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"), XXXXX XXXXXX 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 Xxx 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
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
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
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
(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
000 Xxxxxx Xxxxxx
0
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
Facsimile: (000) 000-0000
If to Seller or Parent:
----------------------
Xxx Target Media, Inc.
0000 Xxxxx Xxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
with a copy ( which shall not constitute notice) to:
---------------------------------------------------
Dow, Xxxxxx & Xxxxxxxxx, PLLC
Xxxxx 0000
Xxx Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to Buyer:
-----------
Genesis Direct Forty-Three, LLC
c/o Genesis Direct, Inc.
000 Xxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxx
Facsimile: (000) 000-0000
With a copy (which shall not constitute notice) to:
--------------------------------------------------
Xxxxxxx X. Xxxxxxxx, Esq. - at the above address
Facsimile: (000) 000-0000
- and -
Xxx Xxxxxxxxxx, Esq.
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
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
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
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
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/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Chief Financial
Officer
Tax Identification No. 00-0000000
----------
XXXXX XXXXXX GIFTS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
Tax Identification No. 00-0000000
----------
STATE STREET BANK AND TRUST
COMPANY,
as Escrow Agent
By: /s/ Xxxxxx X. Xxxx, Xx.
----------------------------------
Name: Xxxxxx X. Xxxx, Xx.
Title: Vice President
9
