<PAGE>
As filed with the Securities and Exchange Commission on September 29, 1998
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): September 14, 1998
GENESIS DIRECT, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-24173 22-3449666
(Commission File Number) (I.R.S. Employer Identification No.)
100 Plaza Drive, Secaucus, NJ 07094
(Address of Principal Executive Offices) (Zip Code)
(201) 867-2800
(Registrant's Telephone Number, Including Area Code)
With a copy to:
Ira A. Greenstein, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, NY 10104
________________________________________________________________________________
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On August 5, 1998, Genesis Direct Forty-Three, LLC (the "Buyer"), a wholly-
owned subsidiary of Genesis Direct, Inc. (the "Company"), entered into an Asset
Purchase Agreement (the "Asset Purchase Agreement"), by and among the Buyer,
Carol Wright Gifts, Inc. (the "Seller") and Cox Target Media, Inc. (the
"Parent"), pursuant to which the Buyer agreed to purchase substantially all of
the assets and assumed certain of the liabilities of the Seller. The Asset
Purchase Agreement was subsequently amended by Amendment No. 1 thereto, dated as
of September 14, 1998 (the "Amendment"), by and among the Buyer, the Seller and
the Parent. The closing of the acquisition took place on September 14, 1998.
The Seller, which includes the Applecreek catalog, markets via direct mail a
variety of products, many of which are part of the Buyer's core merchandise
offerings.
Pursuant to the Asset Purchase Agreement and the Amendment, the Buyer
acquired the Seller's assets, including inventory, and rights to certain
intellectual property of Seller's affiliates and assumed certain liabilities of
the Seller, in exchange for (a) 2,400,000 shares of the Company's common stock,
$.01 par value per share ("Company Stock"), (b) a convertible promissory note
(the "Note") of the Company in the original principal amount of $12,750,000,
bearing interest at an annual rate equal to one-half a percentage point above
the interest rate publicly announced by Citibank, N.A., New York, New York, and
(c) cash in the amount of $100,000. The Note is payable in its full amount on
March 14, 2001; provided, that, in lieu of such payment, the holder of the
Note may at any time after the Conversion Date (as defined below) convert the
principal amount of the Note at a conversion price of $12.75 per share into
1,000,000 shares of Company Stock, subject to certain adjustments. The
Conversion Date is the date immediately following the tenth consecutive
trading day at which the closing price of the Company Stock on the Nasdaq
Stock Market on each such day as reported in the Wall Street Journal was equal
to or exceeded $12.75. Pursuant to the terms of the Note, upon the occurrence
and continuation of an event of default, the Note is convertible into shares
of the Company Stock at a significantly lower conversion price. The Seller had
sales of approximately $118 million in the fiscal year ended December 31,
1997.
The information set forth above is qualified in its entirety by reference
to the Asset Purchase Agreement and the Amendment, which are incorporated herein
by reference. The Company hereby agrees to furnish supplementally copies of
any omitted exhibits or schedules to the Asset Purchase Agreement and the
Amendment to the Securities and Exchange Commission upon request.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. The financial statements
-----------------------------------------
required by this Item 7(a) will be filed by an amendment to this Current Report
on Form 8-K not later than 60 days after the date of the filing hereof.
(b) Pro Forma Financial Information. The pro forma financial information
-------------------------------
required by this Item 7(b) will be filed by an amendment to this Current Report
on Form 8-K not later than 60 days after the date of the filing hereof.
(c) Exhibits.
--------
2.1 Asset Purchase Agreement, dated as of August 5, 1998, by and
among Genesis Direct Forty-Three, LLC, Carol Wright Gifts, Inc.
and Cox Target Media, Inc.
<PAGE>
2.2 Amendment No. 1 to the Asset Purchase Agreement, dated as of
September 14, 1998, by and among Genesis Direct Forty-Three,
LLC, Carol Wright Gifts, Inc. and Cox Target Media, Inc.
4.1 Registration Rights Agreement, dated as of September 14, 1998,
by and between Genesis Direct, Inc. and Carol Wright Gifts, Inc.
4.2 Convertible Note, dated September 14, 1998, made by Genesis
Direct, Inc. in favor of Carol Wright Gifts, Inc.
4.3 Escrow Agreement, dated as of September 14, 1998, by and among
Genesis Direct Forty-Three, LLC, Carol Wright Gifts, Inc. and
State Street Bank and Trust Company.
99.1 Press Release issued by the Registrant, dated September 15,
1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENESIS DIRECT, INC.
By: /s/ Ronald Benanto
-------------------------------------
Ronald Benanto
Vice President and Chief Financial Officer
Date: September 29, 1998
<PAGE>
Exhibit Index
Number Description
- ------- -----------
2.1 Asset Purchase Agreement, dated as of August 5, 1998, by and among
Genesis Direct Forty-Three, LLC, Carol Wright Gifts, Inc. and Cox
Target Media, Inc.
2.2 Amendment No. 1 to the Asset Purchase Agreement, dated as of September
14, 1998, by and among Genesis Direct Forty-Three, LLC, Carol Wright
Gifts, Inc. and Cox Target Media, Inc.
4.1 Registration Rights Agreement, dated as of September 14, 1998, by and
between Genesis Direct, Inc. and Carol Wright Gifts, Inc.
4.2 Convertible Note, dated September 14, 1998, made by Genesis Direct,
Inc. in favor of Carol Wright Gifts, Inc.
4.3 Escrow Agreement, dated as of September 14, 1998, by and among
Genesis Direct Forty-Three, LLC, Carol Wright Gifts, Inc. and State
Street Bank and Trust Company.
99.1 Press Release issued by the Registrant, dated September 15, 1998.
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
AMONG
GENESIS DIRECT FORTY-THREE, LLC
AND
CAROL WRIGHT GIFTS, INC.
AND
COX TARGET MEDIA, INC.
AUGUST 5, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. DEFINITIONS..................................................... 1
SECTION 2. BASIC TRANSACTION............................................... 1
(a) Purchase and Sale of Assets..................................... 1
(b) Assumption of Liabilities....................................... 1
(c) Purchase Price.................................................. 1
(d) The Closing..................................................... 2
(e) Deliveries at the Closing....................................... 2
(f) Post-Closing Adjustment and Payment............................. 3
(g) Intentionally Omitted........................................... 4
(h) Release of Certain Escrow Shares............................... 4
(i) Allocation of Purchase Price.................................... 5
(j) Fractional Shares............................................... 5
(k) Access to Records............................................... 5
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT............. 5
(a) Organization and Corporate Power of Seller and Parent........... 5
(b) Authorization of Transaction.................................... 6
(c) Noncontravention................................................ 6
(d) Brokers' Fees................................................... 7
(e) Title to Assets................................................. 7
(f) Financial Statements............................................ 7
(g) Events Subsequent to December 26, 1997.......................... 8
(h) Stock Ownership................................................. 10
(i) Undisclosed Liabilities......................................... 10
(j) Legal Compliance................................................ 10
(k) Tax Matters..................................................... 10
(l) Real Property................................................... 11
(m) Intellectual Property........................................... 11
(n) Tangible Assets................................................. 15
(o) Inventory....................................................... 15
(p) Contracts....................................................... 15
(q) Predominant Customers........................................... 16
(r) Change in Customers or Vendors.................................. 16
(s) Notes and Accounts Receivable................................... 16
(t) Insurance....................................................... 16
(u) Product Liability............................................... 17
(v) Product Warranty................................................ 17
(w) Litigation...................................................... 17
(x) Employees....................................................... 17
(y) Employee Benefits............................................... 18
(z) Environment, Health and Safety.................................. 18
(aa) Certain Business Relationships With Seller...................... 18
(bb) Disclosure...................................................... 18
(cc) Processing of Returns........................................... 19
(dd) Investment...................................................... 19
(ee) Guaranties...................................................... 19
(ff) Cure............................................................ 19
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER......................... 19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
(a) Organization of Buyer........................................... 20
(B) Authorization of Transaction.................................... 20
(C) Noncontravention................................................ 20
(D) Brokers' Fees................................................... 21
(E) Litigation...................................................... 21
(F) Disclosure...................................................... 21
(G) Cure............................................................ 21
SECTION 5. COVENANTS....................................................... 21
(A) Further Assurances.............................................. 21
(b) Confidentiality................................................. 22
(C) Closing Date Financial Statements............................... 22
(D) Indemnification Provisions for the Benefit of Buyer............. 23
(E) Indemnification Provisions for the Benefit of Seller and Parent. 24
(F) Indemnification Matters Involving Third Parties................. 25
(G) Set-Off and Recoupment.......................................... 27
(H) Other Indemnification Provisions................................ 27
(I) Fraud........................................................... 27
(J) Records......................................................... 27
(K) Third Party Consents............................................ 28
(L) Non-Compete..................................................... 28
(M) Risk of Loss; Condemnation...................................... 29
(N) Tax Return Filing and Payment................................... 30
(O) General......................................................... 31
(P) Operation of Business........................................... 31
(Q) Preservation of Business........................................ 31
(R) Full Access..................................................... 31
(S) No Solicitation................................................. 31
(T) Material Adverse Change......................................... 31
(U) Transfer Taxes.................................................. 32
(V) Satisfaction of Excluded Liabilities............................ 32
(W) Employee Benefit Matters........................................ 32
(X) Use of Trademark "Carol Wright"................................. 33
(Y) Letters of Credit............................................... 34
(Z) Payment of Certain Assumed Liabilities.......................... 34
SECTION 6. CONDITIONS TO OBLIGATION TO CLOSE............................... 34
(A) Conditions to Obligation of Buyer............................... 34
(B) Conditions to Obligation of Seller.............................. 37
SECTION 7. CLOSING DOCUMENTS............................................... 38
(A) Seller and Parent Deliveries.................................... 38
(B) Buyer Deliveries................................................ 39
SECTION 8. TERMINATION..................................................... 41
(A) Method of Termination........................................... 41
(B) Rights Upon Termination......................................... 41
SECTION 9. ARBITRATION OF DISPUTES......................................... 42
(A) Mandatory Arbitration........................................... 42
(B) Arbitrator's Qualifications and Selection....................... 42
(C) Governing Law; Written Decision................................. 42
(D) Procedures; Evidence; Experts................................... 42
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
(E) Costs........................................................... 43
(F) Consent to Jurisdiction......................................... 43
(G) Injunctive Relief............................................... 43
(H) Indemnification................................................. 43
(I) Survival........................................................ 43
(J) WAIVER OF JURY TRIAL; EXEMPLARY DAMAGES......................... 44
(K) Interest........................................................ 44
SECTION 10. OTHER AGREEMENTS................................................ 44
(A) Lockup of the Shares............................................ 44
(B) Press Releases and Public Announcements......................... 44
(C) HSR and Other Filings........................................... 44
(D) No Third-Party Beneficiaries.................................... 45
(E) Entire Agreement................................................ 45
(F) Succession and Assignment....................................... 45
(G) Counterparts.................................................... 45
(H) Headings........................................................ 45
(I) Notices......................................................... 45
(J) Governing Law................................................... 47
(K) Amendments and Waivers.......................................... 47
(L) Severability.................................................... 47
(M) Expenses........................................................ 47
(N) Construction.................................................... 47
(O) Incorporation of Appendices, Exhibits and Schedules............. 48
(P) Taxable Asset Purchase.......................................... 48
(Q) Further Actions................................................. 48
(R) Time of the Essence............................................. 48
(S) Bulk Sales...................................................... 48
</TABLE>
iii
<PAGE>
Exhibits Under the Asset Purchase Agreement
-------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Form of Registration Rights Agreement
Exhibit B Form of Escrow Agreement
Exhibit C Form of Bill of Sale, Assignment and Assumption Agreement
Exhibit D Form of Assignment Documents
Exhibit E Allocation of Purchase Price for Tax Purposes
Exhibit F Intentionally Omitted
Exhibit G Form of Letter from Seller's Auditors
Exhibit H Form of License Agreement
Exhibit I Form of Service Agreement by and between GDI and Parent
Exhibit J Form of Opinion from Counsel to Seller and the Parent
Exhibit K Form of Lease
Exhibit L Form of Opinion of Counsel to Buyer and GDI
Exhibit M Form of Sublease
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Schedules Under the Asset Purchase Agreement
--------------------------------------------
<S> <C>
Schedule 1.1(a) Tangible Personal Property
Schedule 1.1(b) Intellectual Property Included in Acquired Assets
Schedule 1.1(c) Assumed Contracts
Schedule 1.1(d) Receivables Included in Acquired Assets
Schedule 1.1(f) Governmental Permits, Rights, Etc. Included in Acquired
Assets
Schedule 1.1(i) Prepaid Expenses Included in Acquired Assets
Schedule 1.2 Excluded Assets
Schedule 1.3 Assumed Liabilities and Obligations
Schedule 3(a) D.B.A., Assumed and Fictitious Names
Schedule 3(c) Third Party Consents
Schedule 3(d) Brokers' Fees
Schedule 3(e) Title to Assets
Schedule 3(g) Subsequent Events
Schedule 3(k) Tax Matters
Schedule 3(l)(i) Owned Real Property
Schedule 3(l)(ii) Real Property Leased or Subleased to Seller
Schedule 3(m)(i) Intellectual Property Infringement
Schedule 3(m)(ii) Certain Intellectual Property of Seller
Schedule 3(m)(iii) Grant of Rights to Intellectual Property of Seller
Schedule 3(m)(iv) Certain Intellectual Property Used by Seller
Schedule 3(o) Inventory
Schedule 3(p) Contracts
Schedule 3(s) Collectibility of Receivables
</TABLE>
v
<PAGE>
<TABLE>
<S> <C>
Schedule 3(t) Self-Insurance Arrangements
Schedule 3(v) Standard Terms of Sale or Lease
Schedule 3(w) Litigation
Schedule 3(x) Employees
Schedule 3(y) Employee Benefits
Schedule 3(z) Environment, Health and Safety
Schedule 3(aa) Certain Business Relationships
Schedule 4(c) Buyer's Consents
Schedule 5(n) Tax Returns
Schedule 7(a)(x) UCC Financing Statements in Effect
</TABLE>
vi
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
August 5, 1998, among GENESIS DIRECT FORTY-THREE, LLC, a Delaware limited
liability company ("Buyer"), CAROL WRIGHT GIFTS, INC., a Delaware corporation
("Seller"), and COX TARGET MEDIA, INC., a Delaware corporation ("Parent").
Buyer, Seller and Parent are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which Buyer will, on the terms
and conditions set forth herein, purchase substantially all of the assets and
assume certain of the liabilities of Seller for the consideration specified
herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
SECTION 1. DEFINITIONS.
-----------
Capitalized terms used herein and not otherwise defined herein are defined
in Appendix I to this Agreement.
SECTION 2. Basic Transaction.
-----------------
(a) Purchase and Sale of Assets.
----------------------------
Upon the Closing (as defined below) pursuant to this Agreement and subject
to the terms hereof, Buyer will purchase from Seller and Parent and Seller and
Parent will sell, transfer, convey and deliver to Buyer, all of their respective
right, title and interest in and to the Acquired Assets.
(b) Assumption of Liabilities.
--------------------------
Upon the Closing pursuant to this Agreement and subject to the terms hereof
and in consideration of the purchase by Buyer of the Acquired Assets, Buyer
shall assume and become responsible for the Assumed Liabilities. Buyer will not
assume or have any responsibility, however, with respect to any obligation or
liability of Seller not included within the definition of Assumed Liabilities.
(c) Purchase Price.
---------------
In consideration of the purchase by Buyer of the Acquired Assets and the
assumption of the Assumed Liabilities, Buyer agrees to pay to Seller an
aggregate purchase price (subject to adjustment as provided below) (the
"Purchase Price") consisting of:
(i) Stock. 2,700,000 shares of the common stock, $.01 par value per
-----
share, (the "Common Stock") of Genesis Direct, Inc. ("GDI"),
provided that such
<PAGE>
number of shares shall be adjusted as set
forth in clause (ii) below (as so adjusted, the "Shares"). The
Parties hereby agree to enter into and Buyer shall cause GDI to
enter into (i) a registration rights agreement attached as
Exhibit A hereto (the "Registration Rights Agreement"), and (ii)
---------
an escrow agreement attached as Exhibit B hereto (the "Escrow
---------
Agreement"). Pursuant to the Escrow Agreement, at the Closing,
25% of the Shares shall be placed in escrow (the "Escrow Shares")
to secure indemnification obligations of Parent and Seller set
forth in Section 5(d) and, if necessary, the Purchase Price
reduction defined and set forth in Section 2(f)(iii).
(ii) Adjustments to Number of Shares.
-------------------------------
(A) If the Closing Stock Price is less than $6.10, then either
(x) the number of Shares shall be that number of shares
equal to the quotient of $18,900,000 and the Closing Stock
Price, or (y) Buyer may terminate this Agreement pursuant to
Section 8 hereof; or
(B) If the Closing Stock Price is equal to or greater than $6.10
but less than $7.00, then the number of Shares shall be that
number of shares equal to the quotient of $18,900,000 and
the Closing Stock Price; or
(C) If the Closing Stock Price is greater than $9.00, then the
number of Shares shall be that number of shares equal to the
quotient of $24,300,000 and the Closing Stock Price.
(iii) Payments in Respect of Non-Compete and Confidentiality
------------------------------------------------------
Agreements. Cash consideration in an aggregate amount of One
Hundred Thousand Dollars ($100,000), payable to Seller and
Parent, in the amount of Fifty Thousand Dollars ($50,000) each
at the Closing (as defined below).
(d) The Closing.
------------
The closing of the transactions contemplated hereby (the "Closing") shall
take place at the offices of Morrison & Foerster LLP, 1290 Avenue of the
Americas, 40th Floor, New York, New York 10104 at 10:00 a.m. on such date and
time as the Parties shall agree, following (or simultaneously with) the
satisfaction or waiver of all conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (the date of the Closing is
referred to as the "Closing Date").
(e) Deliveries at the Closing.
--------------------------
At the Closing, the following documents shall be executed and delivered and
the following actions shall occur: (i) Seller shall deliver to Buyer the various
certificates, instruments and documents referred to in Section 7(a) below; (ii)
Buyer shall deliver to Seller the various certificates, instruments and
documents referred to in Section 7(b) below; (iii) Seller shall
2
<PAGE>
execute, acknowledge (if appropriate) and deliver to Buyer (A) a bill of sale,
assignment and assumption agreement for the Acquired Assets and the Assumed
Liabilities in the form of Exhibit C hereto (the "Bill of Sale"), (B) assignment
---------
documents with respect to certain of the Acquired Assets (including Intellectual
Property transfer documents) in the forms attached hereto as Exhibit D hereto
---------
(the "Assignment Documents") and (C) such other instruments of sale, transfer,
conveyance and assignment as Buyer and its counsel have reasonably requested for
the sale, transfer, conveyance and assignment of the Acquired Assets free and
clear of all Security Interests, other than as specifically agreed upon herein,
and (iv) Buyer shall execute, acknowledge (if appropriate) and deliver to Seller
(A) the Bill of Sale and (B) such other instruments of assumption as Seller and
its counsel have reasonably requested for the assumption of the Assumed
Liabilities .
(f) Post-Closing Adjustment and Payment
-----------------------------------
(i) Preparation of Closing Date Net Tangible Assets Statement.
---------------------------------------------------------
Seller shall prepare and deliver to the Parties a statement (the
"Closing Date Net Tangible Assets Statement") of the Net Tangible
Assets of Seller as of the Closing Date (the "Closing Date Net
Tangible Assets") derived from the balance sheet of Seller as of
the Closing Date (the "Closing Date Balance Sheet"), which
balance sheet shall be audited by Deloitte & Touche LLP
("Seller's Accountant"), in accordance with GAAP consistently
applied. The Closing Date Net Tangible Assets Statement shall be
prepared by Seller in good faith and at Seller's expense, and
shall set forth in reasonable detail its calculation of Closing
Date Net Tangible Assets. Seller shall use its best efforts to
deliver the Closing Date Net Tangible Assets Statement to Buyer
within 60 days after the Closing Date, but in any event shall
deliver the Closing Date Net Tangible Assets Statement no later
than 90 days after the Closing Date.
(ii) Adjustments to Closing Date Net Tangible Assets Statement. If
---------------------------------------------------------
Buyer has any objections to the Closing Date Net Tangible Assets
Statement, Buyer shall deliver to Seller, within 30 days after
receiving the Closing Date Net Tangible Assets Statement, a
detailed statement (the "NTA Objections Statement") describing
its specific objections. Thereafter, Seller and Buyer shall seek
to resolve Buyer's objections by mutual agreement in order to
determine the Closing Date Net Tangible Assets. If Seller and
Buyer are unable to resolve such objections within 15 days after
delivery of the NTA Objections Statement, they shall promptly
jointly appoint a third-party "Big Five" independent certified
public accountant (the "Third-Party Firm") for the purpose of
resolving Buyer's objections in order to determine the Closing
Date Net Tangible Assets. The written determination (the "Post-
Closing Determination") by agreement of Seller and Buyer or by
the Third-Party Firm, as applicable, of the Closing Date Net
Tangible Assets pursuant to the Closing Date Net Tangible Assets
Statement, after considering all written objections thereto in
accordance
3
<PAGE>
with the foregoing procedure, shall be conclusive and binding
upon the Parties. Any fees and expenses payable to the Third-
Party Firm for services pursuant to this Section 2(f)(ii) shall
be borne solely by Buyer unless the Post-Closing Determination by
the Third-Party Firm results in an amount of Closing Date Net
Tangible Assets that is at least 15% lower than the amount of
Closing Date Net Tangible Assets set forth in the Closing Date
Net Tangible Assets Statement originally delivered by Seller
pursuant to Section 2(f)(i), in which case Seller shall bear all
fees and expenses payable to the Third-Party Firm.
(iii) Purchase Price Reduction. If the Closing Date Net Tangible
------------------------
Assets are less than $7,400,000, Seller shall pay, no later than
ten (10) Business Days after delivery of the Post-Closing
Determination pursuant to Section 2(f)(ii) above, to Buyer the
amount equal to one dollar for each one dollar that such Closing
Date Net Tangible Assets are less than $7,400,000 (the "NTA
Shortfall"). Any such payment shall be made as follows: Buyer
and Seller shall jointly instruct the Escrow Agent pursuant to
the Escrow Agreement to deliver to Buyer that number of Escrow
Shares of Common Stock equal to the quotient of the NTA Shortfall
and the Signing Stock Price. Such payment obligation shall not
be considered an indemnification claim and accordingly will be
paid in full even if it is less than the Basket Amount (as
defined in Section 5(d) below).
(iv) Purchase Price Increase. If the Closing Date Net Tangible Assets
-----------------------
are more than $7,900,000, Buyer shall pay, no later than ten (10)
Business Days after delivery of the Post-Closing Determination
pursuant to Section 2(f)(ii) above, to Seller the amount equal to
one dollar for each one dollar that such Closing Date Net
Tangible Assets are greater than $7,900,000 (the "NTA Excess");
provided, however, that no adjustment shall be made for any NTA
-------- -------
Excess greater than $1,900,000. Any such payment shall be made
by delivery of that number of shares of Common Stock equal to the
quotient of the NTA Excess and the Signing Stock Price.
(g) Intentionally Omitted.
-----------------------
(h) Release of Certain Escrow Shares.
---------------------------------
Following the completion of the Purchase Price adjustment, if any, pursuant
to Section 2(f) hereof, Buyer and Seller shall give joint instructions to the
Escrow Agent pursuant to the Escrow Agreement to deliver to Seller a number of
Escrow Shares such that the number of Escrow Shares remaining in escrow shall be
equal to the greater of (x) the quotient of the amount of all outstanding
indemnification claims and the Signing Stock Price and (y) the quotient of
$2,500,000 and the Signing Stock Price. At any time following the completion of
the Purchase Price adjustment pursuant to Section 2(f) hereof, Seller may, at
its election, substitute for the
4
<PAGE>
Escrow Shares cash in an amount equal to the number of Escrow Shares held in
escrow multiplied by the closing price of the Common Stock, as published in the
Wall Street Journal on the date immediately prior to the date of such election.
(i) Allocation of Purchase Price.
-----------------------------
The consideration paid by Buyer to Seller pursuant to this Agreement shall
be allocated among the Acquired Assets, including any intangible assets, as
Seller and Buyer have mutually agreed on or prior to the date hereof. The
allocation of the Purchase Price was bargained and negotiated for and each party
agrees to report the transactions contemplated hereby for Federal income Tax and
all other Tax purposes (including, without limitation, for purposes of Section
1060 of the Code) in a manner consistent with the allocation set forth on
Exhibit E determined pursuant to this Section 2(i) and in accordance with all
- ---------
applicable rules and regulations and to take no position inconsistent with such
allocation in any administrative or judicial examination or other proceeding.
Each of Buyer and Seller shall timely file the appropriate forms in accordance
with the requirements of Section 1060 of the Code and this Section 2(i).
(j) Fractional Shares.
------------------
No fractional shares and no scrip or certificate therefor will be issued or
transferred in connection with the deliveries contemplated by this Agreement,
and any fractional share shall be rounded to the nearest whole share.
(k) Access to Records.
------------------
After Closing, Buyer shall provide Seller and Seller's Accountant with
reasonable access to all records of Buyer or GDI pertaining to the Acquired
Business that are necessary for Seller to prepare and Seller's Accountant to
audit all of the financial statements to be prepared by Seller or audited by
Seller's Accountant pursuant to the terms of this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER AND PARENT.
---------------------------------------------------
Each of Seller and Parent jointly and severally represents and warrants to
Buyer that each of the statements set forth below is true and correct in all
respects. Such representations, warranties, covenants and agreements constitute
a material inducement to Buyer to enter into this Agreement, to enter into the
other Transaction Documents, to purchase the Acquired Assets, to assume the
Assumed Liabilities and to consummate the other transactions contemplated hereby
and thereby.
(a) Organization and Corporate Power of Seller and Parent.
------------------------------------------------------
Each of Seller and Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and Seller has all
requisite corporate power and authority to own, lease and operate the Acquired
Assets and to carry on the Business. Seller neither owns or leases any real
property nor has any employees, sales representatives, agents or
5
<PAGE>
inventory in any state of the United States other than the States of Nebraska
and Connecticut (except pre-paid inventory in transit) and there are no other
jurisdictions in which the nature of the business of Seller or the locations of
the Acquired Assets requires Seller to obtain qualification or licensing to do
business as a foreign corporation, except where the failure to so qualify or
become licensed would not have a Material Adverse Effect. Except as disclosed on
Schedule 3(a), Seller has no Subsidiaries and does not, directly or indirectly,
- -------------
conduct any of the Business through, or have any investment or other interest
in, any Person. Schedule 3(a) identifies each d.b.a., assumed or fictitious name
------------
in all jurisdictions where such d.b.a., assumed or fictitious names are
registered with the Secretaries of State or where Seller does business using
such d.b.a., assumed or fictitious name.
(b) Authorization of Transaction.
-----------------------------
Each of Seller and Parent has full corporate power and authority to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder. Without limiting
the generality of the foregoing, the Board of Directors and the requisite
stockholders of Seller and Parent have duly authorized the execution, delivery
and performance of this Agreement by Seller and Parent in accordance with
applicable law including the General Corporation Law of the State of Delaware
and the provisions of the Certificate of Incorporation and Bylaws of each of
Seller and Parent. This Agreement and the other Transaction Documents to which
it is a party constitute the valid and legally binding obligations of Seller and
Parent, enforceable in accordance with their respective terms and conditions,
subject to bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting the rights and remedies of creditors and to
general principles of equity (regardless of whether such enforcement is sought
in a proceeding in equity or at law).
(c) Noncontravention.
-----------------
Subject to obtaining the Required Consents listed on Schedule 3(c) and
-------------
compliance with the HSR Act, neither the execution and the delivery of this
Agreement, the other Transaction Documents or the other documents contemplated
hereby and thereby, nor the consummation of the transactions contemplated hereby
and thereby will (i) violate any Law or Order of any Governmental Body or court
to which Seller, Parent or any of the Acquired Assets or Assumed Liabilities are
subject or any provision of the Certificate of Incorporation and Bylaws of
either Seller or Parent or (ii) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under, any
Contract to which either Seller or Parent is a party or by which it is bound or
to which any of its assets are subject (or result in the imposition of any
Security Interest upon any of their assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice or other specified occurrence would not
have a Material Adverse Effect. Except as set forth in Schedule 3(c), neither
-------------
Seller nor Parent needs to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Governmental Body or other Person
in order for the Parties to consummate the transactions contemplated by this
Agreement (including the execution, delivery and performance
6
<PAGE>
of the assignments and assumptions referred to in Section 2 of this Agreement),
except where the failure to give notice, to file, or to obtain any
authorization, consent or approval would not have a Material Adverse Effect. The
consents, approvals and filings described on Schedule 3(c) and identified with
------------
an asterisk shall be deemed "Required Consents" for purposes of this Agreement.
(d) Brokers' Fees.
--------------
Except as set forth on Schedule 3(d), neither Seller nor Parent has any
-------------
Liability or obligation to pay any fees or commissions or other compensation to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which Buyer could become liable or obligated.
(e) Title to Assets.
----------------
Except as set forth in Schedule 3(e), Seller or Parent has good and valid
-------------
title to, or a valid leasehold interest in or the right to use, as the case may
be, all of the Acquired Assets, free and clear of all Security Interests.
Without limiting the generality of the foregoing, except as set forth in
Schedule 3(e), Seller or Parent has good and valid title to, or the right to
- -------------
use, the Catalog Names and associated logos, if any, free and clear of any
Security Interest or restriction on transfer. On the Closing Date, Buyer will
receive good and valid title to, or a valid leasehold interest in or the right
to use, as the case may be, the Acquired Assets, free and clear of any Security
Interest or restriction on transfer (except for Security Interests and
restrictions on transfer imposed as a result of actions or agreements of Buyer).
Upon Closing, the Acquired Assets, together with the license provided by
Seller's Affiliate to Buyer pursuant to the License Agreement and the services
to be provided by Parent to Buyer in accordance with the Service Agreement,
shall be all the assets and services necessary to permit Buyer to conduct the
Business as presently conducted by Seller. Upon Closing, none of the Excluded
Assets, taking into consideration the License Agreement and the Service
Agreement, shall be necessary to permit Buyer to conduct the Business as it is
presently conducted by Seller.
(f) Financial Statements.
---------------------
(i) At or prior to Closing, Seller shall have delivered to Buyer true
and complete copies of the following financial statements
(collectively the "Historical Financial Statements") of Seller:
the audited balance sheet as at December 26, 1997, and the
related statements of income, retained earnings and cash flows
for the fiscal year then ended, audited by Seller's Accountant.
For purposes of this Agreement, December 26, 1997 is referred to
herein as the "Most Recent Fiscal Year End," and the balance
sheet referred to in the previous sentence as of December 26,
1997 is referred to herein as the "Most Recent Balance Sheet").
The Historical Financial Statements (including the notes thereto)
will have been prepared from the books and records of the Seller
in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and the Historical Financial
Statements will present fairly, in all material respects,
7
<PAGE>
the financial condition of Seller as of such dates and the
results of operations of Seller for such periods.
(ii) Seller has delivered to Buyer true and complete copies of the
unaudited balance sheet of Seller as at June 26, 1998 (the "June
1998 Balance Sheet"), and the related unaudited statements of
income, retained earnings and cash flows of Seller for the six-
month period then ended (collectively, the "June 1998 Financial
Statements"). The June 1998 Financial Statements have been
prepared by Seller from the books and records of Seller in
accordance with GAAP consistent with Seller's past practice in
the preparation of its interim financial statements, and the June
1998 Financial Statements present fairly, in all material
respects, the financial condition of Seller as of the date, and
the results of operations of Seller for the six-month period then
ended, subject to normal recurring year-end adjustments and the
lack of footnotes and other presentation items. The Closing Date
Balance Sheet will contain an adequate reserve, in accordance
with GAAP, for any awards payable pursuant to any sweepstakes
currently being conducted by Seller.
(g) Events Subsequent to December 26, 1997.
---------------------------------------
Except as set forth on Schedule 3(g), since December 26, 1997, there has
-------------
not been any Material Adverse Effect and none of the officers or directors of
either Seller or Parent has knowledge of any such event, circumstance or change
which is threatened. Without limiting the generality of the foregoing, since
that date and except as set forth on Schedule 3(g):
-------------
(i) Seller has not sold, leased, transferred or assigned any
material assets (individually or in the aggregate), tangible or
intangible;
(ii) No Person, including Seller, has accelerated, terminated, made
material modifications to, or canceled any material Contract to
which Seller is a party or by which it is bound;
(iii) No Person, including Seller, has imposed any Security Interest
upon any of Seller's assets, tangible or intangible;
(iv) Seller has not made any material capital expenditures;
(v) Seller has not made any material investment in, or any material
loan to, any other Person;
(vi) Seller has not created, incurred, assumed or guaranteed more
than $10,000 individually or $25,000 in the aggregate in
indebtedness for borrowed money and capitalized lease
obligations;
8
<PAGE>
(vii) Seller has not granted any license or sublicense of any
material rights (individually or in the aggregate) under or
with respect to any Intellectual Property;
(viii) There has been no change made or authorized in the Certificate
of Incorporation or in the Bylaws or other organizational
documents of Seller;
(ix) Seller has not, directly or indirectly, distributed to either
Parent or any of its Affiliates or with respect to its capital
stock, any of the Acquired Assets other than the amount of
cash, if any, not included in the Acquired Assets;
(x) Seller has not experienced any material damage, destruction or
loss (whether or not covered by insurance) to any of its
properties or assets;
(xi) Seller has not made any loan to, or entered into any other
transaction (other than a transaction described in clause (xii)
below) that could be Buyer's obligation after the Closing with,
any of its stockholders, directors, officers or employees;
(xii) Except for oral agreements entered into in the Ordinary Course
of Business providing solely for employment at will, Seller has
not entered into any employment Contract or collective
bargaining agreement, written or oral, or modified the terms of
any existing such Contract or agreement;
(xiii) Seller has not granted any increase in the base compensation
of any of its officers or non-officer employees, in each case
other than in the Ordinary Course of Business;
(xiv) Except as contemplated by the provisions of this Agreement,
Seller has not adopted or terminated or, in any material
respect, amended or modified, any bonus, profit-sharing,
incentive, severance or other plan, Contract or commitment for
the benefit of any of its directors, officers or employees (or
taken any such action with respect to any other employee
benefit plan, Contract or arrangement);
(xv) Seller has not made any other material change in employment
terms for any of its officers or employees other than in the
Ordinary Course of Business;
(xvi) Seller has kept in full force and effect insurance comparable
in amount and scope to coverage maintained by it as of the Most
Recent Fiscal Year End and required pursuant to any material
agreement, instrument or document to which it is a party;
9
<PAGE>
(xvii) Seller has not made any material change in any method of
accounting, or accounting principle, method or practice;
(xviii) Seller has not settled, released or forgiven any material
claim or litigation or waived any material right;
(xix) Seller has not committed to do any of the foregoing; and
(xx) Seller has conducted the Business in the Ordinary Course of
Business and has used its commercially reasonable efforts to
preserve its goodwill intact.
(h) Stock Ownership.
----------------
Parent is the beneficial and record owner of 100 shares of the voting
common stock, par value $1.00 per share, of Seller, which in the aggregate
represents 100% of the total number of outstanding shares of voting capital
stock of Seller.
(i) Undisclosed Liabilities.
------------------------
Seller has no material Liabilities, except for (i) liabilities set forth on
the June 1998 Balance Sheet which have arisen in the Ordinary Course of Business
and in connection with and for the benefit of the Acquired Assets; and (ii)
liabilities which have arisen after the date of the June 1998 Balance Sheet in
the Ordinary Course of Business and in connection with and for the benefit of
the Acquired Assets.
(j) Legal Compliance.
-----------------
Seller has complied with all applicable Laws and Orders of all Governmental
Bodies and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand or notice has been filed or, to the Knowledge of the
officers or directors of either Parent or Seller, has been commenced against
Seller alleging any failure so to comply, except where the failure to comply
with any of the above would not have a Material Adverse Effect.
(k) Tax Matters.
------------
Except as set forth on Schedule 3(k):
-------------
(i) Seller has filed all Tax Returns that it was required to file.
All such Tax Returns were correct and complete in all material
respects. All Taxes owed by Seller (whether or not shown on any
Tax Return) have been paid. Seller currently is not the
beneficiary of, or subject to, any extension of time within
which to file any Tax Return.
(ii) There is no material dispute or claim concerning any Tax
liability of Seller either formally asserted or raised, or, to
the Knowledge of the directors or officers of either Seller or
Parent, threatened by any Governmental Body.
10
<PAGE>
(iii) Seller has reported and duly paid state and local sales and use
Taxes in all states in which it is required to report and pay
such Taxes, including sales and/or use Taxes on sales of
merchandise and on catalogs and other promotional materials. A
list of all such states is set forth in Schedule 3(k).
-------------
(iv) There is no material dispute or claim of Liability against
Seller for sales or use Taxes either formally asserted or
raised or, to the Knowledge of the directors or officers of
either Seller or Parent, threatened by any Governmental Body.
(l) Real Property.
--------------
(i) Schedule 3(l)(i) lists and describes briefly certain property
----------------
that Seller owns and will lease to Buyer pursuant to a lease
agreement in substantially the form of Exhibit K (the "Lease").
---------
(ii) Schedule 3(l)(ii) lists and describes briefly certain real
-----------------
property leased to Parent and used by Seller and which Parent
shall sublease to Buyer pursuant to a sublease agreement in
substantially the form of Exhibit M (the "Sublease").
---------
(m) Intellectual Property.
----------------------
(i) Except as disclosed on Schedule 3(m)(i), Seller has not
----------------
interfered with, infringed upon, misappropriated, or violated
any material Intellectual Property rights of any Person in any
material respect and neither of either Seller nor Parent has
received any pending charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation
or violation (including any claim that Seller must license or
refrain from using any Intellectual Property rights of any
Person). To the Knowledge of the directors or officers of
either Seller or Parent after reasonable investigation
customary in the industry, no third party has interfered with,
infringed upon, misappropriated or violated any of the service
marks "Carol Wright," "Carol Wright Gifts," "Applecreek," or
"Health & Comfort," or the Miscellaneous Design or the Mailing
Lists of Seller in any material respect. To the Knowledge of
the directors or officers of either Seller or Parent, no third
party has interfered with, infringed upon, misappropriated or
violated any other Intellectual Property rights of Seller in
any material respect.
(ii) Schedule 3(m)(ii) sets forth each registered and unregistered
-----------------
trademark and service mark and applications therefor, material
trade name, domain name, fictitious and d.b.a. name, 800- or
888-prefix phone number, and other identifier used by Seller in
connection with any aspect of the Business (and, with respect
to such 800- or 888- prefix phone numbers,
11
<PAGE>
Seller will use commercially reasonable efforts to obtain from
its long distance carrier consent to the assignment and
transfer of all such phone numbers and related rights to Buyer
as of the Closing Date). With respect to each item of
Intellectual Property required to be identified in Schedule
--------
3(m)(ii) and except as set forth in such Schedule:
--------
(A) Seller possesses all right, title and interest in and to, or
otherwise has the right to use, without payment to any
Person, the item, free and clear of any Security Interest,
or other restriction, including, without limitation, all
rights to the Catalog Names and associated logos;
(B) the item is not subject to any outstanding Order;
(C) the item has not lapsed, expired or been abandoned;
(D) no Claim is pending or, to the Knowledge of the directors or
officers of either Seller or Parent, is threatened, which
challenges the legality, validity, enforceability, use or
ownership of the item or application, registration or grant
therefor; and
(E) Other than in the Ordinary Course of Business, Seller has
not agreed to indemnify any Person for or against any
interference, infringement, misappropriation or other
conflict with respect to the item.
(iii) Schedule 3(m)(iii) sets forth a complete and accurate list of
-----------------
each material license, sublicense, agreement or other Contract
or other permission, whether written or oral, which is
currently in effect and pursuant to which Seller has granted to
any other party any rights with respect to any of its
Intellectual Property. Seller has delivered to Buyer correct
and complete copies of all such licenses, sublicenses,
agreements and other Contracts or permissions (as amended to
date).
(iv) Schedule 3(m)(iv) identifies each material item of Intellectual
-----------------
Property that any other party owns and that Seller uses
pursuant to a license, sublicense, agreement or other Contract,
or permission. Seller has delivered to Buyer correct and
complete copies of all such licenses, sublicenses, agreements,
Contracts and permissions (as amended to date). With respect to
each such item of used Intellectual Property required to be
identified in Schedule 3(m)(iv):
-----------------
(A) the license, sublicense, agreement, Contract or permission
covering the item is, with respect to Seller, legal, valid,
binding, enforceable and in full force and effect in all
material respects and, with respect to the other party or
parties thereto, is, to the Knowledge of the
12
<PAGE>
directors or officers of either Seller or Parent, legal,
valid, binding, enforceable and in full force and effect in
all material respects;
(B) Seller is not and, to the Knowledge of the officers or
directors of either Seller or Parent, no other party is, in
material breach or default under the license, sublicense,
agreement, Contract or permission and, to the Knowledge of
the directors or officers of either Seller or Parent, no
event has occurred which, with notice or lapse of time or
both, would constitute a material breach or default or
permit termination, modification, or acceleration
thereunder;
(C) to the Knowledge of the directors or officers of either
Seller or Parent, no party to the license, sublicense,
agreement, Contract or permission has repudiated any
material provision thereof or indicated to any director or
officer of either Seller or Parent its intent to terminate,
or not renew on comparable terms, such license, sublicense,
agreement, Contract or permission; and
(D) Seller has not granted any sublicense or similar right with
respect to the license, sublicense, agreement, Contract or
permission, except to its Affiliates as permitted in
accordance with the terms of such license, sublicense,
agreement, Contract or permission as described on Schedule
--------
3(m)(iv) hereto.
--------
(v) The Intellectual Property identified on Schedules 1.1(b) and
--------------------
3(m)(ii) through 3(m)(iv) constitutes each material item of all
-------- --------
of the Intellectual Property used in or necessary for the
conduct of the Business.
(vi) Except as set forth on Schedule 3(m)(i), Seller possesses all
----------------
rights and interests necessary to (A) sell all merchandise
currently sold through Seller's catalogs and other marketing
materials and (B) to use the names and/or likenesses of persons
used in such catalogs for the specific purpose and in the
specific catalogs in which such likenesses appeared, in the
case of both (A) and (B), without infringing the Intellectual
Property rights of any other Person. Except as set forth on
Schedule 3(m)(i), to the Knowledge of the directors or officers
----------------
of either Seller or Parent after reasonable investigation
customary in the industry, each Person from which Seller
acquires products and goods (1) obtained or made and sold such
products and goods without violation of the Intellectual
Property or other rights of any Person, (2) has all rights and
permissions necessary to distribute such products and goods to
Seller, and (3) has all rights and permissions necessary to
grant to Seller the right to redistribute such products and
goods.
13
<PAGE>
(vii) Except as set forth on Schedule 3(m)(iii), all mailing lists,
------------------
maintained by Seller in the Ordinary Course of Business, of all
customers who have purchased Seller's products, including
without limitation through Seller's catalogs and newspaper FSI
(free-standing insert) programs and through its Affiliates'
Carol Wright Co-Op and Val-Pak Programs (the "Mailing Lists")
are owned by Seller and are: (A) able to be copied to a
magnetic tape form in readable format; (B) contain all names
and addresses of customers who have in the past purchased a
product from Seller, and can be sorted to indicate which
customers have purchased products (1) within 12 months prior to
the Closing Date, (2) 12-24 months prior to the Closing Date,
(3) 24-36 months prior to the Closing Date, and (4) more than
36 months prior to the Closing Date; and (C) include a detailed
transaction listing, with original source data including the
names and addresses, of people who have inquired about Seller's
catalogs during the previous 60 days although they may not have
yet purchased. The use of the mailing lists by Seller does not
violate, without limitation, Intellectual Property rights and
rights of publicity or privacy of any Person, and is not in
violation of any applicable Law or Order. Except as set forth
on Schedule 3(m)(iii), there is no limitation on the right of
------------------
Seller to transfer to Buyer any of the Mailing Lists. Seller's
house file contains the names and addresses of approximately
8,850,000 domestic customers who have purchased Seller's
products. The Mailing Lists contain the following approximate
numbers of domestic customers and prospective customers:
<TABLE>
<CAPTION>
Customers who purchased Seller's
Number products during the calendar year:
------ ----------------------------------
<C> <S>
1,972,828 1998 (to July 17, 1998)
3,093,967 1997
2,675,955 1996
3,245,649 1995
25,914,889 1994 and prior to such year
Number Customers who have inquired about
------ Seller's catalogs or have requested a
catalog of Seller:
65,745 period 60 days prior to July 17, 1998
</TABLE>
(viii) Except as set forth on Schedule 3(m)(iii), Seller acknowledges
------------------
and agrees that all Mailing Lists used for the Business and the
Acquired Business will be the exclusive property of Buyer and
Seller shall not be entitled to retain a copy of same or use
the information from such Mailing Lists for any purpose
whatsoever.
14
<PAGE>
(n) Tangible Assets.
----------------
The machinery, equipment (including the computer software technology,
telephone and telecommunication systems) and other tangible assets that Seller
owns, leases or uses in the Business are free from material defects, have been
maintained in accordance with normal industry practice, are in good operating
condition and repair (subject to normal wear and tear), are suitable for their
intended use and have met all fulfillment service and call service needs and
performance standards required of Seller relating to the Business as heretofore
conducted, provided that during peak order activity, Seller utilizes outsourcing
services pursuant to Contracts disclosed on Schedule 3(p) hereto, which have not
-------------
exceeded 15% of telemarketing volume in any fiscal year.
(o) Inventory.
----------
At the Closing, Schedule 3(o) will set forth a complete standard cost
-------------
inventory detail listing of all inventory owned by Seller as of a date within
five days of the Closing Date; provided, however, that Buyer acknowledges that
-------- --------
such inventory detail set forth on Schedule 3(o) shall be revised by Seller to
-------------
reflect any adjustments to the inventory detail disclosed in connection with the
preparation of the Closing Date Balance Sheet (as audited by Seller's
Accountant) and the Closing Date Net Tangible Assets Statement. The inventory
of Seller to be purchased by Buyer as Acquired Assets consists of supplies and
finished goods, all of which is in good and merchantable condition and fit for
the purpose for which it was procured or manufactured and none of which is
obsolete, damaged or defective subject only to a $1,087,299 reserve in
accordance with GAAP for inventory writedown on the Most Recent Balance Sheet as
adjusted for operations and transactions through the Closing Date in accordance
with past custom and practice of Seller and as will be adjusted as set forth in
the Closing Date Net Tangible Assets Statement.
(p) Contracts.
----------
Schedule 3(p) lists all material Contracts to which Seller is a party or by
-------------
which Seller or any of the Acquired Assets may be bound or subject. Seller has
delivered to Buyer a correct and complete copy of each written material
Contract. With respect to each such Contract: (i) the Contract is legal, valid,
binding, enforceable and in full force and effect in all material respects; (ii)
Seller is not, and to the Knowledge of the directors or officers of either
Seller or Parent, no other party is, in material breach or default and, to the
Knowledge of the directors or officers of either Seller or Parent, no event has
occurred which, with notice or lapse of time or both, would constitute a
material breach or default or permit termination, modification or acceleration
under the Contract; (iii) no party has repudiated any material provision of the
Contract or indicated to any director or officer of Seller or Parent of its
intent to cancel or not renew the Contract; (iv) except as disclosed on Schedule
--------
3(c), no consent is required of any party thereto to transfer the benefits of
- ----
each such Contract to Buyer in connection with the transactions contemplated in
this Agreement; and (v) any such Contract under which Donnelley Marketing, Inc.,
Donnelley Marketing Consumer Promotions, Inc. or Carol Wright Sales, Inc. is a
party and a predecessor in interest to Seller has been properly assigned to
Seller. For purposes of this Section 3(p), a
15
<PAGE>
"material" Contract shall mean a Contract providing for the payment by or to
Seller of $25,000 or more annually.
(q) Predominant Customers.
----------------------
No single customer of Seller accounts or accounted for over five percent
(5%) of the total revenues of Seller during any of the three (3) complete fiscal
years immediately preceding the date of this Agreement.
(r) Change in Customers or Vendors.
-------------------------------
No customer or vendor whose annual volume of purchases or sales during
Seller's fiscal year ended December 26, 1997 or during the period between the
Most Recent Fiscal Year End and the Closing Date exceeded $500,000, has
indicated to Seller or to any of Seller's officers or directors that it intends
to cease doing business with Seller or materially alter the amount or pricing of
the business done with Seller.
(s) Notes and Accounts Receivable.
------------------------------
Except as set forth on Schedule 3(s) hereto, all notes and accounts
-------------
receivable of Seller are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, and are current and
collectible in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet as adjusted in a manner consistent with past practice for
operations and transactions in the Ordinary Course of Business through the
Closing Date or as will be set forth on the Closing Date Net Tangible Assets
Statement. If, at any time after the Closing Date, Buyer deems any such account
receivable uncollectible, such account receivable shall be assigned to Seller;
provided, however, that Seller shall remain obligated to indemnify Buyer for any
- -------- -------
claim arising from or in connection with such account receivable pursuant to
Section 5(d) of this Agreement.
(t) Insurance.
----------
Except with respect to the insurance policies disclosed on Schedule 3(y),
------------
Seller has supplied Buyer with a copy of each insurance policy (including
policies providing property, casualty, liability and workers' compensation
coverage and bond and surety arrangements) with respect to which Seller is or is
required to be (pursuant to the provisions of any agreement or license or other
Contract to which it is party) a party, a named insured, or otherwise the
beneficiary of coverage. With respect to each such insurance policy, except
those insurance policies disclosed on Schedule 3(y): (i) the policy is legal,
-------------
valid, binding, enforceable and in full force and effect in all material
respects; (ii) neither Seller nor any other party to the policy is in material
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time or both, would constitute a material breach or default, or permit
termination, modification or acceleration under the policy; (iii) no party to
the policy has repudiated any material provision thereof; and (iv) Seller has
not been notified by any of its insurance carriers that any premiums will
materially
16
<PAGE>
increase in the future or that any insurance coverage provided by such policy
will not be available to Seller in the future on substantially the same terms as
now in effect. Schedule 3(t) describes any and all self-insurance arrangements
-------------
affecting Seller or the Business, except those insurance policies disclosed on
Schedule 3(y).
- -------------
(u) Product Liability.
------------------
To the Knowledge of the directors or officers of either Seller or Parent
after reasonable investigation customary in the industry, except as set forth in
Schedule 3(w), Seller does not have any material liability (whether asserted or
- -------------
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due) arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
Seller.
(v) Product Warranty.
-----------------
All of the products manufactured, sold, leased or delivered by Seller have
conformed in all material respects with all applicable contractual commitments,
with all express and implied warranties, and with all applicable Laws and Seller
has no material Liability for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product refunds or product
warranty claims set forth on the face of the Most Recent Balance Sheet (or in
any notes thereto) as adjusted for operations and transactions in the Ordinary
Course of Business through the Closing Date. Substantially all of the products
manufactured, sold, leased or delivered by Seller are subject to Seller's
standard terms and conditions of sale or lease. Schedule 3(v) includes copies
-------------
of the standard terms and conditions of sale or lease for Seller (containing
applicable guaranty, warranty and indemnity provisions).
(w) Litigation.
-----------
Schedule 3(w) sets forth each instance in which Seller (i) is subject to
-------------
any outstanding Order or (ii) is a party or, to the Knowledge of the directors
or officers of either Seller or Parent, is threatened to be made a party to any
Claim of, in, or before any Governmental Body or before any arbitrator, which
could reasonably be expected to have a Material Adverse Effect. The Most Recent
Balance Sheet reflects an adequate reserve for any Adverse Consequences that
Seller may reasonably be expected to suffer from any such Order or event
specified in the preceding sentence. Without limiting the generality of the
foregoing, Seller has no material Liability arising out of any injury (or
alleged injury) to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased or delivered by
Seller.
(x) Employees.
----------
Schedule 3(x) sets forth a complete list of employees of Seller, including
-------------
the position or title of each employee of Seller, and Seller has previously
delivered to Buyer the current annual compensation of each such employee.
Seller has not received oral or written notice that any executive, key employee
or significant group of employees plans to terminate employment with Seller as a
result of the transactions contemplated by this Agreement or otherwise during
the next
17
<PAGE>
12 months. Seller is not a party to or bound by any collective bargaining
agreement or other Contract with a labor union or association representing any
employee, nor has it experienced any strike, work slowdown or stoppage, or
material grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past three years. Seller has not committed any
material unfair labor practice. None of the directors or the officers of either
Seller or Parent has any Knowledge of any organizational effort presently being
made or threatened by or on behalf of any labor union with respect to employees
of Seller.
(y) Employee Benefits.
------------------
Except as set forth on Schedule 3(y), there are no employee benefit plans
-------------
or arrangements or understandings of any type (whether or not described in
section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
and the regulations thereunder, including, without limitation, plans or
arrangements with employees providing for deferred compensation, severance,
bonuses, stock options, fringe benefits, cafeteria plan deferrals, flexible
arrangements or other similar plans or arrangements), of Seller under which
Seller has or Buyer in the future could have, directly or indirectly, any
liability with respect to any current or former employee of Seller.
(z) Environment, Health and Safety.
-------------------------------
Except as disclosed on Schedule 3(z), or except as would not have a
-------------
Material Adverse Effect, to the Knowledge of the directors or officers of either
Seller or Parent after reasonable investigation customary in the industry,
Seller: (i) is in material compliance with all applicable Environmental, Health
and Safety Laws; (ii) there is no judgment or Claim pending or, to the Knowledge
of the directors or officers of either Seller or Parent, threatened against
Seller pursuant to Environmental, Health and Safety Laws or principles of common
law relating to pollution, protection of the environment or health and safety;
and (iii) there are no past or present events, conditions, circumstances,
activities, practices, incidents, agreements, actions or plans which may prevent
compliance in all material respects with Environmental, Health and Safety Laws,
or which have given rise to any Claim in connection therewith.
(aa) Certain Business Relationships With Seller.
-------------------------------------------
Except as disclosed on Schedule 3(aa), neither Parent nor any of its
--------------
Affiliates (other than Seller) has been involved in any material business
arrangement or relationship with Seller within the past twelve months nor owns
any material asset, tangible or intangible, which is used by Seller in the
Business.
(bb) Disclosure.
-----------
The representations and warranties of Seller and Parent contained in this
Agreement and made herein in connection with the documents included in the
Schedules hereto do not (i) contain any untrue statement of a material fact or
(ii) omit to state any material fact necessary in order to make the statements
and information contained in this Agreement and in such documents not
misleading. Except for the representations and warranties of Seller and Parent
18
<PAGE>
contained in this Agreement and the Transaction Documents, neither Seller nor
Parent shall be deemed to have made any representation, warranty or covenant
whatsoever pertaining to the Acquired Assets, the Business or any other matter.
(cc) Processing of Returns.
----------------------
Seller has consistently and timely processed all customer claims with
respect to returns of sold products.
(dd) Investment.
-----------
Seller (i) understands that the Shares have not been, and will not be, as
of the Closing, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon Federal and
state exemptions for transactions not involving any public offering, (ii) is
acquiring such Shares solely for its own account for investment purposes, and
not with a view to the distribution thereof, (iii) is a sophisticated investor
with knowledge and experience in business and financial matters, (iv) has
received certain information concerning Buyer and GDI and has had the
opportunity to obtain additional information concerning Buyer and GDI as desired
in order to evaluate the merits and the risks inherent in holding such Shares,
including without limitation the risk factors set forth in GDI's Prospectus
dated May 7, 1998, (v) is able to bear the economic risk and lack of liquidity
inherent in holding such Shares, and (vi) is an Accredited Investor within the
meaning of this term as defined in Rule 501 of the rules promulgated under the
Securities Act.
(ee) Guaranties.
-----------
Seller is not a guarantor or otherwise is responsible for any liability or
obligation (including indebtedness) of any other Person for which Buyer could
become liable or obligated.
(ff) Cure.
-----
For all purposes under this Agreement, the existence or occurrence of any
events or circumstances that constitute or cause a breach of a representation or
warranty of either Seller or Parent made in this Agreement (including, without
limitation, the Schedules attached hereto) on the date such representation or
warranty is made shall be deemed not to constitute a breach of such
representation or warranty if such event or circumstance is cured in all
material respects, and said representation or warranty shall be true and correct
in all material respects, on or prior to the Closing Date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
Buyer represents and warrants to Seller and Parent that each of the
statements set forth below is true and correct in all respects. Such
representations, warranties, covenants and agreements constitute a material
inducement to Seller and Parent to enter into this Agreement, to enter into the
other Transaction Documents to which it has become a party, to sell the Acquired
19
<PAGE>
Assets sold by it pursuant hereto and to consummate the other transactions
contemplated hereby and thereby.
(a) Organization of Buyer.
----------------------
Buyer is a limited liability company duly formed, validly existing and in
good standing under the laws of the State of Delaware, and has all requisite
limited liability company power and authority to own, lease and operate its
properties and to carry on its business as now conducted. Buyer is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it makes such
qualification or licensing necessary, except in any jurisdiction where the
failure to be so duly qualified or licensed or in good standing would not
reasonably be expected to have a material adverse effect on the ability of Buyer
to perform its obligations under this Agreement. Notwithstanding the foregoing,
Buyer shall be qualified or licensed to conduct business and be in good standing
in the States of Nebraska and Connecticut within five Business Days after the
Closing. All of Buyer's equity interests are owned directly or indirectly by
GDI.
(b) Authorization of Transaction.
-----------------------------
Buyer has full limited liability company power and authority to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party and to perform its obligations hereunder and thereunder. Without limiting
the generality of the foregoing, the execution, delivery and performance of this
Agreement by Buyer has been duly and validly authorized by all necessary action
on the part of Buyer in accordance with applicable law including the Delaware
Limited Liability Company Act and the provisions of the certificate of formation
and operating agreement of Buyer. This Agreement and the other Transaction
Documents to which it is a party constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with their respective terms and
conditions, subject to bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies of creditors
and to general principles of equity (regardless of whether such enforcement is
sought in a proceeding in equity or at law).
(c) Noncontravention.
-----------------
Subject to obtaining the consents listed on Schedule 4(c) and compliance
-------------
with the HSR Act, neither the execution and the delivery of this Agreement, the
other Transaction Documents or the other documents contemplated hereby and
thereby, nor the consummation of the transactions contemplated hereby and
thereby will (i) violate any Law or Order of any Governmental Body or court to
which Buyer is subject or any provision of its certificate of formation or
operating agreement or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel or require any notice under, any
Contract to which Buyer is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest upon
any of its assets). Except as set forth on Schedule 4(c), Buyer does not need
-------------
to give any notice to, make any filing with or obtain any authorization, consent
or approval of any Governmental Body or other Person in order for the Parties to
consummate the transactions
20
<PAGE>
contemplated by this Agreement (including the execution, delivery and
performance of the assignments and assumptions referred to in Section 2 of this
Agreement), except for such notices, filings, authorizations, consents or
approvals as have been duly made or received, as the case may be.
(d) Brokers' Fees.
--------------
Buyer has no liability or obligation to pay any fees or commissions or
other compensation to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which Seller or Parent could
become liable or obligated.
(e) Litigation.
-----------
Buyer is not (i) subject to any outstanding Order or (ii) a party or, to
the Knowledge of the directors or officers of Buyer, threatened to be made a
party to any Claim of, in or before any Governmental Body or before any
arbitrator, which could reasonably be expected to have a material adverse effect
on the ability of Buyer to perform its obligations under this Agreement.
(f) Disclosure.
-----------
The representations and warranties of Buyer contained in this Agreement do
not (i) contain any untrue statement of a material fact or (ii) omit to state
any material fact necessary in order to make the statements and information
contained in this Agreement not misleading.
(g) Cure.
-----
For all purposes under this Agreement, the existence or occurrence of any
events or circumstances that constitute or cause a breach of a representation or
warranty of Buyer made in this Agreement (including, without limitation, the
Schedules attached hereto) on the date such representation or warranty is made
shall be deemed not to constitute a breach of such representation or warranty if
such event or circumstance is cured in all material respects, and said
representation or warranty shall be true and correct in all material respects,
on or prior to the Closing Date.
SECTION 5. COVENANTS.
----------
(a) Further Assurances.
-------------------
In the event that at any time after the Closing any further action is
necessary to carry out the purposes of this Agreement or the other Transaction
Documents, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
this Section 5).
21
<PAGE>
(b) Confidentiality.
----------------
Each Party will and will cause their respective Affiliates, directors,
officers and employees to, for a period of two years, treat and hold
confidential all of the Confidential Information and all terms of the
transactions contemplated by the Transaction Documents, refrain from using any
of the Confidential Information or any transactional terms except in connection
with this Agreement (or as required to be disclosed to taxing authorities in
connection with the payment of Taxes) and shall deliver promptly to the other
Parties to this Agreement or destroy, at the request and option of such other
Parties, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession; provided, however, that the foregoing
-------- -------
shall not prevent any Person who is an employee of Buyer from after the Closing
to utilize any Confidential Information as necessary in connection with the
exercise of his or her duties on behalf of Buyer. In the event that any of the
Parties or their respective directors, officers or employees is requested or
required (by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information or any terms of the
transactions contemplated by the Transaction Documents, then such Party will
notify the other Parties promptly of the request or requirement so that the
other Parties may seek an appropriate protective order or waive compliance with
the provisions of this Section 5(b). If, in the absence of a protective order
or the receipt of a waiver hereunder, such Party or its director, officer or
employee is, on the advice of counsel, compelled to disclose any Confidential
Information or any terms of the transactions contemplated by the Transaction
Documents to any tribunal or else stand liable for contempt, such Party or
director, officer or employee may disclose such Confidential Information or such
transaction terms to the tribunal; provided, however, that the disclosing Person
-------- -------
shall use his or its reasonable best efforts to obtain, at the reasonable
request of any other Party, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information or
transaction terms required to be disclosed as any other Party shall designate.
If for any reason the transactions contemplated by this Agreement are not
consummated, the Parties shall each return to any other Party all information
received by it from such other Party and all copies thereof.
(c) Closing Date Financial Statements.
----------------------------------
(i) Seller and Parent shall cause to be prepared and delivered to
Buyer the Closing Date Balance Sheet of Seller. Seller shall
use its bests efforts to deliver such financial statements to
Buyer within 60 days after the Closing Date, but in any event
shall deliver such financial statements no later than 90 days
after the Closing Date.
(ii) Seller and the Parent shall cause to be prepared and delivered
to Buyer the related unaudited statements of operations,
stockholders' equity and cash flows of Seller for the period
from December 27, 1997 through the Closing Date. Seller shall
use its best efforts to deliver such financial statements to
Buyer within 45 days after the Closing Date, but in any
22
<PAGE>
event shall deliver such financial statements no later than 60
days after the Closing Date.
(d) Indemnification Provisions for the Benefit of Buyer.
----------------------------------------------------
(i) Breach of Representations, Warranties or Covenants. In the
event that Seller or Parent breaches any of its
representations, warranties (which representations and
warranties shall survive for a period of twenty-four (24)
months from and after the Closing Date except for the
representations and warranties in Section 3(b) (captioned
"Authorization of Transaction"), in Section 3(e) (captioned
"Title to Assets"), and in Section 3(k) (captioned "Tax
Matters"), which shall remain in full force and effect until
the expiration of all applicable statutes of limitations) or
covenants contained in this Agreement and a Buyer Indemnified
Party (as hereinafter defined) makes a written claim for
indemnification against either of Seller or Parent then, each
----
of Seller and Parent agrees jointly and severally to indemnify
Buyer, its members, Affiliates and agents and their respective
officers, directors and employees (collectively, the "Buyer
Indemnified Parties"; each a "Buyer Indemnified Party") from
and against the entirety of Adverse Consequences (subject to
the limitations in Section 5(d)(iii) below) any Buyer
Indemnified Party may suffer through and after the date of the
claim for indemnification, resulting from, arising out of,
relating to, in the nature of, or caused by such breach.
(ii) Unassumed Liabilities; Brokers. Each of Seller and Parent
------------------------------
agrees jointly and severally to indemnify the Buyer Indemnified
Parties from and against the entirety of any Adverse
Consequences (subject to the limitations in Section 5(d)(iii)
below) any Buyer Indemnified Party may suffer through and after
the date of the claim for indemnification, resulting from,
arising out of, relating to, in the nature of, or caused by:
(A) any Liability or obligation of Seller or the Business
which is not an Assumed Liability (including any liability
of Seller or Parent for Taxes that becomes a liability of
Buyer (i) under any Tax or bulk transfer law of any
jurisdictions, (ii) under any common law doctrine of de
facto merger or successor liability or otherwise by
operation of law or (iii) as a result of the consummation
of the transactions contemplated hereby); provided,
however, that, notwithstanding anything to the contrary
herein, the indemnification obligations in this Paragraph
(A) for any Liability or obligation (including for Taxes)
which is not an Assumed Liability shall survive the
Closing (even if Buyer knew or had reason to know of such
Liability or obligation) and continue in full force and
effect until the expiration of all applicable statutes of
limitation; or
23
<PAGE>
(B) the claims of any broker or finder engaged by or on behalf
of Seller or Parent.
(iii) Limitations. Neither Seller nor Parent shall have any
-----------
obligation to indemnify the Buyer Indemnified Parties from and
against any Adverse Consequences resulting from, relating to or
arising out of this Agreement or the transactions contemplated
hereby until the Adverse Consequences suffered in the aggregate
by all Buyer Indemnified Parties is in excess of Two Hundred
Thousand Dollars ($200,000) (the "Basket Amount") (at which
point Seller and Parent will be obligated to indemnify from and
against all such Adverse Consequences relating back to the
first dollar); provided, further, however, that except in
-------- ------- -------
respect of Adverse Consequences resulting from breaches of the
representations and warranties of either Seller or Parent (if
applicable) contained in Section 3(b) (captioned "Authorization
of Transaction") and Section 3(e) (captioned "Title to Assets")
of this Agreement and except as provided in Section 5(i) below,
the obligation of Seller and Parent to jointly and severally
indemnify the Buyer Indemnified Parties shall not exceed the
product of the number of Shares and the Signing Stock Price.
(e) Indemnification Provisions for the Benefit of Seller and Parent.
----------------------------------------------------------------
(i) Breach of Representations, Warranties or Covenants. In the
---------------------------------------------------
event Buyer breaches any of its representations, warranties
(which representations and warranties shall survive for a
period of twenty-four (24) months from and after the Closing
Date except for the representations and warranties in Section
4(b) (captioned "Authorization of Transaction"), which shall
remain in full force and effect until the expiration of all
applicable statutes of limitations) or covenants contained in
this Agreement and a Seller Indemnified Party (as hereinafter
defined) makes a written claim for indemnification against
Buyer, then Buyer agrees to indemnify each of Seller, Parent
----
and their respective shareholders, Affiliates and agents and
their respective officers, directors and employees,
(collectively, the "Seller Indemnified Parties"; each a "Seller
Indemnified Party") from and against the entirety of the
Adverse Consequences any Seller Indemnified Party may suffer
through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of,
or caused by such breach.
(ii) Assumed Liabilities; Brokers. Buyer agrees to indemnify the
-----------------------------
Seller Indemnified Parties from and against the entirety of any
Adverse Consequences any Seller Indemnified Party may suffer
through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of,
or caused by: (A) any Assumed Liability (provided, however,
that notwithstanding anything to the contrary herein,
24
<PAGE>
the indemnification obligations in this Paragraph (A) for any
Assumed Liability shall survive the Closing and continue in
full force and effect until the expiration of all applicable
statutes of limitation); or (B) the claims of any broker or
finder engaged by or on behalf of Buyer or GDI.
(iii) Limitation. Buyer shall not have any obligation to indemnify
-----------
the Seller Indemnified Parties from and against any Adverse
Consequences resulting from, relating to or arising out of this
Agreement or the transactions contemplated hereby until the
Adverse Consequences suffered in the aggregate by all Seller
Indemnified Parties under this Agreement, together with Adverse
Consequences suffered in the aggregate by all Seller
Indemnified Parties under the GDI Agreement, is in excess of
the Basket Amount (at which point Buyer will be obligated to
indemnify from and against all such Adverse Consequences
relating back to the first dollar); provided, further, however,
-------- ------- -------
that except in respect of Adverse Consequences resulting from
breaches of the representations and warranties of Buyer
contained in Section 4(b) (captioned "Authorization of
Transaction") of this Agreement and except as provided in
Section 5(i) below, the obligation of Buyer to indemnify the
Seller Indemnified Parties under this Agreement, together with
the obligation of GDI to indemnify the Seller Indemnified
Parties under the GDI Agreement, shall not exceed the product
of the number of Shares and the Signing Stock Price.
(f) Indemnification Matters Involving Third Parties.
------------------------------------------------
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third-Party Claim")
which may give rise to a claim for indemnification against any
other Party (the "Indemnifying Party") under this Section 5,
then the Indemnified Party shall promptly notify each
Indemnifying Party thereof in writing; provided, however, that
-------- -------
no delay on the part of the Indemnified Party in notifying any
Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party is prejudiced thereby. In determining
the amount of Adverse Consequences for purposes of Sections
5(d), (e) and (f) hereof, the Parties shall make appropriate
adjustments for tax effects and insurance coverage and take
into account the time cost of money (using the Applicable Rate
as the discount rate).
(ii) Any Indemnifying Party will have the right to assume the
defense of the Third-Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party at any time
within 20 days after the Indemnified Party has given notice of
the Third-Party Claim; provided, however, that the Indemnifying
-------- -------
Party must conduct the defense of the Third-Party Claim
actively and diligently thereafter in order to preserve its
rights in this
25
<PAGE>
regard; and, provided, further, that the Indemnified Party may
-------- -------
retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third-Party Claim; provided,
--------
that, if the named parties to any such Third-Party Claim
(including any impleaded parties) include an Indemnified Party
and the Indemnifying Party or one or more other Indemnified
Parties and such Indemnified Party shall have been advised by
its counsel in writing that there is a conflict of interest
between such Indemnified Party and the Indemnifying Party or
any such other Indemnified Party in the conduct of the defense
thereof, then in any such case the reasonable fees and expenses
of such separate counsel shall be borne by the Indemnifying
Party. In the event that the Indemnifying Party fails to assume
the defense of a Third-Party Claim in the manner provided above
in this Paragraph (ii) or fails to conduct the defense of a
Third-Party Claim actively and diligently after such
assumption, the Indemnified Party shall have the right to
select counsel of its choice (and at its sole discretion) and
the reasonable fees and expenses of such counsel shall be paid
by the Indemnifying Party.
(iii) So long as the Indemnifying Party has assumed and is conducting
the defense of the Third-Party Claim in accordance with
paragraph (ii) above, (A) the Indemnifying Party will not
consent to the entry of any judgment or enter into any
settlement with respect to the Third-Party Claim without the
prior written consent of the Indemnified Party (not to be
withheld unreasonably) unless the judgment or proposed
settlement involves only the payment of money damages by one or
more of the Indemnifying Parties and does not impose an
injunction or other equitable relief upon the Indemnified Party
and (B) the Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably).
(iv) In the event none of the Indemnifying Parties assumes and
conducts the defense of the Third-Party Claim in accordance
with Paragraph (ii) above, (A) the Indemnified Party may defend
against and consent to the entry of any judgment, or enter into
any settlement with respect to, the Third-Party Claim in any
manner it reasonably may deem appropriate (although the
Indemnified Party shall use reasonable efforts to consult with,
and obtain prior written consent from, any Indemnifying Party
in connection therewith, which consent shall not be
unreasonably withheld or delayed) and (B) the Indemnifying
Parties will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by, the Third-
Party Claim to the fullest extent provided in this Section
5(f).
26
<PAGE>
(g) Set-Off and Recoupment.
-----------------------
Seller and Parent, by executing this Agreement, covenant and agree that
Buyer shall have the right, but not the obligation, to set-off against its
obligations to pay any amount payable hereunder by Buyer, and recoup the full
amount of any Adverse Consequences required to be paid hereunder by Seller or
Parent. If Buyer elects to exercise its set-off and recoupment rights, it will
give to Seller and Parent written notice of such election, which shall include
the amount to be set-off, and the amounts payable hereunder by Buyer shall
automatically be reduced by the amount set forth in such notice as fully as if
such amount had been paid by Buyer to Seller.
(h) Other Indemnification Provisions.
---------------------------------
Except for a claim which resulted from intentional fraud on the part of any
Party, the foregoing indemnification provisions shall be the exclusive remedy
any Party may have for breach of representation, warranty or covenant. Parent
hereby agrees that it will not make any claim for indemnification (whether such
indemnification is available by statute, charter document, bylaw, agreement or
otherwise) against any Buyer Indemnified Party as successor in interest to the
assets of Seller solely by reason of the fact that it was a director, officer,
employee or agent of Seller or was serving at the request of Seller as a
partner, trustee, director, officer, employee or agent of another entity
(whether such claim is for judgments, damages, penalties, fines, costs, amounts
paid in settlement, losses, expenses or otherwise) with respect to any action,
suit, proceeding, complaint, claim or demand brought by Buyer or any other
Person against Parent (whether such action, suit, proceeding, complaint, claim
or demand is pursuant to this Agreement, applicable law or otherwise). The
immediately preceding sentence is not intended to foreclose the rights of Parent
to seek indemnification from Buyer pursuant to Section 5(e) of this Agreement.
(i) Fraud.
------
In a claim for indemnity which is related to an Adverse Consequence which
resulted from intentional fraud on the part of Seller or Parent or Buyer, Seller
or Parent or Buyer responsible for such intentional fraud will not have the
benefit of the limitation of Section 5(d)(iii) or 5(e)(iii), as the case may be,
or the 24 months survival limitation period.
(j) Records.
--------
Buyer shall preserve and retain the corporate, accounting, legal and other
records of Seller and the Business that shall come into Buyer's possession as a
result of the transactions contemplated hereby for a period of not less than
seven years from the Closing Date and give reasonable access to Seller, Parent
and their auditors, counsel and other authorized representatives for the purpose
of preparing or defending Tax Returns or for other reasonable business purposes.
27
<PAGE>
(k) Third Party Consents.
---------------------
Each Party shall use its reasonable efforts to procure all consents
necessary to permit it to consummate the transactions contemplated by this
Agreement. If the Parties have not obtained a consent or approval necessary for
the assignment of any Contract, arrangement or right included in the Acquired
Assets or the assumption of any of the Assumed Liabilities prior to the Closing
Date and any condition precedent to the Closing relating thereto shall have been
waived by Buyer and/or Seller as applicable, then such failure shall not
constitute a breach of any representation or warranty of Seller or Parent and
Buyer shall attempt, with the reasonable assistance of Seller and Parent, when
requested by Buyer, to obtain such consents and approvals promptly after the
Closing Date. Within five (5) Business Days after the date hereof, the Parties
shall mutually agree in good faith which consents set forth on Schedule 3(c) are
-------------
deemed to be Required Consents.
(l) Non-Compete
-----------
Each of Seller and Parent agrees that it will not:
(A) for a period of two (2) years from and after the Closing Date
(the "Non-Compete Period"), directly or indirectly (whether
as owner, consultant, employee, partner, venturer, agent
through stock ownership, investment of capital, lending of
money or property, or otherwise) anywhere in the world,
engage in the marketing, sale and distribution to consumers
by direct mail and advertising in free-standing-inserts in
newspapers, magazines, and/or other publications of products
which are of the type offered for sale by Seller and/or the
Acquired Business during 1997 and/or 1998, provided however
that nothing herein contained shall prohibit Carol Wright
Promotions, Inc. and/or V.P. Holdings, Inc. and its
subsidiaries from continuing to be engaged in the business of
selling direct-mail advertising and promotions of the type
sold by such entities in the 24 months prior to the execution
of this Agreement;
(B) during the Non-Compete Period, employ or retain, or have or
cause any other Person or entity to employ or retain or
otherwise cause to terminate his or her employment with
Buyer, any key employee who was employed or retained by Buyer
or Seller at any time during the three-month period prior to
the Closing Date and which key employees shall be identified
by Buyer to Seller in writing any time prior to the Closing
(the "Key Employees");
(C) for a period of three months following the Closing, employ or
retain, or have or cause any other Person or entity to employ
or retain or otherwise cause to terminate his or her
employment with Buyer any other employee who was employed or
retained by Buyer at the Closing Date; provided, however,
that Seller shall not in any
28
<PAGE>
event during the Non-Compete Period solicit the employment of
such employee or cause such employees to leave the employment
with Buyer, and, provided, further, that Seller or Parent
shall not be restricted from employing any employee (other
than a Key Employee) to whom an offer of employment has not
been made by Buyer as of the Closing; or
(D) during the Non-Compete Period, solicit, interfere with, or
endeavor to entice away from Buyer, any principal,
salesperson, supplier or other Person with whom Buyer or
Seller, during the 12-month period prior to the Closing Date
or during the Non-Compete Period, has conducted business or
has had an introduction, lead, relationship, understanding or
arrangement.
Notwithstanding anything set forth in this Section 5(l) to the contrary, no
owner of stock of GDI or owner of less than five percent (5%) of the outstanding
stock of any publicly traded corporation shall be deemed, solely by reason
thereof, to engage in any of its businesses.
(m) Risk of Loss; Condemnation.
---------------------------
(i) Seller will bear the risk of any loss or damage to the Acquired
Assets resulting from fire, theft or other casualty (except
reasonable wear and tear) at all times prior to the Closing. If
any such loss or damage, in the reasonable opinion of Buyer, is
so substantial as to (I) prevent normal operation of any
material portion of the Business or the replacement or
restoration of the lost or damaged property within 20 days
after the occurrence of the event resulting in such loss or
damage, or (II) result in a Material Adverse Effect, Seller
will (a) immediately notify Buyer of that fact and (b) any
Party may elect to terminate this Agreement. If any Party
elects so to terminate this Agreement, all Parties will be
discharged of any and all obligations hereunder (other than any
obligations arising from a breach by any Party of this
Agreement). If the Parties mutually elect to consummate the
transactions contemplated by this Agreement notwithstanding
such loss or damage and do so, all insurance proceeds payable
as a result of the occurrence of the event resulting in such
loss or damage will be delivered promptly by Seller to Buyer,
or the rights to such proceeds will be assigned by Seller to
Buyer if not yet paid over to Seller, and Seller will pay to
Buyer an amount equal to the difference between the amount of
such insurance proceeds and the full replacement cost of the
damaged or lost assets as reasonably agreed to by the Parties.
(ii) If, prior to the Closing, all or any part of or interest in the
Acquired Assets is taken or condemned as a result of the
exercise of the power of eminent domain, or if a Governmental
Body having such power informs Seller or Buyer that it intends
to condemn all or any part of or interest in the
29
<PAGE>
Acquired Assets, and such taking is, in the reasonable opinion
of Buyer, so substantial as to prevent normal operation of any
material portion of the Business (such event being called, in
either case, a "Taking"), then any Party may terminate this
Agreement. If all Parties mutually elect to consummate the
transactions contemplated by this Agreement, notwithstanding
such Taking, then (I) Buyer will have the sole right, in the
name of Seller, if Buyer so elects, to negotiate for, claim,
contest and receive all damages with respect to the Taking;
(II) Seller will be relieved of its obligation to convey to
Buyer the assets or interests that are the subject of the
Taking; (III) at the Closing, Seller will assign to Buyer all
of Seller's rights to all damages payable with respect to such
Taking and will pay to Buyer all damages previously paid to
Seller with respect to the Taking; and (IV) following the
Closing, Seller will give Buyer such further assurances of such
rights and assignments with respect to the taking as Buyer may
from time to time reasonably request.
(n) Tax Return Filing and Payment.
------------------------------
(i) Seller and Parent shall prepare and file any Tax Return with
appropriate Federal, state and local government agencies,
required to be filed with respect to Taxes (excluding income
taxes), a portion of which relates to the assets or the
operations of the Business for periods beginning prior to the
Closing Date for which a return or payment is due after the
Closing Date (collectively, "Straddle Non-Income Tax Returns").
Buyer shall prepare and file all other Tax Returns and pay all
other Taxes required to be filed or paid after the Closing Date
which solely relate to periods after the Closing Date.
(ii) For each Straddle Non-Income Tax Return, Seller and Parent
shall notify Buyer, in good faith, of its obligation for the
Taxes due (or portion thereof, in the case of property Taxes)
in accordance with the terms of this Agreement, within 30 days
of the due date of such Tax Return. Buyer shall remit such
amounts to Seller and Parent within 15 days of such notice. Any
interest, penalties or additional amounts imposed by the
relevant taxing authority caused by Buyer's failure to so remit
such amounts shall be an obligation of Buyer.
(iii) The Parties shall provide each other at no additional charge
with such assistance as may reasonably be requested in
connection with the preparation of any Tax Return relating to
the Acquired Assets.
(iv) Attached hereto as Schedule 5(n) is a schedule of all Tax
-------------
Returns currently being filed by Seller and Parent and their
Affiliates relating to the Acquired Assets and the Business.
Seller and Parent shall not be liable for
30
<PAGE>
any penalties imposed on Buyer as a result of Buyer's reliance
on such schedule.
(o) General.
--------
Each of the Parties will use its reasonable best efforts to take all action
and to do all things necessary in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Section 6 below).
(p) Operation of Business.
----------------------
Prior to the Closing, Seller will not engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, Seller will not engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 3(g) above.
(q) Preservation of Business.
-------------------------
Prior to the Closing, Seller will keep its business and properties
substantially intact, including its present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
(r) Full Access.
------------
Prior to the Closing, upon request of Buyer, Seller will permit
representatives of Buyer to have full access at all reasonable times, and in a
manner so as not to interfere with the normal business operations of Seller, to
all premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to Seller.
(s) No Solicitation.
----------------
Until September 15, 1998, Seller and Parent shall not (i) solicit,
initiate, or encourage the submission of any proposal or offer from any Person
relating to the acquisition of any capital stock or other voting securities, or
any substantial portion of the assets, of Seller (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing.
(t) Material Adverse Change.
------------------------
(i) Subject to the provisions of Section 3(ff), Seller and Parent
shall give prompt written notice to Buyer of any material
adverse development of which the officers or directors of
either Seller or Parent have Knowledge after reasonable
investigation and which Seller and Parent believe causes a
breach of any of their representations and warranties in
Section 3 above.
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<PAGE>
No disclosure by Seller pursuant to this Section 5(t), however,
shall be deemed to amend or supplement Schedules to this
Agreement or to prevent or cure any misrepresentation, breach
of warranty, or breach of covenant.
(ii) Subject to the provision of Section 4(g), Buyer shall give
prompt written notice to Seller and Parent of any material
adverse development of which the officers or directors of Buyer
have Knowledge after reasonable investigation and which it
believes causes a breach of any of its representations and
warranties in Section 4 above. No disclosure by Buyer pursuant
to this Section 5(t), however, shall be deemed to amend or
supplement Schedules to this Agreement or to prevent or cure
any misrepresentation, breach of warranty, or breach of
covenant.
(u) Transfer Taxes.
---------------
Buyer shall pay and hereby agrees to indemnify Seller and Parent, and any
Affiliate thereof, from and against any sales, use, excise, transfer or similar
Taxes that are imposed on or in connection with the consummation of the
transactions contemplated hereby, regardless of the identity of the Person on
which liability is imposed under law, provided that nothing herein shall shift
the liability for sales and use Taxes arising prior to the Closing.
(v) Satisfaction of Excluded Liabilities.
-------------------------------------
Seller and Parent shall satisfy when due all Excluded Liabilities, except
those Excluded Liabilities that Seller disputes in good faith.
(w) Employee Benefit Matters.
-------------------------
(i) Buyer agrees that it will provide Seller with notice of which
employees of Seller that Buyer intends to hire at least five
(5) Business Days before the Closing Date. With respect to the
employees of Seller hired by Buyer ("Hired Employees"), Buyer
---------------
shall honor all accrued vacation not taken by such employees
for the calendar year in which the Closing occurs to the extent
such accrued vacation does not exceed that awarded to Buyer's
other employees pursuant to Buyer's standard vacation accrual
and year-end carryover policy.
(ii) Buyer shall offer health plan coverage to all of the Hired
Employees who become employed by Buyer as of the Closing Date
on terms and conditions generally applicable to all of Buyer's
employees. For purposes of providing such coverage, Buyer shall
waive all preexisting condition limitations for all such Hired
Employees covered by the Seller's health care plan as of the
Closing Date and shall provide such health care coverage
effective as of the Closing Date without the application of any
eligibility period for coverage. In addition, Buyer shall
credit all
32
<PAGE>
employee payments toward deductible and co-payment obligation
limits under Seller's health care plans for the plan year which
includes the Closing Date as if such payments had been made for
similar purposes under Buyer's health care plans during the
plan year which includes the Closing Date, with respect to the
Hired Employees who become employed by Buyer as of the Closing
Date.
(iii) For each Hired Employee who Buyer hires on the Closing Date,
Buyer shall give past service credit for all crediting purposes
under each of its employee benefit plans that, on or after the
Closing Date, provides coverage to the Hired Employees employed
by Buyer as of the Closing Date to the same extent such
employment service was credited for similar purposes under
Seller's employee benefit plans prior to the Closing Date.
(iv) In accordance with the provisions of Internal Revenue Service
Revenue Procedure 96-60, Buyer shall assume the obligation to
make all Form W-2 income tax report filings for the calendar
year in which the Closing Date occurs, and Seller shall be
relieved from making any such filings with respect to the Hired
Employees that are employed by Buyer as of the Closing Date.
Seller shall provide to Buyer all information, including
withholding certificates, as may be reasonably requested by
Buyer to accomplish Buyer's obligations under this Agreement.
(v) Buyer shall offer employment to a sufficient number of the
employees employed by Seller as of the Closing Date to ensure
that fifty or more employees of Seller do not experience
"employment loss," as that term is defined in the Worker
Adjustment Retraining Notification Act, Public Law 100-379
(August 4, 1988) ("WARN Act") during the ninety (90) day period
--------
prior to and including the Closing Date. Buyer shall continue
to employ such employees who accept such offers for a period of
at least ninety (90) days after the Closing Date, except for
such employees who voluntarily terminate employment, retire or
are discharged for cause. Buyer shall be solely responsible for
and shall indemnify and hold Seller harmless from any liability
arising under the WARN Act after the Closing Date, including
without limitation any liability arising out of Buyer's failure
to extend such offers of employment to such employees of
Seller.
(x) Use of Trademark "Carol Wright".
--------------------------------
Parent and Seller agree that Buyer may use all existing printed materials
included in the Acquired Assets even if such materials bear the service mark
"Carol Wright". Buyer covenants and agrees to cease using the service mark
"Carol Wright" on all printed materials as soon as practicable following the
Closing Date, but in no event later than December 31, 1999.
33
<PAGE>
(y) Letters of Credit.
------------------
Buyer covenants and agrees to replace (or to provide other assurances of
payment satisfactory to such vendors) as of the Closing Date outstanding letters
of credit, bonds and powers of attorney, which are in place as of the Closing
Date to secure the obligations of Seller to pay for merchandise ordered in the
Ordinary Course of Business but not yet received.
(z) Payment of Certain Assumed Liabilities.
--------------------------------------
The Assumed Liabilities that are payable by Seller to Parent or its
Affiliates listed on the Closing Date Net Tangible Asset Statement shall be paid
by Buyer on or prior to December 31, 1998.
(aa) Unclaimed Property Tax Returns.
------------------------------
Included in the Assumed Liabilities set forth on the Closing Date Net
Tangible Assets Statement will be an amount relating to refund checks that have
been issued to customers of the Acquired Business but which have not as yet been
cashed as of the Closing. With respect to such refund amounts for which a Tax
is due and payable as of the Closing Date under state unclaimed property laws or
similar escheat laws, Seller and Parent covenant and agree to file all required
Tax Returns with respect thereto and to pay all Taxes reflected thereon as soon
as reasonably practicable following the Closing. Buyer shall reimburse Seller
for the amount of such Taxes actually paid to the applicable Governmental Body
within 30 days of receipt by Buyer of an invoice therefor from Seller, together
with a copy of the applicable Tax Returns and such other supporting materials as
Buyer may reasonably request.
SECTION 6. CONDITIONS TO OBLIGATION TO CLOSE.
---------------------------------
(a) Conditions to Obligation of Buyer.
----------------------------------
The obligation of Buyer to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 3 above
shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(iii) Seller shall have procured all of the Required Consents
specified in Schedule 3(c) at or prior to the Closing;
-------------
(iv) no action, suit or proceeding is pending before any
Governmental Body or arbitrator wherein an unfavorable Order
would (A) prevent consummation of any of the transactions
contemplated by this Agreement or the other Transaction
Documents, (B) cause any of the transactions contemplated by
this Agreement or the other Transaction Documents to be
rescinded
34
<PAGE>
following consummation or (C) affect adversely the Acquired
Assets or their value or the right of Buyer to own the Acquired
Assets and to operate the Acquired Business (and no such Order
shall be in effect);
(v) all material registrations, filings, applications, notices,
consents, approvals, orders, qualifications and waivers required
in respect of the transactions contemplated hereby shall have
been filed, made or obtained, and all waiting periods applicable
under the HSR Act shall have expired or been terminated;
(vi) Seller shall have delivered to Buyer a certificate signed by a
Vice President of Seller, without personal liability, to the
effect that each of the conditions specified above in Section
6(a)(i) and (ii) is satisfied;
(vii) Buyer shall have received from or on behalf of Seller delivery
of all the Closing Documents listed in Section 7(a) below;
(viii) all actions to be taken by Seller and Parent in connection
with consummation of the transactions contemplated hereby and by
the other Transaction Documents and all certificates, opinions,
instruments and other documents required to effect the
transactions contemplated hereby and thereby will be reasonably
satisfactory in form and substance to Buyer;
(ix) Seller shall have delivered the audited balance sheet and related
statements of operations, stockholder's equity and cash flows of
Seller as of and for the fiscal year ended December 26, 1997
prepared in accordance with GAAP and which conform with the
provisions of Regulation S-X of the Securities Act, which have
been previously delivered to Buyer in draft form and with respect
to which Buyer acknowledges that none of the conditions specified
in the definition of "significant subsidiary" in Rule 1-02(w) of
Regulation S-X exceeds 40% when compared to the consolidated
financial statements of GDI. The reasonable cost of preparing
the aforesaid financial statements shall be borne by Seller.
Alternatively, should such statements not be available prior to
the Closing, Seller shall have delivered prior to the Closing a
letter from the Seller's Accountant confirming that they can
provide such audited financial statements. In addition, Seller
shall have delivered a letter, in substantially the form set
forth in Exhibit G, from the Seller's Accountant, containing an
---------
undertaking to consent in the future to the use by Buyer or its
Affiliates, in documents filed pursuant to the Securities Act or
the Securities Exchange Act, of the above required financial
statements of Seller audited by such auditors and the auditor's
reports with respect to such financial statements;
(x) The Estimated Closing Date Net Tangible Assets (as defined below)
of Seller shall be not less than Six Million Dollars
($6,000,000). The amount
35
<PAGE>
of the Estimated Closing Date Net Tangible Assets shall be based
on a statement of the Net Tangible Assets of Seller delivered by
Seller no less than 5 days prior to the Closing Date (which was
prepared in good faith by Seller in accordance with GAAP and
accepted by Buyer, the "Estimated Closing Date Net Tangible
Assets Statement"), as estimated for and as of the Closing Date
(the "Estimated Closing Date Net Tangible Assets"); and
(xi) Seller shall deliver at the Closing a complete, accurate and
current, as of a date within two weeks prior to Closing,
"marketing extract" in electronic form useable by Buyer,
extracted from Seller's database. The marketing extract shall
include, and Seller and Parent hereby covenant that it will
include:
(A) The names of all customers located in the United States,
Canada and Germany, with addresses, ever obtained by Seller
(except for the loss of certain customers which is the
subject of item 4 on Schedule 3(m)(iii)), including but not
------------------
limited to, the names and addresses of all customers, ship
to's and "giftees" located in the United States and the
names and addresses of all persons in the United States who
have inquired about Seller's catalogs in the 60 days
immediately preceding the date of such marketing extract;
(B) For buyers located in the United States and Germany (except
for the loss of certain customers which is the subject of
item 4 on Schedule 3(m)(iii)), associated transaction
------------------
details, including but not limited to, dates and promotional
sources of all transactions, products purchased in each
transaction since 1994, partial customer service history
associated with each transaction, payment type and credit
worthiness information; and
(C) Tables, legends and other explanatory information that will
enable Buyer to interpret all coded information, such as
source codes, product codes, etc.
In the event Seller is unable to deliver the marketing extract in
electronic form required by this Section 6(a)(xi), Seller shall be deemed to
have fulfilled its obligation hereunder by delivering to Buyer at the Closing a
complete system back-up of all of the data files containing all of the
information requested in this Section 6(a)(xi) and delivery within 15 days after
the Closing to Buyer of the marketing extract in electronic form requested by
this Section 6(a)(xi).
Buyer may waive any condition specified in this Section 6(a) if it executes
a writing so stating at the Closing, it being understood that if Buyer elects to
waive in writing any of such conditions and proceed with the Closing, no claim
or right to be indemnified for failure to satisfy such condition shall be
available to Buyer.
36
<PAGE>
(b) Conditions to Obligation of Seller.
-----------------------------------
The obligation of Seller to consummate the transactions to be performed by
it in connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section 4 above
shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing;
(iii) no action, suit or proceeding is pending before any
Governmental Body or arbitrator wherein an unfavorable Order
would (A) prevent consummation of any of the transactions
contemplated by this Agreement or the other Transaction Documents
or (B) cause any of the transactions contemplated by this
Agreement or the other Transaction Documents to be rescinded
following consummation or (C) affect adversely the ability of
Buyer to assume the Assumed Liabilities (and no such Order shall
be in effect);
(iv) Buyer shall have procured all of the consents specified in
Schedule 4(c) at or prior to the Closing;
-------------
(v) all material registrations, filings, applications, notices,
consents, approvals, orders, qualifications and waivers required
in respect of the transactions contemplated hereby shall have
been filed, made or obtained, and all waiting periods applicable
under the HSR Act shall have expired or been terminated;
(vi) Buyer shall have delivered to Seller a certificate signed by the
Chief Executive Officer of Buyer, without personal liability, to
the effect that each of the conditions specified above in
Section 6(b)(i) and (ii) is satisfied;
(vii) Buyer shall have made available to Seller such information
concerning GDI as may be reasonably necessary to enable Seller to
be reasonably satisfied of GDI's ability to fulfill its duties
and obligations pursuant to the Registration Rights Agreement;
(viii) Seller shall have received from or on behalf of Buyer all of the
Closing Documents listed in Section 7(b) below;
(ix) all actions to be taken by Buyer or GDI in connection with
consummation of the transactions contemplated hereby and by the
other Transaction Documents and all certificates, opinions,
instruments and other documents required to effect the
transactions contemplated hereby and thereby will be reasonably
satisfactory in form and substance to Seller;
37
<PAGE>
(x) Seller shall have received the certificate of GDI and the other
deliveries of GDI to be delivered to Seller pursuant to the GDI
Agreement; and
(xi) Seller shall have received the consent of the landlord to enter
into the Sublease.
Seller may waive any condition specified in this Section 6(b) if it executes a
writing so stating at the Closing, it being understood that if Seller elects to
waive in writing any of such conditions and proceeds with the Closing, no claim
or right to be indemnified for failure to satisfy such condition shall be
available to Seller.
SECTION 7. CLOSING DOCUMENTS.
-----------------
(a) Seller and Parent Deliveries.
-----------------------------
Seller or Parent, as the case may be, shall execute and deliver (or cause
the execution and delivery of) the following documents to Buyer, prior to or
simultaneously with the Closing:
(i) the Bill of Sale;
(ii) the Assignment Documents;
(iii) the Required Consents listed on Schedule 3(c) and all other
-------------
documents necessary to convey good and valid title to the
Acquired Assets;
(iv) the Escrow Agreement;
(v) the Registration Rights Agreement;
(vi) a certificate, dated the Closing Date, of the Secretary of each
of Seller and Parent: (A) attaching copies, certified by such
officer, without personal liability, as true and complete, of
the Bylaws of each of Seller and Parent, as amended to the
Closing Date; (B) attaching resolutions of the Board of
Directors and the stockholders of each of Seller and Parent, if
required, in connection with the authorization and approval of
the execution, delivery and performance by each of Seller and
Parent of this Agreement and the Transaction Documents to which
it is a party; (C) setting forth the incumbency of the officer
or officers of each of Seller and Parent who have executed and
delivered this Agreement and each other Transaction Document to
which it is a party, including therein a signature specimen of
each such officer or officers; (D) attaching copies, certified
by the Secretary of State of the State of Delaware, of each of
Seller and Parent's Certificate of Incorporation as amended to
the Closing Date; and (E) certifying without personal liability
that no action, suit or proceeding is pending before any
Governmental Body or arbitrator wherein an unfavorable Order
would (1) prevent consummation of any of the
38
<PAGE>
transactions contemplated by this Agreement or the other
Transaction Documents, (2) cause any of the transactions
contemplated by this Agreement or the other Transaction
Documents to be rescinded following consummation or (3) affect
adversely the Acquired Assets or their value or the right of
Buyer to own the Acquired Assets and to operate the Acquired
Business (and that no such Order is in effect);
(vii) a license agreement with Buyer in substantially the form of
Exhibit H (the "License Agreement");
---------
(viii) a service agreement executed by Parent with GDI incorporating
the terms and conditions set forth in the draft agreement
attached hereto as Exhibit I (the "Service Agreement");
---------
(ix) an opinion of Dow, Lohnes & Albertson, PLLC, counsel to Seller
in substantially the form and substance as set forth in
Exhibit J;
---------
(x) UCC-3 financing statements terminating UCC-1 financing
statements filed wherever and whenever, including with the
Delaware, Connecticut and Nebraska Secretary of State and the
Lancaster County, Nebraska, and Stamford (Town), Connecticut,
Clerk's Office, releasing all Security Interests held by any
Person in the Acquired Assets, including, without limitation,
those security interests evidenced by the UCC-1 financing
statements set forth on Schedule 7(a)(x);
----------------
(xi) evidence reasonably acceptable to Buyer that Seller has taken
all steps necessary to change, effective immediately following
the Closing: its corporate name to any name other than "Carol
Wright Gifts, Inc." or any variant or abbreviation thereof;
provided that Carol Wright Promotions, Inc. shall not be
-------- ----
required to change its corporate name;
(xii) an assignment to Buyer of Seller's merchant numbers used for
credit card purchases, to the extent transferable;
(xiii) the Sublease (including an estoppel certificate from the
lessor);
(xiv) letters from each of MCI and Sprint, consenting to the
assignment and transfer to Buyer of all toll-free 800 and 888-
prefix phone numbers used by Seller in the Business; and
(xv) the Lease between Buyer and Seller.
(b) Buyer Deliveries.
-----------------
Buyer shall execute and deliver to Seller (or cause the execution and
delivery of) the following documents to Seller, prior to or simultaneously with
the Closing:
39
<PAGE>
(i) the Bill of Sale executed by Buyer;
(ii) the Assignment Documents;
(iii) the Stock Certificates for the Shares issued by GDI;
(iv) the consideration provided for in Section 2(c)(iii), by wire
transfer of immediately available funds;
(v) the Escrow Agreement executed by Buyer;
(vi) the Registration Rights Agreement executed by GDI;
(vii) a certificate, dated the Closing Date, of the Secretary or other
authorized representative of each of Buyer and GDI: (A)
attaching resolutions of the members of Buyer and the Board of
Directors and the stockholders, if required, of GDI, in
connection with the authorization and approval of the execution,
delivery and performance of this Agreement (in the case of
Buyer) and the other Transaction Documents to which it is a
party; (B) attaching copies, certified by such officer, without
personal liability, as true and complete of the Limited
Liability Company Agreement of Buyer and of the Bylaws of GDI;
(C) setting forth the incumbency of the officer or officers of
each of Buyer and GDI who have executed and delivered this
Agreement (in the case of Buyer) and each other Transaction
Document to which it is a party, including therein a signature
specimen of each such officer or officers; (D) attaching copies,
certified by the Secretary of State of the State of Delaware, of
Buyer's Certificate of Formation and GDI's Articles of
Incorporation; (E) certifying, without personal liability, that
no action, suit or proceeding is pending before any Governmental
Body or arbitrator wherein an unfavorable Order would (1)
prevent consummation of any of the transactions contemplated by
this Agreement or the other Transaction Documents, (2) cause any
of the transactions contemplated by this Agreement or the other
Transaction Documents to be rescinded following consummation or
(3) affect adversely the right of Buyer to assume the Assumed
Liabilities or pay the Purchase Price (and that no such Order is
in effect);
(viii) all material authorizations, consents and approvals of
governments and governmental agencies set forth in Schedule 4(c)
-------------
hereof;
(ix) the License Agreement;
(x) the Service Agreement;
(xi) an opinion of Morrison & Foerster LLP, counsel to Buyer and GDI,
in substantially the form and substance as set forth in Exhibit
-------
L;
--
40
<PAGE>
(xii) the Lease; and
(xiii) the Sublease.
SECTION 8. TERMINATION.
-----------
(a) Method of Termination.
----------------------
This Agreement may be terminated or abandoned only as follows:
(i) At any time prior to the Closing by the mutual consent of the
Parties hereto;
(ii) By Buyer after September 30, 1998, if any of the conditions
set forth in Section 6(a) hereof to which the obligations of
Buyer are subject have not been fulfilled or waived in
writing, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of Buyer;
(iii) By Seller after September 30, 1998, if any of the conditions
set forth in Section 6(b) hereof to which the obligations of
Seller are subject have not been fulfilled or waived in
writing, unless such fulfillment has been frustrated or made
impossible by any act or failure to act of Seller or Parent;
or
(iv) By any Party pursuant to the terms of Sections 5(m) ("Risk of
Loss; Condemnation") and 10(c) ("HSR and Other Filings").
(b) Rights Upon Termination.
------------------------
(i) In the event of a termination of this Agreement pursuant to
Section 8(a)(i) or 8(a)(iv) hereof, each Party shall pay the
costs and expenses incurred by it in connection with this
Agreement, and no Party (or any of its officers, directors,
members, employees, agents, representatives or stockholders)
shall be liable to any other Party for any cost, expense,
damage or loss of anticipated profits hereunder.
(ii) In the event of a termination of this Agreement pursuant to
Section 8(a)(ii) hereof and either Seller or Parent is in
breach of any material provision of this Agreement, then
Buyer shall have the right to seek all remedies available to
it as provided under this Agreement and at law.
(iii) In the event of termination of this Agreement pursuant to
Section 8(a)(iii) hereof and Buyer is in breach of any
material provision of this Agreement, then Seller and Parent
shall have the right to seek all remedies available to them
as provided under this Agreement and at law.
41
<PAGE>
(iv) In the event of termination of this Agreement for any reason,
the confidentiality provisions contained in Section 5(b) hereof
shall survive.
SECTION 9. ARBITRATION OF DISPUTES.
-----------------------
(a) Mandatory Arbitration.
----------------------
Buyer, on the one hand, and Seller and Parent, on the other, shall promptly
submit any dispute, claim or controversy arising out of or relating to this
Agreement or any Transaction Document (including, without limitation, with
respect to the meaning, effect, validity, termination, interpretation,
performance or enforcement of this Agreement or such Transaction Document) or
any alleged breach (including any action in tort, contract, equity or otherwise)
to binding arbitration before one arbitrator (the "Arbitrator"). The Parties
agree that, except as otherwise provided herein respecting temporary or
preliminary injunctive relief, binding arbitration shall be the sole means of
resolving any dispute, claim or controversy arising out of or relating to this
Agreement or any Transaction Document (including, without limitation, with
respect to the meaning, effect, validity, termination, interpretation,
performance or enforcement of this Agreement or such Transaction Document) or
any alleged breach (including any claim in tort, contract, equity or otherwise).
(b) Arbitrator's Qualifications and Selection.
------------------------------------------
The Arbitrator shall be an active member of the New York Bar, specializing
for at least 15 years in mergers and acquisitions. The Arbitrator shall be
selected by the New York chapter head of the American Arbitration Association
upon the request of any Party. The Arbitrator shall be selected within 30 days
of request.
(c) Governing Law; Written Decision.
--------------------------------
Any arbitration hereunder or under any Transaction Document, shall be
governed by the laws of the State of Delaware, which laws the Arbitrator shall
apply in rendering his or her decision. The Arbitrator shall issue a written
decision, setting forth findings of fact and conclusions of law, within 60 days
after he or she shall have been selected. The Arbitrator shall have no
authority to award punitive or other exemplary damages.
(d) Procedures; Evidence; Experts.
------------------------------
(i) Any arbitration instituted by a Party shall be held in New
York, New York, in accordance with and under the then-current
provisions of the rules of the American Arbitration
Association, except as otherwise provided herein.
(ii) On application to the Arbitrator, any Party shall have rights
to discovery to the same extent as would be provided under the
Federal Rules of Civil Procedure and the Federal Rules of
Evidence shall apply to any Arbitration under this Agreement;
provided, however, that the Arbitrator
-------- -------
42
<PAGE>
shall limit any discovery or evidence such that his or her
decision shall be rendered within the period referred to in
Section 9(c).
(iii) The Arbitrator may, at his or her discretion and at the expense
of the Party(ies) who will bear the cost of the Arbitration,
employ experts to assist him or her in his or her
determinations.
(e) Costs.
------
The costs (excluding the fees of counsel for the Parties) of the
Arbitration proceeding shall be borne solely by the unsuccessful Party and shall
be awarded as part of the Arbitrator's decision, unless the Arbitrator shall
otherwise allocate such costs, for reasons set forth in such decision.
(f) Consent to Jurisdiction.
------------------------
Any judgment upon any award rendered by the Arbitrator may be entered in
and enforced by any court of competent jurisdiction. The Parties expressly
consent to the jurisdiction of the Federal courts in New York, New York to
enforce any award of the Arbitrator or to render any provisional or injunctive
relief in connection with or in aid of the arbitration. The Parties expressly
consent to the personal and subject matter jurisdiction of the Arbitrator to
arbitrate any and all matters to be submitted to arbitration hereunder. None of
the Parties hereto shall challenge any arbitration hereunder on the grounds that
any Person necessary to such arbitration (including, without limitation, any
Party hereto) shall have been absent from such arbitration for any reason,
including, without limitation, that such Person shall have been the subject of
any bankruptcy, reorganization or insolvency proceeding.
(g) Injunctive Relief.
------------------
This Section 9 shall not prevent any Party from seeking or obtaining
temporary or preliminary injunctive relief in a court for any breach or
threatened breach of any provision of this Agreement or any Transaction
Document; provided, that the determination whether such breach or threatened
--------
breach shall have occurred and the remedy therefor (other than with respect to
such preliminary or temporary relief) shall be made by arbitration pursuant to
this Section 9.
(h) Indemnification.
----------------
The Parties shall indemnify the Arbitrator and any experts employed by the
Arbitrator and hold them harmless from and against any Claim arising out of any
arbitration under this Agreement or any Transaction Document, unless resulting
from the willful misconduct of the Person indemnified.
(i) Survival.
---------
The provisions of this Section 9 shall survive the termination of this
Agreement and any Transaction Document.
43
<PAGE>
(j) WAIVER OF JURY TRIAL; EXEMPLARY DAMAGES.
----------------------------------------
ALL PARTIES HEREBY WAIVE THEIR RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY
DISPUTE ARISING UNDER THIS AGREEMENT OR ANY TRANSACTION DOCUMENT. No Party
shall be awarded punitive or other exemplary damages respecting any dispute
arising under this Agreement or any Transaction Document.
(k) Interest.
---------
Any amount payable by one Party to another under this Section 9, shall bear
interest at the rate of 12% per annum from the date due until paid.
SECTION 10. OTHER AGREEMENTS.
----------------
(a) Lockup of the Shares.
---------------------
Seller agrees not to offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly (including short sales, sales against the tax and/or
other hedging to derivative transactions) or announce an offering of, any Shares
beneficially owned by Seller before November 4, 1998, without Buyer's prior
written consent.
(b) Press Releases and Public Announcements.
----------------------------------------
Upon the signing of this Agreement or within a reasonable time thereafter,
Buyer shall, and Seller or Parent may, issue a press release relating to the
purchase and sale of the assets of Seller. The text of such press release shall
be subject to the reasonable approval, which will not be unreasonably withheld
or delayed, of Seller and Parent or Buyer, as the case may be. No Party shall
disclose to any third party, other than its legal and financial advisors and
others who need to know in order to consummate this Agreement, the terms of this
Agreement or the other Transaction Documents, without the prior written approval
of the other Parties; provided, however, that any Party may make any public
-------- -------
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(c) HSR and Other Filings.
----------------------
Each of the Parties agrees to use commercially reasonable efforts to effect
all necessary registrations and filings including, but not limited to, filings
under the HSR Act, if applicable, and submissions of information requested by
Governmental Bodies, necessary to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to cooperate
with the other Parties in connection with the foregoing. The Parties shall use
commercially reasonable efforts to respond as promptly as reasonably practicable
to any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests received from
44
<PAGE>
any other Governmental Body in connection with antitrust matters. The Parties
shall use their respective commercially reasonable efforts to overcome any
objections which may be raised by the FTC, the Antitrust Division or any other
Governmental Body having jurisdiction over antitrust matters. Notwithstanding
anything to the contrary in this Agreement, if any Party, in its reasonable
business judgment, considers the imposition of a condition upon the transactions
by a Governmental Body to be materially adverse to such Party, such Party may
terminate this Agreement.
(d) No Third-Party Beneficiaries.
-----------------------------
This Agreement shall not confer any rights or remedies upon any Person
other than the Parties and their respective successors and permitted assigns.
(e) Entire Agreement.
-----------------
This Agreement (including the Exhibits, Appendices and Schedules) and the
Transaction Documents (including the documents referred to herein and therein)
collectively constitute the entire agreement among the Parties and supersede any
prior and contemporaneous understandings, agreements or representations by or
among the Parties (including, without limitation, the Letter of Proposal and
Term Sheet, dated June 15, 1998), written or oral, to the extent they related in
any way to the subject matter hereof.
(f) Succession and Assignment.
--------------------------
This Agreement shall be binding upon and inure to the benefit of the
Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests or
obligations hereunder without the prior written approval of the other Parties;
provided, however, that Buyer may (i) assign any or all of its rights and
- -------- -------
interests hereunder to one or more of its Affiliates and (ii) designate one or
more of its Affiliates to perform its obligations hereunder (in any or all of
which cases Buyer nonetheless shall remain responsible for the performance of
all of its obligations hereunder).
(g) Counterparts.
-------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument.
(h) Headings.
---------
The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
(i) Notices.
--------
All notices, requests, demands, claims and other communications hereunder
will be in writing. Any notice, request, demand, claim or other communication
hereunder shall be deemed
45
<PAGE>
duly given if (and then two Business Days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid and addressed to the
intended recipient as set forth below:
If to Seller or Parent:
----------------------
to:
Cox Target Media, Inc.
8605 Largo Lakes Drive
Largo, Florida 33773
Facsimile: (813) 399-3120
Attn: William B. Disbrow
with a copy in each case
------------------------
(which shall not constitute notice) , to:
-----------------------------------------
Dow, Lohnes & Albertson, PLLC
Suite 1600
One Ravinia Drive
Atlanta, Georgia 30346
Facsimile: (770) 901-8874
Attn: Richard A. Wilhelm, Esq.
If to Buyer:
-----------
Genesis Direct Forty-Three, LLC
c/o Genesis Direct, Inc.
100 Plaza Drive
Secaucus, New Jersey 07094
Facsimile: (201) 583-3611
Attention: Douglas S. Rose
With a copy to (which shall not constitute notice):
--------------------------------------------------
Raphael S. Grunfeld Esq. - at the above address
Facsimile: (201) 583-3611
- and -
Ira Greenstein, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Facsimile: (212) 468-7900
46
<PAGE>
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(j) Governing Law.
--------------
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Delaware without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Delaware.
(k) Amendments and Waivers.
-----------------------
No amendment of any provision of this Agreement shall be valid unless the
same shall be in writing and signed by each Party. No waiver by any Party of
any default, misrepresentation or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(l) Severability.
-------------
Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction.
(m) Expenses.
---------
Each Party will bear its own costs and expenses (including, without
limitation, fees and expenses of accountants, attorneys, financial advisors and
brokers) incurred in connection with the Letter of Proposal and Term Sheet,
dated June 15, 1998, this Agreement, the other Transaction Documents and the
preparation and negotiation thereof and the consummation of the transactions
contemplated hereby and thereby ("Transaction Expenses").
(n) Construction.
-------------
The Parties have participated jointly in the negotiation and drafting of
this Agreement and the other Transaction Documents. In the event an ambiguity
or question of intent or interpretation arises, this Agreement and the other
Transaction Documents 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 and
47
<PAGE>
the other Transaction Documents. Any reference to any Federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(o) Incorporation of Appendices, Exhibits and Schedules.
----------------------------------------------------
The Exhibits, Appendices and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
(p) Taxable Asset Purchase.
-----------------------
Each of the Parties agrees that the transaction contemplated in this
Agreement shall be reflected in any Tax Return filed by such Party as taxable
sale (as described in Section 1001 of the Code) of the Acquired Assets.
(q) Further Actions.
----------------
The Parties will execute and deliver to the other (and Buyer shall cause
GDI to deliver), from time to time at or after the Closing, for no additional
consideration and at no additional cost to the requesting party, such further
assignment, certificates, instruments, records or other documents, assurances or
things as may be reasonably necessary to give full effect to this Agreement and
to allow each Party fully to enjoy and exercise the rights accorded and acquired
by it under this Agreement.
(r) Time of the Essence.
----------------------
Time is of the essence under this Agreement. If the last day permitted for
the giving of any notice or the performance of any act required or permitted
under this Agreement falls on a day that is not a Business Day, the time for the
giving of such notice or the performance of such act will be extended the next
succeeding Business Day.
(s) Bulk Sales.
-----------
The Parties acknowledge and agree that Seller and Parent will not comply
with the bulk sale requirements of the Uniform Commercial Code. Buyer agrees
that such non-compliance will not constitute a breach of this Agreement;
provided however, Seller and Parent agree that any claim which is related to an
Adverse Consequence which results from such non-compliance is an Excluded
Liability.
48
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
GENESIS DIRECT FORTY-THREE, LLC
By: /s/ Warren Struhl
----------------------------------------
Name: Warren Struhl
Title: President and Chief Executive Officer
CAROL WRIGHT GIFTS, INC.
By: /s/ William B. Disbrow
----------------------------------------
Name: William B. Disbrow
Title: Vice President
COX TARGET MEDIA, INC.
By: /s/ William B. Disbrow
----------------------------------------
Name: William B. Disbrow
Title: President and Chief Executive Officer
49
<PAGE>
APPENDIX I
DEFINITIONS
-----------
"Acquired Assets" means all of the Business, goodwill, assets,
---------------
properties and rights of every nature, kind and description, whether tangible or
intangible, real, personal or mixed, wherever located and whether or not carried
or reflected on the books and records of Seller, which are (i) owned by Seller
or (ii) in which Seller has any interest, or (iii) which are located on the
premises of Seller or Parent and used exclusively by Seller in its Business as
of the Closing Date, or which are otherwise used exclusively in, related
exclusively to, or useful exclusively to, the Business, except for the Excluded
Assets referred to below. The Acquired Assets shall include, but not be limited
to, the following:
(a) all tangible personal property set forth on Schedule 1.1(a)
---------------
(such as machinery, equipment, inventories of supplies, manufactured and
purchased parts, goods in process and finished goods, furniture, automobiles,
trucks, tractors, trailers, tools, jigs, dies and leasehold improvements);
(b) all Intellectual Property set forth on Schedule 1.1(b), goodwill
---------------
associated therewith, licenses and sublicenses granted and obtained with respect
thereto and rights thereunder, remedies against infringements thereof and rights
to protection of interests therein under the laws of all jurisdictions,
including, without limitation, the exclusive right to use the toll-free
telephone numbers used for Seller's catalogs and the domain name "carolwright
gifts.com," and the right to use in the Business the names (including
derivatives and variations thereof) and associated logos, if any, "Applecreek,"
"Health & Comfort," and the Miscellaneous Design (collectively, the "Catalog
Names"); provided, however, that the Acquired Assets shall not include any
-------- -------
Intellectual Property specifically listed as an Excluded Asset;.
(c) all agreements, contracts, indentures, mortgages, instruments,
chattel paper, guaranties, other similar arrangements and rights thereunder,
including, without limitation, the leases in respect of (i) the telephone and
computer equipment (to the extent included in the Acquired Assets), and (ii)
warehouse machinery, set forth on Schedule 1.1(c) (the "Assumed Contracts");
---------------
(d) all accounts, notes and other receivables set forth in
Schedule 1.1(d);
- ---------------
(e) all claims, deposits, prepayments, refunds, causes of action,
chooses in action, rights of recovery, rights of set off and rights of
recoupment (excluding any such item exclusively relating to an Excluded Asset,
Excluded Contract or Excluded Liability);
(f) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from
governments and governmental agencies set forth in Schedule 1.1(f) to the extent
---------------
transferable;
I-1
<PAGE>
(g) all books, records, ledgers, files, documents, correspondence,
customer lists, prospect lists and other lists, plats, architectural plans,
drawings and specifications, creative materials, advertising and promotional
materials, studies, reports and other printed or written material (excluding any
such item exclusively relating to an Excluded Asset, Excluded Contract or
Excluded Liability);
(h) all cash; provided, however, that Seller may exclude cash from
-------- -------
the Acquired Assets so long as the Closing Date Net Tangible Assets do not fall
below $7,750,000;
(i) all prepaid expenses set forth in Schedule 1.1(i) (including all
---------------
prepaid catalog expenses and all rights to Seller's library or collection of
photographs or images (in whatever form or medium) used in Seller's catalogs) to
the extent included in Closing Date Net Tangible Assets; provided that any
prepaid expense that is included in the Closing Date Net Tangible Assets will be
considered part of the Acquired Assets even if its value is zero;
(j) all data processing programs, computer printouts, data bases,
hardware, merchant numbers used for credit card purchases (to the extent
transferable) and related items owned by Seller or used exclusively in the
conduct of the Business, including accounting, invoices, crediting and data
processing losses and programs; and
(k) all rights, claims and causes of action held by or inuring to the
benefit of Seller (excluding any such item relating exclusively to an Excluded
Asset, Excluded Contract or Excluded Liability); provided, however, that the
-------- --------
Acquired Assets shall not include (i) those items specifically listed on
Schedule 1.2; (ii) the corporate charter, qualifications to conduct business as
- ------------
a foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers (except merchant
numbers used for credit card purchases to the extent transferable), seals,
minute books, stock transfer books, blank stock certificates and other documents
relating to the organization, maintenance, internal corporate matters and
existence of Seller as a corporation; (iii) any of the rights of Seller under
this Agreement (or under any other agreement between Seller on the one hand and
Buyer on the other hand entered into on or after the date of this Agreement);
(iv) any real property interests owned, held or leased by Seller except to the
extent expressly provided for in the Lease or the Sublease; (v) the Excluded
Contracts and any and all assets which are the subject of any of the Excluded
Contracts; (vi) all claims, causes of actions, choses in action, rights of
recovery and rights of set-off of any kind in favor of Seller and pertaining to,
or arising out of, an Excluded Asset, an Excluded Contract or offsetting any
Excluded Liabilities or with respect to any asset where Seller has retained the
liability therefor or warranty claim with respect thereto; (vii) any employee
benefit plan of Seller; (viii) any current asset of Seller that is not included
in the Closing Date Net Tangible Assets, provided, however, that any asset that
-------- -------
is so included will be considered part of the Acquired Assets even if its value
is zero; (ix) any claims, rights and interests in and to any refunds of Federal,
state or local franchise, income or other Taxes or fees, whether attributable to
Taxes or fees paid with respect to periods ending on or before the Closing Date
or receivable by reason of any carryback to any such period, provided, however,
-------- -------
that Buyer may apply any Tax credit
I-2
<PAGE>
received by it from such taxing authority to any liability for such period for
which Buyer is held liable; (x) all Tax Returns and all other records relating
to Excluded Assets or Excluded Liabilities; (xi) all financial records of
Seller; (xii) all insurance policies of Seller; or (xiii) any agreement, right,
asset or property used by Seller that is not exclusively used in the Acquired
Business; or (xiv) the unregistered service mark "Carol Wright Gifts" (except to
the extent granted to Buyer pursuant to the License Agreement) and the service
mark "Carol Wright," together with all derivatives, abbreviations and variations
thereof (all of such excluded items collectively referred to as the "Excluded
Assets").
"Acquired Business" means the businesses and operations acquired by
-----------------
Buyer pursuant to this Agreement.
"actual attorneys' fees" or "attorneys' fees actually incurred" means
---------------------- ---------------------------------
the full and actual costs of any real services actually performed in connection
with the matter for which such fees are sought, calculated on the basis of the
usual fees charged by the attorneys performing such services and shall not be
limited to "reasonable attorneys' fees" as that term may be defined in statutory
or decisional authority.
"Adverse Consequences" means all actions, suits, proceedings,
--------------------
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses and fees, including court costs and reasonable attorneys' fees
and expenses, whether resulting from the breach of a representation, warranty,
covenant or otherwise.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
---------
regulations promulgated under the Securities Exchange Act.
"Agreement" has the meaning set forth in the preface of this
---------
Agreement.
"Antitrust Division" has the meaning set forth in Section 10(c) of
------------------
this Agreement.
"Applicable Rate" means the annualized interest rate as determined
---------------
pursuant to Section 1274(d) of the Code.
"Arbitrator" has the meaning set forth in Section 9(a) of this
Agreement.
"Assignment Documents" has the meaning set forth in Section 2(e) of
this Agreement.
"Assumed Contracts" has the meaning set forth in the definition of the
-----------------
term "Acquired Assets."
"Assumed Liabilities" means (i) all Liabilities and obligations listed
-------------------
on Schedule 1.3 hereto, but only to the extent that such Assumed Liabilities
------------
have been incurred in the Ordinary Course of Business and are within usual
commercial terms; (ii) all Liabilities and
I-3
<PAGE>
obligations of Seller under the Contracts and other arrangements listed on
Schedule 1.1(c) to furnish goods, services and other non-cash benefits to
- ---------------
another party after the Closing or to pay for goods, services and other non-cash
benefits that another party will furnish to Seller after the Closing, in each
case in connection with the Business; (iii) those Liabilities included in the
Closing Date Net Tangible Assets; (iv) product liability claims with respect to
the specific inventory included in the Acquired Assets; and (v) the Liabilities
with respect to the Acquired Business arising from and after the Closing
provided that they were not incurred by Seller prior to the Closing. Except as
expressly set forth in the preceding sentence, Buyer shall not assume or be
liable for any liabilities or obligations of Seller, whether the same are direct
or indirect, fixed, contingent or otherwise, known or unknown, whether arising
under an agreement or contract or otherwise, including without limitation the
following: (A) any Liability (including in connection with termination,
compensation, benefits or obligations under any employee benefit plan) relating
to any employee of Seller for the period up to and including the Closing Date,
(B) any product liability, claims for injuries, property damage or other losses
arising with respect to sales of merchandise prior to the Closing (but excluding
with respect to inventory of products existing at or prior to the Closing Date
(which are included in the Acquired Assets and for which Buyer will be
responsible); (C) any Liability for any claim relating to any act, omission,
event, occurrence or condition on or before the Closing Date, whether or not
such claim is asserted, pending or threatened; (D) any Liability for any failure
to comply with or any violation of any Law relating to the Business, which
failure or violation occurred at or prior to the Closing Date; (E) other than to
the extent expressly set forth in this Agreement, any Liability for Taxes
arising as a result of the transactions contemplated hereby and any Liability
for Taxes attributable to the Business for the period up to and including the
Closing Date; (F) any Liability related to matters not disclosed by the Seller
to Buyer hereunder; (G) any Liability in connection with any infringement of any
Intellectual Property rights of any Person for the period up to and including
the Closing Date; (H) the corporate charter, qualification to conduct business
as a foreign corporation, arrangements with registered agents relating to
foreign qualifications, taxpayer and other identification numbers, seals, minute
books, stock transfer books, stock certificates and other documents relating to
the organization, maintenance and existence of Seller as a corporation; (I) any
Liability incurred in connection with the operation of the Business for the
period up to and including the Closing Date other than as expressly set forth in
this Agreement; and (J) any Liability incurred by Seller to Parent or any of its
Affiliates, including, but not limited to, any notes, loans or advances other
than those Liabilities which are included in the Closing Date Net Tangible
Assets.
"Basket Amount" has the meaning set forth in Section 5(d)(iii) of
-------------
this Agreement.
"Bill of Sale" has the meaning set forth in Section 2(e) of this
------------
Agreement.
"Business" means the businesses and operations of Seller as conducted
--------
now by Seller anywhere in the world.
"Business Day" means any day other than a Saturday, a Sunday or a day
------------
on which banking institutions in New York, New York are not open for business.
I-4
<PAGE>
"Buyer" has the meaning set forth in the preface of this Agreement.
-----
"Buyer Indemnified Parties" has the meaning set forth in Section
-------------------------
5(d)(i) of this Agreement.
"Buyer Indemnified Party" has the meaning set forth in Section 5(d)(i)
-----------------------
of this Agreement.
"Catalog Names" has the meaning set forth in the definition of the
-------------
term "Acquired Assets."
"Claims" mean all actions, suits, notices, claims, demands, orders,
------
Governmental Body-imposed or court-imposed requirements, proceedings, hearings
and investigations.
"Closing" has the meaning set forth in Section 2(d) of this Agreement.
-------
"Closing Date" has the meaning set forth in Section 2(d) of this
------------
Agreement.
"Closing Date Balance Sheet" has the meaning set forth in Section
--------------------------
2(f)(i) of this Agreement.
"Closing Date Net Tangible Assets" has the meaning set forth in
--------------------------------
Section 2(f)(i) of this Agreement.
"Closing Date Net Tangible Assets Statement" has the meaning set forth
------------------------------------------
in Section 2(f)(i) of this Agreement.
"Closing Stock Price" means the closing stock price of the Common
-------------------
Stock on the Business Day immediately prior to the Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Common Stock" has the meaning set forth in Section 2(c)(i) of this
------------
Agreement.
"Confidential Information" means any information concerning the
------------------------
businesses and affairs of Seller, Parent, Buyer, the Business or the Acquired
Business that is not already generally available to the public and that is
treated as confidential by the party who owns or created such information, other
than (x) information that is required to be disclosed by applicable law or
judicial order, (y) disclosures made by any Party to its directors, officers,
employees, attorneys, accountants, members, lenders and accredited potential
investors (excluding any potential investors that are competitors of the
Business) and other agents that need the information in connection with the
evaluation and consummation of the transactions contemplated herein, or (z)
disclosures made by any Party as shall be reasonably necessary in connection
with obtaining the consents and approvals set forth in Schedule 3(c) or Schedule
------------- --------
4(c); provided, however, in connection with disclosure of Confidential
- ---- -------- -------
Information under (x) and (z) hereof, the disclosing Party shall give the other
Party hereto timely prior notice of the anticipated
I-5
<PAGE>
disclosure and the Parties shall cooperate in designing reasonable procedural
and other safeguards to preserve, to the maximum extent possible, the
confidentiality of such material.
"Contract" means any contract, agreement, indenture, note, bond, loan,
--------
guaranty, instrument, lease, conditional sale contract, mortgage, license,
franchise, power of attorney, commitment or other binding arrangement, whether
written or oral.
"Environmental, Health and Safety Laws" means the following as in
-------------------------------------
effect as of the date hereof: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976 and the Occupational Safety and Health Act of 1970, each as amended,
together with all other laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings and charges thereunder) of
Federal, state, local and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, public health and safety
or employee health and safety, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants or chemical,
industrial, hazardous or toxic materials or wastes into ambient air, surface
water, ground water or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants or chemical, industrial, hazardous or toxic
materials or wastes.
"Escrow Agent" has the meaning set forth in the Escrow Agreement.
------------
"Escrow Agreement" has the meaning set forth in Section 2(c)(i) of
----------------
this Agreement.
"Escrow Shares" has the meaning set forth in Section 2(c)(i) of this
-------------
Agreement.
"Estimated Closing Date Net Tangible Assets" has the meaning set forth
------------------------------------------
in Section 6(a)(x) of this Agreement.
"Estimated Closing Date Net Tangible Assets Statement" has the meaning
----------------------------------------------------
set forth in Section 6(a)(x) of this Agreement.
"Excluded Assets" has the meaning set forth in the definitions of the
---------------
term "Acquired Assets."
"Excluded Contracts" means those Contracts of Seller other than
-----------------
Assumed Contracts, including those listed in Schedule 1.2.
------------
"Excluded Liability" means any liability of Seller other than Assumed
------------------
Liabilities.
"FTC" has the meaning set forth in Section 10(c) of this Agreement.
---
"GAAP" means United States generally accepted accounting principles
----
as in effect from time to time.
I-6
<PAGE>
"GDI" has the meaning set forth in Section 2(c)(i) of this Agreement.
---
"GDI Agreement" means that certain Agreement of even date herewith
-------------
among Seller, Parent and GDI.
"Governmental Body" means any government or any agency, subdivision or
-----------------
instrumentality of any government.
"Historical Financial Statements" has the meaning set forth in Section
-------------------------------
3(f)(i) of this Agreement.
"Hired Employees" has the meaning set forth in Section 5(w)(i) of this
---------------
Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 5(f)(i) of
-----------------
this Agreement.
"Indemnifying Party" has the meaning set forth Section 5(f)(i) of this
------------------
Agreement.
"Intellectual Property" means (a) all inventions (whether patentable
---------------------
or unpatentable and whether or not reduced to practice), all improvements
thereto and all patents, patent applications and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof, (b) all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all goodwill
associated therewith and all applications, registrations and renewals in
connection therewith, (c) all copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, (d) all mask
works and all applications, registrations and renewals in connection therewith,
(e) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, housefile databases, mailing lists, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(f) all computer software (including all data and related documentation), (g)
all other proprietary rights and (h) all copies and tangible embodiments thereof
(in whatever form or medium).
"June 1998 Balance Sheet" has the meaning set forth in Section
-----------------------
3(f)(ii) of this Agreement.
"June 1998 Financial Statements" has the meaning set forth in Section
------------------------------
3(f)(ii) of this Agreement.
"Key Employees" has the meaning set forth in Section 5(l)(B) of this
-------------
Agreement.
I-7
<PAGE>
"Knowledge" means actual knowledge.
---------
"Law" means any applicable law, statute, code,
---
ordinance, regulation or other requirement of any Governmental Body.
"Lease" has the meaning set forth in Section 3(l)(i) of this
-----
Agreement.
"Liabilities" means any direct or indirect indebtedness, liability,
-----------
claim, loss, damage, obligation or responsibility, known or unknown, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, whether or not of a kind required by
GAAP to be set forth on a financial statement or in the notes thereto,
including, without limitation, any Liabilities for Taxes.
"License Agreement" has the meaning set forth in Section 7(a)(vii) of
-----------------
this Agreement.
"Mailing Lists" has the meaning set forth in Section 3(m)(vii) of this
-------------
Agreement.
"Material Adverse Effect" means a material adverse effect on the
-----------------------
assets, properties, operations, results of operations, condition (financial or
otherwise) of Seller or the Business or on the ability of Seller to consummate
the transactions contemplated herein or in the other Transaction Documents.
"Miscellaneous Design" means the registered service mark of the Carol
--------------------
Wright cameo, registration number 1,542,841.
"Most Recent Balance Sheet" has the meaning set forth in Section
-------------------------
3(f)(i) of this Agreement.
"Most Recent Fiscal Year End" has the meaning set forth in Section
---------------------------
3(f)(i) of this Agreement.
"Net Tangible Assets" for purposes hereof, as of any date of
-------------------
determination (or date of estimated determination) shall be equal to the
following as of such date or date of estimation: (i) cash, accounts receivable
(net of reserves), inventories (net of reserves), prepaid and deferred promotion
costs, prepaid expenses (except prepaid intercompany and prepaid divestiture
expenses), leasehold improvements, furniture, fixtures and equipment, computer
equipment, software and construction in progress (in each case net of all
accumulated depreciation and amortization), and investment in joint venture,
less (ii) accounts payable, deferred revenue, accrued payroll and related
- ----
withholdings, and other current liabilities, all incurred in the Ordinary Course
of Business for the benefit of the Acquired Assets and Acquired Business
consistent with Seller's past custom and practice, and as reflected on the
Closing Date Net Tangible Asset Statement as determined in accordance with GAAP
consistently applied.
"Non-Compete Period" has the meaning set forth in Section 5(l)(A) of
------------------
this Agreement.
I-8
<PAGE>
"NTA Excess" has the meaning set forth in Section 2(f)(iv) of this
----------
Agreement.
"NTA Objections Statement" has the meaning set forth in Section
------------------------
2(f)(ii) of this Agreement.
"NTA Shortfall" has the meaning set forth in Section 2(f)(iii) of
-------------
this Agreement.
"Order" means any order, judgment, ruling, injunction, award, decree,
-----
charge or writ.
"Ordinary Course of Business" means the ordinary course of business of
---------------------------
Seller consistent with past custom and practice (including with respect to
quantity and frequency) and for the direct benefit of the Acquired Business or
the Acquired Assets.
"Parent" has the meaning set forth in the preface of this Agreement.
------
"Parties" has the meaning set forth in the preface of this Agreement.
-------
"Person" means an individual, a partnership (general or limited), a
------
member, a corporation, a limited liability company or partnership, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
"Post-Closing Determination" has the meaning set forth in Section
--------------------------
2(f)(ii) of this Agreement.
"Purchase Price" has the meaning set forth in Section 2(c) of this
--------------
Agreement.
"Registration Rights Agreement" has the meaning set forth in Section
-----------------------------
2(c)(i) of this Agreement.
"Required Consents" has the meaning set forth in Section 3(c) of this
-----------------
Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
-----------------
charge or other security interest, except for (i) minor imperfections of title
and liens which are not substantial in amount, which do not materially detract
from the property subject thereto or materially impair the use of the property
in the Business and which have arisen in the Ordinary Course of Business, (ii)
liens for Taxes not yet due or which are being contested in good faith by
appropriate proceedings, (iii) pledges or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other social security legislation, (iv) carriers, warehousemen's, mechanics',
materialmen's, repairmen's or other like
I-9
<PAGE>
liens arising in the Ordinary Course of Business which are not overdue for a
period of more than 90 days or which are being contested in good faith by
appropriate proceedings, and (v) statutory and contractual liens in favor of
landlords securing leases.
"Seller" has the meaning set forth in the preface to this Agreement.
------
"Seller's Accountant" has the meaning set forth in Section 2(f)(i) of
-------------------
this Agreement.
"Seller Indemnified Parties" has the meaning set forth in Section
--------------------------
5(e)(i) of this Agreement.
"Seller Indemnified Party" has the meaning set forth in Section
------------------------
5(e)(i) of this Agreement.
"Service Agreement" has the meaning set forth in Section 7(a)(viii) of
-----------------
this Agreement.
"Shares" has the meaning set forth in Section 2(c)(i) of this
------
Agreement.
"Signing Stock Price" means the average closing price of the Common
-------------------
Stock, as published in the Wall Street Journal, of the five trading days
immediately prior to the signing of this Agreement.
"Straddle Non-Income Tax Returns" has the meaning set forth in Section
-------------------------------
5(n)(i) of this Agreement.
"Sublease" has the meaning set forth in Section 3(l)(ii) of this
--------
Agreement.
"Subsidiary" means any corporation with respect to which a specified
----------
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any Federal, state, local and foreign income, profits,
---
franchise, gross receipts, payroll, employment, sales, use, property,
withholding, excise and other tax, duty or assessment of any nature whatsoever,
together with all interest, penalties and additions imposed with respect
thereto. The term "taxable" shall have a correlative meaning.
"Taking" has the meaning set forth in Section 5(m)(ii) of this
------
Agreement.
"Tax Return" means any return, declaration, report, claim for refund,
----------
or information return or statement relating to Taxes, including any schedule or
attachment thereto and including any amendment thereof.
"Third-Party Claim" has the meaning set forth in Section 5(f)(i) of
-----------------
this Agreement.
I-10
<PAGE>
"Third-Party Firm" has the meaning set forth in Section 2(f)(ii) of
----------------
this Agreement.
"Transaction Documents" means this Agreement, the Escrow Agreement,
---------------------
the Registration Rights Agreement, the Lease, the Sublease, the License
Agreement, the Service Agreement, the GDI Agreement, and every other instrument
and document entered into in connection with this Agreement.
"Transaction Expenses" has the meaning set forth in Section 10(m)
--------------------
of this Agreement.
"WARN Act" has the meaning set forth in Section 5(w)(v) of this
--------
Agreement.
I-11
<PAGE>
EXHIBIT 2.2
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
This Amendment No. 1 to the Asset Purchase Agreement (this "Amendment") is
entered into as of September 14, 1998, among GENESIS DIRECT FORTY-THREE, LLC, a
Delaware limited liability company ("Buyer"), CAROL WRIGHT GIFTS, INC., a
Delaware corporation ("Seller"), and COX TARGET MEDIA, INC., a Delaware
corporation ("Parent"). Buyer, Seller and Parent are referred to collectively
herein as the "Parties."
WHEREAS, the Parties have previously entered into that certain Asset
Purchase Agreement, dated as of August 5, 1998 (the "Agreement"), pursuant to
which the Parties have agreed to carry out a transaction in which Buyer will, on
the terms and conditions set forth therein, purchase substantially all of the
assets and assume certain of the liabilities of Seller for the consideration
specified therein;
WHEREAS Buyer, Seller and Parent have each determined that it is advisable
that the Agreement be amended as provided herein;
WHEREAS in order to enable Seller to transfer shares of common stock of
Genesis Direct, Inc. resulting from the conversion of the Convertible Note paid
to Seller hereunder as part of the Purchase Price pursuant to the exemption from
registration provisions of Section 5 of the Securities Act of 1933 under Rule
144 of the regulations promulgated under the Securities Act, Seller has
requested that Genesis Direct, Inc. and not Buyer issue the Convertible Note and
Genesis Direct, Inc. has agreed to do so;
NOW THEREFORE, in consideration of the premises and the mutual promises
herein made and in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows:
SECTION 1. Section 2(c) of the Agreement entitled "Purchase Price" shall
be deleted in its entirety and a new Section 2(c) shall be inserted in lieu
thereof, which shall read in its entirety as follows:
"(c) Purchase Price.
--------------
In consideration of the purchase by Buyer of the Acquired Assets and
the assumption of the Assumed Liabilities, Buyer agrees to cause its parent
Genesis Direct, Inc. ("GDI") to pay to Seller an aggregate purchase price
(subject to adjustment as provided below) (the "Purchase Price") consisting
of:
(i) Stock. 2,400,000 shares (the "Shares") of the common stock,
-----
$.01 par value per share (the "Common Stock"), of GDI. The Parties
hereby agree to enter into and Buyer shall cause GDI to enter into (i)
a registration rights agreement attached as Exhibit A hereto (the
---------
"Registration Rights Agreement"), and (ii) an escrow agreement
attached as Exhibit B hereto (the "Escrow Agreement"). Pursuant to
---------
the Escrow Agreement, at the Closing,
1
<PAGE>
25% of the Shares shall be placed in escrow (the "Escrow Shares") to
secure indemnification obligations of Parent and Seller set forth in
Section 5(d) and, if necessary, the Purchase Price reduction defined
and set forth in Section 2(f)(iii).
(ii) Convertible Note. An interest-bearing convertible
----------------
promissory note of GDI in the original principal amount of Twelve
Million Seven Hundred Fifty Thousand Dollars ($12,750,000),
substantially in the form of Exhibit N hereto (the "Convertible
Note"); provided, however, that if the Closing Date Net Tangible
Assets (as defined in and determined pursuant to Section 2(f)(i)
below) is less than Seven Million Four Hundred Thousand Dollars
($7,400,000), then the principal amount of the Convertible Note shall
be reduced in an amount equal to one dollar for each one dollar that
such Closing Date Net Tangible Assets are less than $7,400,000.
(iii) Payments in Respect of Non-Compete and Confidentiality
------------------------------------------------------
Agreements. Cash consideration in an aggregate amount of One Hundred
----------
Thousand Dollars ($100,000), payable to Seller and Parent, in the
amount of Fifty Thousand Dollars ($50,000) each at the Closing (as
defined below)."
SECTION 2. The second sentence of Section 2(f)(iii) of the Agreement shall
be deleted in its entirety and the following sentence shall be inserted in lieu
thereof, which shall read as follows:
"Seller shall no later than ten (10) Business Days after delivery of
the Post Closing Determination deliver to Buyer the Convertible Note and
Buyer shall simultaneously cause GDI to reissue to Seller a new Convertible
Note with the principal amount thereof reduced by the amount provided in
the immediately preceding sentence."
SECTION 3. Section 5(g) shall be deleted in its entirety and a new Section
5(g) shall be inserted in lieu thereof, which shall read in its entirety as
follows:
"Recoupment Under Convertible Note or from Escrow Shares. Buyer and
-------------------------------------------------------
GDI shall have the option but not the obligation of recouping all or any
part of any Adverse Consequences Buyer may suffer (in lieu of seeking any
indemnification to which it is entitled under this Section 5) by notifying
Seller that GDI is reducing the principal amount outstanding under the
Convertible Note by the amount of the Adverse Consequences suffered (such
reduced amount is referred to herein as the "Set-Off Amount"); provided,
however, that such reduction shall not be made prior to a "final
determination," as defined in Section 5 of the Convertible Note; and
provided further that GDI shall only be entitled to so reduce the
Convertible Note in the event that Buyer has not been fully indemnified for
such Adverse Consequences within 30 days following such "final
determination." This shall affect the timing and amount of payment
required under the Convertible Note in
2
<PAGE>
the same manner as if Buyer had made a payment otherwise due under the
Convertible Note and reduce the number of shares of Common Stock to be
received upon conversion of the Convertible Note in the manner provided
therein. If Buyer elects to exercise its set-off and recoupment rights
against the Convertible Note, it will give to the holder of the Convertible
Note written notice of such election which includes the Set-Off Amount, and
the amount of obligations under the Convertible Note shall automatically be
reduced by the Set-Off Amount set forth in such notice as if such amount
had been prepaid by Buyer. In addition, Buyer shall have the option of
recouping any portion or all of any Adverse Consequences it may suffer out
of the Escrow Shares."
SECTION 4. Section 5(s) shall be amended by deleting the words "until
September 15, 1998," and by replacing them with the words "until September 18,
1998."
SECTION 5. Section 7(b)(vi) shall be deleted in its entirety and the
following sentence shall be inserted in lieu thereof, which shall read in its
entirety as follows:
"(vi) the Registration Rights Agreement and the Convertible Note,
each executed by GDI;"
SECTION 6. The definition of "Transaction Documents" in Appendix I shall
be deleted in its entirety and a new definition of "Transaction Documents" shall
be inserted in lieu thereof, which shall read in its entirety as follows:
"Transaction Documents" means this Agreement, the Escrow Agreement, the
---------------------
Registration Rights Agreement, the Lease, the Sublease, the License Agreement,
the Service Agreement, the GDI Agreement, the Convertible Note, and every other
instrument and document entered into in connection with this Agreement."
SECTION 7. Certain Schedules attached to the Agreement are hereby amended
as set forth in Exhibit A attached hereto and the Schedules set forth in Exhibit
A replace in their entirety said Schedules originally attached to the Agreement.
SECTION 8. Upon the effectiveness of this Amendment, each reference in the
Agreement to "this Agreement," "hereunder," "hereof," "herein," or words of like
import, and each reference thereto in any other Transaction Documents, shall
mean and be a reference to the Agreement, as amended hereby. Except as
specifically amended above, the Agreement shall remain in full force and effect
and is hereby ratified and confirmed.
SECTION 9. This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together will constitute
one and the same instrument.
SECTION 10. Capitalized terms used in this Amendment and not defined herein
have the meanings ascribed to them in the Agreement.
SECTION 11. This Amendment shall be governed by and construed in accordance
with the domestic laws of the State of Delaware.
3
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Amendment as of
the date first above written.
GENESIS DIRECT FORTY THREE, LLC
By: /s/ Ronald R. Benanto
-------------------------------------------
Name: Ronald R. Benanto
Title: Vice President and Chief Financial
Officer
CAROL WRIGHT GIFTS, INC.
By: /s/ William B. Disbrow
---------------------------------------
Name: William B. Disbrow
Title: Vice President
COX TARGET MEDIA, INC.
By: /s/ William B. Disbrow
----------------------------------------
Name: William B. Disbrow
Title: President and Chief
Executive Officer
4
<PAGE>
EXHIBIT 4.1
GENESIS DIRECT, INC.
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of September 14, 1998, by and between Genesis
Direct, Inc., a Delaware corporation (the "Company"), and Carol Wright Gifts,
Inc. (the "Stockholder").
PREAMBLE
WHEREAS, pursuant to the terms of an Asset Purchase Agreement, dated as of
August 5, 1998, among Genesis Direct Forty-Three, LLC (the "Buyer"), the
Stockholder and Cox Target Media, Inc., as amended by Amendment No. 1 thereto
(as amended, the "Asset Purchase Agreement"), the Buyer, a wholly-owned
subsidiary of the Company, purchased substantially all of the assets of
Stockholder; and
WHEREAS, pursuant to the terms of the Asset Purchase Agreement, the Buyer
caused the Company to issue to the Stockholder 2,400,000 shares of the Company's
Common Stock, $.01 par value per share, subject to certain adjustments (the
"Common Stock"), as set forth in the Asset Purchase Agreement and a Convertible
Note, dated the dated hereof (the "Convertible Note"), convertible into
additional shares of the Company's Common Stock ; and
WHEREAS, the Company desires to extend registration rights to the Stockholder
for the Common Stock issued pursuant to the Asset Purchase Agreement, including,
without limitation, upon conversion of the Convertible Note.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the Company and the Stockholder agree as follows:
Section 1. Definitions. As used in this Agreement, the following terms
-----------
shall have the following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission, or any
other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations
promulgated thereunder, all as the same shall be in effect at the time.
(c) "Fully Diluted Common Stock" shall mean: (i) all outstanding shares of
Common Stock, (ii) any shares of Common Stock issuable upon the conversion of
any outstanding securities of the Company, and (iii) any shares of Common Stock
issued or issuable under the Company's stock option plans and employee stock
purchase plan.
1
<PAGE>
(d) "Holder" shall mean any holder of outstanding Registrable Securities or
anyone who holds outstanding Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with this
Agreement.
(e) "Person" shall mean and include an individual, a corporation, a limited
liability company, an association, a partnership, a trust or estate, a
government or any department or agency thereof.
(f) "Priority Registrable Securities" shall mean all of the equity
securities of the Company which have registration rights attached thereto as of
the date of this Agreement, to the extent the same have not been sold to the
public.
(g) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which holders notify the Company of
their intention to offer Registrable Securities.
(h) "Registrable Securities" shall mean all of the following to the extent
the same have not been sold to the public: (i) any and all shares of Common
Stock of the Company issued to the Stockholder pursuant to the Asset Purchase
Agreement, including, without limitation, shares of Common Stock issued pursuant
to, and upon conversion of, the Convertible Note; or (ii) stock issued in
respect of securities referred to in clause (i) above or clause (iii) below in
any reorganization; or (iii) stock issued in respect of the securities referred
to in either clause (i) or clause (ii) above as a result of a stock split, stock
dividend, recapitalization or combination or upon the exercise of any rights,
options, warrants or similar rights to purchase any Common Stock.
Notwithstanding the foregoing, Registrable Securities shall not include
otherwise Registrable Securities (i) sold by a Person in a transaction in which
its rights under this Agreement are not properly assigned; or (ii)(A) sold to
the public under a registration statement filed with the Commission or pursuant
to Rule 144, (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof and with respect to which all transfer restrictions, and restrictive
legends with respect thereto, if any, are removed upon the consummation of such
sale or (C) the registration rights associated with such securities have been
terminated pursuant to Section 10 of this Agreement.
(i) "Registration Expenses" shall mean all expenses incident to the
Company's performance or compliance with its obligations under this Agreement,
including without limitation, all Commission, NASD and stock exchange or Nasdaq
registration and filing fees and expenses, fees and expenses of compliance with
applicable state securities or "blue sky" laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with "blue sky" qualifications of the Registrable Securities), printing
expenses, messenger and delivery expenses, the fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange or national market system on which such securities are
listed, fees and disbursements of counsel for the Company and all independent
certified accountants (including the expenses of any annual audit and "cold
comfort" letters required by or incident to
2
<PAGE>
such performance and compliance), the fees and disbursements of underwriters
customarily paid by issuers or sellers of securities (including the fees and
expenses of any "qualified independent underwriter" required by the NASD), the
reasonable fees of one counsel retained in connection with each such
registration by the holders of a majority of the Registrable Securities and
Priority Registrable Securities being registered, the reasonable fees and
expenses of any special experts retained by the Company in connection with such
registration, and fees and expenses of any other Persons retained by the Company
(but not including any underwriting discounts or commissions or transfer taxes,
if any, attributable to the sale of Registrable Securities by holders of such
Registrable Securities other than the Company).
(j) "Rule 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time.
(k) "Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations promulgated
thereunder, all as the same shall be in effect at the time.
Section 2. Piggyback Registration.
----------------------
(a) If the Company at any time proposes to register, for its account
or the account of any holder of the Company's securities, any of its equity
securities (other than securities issued with respect to any acquisition or any
employee stock option, stock purchase, or similar plan) under the Securities Act
on Form S-1, Form S-2, Form S-3 or any other form of general application for
sale of securities to the public in an underwritten public offering upon which
may be registered securities similar to the Registrable Securities, it will each
such time at least 30 days prior to the anticipated filing date of such proposed
registration statement give written notice to the holders of all Registrable
Securities of its intention to do so and, upon the written request of any such
holder made within 15 days after the receipt of any such notice (which request
shall specify the Registrable Securities intended to be disposed of by such
holder and state the intended method of disposition thereof), the Company will
use its best efforts to effect the registration under the Securities Act of
Registrable Securities which the Company has been so requested to register, to
the extent requisite to permit the disposition (in accordance with the intended
methods thereof as aforesaid) by such holders of the Registrable Securities to
be so registered, subject to the discretion of the managing underwriter to limit
or exclude any of such equity securities from the offering (subject to the same
priorities as set forth in Section 2(b) hereof) if it determines that the
inclusion thereof would adversely affect the marketing of the securities to be
sold by the Company therein.
(b) If a requested registration pursuant to this Section 2 involves
an underwritten public offering, and the managing underwriter shall advise the
Company in writing (with a copy to each holder of Registrable Securities
requesting registration) that in its opinion, the number of securities to be
included in such registration exceeds the number which can be sold in such
offering within a price range acceptable to the holders of a majority of the
Registrable Securities and Priority Registrable Securities requested to be
registered therein, the Company shall exclude from such registration, to the
extent of the number of securities which the Company is so advised cannot be
sold in such offering, first, on a pro rata basis in accordance with Fully
Diluted
3
<PAGE>
Common Stock held, the Registrable Securities requested to be registered for the
account of any Person and, second, in accordance with the terms and provisions
of the relevant controlling agreements, the Priority Registrable Securities. Any
holder of Registrable Securities to be included in any registration pursuant to
this Section 2 by written notice to the Company within 20 days after its receipt
of a copy of a notice from the managing underwriter delivered in accordance with
this Section 2(b), may rescind its request for registration of any Registrable
Securities held by it with respect to all or any of such Registrable Securities.
In addition to such underwriter cutbacks, any such registration will be subject
to any commercially reasonable and customary conditions that might be imposed by
the managing underwriter of the underwritten offering.
Section 3. Registration Expenses. The Registration Expenses in connection
---------------------
with any registration in which Registrable Securities shall be included pursuant
to Section 2 hereof (including any registration withdrawn) shall be borne by the
Company.
Section 4. Registration Procedures. If and whenever the Company is required
-----------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in this Agreement, the Company will as
promptly as possible:
(a) prepare and (in any event within 120 days after the end of the
period within which requests for registration may be given to the Company) file
with the Commission a registration statement with respect to such Registrable
Securities and use its best efforts to cause such registration statement to
become effective; provided, however, that before filing with the Commission a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to each holder of Registrable Securities included in
such registration statement copies of such documents proposed to be filed for
such holder's review;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all such Registrable Securities and other securities covered by
such registration statement until such time as all of such Registrable
Securities and other securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement, but in no event for a period of less than 120 days
after such registration statement becomes effective;
(c) furnish to each seller of such Registrable Securities such number
of copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other applicable
securities or "blue sky" laws of such jurisdictions within the United States of
America (including territories and commonwealths thereof) as each seller shall
reasonably request, except that the Company shall not for any such purpose be
4
<PAGE>
required to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, to subject itself to taxation in
any such jurisdiction, or to consent to general service of process in any
jurisdiction;
(e) notify each seller of any such Registrable Securities covered by
such registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act within the period mentioned in
paragraph (b) of this Section 4, of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances under which they were made (and
upon receipt of such notice and until a supplemented or amended prospectus as
set forth below is available, each such seller shall not offer or sell any
securities covered by such registration statement and shall return all copies of
such prospectus to the Company if requested to do so by it), and at the request
of any such seller prepare and furnish to such seller as promptly as practicable
a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made; and
(f) furnish to each holder for which Registrable Securities are
registered or are to be registered, and to any participating underwriters, at
the time of the disposition of such Registrable Securities by such holder, a
signed copy of an opinion of counsel dated the effective date of such
registration statement covering substantially the matters with respect to such
registration statement (and the prospectus, included therein) as are customarily
covered in opinions of issuer's counsel delivered to underwriters in
underwritten public offerings of securities; it being understood that such
opinion may contain such qualifications and assumptions as are customary in the
rendering of similar opinions.
The Company may require each seller of any Registrable Securities as to which
any registration is being effected to furnish to the Company such information
regarding such seller and the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing and as shall be
required by law to effect such registration.
Section 5. Indemnification.
---------------
(a) In the event of any registration of any Registrable Securities
under the Securities Act pursuant to this Agreement, the Company will indemnify
and hold harmless the seller of such securities and its directors and officers
and each underwriter of such securities and each other person, if any, who
controls such seller or underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such seller, director or officer or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
5
<PAGE>
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or (ii) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; and the Company will reimburse such seller, each such director and
officer, each such underwriter and each such controlling person for any legal or
any other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that, the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary prospectus,
final prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company through an instrument duly
executed by such seller, officer or director, underwriter or controlling person
specifically for use in the preparation thereof. Such indemnity shall remain in
full force and effect irrespective of any investigation by any person
indemnified above.
(b) In connection with any registration statement in which a holder
of Registrable Securities is participating, each holder shall indemnify (to the
extent permitted by law in the same manner and to the same extent as set forth
in paragraph (a) of this Section 5, but only to an amount, with respect to such
prospective seller, not in excess of the gross proceeds realized by such seller
from the sale of Registrable Securities registered pursuant to such registration
statement) the Company, each director of the Company, each officer of the
Company who shall sign such registration statement and any person who controls
the Company within the meaning of the Securities Act, with respect to any
statement in or omission from such registration statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, if such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller, specifically for use in the preparation
of such registration statement, preliminary prospectus, final prospectus,
amendment or supplement.
(c) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 5, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party, give written notice
to the latter of the commencement of such action; provided, however, that the
failure of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding paragraphs
of this Section 5, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, unless in the written opinion of counsel for such
indemnified party a conflict of interest between such indemnified and
indemnifying party may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent that it may wish,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expense subsequently incurred by the
latter in connection with the defense thereof. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified
6
<PAGE>
party, consent to the entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation. An indemnifying party shall not be subject to any
liability for any settlement made without its consent which shall not be
unreasonably withheld.
If for any reason, the foregoing indemnity is unavailable, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other hand.
Section 6. Information by the Holders. Each of the holders included in any
--------------------------
registration statement shall furnish to the Company such information regarding
such holder and the distribution proposed by such holder as the Company may
reasonably request in writing and shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
Section 7. "Market Standoff" Agreement. Any holder shall not sell or
---------------------------
otherwise transfer or dispose of any Registrable Securities prior to or on
November 4, 1998. In addition, any holder, if required by the Company and any
underwriter of Registrable Securities of the Company, shall agree not to sell or
otherwise transfer or dispose of any Registrable Securities of the Company
(other than those included in the registration) held by such holder during the
period not to exceed ninety (90) days (or such shorter period as may be
requested by the managing underwriter) following the effective date of such
registration as the Company and the underwriters may specify, provided that all
executive officers and directors of the Company enter into similar agreements.
Section 8. Rule 144 Reporting. With a view to making available the benefits
------------------
of certain rules and regulations of the Commission which may permit the sale of
the Registrable Securities to the public without registration, the Company
agrees to use all commercially reasonable efforts to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) so long as any holder owns any Registrable Securities, furnish to
such holder upon request a written statement by the Company as to its compliance
with the reporting requirements of Rule 144, the Securities Act and the Exchange
Act (to the extent that it is then subject to any such reporting requirements),
a copy of the most recent annual or quarterly report of the Company, and such
other reports and documents so filed as any holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing such holder
to sell any such securities without registration.
7
<PAGE>
Section 9. Assignability. The registration rights set forth in this
-------------
Agreement shall be assignable by any holder, in whole or in part, to any
transferee of Registrable Securities; provided, however, that (i) such transfer
or assignment may otherwise be made in accordance with applicable securities
laws, (ii) prompt written notice of such transfer or assignment is given to the
Company, and (iii)(A) such transferee or assignee controls, is controlled by, or
is under common control with, the Stockholder and (B) such transferee or
assignee is acquiring at least 25,000 shares of Registrable Securities.
Section 10. Termination of Rights.
---------------------
(a) The rights of any particular holder to cause the Company to
register securities shall terminate with respect to such holder at such time as
such holder is able to dispose of all of his or its Registrable Securities
pursuant to the provisions of Rule 144(k) or such similar rule than in effect.
(b) Notwithstanding the provisions of paragraph (a) of this Section
10, all rights of any particular holder under this Agreement shall terminate at
5:00 p.m., Eastern time, on the third anniversary of this Agreement.
Section 11. Miscellaneous.
-------------
(a) Further Assurances. Each party hereto shall do and perform or
------------------
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
(b) Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.
(c) Entire Agreement; Amendment; Waiver. This Agreement and the
-----------------------------------
Asset Purchase Agreement contain the entire agreement among the parties hereto
with respect to the subject matter hereof. This Agreement may be amended only by
a writing signed by the Company and the holders of more than fifty percent (50%)
of the Registrable Securities, as constituted from time to time. Any amendment
so approved shall be binding on all the holders of the Registrable Securities.
No waiver of any term or provision shall be effective unless in writing signed
by the party to be charged.
(d) Binding Effect. This Agreement shall be binding on and inure
--------------
to the benefit of the parties hereto and, subject to the terms and provisions
hereof, their respective legal representative, successors and assigns.
(e) Invalidity of Provision. The invalidity or unenforceability of
-----------------------
any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder
8
<PAGE>
of this Agreement in that jurisdiction or the validity or enforceability of this
Agreement, including that provision, in any other jurisdiction.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be deemed but one and the same instrument and
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement to produce or account for more than one
counterpart.
(g) Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and may be sent initially by facsimile
transmission and shall be mailed by registered or certified mail, postage
prepaid, or otherwise delivered by hand or by messenger, addressed (i) if to a
holder, at such holder's address set forth on the books of the Company, or at
such other address as such holder shall have furnished to the Company in
writing, or (ii) if to the Company, one copy should be sent to the Company's
current address at 100 Plaza Drive, Secaucus, New Jersey 07094, or at such other
address as the Company shall have furnished to the holders. All such notices
shall be effective and deemed duly given when received or when attempted
delivery is refused.
(h) Headings. The descriptive headings of the several paragraphs
--------
of this Agreement are inserted for convenience only and do not constitute part
of this Agreement.
(i) Non-Public Information. Any other provisions of this Agreement
----------------------
to the contrary notwithstanding, the Company's obligation to file a registration
statement, or cause such registration statement to become and remain effective,
shall be suspended for a period not to exceed 30 days (and for periods not
exceeding, in the aggregate, 60 days in any 24-month period) if there exists at
the time material non-public information relating to the Company which, in the
reasonable opinion of the Company, should not be disclosed.
(j) Other Registration Rights. For a period of two years from the
-------------------------
date of this Agreement, the Company shall not, without the prior written consent
of holders of at least a majority of the Registrable Securities, grant rights to
any person with priority over the registration rights granted pursuant to this
Agreement without granting such priority rights to the holders of the
Registrable Securities; provided, however, that, from and after the date of this
Agreement, the Company may grant rights to any person on a parity with the
registration rights granted pursuant to this Agreement.
(k) Controlling Document. To the extent that any terms or provisions
--------------------
of this Agreement are inconsistent with the terms or provisions of the Asset
Purchase Agreement, the terms and provisions of the Asset Purchase Agreement
shall control.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
GENESIS DIRECT, INC.
By /s/ Ronald R. Benanto
------------------------------------
Name: Ronald R. Benanto
Title: Vice President and Chief Financial
Officer
CAROL WRIGHT GIFTS, INC.
By /s/ William B. Disbrow
------------------------------------
Name: William B. Disbrow
Title: Vice President
10
<PAGE>
EXHIBIT 4.2
-----------
CONVERTIBLE NOTE
----------------
THIS NOTE WAS ORIGINALLY ISSUED ON SEPTEMBER 14, 1998. THIS NOTE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE TRANSFER OF THIS
NOTE IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN THE ASSET PURCHASE
AGREEMENT DATED AS OF AUGUST 5, 1998 AND AS AMENDED ON SEPTEMBER 14, 1998 TO
WHICH THE ORIGINAL HOLDER OF THIS NOTE IS A PARTY. THE ISSUER OF THIS NOTE WILL
FURNISH A COPY OF THESE PROVISIONS TO THE HOLDER HEREOF WITHOUT CHARGE UPON
WRITTEN REQUEST.
GENESIS DIRECT, INC.
Convertible Promissory Note
New York, New York
September 14, 1998
Genesis Direct, Inc., a Delaware corporation (the "Company"), for value
received, promises to pay, subject to the terms and conditions of this Note, to
the order of Carol Wright Gifts, Inc., a Delaware corporation (the "holder"),
the principal sum of TWELVE MILLION, SEVEN HUNDRED FIFTY THOUSAND AND NO/100ths
DOLLARS ($12,750,000.00) with interest on the outstanding unpaid principal
amount hereof to accrue from the date hereof to the date which is the earlier of
(i) the Conversion Date (as defined below) and (ii) March 14, 2001, at the
annual rate equal to one-half of a percentage point (1/2%) above the interest
rate or rates, as the case may be, publicly announced by Citibank, N.A., New
York, New York, as its prime rate then in effect. Interest shall be payable in
cash on and not later than the earliest of (i) thirty (30) days following the
date this Note is converted into stock pursuant to Section 3 hereof, (ii) 30
days following the Conversion Date and (iii) March 14, 2001. All interest
payment calculations required hereunder shall be computed on the basis of the
actual number of days elapsed over a year comprised of 365 days.
This Note is issued by the Company pursuant to the Asset Purchase
Agreement, dated as of August 5, 1998, among Genesis Direct Forty-Three, LLC
("Buyer"), the holder and Cox Target Media, Inc., as amended by Amendment No. 1,
dated as of September 14, 1998 (as amended, the "Asset Purchase Agreement"),
pursuant to which the Buyer is acquiring substantially all of the assets of the
holder. All capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Asset Purchase Agreement.
1. Reduction of Principal Amount.
- ---------------------------------
1.1. If the Closing Date Net Tangible Assets (as determined pursuant to
Section 2(f) of the Asset Purchase Agreement) is less than Seven Million and
Four
1
<PAGE>
Hundred Thousand Dollars ($7,400,000), then the principal amount of this Note
shall be reduced by an amount (the "NTA Shortfall Amount") equal to one dollar
for each one dollar that such Closing Date Net Tangible Assets are less than
$7,400,000.
1.2. In such case, the holder shall, no later than ten (10) Business Days
after delivery of the Post-Closing Determination, deliver and surrender to the
Company this Note, and the Company shall simultaneously reissue to the holder a
new Note of like tenor with the principal amount thereof reduced as provided in
Section 1.1 hereof.
2. Payments.
--------
2.1. Unless converted (as provided in Section 3 hereof), principal (as
appropriately adjusted to reflect any reductions in the principal amount of this
Note) shall be due and payable, plus accrued interest thereon, on March 14,
2001.
2.2. Payments of principal and accrued interest of this Note shall be made
to the holder at 8605 Largo Lakes Drive, Largo, Florida 33773, or such other
place or places within the United States as may be specified by the holder of
this Note in a written notice to the Company at least 10 Business Days before a
given payment date.
2.3. Unless converted (as provided Section 3 hereof), payments of
principal and accrued interest of this Note shall be made in lawful money of the
United States of America by wire transfer of immediately funds in the proper
amount to such holder so as to be received by such holder on the due date of
such payment.
2.4. If any payment on this Note becomes due and payable on a Saturday,
Sunday or other day on which commercial banks in New York City are authorized or
required by law to close, the maturity thereof shall be extended to the next
succeeding Business Day, and no interest on the principal amount shall be
payable during such extension.
2.5 In no event shall the amount of interest due or payable hereunder
exceed the maximum rate of interest allowable by applicable law, and in the
event any such payment is inadvertently paid by the Company or inadvertently
received by the holder, then such excess shall be credited as a payment of
principal. It is the express intent hereof that the Company not pay, and the
holder not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may be legally paid by the Company under applicable law.
2.6 The Company may not prepay any amount owing hereunder in whole or in
part.
3. Conversion Right.
----------------
3.1. Subject to the provisions of this Section 3, the holder of this Note
shall have the right (the "Conversion Right") at the holder's option at any time
on or after the
2
<PAGE>
Conversion Date (as defined below) to convert the entire principal amount of
this Note into such number of unregistered, fully paid and nonassessable shares
of Common Stock of the Company ("Genesis Stock") as determined by dividing the
principal amount of this Note (as determined by Section 3.2 below) by the
Conversion Price (as defined below). If the holder elects to convert this Note
into Genesis Stock, the holder shall notify the Company by written notice of
such election no later than ten (10) Business Days prior to the date on which
holder desires to convert this Note (the "Exercise Date").
3.2. For purposes of the conversion calculation only, the principal amount
of this Note shall be deemed to be: (x) TWELVE MILLION, SEVEN HUNDRED FIFTY
THOUSAND AND NO/100ths DOLLARS ($12,750,000.00); minus (y) the NTA Shortfall
-----
Amount, if any; minus (z) the amount of any set-off, if any, pursuant to Section
-----
5 hereof. The Conversion Price shall be $12.75 per share of Genesis Stock;
provided, however, that the Conversion Price shall be adjusted to give
- -------- -------
appropriate effect to the occurrence prior to the Conversion Date of any
dividend paid by the Company in shares of Genesis Stock, stock split or
combination of shares of Genesis Stock, reclassification of Genesis Stock or
capital reorganization of the Company. The Conversion Date shall be the day
immediately following the tenth consecutive trading day on which the closing
price at which the Genesis Stock traded on Nasdaq on each such day as reported
in the Wall Street Journal was equal to or exceeded the Conversion Price. The
number of shares of Genesis Stock issuable upon conversion of this Note shall be
determined by dividing the principal amount of this Note (as determined pursuant
to the first sentence of this Section 3.2) by the Conversion Price, rounding any
fractional result down to the nearest whole share. No fractional shares of
Genesis Stock shall be issued upon conversion of this Note.
3.3. On the Exercise Date, the holder shall surrender this Note at the
office of the transfer agent for Genesis Stock, together with written notice
that shall state such holder's name. The certificates for the shares of Genesis
Stock shall be issued in the name of the holder (or its nominees) as of the
Exercise Date, and shall be delivered no later than 10 Business Days following
the date the Note is surrendered. Until delivery of shares of Genesis Stock to
the holder, the holder shall not be entitled to sell, transfer, pledge, encumber
or vote any such shares. The Company shall, on the date it delivers the Genesis
Stock pursuant hereto, cause there to be delivered to the holder certificates
representing the number of full shares of unregistered, fully paid and
nonassessable shares of Genesis Stock into which this Note may be converted in
accordance with the provisions hereof.
3.4. In the event that, on the Conversion Date, the holder does not
exercise its Conversion Right, no interest shall accrue or be payable in respect
of the period following the Conversion Date and prior to the Exercise Date and
only interest accrued prior to the Conversion Date shall be payable.
3
<PAGE>
4. Cancellation of Note.
--------------------
Upon payment in full (and/or set-off (as provided in Section 5 hereof)) of
all outstanding obligations under this Note or the receipt by the holder of the
appropriate number of shares of Genesis Stock upon conversion of the Note into
Genesis Stock pursuant to Section 3, the Company's obligations in respect of
payment of this Note shall terminate and the holder shall surrender this Note to
the Company.
5. Set-off and Recoupment Rights.
-----------------------------
The Company, by its execution of this Note, and the holder by its
acceptance of this Note, covenants and agrees that the Company shall, in the
event a Buyer Indemnified Party suffers any Adverse Consequences required to be
paid by the holder or Cox Target Media, Inc. pursuant to the Asset Purchase
Agreement, set-off against its obligations under this Note (including without
limitation, the issuance and delivery of Genesis Stock upon a conversion of this
Note pursuant to Section 3 hereof), and recoup the amounts of any Adverse
Consequences, as required pursuant to Section 5(g) of the Asset Purchase
Agreement, provided however, that no such reduction shall be made prior to a
"final determination" as defined below, and provided further that the Company
shall be entitled to reduce the Note only in the event that the Company has not
been fully indemnified for such Adverse Consequences within 30 days of such
final determination. The Company will give to the holder of this Note written
notice of such election, which includes the amount to be set-off, and the amount
of obligations under this Note shall be reduced by the amount set forth in such
notice as fully as if such amount had been paid (or such shares of Genesis Stock
had been delivered) to the holder by the Company. For purposes of this Section
5, a determination shall be a "final determination" if made by a court of
competent jurisdiction pursuant to Section 9(f) of the Asset Purchase Agreement
and if any and all appeals therefrom shall have been resolved or if thirty (30)
days shall have passed from the rendering of such determination (or of any
determination on appeal therefrom) and no party shall have duly commenced an
appeal therefrom.
6. Events of Default.
-----------------
6.1. In the event that:
(a) the Company defaults for more than ten (10) Business Days in
making any payment of principal or interest required to be made on
this Note which default is not cured within 10 Business Days from
the receipt by Company of written notice by holder of such
default; or
(b) the Company: (i) commences any case, proceeding or other action
(x) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking
4
<PAGE>
reorganization, arrangement, composition or other relief with
respect to it or its debts or (y) seeking appointment of a
receiver, trustee, custodian or other similar official for it or
for all or any substantial part of its assets, or shall make a
general assignment for the benefit of its creditor; or (ii) is the
debtor named in any other case, proceeding or other action of a
nature referred to in clause (i) above which (x) results in the
entry of an order for relief or any such adjudication or
appointment or (y) remains undismissed, undischarged or unbonded
for a period of sixty (60) days; or (iii) takes any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the facts set forth in clause (i) or (ii)
above; or (iv) shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they
become due;
then, and in any such event as set forth in Section 6.1(a) or Section 6.1(b) (an
"Event of Default"), and at any time thereafter, if such Event of Default shall
then be continuing, any holder of this Note may, by written notice to the
Company, declare this Note due and payable, whereupon this Note shall be due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, and in such event the holder shall also have
the right at the holder's option to immediately convert the entire principal
amount of this Note on the date of holder's election to convert, without regard
to other notice periods provided herein, together with any accrued but unpaid
interest owing hereunder through but not after the date which is 90 days
following the Event of Default, into such number of unregistered, fully-paid and
non-assessable shares of Genesis Stock as determined by dividing the principal
amount, together with interest owing hereunder through but not after the date
which is 90 days following the Event of Default, of this Note by the Signing
Stock Price; provided that the Company shall remain liable to pay the amount of
interest accruing after the 90th day following such Event of Default.
7. Investment Representation.
-------------------------
The holder of this Note hereby acknowledges that this Note and any shares
of Genesis Stock to be issued upon conversion of this Note have not been and
will not be registered (i) under the Securities Act of 1933, as amended (the
"Act"), on the ground that the issuance of this Note is exempt from registration
under Section 4(2) of the Act as not involving any public offering or (ii) under
any applicable state securities law on the ground that the issuance of this Note
does not involve any public offering; and that the Company's reliance on the
Section 4(2) exemption of the Act and on applicable state securities laws is
predicated in part on the representations hereby made to the Company by the
holder that it is acquiring the Note and the shares of Genesis Stock (if any)
for investment for its own account, with no intention of dividing its
participation with others or otherwise distributing the same, subject,
nevertheless, to any requirements of law that the disposition of its property
shall at all times be within its control.
5
<PAGE>
8. Miscellaneous.
-------------
8.1. Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Note and of a letter of
indemnity reasonably satisfactory to the Company, and upon reimbursement to the
Company of all reasonable expenses incident thereto, and upon surrender or
cancellation of the Note, if mutilated, the Company will make and deliver a new
Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note.
8.2. In the event that one of the Events of Default specified in Section 6
hereof has occurred and is continuing, the holder of this Note shall be
reimbursed by the Company for the payment of its reasonable attorneys' fees
relating to the enforcement of any of the provisions of this Note.
8.3. This Note and the rights and obligations of the Company and any
holder hereunder shall be construed in accordance with and be governed by the
laws of the State of Delaware and shall be subject to the arbitration provisions
set forth in Section 9 of the Asset Purchase Agreement as if expressly included
herein.
8.4. The Company shall assign all of its rights and obligations under this
Note to any party who is a successor by merger to the Company, and such
assignment or merger shall not require any consent of any holder of this Note.
This Note and the rights hereunder are transferable by the holder without the
prior written consent of the Company to any party to whom holder transfers all
of its shares of Genesis Stock.
8.5 Time is of the essence of this Note. If any provisions of this Note
or the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Note and the application of
such provisions to other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
8.6 Holder shall be under no duty to exercise any or all of the rights or
remedies given by this Note and Company shall not be discharged from its
obligations hereunder should holder agree to waive any right it may have
hereunder or to suspend the right to enforce this Note at any time. No waiver
by holder shall be deemed to extend to any prior or subsequent default hereunder
or affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
8.7 Company shall notify holder of its Conversion Right to the extent
available pursuant to the terms hereof on or about January 14, 2001 to the
extent said Conversion Right has not been exercised prior to such date. Such
notice shall be given in accordance with the notice provisions set forth in the
Asset Purchase Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Note as of the day and
year first above written.
GENESIS DIRECT, INC.
By:__________________________________________
Name: Warren Struhl
Title: President and Chief Executive Officer
Attest:
_________________________
7
<PAGE>
EXHIBIT 4.3
ESCROW AGREEMENT
----------------
This ESCROW AGREEMENT (this "Agreement") dated as of September 14,
---------
1998, by and among GENESIS DIRECT FORTY-THREE, LLC, a Delaware limited liability
company ("Buyer"), CAROL WRIGHT GIFTS, INC., a Delaware corporation ("Seller"),
----- ------
and STATE STREET BANK AND TRUST COMPANY ("Escrow Agent"). Buyer and Seller are
------------
sometimes referred to herein individually as a "Depositor" and collectively as
---------
the "Depositors."
----------
WHEREAS, Buyer, Seller and Cox Target Media, Inc., the stockholder of
Seller ("Parent"), have entered into an Asset Purchase Agreement, dated as of
------
August 5, 1998, as amended by Amendment No. 1 thereto, dated as of September 14,
1998 (as amended, the "Asset Purchase Agreement"); and
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer is purchasing
substantially all of the assets of Seller for the Purchase Price (as defined in
the Asset Purchase Agreement), which Purchase Price includes shares (the
"Shares") of Genesis Direct, Inc.'s ("GDI") common stock, $.01 par value per
share ("Common Stock");
WHEREAS, the Asset Purchase Agreement provides that a portion of the
Shares be placed in escrow to secure Seller's indemnification obligations
thereunder;
WHEREAS, the Asset Purchase Agreement provides that a post-closing
adjustment may be made to the Purchase Price based upon the Closing Date Net
Tangible Assets (as defined in the Asset Purchase Agreement), which may result
in an adjustment of the number of Escrow Shares, as said term is defined below;
and
WHEREAS, the Asset Purchase Agreement provides that, upon completion
of the adjustments to the Purchase Price set forth above, a portion of the
Escrow Shares shall be released to Seller.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the parties hereto agree as follows:
Section 1. ESTABLISHMENT OF ESCROW. Contemporaneously with the
-----------------------
execution of this Agreement by all of the parties hereto, Buyer has deposited
600,000 Shares (the "Escrow Shares") with the Escrow Agent, Seller has deposited
-------------
executed stock powers in blank with the Escrow Agent, and the Escrow Agent upon
receipt of the Escrow Shares and the executed stock powers in blank will
promptly acknowledge receipt thereof. The Escrow Agent shall hold the Escrow
Shares in an escrow account (the "Escrow Account"), and any dividends and any
--------------
other payment or distribution thereon (the "Escrow Funds" and together with the
------------
Escrow Shares, the "Escrow Property") in an interest bearing account (the
---------------
"Escrow Fund Account").
- --------------------
1
<PAGE>
Section 2. CONDITIONS TO DISBURSEMENT OF THE ESCROW ACCOUNT AND THE
--------------------------------------------------------
ESCROW FUND ACCOUNT.
- -------------------
(a) Except as otherwise provided in this Section 2, promptly following the
close of business on the fifteenth-month anniversary of this Agreement, Escrow
Agent shall release from escrow and distribute to Seller or to the party
designated in writing by Seller or Seller's successor in interest, the Escrow
Property less the amounts of any indemnification claims made by a Buyer
----
Indemnified Party (as defined in the Asset Purchase Agreement) against Seller or
Parent on or prior to the fifteenth-month anniversary of this Agreement, notice
of which indemnification claims has been received by the Escrow Agent pursuant
to Section 2(c) on or prior to the close of business on the fifteenth-month
anniversary of this Agreement. Escrow Agent shall not be required to provide
notice to any party hereto in connection with any such release of the Escrow
Property unless Escrow Agent has received a notice from Buyer pursuant to
Section 2(c) of this Agreement.
(b) Except as otherwise provided in this Section 2, from time to time,
promptly following the receipt of written joint instructions signed by Buyer and
Seller, Escrow Agent shall release from escrow and distribute to the party
designated in such written instructions, the Escrow Property described in such
written instructions. Buyer and Seller shall issue, from time to time, written
joint instructions to Escrow Agent in accordance with the terms and provisions
of the Asset Purchase Agreement.
(c) Upon (i) receipt by Escrow Agent of written notice from Buyer,
certifying that there exists an indemnification claim (which claim shall be
specified in reasonable detail) which under the Asset Purchase Agreement
entitles a Buyer Indemnified Party to receipt of the Escrow Property or any
portion thereof from Escrow Agent and specifying the number of Escrow Shares
relating thereto; (ii) notification within five (5) business days by Escrow
Agent to Seller of the notice received from Buyer; and (iii) a failure by Escrow
Agent to receive within five (5) business days after receipt by Seller of the
Escrow Agent's notification to Seller, a written notice and certification from
Seller of the non-entitlement of Buyer to the receipt of the Escrow Property
claimed (the "Non-entitlement Notice"), then Escrow Agent shall distribute to
Buyer the portion of the Escrow Property designated in the notice and
certification referenced in clause (c)(i) above.
(d) No fractional shares or scrip representing fractional shares shall be
issuable to Buyer, a Buyer Indemnified Party or Seller. Rather, any fractional
share shall be rounded to the nearest full Escrow Share.
(e) If Escrow Agent does receive a Non-entitlement Notice from Seller as
described in Section 2(c)(iii) hereof, then Escrow Agent shall hold Escrow
Property representing the disputed amount in escrow until a final determination
("Final Determination") of the controversy by an arbitrator pursuant to the
-------------------
Asset Purchase Agreement. In the event that the arbitrator decides in favor of
the Buyer Indemnified Party, the Escrow Agent shall distribute to Buyer the
number of Escrow Shares subject to such indemnification claim as designated in
the Buyer's notice and certification referenced in clause (c)(i) above. In the
event that the arbitrator decides
2
<PAGE>
in favor of Seller or Parent, the Escrow Agent shall continue to hold the Escrow
Property until the close of business of the fifteenth-month anniversary date of
this Agreement, unless the Final Determination shall occur following the close
of business on the fifteenth-month anniversary date of this Agreement, in which
case the Escrow Agent shall distribute the Escrow Property to Seller pursuant to
Section 2(a) hereof.
(f) Escrow Agent shall be permitted to disburse the Escrow Property or a
portion thereof in accordance with a Final Determination or in accordance with
joint written instructions from Seller and Buyer, as the case may be.
(g) The Escrow Agent shall be discharged from all obligations under this
Agreement with respect to the Escrow Property and shall have no further duties
or responsibilities in connection herewith, and this Agreement shall terminate
upon the distribution of all of the Escrow Property pursuant to the terms of
this Agreement and the return of any remaining stock powers to Seller.
(h) In the event that the Escrow Agent is required, pursuant to the terms
and provisions of this Agreement, to distribute any of the Escrow Shares to a
party hereunder, then, promptly following receipt of written joint instructions
signed by Buyer and Seller (pursuant to Section 2(b) hereof or pursuant to a
"final determination" of binding arbitration under Section 9 of the Asset
Purchase Agreement), which state the exact number of the Escrow Shares which
Buyer or Seller, as the case may be, is entitled to receive, the Escrow Agent
shall mail the existing stock certificate, together with stock powers signed by
Seller, to American Stock Transfer & Trust Company using a letter prepared by
Buyer or Seller, as applicable, which is included in the joint instructions and
which instructs American Stock Transfer & Trust Company as to the number of
shares to be transferred to Buyer or Seller, as the case may be, and the number
of shares to be sent back to the Escrow Agent and held as the Escrow Shares in
accordance with the terms and provisions of this Agreement.
Section 3. RESPONSIBILITIES OF ESCROW AGENT.
--------------------------------
(a) Escrow Agent shall exercise the same degree of care toward the Escrow
Property as it exercises toward its own similar property and shall not be held
to any higher standard of care under this Agreement, nor deemed to owe any
fiduciary duty to the Depositors.
(b) Escrow Agent shall be obligated to perform only such duties as are
expressly set forth in this Agreement. No implied covenants or obligations
shall be inferred from this Agreement against Escrow Agent, nor shall Escrow
Agent be bound by the provisions of any agreement among the Depositors beyond
the specific terms hereof.
(c) Escrow Agent shall not be liable hereunder except for its own gross
negligence or willful misconduct and the Depositors severally and not jointly,
to the extent of 50% each agree to indemnify Escrow Agent for and hold it
harmless as to any loss, liability, or expense, including reasonable attorney's
fees, incurred on the part of Escrow Agent and arising out of or in connection
with Escrow Agent's duties under this Agreement, except for any such loss,
liability
3
<PAGE>
or expense arising out of or in connection with Escrow Agent's gross negligence
or willful misconduct.
(d) Escrow Agent shall be entitled to rely upon any reasonable order,
judgment, certification, instruction, notice or other writing delivered to it in
compliance with the provisions of this Agreement without being required to
determine the authenticity or the correctness of any fact stated therein or the
propriety or validity thereof. Escrow Agent may act in reliance upon any
instrument or signature believed by it to be genuine and comporting with the
provisions of this Agreement and may assume that any Person purporting to give
notice or receipt or advice or make any statement or execute any document in
accordance with the provisions hereof has been duly authorized to do so.
(e) Escrow Agent may consult with, and obtain advice from, legal counsel
chosen by Escrow Agent in the event of any question as to any of the provisions
of this Agreement or the duties hereunder, and Escrow Agent shall, except in the
case of gross negligence or willful misconduct, incur no liability and shall be
fully protected in acting in good faith in accordance with the written opinion
and instructions of such counsel.
(f) Escrow Agent does not have any interest in the Escrow Property
deposited hereunder but is serving as escrow holder only and has only possession
thereof.
(g) Escrow Agent shall not be called upon to advise any party as to selling
or retaining, or taking or refraining from taking any action with respect to,
any securities or other property deposited hereunder.
(h) Escrow Agent shall have no responsibility to withhold for tax purposes
any portion of any distribution made pursuant to this Agreement. Responsibility
for any tax payments to be made in connection with Escrow Property distributed
pursuant to this Agreement shall remain with Buyer and Seller.
Section 4. RESIGNATION OR REMOVAL OF ESCROW AGENT.
--------------------------------------
(a) Escrow Agent may resign by giving written notice thereof to each
Depositor, but its resignation shall not become effective until a successor
escrow agent shall have been appointed by mutual agreement of the Depositors and
shall have accepted such appointment in writing. Escrow Agent shall, upon
receipt of the joint written instructions of each Depositor, distribute the
Escrow Property to such successor escrow agent.
(b) The Depositors may remove Escrow Agent for any reason upon written
notice to Escrow Agent signed by each Depositor. Such removal shall take effect
upon delivery of the Escrow Property to a successor escrow agent designated in
joint written instructions signed by each Depositor, and Escrow Agent shall
thereupon be discharged from all obligations under this Agreement and shall have
no further duties or responsibilities in connection herewith. Escrow Agent
shall deliver the Escrow Property without unreasonable delay after receiving the
Depositors' designation of such successor escrow agent.
4
<PAGE>
(c) If a successor escrow agent has not been appointed or has not accepted
such appointment within 30 calendar days after notice of resignation or removal
is given hereunder, Escrow Agent may petition any court of competent
jurisdiction for the appointment of a successor escrow agent. The reasonable
costs, expenses and attorney's fees which Escrow Agent incurs in connection with
such a proceeding shall be paid 50% by Buyer and 50% by Seller. Until a
successor escrow agent is appointed by the Depositors or such a court, as the
case may be, Escrow Agent shall continue to hold the Escrow Property in
accordance with the terms of this Agreement.
Section 5. CHOICE OF LAW AND JURISDICTION. This Agreement shall be
------------------------------
governed by and construed in accordance with the laws of the State of Delaware.
Section 6. BENEFITS AND ASSIGNMENT. Nothing in this Agreement,
-----------------------
expressed or implied, shall give or be construed to give any person or entity,
other than the parties hereto and their successors and permitted assigns, any
legal claim under any covenant, condition and provisions hereof, all the
covenants, conditions and provisions contained in this Agreement being for the
sole benefit of the parties hereto and their successors and permitted assigns.
No party may assign any of its rights or obligations under this Agreement
without the written consent of all the other parties, which consent may be
withheld in the sole discretion of the party whose consent is sought; provided,
---------
however, that Buyer may assign all of its rights and obligations under this
- -------
Agreement to any affiliate of GDI; provided that Buyer nonetheless shall remain
responsible for the performance of all of its obligations hereunder, and such
assignment shall not require the consent of any party hereto.
Section 7. AMENDMENT. This Agreement may not be amended except in a
---------
writing signed by Buyer and Seller and, if the rights, duties or obligations of
the Escrow Agent shall be affected thereby, the Escrow Agent.
Section 8. HEADINGS. The headings contained in this Agreement are for
--------
convenience of reference only and shall have no effect on the interpretation or
operation hereof.
Section 9. NOTICES. All notices and other communications hereunder
-------
shall be in writing and deemed to have been duly given when delivered by hand,
when mailed by registered or certified mail, postage prepaid, return receipt
requested, on the day received, as evidenced by return receipt, when given by
prepaid courier delivery services such as Federal Express, DHL or other similar
services on the day following the date that such notice is delivered to such
courier, or when given by facsimile transmission upon receipt by sender of
confirmed answer-back, to the parties as specified below:
Each of the parties, may, by notice given as aforesaid, change its address
for all subsequent notices.
If to Escrow Agent:
------------------
State Street Bank and Trust Company
225 Asylum Street
5
<PAGE>
Hartford, CT 06103
Attention: Steven Cimalore
Facsimile: (860) 244-1897
If to Seller or Parent:
----------------------
Cox Target Media, Inc.
8605 Largo Lakes Drive
Largo, Florida 33773
Attn: William B. Disbrow
Facsimile: (813) 399-3120
with a copy ( which shall not constitute notice) to:
---------------------------------------------------
Dow, Lohnes & Albertson, PLLC
Suite 1600
One Ravinia Drive
Atlanta, Georgia 30346
Attn: Richard A. Wilhelm, Esq.
Facsimile: (770) 901-8874
If to Buyer:
-----------
Genesis Direct Forty-Three, LLC
c/o Genesis Direct, Inc.
100 Plaza Drive
Secaucus, New Jersey 07094
Attention: Douglas S. Rose
Facsimile: (201) 583-3611
With a copy (which shall not constitute notice) to:
--------------------------------------------------
Raphael S. Grunfeld, Esq. - at the above address
Facsimile: (201) 583-3611
- and -
Ira Greenstein, Esq.
Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
Facsimile: (212) 468-7900
Section 10. FURTHER ASSURANCES. In case at any time any further action
------------------
is necessary or desirable to carry out the purposes of this Agreement, each of
the parties hereto will take such further action (including the execution and
delivery of such further instruments and
6
<PAGE>
documents) as may be reasonably requested by another party, at the sole cost and
expense of the requesting party (except that any expense of Escrow Agent
hereunder shall be reimbursed 50% by Buyer and 50% by Seller).
Section 11. COUNTERPARTS. This Agreement may be executed by the
------------
parties hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which shall together constitute
one and the same agreement.
Section 12. ENTIRE AGREEMENT. This Agreement, the Asset Purchase
----------------
Agreement and the other agreements referred to in such agreements, constitute
the entire agreement among the parties hereto and supersede any prior
understandings, agreements or representations by or among the parties, written
or oral, that may have related in any way to the subject matter hereof.
Section 13. FEES. The fees of the Escrow Agent set forth on Schedule I
----
hereto shall be borne 50% by Buyer and 50% by Seller.
Section 14. DEFINITIONS. Capitalized terms used herein and not defined
-----------
shall have the meanings given such terms in the Asset Purchase Agreement.
Section 15. THE ESCROW AGENT
----------------
(a) The Escrow Agent shall not be obligated to take any legal or other
action under this Agreement which might, in its sole judgment, involve expense
or liability unless it shall have been furnished with indemnity acceptable to
it.
(b) Buyer and Seller shall instruct the Escrow Agent in writing with
respect to charges, certifications and governmental reporting in connection with
its acting as Escrow Agent.
(c) Escrow Agent shall have no liability or responsibility for the
compliance or the failure to comply with this Agreement or any other agreement
by Buyer, Seller or any other party other than Escrow Agent.
(d) The obligations pursuant to Section 3(c) and Section 13 shall survive
the termination of this Agreement.
Section 16. DISPUTE RESOLUTION. In the event that any dispute arises
------------------
with respect to this Agreement or in the event that any claim is made with
respect to the Escrow Property, the Escrow Agent, upon receipt of written notice
of such dispute, is authorized and directed to retain in its possession without
liability to any person or party, all of the Escrow Property until such dispute
shall have been settled either by the mutual agreement of the parties involved
or by a final, unappealable order, decree or judgment of a court of competent
jurisdiction. The Escrow Agent may, but shall be under no duty to, institute or
defend any legal proceeding which relates to this Agreement.
Section 17. CONSENT TO JURISDICTION AND SERVICE. Buyer and Seller
-----------------------------------
consent and submit to the jurisdiction of the courts of the State of Connecticut
and of any federal
7
<PAGE>
court located in the State of Connecticut in connection with any actions or
proceeding brought against Buyer or Seller by the Escrow Agent arising out of or
relating to this Agreement.
Section 18. TAXES. All interest earned on any funds held by the Escrow
-----
Agent in the accounts hereunder shall be considered the currently reportable
income, for federal income tax purposes, of the party that eventually receives
the money from the Escrow Agent. The Escrow Agent annually shall file
information returns with the United States Internal Revenue Service and payee
statements with the payee, documenting such interest payment. Buyer and Seller
shall provide the Escrow Agent all forms and information necessary to complete
such information returns and payee statements. Buyer and Seller agree to
provide the Escrow Agent with a certified tax identification number by signing
and returning a W-9 (or Form W-8, in the case of non-U.S. persons) to the Escrow
Agent within 30 days from the date hereof. The Escrow Agent understands that,
in the event such tax identification numbers are not certified to the Escrow
Agent, the Internal Revenue Code, as amended from time to time, may require
withholding of a portion of any interest or other income earned on the
investment of the account hereunder. Should the Escrow Agent become liable for
the payment of taxes, including withholding taxes, relating to income derived
from any funds held by it in the accounts hereunder or any payment made
hereunder, the Escrow Agent may pay such taxes from such accounts.
Section 19. MERGER. Any corporation or association in which the Escrow
------
Agent may be converted or merged, or with which it may be consolidated, or to
which it may sell or transfer its corporate trust business and assets as a whole
or substantially as a whole, or any corporation or association resulting from
any such conversion, sale, merger, consolidation or transfer to which it is a
party, shall be and become successor Escrow Agent hereunder and vested with all
of the title to the assets and all the trusts, powers discretions, immunities,
privileges and all other matters as was its predecessor, without the execution
or filing of any instrument or any further act, deed or conveyance on the part
of any of the parties hereto, anything herein to the contrary notwithstanding.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers on the date first
written above.
GENESIS DIRECT FORTY-THREE, LLC
By: /s/ Ronald R. Benanto
----------------------------------
Name: Ronald R. Benanto
Title: Vice President and Chief Financial
Officer
Tax Identification No. 22-3603753
----------
CAROL WRIGHT GIFTS, INC.
By: /s/ William B. Disbrow
----------------------------------
Name: William B. Disbrow
Title: Vice President
Tax Identification No. 58-2220118
----------
STATE STREET BANK AND TRUST
COMPANY,
as Escrow Agent
By: /s/ Philip G. Kane, Jr.
----------------------------------
Name: Philip G. Kane, Jr.
Title: Vice President
9
<PAGE>
EXHIBIT 99.1
GENESIS DIRECT COMPLETES ACQUISITION OF CAROL WRIGHT GIFTS
- Appoints Joe Grabowski President of Carol Wright Gifts -
Secaucus, New Jersey, September 15, 1998 - Genesis Direct, Inc.
(Nasdaq:GEND) today announced that it has completed the acquisition of the Carol
Wright Gifts unit of Cox Enterprises, Inc. Carol Wright Gifts was purchased for
2.4 million shares of Genesis Direct common stock, plus a $12.75 million
convertible note, which is convertible into 1,000,000 shares of Genesis Direct
common stock at $12.75 per share. Carol Wright Gifts, which includes the
Applecreek catalog, markets via direct mail a variety of products, many of which
are part of Genesis Direct's core merchandise offerings.
The Company also announced the appointment of Joe Grabowski as
President of Carol Wright Gifts. Mr. Grabowski, who was most recently President
and Chief Executive Officer at Brownstone Studio, has over 28 years of
experience in the direct mail industry, and has held various positions as J.
Crew, Haband and Doubleday & Co.
Warren Struhl, President and Chief Executive Officer of Genesis
Direct, commented, "We are very pleased to have completed this acquisition,
which represents a key step for us in generating significant opportunities to
enhance our revenues and profitability. We believe Carol Wright Gifts has a
great deal of marketing potential, and look forward to building this business
over the long term. We are also excited to welcome Joe as President of Carol
Wright Gifts, and believe his extensive industry experience will be invaluable
in overseeing the growth of this business."
Genesis Direct anticipates that this acquisition may lead to other
strategic relationships with Cox Enterprises, a privately held Atlanta-based
media and
1
<PAGE>
communications company. Cox has diversified operations and investments in U.S.
and international newspapers, television and radio stations, cable systems,
programming, telecommunications and the Internet, which could potentially
provide new outlets for Genesis Direct's multiple brands.
David Easterly, President and Chief Executive Officer of Cox
Enterprises, further commented, "We are excited to become a significant
shareholder in Genesis Direct. When we first signed this agreement, we saw many
strategic opportunities to broaden Genesis Direct's exposure to on-line
shoppers. Since then, we have begun work on many exciting projects that will
enable Genesis Direct to tap into the Internet as well as alternate media
sources more than ever before, and we are very excited to be partnered with them
in this effort."
Carol Wright Gifts has an extensive database approaching nine million
customers. Sales for the fiscal year ended December 31, 1997 were approximately
$118 million, and sales are expected to exceed $140 million in fiscal 1998,
which will bring Genesis Direct's total revenues to approximately $400 million
this year.
Genesis Direct is a leading database-driven specialty retailer in the
rapidly growing universe of non-store shopping. With a current portfolio of 34
Company-owned brands, the Company offers products directly to consumers in
targeted niche markets primarily through a variety of distinctive information-
rich catalogs, as well as Internet websites and electronic media, including
television and radio.
This press release may contain statements that are forward-looking within the
meaning of applicable federal securities laws and are based on Genesis Direct's
current expectations and assumptions, which are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
anticipated Factors that could cause actual results to differ from those
anticipated are detailed in Genesis Direct's filings with the Securities and
Exchange Commission.
2
