.14 constitutes all of the real property leased by the
Sellers as lessee and occupied in connection with the operation of the Business.
The areas of such leased premises that the Sellers are responsible for
maintaining are in good condition (reasonable wear and tear excepted). Sellers
have provided to Purchaser true and complete copies of the Leases. None of the
Sellers is a sublessor with respect to any real property.
(b) To the knowledge of the Sellers, no condemnation of any of the
Leased Real Property has occurred, is pending or, is threatened. To the
knowledge of the Sellers, the conduct of the Business by the Sellers at the
Leased Real Property complies in all material respects with all applicable legal
requirements relating to the Leased Real Property, including requirements under
the applicable zoning ordinances, building code requirements and any
requirements under applicable private restrictions.
5.15 Intellectual Property. Schedule 5.15 lists all material items of
the Intellectual Property. Each Seller has the right to use all its Intellectual
Property as it presently uses them. No trademark, trade name, service mark,
logotype, copyright, patent or other Intellectual Property used by the Seller in
the Business is the subject of any pending or, to the knowledge of Seller,
threatened infringement action, or action seeking to deny, modify or revoke any
registration or application therefor or renewal thereof, and, to the knowledge
of the Seller, no other Person is currently infringing upon any of the
Intellectual Property. Each Seller is entitled to use all designs, processes,
licenses and all other Intellectual Property used by it, and no Seller has
granted to any third party any right, title or interest in or to any such
Intellectual Property.
5.16 Environmental Matters.
---------------------
(a) None of the Sellers has ever generated, used, handled, treated,
released, stored or disposed of any Hazardous Materials on or about the Leased
Real Property, except in substantial compliance with all applicable
Environmental Laws; and to the knowledge of the Sellers, no other Person has
ever engaged in any such activity on or about the Leased Real Property.
(b) The Sellers' historical and present operation of the Business is in
substantial compliance with all applicable Environmental Laws.
(c) There are no material pending or, to the knowledge of the Sellers,
threatened, demands, claims or notices of noncompliance or violation against or
to the Business relating to an Environmental Law; and, to the knowledge of the
Sellers, there are no conditions or occurrences on the Leased Real Property that
would reasonably be expected to lead to any such demands, claims or notices
against or to any Seller.
(d) To the knowledge of the Sellers, there are no underground storage
tanks located at the Leased Real Property. To the knowledge of the Sellers, any
storage tanks (whether
17
underground or above ground) previously located at the Leased Real Property were
at all times maintained, sealed and/or disposed of in accordance with all
applicable Environmental Laws.
(e) (i) To the knowledge of the Sellers, none of the Sellers has, in
the Business, sent or disposed of, otherwise had taken or transported, arranged
for the taking or disposal of (on behalf of itself, a customer or any other
party) or in any other manner participated or been involved in the taking of or
disposal or release of a Hazardous Material to or at a site that is contaminated
by any Hazardous Material or that, pursuant to any Environmental Law, (A) has
been placed on the "National Priorities List", the "CERCLIS" list, or any
similar state or federal list, or (B) is subject to or the source of a claim, an
administrative order or other request to take "removal", "remedial",
"corrective" or any other "response" action, as defined in any Environmental
Law, or to pay for the costs of any such action at the site; (ii) none of the
Sellers is involved in (or has any basis to reasonably expect to be involved in)
any suit or proceeding or has received (or has any basis to reasonably expect to
receive) any notice, request for information or other communication from any
Governmental Authority or other third party with respect to a release or
threatened release of any Hazardous Material or a violation or alleged violation
of any Environmental Law in the Business, or has received (or has any basis to
reasonably expect to receive) notice of any claims from any Person relating to
property damage or to personal injuries from exposure to any Hazardous Material
in the Business; and (iii) each of the Sellers has, in respect of the Business,
timely filed every report required to be filed, acquired all necessary
certificates, approvals and Permits, and generated and maintained all required
data, documentation and records under all Environmental Laws, except where the
failure to do so would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
5.17 Accounts Receivable.
-------------------
(a) To the extent not already collected, all accounts receivable shown
on Schedule 5.4(b), and all accounts receivable thereafter created or acquired
by the Seller prior to the Closing Date (the "Accounts"), have arisen or will
arise in the ordinary course of the Business, and, to the extent not already
collected, represent and will represent amounts owed to the Sellers by account
debtors in respect of goods, products or services provided to such account
debtors by the Sellers, subject to the reserve utilized in the calculation of
Net Working Capital and subject to customary adjustments which may be effected
with customers in the ordinary course of business (which adjustments are not and
will not be, in the aggregate, material to the financial condition and business
of the Sellers taken as a whole).
(b) The Sellers have no knowledge of any asserted counterclaims or
set-offs in respect of any of such Accounts, or any state of facts, events or
occurrences which would impair the collection of such Accounts in the ordinary
course of business, subject to the reserve utilized in the calculation of Net
Working Capital and subject to customary adjustments which may be effected with
customers in the ordinary course of business (which adjustments are not and will
not be, in the aggregate, material to the financial condition and business of
the Sellers taken as a whole).
5.18 Inventories. All inventories which are owned by the Sellers and
reflected in Schedule 5.4(b) have been valued at the lower of cost or market,
based on the first in/first out
18
method of accounting, and all items of obsolete or slow-moving inventory have
been written down to net realizable or scrap value. Except as otherwise
disclosed in Schedule 5.4(b) annexed hereto or reflected in the reserve utilized
in the calculation of Net Working Capital, such inventories, in the aggregate,
consist, and at the Closing Date will consist, of items which are of a quality
and quantity which are useable in the ordinary course of the Sellers' business.
The Sellers are not aware of any government or governmental agency approvals
required to be obtained in respect of such inventories, and to the Sellers'
knowledge, all of such inventories have been manufactured in accordance with and
comply in all material respects with all applicable laws and regulations.
5.19 Insurance Policies. Schedule 5.19 annexed hereto contains a true
and correct schedule of all insurance coverages held by the Sellers concerning
their business and properties, including the names of insurers, policy limits
and deductibles. To the extent that such coverages are provided pursuant to
group policies of GSI, no representation or warranty is made as to the
continuation of such coverages from and after the Closing.
5.20 Permits and Licenses. Schedule 5.20 annexed hereto contains a true
and complete list of all Permits of the Business, which, to the Sellers'
knowledge, constitute all required Permits necessary in order to operate the
Business in the manner presently conducted (except where the failure to hold any
Permit would not reasonably be expected to have a Material Adverse Effect). No
representation or warranty is made with respect to the assignability or
transferability of any of such Permits.
5.21 Books and Records. All the books and records of the Business have
been maintained in the ordinary course of the Business consistent with the
Sellers' past practices and fairly reflect all material transactions of the
Business.
5.22 Brokers and Finders. No broker, finder or other Person is entitled
to any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken or commitment
made by any Seller or any of its Affiliates.
5.23 Disclaimer of Additional Warranties. Except as expressly set forth
in this Agreement, or any of the certificates or instruments delivered pursuant
to the terms hereof, neither GSI nor any of the Sellers makes any
representations or warranties, express or implied, at law or in equity,
including any representation or warranty as to the quality of the Assets, or any
part thereof, the condition thereof or fitness thereof for any purpose, or the
absence of any defects therein, whether latent or patent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to GSI and the Sellers as
follows:
6.1 Organization. The Purchaser is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has delivered to the Sellers a true and correct copy of
its Certificate of Formation as amended to the date of this Agreement.
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6.2 Authority. The Purchaser has the full power and authority to
execute the Transaction Agreements and to consummate the transactions
contemplated thereby. The execution and delivery of the Transaction Agreements
and the consummation of the transactions contemplated thereby have been duly and
validly authorized and approved by all necessary action on behalf of the
Purchaser, and no other proceedings are necessary on the part of the Purchaser
to authorize the Transaction Agreements or the consummation of the transactions
contemplated thereby. This Agreement has been duly and validly executed and
delivered by the Purchaser, and at the Closing the other Transaction Agreements
will be duly and validly executed by the Purchaser. Assuming this Agreement and
the other Transaction Agreements constitute or will constitute legal, valid and
binding agreements of the Sellers, this Agreement and the other Transaction
Agreements constitute or will constitute, upon execution, legal, valid and
binding agreements of the Purchaser, enforceable against the Purchaser in
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity.
6.3 Consents and Approvals.
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(a) The execution, delivery and performance of the Transaction
Agreements by the Purchaser and the Purchaser's compliance with the terms
thereof will not (i) conflict with any provision of the Certificate of Formation
or other governing document(s) of the Purchaser, (ii) conflict with, constitute
a breach of, or result in a default (whether upon notice or lapse of time or
both) under any of the terms, conditions or provisions of any agreement,
instrument, commitment or obligation to which the Purchaser is a party or by
which any of its assets is bound, or (iii) violate any statute, law, rule,
regulation, order, writ, injunction or decree of any Governmental Authority, but
excluding from the foregoing clause (iii) such defaults, impositions and
violations that, in the aggregate, could not reasonably be expected to impair
the Purchaser's ability to perform its obligations under this Agreement.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority or by any other Person, is required by or with
respect to the Purchaser in connection with the execution and delivery of this
Agreement by the Purchaser or the consummation of the transactions contemplated
hereby.
6.4 Legal Compliance. The Purchaser is in compliance in all material
respects with all statutes, laws, rules, regulations and ordinances applicable
to the Purchaser and its business.
6.5 Litigation. There are no legal, administrative, arbitration or
other proceedings or governmental investigations pending or, to the knowledge of
the Purchaser, threatened against the Purchaser that could reasonably be
expected to impair the Purchaser's ability to perform its obligations under this
Agreement.
6.6 Brokers and Finders. No broker, finder or other Person is entitled
to any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby by reason of any action taken or commitment
made by the Purchaser or any of its member owners or any of their respective
Affiliates.
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6.7 No Knowledge of Breach. The Purchaser has no knowledge, on the date
hereof, that GSI or any Seller is in breach of any of its representations or
warranties made in Article V above.
ARTICLE VII
COVENANTS OF THE PARTIES
7.1 Conduct of Business. Except as indicated on Schedule 7.1 or as
otherwise contemplated by this Agreement, during the period from the date of
this Agreement to the Closing Date, the Seller will conduct the Business only in
the ordinary course and in a manner consistent with prior practice and Seller
will use its best efforts to preserve its business organization intact and to
preserve its present relationships with referral sources, clients, customers,
suppliers and others having business relationships with it. Without limiting the
generality of the foregoing, except as set forth on Schedule 7.1 or as otherwise
contemplated by this Agreement, prior to the Closing Date, without the prior
written consent of the Purchaser, none of the Sellers will:
(a) amend its articles or certificate of incorporation or bylaws in any
manner that would adversely affect such Seller's ability to comply with its
obligations under this Agreement;
(b) grant to any employee or consultant of the Business any bonus or
any increase in fees, compensation, benefits or perquisites, except in each case
in the ordinary course of business;
(c) cancel any indebtedness owing to such Seller or waive any claims or
rights of material value, in each case relating to the Business;
(d) make any change in any method of accounting or accounting practice
or policy, except as may be required by GAAP;
(e) fail to maintain the books and accounts of the Business in the
usual and regular manner;
(f) sell, lease, license or otherwise dispose of, or agree to sell,
lease, license or otherwise dispose of, any assets of the Business other than in
the ordinary course of business;
(g) take any action that would make any of the representations or
warranties of the Seller contained in this Agreement untrue or incorrect or
would be reasonably likely to result in any of the conditions set forth in this
Agreement not being satisfied;
(h) enter into, cancel or modify any Contract or create, incur or
undertake or assume any Liability, other than in the ordinary course of business
consistent with past practices;
(i) make any change in the senior management personnel of the Business;
(j) except pursuant to commitments in effect on the date hereof and
disclosed in the Schedules to this Agreement, or any emergency replacements of
capital assets which may be
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required in the Business, make any capital expenditures or commitments (whether
by means of purchase, lease or otherwise) or any operating lease commitments for
the Business in excess of $20,000 in the aggregate;
(k) create or grant any Liens on any of the assets of the Business,
other than Permitted Liens; or
(l) agree or commit, whether in writing or otherwise, to do any of the
foregoing.
7.2 Access to Information.
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(a) From the date of this Agreement to the Closing Date, each Seller
will (i) give the Purchaser and its authorized representatives reasonable access
during normal business hours to the facilities, assets, personnel, operations,
books and records of the Business, and (ii) cause its officers or other
appropriate officials to furnish the Purchaser with such financial and operating
data and other information with respect to the Business as the Purchaser may
from time to time reasonably request; provided, however, that any such
investigation by the Purchaser shall be conducted at the sole cost and expense
of the Purchaser and in such a manner as not to interfere unreasonably with the
normal conduct of the Business.
(b) After the Closing, the Purchaser and each Seller will use
reasonable commercial efforts to furnish the other and its authorized
representatives such financial and operating data and other information with
respect to the Business as each may from time to time reasonably request in
connection with tax matters, litigation or other disputes, or otherwise. In the
event that, at any time and from time to time after the Closing, the Purchaser
shall propose to dispose of or destroy any of the books and records included in
the Assets, the Purchaser shall first provide the Sellers with a reasonable
opportunity to take possession of such books and records at the Sellers'
expense.
7.3 Employees, Consultants and Employee Benefits.
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(a) On the Closing Date, the Purchaser shall offer employment, as of
the Effective Time, on an at will basis (except that those employees who are
party to Employment Agreements shall be employed by the Purchaser in accordance
with the terms of such Employment Agreements), to each Employee employed as of
the Closing Date, at wages and salaries that are substantially equivalent, in
the aggregate, to the wages and salaries currently being paid by the Sellers to
such Employee. The Purchaser will have no obligation to continue the employment
of any Employee who is not a party to an Employment Agreement, it being
understood that, subject to applicable law, such employment may be terminated at
any time, for any reason or for no reason. Except to the extent included in the
calculation of Accounts Payable and/or Accrued Expenses as of the Effective
Time, Sellers shall be responsible for the payment of all regular and overtime
compensation to Employees of the Business; medical plan withholding; federal and
state withholding; workers' compensation insurance premium payments and claims;
medical plan claims; accrued vacation, sick time or paid time off; health,
disability, benefit and retirement plan contributions and claims related to
fiduciary management of such plans (including 401(k), Keough and pension plans);
unemployment compensation claims, unemployment tax payments and withholding; any
and all employment related claims arising
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from acts or omissions occurring prior to the Effective Time (including claims
under the workers' compensation laws, ERISA, and any equal opportunity or human
rights acts and any other state, federal or common law claim); and any fines or
administrative expenses assessed thereunder for acts or omissions occurring
prior to the Effective Time.
(b) Following the Closing Date, each Seller shall, in accordance with
its obligations under the Comprehensive Omnibus Budget Reconciliation Act
("COBRA"), notify each Employee of the continued availability of health
insurance benefits to such Employee through such Seller's group health plans
(subject to the Employee's payment of applicable premiums thereunder), and will
permit all electing Employees to maintain continued coverage thereunder as and
to the extent and subject to the conditions provided in COBRA.
7.4 Filings.
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(a) Subject to the terms and conditions of this Agreement, each party
will use reasonable commercial efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement by the Closing Date.
(b) In furtherance and not in limitation of the covenants of the
parties contained in Section 7.4(a), if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any applicable law or regulation, the Purchaser and
each Seller shall cooperate in all respects with each other and use reasonable
commercial efforts to contest and resist any such action or proceeding and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the transactions
contemplated by this Agreement. Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 7.4 shall limit a party's
right to terminate this Agreement pursuant to Section 10.1(d) or 10.1(e) so long
as such party has complied in all respects with its obligations under this
Section 7.4.
(c) If any objections are asserted with respect to the transactions
contemplated hereby under any applicable law or regulation or if any suit is
instituted by any Governmental Authority or any private party challenging any of
the transactions contemplated hereby as violative of any applicable law or
regulation, the Purchaser and each Seller shall use reasonable commercial
efforts to resolve any such objections or challenges as such Governmental
Authority or private party may have to such transactions under such law or
regulation so as to permit consummation of the transactions contemplated by this
Agreement.
7.5 Consummation of Agreement. Each Seller and the Purchaser shall use
reasonable commercial efforts to perform or fulfill all conditions and
obligations to be performed or fulfilled by it under this Agreement so that the
transactions contemplated hereby shall be consummated. GSI and the Sellers shall
use commercially reasonable efforts (but without any requirement of incurring
any material obligations or costs or making any material expenditure) to obtain
all consents required by the Sellers or in the Business for the consummation of
the transactions contemplated by this Agreement. Neither any Seller nor the
Purchaser shall take any action or
23
fail to take any commercially reasonable action if such action or failure could
reasonably be expected to cause the representations of the other party contained
in this Agreement to become false. Except for events that are the subject of
specific provisions of this Agreement, if any event shall occur, either within
or outside the control of the Purchaser or any Seller, that would materially
delay or prevent fulfillment of the conditions upon the obligations of any party
hereto to consummate the transactions contemplated by this Agreement, the
Purchaser and the Sellers will use their respective best, diligent and good
faith efforts to cure or minimize the same as expeditiously as possible.
7.6 Confidentiality; Public Statements.
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(a) The Purchaser shall hold, and cause its consultants, advisors and
financing sources to hold, in strict confidence all documents and information
concerning the Seller furnished to the Purchaser in connection with the
transactions contemplated by this Agreement; provided, however, that the
Purchaser may disclose any document or information (i) that is already public
knowledge prior to such disclosure, or (ii) to the extent that, in the
reasonable opinion of the Purchaser's legal counsel, such disclosure is required
by law or is necessary in order to conform to the requirements of any applicable
security laws and regulations, including without limitation the rules of any
securities exchange, but in either case only after the disclosing party has
given prior written notice of the disclosure to the other party, to the extent
reasonably possible. (b) The Purchaser and the Sellers shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the sale of the Assets or the Business hereunder and shall not
issue any such press release or make any such public statement that is not
approved by the other party, which approval shall not be unreasonably withheld
or delayed, except as may be required by law or court order, in which case the
Purchaser and the Sellers will make reasonable efforts to consult with each
other prior to the issuance of such press release or the making of such public
statement.
7.7 Notice of Events.
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(a) The Purchaser will promptly, and in no event later than three (3)
Business Days after obtaining knowledge thereof, give oral and written notice to
the Sellers of (i) any material default or breach by the Purchaser with respect
to any of the Purchaser's representations and warranties in this Agreement or
the due and timely performance of any of the Purchaser's covenants and
agreements contained in this Agreement, or (ii) any other matter that has
impaired materially, or might reasonably be expected to impair materially, the
Purchaser's ability to perform its obligations under this Agreement.
(b) The Sellers will promptly, and in no event later than three (3)
Business Days after obtaining knowledge thereof, give oral and written notice to
the Purchaser of (i) any material default or breach by any Seller with respect
to any of the Sellers' representations and warranties in this Agreement or the
due and timely performance of any of the Sellers' covenants and agreements
contained in this Agreement, or (ii) any matter that has resulted in, or might
reasonably be expected to result in, a Material Adverse Effect.
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7.8 Post-Closing Access.
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(a) The Purchaser shall permit the Sellers to have access to the Leased
Real Property for a reasonable period of time following the Closing for the
purpose of allowing the Sellers to remove, at their sole expense, (i) any and
all indicia and uses of the "Gerald Stevens" names and logos from the Leased
Real Property as required to protect the Gerald Stevens marks and trade dress,
and (ii) any other assets that are not included in the Assets. The Sellers shall
promptly repair, or reimburse the Purchaser for the cost of repairing, any
damage to the Leased Real Property which may occur by reason of the Sellers'
removal of such property.
(b) Each Seller shall permit the Purchaser access to any records held
by such Seller (to the extent not a part of the Assets) relating to the Business
for such reasonable purposes and at such reasonable times as may be required by
the Purchaser from time to time for a period of five years after the Closing.
7.9 Accounts Receivable. From and after the Closing, in the event and
to the extent that any Seller receives payment of any of the Accounts Receivable
included in such Assets, such Seller shall promptly remit same to the Purchaser
in the form received (subject to any necessary endorsement), and pending such
delivery, such Seller shall be deemed to hold same in trust for the benefit of
the Purchaser.
7.10 Allocation of Purchase Price. The Purchaser and the Sellers shall
use reasonable commercial efforts to agree on a reasonable and fair allocation
of the Purchase Price among the Assets sold by each Seller, which shall value
Accounts Receivable and Inventory at their net book values as of the Effective
Time, shall value Fixed Assets at their estimated fair market values as of the
Effective Time, and shall allocate the remainder of the Purchase Price to
intangibles and goodwill. The Purchaser and the Sellers agree that each party
shall report the transactions contemplated by this Agreement for income tax
purposes in accordance with the agreed-upon allocation of the Purchase Price,
pursuant to Section 1060 of the Code and the regulations thereunder, and agree
not to take, in any filing with or accompanying any Tax Return reporting any
part of the transaction undertaken herein, a position inconsistent with such
allocations; provided, however, that if the Purchaser and the Sellers are unable
in good faith to reach an agreement with respect to the allocation of the
Purchase Price consistent with the foregoing, each such party may allocate the
Purchase Price among the Assets as it deems appropriate but generally consistent
with the foregoing.
7.11 Customer Lists. From the date of this Agreement, none of the
Sellers shall, and shall not permit any of its Affiliates to, utilize or
disclose, to the detriment of the Purchaser, any of the customer lists related
exclusively or primarily to the Business.
7.12 Non-Compete.
-----------
(a) Provided that the Closing shall have occurred, neither GSI, Seller
nor any Seller Affiliate ("Covenantor") shall at any time during the three (3)
year period from and after the Closing Date, within the United States, engage or
participate in (whether as an operator, shareholder, owner, consultant, adviser,
manager, partner, or in any other capacity) any business which derives in excess
of $100,000 in annual revenues from (a) acting as an intermediary or
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clearinghouse for floral orders originated or fulfilled by third parties, and/or
(b) sponsoring corporate floral affinity programs in the United States involving
direct mail or internet solicitation of customers or employees of corporate
"Partners" within any such affinity program. The foregoing restriction shall not
be applicable to or binding upon any assignee, acquiror or successor-in-interest
to the business of GSI, and shall lapse and be of no further force or effect
from and after the consummation of any sale or disposition of a controlling
ownership interest in the Purchaser following the Closing.
(b) Because of (i) the difficulty of measuring economic losses to
Purchaser as a result of any breach by a Covenantor of the covenants in this
Section 7.12, and (ii) the immediate and irreparable damage that could be caused
to Purchaser for which it would have no other adequate remedy, each Covenantor
agrees that Purchaser may enforce the provisions of this Agreement by
injunctions and restraining orders upon a breach of any of those provisions. The
parties agree that the agreements of the Covenantors set forth in this Section
7.12 are a substantial part of the consideration for the transactions
contemplated by this Agreement. If any court of competent jurisdiction
determines that the scope, time or territorial restrictions set forth herein are
unreasonable as applied to any Covenantor, the parties hereto, including that
Covenantor, acknowledge their mutual intention and agreement that those
restrictions be enforced to the fullest extent the court deems reasonable, and
thereby will be reformed to that extent as applied to that Covenantor and any
other Covenantor similarly situated.
7.13 Non-Solicitation of Employees. For a period of one (1) year from
and after the Closing Date, neither GSI nor any of its Affiliates (on the one
hand) nor the Purchaser nor any of its Affiliates (on the other hand) shall
solicit or encourage any employee of the other party to terminate his or her
employment relationship with the other party, except, in any case, with the
prior written consent of the party then employing the subject individual. This
Section 7.13 shall not be deemed violated by reason of any general industry
solicitation or advertising. Each party shall advise any headhunter or other
agent employed or retained by such party of the requirements of this Section
7.13.
7.14 No Shopping. Prior to any valid termination of this Agreement
pursuant to Article X, neither GSI, any Seller, any Seller Affiliate nor any of
their representatives will engage in any negotiation with any other Person,
solicit any offers for any of the Assets (other than sales of Inventory and
dispositions of Fixed Assets in the ordinary course of business permitted
hereunder) or any capital stock of Seller, or respond to inquiries from, share
information with, negotiate with or in any other manner facilitate inquiries or
offers from any third party in respect of any such proposed transaction.
7.15 Change of Name. Each Seller shall amend its articles or
certificate of incorporation in the state of its incorporation and certificates
of authority in the states in which it has qualified to do business to delete
any reference to "Florafax" "The Flower Club" or any variant thereof within
thirty (30) days following the Closing Date.
7.16 Transition of Support Services. The parties acknowledge that
certain elements of the web hosting, internet back-end fulfillment and other
services currently provided by GSI and its Affiliates to the Business (and vice
versa) may require a transition period following the Closing, within which to
effect the changeover of such services. The parties shall cooperate in
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good faith to ease such transition, and each party shall reimburse each other
party for such other party's actual costs in providing such transitional
services.
ARTICLE VIII
CLOSING CONDITIONS
8.1 Mutual Conditions. The respective obligations of each of the
parties to this Agreement to effect the transactions contemplated hereby shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) No party to this Agreement shall be subject on the Closing Date to
any order, decree or injunction of a court of competent jurisdiction that
enjoins or prohibits the consummation of this Agreement and no Governmental
Authority shall have instituted a suit or proceeding that is then pending that
seeks to enjoin or prohibit the transactions contemplated hereby. Any party who
is subject to any such order, decree or injunction or the subject of any such
suit or proceeding shall take any steps within that party's control to cause any
such order, decree or injunction to be modified so as to permit the Closing and
to cause any such suit or proceeding to be dismissed.
(b) No federal, state, local or foreign, if any, law, statute,
regulation, code, ordinance or decree shall have been adopted or promulgated,
and no temporary restraining order, preliminary or permanent injunction or other
order issued by a court or other Governmental Authority of competent
jurisdiction shall be in effect, having the effect of making the transactions
contemplated herein illegal or otherwise prohibiting consummation of the
transactions contemplated herein; provided, however, that the provisions of this
Section 8.1(b) shall not relieve a party of its obligations to effect the
transactions contemplated by this Agreement if such party's failure to fulfill
its obligations pursuant to Section 7.4 shall have been the cause of, or shall
have resulted in, such order or injunction.
(c) The Closing of the transactions contemplated by this Agreement
shall be in compliance with all applicable state and federal laws, including
without limitation all laws that would render the transactions contemplated by
this Agreement void or voidable.
(d) The transactions contemplated by the Calyx Agreement shall have
been consummated; provided, however, that the condition precedent set forth in
this Section 8.1(d) shall be of no further force or effect from and after any
termination of the Calyx Agreement pursuant to Section 10.1(b) thereof.
8.2 Conditions to the Obligations of the Sellers. The obligations of
the Sellers to effect the transactions contemplated hereby shall be subject
further to the fulfillment of the following conditions, any one or more of which
may be waived by the Sellers in their sole and absolute discretion:
(a) All representations and warranties of the Purchaser contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date as though made as of such date, except as otherwise contemplated by
this Agreement. The Purchaser shall have performed and complied in all material
respects with all its covenants and agreements contained in this
27
Agreement required to be performed and complied with by it at or prior to the
Closing. The Sellers shall have received a certificate with respect to the
matters set forth in this Section 8.2(a) signed on behalf of the Purchaser by an
authorized officer.
(b) (i) All documents required to have been delivered by the Purchaser
to any of the Sellers at or prior to the Closing shall have been delivered, and
(ii) all actions required to have been taken by the Purchaser at or prior to the
Closing shall have been taken.
(c) The Sellers shall have received a legal opinion of Doherty, Doherty
& Adams, L.L.P., counsel to the Purchaser, dated the Closing Date and in form
and substance reasonably satisfactory to the Sellers, as to such matters as
shall reasonably be requested by the Sellers.
(d) As of the Closing Date, the Sellers shall have received from the
Purchaser the following documents:
(i) a certificate of existence and good standing of
the Purchaser from its state of formation;
(ii) a true and complete copy of the resolutions of
the Managers of the Purchaser authorizing the execution,
delivery and performance of this Agreement, and all
instruments and documents to be delivered in connection
herewith, and the transactions contemplated hereby by the
Purchaser, certified on behalf of the Purchaser by its
Secretary or Assistant Secretary;
(iii) a certificate from the Secretary or Assistant
Secretary of the Purchaser as to the incumbency and signatures
of its officers who will execute documents at the Closing or
who have executed this Agreement;
(iv) the Assignment and Assumption Agreement in
respect of the Assumed Liabilities, the Florafax Agreement
(executed by the Purchaser), and the Escrow Agreement
(executed by the Purchaser and the escrow agent thereunder);
and
(v) such other documents, opinions and certificates
that the Seller may have reasonably requested in connection
with the consummation of the transactions contemplated by this
Agreement.
(e) The Purchaser shall have paid and delivered the Purchase Price in
accordance with Section 3.1(a).
8.3 Conditions to the Obligations of the Purchaser. The obligations of
the Purchaser to effect the transactions contemplated hereby shall be subject
further to the fulfillment of the following conditions, any one or more of which
may be waived by the Purchaser in its sole and absolute discretion:
(a) All representations and warranties of the Sellers and GSI contained
in this Agreement shall be true and correct in all material respects as of the
Closing Date as though made as of such date, except as otherwise contemplated by
this Agreement. Each Seller shall
28
have performed and complied in all material respects with all its covenants and
agreements contained in this Agreement required to be performed and complied
with by it at or prior to the Closing. The Purchaser shall have received a
certificate with respect to the matters set forth in this Section 8.3(a) signed
on behalf of the Sellers by an authorized officer.
(b) (i) All documents required to have been delivered by the Sellers to
the Purchaser at or prior to the Closing shall have been delivered, and (ii) all
actions required to have been taken by the Sellers at or prior to the Closing
shall have been taken. (c) The Purchaser shall have received a legal opinion of
Greenberg Traurig, LLP, counsel to the Sellers and GSI, dated the Closing Date
and in form and substance reasonably satisfactory to the Purchaser, as to such
matters as shall reasonably be requested by the Purchaser.
(d) As of the Closing Date, the Purchaser shall have received from the
Sellers the following documents:
(i) a certificate of corporate existence and good
standing of each Seller and GSI from its state of
incorporation;
(ii) a true and complete copy of the resolutions of
the board of directors of each Seller and GSI authorizing the
execution, delivery and performance of this Agreement, and all
instruments and documents to be delivered in connection
herewith, and the transactions contemplated hereby by such
Seller, certified on behalf of such Seller by its Secretary or
Assistant Secretary;
(iii) a certificate from the Secretary or Assistant
Secretary of each Seller and GSI as to the incumbency and
signatures of its officers who will execute documents at the
Closing or who have executed this Agreement;
(iv) the Bill of Sale in respect of the Assets, the
Assignment and Assumption Agreement in respect of the Assumed
Liabilities, the Florafax Agreement (executed by GSI), and the
Escrow Agreement (executed by GSI); and
(v) such other documents, opinions and certificates
that the Purchaser may have reasonably requested in connection
with the proper and effective conveyance of the Assets free
and clear of all Liens (excluding the Excluded Assets and
except for Permitted Liens), and the consummation of the other
transactions contemplated by this Agreement.
(e) The Purchaser shall have received (i) true and complete copies of
all required landlord consents as contemplated by Section 8.2(e), and (ii) a
written release from the Sellers' secured lender of all Liens held by such
lender on any of the Assets.
(f) No action, suit or proceeding by or before any court or
Governmental Authority shall be pending on the Closing Date which, if determined
adversely, could reasonably be
29
expected to impair the ability of any Seller to transfer and deliver to the
Purchaser the Assets and the Business as contemplated by this Agreement.
(g) The Purchaser shall have received gross proceeds of not less than
$15,000,000 from one or more financings, either through existing or new
financing sources, to finance the transactions contemplated by this Agreement on
terms and conditions reasonably satisfactory to the Purchaser.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
9.1 Survival of Representations. All representations, warranties,
covenants and agreements made by the parties to this Agreement or pursuant
hereto shall survive the Closing, but all claims made by virtue of such
representations, warranties, covenants and agreements shall be made exclusively
under, and subject to the limitations set forth in, this Article IX.
9.2 GSI and Sellers' Agreement to Indemnify.
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(a) Indemnification. Subject to the limitations, conditions and
provisions set forth herein, GSI and Sellers, jointly and severally, agree to
indemnify the Purchaser Indemnitees (as defined below) for, and the Purchaser
shall be entitled, from and after the Closing Date, to recover from GSI and the
Sellers, jointly and severally, all demands, claims, actions, losses, damages,
liabilities, costs and expenses, including interest, penalties, reasonable costs
of investigation and reasonable attorneys' fees, asserted against or incurred by
the Purchaser or any of its shareholders, directors, officers, Affiliates,
employees and agents (the "Purchaser Indemnitees") (i) resulting from a breach
of any covenant, agreement, representation or warranty of GSI and Sellers
contained in this Agreement, and/or (ii) with respect to any Liabilities that
the Purchaser does not assume pursuant to the terms of this Agreement
(collectively, the "Purchaser Damages"); provided, that Purchaser Damages shall
not include any consequential, incidental or indirect damages.
(b) Limitation of Liability. The Purchaser's right to recover any
Purchaser Damages from GSI and the Sellers shall be subject to all of the
following terms and limitations:
(i) The Purchaser may not recover any Purchaser
Damages by reason of a breach of representation or warranty of
GSI and Sellers contained in this Agreement, or by reason of
the breach of any covenant required to be performed by GSI or
any Seller hereunder prior to the Closing Date, unless and
until the aggregate amount of such Purchaser Damages exceeds
$200,000, and any Purchaser Damages of such nature shall be
reimbursed by GSI and the Sellers only to the extent of such
excess over $200,000; provided that such "deductible" shall
not be applicable to, and there shall not be counted against
such "deductible," the actual payment of any Excluded
Liabilities and any Purchaser Damages arising by reason of the
breach by GSI or any Seller of any covenant to be performed by
them subsequent to the Closing.
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(ii) The Purchaser Indemnitees may not recover (after
giving effect to Section 9.2(b)(i) and 9.2(b)(iv)) Purchaser
Damages in an aggregate amount in excess of the Purchase
Price.
(iii) The Purchaser Indemnitees shall have the right
to recover only those Purchaser Damages as to which the
Purchaser has given the Sellers written notice within twelve
(12) months after the Closing Date, except that: (A) any claim
for misrepresentation or breach of warranty under Section 5.13
may be recovered to the extent that the Purchaser has given
written notice thereof within three (3) years after the
Closing Date; (B) any claim for misrepresentation or breach of
warranty under Section 5.12 may be recovered to the extent
that written notice thereof has been given within the statute
of limitations applicable to the subject Taxes or Tax Returns;
and (C) any claim for Purchaser Damages relating to Excluded
Liabilities may be recoverable to the extent that the
Purchaser has given written notice thereof within four (4)
years after the Closing Date. Any written notice delivered by
the Purchaser to the Sellers pursuant to this subparagraph
(iii) shall set forth with reasonable specificity (to the
extent known to the Purchaser) the basis of the claim for
Purchaser Damages and an estimate (to the extent known to the
Purchaser) of the amount thereof.
(iv) All Purchaser Damages shall be computed net of
the present value of any income tax benefit resulting
therefrom to the Purchaser or any Purchaser Indemnitee or any
proceeds paid or payable (net of any taxes payable in respect
thereof) to the Purchaser or any Purchaser Indemnitee as a
result of any insurance coverage with respect thereto that
reduces the Purchaser Damages that would otherwise be
sustained.
(c) Conditions of Indemnification. The right of the Purchaser and the
other Purchaser Indemnitees to be reimbursed for claims for Purchaser Damages
resulting from the assertion of liability by third parties ("Purchaser Claims")
shall be subject to the following additional terms and conditions:
(i) Promptly after receiving notice thereof, the
Purchaser shall give the Sellers written notice of any
Purchaser Claims together with a statement of any available
information regarding such claim; provided, however, that any
failure to give such prompt notice shall not affect the
Purchaser Indemnitee's rights hereunder except to the extent
such failure shall have prejudiced GSI or the Sellers with
respect to such claim. The Sellers shall have the right to
undertake the defense thereof by counsel of their own choosing
and reasonably satisfactory to the Purchaser. The Purchaser
may, by counsel, participate in such proceedings, negotiations
or defense, at its own expense, but the Sellers shall retain
control over such litigation except as hereinafter set forth.
In all such cases, the Purchaser shall give reasonable
assistance to the Sellers, including making employees of the
Purchaser available without charge as reasonably requested.
(ii) If within twenty (20) days after receiving
notice of any such Purchaser Claim, the Sellers fail to notify
the Purchaser of their intention to
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defend, or if the Sellers at any time notify the Purchaser of
their decision to abandon the defense, the Purchaser shall
(upon further notice to the Sellers) have the right, at the
Sellers' expense, to undertake the defense, compromise or
settlement of such Purchaser Claim, subject to the right of
the Sellers to assume the defense of such Purchaser Claim at
any time prior to final settlement, compromise or
determination thereof.
(iii) Without the prior written consent of the
Purchaser, the Sellers shall not enter into any settlement of
any Purchaser Claim, if pursuant to or as a result of such
settlement (A) injunctive or other equitable relief would be
imposed against the Purchaser, or (B) such settlement would
lead to liability or create any financial or other obligation
on the part of the Purchaser for which the Purchaser is not
otherwise obligated or entitled to indemnification hereunder.
9.3 Purchaser's Agreement to Indemnify. The Purchaser hereby agrees,
from and after the Closing Date to indemnify, defend and hold GSI and the
Sellers and each of their shareholders, directors, officers, Affiliates,
employees and agents harmless from and against all demands, claims, actions,
losses, damages, liabilities, costs and expenses, including interest, penalties,
reasonable costs of investigation and reasonable attorneys' fees, asserted
against or suffered or incurred by any of such Persons (the "Seller
Indemnitees") (a) resulting from a breach of any covenant, agreement,
representation or warranty of the Purchaser contained in this Agreement, and/or
(b) resulting from the failure by the Purchaser to pay or perform when due any
of the Assumed Liabilities (collectively, the "Seller Damages"); provided,
however, that Seller Damages shall not include any consequential, incidental or
indirect damages; and further provided, that the Seller Indemnitees shall have
the right to recover only those Seller Damages as to which GSI or any Seller has
given the Purchaser written notice within twelve (12) months after the Closing
Date, except that any claim for Seller Damages under Section 9.3(b) may be
recovered to the extent that GSI or any Seller gives written notice thereof
within four (4) years after the Closing Date; and further provided, that the
Purchaser's obligations under this Section 9.3 shall be subject, mutatis
mutandis, to the same qualifications as are provided in Sections 9.2(b)(ii),
9.2(b)(iv) and 9.2(c).
9.4 Remedies. The Purchaser understands and agrees that the Purchaser's
right to indemnification and other rights under this Article IX shall, from and
after the Closing Date, constitute the Purchaser's sole and exclusive remedy
against GSI and Seller and their Affiliates with respect to money damages for
any claim by the Purchaser or its Affiliates against GSI or any Seller arising
under or related to this Agreement, the Transaction Agreements or the
transactions contemplated hereby. Any payment by or on behalf of GSI or any
Seller in respect of Purchaser Damages or by or on behalf of Purchaser in
respect of Seller Damages shall be treated as an adjustment of the Purchase
Price.
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ARTICLE X
TERMINATION
10.1 Termination. This Agreement may be terminated prior to the Closing
Date:
(a) at any time by mutual written consent of GSI, the Sellers and the
Purchaser;
(b) by the Sellers if there has been a material misrepresentation or a
material default or breach by the Purchaser with respect to any of the
Purchaser's representations and warranties in this Agreement or the due and
timely performance of any of the Purchaser's covenants and agreements contained
in this Agreement and such misrepresentation, default or breach is not cured at
the Closing Date; provided that prompt written notice shall have been given to
the Purchaser upon discovery of any such misrepresentation, default or breach
(although the failure to give such notice shall not affect or impair the
termination right hereunder);
(c) by the Purchaser if there has been a material misrepresentation or
a material default or breach by any Seller with respect to such Seller's
representations and warranties in this Agreement or the due and timely
performance of any of such Seller's covenants and agreements contained in this
Agreement, and such misrepresentation, default or breach is not cured at the
Closing Date; provided that prompt written notice shall have been given to the
Sellers upon discovery of any such misrepresentation, default or breach
(although the failure to give such notice shall not affect or impair the
termination right hereunder);
(d) by either GSI and the Sellers (on the one hand) or the Purchaser
(on the other hand) if the Closing shall not have occurred on or before April
30, 2001 (the "Termination Date"); provided, however, that the right to
terminate this Agreement under this Section 10.1(d) shall not be available to
any party whose failure to fulfill any covenant or agreement under this
Agreement (including those covenants and agreements in Section 7.4) has to any
extent been the cause of, or resulted in, the failure of the Closing to occur on
or before the Termination Date;
(e) by either GSI and the Sellers (on the one hand) or the Purchaser
(on the other hand) if any Governmental Authority shall have issued an order,
decree or ruling or taken any other action (which the Purchaser and the Sellers
shall have used reasonable commercial efforts to resist, resolve or lift, as
applicable, in accordance with Section 7.4) permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable; provided, however, that the right to terminate this Agreement
under this Section 10.1(e) shall not be available to any party whose failure to
comply with Section 7.4 has to any extent been the cause of such action or
inaction;
(f) by GSI and the Sellers on February 28, 2001 if, prior to such date,
GSI and its Board of Directors has not received a favorable opinion, in form and
from an investment banking firm reasonably satisfactory to GSI and its Board of
Directors, with respect to the fairness of the transactions pursuant to this
Agreement and the Calyx Agreement from a financial point of view, provided that,
as a condition to the exercise of such right to terminate, the terminating party
must also terminate the Calyx Agreement;
(g) by GSI and the Sellers (on the one hand) and the Purchaser (on the
other hand) on February 28, 2001 if, prior to such date, GSI has not received
the consent of its secured lender with respect to the transactions contemplated
by this Agreement and the Calyx Agreement, provided that, as a condition to the
exercise of such right to terminate, the terminating party must also terminate
the Calyx Agreement; and
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(h) by the Purchaser at any time on or before February 21, 2001, if the
Purchaser is not satisfied for whatever reason with its review of the due
diligence materials relating to the Business provided by the Sellers.
10.2 Procedure and Effect of Termination or Failure to Close.
-------------------------------------------------------
(a) In the event of termination of this Agreement and abandonment of
the transactions contemplated hereby pursuant to Section 10.1, prompt written
notice thereof shall be given to the non-terminating part(ies) and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(i) All further obligations of the parties hereunder
shall terminate, except the obligations contained in Sections
7.6(a), 10.2 and 11.1 shall survive; and
(ii) All filings, applications and other submissions
relating to the transactions contemplated by this Agreement
shall, to the extent practicable, be withdrawn from the agency
or Person to which made.
(b) Upon termination of this Agreement, none of the parties hereto
shall have any further obligation to any other party under this Agreement unless
such termination was the result of an intentional breach by a party of any
representation, warranty, covenant or other provision of this Agreement or an
intentional act or omission by a party that resulted in the breach of any
representation, warranty, covenant or other provision of this Agreement, in
which case the other party hereto shall be entitled to seek any remedy to which
such other party may be entitled at law or in equity for such violation or
breach of this Agreement. Furthermore, Section 3.1 shall survive any termination
of this Agreement, in accordance with the terms thereof.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Expenses. Whether or not the transactions contemplated hereby are
consummated, (a) all filing fees and other out-of-pocket costs required to be
paid to obtain any consent required of any Person to consummate the transactions
contemplated hereby will be borne by Seller, and (b) except as otherwise
provided herein, all other costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby, including the preparation
and execution of this Agreement and performance of the transactions contemplated
hereby, and all fees and expenses of investment bankers, finders, brokers,
agents, representatives, consultants, counsel and accountants will be paid by
the party incurring such costs and expenses.
11.2 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use all commercially reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement.
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11.3 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by written agreement signed by GSI, the Sellers
and the Purchaser.
11.4 Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
by the party entitled to the benefits thereof only by a written instrument
signed by the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, representation, warranty, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section.
11.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered by hand or by facsimile
transmission or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice; provided
that notices of a change of address shall be effective only upon receipt
thereof):
(a) If to GSI or any Seller, to:
c/o Gerald Stevens, Inc.
1800 Eller Drive, Suite 300
Fort Lauderdale, Florida 33316
Attention: General Counsel
Facsimile: (954) 627-1330
With copies to:
Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
Attention: Shahe Sinanian
Facsimile: (212) 801-6400
(b) If to the Purchaser, to:
Equity Resource Partners, LLC
616 Azalea
Vero Beach, FL 32963
Attention: Andy Williams
Facsimile: 561 234-4044
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With copies to:
Doherty, Doherty & Adams, L.L.P.
1717 St. James Place, Suite 520
Houston, TX 77056
Attention: J. Patrick Doherty
Facsimile: 713 572-1001
11.6 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of each other party.
11.7 Governing Law. The execution, interpretation and performance of
this Agreement shall be governed by the internal laws and judicial decisions of
the State of Florida, without giving effect to conflicts of laws principles.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by fax with the same binding effect as original ink signatures.
11.9 Severability. If any provision of this Agreement, or the
application thereof to any Person(s) or circumstance(s), shall be held by a
court of competent jurisdiction to be contrary to law, invalid or unenforceable
to any extent or in any respect, then such provision shall be deemed to be
amended, modified and reduced in scope and effect, only to that extent necessary
to render same valid and enforceable, and all other provisions of this Agreement
shall be unaffected and shall remain in full force and effect.
11.10 Parties in Interest. Nothing in this Agreement, express or
implied, other than as otherwise specifically provided herein, is intended to or
shall confer upon any Person other than the parties hereto any rights, benefits
or remedies of any nature whatsoever under or by reason of this Agreement.
11.11 Bulk Sales. The parties to this Agreement hereby waive compliance
with any applicable bulk sales law and any other similar laws in any applicable
jurisdictions in respect of the transactions contemplated by this Agreement.
11.12 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto and the documents delivered pursuant to this Agreement, and the
outstanding confidentiality agreement between GSI and the Purchaser, embody the
entire agreement and understanding of the parties hereto in respect of the
subject matter hereof. The Exhibits and Schedules hereto are an integral part of
this Agreement and are incorporated by reference herein. Each party acknowledges
that no other party has made any, or makes any, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to the transactions contemplated by this
Agreement.
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IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be signed on their respective behalf by their respective duly
authorized officers as of the date first above written.
GSI:
GERALD STEVENS, INC.
By:
------------------------------------
Name:
Title:
SELLERS:
GS CALL CENTER CO.
By:
------------------------------------
Name:
Title:
FLOWER CLUB INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
FLORAFAX FINANCIAL SERVICES CORP.
By:
------------------------------------
Name:
Title:
WORLDWIDE FLORAL & GIFTS, INC.
By:
------------------------------------
Name:
Title:
PURCHASER:
EQUITY RESOURCE PARTNERS, LLC
By:
------------------------------------
Name:
Title:
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