EXHIBIT (R)
September ., 1999
Global Sports, Inc.
555 South Henderson Road
King of Prussia, Pennsylvania
USA 19406
Attention: Michael Rubin
- - and to -
Blank Rome Comisky & McCauley
One Logan Square
Philadelphia, PA
19103
Attention: Frances Dehel
Dear Sirs/Mesdames:
Re: Gen-X Acquisition (U.S.), Inc. and Gen-X Acquisition (Canada) Inc.
acquisition of all of the issued and outstanding shares in the capital
stock of Gen-X Holdings Inc. and Gen-X Equipment Inc., respectively
This opinion is delivered to you pursuant to Section 10.3.21 of the
Acquisition Agreement (as hereinafter defined).
Capitalized terms used but not defined herein have the meanings ascribed
thereto in the Acquisition Agreement.
We are solicitors for each of Gen-X Acquisition (Canada) Inc. ("Acquisition
Canada") and Gen-X Equipment Inc. ("Equipment") and have acted on its behalf in
connection with the sale by Global Sports, Inc. ("Global") to Acquisition Canada
of all of the issued and outstanding shares in the capital stock of Equipment.
1. Scope of Enquiry
----------------
For the purposes of the opinions expressed below, we have examined executed
originals or copies of or participated in the preparation and settlement of,
each of the following documents:
General
(a) the Acquisition Agreement dated as of September 24, 1999 (the
"Acquisition Agreement") among Global, DMJ Financial, Inc. ("DMJ"),
Acquisition Canada, Gen-X Acquisition (U.S.), Inc. ("Acquisition US"),
James J. Salter ("Salter") and Kenneth J. Finkelstein ("Finkelstein")
pursuant to which (i) Global shall sell to Acquisition US, and
Acquisition US shall purchase, all of the issued and outstanding
shares in the capital stock of Gen-X Holdings Inc. and (ii) Global
shall sell to Acquisition Canada, and Acquisition Canada shall
purchase, all of the issued and outstanding shares in the capital
stock of Equipment;
(b) the Ancillary Agreements listed in Schedule "A" hereto;
(collectively, the "Documents");
Gen-X Acquisition (Canada) Inc.
(c) articles of incorporation issued September ., 1999 (the "Acquisition
Articles") whereby Acquisition Canada was incorporated under the
Business Corporations Act (Ontario) (the "OBCA");
(d) the by-laws of Acquisition Canada (the "Acquisition By-laws");
(e) a certificate of status issued by the Ministry of Consumer and
Commercial Relations in respect of Acquisition Canada dated September
., 1999 (the "Acquisition Certificate of Status");
(f) a certificate dated as of September ., 1999 given by Finkelstein, an
officer of Acquisition Canada, respecting non-restriction on
borrowing, certificate of incumbency, place of business, litigation,
ownership of assets, shares and authorizing resolution, a copy of
which is attached as Schedule "B" hereto (the "Acquisition Officer's
Certificate");
Gen-X Equipment Inc.
(g) articles of incorporation issued January 12, 1998 whereby Equipment
was incorporated under the OBCA, Articles of Amendment of Equipment
issued October 10, 1997 providing for a change in the name of
Equipment from "C.A.S.
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International Sports Inc." to "Gen-X Equipment Inc." (collectively,
the "Equipment Articles");
(h) the by-laws of Equipment (the "Equipment By-laws");
(i) a certificate of status issued by the Ministry of Consumer and
Commercial Relations in respect of Equipment dated September ., 1999
(the "Equipment Certificate of Status"); and
(j) a certificate dated as of September ., 1999 given by Finkelstein, an
officer of the Corporation, respecting non-restriction on borrowing,
certificate of incumbency, place of business, litigation, ownership of
assets, shares and authorizing resolution, a copy of which is attached
as Schedule "C" hereto (the "Equipment Officer's Certificate").
We have also considered such statutes and regulations of the Province of
Ontario and of Canada applicable in the Province of Ontario as at the date of
this opinion ("Ontario Law"), and have conducted such examinations and
investigations, as we have considered necessary as a basis for the opinions
expressed below.
As to certain questions of fact material to the opinions expressed below,
we have also examined and relied on the Acquisition Officer's Certificate and
the Equipment Officer's Certificate.
Whenever our opinion with respect to the existence of absence of facts or
circumstances is qualified by the expression "to our knowledge" or words to like
effect, it is based solely on (i) the actual knowledge of current partners and
employees of the Toronto office of the firm of Borden & Elliot directly involved
in this transaction learned during the course of representing each of
Acquisition Canada and Equipment (ii) a review of the Acquisition Officer's
Certificate and the Equipment Officer's Certificate. We have not undertaken any
other investigation.
2. Assumptions
-----------
For the purposes of the opinions expressed below, we have assumed:
(a) that all signatures are genuine, that all facts set forth in the
Acquisition Officer's Certificate and the Equipment Officer's
Certificate are true, accurate and complete with respect to material
factual matters, that all documents submitted to us as originals are
authentic, and that all documents submitted to us as copies conform to
authentic original documents;
(b) all individuals had the requisite legal capacity;
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(c) that all facts set forth in official public records and certificates
and other documents supplied by public officials or otherwise conveyed
to us by public officials are complete, true and accurate;
(d) that the Acquisition Certificate of Status and the Equipment
Certificate of Status is conclusive evidence that each of Acquisition
Canada and Equipment, respectively, are incorporated under the OBCA
and have not discontinued under the OBCA or been dissolved, and that a
similar certificate bearing today's date could be obtained if
requested;
(e) that, notwithstanding that the Documents state that they are to be
governed by laws other Ontario Law, each of the Documents is governed
in all instances by the internal laws (and not the conflicts of law
provisions) of Ontario Law.
3. Registrations
-------------
We have not effected any registrations, filings or recordings in respect of
the Documents which may be necessary or appropriate with respect to the
transactions contemplated thereby.
4. Applicable Law
--------------
We are solicitors qualified to practice law only in the Province of Ontario
and accordingly do not express any opinion with respect to laws other than
Ontario Law.
5. Opinions
--------
Based and relying upon the foregoing and subject to the limitations,
qualifications and assumptions hereinafter expressed, we are of the opinion
that:
(a) each of Acquisition Canada and Equipment is a corporation incorporated
under the OBCA has not been discontinued or dissolved under the OBCA;
(b) each of Acquisition Canada and Equipment has the corporate power and
authority to execute, deliver and perform its obligations under each
of the Documents;
(c) the execution, delivery and performance by each of Acquisition Canada
and Equipment of the Documents have been authorized by all necessary
corporate action on the part of Acquisition Canada and Equipment;
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(d) each of Acquisition Canada and Equipment has duly executed and
delivered each of the Documents;
(e) each of the Documents constitutes a legal, valid and binding
obligation of each of Acquisition Canada and Equipment, enforceable
against it in accordance with its terms;
(f) the execution, delivery and performance by Acquisition Canada of the
Documents to which it is a party do not constitute or result in a
violation or a breach of, or a default under:
(i) the Acquisition Articles or the Acquisition By-laws; or
(ii) any Ontario Law to which Acquisition Canada is subject;
(g) the execution, delivery and performance by Equipment of the Documents
to which it is a party do not constitute or result in a violation or a
breach of, or a default under:
(i) the Equipment Articles or the Equipment By-laws; or
(ii) any Ontario Law to which Equipment is subject;
(h) the execution, delivery and performance by DMJ of the Documents to
which it is a party do not constitute or result in a violation or a
breach of, or a default under, any Ontario Law to which DMJ is
subject;
(i) no Consents of any Governmental Authority on the part of either
Acquisition Canada and Equipment are required in connection with the
execution and delivery of the Documents and consummation of the
transactions contemplated thereby;
(j) except as is described on Schedule . to the Acquisition Agreement, to
our knowledge, there is no Proceeding currently pending or threatened
against either Acquisition Canada or Equipment, except any such
Proceeding that would not be Material to either Acquisition Canada or
Equipment; and
6. Qualifications
--------------
Subject as hereinabove provided, our opinions expressed above are subject
to the following qualifications:
(a) the enforceability of the Documents or any judgment arising out of or
in connection with any Document may be limited by applicable
bankruptcy,
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insolvency, winding-up, reorganization, arrangement, moratorium or
other laws of general application;
(b) the enforceability of the Documents may be limited by general
principles of equity, and equitable remedies, such as specific
performance and injunction, are subject to the discretion of the
court;
(c) the enforceability of the Documents may be limited by general
principles of law relating to the conduct of Global prior to execution
of or in the administration or performance of the Documents,
including, without limitation (i) undue influence, unconscionability,
duress, misrepresentation and deceit, (ii) estoppel and waiver, (iii)
laches, and (iv) reasonableness and good faith in the exercise of
discretionary powers;
(d) any action on any of the Documents may, with the affluxion of time, be
prescribed by the Limitations Act (Ontario);
(e) no opinion is given as to the title to or the legal or beneficial
interest of any person in any property;
(f) provisions in the Documents to the effect that enforcement may take
place without notice may be ineffective;
(g) Global may be precluded from enforcing the Documents until after each
of Acquisition Canada and Equipment has been given a reasonable time
to make payment of any amount demanded under the Documents;
(h) a court will require that discretionary powers afforded to a party be
exercised reasonably and in good faith;
(i) a court may decline to hear an action if it determines, in its
discretion, that it is not the proper forum or if concurrent
proceedings are brought elsewhere;
(j) a court may decline to accept the factual and legal determinations of
a party notwithstanding that a contract or instrument provides that
the determinations of the party shall be conclusive;
(k) provisions in the Documents purporting to sever invalid and
unenforceable provisions may not be enforceable, as an Ontario court
may reserve to itself the decision as to whether any provision is
severable or otherwise of no force and effect;
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(l) counsel fees and disbursements are subject to taxation; in addition,
the costs of and incidental to all proceedings taken in court are in
the discretion of a court and a court has full power to determine by
whom and to what extent the costs shall be paid;
(m) the provisions of any of the Documents permitting service of legal
process by the posting or transmission of copies thereof in accordance
with the provisions thereof may not be recognized as good service on
each of Acquisition Canada and Equipment by an Ontario court;
(n) a money judgment by an Ontario court may be awarded only in Canadian
currency;
(o) assuming the choice of law of one of the United States of America as
the governing law of the Documents is valid under such law, the choice
of the law of such State as the governing law of the Documents would,
to the extent specifically pleaded, be recognized and applied in an
action brought before a court of competent jurisdiction in the
Province of Ontario, except for those laws of such State which (i)
such court considers procedural in nature, (ii) are revenue or penal
laws, (iii) such court considers to be political in nature, or (iv)
are inconsistent with "public policy" as such term is understood under
the Ontario Law;
(p) rights of indemnification may be limited under applicable law;
(q) the provisions for the payment of interest under the Documents may not
be enforceable if those provisions provide for the receipt of interest
by Global at a "criminal" rate within the meaning of Section 347 of
the Criminal Code (Canada);
(r) we express no opinion as to the enforceability of any provision of the
Documents:
(i) which purports to waive all defences which might be available to
each of Acquisition Canada and Equipment;
(ii) to the extent it purports to exculpate Global from liability in
respect of acts or omissions which may be illegal, fraudulent or
involve wilful misconduct; and
(iii) which states that modifications, amendments or waivers are not
binding unless in writing.
7. Reliance
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The opinions expressed in this opinion letter are for the sole benefit of
the addressees of this opinion letter and with respect only to the transactions
referred to herein and may not be relied upon by any other person or in respect
of any other transaction.
Yours truly,
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Schedule "A"
(List of Documents)
Each of the following documents (as defined in the Acquisition Agreement) dated
as of September ___, 1999 unless otherwise noted:
Documents Applicable to Acquisition Canada:
1. Canadian Co. Promissory Note
2. Intercreditor Agreement
3. Subordinated Note Agreement
4. Pledge Agreement
5. Restructuring Plan Agreement dated as of September 24, 1999
Documents Applicable to Equipment:
1. Shared Facilities Agreement
2. Intercreditor Agreement
3. Subordinated Note Agreement
4. Guaranty Agreement
5. Security Agreement
6. Trademark Security Agreement
7. Preferred Stock Purchase Agreement
8. Restructuring Plan Agreement dated as of September 24, 1999
Documents Applicable to DMJ:
1. Intercreditor Agreement
2. Preferred Stock Purchase Agreement
3. Restructuring Plan Agreement
Documents Applicable to Salter:
1. Termination Agreement
2. Termination of Non-Competition Agreement
3. Restructuring Plan Agreement dated as of September 24, 1999
Documents Applicable to Finkelstein:
1. Termination Agreement
2. Termination of Non-Competition Agreement
3. Restructuring Plan Agreement dated as of September 24, 1999
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Schedule "B"
Certificate of Officers
and Resolution of Directors
Schedule "C"
Certificate of Officers
and Resolution of Directors