THIS NOTE WAS ORIGINALLY ISSUED ON APRIL 17, 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 APRIL 17, 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 THIRTY-FOUR, LLC
Promissory Note
New York, New York
April 17, 1998
Genesis Direct Thirty-Four, LLC, a Delaware limited
liability company ("Company"), for value received, promises to pay, subject to
the terms and conditions of this Note, to BIOBOTTOMS, INC., a California
corporation (the "holder"), the principal sum of ONE MILLION ONE HUNDRED
SEVENTY THOUSAND DOLLARS ($1,170,000) with interest on the outstanding unpaid
principal amount hereof from the date hereof until the Maturity Date at the
annual rate of seven percent (7.00%) payable only in the event that any unpaid
principal is due and payable on the first anniversary of the date hereof as
set forth in Section 1.1 hereof, provided, however, that the principal amount
of this Note is subject to reduction as provided below. 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 Company pursuant to the Asset
Purchase Agreement, dated as of April 17, 1999, among Company, the holder and
Diplomat Corporation, a Delaware corporation ("Stockholder") (the "Asset
Purchase Agreement"), pursuant to which Company 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. Payments
1.1. Principal and any accrued but unpaid
interest shall be due and payable as follows:
(a) on the earlier of (1) the 90th day
following the closing of the
initial public offering of any
equity or debt securities of
Genesis Direct, Inc., a Delaware
corporation ("Parent") or any
Affiliate thereof (or the 60th day
following the closing of such
initial public offering if such
closing occurs after May 30,
1998), or (ii) the first
anniversary of the date hereof. an
amount equal to Six Hundred
Seventy Thousand Dollars
($670,000), subject to reduction as
provided in Section 2(f)(iii) of
the Asset Purchase Agreement;
(b) on the later of (i) the date 15
months from the date hereof and
(ii) the date on which there are
no outstanding claims for
indemnification under Section 5
of the Asset Purchase Agreement
(the "Maturity Date"), an amount
equal to the unpaid principal and
any accrued but unpaid interest
hereunder, subject to reduction
as provided in Section hereof,
provided, however, that the
excess, if any, of (i) the unpaid
principal and any accrued but
unpaid interest over (ii) any
outstanding claims for
indemnification under Section 5
of the Asset Purchase Agreement
shall be due and payable on the
date 15 months from the date
hereof.
1.2. Payments of principal and accrued interest
of this Note shall be made to the holder at 00 Xxx Xxxxx Xxxxx, Xxxxxx Xxxxx,
Xxx Xxxx 00000, 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 Company at
least 10 business days before a given payment date.
1.3. Payments of principal and accrued interest
of this Note shall be made in lawful money of the United States of America by
mailing Company's good check in the proper amount to such holder at least
three days prior to the due date of such payment or otherwise transferring
funds so as to be received by such holder on the due date of such payment.
1.4. 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.
1.5. 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
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
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
Company under applicable law.
2. Cancellation of Note.
Upon payment in full in accordance with Section I
hereof (and/or set-off (as provided in Section 3 hereof)) of all outstanding
obligations under this Note, Company's obligations in respect of payment of
this Note shall terminate and the holder shall surrender this Note to Company.
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3. Set-off and Recoupment Rights.
Company, by its execution of this Note, and holder
by its acceptance of this Note, covenants and agrees that Company shall, in
the event a Buyer Indemnified Party suffers any Adverse Consequences required
to be paid by the holder or Stockholder pursuant to the Asset Purchase
Agreement, set-off against its obligations under Section 1.1 (b) of this Note
and recoup the amounts of any Adverse Consequences, as required pursuant to
Section 5(f) of the Asset Purchase Agreement. 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 automatically be
reduced by the amount set forth in such notice as fully as if such amount had
been paid to the holder by Company; provided, however, that any disputed
set-off amount shall be placed in an escrow account to be established pursuant
to the terms of an escrow agreement in the form of Exhibit A hereto (the
"Escrow Agreement") pending, "final determination" by a court of competent
jurisdiction as to whether Company is entitled to indemnification under the
Asset Purchase Agreement with respect to the disputed set-off amount. For
purposes of this Section 3, a determination shall be "final" 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 duty commenced an appeal therefrom.
4. Events of Default.
4.1 In the event that:
(a) Company defaults for more than
fifteen (I 5) Business Days after
receipt of written notice of
failure to make any payment of
principal or interest required to
be made on this Note, or
(b) 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
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
(1) 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
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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 (an "Event of Default"), and at any time
thereafter, if such Invent of Default shall then be continuing, any holder of
this Note may, by written notice to 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. It is hereby expressly agreed that should any Event of Default exist
and be continuing then, in such event, simple interest shall accrue on the
outstanding principal balance of this Note from the date of any Event of
Default at the rate of ten percent (10.0%) percent per annum.
5. Investment Representation.
Each holder of this Note hereby acknowledges that
this Note has 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 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 Company by the holder that it is acquiring the Note for
investment for its own or Stockholder's 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.
6. Miscellaneous.
6.1 Upon receipt of evidence reasonably
satisfactory to Company of the loss. theft, destruction or mutilation of this
Note and of a letter of indemnity reasonably satisfactory to Company, and upon
reimbursement to Company of all reasonable expenses incident thereto. and upon
surrender or cancellation of the Note, if mutilated, Company will make and
deliver a new Note of like tenor in lieu of such lost, stolen, destroyed or
mutilated Note.
6.2 In the event that one of the Events of
Default specified in Section 4 hereof has occurred and is continuing, the
holder of this Note shall be reimbursed by Company for the payment of its
reasonable attorneys' fees relating to the enforcement of any of the
provisions of this Note.
6.3 This Note and the rights and obligations
of Company and any holder hereunder shall be construed in accordance with and
be governed by the internal laws of the State of New York and shall be subject
to the arbitration provisions set forth in Section 8 of the Asset
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Purchase Agreement as if expressly included herein.
6.4 Company shall assign all of its rights and
obligations under this Note to any affiliate of Parent to whom it transfers
all or substantially all of its assets or who is a successor by merger to
Company, and such assignment or merger shall not require any consent of any
holder of this Note. This Note and the rights hereunder are not transferable
by the holder without the prior written consent of Company; provided that the
holder may assign this Note to Stockholder without the prior written consent
of Company, subject to Company's right of Set-off and recoupment, as set forth
in Section 3 hereof.
6.5 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.
IN WITNESS WHEREOF, Company has executed this Note as of the
day and year first above written.
GENESIS DIRECT THIRTY-FOUR, LLC
By:_/s/____________________________
Name:
Title:
[SEAL]
Attest:
_/s/__________________________________
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