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STOCK PURCHASE AGREEMENT
among
GLOBAL SPORTS, INC.,
DMJ FINANCIAL, INC.,
JAMES J. SALTER,
KENNETH J. FINKELSTEIN,
AND
CERTAIN OTHER INDIVIDUALS AND ENTITIES
MAY 12, 1998
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TABLE OF CONTENTS
PAGE
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SECTION 1: DEFINED TERMS................................................. 2
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SECTION 2: SALE AND PURCHASE............................................. 6
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2.1 Sale and Purchase............................................. 6
SECTION 3: PURCHASE PRICE AND OTHER PAYMENTS............................. 6
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3.1 Purchase Price................................................ 6
3.2 Other Payments................................................ 6
3.3 Closing Date Financial Information............................ 7
3.4 Purchase Price Adjustment..................................... 9
3.5 Currency and Method of Payment................................ 13
3.6 Global Inventory.............................................. 13
SECTION 4: REPRESENTATIONS AND WARRANTIES OF DMJ, SALTER AND FINKELSTEIN. 14
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4.1 Organization and Authority.................................... 14
4.2 Subsidiaries.................................................. 14
4.3 The Gen-X Stock............................................... 15
4.4 Effect of Agreement........................................... 15
4.5 Financial and Corporate Records............................... 16
4.6 Compliance with Law........................................... 17
4.7 Financial Statements.......................................... 17
4.8 Accounts Receivable........................................... 17
4.9 Gen-X Inventory............................................... 17
4.10 Operations Since March 31, 1998............................... 18
4.11 Tangible Property............................................. 19
4.12 Real Property................................................. 19
4.13 Software and Intangibles...................................... 21
4.14 Obligations................................................... 22
4.15 Contracts..................................................... 22
4.16 Employees and Independent Contractors......................... 23
4.17 Employee Benefit Plans........................................ 23
4.18 Taxes 25
4.19 Proceedings and Judgments..................................... 25
4.20 Insurance..................................................... 26
4.21 Questionable Payments......................................... 26
4.22 Related Party Transactions.................................... 27
4.23 Brokerage Fees................................................ 27
4.24 Investment Matters............................................ 27
4.25 Full Disclosure............................................... 27
4.26 Accounts Payable.............................................. 28
SECTION 5: REPRESENTATIONS AND WARRANTIES OF GLOBAL...................... 28
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5.1 Organization and Authority.................................... 28
5.2 Subsidiaries.................................................. 28
5.3 Global Stock.................................................. 28
5.4 Effect of Agreement........................................... 29
5.5 Compliance with Law........................................... 29
5.6 Public Reports................................................ 29
5.7 Financial Statements.......................................... 30
5.8 Taxes......................................................... 30
5.9 Proceedings and Judgments..................................... 30
5.10 Brokerage Fees................................................ 30
5.11 Full Disclosure............................................... 31
5.12 Investment Canada Act......................................... 31
SECTION 6: REPRESENTATIONS AND WARRANTIES OF THE MINORITY SHAREHOLDERS.... 31
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6.1 Stock Ownership and Authority................................. 31
6.2 Effect of Agreement........................................... 31
6.3 Brokerage Fees................................................ 31
6.4 Investment Matters............................................ 32
6.5 Full Disclosure............................................... 32
SECTION 7: CERTAIN OBLIGATIONS OF THE OWNERS PENDING CLOSING............. 32
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7.1 Investigation................................................. 32
7.2 Conduct Pending Closing....................................... 32
7.3 Acquisition Proposals......................................... 34
7.4 Consents...................................................... 34
7.5 Advice of Changes............................................. 35
7.6 Reasonable Efforts............................................ 35
SECTION 8: CERTAIN OBLIGATIONS OF GLOBAL PENDING CLOSING................. 35
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8.1 Public Reports................................................ 35
8.2 Consents...................................................... 35
8.3 Advice of Changes............................................. 35
8.4 Reasonable Efforts............................................ 35
SECTION 9: CONDITIONS PRECEDENT TO CLOSING BY THE OWNERS................. 35
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9.1 Representations of Global..................................... 35
9.2 Performance by Global......................................... 36
9.3 Absence of Adverse Changes.................................... 36
9.4 Absence of Proceedings........................................ 36
SECTION 10: CONDITIONS PRECEDENT TO CLOSING BY GLOBAL..................... 36
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10.1 Representations of the Owners................................. 36
10.2 Performance by the Owners..................................... 37
10.3 Absence of Adverse Changes.................................... 37
10.4 Absence of Proceedings........................................ 37
SECTION 11: CLOSING....................................................... 37
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11.1 Closing....................................................... 37
11.2 Obligations of the Owners at Closing.......................... 37
11.3 Obligations of Global at Closing.............................. 39
SECTION 12: CERTAIN OBLIGATIONS AFTER CLOSING............................. 40
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12.1 Obligations of the Owners..................................... 40
SECTION 13 INDEMNIFICATION, SETOFF AND PAYMENT OF ADJUSTMENTS............ 41
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13.1 Indemnification Obligations of DMJ, Salter and Finkelstein.... 41
13.2 Indemnification Obligations of Global......................... 42
13.3 Indemnification Obligations of the Minority Shareholders...... 43
13.4 Indemnification Notice........................................ 43
13.5 Defense of Indemnification Matters............................ 43
13.6 Limits on Indemnification Matters and Owners' Payments........ 44
13.7 Indemnification Payment and Owners' Payment................... 45
13.8 Setoff and Holdback........................................... 46
SECTION 14: TERMINATION................................................... 46
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14.1 Termination................................................... 46
14.2 Effect of Termination......................................... 46
SECTION 15: OTHER PROVISIONS.............................................. 47
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15.1 Confidentiality............................................... 47
15.2 Publicity..................................................... 47
15.3 Expenses...................................................... 47
15.4 Notices....................................................... 47
15.5 Amendment..................................................... 48
15.6 Waivers....................................................... 48
15.7 Reliance...................................................... 48
15.8 Survival of Representations................................... 48
15.9 Interpretation of Representations............................. 48
15.10 Entire Understanding.......................................... 49
15.11 Parties in Interest........................................... 49
15.12 Time of the................................................... 49
15.13 Severability.................................................. 49
15.14 Counterparts.................................................. 49
15.15 Section Headings.............................................. 49
15.16 References.................................................... 49
15.17 Controlling Law............................................... 49
15.18 Jurisdiction and Process...................................... 49
15.19 No Third Party Beneficiaries.................................. 50
15.20 Appointment of Agent.......................................... 50
EXHIBITS
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Exhibit "A" Form of Global/Gen-X Holdings Note
Exhibit "B" Terms of Global Preferred Stock
Exhibit "C" Form of Global/Gen-X Equipment Note
Exhibit "D" Form of Gen-X Holdings Note
Exhibit "E" Form of Legal Opinion of Baker & McKenzie
Exhibit "F" Form of Registration Rights Agreement
Exhibit "G" Form of Employment Agreement for James J. Salter
Exhibit "H" Form of Employment Agreement for Kenneth J. Finkelstein
Exhibit "I" Form of Release of Owners
Exhibit "J" Form of Non-Competition Agreement
Exhibit "K" Form of Legal Opinion of Blank Rome Comisky & McCauley LLP
SCHEDULES
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Schedule "A" List of Minority Shareholders
Schedule 3.1(a) Allocation of Global Common Stock and Global Preferred Stock
Schedule 3.1(b) Principal Amounts of Global/Gen-X Equipment Notes
Schedule 3.2(b) Principal Amounts of Gen-X Holdings Notes
Schedule 3.4(c) List of Excluded Vendors
Schedule 3.6 Global Closing Date Inventory
Schedule 4.1 Jurisdictions where Gen-X does Business
Schedule 4.2 Subsidiaries
Schedule 4.3 Owners of Gen-X Holdings Stock and Gen-X Equipment Stock
Schedule 4.4 Gen-X Consents
Schedule 4.5 Financial and Corporate Records
Schedule 4.6 Non-Compliance with Law by Gen-X
Schedule 4.8 Uncollectible Accounts Receivables
Schedule 4.10 Operations Since March 31, 1998
Schedule 4.11 Tangible Property
Schedule 4.12 Real Property
Schedule 4.13 Software and Intangibles
Schedule 4.14 Obligations
Schedule 4.15 Contracts
Schedule 4.16(a) Employees
Schedule 4.16(b) Sales Representatives, Consultants and Independent Contractors
Schedule 4.17 Employee Benefits Plan
Schedule 4.18 Gen-X Tax Representations
Schedule 4.19 Proceedings and Judgments
Schedule 4.20 Insurance Policies
Schedule 4.22 Related Party Transactions
Schedule 4.26 Accounts Payable
Schedule 5.4 Global Consents
Schedule 5.5 Non-Compliance with Law by Global
Schedule 5.8 Global Tax Representations
Schedule 6.4 Non-Accredited Investors
STOCK PURCHASE AGREEMENT
Parties:
- ------- GLOBAL SPORTS, INC.,
a Delaware corporation ("Global")
555 S. Henderson Road
King of Prussia, PA 19406
DMJ FINANCIAL, INC.,
a Barbados limited company ("DMJ")
Royal Bank of Canada (Caribbean) Corporation
2nd Floor, Building #2
Chelston Park, Collymore
St. Michael, Barbados
JAMES J. SALTER,
an individual ("Salter")
277 Glencairn Avenue
Toronto, Ontario M5N1T8
KENNETH J. FINKELSTEIN,
an individual ("Finkelstein")
25 Brandy Court
Toronto, Ontario M3B3L3
EACH OF THE INDIVIDUALS AND
ENTITIES SET FORTH ON
SCHEDULE "A" (the "Minority Shareholders")
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Date: May 12, 1998
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Background: Gen-X Equipment Inc. ("Gen-X Equipment") is an Ontario
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corporation in the business of distributing excess inventories of sports
equipment and accessories. Gen-X Holdings Inc. ("Gen-X Holdings") is a
Washington corporation also in the business of distributing excess inventories
of sports equipment and accessories. DMJ, Salter, Finkelstein and the Minority
Shareholders (hereinafter collectively referred to as the "Owners") own
beneficially and of record all of the issued and outstanding shares of capital
stock of Gen-X Equipment and Gen-X Holdings. Salter and Finkelstein own
beneficially and of record substantially all of the issued and outstanding
shares of capital stock of DMJ. The parties desire that the Owners sell and
Global (or an affiliate designated by Global) purchase all of the issued and
outstanding shares of capital stock of Gen-X Equipment and the Gen-X Holdings on
the terms and conditions stated in this Agreement.
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below, the parties agree as follows:
SECTION 1: DEFINED TERMS
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All defined terms used in this Agreement and not specifically defined in
context are defined in this Section 1, as follows:
1.1 "Accounts Payable" means (a) any obligation to pay for goods
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purchased, leased or licensed or for services performed, whether or not it has
been incurred by receipt, whether billed or unbilled, and whether or not it is
evidenced by any Contract (as defined in Section 1.7), (b) any note payable, or
(c) any other payable of any nature.
1.2 "Accounts Receivable" means (a) any right to payment for goods sold,
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leased or licensed or for services rendered, whether or not it has been earned
by performance, whether billed or unbilled, and whether or not it is evidenced
by any Contract (as defined in Section 1.7), (b) any note receivable, or (c) any
other receivable or right to payment of any nature.
1.3 "Ancillary Agreements" means (a) the Global/Gen-X Holdings Notes (as
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hereinafter defined); (b) the Global/Gen-X Equipment Notes (as hereinafter
defined); (c) the Registration Rights Agreement (as hereinafter defined); (d)
the Employment Agreements (as hereinafter defined); (e) the Releases (as
hereinafter defined); (f) the Non-Competition Agreements (as hereinafter
defined); and (g) the Gen-X Holdings Notes.
1.4 "Asset" means any real, personal, mixed, tangible or intangible
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property of any nature, including, but not limited to, Cash Assets, prepayments,
deposits, escrows, Accounts Receivable, Inventory, Tangible Property, Real
Property, Software, Contract Rights, Intangibles and good will, and claims,
causes of action and other legal rights and remedies.
1.5 "Canadian GAAP" means, at any time, accounting principles generally
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accepted in Canada including those set out in the Handbook of the Canadian
Institute of Chartered Accountants, at the relevant time applied on a consistent
basis.
1.6 "Cash Asset" means any cash on hand, cash in bank or other accounts,
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marketable securities, and other cash-equivalent assets of any nature.
1.7 "Consent" means any consent, approval, order or authorization of, or
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any declaration, filing or registration with, or any application, notice or
report to, or any waiver by, or any other action (whether similar or dissimilar
to any of the foregoing) of, by or with, any Person, which is necessary in order
to take a specified action or actions in a specified manner and/or to achieve a
specified result.
1.8 "Contract" means, with respect to any Person, any written or oral
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contract, agreement, instrument, order, arrangement, commitment or understanding
of any nature, including, but not limited to, reinsurance agreements and
treaties, insurance policies under which such Person is the
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insurer, sales orders, purchase orders, leases, subleases, data processing
agreements, maintenance agreements, license agreements, sublicense agreements,
loan agreements, promissory notes, security agreements, pledge agreements,
deeds, mortgages, guaranties, indemnities, warranties, employment agreements,
consulting agreements, sales representative agreements, joint venture
agreements, buy-sell agreements, options or warrants.
1.9 "Contract Right" means any right, power or remedy under any Contract,
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including, but not limited to, rights to receive property or services or
otherwise derive benefits from the payment, satisfaction or performance of
or options.
1.10 "Employee Benefit Plan" means any employee benefit plan, as defined
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in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or as defined in any other applicable Law, or any employee
benefit or fringe benefit arrangement of any nature, including, but not limited
to, bonus plans, incentive compensation plans, severance pay plans, vacation pay
plans, deferred compensation plans, pension plans, profit sharing plans,
retirement plans, payroll savings plans, stock option plans, stock purchase
plans, stock ownership plans, hospitalization plans, medical plans, dental
plans, disability plans, sick pay plans, group insurance plans, death benefit
plans or employee welfare plans, including those benefitting former employees;
but not including employment Contracts with individual employees.
1.11 "Encumbrance" means any lien, charge, hypothecation, restrictive
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covenant, assignment, title retention agreement or arrangement, security
interest, pledge, mortgage, easement, leasehold, assessment, covenant,
restriction, reservation, conditional sale, prior assignment, or other
encumbrance, claim, burden or charge of any nature.
1.12 "Governmental Authority" means any (a) nation, state, province, local
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or other jurisdiction of any nature, (b) foreign, federal, state, provincial,
local or other government, (c) authority, agency, branch, department, court,
tribunal, official or entity of any of the foregoing or of any quasi-
governmental authority, (d) international or multinational organization,
authority, body or tribunal, or (e) other organization, body, authority or
tribunal exercising or entitled to exercise any administrative, executive,
judicial, legislative, police, regulatory arbitration or taxing authority or
power of any nature.
1.13 "Hazardous Substances" means any substance, waste, contaminant,
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pollutant or material that has been determined by any applicable Governmental
Authority to be capable of posing a risk of injury or damage to health, safety,
property or the environment, including, but not limited to, (a) all substances,
wastes, contaminants, pollutants and materials defined or designated as
hazardous, dangerous or toxic pursuant to any Laws of any Governmental Authority
in which any Real Property leased or owned by the Gen-X Companies is located and
regulations, and (b) asbestos, polychlorinated biphenyls ("PCB's"), radioactive
materials and petroleum.
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1.14 "Insurance Policy" means, with respect to any Person, any public
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liability, product liability, general liability, comprehensive, property damage,
vehicle, life, hospital, medical, dental, disability, worker's compensation, key
man, fidelity bond, theft, forgery, errors and omissions, directors' and
officers' liability, or other insurance policy of any nature under which such
Person is the insured.
1.15 "Intangible" means any name, corporate name, fictitious name,
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trademark, trademark application, service mark, service mark application, trade
name, author and moral rights, brand name, product name, slogan, trade secret,
know-how, patent, patent application, copyright, copyright application,
industrial design, industrial design application, design, logo, formula,
invention, product right or other intangible asset of any nature, whether in
use, under development or design, or inactive.
1.16 "Inventory" means, with respect to a Person, all inventory,
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merchandise, goods, packaging, supplies, boxes and other personal property held
for sale or rental in the business conducted by such Person and their
Subsidiaries, wherever such property is located, and any prepaid deposits for
any of the same.
1.17 "Judgment" means any order, writ, injunction, citation, award, decree
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or other judgment of any nature of any Governmental Authority.
1.18 "Law" means any provision of any foreign, federal, state, provincial
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or local law, statute, ordinance, charter, constitution, treaty, rule or
regulation of any Governmental Authority.
1.19 "Material" means, with respect to any Person, material in a legal
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sense or in an accounting sense to (a) such Person and its Subsidiaries, or (b)
the business, Assets, financial condition or results of operations of such
Person and its Subsidiaries.
1.20 "Obligation" means any debt, liability or obligation of any nature,
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whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated,
accrued, absolute, fixed, contingent, ascertained, unascertained, known, unknown
or otherwise.
1.21 "Permit" means any license, permit, approval, waiver, order,
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authorization, right or privilege of any nature, granted, issued, approved or
allowed by any Governmental Authority.
1.22 "Person" means any individual, sole proprietorship, joint venture,
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partnership, corporation, association, cooperative, trust, estate, Governmental
Authority or other entity of any nature.
1.23 "Prime Rate" means the prime rate of general application as set forth
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in the "Money Rates" section (or such future section as shall replace it) of The
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Wall Street Journal (Eastern Edition), as published on a specified date or
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dates, or, if no date(s) are specified, as the same shall be published from time
to time.
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1.24 "Proceeding" means any demand, claim, suit, action, equitable action,
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litigation, investigation, arbitration, administrative hearing or other
proceeding of any nature.
1.25 "Real Property" means any real estate, land, building, condominium,
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townhouse, structure or other real property of any nature, all shares of stock
or other ownership interests in cooperative or condominium associations or other
forms of ownership interest through which interests in real estate may be held,
and all appurtenant and ancillary rights thereto, including, but not limited to,
easements, covenants, water rights, sewer rights and utility rights.
1.26 "Software" means any computer program, operating system, applications
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system, firmware or software of any nature, whether operational, under
development or inactive, including all object code, source code, technical
manuals, user manuals and other documentation therefor, whether in machine-
readable form, programming language or any other language or symbols, and
whether stored, encoded, recorded or written on disk, tape, film, memory device,
paper or other media of any nature.
1.27 "Subsidiary" means, with respect to any Person, any other Person as
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to which such Person directly or indirectly owns or has the power to vote, or to
exercise a controlling influence with respect to, 50% or more of the securities
or interests of any class of such other Person which are entitled to vote for
the election of directors or others performing similar functions.
1.28 "Tangible Property" means any furniture, fixtures, leasehold
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improvements, vehicles, office equipment, computer equipment, other equipment,
machinery, tools, forms, supplies, moulds or other tangible personal property
of any nature, other than Inventory.
1.29 "Tax" means (a) any income, earnings, profits, gross receipts,
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franchise, capital stock, net worth, sales, use, occupancy, general property,
real property, personal property, intangible property, transfer, fuel, excise,
license, environmental, value-added, customs, payroll, withholding, unemployment
compensation, social security or other tax of any nature imposed, assessed or
collected by or under the authority of any Governmental Authority, (b) any
organization fee, qualification fee, annual report fee, filing fee, occupation
fee, assessment, sewer rent or other fee or charge of any nature imposed,
assessed or collected by or under the authority of any Governmental Authority,
or (c) any deficiency, interest or penalty imposed with respect to any of the
foregoing.
1.30 "Tax Return" means any return, declaration, report, claim for refund
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or information return or statement relating to Taxes, including any schedule or
attachment thereto or amendment thereof.
1.31 "U.S. GAAP" means generally accepted accounting principles under
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United States accounting rules and regulations.
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SECTION 2: SALE AND PURCHASE
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2.1 Sale and Purchase. On the Closing Date (as defined in Section
11.1), and subject to the other provisions of this Agreement, Owners shall sell,
assign, convey and transfer to Global or its designee, and Global or its
designee shall purchase from the Owners, all of their respective right, title
and interest in and to the Gen-X Equipment Stock (as defined in Section 4.3(a))
and the Gen-X Holdings Common Stock (as defined in Section 4.3(b)).
SECTION 3: PURCHASE PRICE AND OTHER PAYMENTS
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3.1 Purchase Price. Subject to the adjustments and provisions in
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Section 3.4, the total purchase price for the Gen-X Equipment Stock and for the
Gen-X Holdings Common Stock (referred to collectively as the "Purchase Price")
shall consist of the following:
(a) Gen-X Holdings Stock. On the Closing Date, Global shall issue and
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deliver to the Owners in full payment of the purchase price for the Gen-X
Holdings Common Stock (i) One Million Five Hundred Thousand (1,500,000)
unregistered shares of Global common stock, par value $.01 per share (the
"Global Common Stock"); (ii) one or more non-negotiable subordinated contingent
notes in the form attached hereto as Exhibit "A" in the maximum aggregate
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principal amount of Four Million Five Hundred Thousand Dollars ($4,500,000) (the
"Global/Gen-X Holdings Notes"); and (iii) Ten Thousand (10,000) unregistered
shares of Global preferred stock, par value $.01 per share (the "Global
Preferred Stock") having a maximum aggregate redemption price of $500,000 and
the other terms and conditions set forth on Exhibit "B". Global shall issue
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the Global Common Stock and the Global Preferred Stock to or on behalf of the
Owners in the amounts set forth on Schedule 3.1(a).
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(b) Gen-X Equipment Stock. On the Closing Date, Global shall deliver
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to the Owners in full payment of the purchase price for the Gen-X Equipment
Stock one or more non-negotiable subordinated promissory notes in the form
attached hereto as Exhibit "C" (collectively, the "Global/Gen-X Equipment
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Notes") in the aggregate principal amount of $1,350,000. Global shall deliver
the Global/Gen-X Equipment Notes to or on behalf of the Owners in the principal
amounts set forth on Schedule 3.1(b).
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3.2 Other Payments. The following payments (the "Other Payments") shall
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be made at the times and by the parties set forth below:
(a) 1998 Bonus. On or after the Closing Date, Gen-X Equipment shall
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pay to Salter and Finkelstein in full payment of their bonuses for the year
commencing October 1, 1997, the total sum of One Million Dollars ($1,000,000.00)
less the amount of any taxes required to be withheld by applicable Law (the
A1998 Bonus") provided that (i) Salter and Finkelstein shall have delivered to
Global prior to such payment the written consent of Hongkong Bank of Canada (the
"Hongkong Bank") approving such payment; and (ii) such payment may only be made
to the extent to which it is funded by the line of credit provided to Gen-X
Equipment by the Hongkong Bank
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pursuant to that certain Commitment Letter dated June 25, 1997, as amended, and
related documents and agreements, by and between Hongkong Bank, as amended, and
Gen-X Equipment (the "Loan Agreement"). If the 1998 Bonus shall not be paid on
the Closing Date, the amount of the bonus shall accrue interest on the unpaid
amount of the 1998 Bonus at an annual rate equal to the Prime Rate from the
Closing Date until the payment of the 1998 Bonus. Gen-X Equipment shall pay the
1998 Bonus to Salter and Finkelstein in two equal amounts.
(b) Gen-X Holdings Subordinated Debt and Preferred Stock. On the
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Closing Date, Gen-X Holdings shall deliver to the Owners in full payment of the
$149,298.67 subordinated note owed to the Owners and of the redemption price of
$499,750 for the Gen-X Holdings Preferred Stock (as defined in Section 4.3(b))
one or more non-negotiable subordinated promissory notes in the form attached
hereto as Exhibit "D" in the aggregate principal amount of Six Hundred Forty
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Nine Thousand Forty Eight Dollars and Sixty Seven Cents ($649,048.67)
(collectively, the "Gen-X Holdings Notes"). Gen-X Holdings shall issue the Gen-X
Holdings Notes to or on behalf of the Owners in the principal amounts set forth
on Schedule 3.2(b).
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3.3 Closing Date Financial Information. The Owners shall prepare or
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cause to be prepared the following financial information:
(a) Backlog of Sales Orders. The Owners shall prepare or cause to be
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prepared a statement (the "Backlog Statement") reflecting in reasonable detail,
as of the Closing Date, the actual gross amount of the Gen-X Companies'
confirmed purchase orders received by the Gen-X Companies from its customers
(the "Backlog"), including the name of the customer, the date of the order, the
requested delivery date, the product number, the product description, the
quantity of each product ordered, the amount of the order and the gross profit
related to such order. On the Closing Date, the Owners shall deliver or cause to
be delivered to Global the Backlog Statement; provided, however, that Owners
shall have thirty days after the Closing Date in which to furnish the gross
profit information required on the Backlog Statement. The Backlog Statement
(and any additional gross profit information) shall be accompanied by a
certificate signed by DMJ, Salter and Finkelstein in which they, jointly and
severally, represent and warrant to Global that the Backlog Statement is
accurate and complete.
(b) Physical Inventory. Prior to the Closing Date, the Owners shall
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cause the public warehouses holding Inventory on behalf of the Gen-X Companies
(the "Inventory Agent"), to conduct a complete physical count of the Inventory
on the Closing Date (the "Physical Inventory"), which such Physical Inventory
shall be observed by the Toronto, Canada office of Arthur Andersen & Co., and to
provide Global and the Owners a statement (the "Inventory Statement") reflecting
as of the Closing Date the Inventory, itemized by category and valued in
accordance with U.S. GAAP at the lower of cost or market using the first-in,
first-out method (the "Actual Inventory Amount"). The Physical Inventory shall
take place between the close of business on the date preceding the Closing Date
and be completed prior to the time at which Gen-X Holdings and Gen-X Equipment
shall reopen for business on or after the Closing Date. Global and the Owners
shall provide all reasonable assistance and cooperation to one another and their
respective
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employees and representatives (including, without limitation, their respective
accountants) to permit Global and the Owners to monitor the planning for and
taking of the Physical Inventory. The Owners shall instruct or cause to be
instructed the Inventory Agent to deliver to Global and the Owners within 15
days after the Closing Date, the Inventory Statement reflecting, as of the
Closing Date, a calculation of the Actual Inventory Amount.
(c) Closing Date Balance Sheets.
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(i) The Owners shall prepare or cause to be prepared a consolidated
and consolidating balance sheet of Gen-X Holdings, a balance sheet of Gen-X
Equipment and a combined balance sheet of both Gen-X Holdings and Gen-X
Equipment, all as of the Closing Date (the "Closing Date Balance Sheets"), and
shall engage the Toronto, Canada office of either Arthur Andersen and Co. or
another "Big 6" accounting firm (the "Gen-X Accountants") to conduct audits
("Closing Date Audits") of the Closing Date Balance Sheets, in accordance with
this Section 3.3(c). The Closing Date Balance Sheets shall be prepared and
audited in accordance with U.S. GAAP, provided that any differences shall be
booked based on the recommendations of the Gen-X Accountants. The Owners shall
fully cooperate with the Gen-X Accountants in connection with the Closing Date
Audits, including, but not limited to, agreeing to any required adjustments and
taking any other necessary actions to enable the audit reports issued by the
Gen-X Accountants with respect to the Closing Date Balance Sheets ("Audit
Reports") to be completely unqualified, without any explanatory paragraphs. The
Owners shall instruct the Gen-X Accountants to review with the Philadelphia,
Pennsylvania office of Deloitte & Touche LLP (the "Global Accountants") the work
papers prepared by the Gen-X Accountants in connection with the Closing Date
Audits ("Audit Work Papers") before the Gen-X Accountants finalize the Closing
Date Balance Sheets and Audit Reports.
(ii) The Owners shall instruct or cause to be instructed the Gen-X
Accountants to deliver to Global, within thirty (30) days after the Closing
Date, the Closing Date Balance Sheets including signed copies of the Audit
Reports and copies of the Audit Work Papers. On or before the date that the
Gen-X Accountants deliver the Closing Date Balance Sheets and accompanying
documents to Global, the Owners shall deliver to Global detailed lists ("Closing
Date Balance Sheet Lists") of all of the Assets and Obligations of Gen-X
Holdings and Gen-X Equipment reflected on the Closing Date Balance Sheets,
itemized by owner and by balance sheet account, and with aggregate net balances
equal to the balances on the Closing Date Balance Sheets. The Closing Date
Balance Sheet Lists shall include, but not necessarily be limited to, lists of
(a) Cash Assets, itemized by bank or other account, showing cost and market
value if different from cost, (b) Accounts Receivable, showing customer names,
individual invoice number and dates, individual invoice amounts, individual
invoice due dates and allowances for doubtful accounts, (c) the Inventory
Statement, (d) other current assets, itemized by category and with appropriate
explanation, (e) Tangible Property, grouped as to type, showing cost,
accumulated depreciation and net book value, (f) Real Property, showing cost,
accumulated depreciation and net book value, (g) Software and Intangibles,
showing cost or amount capitalized, accumulated amortization and net book value,
(h) Accounts Payable, itemized by payee, showing payee names, individual invoice
dates, individual
-8-
invoice amounts and individual invoice due dates, (i) accrued expenses and
reserves, itemized by category and with appropriate explanation, and (j) other
current and long-term liabilities, itemized by payee. The Closing Date Balance
Sheet Lists shall be accompanied by a certificate signed by DMJ, Salter and
Finkelstein, in which they, jointly and severally, represent and warrant to
Global that (x) the Closing Date Balance Sheets were prepared in accordance with
U.S. GAAP and fairly present the financial condition of Gen-X Holdings and Gen-X
Equipment as of the Closing Date (y) the Closing Date Balance Sheet Lists are
accurate and complete, and (z) none of the Gen-X Companies had any Obligations
as of the Closing Date other than the Obligations reflected on the Closing Date
Balance Sheets.
(d) Dispute Resolution. Within 15 days of the receipt of the
------------------
Backlog Statement, Inventory Statement, the Closing Date Balance Sheets or the
Closing Date Balance Sheet Lists, as the case may be, Global and the Owners
shall inform the other of any objections with one or more of the determinations
in such statements or documents. If no objection is made within such 15-day
period, then the statement or document in question shall be considered final on
the last day of such 15-day period. If the parties cannot resolve such objection
within 15 days of receipt of any such notice of objection, the objection shall
be submitted to the Toronto, Canada office of a "Big 6" accounting firm agreed
upon by Global and the Owners other than Deloitte & Touche LLP, Arthur Andersen
& Co. or the accounting firm selected as the Gen-X Accountants (the "Arbiter")
for resolution, with the costs thereof paid 50% by Owners and 50% by Global, and
the Arbiter shall be instructed to deliver a final Backlog Statement, Inventory
Statement, Closing Date Balance Sheets or Closing Date Balance Sheet Lists, as
the case may be, to the Owners and Global as soon as possible.
3.4 Purchase Price Adjustment. The "Purchase Price Adjustment" shall be
-------------------------
equal to the sum of the Closing Date Adjustment (as defined below), the Six
Month Adjustment (as defined below) and the Supplemental Backlog Adjustment (as
defined below). No adjustment under this Section 3.4 shall result in an
increase to the Purchase Price or Other Payments.
(a) Closing Date Adjustment. The "Closing Date Adjustment" shall be
-----------------------
equal to the sum of the TNW Adjustment (as defined below) and the Initial
Backlog Adjustment (as defined below).
(i) Tangible Net Worth Adjustment. The "TNW Adjustment" shall be
-----------------------------
equal to the amount, if any, by which the Actual TNW (as defined below) is less
than the Minimum TNW (as defined below). The "Actual TNW" shall equal the
combined stockholders' equity of Gen-X Holdings and Gen-X Equipment as of the
Closing Date, as reflected on the Closing Date Balance Sheets, minus the book
value of the good will of Gen-X Holdings and Gen-X Equipment as of the Closing
Date, as reflected on the Closing Date Balance Sheets. The "Minimum TNW" shall
be equal to a deficit of One Hundred Thousand Dollars ($100,000).
(ii) Initial Backlog Adjustment. The "Initial Backlog Adjustment"
--------------------------
shall be equal to the amount, if any, by which the gross profit (computed in
accordance with U.S. GAAP)
-9-
attributable to the Backlog, and reflected on the Backlog Statement, is less
than Two Million Six Hundred Thousand Dollars ($2,600,000.00).
(b) Six Month Adjustment. The "Six Month Adjustment" shall be equal
--------------------
to the sum of the A/R Adjustment (as defined below), the Inventory Adjustment
(as defined below) and the A/P Adjustment (as defined below).
(i) Accounts Receivable Adjustment. After Closing, Salter and
------------------------------
Finkelstein shall cause the Gen-X Companies, in the ordinary course of business,
to use reasonable and normal efforts to collect the gross amount of all of the
Accounts Receivable reflected on the Closing Date Balance Sheet Lists (the "Gen-
X Companies Receivables"). Salter and Finkelstein shall cause the Gen-X
Companies to apply collections from each customer or from an insurance company
on behalf of a customer ("Insurance Proceeds") to the earliest open Gen-X
Companies Receivable due from that customer, unless otherwise specified by the
customer or unless the payment clearly applies to a specific invoice. Neither
Global nor the Gen-X Companies shall have any obligation to institute legal
action or otherwise take unusual steps to collect any of the Gen-X Companies
Receivables. Salter and Finkelstein shall cause the Gen-X Companies to maintain
complete and accurate records of all customer payments received by Global and
customer credits issued by the Gen-X Companies from the Closing Date until 180
days after the Closing Date ("A/R Cutoff Date"), which records shall show the
individual amounts of such payments and credits that were applied to the Gen-X
Companies Receivables. Within 195 days after the Closing Date, Salter and
Finkelstein shall deliver to Global copies of such records, together with a
statement (the "Statement of Unpaid Receivables") as to which of (i) the Gen-X
Companies Receivables (if any) were not collected by the A/R Cutoff Date
including the amount of customer credits ("Unpaid Receivables"), (ii) the Gen-X
Companies Receivables that were not due within 150 days after the Closing Date
as reflected on the Closing Date Balance Sheet Lists (the "Extended
Receivables"), and (iii) the Insurance Proceeds were not collected by the A/R
Cutoff Date ("Unpaid Insurance Proceeds"). Global shall notify the Owners of
any objections to the Statement of Unpaid Receivables within 30 days after the
Global receives such documents. If Global does not notify the Owners of any
objections by the end of such 30-day period, then the amount of Unpaid
Receivables shown on the Statement of Unpaid Receivables shall be considered
final on the last day of such 30-day period. If Global does notify the Owners
of any objections by the end of such 30-day period, and the Owners and Global
are unable to resolve their differences within 15 days thereafter, then the
disputed amount of Unpaid Receivables shall be submitted to the Arbiter for
resolution, with the costs thereof paid 50% by the Owners and 50% by Global, and
the Arbiter shall be instructed to deliver a final Statement of Unpaid
Receivables to the Owners and Global as soon as possible. The "A/R Adjustment"
shall be equal to the amount, if any, of the (i) Unpaid Receivables, (ii) the
Extended Receivables that are not paid within thirty (30) days of the latest due
date of such Extended Receivables as reflected on the Closing Date Balance Sheet
Lists or within three hundred sixty (360) days of the Closing Date, and (iii)
the Unpaid Insurance Proceeds not paid before the earlier of 180 days after the
claim for Insurance Proceeds was submitted and 360 days after the Closing Date,
less the allowance, if any, for such Unpaid Receivables, provided that such
allowance was properly accrued and fully reserved on the Closing Date Balance
Sheets. At any time after receipt of the
-10-
Statement of Unpaid Receivables, Global may assign the Unpaid Receivables to the
Owners without recourse. If, after the A/R Cutoff Date, Global receives any
payments on account of the Unpaid Receivables, then Global shall promptly notify
the Owners and the amount of such payments shall be applied to reduce the A/R
Adjustment. Notwithstanding the foregoing provisions of this Section 3.4.(b)(i),
Global may elect to retain any Unpaid Receivables it wishes to retain, in which
case such retained receivables shall not be included in the A/R Adjustment, and
the Owners shall have no further responsibility with respect thereto.
(ii) Inventory Adjustment. After Closing, Salter and Finkelstein
--------------------
shall cause the Gen-X Companies, in the ordinary course of business, to use
reasonable and normal efforts to sell the Inventory reflected on the Closing
Date Balance Sheets (the "Gen-X Closing Inventory") at the highest possible
prices. Salter and Finkelstein shall cause the Gen-X Companies to maintain
complete and accurate records of all sales of Inventory by the Gen-X Companies
from the Closing Date until 180 days after the Closing Date (the "Inventory
Cutoff Date"), which records shall show the date of the sale, the customer to
whom the sale was made and the cost and sales price of the Inventory sold.
Within 195 days after the Closing Date, Salter and Finkelstein shall cause the
Gen-X Companies to deliver to Global copies of such records, together with a
statement (the "Statement of Unsold and Other Inventory") as to which of the
Gen-X Closing Inventory has not been sold by the Inventory Cutoff Date (the
"Unsold Inventory") (including a statement of the net realizable value to which
such Unsold Inventory should be written down as of the Inventory Cutoff Date)
and which of the Gen-X Closing Inventory was sold at an amount less than the
amount at which such Inventory was reflected on the Closing Date Balance Sheets
(the "Other Inventory"). Within 30 days after the receipt of the Statement of
Unsold and Other Inventory, Global shall notify the Owners of any objections to
the Statement of Unsold and Other Inventory. If Global does not notify the
Owners of any objections by the end of such 30-day period, then the amounts of
Unsold Inventory (including the value thereof) and Other Inventory shall be
considered final on the last day of such 30-day period. If Global does notify
the Owners of any objections by the end of such 30-day period, and the Owners
and Global are unable to resolve their differences within 15 days thereafter,
then the disputed amounts of Unsold Inventory (or the value thereof) and Other
Inventory shall be submitted to the Arbiter for resolution, with the costs
thereof paid 50% by the Owners and 50% by Global, and the Arbiter shall be
instructed to deliver a final Statement of Unsold Inventory to the Owners and
Global as soon as possible. The "Inventory Adjustment" shall be equal to the
sum of (i) the amount, if any, by which the value of the Unsold Inventory as of
the Inventory Cutoff Date is less than the value at which such Unsold Inventory
was reflected the Closing Date Balance Sheets, and (ii) the amount, if any, by
which the price at which such Other Inventory was sold by the Gen-X Companies is
less than the value at which such Other Inventory was reflected on the Closing
Date Balance Sheets.
(iii) Accounts Payable Adjustment. After Closing, Salter and
---------------------------
Finkelstein shall cause the Gen-X Companies, in the ordinary course of business,
to pay all of the Accounts Payable required to be paid and reflected on the
Closing Date Balance Sheets (the "Gen-X Companies Payables"). Salter and
Finkelstein shall cause the Gen-X Companies to maintain complete and accurate
records of all payments made by Global from the Closing Date until 180 days
-11-
after the Closing Date ("A/P Cutoff Date"), which records shall show the
individual amounts of such payments that were made on account of the Payables.
Within 195 days after the Closing Date, Salter and Finkelstein shall deliver to
Global copies of such records, together with a statement (the "Statement of
Payables") indicating the aggregate amount by which any of the Payables were
finally and completely settled by the A/P Cutoff Date in an amount greater than
the amount reflected on the combined Closing Date Balance Sheet of Gen-X
Holdings and Gen-X Equipment for such Payables, less the amount by which any of
the Payables were finally and completely settled by the A/P Cutoff Date in an
amount less than the amount reflected on such Closing Date Balance Sheet for
such Payables; provided, however, that any settlement of the amounts owed to
Ride, Inc. in an amount less than that reflected on such Closing Date Balance
Sheet shall not be taken into account (the "A/P Adjustment", which amount may be
positive or negative). Global shall notify the Owners of any objections to such
Statement of Payables within 30 days after Global receives such documents. If
Global does not notify the Owners of any objections by the end of such 30-day
period, then the amounts shown on the Statement of Payables shall be considered
final on the last day of such 30-day period. If Global does notify the Owners
of any objections by the end of such 30-day period, and the Owners and Global
are unable to resolve their differences within 15 days thereafter, then the
disputed amounts on the Statement of Payables shall be submitted to the Arbiter
for resolution, with the costs thereof paid 50% by the Owners and 50% by Global,
and the Arbiter shall be instructed to deliver a final Statement of Payables to
the Owners and Global as soon as possible. If, after the A/P Cutoff Date,
Global is required to make any payments on account of the Payables, then Global
shall promptly notify the Owners and the amount of such payments shall be
applied to increase the A/P Adjustment.
(c) Supplemental Backlog Adjustment. After Closing, Salter and
-------------------------------
Finkelstein shall cause the Gen-X Companies, in the ordinary course of business,
to use reasonable and normal efforts to ship, send invoices for and collect
payment for (i) the products listed on the Backlog Statement and (ii) the
products substituted for the products listed on the Backlog Statement as a
result of late delivery or cancellation by the factory supplying such products
(the "Backlog Products"). Salter and Finkelstein shall cause the Gen-X
Companies to maintain complete and accurate records of all shipments, invoices
and collections for the Backlog Products by the Gen-X Companies from the Closing
Date until December 1, 1998 (the "Backlog Cutoff Date"), which records shall
show the customer to whom the Backlog Products were sold, the date on which the
Backlog Products were shipped, the invoice numbers for the Backlog Products and
the cost and sales prices of the Backlog Products. Within 15 days after the
Backlog Cutoff Date, Salter and Finkelstein shall cause the Gen-X Companies to
deliver to Global copies of such records, together with a statement (the
"Statement of Shipped Backlog Gross Profit") as to which of the Backlog Products
have been shipped and invoiced by the Backlog Cutoff Date and the gross profit
(computed in accordance with U.S. GAAP) attributable to such shipped and
invoiced Backlog Products (the "Shipped Backlog Gross Profit"). Within 30 days
after the receipt of the Statement of Shipped Backlog Gross Profit, Global shall
notify the Owners of any objections to the Statement of Shipped Backlog Gross
Profit. If Global does not notify the Owners of any objections by the end of
such 30-day period, then the amount of Shipped Backlog Gross Profit shall be
considered final on the last day of such 30-day period. If Global does notify
the Owners of any objections by the end of such
-12-
30-day period, and the Owners and Global are unable to resolve their differences
within 15 days thereafter, then the disputed amount of Shipped Backlog Gross
Profit shall be submitted to the Arbiter for resolution, with the costs thereof
paid 50% by the Owners and 50% by Global, and the Arbiter shall be instructed to
deliver a final Statement of Shipped Backlog Gross Profit to the Owners and
Global as soon as possible. The "Unshipped Backlog Adjustment" shall be equal to
the amount, if any, by which the Shipped Backlog Gross Profit is less than Two
Million Six Hundred Thousand Dollars ($2,600,000), less the amount, if any, of
the Initial Backlog Adjustment. Provided, however, that the Unshipped Backlog
Adjustment shall be eliminated if, (i) during the period commencing May 1, 1998
and ending December 31, 1998, (a) Gen-X Holdings' sales are equal to or greater
than $30,000,000 (without taking into account sales by Gen-X Holdings to the
vendors set forth on Schedule 3.4(c)), and (b) Gen-X Holdings' gross profit
margin is equal to or greater than 22% and (ii) at December 31, 1998, the actual
gross amount of confirmed purchase orders received by Gen-X Holdings from its
customers is equal to or greater than $2,500,000, and the gross profit margin
attributable to such orders is not less than 22%.
(d) Payment of Purchase Price Adjustment. The Purchase Price
------------------------------------
Adjustment, if any, shall be paid in accordance with Section 13.
3.5 Currency and Method of Payment. All dollar amounts stated in this
------------------------------
Agreement are stated in United States currency, and all payments required under
this Agreement shall be paid in United States currency. All payments required
under this Agreement shall be made as follows: (i) any payment may be made by
wire transfer of United States funds; (ii) any payment exceeding $100,000 shall
be made by wire transfer of United States funds; (iii) any payment exceeding
$50,000, but not exceeding $100,000, may be made by bank certified, treasurer's
or cashier's check; and (iv) any payment not exceeding $50,000 may be made by
ordinary check.
3.6 Global Inventory. Schedule 3.6 sets forth a list of all Inventory
----------------
of Global and its Subsidiaries as of the Closing Date (the "Global Closing Date
Inventory"). For the purposes of determining (i) Global's Close-Out Business
Gross Profit Amount under Section 4 of the Certificate of Designation for the
Global Preferred Stock and Section 2(a) of the Global/Gen-X Holdings Notes, and
(ii) the gross profit on the gross sales for all of the Gen-X Holdings, Inc.'s
subsidiaries (the "Gen-X Gross Profit Amount") under Section 2.b. of Exhibit A
to the Salter Employment Agreement and the Finkelstein Employment Agreement, if
during the period commencing May 1, 1998 and ending April 30, 1999, any of the
Global Closing Date Inventory is sold at an amount less than the historical cost
of such Inventory, the amount by which such sales price is less than such
historical cost shall be added to Global's Close-Out Business Gross Profit
Amount and the Gen-X Gross Profit Amount, as the case may be, so long as the
sale of such Inventory at less than historical cost was approved in writing by
Michael G. Rubin.
-13-
SECTION 4: REPRESENTATIONS AND WARRANTIES OF DMJ, SALTER AND
- --------- -------------------------------------------------
FINKELSTEIN
-----------
Knowing that Global is relying thereon, DMJ, Salter and Finkelstein,
jointly and severally, represent and warrant to Global as follows:
4.1 Organization and Authority. Gen-X Equipment is a corporation duly
--------------------------
organized and validly existing under the Laws of Ontario and carrying on
business in the jurisdictions set forth on Schedule 4.1, and Gen-X Holdings is a
------------
corporation duly organized, validly existing and in good standing under the Laws
of the state of Washington. Gen-X Equipment and Gen-X Holdings each possess the
full corporate power and authority to own their Assets, conduct their business
as and where presently conducted and enter into and perform this Agreement and
the transactions contemplated hereby and the Ancillary Agreements to which they
are a party or by which they are bound and the transactions contemplated
thereby. DMJ is a corporation duly organized, validly existing and in good
standing under the Laws of Barbados. DMJ possesses the full corporate power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby and the Ancillary Agreements to which it is a party or by
which it is bound and the transactions contemplated thereby.
4.2 Subsidiaries. Schedule 4.2 sets forth a list of each direct or
------------ ------------
indirect Subsidiary of Gen-X Equipment and Gen-X Holdings (such Subsidiaries,
Gen-X Equipment and Gen-X Holdings being hereinafter referred to as the "Gen-X
Companies"), setting forth as to each such Subsidiary its name, address, and
jurisdiction of incorporation or organization, and the percentage and the nature
of the interest or percentage of voting securities owned by the Gen-X Companies.
Except as set forth on Schedule 4.2, each of the Subsidiaries (a) is a
------------
corporation duly organized, validly existing, and in good standing under the
laws of its respective jurisdiction of incorporation (to the extent that good
standing or a similar concept is relevant under the Laws of such jurisdiction),
(b) is duly qualified or registered to do business as a foreign corporation or
entity in each jurisdiction where the nature of its respective businesses,
properties, or employees requires such qualification or registration, except
where the failure to so qualify or register would not have any material adverse
effect on Gen-X Holdings or Gen-X Equipment and would not subject Gen-X Holdings
or Gen-X Equipment to any material penalty, and (c) has the full corporate power
and authority to own its respective Assets and conduct its respective business
as and where such business is presently conducted. All of the issued and
outstanding capital stock of each of the Subsidiaries are duly authorized,
validly issued, fully paid and non-assessable, with no liability attaching to
the ownership thereof, and are not subject to, and were not issued in violation
of, any preemptive rights. The shares of each of the Subsidiaries are owned by
either Gen-X Equipment or Gen-X Holdings, as indicated, free and clear of all
Encumbrances, and there are no voting trusts or other arrangements or
understandings in favor of any Person other than either Gen-X Equipment or Gen-X
Holdings with respect to the voting of the capital stock or other interests of
any of the Subsidiaries. Except as may be disclosed in Schedule 4.2, there are
------------
no outstanding contracts or other rights relating to the issuance, sale,
redemption, or disposition of any shares of capital stock or other interests of
any of the Subsidiaries or any other securities of any of the Subsidiaries.
Except for Gen-X Equipment's
-14-
or Gen-X Holdings' interest in their Subsidiaries, neither Gen-X Equipment nor
Gen-X Holdings owns directly or indirectly any interest in any other Person.
4.3 The Gen-X Stock
---------------
(a) The Gen-X Equipment Stock. The authorized capital stock of Gen-X
-------------------------
Equipment consists of an unlimited number of common shares and an unlimited
number of preference shares, of which 10,000 common shares are issued and
outstanding (the "Gen-X Equipment Stock") and owned beneficially and of record
by the Owners as set forth on Schedule 4.3 attached hereto, free and clear of
------------
all Encumbrances. All of the Gen-X Equipment Stock has been issued in
compliance with all applicable Laws, including but not limited to applicable
securities laws. The Owners have the full right to sell and transfer all right,
title and interest in and to the Gen-X Equipment Stock, and upon delivery and
payment for the Gen-X Equipment Stock as provided herein, Global will acquire
good and marketable title thereto, free and clear of all Encumbrances. All of
the Gen-X Equipment Stock has been validly issued and is fully paid and
nonassessable, with no liability attaching to the ownership thereof, and is not
subject to, and was not issued in violation of, any preemptive rights. Except
for this Agreement, there are no outstanding Contracts relating to the issuance,
sale, redemption, ownership or disposition of any of the Gen-X Equipment Stock
or other securities of Gen-X Equipment. There are no stock appreciation rights,
phantom shares, cash performance units or other similar rights issued by Gen-X
Equipment.
(b) The Gen-X Holdings Stock. The authorized capital stock of Gen-X
------------------------
Holdings consists of (i) 1,000,000 shares of Class A common shares, no par value
and 1,000,000 shares of Class V common shares, no par value of which 9,650
shares and 350 shares, respectively, are issued and outstanding (the "Gen-X
Holdings Common Stock") and owned beneficially and of record by the Owners as
set forth on Schedule 4.3 attached hereto, free and clear of all Encumbrances,
------------
and (ii) 1,000,000 preferred shares, of which 49,975 shares are issued and
outstanding (the "Gen-X Holdings Preferred Stock") and owned beneficially and of
record by the Owners as set forth on Schedule 4.3 attached hereto, free and
------------
clear of all Encumbrances (the Gen-X Holdings Common Stock and the Gen-X
Holdings Preferred Stock being collectively referred to as the "Gen-X Holdings
Stock"). The Owners have the full right to sell and transfer all right, title
and interest in and to the Gen-X Holdings Stock, and upon delivery and payment
for the Gen-X Holdings Stock as provided herein, Global or Gen-X Holdings, as
the case may be, will acquire good and marketable title thereto, free and clear
of all Encumbrances. All of the Gen-X Holdings Stock has been validly issued
and is fully paid and nonassessable, with no liability attaching to the
ownership thereof, and is not subject to, and was not issued in violation of,
any preemptive rights. Except for this Agreement, there are no outstanding
Contracts relating to the issuance, sale, redemption, ownership or disposition
of any of the Gen-X Holdings Stock or other securities of Gen-X Holdings. There
are no stock appreciation rights, phantom shares, cash performance units or
other similar rights issued by Gen-X Holdings.
4.4 Effect of Agreement. The execution, delivery and performance of
-------------------
this Agreement and the Ancillary Agreements by the Owners, Gen-X Holdings and
Gen-X Equipment (to the extent they are a party thereto or bound thereby), and
the consummation by each of them of the transactions
-15-
contemplated hereby and thereby, (a) have been duly authorized by all necessary
corporate actions by their board of directors and/or shareholders (b) do not
constitute a breach or violation of, or a default under, the respective
certificates of incorporation or bylaws (or other organization documents), as
the case may be, of the Owners, or any of the Gen-X Companies, (c) do not
constitute a breach or violation of, or a default under, any Contract to which
any Owner or any of the Gen-X Companies is a party or by which any Owner or any
of the Gen-X Companies or their respective Assets or businesses is bound and
which is Material to either Gen-X Holdings or Gen-X Equipment, (d) do not
constitute a violation of any Law or Judgment applicable to the Owners or any of
the Gen-X Companies or to the businesses or Assets of any Owner or any of the
Gen-X Companies, (e) do not constitute a violation of, and do not result in the
revocation, restriction, suspension or modification of any Permit of any of the
Gen-X Companies, (f) do not accelerate or otherwise modify any Obligation of any
Owner or any of the Gen-X Companies, (g) do not result in the creation of any
Encumbrance upon, or give to any other Person any interest in, the Gen-X
Equipment Stock, the Gen-X Holdings Stock or in the businesses or Assets of any
of the Gen-X Companies, and (h) except for the Consents set forth on
Schedule 4.4 (the "Gen-X Required Consents"), do not require the Consent of any
- ------------
Person. This Agreement constitutes, and the Ancillary Agreements when executed
and delivered will constitute, the valid and legally binding agreements of the
Owners, Gen-X Holdings and Gen-X Equipment enforceable against each of them (to
the extent they are a party thereto or bound thereby) in accordance with their
respective terms.
4.5 Financial and Corporate Records. Except as set forth on Schedule
------------------------------- --------
4.5, the Gen-X Companies' books and records are and have been properly prepared
- ---
and maintained in form and substance adequate for preparing audited financial
statements in accordance with U.S. GAAP and Canadian GAAP, as applicable, and
fairly and accurately reflect all of the Gen-X Companies' Assets and Obligations
and all Contracts and transactions to which any of the Gen-X Companies is or was
a party or by which any of the Gen-X Companies or any of their respective
businesses or Assets is or was affected. True and complete copies of the
certificates of incorporation and by-laws (or other organizational documents) of
the Gen-X Companies in full force and effect on the date hereof are attached to
Schedule 4.5. Except as set forth on Schedule 4.5, the minute books of the Gen-
- ------------
X Companies, copies of which have been delivered or made available to Global,
contain accurate and complete minutes of all meetings of the Gen-X Companies'
respective shareholders and boards of directors, accurate and complete written
statements of all actions taken by the Gen-X Companies' respective shareholders
and boards of directors without a meeting, and accurate and complete records of
the issuance and transfer of the stock of the Gen-X Companies since their
respective dates of incorporation. Schedule 4.5 sets forth a list of (a) the
------------
names and titles of the directors and officers of the Gen-X Companies, (b) all
bank accounts, securities accounts, other accounts, safe deposit boxes and safes
of the Gen-X Companies, the names of the banks, securities firm or other
financial institution or Person where any such account, safe deposit box or safe
is located and the names of all Persons who have access thereto or who are
authorized to make withdrawals therefrom, and (c) the names of all Persons
authorized by proxies, powers of attorney or other instruments to act on behalf
of any of the Gen-X Companies concerning its business or Assets.
-16-
4.6 Compliance with Law. The Gen-X Companies' operations, the conduct
-------------------
of the Gen-X Companies' businesses as and where such businesses have been or
presently are conducted, and the Gen-X Companies' Assets and their uses comply
with all Laws and Judgments applicable to the Gen-X Companies, and their
respective operations, businesses or Assets, except where the failure to so
comply would not be Material to either Gen-X Holdings or Gen-X Equipment, and
none of the Gen-X Companies has received written notice that it is not in
compliance. Except as set forth on Schedule 4.6, the Gen-X Companies have
------------
obtained and hold all Permits required for the lawful operation of their
respective businesses as and where such businesses are presently conducted,
except where the failure to do so would not be Material to either Gen-X Holdings
or Gen-X Equipment. All Permits held by the Gen-X Companies that are necessary
or Material to either Gen-X Holdings or Gen-X Equipment are listed on Schedule
--------
4.6, and copies of such Permits have been delivered to Global.
- ---
4.7 Financial Statements. The Owners have delivered to Global copies of
--------------------
(a) the audited consolidated balance sheets of Gen-X Holdings as of September
30, 1997, and the related consolidated statements of income and retained
earnings of Gen-X Holdings for the year then ended, including the notes thereto,
accompanied by the report of Arthur Anderson & Co., independent certified public
accountants (the "Gen-X Annual Financial Statements"), and (b) the unaudited
consolidated balance sheets of Gen-X Holdings as of March 31, 1998, and the
related consolidated statements of income and retained earnings of Gen-X
Holdings for the six-month period ended March 31, 1998 (the "Gen-X Interim
Financial Statements"). The Gen-X Annual Financial Statements and the Gen-X
Interim Financial Statements, including the notes thereto, have been prepared in
accordance with U.S. GAAP under the accounting rules and regulations of Canada
consistently applied, and fairly present the financial condition and results of
operations of Gen-X Holdings as of the dates and for the periods indicated, and
in the case of the Gen-X Interim Financial Statements, all adjustments which are
necessary for a fair presentation of such financial statements (consisting only
of normal recurring adjustments) have been made.
4.8 Accounts Receivable. All Accounts Receivable of the Gen-X Companies
-------------------
that are reflected on the Closing Date Balance Sheets, the Gen-X Annual
Financial Statements or the Gen-X Interim Financial Statements (the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business
of the Gen-X Companies, and none of such Accounts Receivable represent
consignment or conditional arrangements. Unless paid prior to the Closing Date,
except as set forth in Schedule 4.8, the Accounts Receivable are or will be as
------------
of the Closing Date current and collectible net of the respective allowances
shown on the Closing Date Balance Sheets, the Gen-X Annual Financial Statements
or the Gen-X Interim Financial Statements, as the case may be (which reserves
are adequate and calculated consistent with past practice). There is no
contest, claim, or right of set-off, other than returns in the ordinary course
of business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable.
4.9 Gen-X Inventory. All Inventory of the Gen-X Companies, whether or
---------------
not reflected on the Closing Date Balance Sheets, the Gen-X Annual Financial
Statements or the Gen-X Interim
-17-
Financial Statements, consists of a quality and quantity usable and salable in
the ordinary course of business, except for obsolete items and items of below-
standard quality, all of which have been written off or written down to net
realizable value in the Closing Date Balance Sheets, the Gen-X Annual Financial
Statements and the Gen-X Interim Financial Statements. "ll Inventory of the Gen-
X Companies not written off has been priced at the lower of cost or market on a
first in, first out basis. The quantities of each item of Inventory of the Gen-X
Companies are not excessive, but are reasonable in the present circumstances of
the Gen-X Companies.
4.10 Operations Since March 31, 1998. Except as set forth on Schedule
------------------------------- --------
4.10, since March 31, 1998:
- ----
(a) Except in the ordinary course of its business consistent with its
past practices, none of the Gen-X Companies has (i) created or assumed any
Encumbrance upon any of its business or Assets, (ii) incurred any Obligation,
(iii) made any loan or advance to any Person, (iv) assumed, guaranteed or
otherwise become liable for any Obligation of any Person, (v) committed for any
capital expenditure, (vi) sold, abandoned or otherwise disposed of any of its
business or Assets, (vii) purchased, leased or otherwise acquired any business,
Assets or capital stock of any other Person, (viii) settled any dispute, waived
any right or canceled any Obligation, (ix) assumed, entered into or amended any
Contract other than this Agreement and the Ancillary Agreements, or canceled or
terminated any Contract other than in accordance with its terms, (x) hired any
new officer, employee, salesman, agent or representative or increased, or
authorized an increase in, the compensation or benefits paid or provided to any
of its directors, officers, employees, salesmen, agents or representatives, or
(xi) done anything else outside the ordinary course of business, whether or not
specifically described in any of the foregoing clauses.
(b) Even in the ordinary course of its business consistent with its
past practices, none of the Gen-X Companies has (i) declared, paid or set aside
for payment any dividend or other distribution, or made any direct or indirect
redemption, retirement or acquisition of any shares of its capital stock, (ii)
made any change in its accounting policies or practices, (iii) made any loan or
advance, or paid any bonus, to any of its shareholders, officers, directors,
consultants, affiliates or associates, (iv) paid directly or indirectly any of
its Obligations before it became due in accordance with its terms, (v) issued,
or authorized the issuance, of any shares or other securities or granted any
rights with respect to its shares or other securities, (vi) amended its
certificate of incorporation or bylaws (or other organization documents), or
merged with or into, consolidated with, completely or partially liquidated or
dissolved, or was involved in any other business combination with any other
Person, (vii) changed, or authorized a change in, the rights of its outstanding
capital stock or the character of its business, (viii) adopted or amended any
Employee Benefit Plan, or (ix) done any of the other things described in Section
4.10(a) involving an amount exceeding $25,000 in any single case or an aggregate
amount exceeding $50,000 for any series of related transactions, other than the
purchase of Inventory.
(c) There has been no casualty loss (whether or not covered by
insurance) affecting any of the Gen-X Companies that was or is Material to
either Gen-X Equipment or Gen-X
-18-
Holdings, and there has been no event or occurrence adversely affecting any of
the Gen-X Companies that was or is Material to either Gen-X Equipment or Gen-X
Holdings.
4.11 Tangible Property. Schedule 4.11 sets forth a list, as of March
----------------- -------------
31, 1998 of all of the Gen-X Companies' Tangible Property, by category,
including the cost, accumulated depreciation and net book value for each
category. Each of the Gen-X Companies has good and marketable title to its
Tangible Property including, without limitation, all such Tangible Property
reflected in the Gen-X Interim Financial Statements, except for Tangible
Property sold since March 31, 1998 in the ordinary course of business consistent
with past practice. Except as indicated on Schedule 4.11, none of such Tangible
-------------
Property is subject to any Encumbrance except: (i) Encumbrances securing
Obligations reflected on the Gen-X Equipment Interim Financial Statements with
respect to which no default exists; or (ii) Encumbrances for current taxes not
yet due or for taxes being contested in good faith as to which adequate reserves
have been provided. All Tangible Property owned by or under lease to any of the
Gen-X Companies is in good condition, ordinary wear and tear (other than that
which materially detracts from the value or impairs the present use of the
property) excepted, and are sufficient for the Gen-X Companies' operations as
presently conducted. Except as set forth on Schedule 4.11, all of the Gen-X
-------------
Companies' Tangible Property is located at the Gen-X Companies' offices or
facilities, and the Gen-X Companies have the full and unqualified right to
require the immediate return of any of their respective Tangible Property which
is not located at the Gen-X Companies' offices or facilities. The product
moulds included in the Gen-X Companies' Tangible Property have an aggregate fair
market value equal to or greater than the book value of such moulds, are being
used to produce products and have a useful life at least equal to the period
over which they are being amortized.
4.12 Real Property.
-------------
(a) Schedule 4.12 is a detailed list of all Real Property owned or
-------------
leased by any of the Gen-X Companies, showing cost, accumulated depreciation and
net book value for all owned Real Property. Except as set forth on Schedule
--------
4.12, the Gen-X Companies hold fee simple title to all of their owned Real
- ----
Property, free and clear of any Encumbrances. Copies of all deeds, title
searches, title opinions, surveys, plot plans and appraisals held by the Gen-X
Companies with respect to their owned Real Property have been delivered to
Global. To the best knowledge and belief of each of DMJ, Salter and Finkelstein
without independent investigation, or except as set forth on Schedule 4.12, none
-------------
of the Real Property owned or leased by the Gen-X Companies, nor the
construction, occupancy, maintenance or use thereof, is in violation of any
Contract or Law, and no notice from any lessor, governmental body or other
Person has been received by the Gen-X Companies or served upon any such Real
Property claiming any violation of any Contract or Law, or requiring or calling
attention to the need for any work, repairs, construction, alterations or
installations, except where the violation, claimed violation or required actions
are not and would not be Material to the Gen-X Companies. Except as set forth
on Schedule 4.12, to the best knowledge and belief of each of DMJ, Salter and
-------------
Finkelstein without independent investigation, all Real Property owned or leased
by the Gen-X Companies is structurally sound, in good condition and repair, and
is sufficient for the Gen-X Companies' operations as presently conducted. To
the best knowledge and belief of each of DMJ, Salter and Finkelstein without
independent investigation, without independent investigation, no Proceedings are
pending which would affect the zoning or use of any Real Property owned or
leased by the Gen-X Companies. The Gen-X Companies have not placed or caused to
be placed, and none of DMJ, Salter or Finkelstein has any knowledge or, except
as set forth in Schedule 4.12, belief that there exists, any Hazardous
-------------
Substances on or under any of the Gen-X Companies' Real Property. To the best
-19-
knowledge and belief of each of DMJ, Salter and Finkelstein without independent
investigation, there are no soil or subsoil conditions at any of the Gen-X
Companies' undeveloped Real Property that would restrict, impair or prohibit the
use of all or any portion thereof for further development similar to the Gen-X
Companies' developed Real Property. To the best knowledge and belief of each of
DMJ, Salter and Finkelstein without independent investigation, no portion of any
of the Gen-X Companies' Real Property is within an identified flood plain or
other designated flood hazard area as established under any Law or otherwise by
any Governmental Authority. To the best knowledge and belief of each of DMJ,
Salter and Finkelstein without independent investigation, all of the Gen-X
Companies' Real Property has direct legal access to, abuts, and is served by a
publicly dedicated and maintained road, which road does and shall provide a
valid means of ingress and egress thereto and therefrom, without additional
expense to Global. To the best knowledge and belief of each of DMJ, Salter and
Finkelstein without independent investigation, all utilities (including water,
gas, telephone, electricity, sanitary and storm sewers) are currently available
to all of the Gen-X Companies' Real property at normal and customary rates, and
are adequate to serve such Real Property for the Gen-X Companies' current use
thereof. No asbestos-containing materials are or were installed or exposed in
any of the Gen-X Companies' Real Property, through demolition, renovation or
otherwise, at any time during the Gen-X Companies' ownership thereof or, to the
best knowledge and belief of each of DMJ, Salter and Finkelstein without
independent investigation, before the Gen-X Companies' ownership thereof. No
electrical transformers, fluorescent light fixtures with ballasts, or other
equipment containing PCB's are or were located on any of the Gen-X Companies'
Real Property at any time during the Gen-X Companies' ownership thereof or, to
the best knowledge and belief of each of DMJ, Salter and Finkelstein without
independent investigation, before the Gen-X Companies' ownership thereof. No
storage tanks for any Hazardous Substances are or were located on any of the
Gen-X Companies' Real Property at any time during the Gen-X Companies' ownership
thereof or, to the best knowledge and belief of each of DMJ, Salter and
Finkelstein without independent investigation, before the Gen-X Companies'
ownership thereof. To the best knowledge and belief of each of DMJ, Salter and
Finkelstein without independent investigation, none of the Gen-X Companies'
Real Property is on any federal or state "Superfund" list or any similar list
maintained by any Governmental Authority with respect to sites requiring cleanup
due to contamination by Hazardous substances. None of the Gen-X Companies' Real
property has been used to generate, manufacture, refine, transport, treat,
store, handle, dispose, transfer, produce or process any Hazardous Substances at
any time during the Gen-X Companies' ownership thereof or, to the best knowledge
and belief of each of DMJ, Salter and Finkelstein without independent
investigation, before the Gen-X Companies' ownership thereof. No condemnation
or expropriation proceeding is pending or, to the knowledge of DMJ, Salter and
Finkelstein without independent investigation, threatened against any of the
Real Property.
(b) Except as set forth in Schedule 4.12:
-20-
(i) none of the Real Property currently or, to the knowledge of DMJ,
Salter and Finkelstein without independent investigation, formerly owned, leased
or used by the Gen-X Companies or over which the Gen-X Companies have or have
charge, management or control have ever been used by any Person as a waste
disposal site or as a licensed landfill;
(ii) to the knowledge of DMJ, Salter and Finkelstein without
independent investigation, no properties adjacent to any of the Gen-X Companies'
Real Properties are contaminated;
(iii) none of the Gen-X Companies have transported, removed or
disposed of any waste to a location outside of Canada;
(iv) to the knowledge of DMJ, Salter and Finkelstein without
independent investigation, there are no contaminants located in the ground or in
groundwater under any of the Gen-X Companies' Real Property;
(v) the Gen-X Companies have not been required by any Governmental
Authority to (A) alter any of the Real Property in a material way in order to be
in compliance with environmental laws, or (B) perform any environmental closure,
decommissioning, rehabilitation, restoration or post-remedial investigations,
on, about, or in connection with any Real Property;
4.13 Software and Intangibles.
------------------------
(a) Schedule 4.13 sets forth a list and description of all Software
-------------
and Intangibles owned or used by any of the Gen-X Companies. Each of the Gen-X
Companies has good and marketable title to all Software and Intangibles owned by
it, free and clear of all Encumbrances. None of the Software or Intangibles
owned or used by any of the Gen-X Companies, or their respective past or current
uses, has violated or infringed upon or is violating or infringing upon any
patent, copyright, trade secret, industrial or other proprietary right or
Intangible of any Person, except where such violation or infringement would not
be Material to either Gen-X Equipment or Gen-X Holdings. To the knowledge of
DMJ, Salter and Finkelstein, no Person is violating or infringing upon any
Software or Intangibles owned by any of the Gen-X Companies. No Software or
Intangibles owned by any of the Gen-X Companies is owned by or registered in the
name of any current or former shareholder, director, officer, employee,
salesman, agent, representative or contractor of any of the Gen-X Companies, nor
does any such Person have any interest therein or right thereto.
(b) The Gen-X Companies have devised a plan that will ensure that the
information technology systems (including hardware, Software and any equipment
that may be controlled by embedded chips, as well as all databases) used, in
whole or in part in, or required for, the carrying on of the Gen-X Companies'
operations in the manner heretofore carried on, will operate prior to, during
and after the calendar year 2000 A.D. without error relating to date-related
-21-
data. The Gen-X Companies will be able to implement such plan without any
material cost to the Gen-X Companies.
4.14 Obligations. Except as set forth on Schedule 4.14, none of the
----------- -------------
Gen-X Companies has any Obligations other than (a) those Obligations reflected
on the Gen-X Interim Financial Statements, (b) Obligations under the Real Estate
Contracts listed on Schedule 4.12, the Specified Contracts listed on Schedule
-------------- --------
4.15, any Contracts not required to be listed on Schedule 4.15, Employee Benefit
- ---- -------------
Plans listed on Schedule 4.17 and the Insurance Policies listed on Schedule 4.20
------------- -------------
that were not required to be reflected on the Gen-X Interim Financial
Statements, and (c) Obligations incurred since March 31, 1998 and not in breach
or violation of any of the representations or warranties of Section 4.10 and/or
the covenants of Section 7.2.
4.15 Contracts.
---------
(a) Schedule 4.15 is a detailed list of all of the following types of
-------------
Contracts to which any of the Gen-X Companies is a party or by which any of the
Gen-X Companies or its business or Assets is bound, (collectively, the
"Specified Contracts"), grouped into the following categories: (i) purchase
orders with or other commitments to vendors or factories, (ii) loan agreements,
mortgages, notes, and other financing Contracts, (iii) Contracts for the
purchase, lease, license and/or maintenance of Tangible Property or Software
under which any of the Gen-X Companies is the purchaser, licensee, lessee or
user, and other supplier Contracts that are Material to either Gen-X Holdings or
Gen-X Equipment, (iv) Contracts with current or former officers, directors,
employees, consultants, representatives or agents (excluding Contracts which
constitute Employee Benefit Plans listed on Schedule 4.17, oral Contracts with
-------------
employees in the United States for "at will" employment or oral contracts with
employees in Canada and Contracts with managing general agents or insurance
agents or brokers), (v) Contracts under which any of the Gen-X Companies agrees
to indemnify any Person, share the tax liability of any Person, or guarantee any
Obligation of any Person, or any similar Contract, (vi) Contracts containing
covenants of any of the Gen-X Companies not to compete in any line of business
or with any Person in any geographical area or covenants of any other Person not
to compete with any of the Gen-X Companies in any line of business or in any
geographical area, and (vii) other Contracts (excluding Contracts which
constitute Insurance Policies listed on Schedule 4.20) that are Material to
-------------
either Gen-X Holdings or Gen-X Equipment. A description of each oral Specified
Contract is included on Schedule 4.15, and copies of each written Specified
-------------
Contract have been delivered to Global.
(b) Except as set forth on Schedule 4.15, (i) with respect to each of
-------------
the Specified Contracts, none of the Gen-X Companies is in default thereunder or
would be in default thereunder, with or without notice and/or lapse of time,
except where such default would not be Material to either Gen-X Holdings or Gen-
X Equipment, (ii) to the knowledge of DMJ, Salter and Finkelstein, none of the
other parties to any Specified Contract is in default thereunder or would be in
default thereunder, with or without notice and/or lapse of time, except where
such default would not be Material to either Gen-X Holdings or Gen-X Equipment,
(iii) none of the Gen-X Companies has given or received any notice of default or
notice of termination with respect to any Specified
-22-
Contract, and each Specified Contract is in full force and effect in accordance
with its terms, and (iv) there are no currently outstanding proposals or offers
submitted by or to any of the Gen-X Companies which, if accepted, would result
in a legally binding Contract of any of the Gen-X Companies involving an amount
or commitment exceeding $25,000 in any single case or an aggregate amount or
commitment exceeding $50,000 for any series of related transactions.
4.16 Employees and Independent Contractors.
-------------------------------------
(a) Schedule 4.16(a) sets forth a list of all employees of any of the
----------------
Gen-X Companies and (i) their titles or responsibilities, (ii) their social
security and social insurance numbers (or other tax identification) numbers and
states or provinces of residence, (iii) their dates of hire, (iv) their current
salaries or wages, (v) their last compensation changes and the dates on which
such changes were made, (vi) any specific bonus, commission or incentive plans
or agreements for or with them, together with all bonuses, commissions and
incentives paid to them at any time during the past twelve months (if not set
forth in a Contract listed on described on Schedule 4.15), and (viii) any
-------------
outstanding loans or advances made to them. Except as limited by any employment
Contracts listed on Schedule 4.15 and except for any limitations of general
-------------
application which may be imposed under applicable employment Laws or the common
law, each of the Gen-X Companies has the right to terminate the employment of
each of its employees and without incurring any penalty or liability. Each of
the Gen-X Companies is in full compliance with all Laws respecting employment
and employment practices, terms and conditions of employment, pay equity, wages
and hours of work, except where the failure to so comply is not and would not be
Material to either Gen-X Holdings or Gen-X Equipment. None of the Gen-X
Companies has ever been a party to or bound by any union or collective
bargaining Contract, nor is any such Contract currently in effect or being
negotiated by or on behalf of any of the Gen-X Companies. Since January 1,
1995, none of the Gen-X Companies has experienced any labor problem that was or
is Material to either Gen-X Holdings or Gen-X Equipment. Each of the Gen-X
Companies' relations with its employees are currently on a good and normal
basis. Since January 1, 1998, no employee of any of the Gen-X Companies having
an annual salary of $50,000 or more has indicated an intention to terminate his
or her employment with any of the Gen-X Companies.
(b) Schedule 4.16(b) sets forth a list of all sales representatives,
----------------
consultants, agents and independent contractors engaged by any of the Gen-X
Companies and (i) their social security or social insurance (or other tax
identification) numbers and states or provinces of residences, (ii) their
payment arrangements (if not set forth in a Contract listed or described on
Schedule 4.15), and (iii) a brief description of their jobs or projects
currently in progress for any of the Gen-X Companies.
4.17 Employee Benefit Plans.
----------------------
(a) Except as set forth on Schedule 4.17, none of the Gen-X Companies
-------------
has established or sponsors, maintains or contributes to, or has any ongoing
Obligations with respect to, any Employee Benefit Plan. Schedule 4.17 includes
-------------
an accurate description of each Employee
-23-
Benefit Plan that is currently in effect or as to which any of the Gen-X
Companies has any ongoing Obligation, which description indicates the employees
covered or affected thereby and all of the Obligations of any of the Gen-X
Companies thereunder. The Employee Benefit Plans are duly registered where
required by, and are in good standing under, all applicable Laws. Copies of all
Employee Benefit Plans described on Schedule 4.17 and all written materials
-------------
used by any of the Gen-X Companies to describe its Employee Benefit Plans to
employees have been delivered to Global. Except as set forth on Schedule 4.17,
-------------
none of the Gen-X Companies is a party to any Contract to create, or has
proposed to create, any additional Employee Benefit Plan or to continue, modify,
change or terminate any of its current Employee Benefit Plans in any respect
that would be Material to either Gen-X Holdings or Gen-X Equipment.
(b) If permitted or required by applicable Law, each of the Gen-X
Companies has properly submitted, or intends to properly submit, all of its
Employee Benefit Plans described on Schedule 4.17, for the purpose of meeting
-------------
the requirements of all applicable Laws, to the appropriate Governmental
Authority for its approval within the time prescribed therefor.
(c) With respect to Employee Benefit Plans described on Schedule 4.17,
-------------
(i) each of the Gen-X Companies have made all payments required to be made by
them to date, have accrued (in accordance with U.S. GAAP or Canadian GAAP, as
applicable, consistently applied) all payments due but not yet payable as of the
date of this Agreement, and shall have made on or before the Closing Date all
payments due as of the Closing Date, (ii) no past service funding liabilities
exist, (iii) there are no Proceedings pending or threatened (other than routing
claims for benefits) relating to any of the Employee Benefit Plans, (iv) there
is no requirement to provide post-retirement profit sharing, medical or health
benefits to employees of any of the Gen-X Companies (v) each of the Gen-X
Companies has operated and currently operates each such plan in compliance with
the plan documents and all applicable Laws, except where the failure to so
comply would not be Material to either Gen-X Holdings or Gen-X Equipment, and
(vi) there has not been any termination or partial termination of such plan
(including, but not limited to, any termination or partial termination
attributable to the transactions contemplated by this Agreement).
(d) There are no circumstances arising out of the sponsorship by any
of the Gen-X Companies of any Employee Benefit Plan that will result in any of
the Gen-X Companies having any Obligations with respect thereto, other than
Obligations for contributions, benefit payments, administrative costs and
liabilities incurred in the ordinary course of business consistent with past
practices. There would be no Obligations of any of the Gen-X Companies under
any applicable Law if any of its Employee Benefit Plans were terminated as of
the Closing Date (other than Canadian Laws). None of the Gen-X Companies has
incurred, and will not incur, any Obligation to any Governmental Authority with
respect to any of its Employee Benefit Plans. None of the Gen-X Companies has
incurred, and will not incur, any withdrawal liability, and none of the Gen-X
Companies have or will have, any contingent withdrawal liability, with respect
to any Employee Benefit Plan under any applicable Law. No event has occurred,
and no circumstances currently exist, that do or will result in any penalty
being assessed pursuant to any tax being imposed under, or any liability for
breach of fiduciary or other responsibility under, any applicable Law, in
-24-
connection with any Employee Benefit Plan that has been established, maintained
or contributed to by any of the Gen-X Companies or any other entity or entities
affiliated or associated with any of the Gen-X Companies.
4.18 Taxes. Except as set forth in Schedule 4.18 or as provided below
-----
with respect to the period from October 1, 1997 through the Closing Date, each
of the Gen-X Companies has timely filed all Tax Returns required to be filed by
them, all of which were accurately prepared, and paid all Taxes required to be
paid. Each of the Gen-X Companies has properly withheld from payments to its
employees, contractors, salesmen, agents, representatives, vendors and other
Persons all amounts required by Law to be withheld, and each of the Gen-X
Companies has timely filed all Tax Returns required to be filed by it with
respect to such withholdings. There are no outstanding agreements or waivers
extending the statutory period providing for an extension of time with respect
to the assessment or re-assessment of tax or the filing of any tax return by, or
any payment of any tax by any of the Gen-X Companies, no notice of assessment or
reassessment has been received and to the knowledge of DMJ, Salter and
Finkelstein, no examination of any tax return of any of the Gen-X Companies is
currently in progress. Each of the Gen-X Companies has duly paid or made
adequate provision on the Gen-X Financial Statements for the fiscal year ended
September 30, 1997, and on its books and records for the period October 1, 1997
to the Closing Date, for the payment of all Taxes required to be paid by them
including, without limitation, any Taxes which may arise directly or indirectly
as a result of the transactions contemplated herein (which, for these purposes,
shall include the disposition by Gen-X Holdings in whole or part of ownership
interest in the capital stock of Gen-X Equipment prior to the sale of Gen-X
Holdings to Global). Copies of all Tax Returns filed by each of the Gen-X
Companies since inception have been delivered to Global. The Tax Returns of the
Gen-X Companies have been audited by the appropriate Governmental Authority as
set forth on Schedule 4.18, for all fiscal years through and including the date
-------------
set forth on Schedule 4.18, and except as indicated on Schedule 4.18, no audit
------------- -------------
or other Proceeding is pending or threatened against any of the Gen-X Companies,
no notice of deficiency or adjustment has been received by any of the Gen-X
Companies, by or from any Governmental Authority, and no Tax is being contested
by any of the Gen-X Companies. All deficiencies asserted or threatened by any
Governmental Authority relating to any of the Gen-X Companies have been paid,
fully satisfied or adequately provided for on the books and records of the Gen-X
Companies. The statutes of limitations on assessment or relevant periods to
reassess under applicable Tax Laws with respect to the Tax Returns of each of
the Gen-X Companies through the fiscal year ended September 30, 199__, have
expired and there are no agreements or waivers in effect which provide for an
extension of time for the assessment of any Tax against any of the Gen-X
Companies. Except as set forth on Schedule 4.18, none of the Gen-X Companies is
-------------
a party to, is bound by or has any obligation under any tax sharing or similar
agreement. Gen-X Equipment is a registrant for purposes of the tax imposed
under Part IX of the Excise Tax Act (Canada). Except as set forth on Schedule
4.18, none of the Owners is a non-resident of Canada within the meaning of the
Income Tax Act (Canada)
4.19 Proceedings and Judgments. Except as described on Schedule 4.19,
------------------------- -------------
(a) no Proceeding is currently pending or, to the knowledge of DMJ, Salter or
Finkelstein, threatened, nor has any Proceeding occurred at any time since
January 1, 1995, to which any of the Gen-X Companies is or was a party, or by
which the Gen-X Holdings Stock, the Gen-X Equipment Stock, the business or
Assets of any of the Gen-X Companies is or
-25-
was affected, except any such Proceeding that was not and would not be Material
to either Gen-X Holdings or Gen-X Equipment and there is no basis known to DMJ,
Salter or Finkelstein for any such Proceeding, (b) no Judgment is currently
outstanding, nor has any Judgment been outstanding at any time since January 1,
1995, against any of the Gen-X Companies, or by which the Gen-X Holdings Stock,
the Gen-X Equipment Common Shares, the business or Assets of any of the Gen-X
Companies or the Assets of any other Person which are used by any of the Gen-X
Companies, is or was affected, except any such Judgment that was not and would
not be Material to either Gen-X Holdings or Gen-X Equipment, and (c) no breach
of contract, breach of warranty, tort, negligence, infringement, product
liability, discrimination, wrongful discharge or other claim of any nature has
been asserted or, to the knowledge of DMJ, Salter or Finkelstein, threatened by
or against any of the Gen-X Companies, except where any such claim would not be
Material to either Gen-X Holdings or Gen-X Equipment, and there is no basis
known to DMJ, Salter or Finkelstein for any such claim. "s to each matter
described on Schedule 4.19, copies of all pertinent pleadings, judgments,
-------------
orders, correspondence and other documents have been delivered to Global.
4.20 Insurance. Schedule 4.20 is a list and description of all
--------- -------------
Insurance Policies currently owned or maintained by any of the Gen-X Companies
(excluding Insurance Policies that constitute Employee Benefit Plans described
on Schedule 4.15) and all liability and errors and omissions Insurance Policies
-------------
owned or maintained by any of the Gen-X Companies and/or any of its predecessors
at any time since January 1, 1995. Except as indicated on Schedule 4.20, all
-------------
such Insurance Policies are or were on an "occurence" rather than a "claims
made" basis. Copies of all Insurance Policies described on Schedule 4.20 have
-------------
been delivered to Global. Each such Insurance Policy is or was in full force
and effect during the period(s) of coverage indicated on Schedule 4.20. There
-------------
are no claims Material to either Gen-X Holdings or Gen-X Equipment that are
pending under any of the Insurance Policies described on Schedule 4.20. None of
-------------
the Gen-X Companies has received any notice of cancellation with respect to any
of its current Insurance Policies, each of which is in full force and effect,
and there is no basis for the insurer thereunder to terminate any of the current
Insurance Policies of any of the Gen-X Companies.
4.21 Questionable Payments. None of the Gen-X Companies or any of its
---------------------
current or former shareholders, directors, officers, representatives, agents or
employees (when acting in such capacity or otherwise on behalf of any of the
Gen-X Companies or any of its predecessors), (a) has used or is using any
corporate funds for any illegal contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) has used or is using any
corporate funds for any direct or indirect unlawful payments to any foreign or
domestic government officials or employees, (c) has violated or is violating any
provision of the Foreign Corrupt Practices Act of 1977 or any similar provisions
of any Laws, (d) has established or maintained, or is maintaining, any unlawful
or unrecorded fund of corporate monies or other properties, (e) has made any
false or fictitious entries on the books and records of any of the Gen-X
Companies, or (f) has made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment of any nature.
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4.22 Related Party Transactions. Except as described on Schedule 4.22,
-------------------------- -------------
any employment Contracts listed on Schedule 4.15, and any Contracts or other
-------------
arrangements or transactions that do not have any prospective effect and which
were accounted for properly in accordance with U.S. GAAP or Canadian GAAP, as
applicable, there are no Contracts or other arrangements or transactions of any
nature between any of the Gen-X Companies and any current or former shareholder,
partner, director, officer or controlling Person of any of the Gen-X Companies
or any other Person affiliated with any of the Gen-X Companies.
4.23 Brokerage Fees. Global is not responsible for the payment to any
--------------
Person acting on behalf of any of the Owners for any brokerage or finder's fee
in connection with the transactions contemplated by this Agreement.
4.24 Investment Matters. The shares of Global Stock to be issued to
------------------
DMJ, Salter and/or Finkelstein hereunder are being acquired for investment
purposes only and not with a view to, or for sale in connection with, any resale
or distribution in violation of the Securities Act of 1933, as amended (the
"1933 Act"). DMJ, Salter and Finkelstein have received and examined Global's
Public Reports, have had the opportunity to ask questions and receive answers
from Global concerning Global, and have been furnished with all other
information about Global which they have requested. Each of DMJ, Salter and
Finkelstein believes that it or he has been fully apprised of all facts and
circumstances necessary to permit it or him to make an informed decision about
acquiring shares of Global Stock, that it or he has sufficient knowledge and
experience in business and financial matters, that it or he is capable of
evaluating the merits and risks of an investment in Global Stock, and that it or
he has the capacity to protect their own interests in connection with the
transactions contemplated hereby. Each of DMJ, Salter and/or Finkelstein is an
"accredited investor" as defined in Regulation D under the 1933 Act. Each of
DMJ, Salter and Finkelstein has been advised by Global and understands that (a)
the shares of Global Stock to be issued hereunder will not be registered under
the 1933 Act or any securities Law of any Governmental Authority, (b) such
shares must be held indefinitely unless and until they are subsequently
registered under the 1933 Act and all other applicable securities Laws or an
exemption from registration becomes available, (c) the certificates representing
such shares shall bear appropriate restrictive legends, and (d) Global shall
have the right to direct the transfer agent of Global Stock to place a stop
order against such certificates.
4.25 Full Disclosure. No representation or warranty made by the Owners
---------------
in this Agreement or the Ancillary Agreements or pursuant hereto or thereto
contains any untrue statement of any material fact or omits to state any
material fact that is necessary to make the statements made, in the context in
which made, not false or misleading. The copies of documents attached as
Schedules to this Agreement or the Ancillary Agreements or otherwise delivered
to Global in connection with the transactions contemplated by this Agreement or
the Ancillary Agreements, are accurate and complete and are not missing any
amendments, modifications, correspondence or other related papers which would be
pertinent to Global's understanding thereof. There is no fact known to DMJ,
-27-
Salter or Finkelstein, that has not been disclosed to Global in the Schedules to
this Agreement or the Ancillary Agreements or otherwise in writing, that was or
is, or so far as DMJ, Salter and Finkelstein can reasonably foresee will be,
Material to either Gen-X Holdings or Gen-X Equipment or Material to the ability
of the Owners to perform their obligations under this Agreement and the
Ancillary Agreements.
4.26 Accounts Payable. Schedule 4.26 is a detailed list, as of March
---------------- -------------
31, 1998, of the Gen-X Companies' Accounts Payable, itemized by payee, showing
payee names, individual invoice dates, individual invoice amounts and
individual invoice due dates.
4.27 Disposition by Gen-X Holdings of Gen-Equipment Stock. The
----------------------------------------------------
disposition by Gen-X Holdings of its ownership interest in Gen-X Equipment prior
to the Closing Date was effected in compliance with all applicable Laws and did
not and will not result in any Obligation of Gen-X holdings or any other Gen-X
Company to pay any Tax in connection therewith.
SECTION 5: REPRESENTATIONS AND WARRANTIES OF GLOBAL
- --------- ----------------------------------------
Knowing that the Owners are relying thereon, Global represents and warrants
to the Owners as follows:
5.1 Organization and Authority. Global is a corporation duly organized,
--------------------------
validly existing and in good standing under the Laws of the State of Delaware.
Global possesses the full corporate power and authority to own its Assets,
conduct its business as and where presently conducted, and enter into and
perform this Agreement and the transactions contemplated hereby and the
Ancillary Agreements to which it is a party or by which it is bound and the
transactions contemplated thereby.
5.2 Subsidiaries. Global's Subsidiaries are duly organized, validly
------------
existing, and in good standing under the laws of their respective jurisdictions
of incorporation. Global's Subsidiaries have the full corporate power and
authority to own their Assets and conduct their business as and where such
businesses are presently conducted. All of the issued and outstanding capital
stock of Global's Subsidiaries are duly authorized, validly issued, fully paid
and nonassessable, with no liability attaching to the ownership thereof, and are
not subject to, and were not issued in violation of, any preemptive rights. All
shares of Global's Subsidiaries are owned by Global, free and clear of all
Encumbrances, and there are no voting trusts or other arrangements or
understandings in favor of any Person other than Global with respect to the
voting of the capital stock of Global's Subsidiaries. There are no outstanding
Contracts or other rights relating to the issuance, sale, redemption, or
disposition of any shares of capital stock or other interests of Global's
Subsidiaries or any other securities of Global's Subsidiaries.
5.3 Global Stock. The authorized capital stock of Global consists of
------------
(i) 20,000,000 shares of Global Common Stock, of which 10,418,711 shares are
issued and outstanding, and (ii) 1,000,000 shares of Global Preferred Stock, of
which no shares are issued and outstanding. As of March 31, 1998, the aggregate
number of shares of Global Common Stock issuable pursuant to outstanding options
or warrants was 921,015. The shares of Global Common Stock and Global Preferred
Stock to be issued as part of the Purchase Price for the Gen-X Holdings Stock,
when issued in accordance
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with the terms of this Agreement will be duly authorized, validly issued, fully
paid and nonassessable, with no liability attaching to the ownership thereof,
and are not subject to, and were not issued in violation of, any preemptive
rights. Except for the outstanding options and warrants referred to in this
Section 5.3 and as contemplated by this Agreement and Ancillary Agreements,
there are no outstanding contracts or other rights relating to the issuance,
sale, redemption or disposition by Global of any shares of Global Capital Stock.
5.4 Effect of Agreement. The execution, delivery and performance of
-------------------
this Agreement and the Ancillary Agreements by Global, and the consummation by
Global of the transactions contemplated hereby and thereby, (a) have been duly
authorized by all necessary corporate actions by its board of directors, (b) do
not constitute a breach or violation of, or a default under, Global's
certificate of incorporation or bylaws, (c) do not constitute a breach or
violation of, or a default under, any Contract to which Global is a party or by
which Global or its Assets or business are bound and which is Material to
Global, (d) do not constitute a violation of any Law or Judgment applicable to
Global or its Assets or business, (e) do not constitute a violation of, and do
not result in the revocation, restriction, suspension or modification of any
Permit, (f) do not accelerate or otherwise modify any Obligation of Global, (g)
do not result in the creation of any Encumbrance upon, or give to any other
Person any interest in, Global's Stock or in the business or Assets of Global,
and (h) except for the Consents set forth on Schedule 5.4 (the "Global Required
------------
Consents") do not require the Consent of any Person other than applicable
requirements of the 1934 Act. This Agreement constitutes, and the Ancillary
Agreements when executed and delivered will constitute, the valid and legally
binding agreements of Global, enforceable against Global in accordance with
their respective terms.
5.5 Compliance with Law. Global's operations, the conduct of Global's
-------------------
business as and where such business has been or presently is conducted, and
Global's Assets and their uses comply with all Laws and Judgments applicable to
Global and its operations, business or Assets, except where the failure to so
comply would not be Material to Global, and Global has not received written
notice that it is not in compliance. Except as set forth on Schedule 5.5,
------------
Global has obtained and holds all Permits required for the lawful operation of
its business as and where such business presently conducted, except where the
failure to do so was not, is not and would not be Material to Global.
5.6 Public Reports. Global has delivered to the Owners copies of the
--------------
following reports and documents filed by Global with the SEC ("Public Reports"):
(a) Annual Report on Form 10-K for the year ended December 31, 1997, and (b) the
definitive Proxy Statement relating to Global's 1997 Annual Meeting of
Shareholders. As of their respective dates, none of the Public Reports
contained any untrue statement of fact that was or is Material to Global or
omitted any fact that was required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except to the extent that any such statement or omission has
been modified or superseded in a Public Report subsequently filed with the SEC
or in any other document, report, release or statement that is publicly
available.
-29-
5.7 Financial Statements. The consolidated balance sheets and related
--------------------
statements of operations, cash flows and changes in shareholders' equity of
Global and its Subsidiaries contained in the Public Reports, including the notes
thereto, were prepared in accordance with U.S. GAAP consistently applied, and
fairly present the financial condition and results of operations, cash flows and
changes in stockholders' equity of Global and its Subsidiaries as of the dates
and for the periods indicated, and in the case of unaudited financial
statements, all adjustments which are necessary for a fair presentation of such
financial statements (consisting of normal recurring adjustments) have been
made. Since December 31, 1997, there has been no event or occurrence adversely
affecting Global and its Subsidiaries that was or is Material to Global.
5.8 Taxes. Global has timely filed all Tax returns and reports required
-----
to be filed by it, all of which were accurately prepared. Global and its
Subsidiaries have properly withheld from payments to its employees, contractors,
salesmen, agents, representatives, vendors and other Persons all amounts
required by Law to be withheld, and Global and its Subsidiaries have timely
filed all information returns and reports required to be filed by it with
respect to such withholdings. Global and its Subsidiaries have duly paid or
made adequate provision on Global's consolidated balance sheet as of December
31, 1997 for the payment of all Taxes required to be paid by them. Global and
its Subsidiaries have been audited by the IRS for all fiscal years through and
including the date set forth on Schedule 5.8, and except as indicated on
------------
Schedule 5.8, no audit or other Proceeding is pending or threatened against
- ------------
Global or any of its Subsidiaries, and no notice of deficiency or adjustment has
been received by Global, by or from any governmental taxing authority. All
deficiencies asserted by the IRS or any other Governmental Authority relating to
Global or any of its Subsidiaries have been paid, fully satisfied or adequately
provided for on the books of Global and its Subsidiaries. There are no
agreements or waivers in effect which provide for an extension of time for the
assessment of any Tax against Global or any of its Subsidiaries.
5.9 Proceedings and Judgments. Except as described in Global's Public
-------------------------
Reports, (a) no Proceeding is currently pending or, to the knowledge of Global,
threatened, nor has any Proceeding occurred at any time since January 1, 1998,
to which Global is or was a party, or by which Global Stock, the business or
Assets of Global is or was affected, except any such Proceeding that would not
be Material to Global, and there is no basis known to Global for any such
Proceeding, (b) no Judgment is currently outstanding, nor has any Judgment been
outstanding at any time since January 1, 1998, against Global, or by which
Global Stock, the business or Assets of Global or the assets of any other Person
which are used by Global, is or was affected, except any such Judgment that
would not be Material to Global, and (c) no breach of contract, breach of
warranty, tort, negligence, infringement, product liability, discrimination,
wrongful discharge or other claim of any nature has been asserted or, to the
knowledge of Global, threatened by or against Global, except where any such
claim is not and would not be Material to Global, and there is no basis known to
Global for any such claim.
5.10 Brokerage Fees. No Person acting on behalf of Global is entitled
--------------
to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement.
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5.11 Full Disclosure. No representation or warranty made by Global in
---------------
this Agreement or the Ancillary Agreements or pursuant hereto or thereto
contains any untrue statement of any material fact or omits to state any
material fact that is necessary to make the statements made, in the context in
which made, not false or misleading. The copies of documents attached as
Schedules to this Agreement or the Ancillary Agreements or otherwise delivered
to the Owners in connection with the transactions contemplated by this Agreement
are accurate and complete, and are not missing any amendments, modifications,
correspondence or other related papers which would be pertinent to the Owners'
understanding thereof. There is no fact known to Global, that has not been
disclosed to the Owner in the Schedules to this Agreement or the Ancillary
Agreements or otherwise in writing, that was or is, or so far as Global can
reasonably foresee will be, Material to Global or Material to the ability of
Global to perform its obligations under this Agreement and the Ancillary
Agreements.
5.12 Investment Canada Act. Global is a non-Canadian for purposes of
---------------------
the Investment Canada Act.
SECTION 6: REPRESENTATIONS AND WARRANTIES OF THE MINORITY
- --------- ----------------------------------------------
SHAREHOLDERS
------------
Knowing that Global is relying thereon, each of the Minority Shareholders
severally represents and warrants to Global as follows:
6.1 Stock Ownership and Authority. Such Minority Shareholder owns
-----------------------------
beneficially and of record the shares of Gen-X Holdings Stock and Gen-X
Equipment Stock set forth on Schedule 4.3 attached hereto, free and clear of all
------------
Encumbrances. Such Minority Shareholder possesses the full legal right, power
and authority to enter into and perform this Agreement and the transactions
contemplated hereby and the Ancillary Agreements to which it is a party or by
which it is bound and the transactions contemplated thereby.
6.2 Effect of Agreement. The execution, delivery and performance of
-------------------
this Agreement and the Ancillary Agreements by such Minority Shareholder (to the
extent such Minority Shareholder is a party thereto or bound thereby), and the
consummation by such Minority Shareholder of the transactions contemplated
hereby and thereby, (a) do not constitute a breach or violation of, or a default
under, the organizational documents of such Minority Shareholder (if such
Minority Shareholder is a Person other than a natural person) or under any
Contract to which such Minority Shareholder is a party or by which such Minority
Shareholder is bound; (b) do not constitute a violation of any Law or Judgment
applicable to such Minority Shareholder; and (c) do not require the Consent of
any Person.
6.3 Brokerage Fees. Such Minority Shareholder shall pay and shall
--------------
otherwise be responsible for any and all brokerage and/or finder's fees payable
to any Person acting on behalf of such Minority Shareholder in connection with
the transactions contemplated by this Agreement.
-31-
6.4 Investment Matters. The shares of Global Stock to be issued to such
------------------
Minority Shareholder hereunder are being acquired for investment purposes only
and not with a view to, or for sale in connection with, any resale or
distribution in violation of the 1933 Act. Such Minority Shareholder has
received and examined Global's Public Reports, has had the opportunity to ask
questions and receive answers from Global concerning Global, and has been
furnished with all other information about Global which such Minority
Shareholder has requested. Such Minority Shareholder believes that such
Minority Shareholder has been fully apprised of all facts and circumstances
necessary to permit such Minority Shareholder to make an informed decision about
acquiring shares of Global Stock, that such Minority Shareholder has sufficient
knowledge and experience in business and financial matters, that such Minority
Shareholder is capable of evaluating the merits and risks of an investment in
Global Stock, and that such Minority Shareholder has the capacity to protect
such Minority Shareholder's own interests in connection with the transactions
contemplated hereby. Except as set forth on Schedule 6.4, such Minority
------------
Shareholder is an "accredited investor" as defined in Regulation D, Rule 501(a)
promulgated under the 1933 Act. Such Minority Shareholder has been advised by
Global and understands that (a) the shares of Global Stock to be issued
hereunder will not be registered under the 1933 Act or any securities Law of any
other Governmental Authority, (b) such shares must be held indefinitely unless
and until they are subsequently registered under the 1933 Act and all other
applicable securities Laws or an exemption from registration becomes available,
(c) the certificates representing such shares shall bear appropriate restrictive
legends, and (d) Global shall have the right to direct the transfer agent of
Global Stock to place a stop order against such certificates.
6.5 Full Disclosure. No representation or warranty made by such
---------------
Minority Shareholder in this Agreement or the Ancillary Agreements or pursuant
hereto or thereto contains any untrue statement of any material fact or omits to
state any material fact that is necessary to make the statements made, in the
context in which made, not false or misleading.
SECTION 7: CERTAIN OBLIGATIONS OF THE OWNERS PENDING CLOSING
- --------- -------------------------------------------------
7.1 Investigation. During the period from the date of this Agreement to
-------------
the Closing Date, the Owners shall, and shall cause the Gen-X Companies to, (a)
permit Global and its authorized representatives to have access to the Gen-X
Companies' facilities during normal business hours, to observe the Gen-X
Companies' operations, to meet with the Gen-X Companies' officers and employees,
and to audit, examine and copy the Gen-X Companies' files, books and records,
and other documents and papers, and (b) provide to Global and its authorized
representatives all information concerning the Gen-X Companies and their
businesses, Assets and financial condition that is reasonably requested by
Global.
7.2 Conduct Pending Closing. During the period from the date of this
-----------------------
Agreement to the Closing Date, except with the express prior written consent of
Global:
(a) The Owners shall cause the Gen-X Companies to conduct their
respective businesses in a diligent manner consistent with past practices, and
shall, in good faith, use all
-32-
reasonable efforts to preserve their respective business organizations intact,
retaining the services of their respective current officers, employees,
salesmen, contractors, agents and representatives, and maintaining the good will
of their respective suppliers, customers and other Persons having business
relations with any of the Gen-X Companies.
(b) Except in the ordinary course of its business consistent with its
past practices, the Owners shall cause the Gen-X Companies not to, (i) create or
assume any Encumbrance upon any of their businesses or Assets, (ii) incur any
Obligation, (iii) make any loan or advance to any Person, (iv) assume, guarantee
or otherwise become liable for any Obligation of any Person, (v) commit for any
capital expenditure, (vi) sell, abandon or otherwise dispose of any business or
Assets, (vii) purchase, lease or otherwise acquire any business, Assets or
capital stock of any other Person, (viii) settle any dispute, waive any right or
claim or cancel any Obligation, (ix) assume, enter into or amend any Contract,
or cancel or terminate any Contract other than in accordance with its terms, (x)
increase, or authorize an increase in, the compensation or benefits paid or
provided to any of its directors, officers, employees, salesmen, agents or
representatives, (xi) initiate any Proceeding, or (xii) do anything else outside
the ordinary course of business, whether or not specifically described in any of
the foregoing clauses.
(c) Even in the ordinary course of its business consistent with its
past practices, the Owners shall cause the Gen-X Companies not to, (i) declare,
pay or set aside for payment any dividend or other distribution, or make any
direct or indirect redemption, retirement or acquisition of any shares of its
capital stock, (ii) make any change in their accounting policies or practices,
(iii) except as required by law, change any of their business policies or
practices, (iv) make any loan or advance to any of their shareholders, officers,
directors, consultants, affiliates or associates, (v) pay directly or indirectly
any of their Obligations before they become due in accordance with their terms,
(vi) issue, or authorize the issuance, of any shares or other securities or
grant any rights with respect to its shares or other securities, (vii) amend
their certificate of incorporation or bylaws (or other organizational
documents), or merge with or into, consolidate with, completely or partially
liquidate or dissolve, or be involved in any other business combination with any
other Person, (viii) change, or authorize a change in, the rights of their
outstanding capital stock or the character of its business, (ix) adopt or amend
any Employee Benefit Plan, or (x) do any of the other things described in
Section 7.2(b) involving an amount exceeding $25,000 in any single case or an
aggregate amount exceeding $50,000 for any series of related transactions.
(d) The Owners shall cause the Gen-X Companies not to (i) do or omit
to do any act, or permit any act or omission to occur, which will cause a breach
or violation of, or a default with or without notice and/or lapse of time under,
any of their Contracts, Employee Benefit Plans, Insurance Policies or Permits,
except where the breach or violation would not be Material to either Gen-X
Holdings or Gen-X Equipment, (ii) begin to engage in any new type of business,
or (iii) terminate any part of their businesses that is Material to either Gen-X
Holdings or Gen-X Equipment.
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(e) The Owners shall cause the Gen-X Companies to (i) maintain all
Real Property and Tangible Property owned or used by the Gen-X Companies in good
condition and repair, and, consistent with their past practices, replace any
Tangible Property which is damaged beyond repair, destroyed, lost or stolen,
(ii) maintain the Gen-X Companies' Contracts, Permits and Insurance Policies in
full force and effect, (iii) comply with all applicable Contracts, Permits, Laws
and Judgments, except where the failure to so comply would not be Material to
either Gen-X Holdings or Gen-X Equipment, (iv) duly and timely file all Tax
Returns required to be filed by them, (v) fully pay when due all Taxes payable
by them or assessed against them or any of their respective Assets, and (vi)
continue to maintain all of their Employee Benefit Plans in accordance with
their respective terms, and (vii) maintain their existence and good standing in
their respective jurisdictions of organization.
(f) The Owners shall not, and shall cause the Gen-X Companies not to,
(i) sell, transfer, give or otherwise dispose of, or create any Encumbrance
upon, any of the Gen-X Holdings Stock or the Gen-X Equipment Stock, or (ii)
enter into any Contract which requires or commits any of them to take any action
or omit to take any action which would be inconsistent with the foregoing
provisions of this Section 7.2.
(g) Notwithstanding the provisions of this Section 7, but subject to
the provisions of Section 3.4 (relating to Purchase Price Adjustments), the
Owners may cause the Gen-X Companies to pay to Salter and Finkelstein in full
payment of their bonuses for the fiscal year ended September 30, 1997, the
total, aggregate, sum of One Million Dollars ($1,000,000) (the "1997 Bonus");
provided that the Owners shall have caused the Gen-X Companies to deliver to
Global prior to such payment the written consent from the Hongkong Bank
approving such payment; and provided further that such payment may only be made
to the extent by which it is funded by the line of credit provided to Gen-X
Equipment by the Hongkong Bank pursuant to the Loan Agreement.
7.3 Acquisition Proposals. The Owners shall not, and the Owners shall
---------------------
cause the Gen-X Companies and their respective directors, officers, partners,
shareholders, employees, affiliates, associates, advisors, representatives or
agents not to, directly or indirectly, solicit, initiate or encourage any
inquiries or proposals from, discuss or negotiate with, provide any non-public
information to, or consider the merits of any unsolicited inquiries or proposals
from, any Person (other than Global and its officers, employees, representatives
and agents) relating to any transaction involving the sale of the business or
Assets of any of the Gen-X Companies, or any of the capital stock of any of the
Gen-X Companies, or any merger, consolidation, business combination, or similar
transaction involving any of the Gen-X Companies, including, without limitation,
any management buyout.
7.4 Consents. Between the date of this Agreement and the Closing Date,
--------
the Owners shall, and the Owners shall cause the Gen-X Companies to, in good
faith, use all reasonable efforts to obtain as promptly as practicable the Gen-X
Required Consents and cooperate with Global in obtaining the Global Required
Consents.
-34-
7.5 Advice of Changes. Between the date of this Agreement and the
-----------------
Closing Date, the Owners shall promptly advise Global in writing of any fact of
which any of them obtains knowledge and which, if existing or known as of the
date of this Agreement, would have been required to be set forth or disclosed in
or pursuant to this Agreement or the Ancillary Agreements (it being understood
that any such advice shall not be deemed to modify the representations,
warranties or covenants of the Owners contained in this Agreement, the Ancillary
Agreements or any written statement, document or certificate delivered by any
Owner under or in connection with this Agreement or the Ancillary Agreements).
7.6 Reasonable Efforts. The Owners shall, and the Owners shall cause
------------------
the Gen-X Companies to, use all reasonable efforts to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements as
promptly as practicable.
SECTION 8: CERTAIN OBLIGATIONS OF GLOBAL PENDING CLOSING
- --------- ---------------------------------------------
8.1 Public Reports. Between the date of this Agreement and the Closing
--------------
Date, Global shall deliver to the Owners, promptly after they are filed with the
SEC, all reports and other filings that Global files with the SEC.
8.2 Consents. Between the date of this Agreement and the Closing Date,
--------
Global shall, in good faith, use all reasonable efforts to obtain as promptly as
practicable the Global Required Consents, and shall cooperate with the Owners
and the Gen-X Companies in obtaining the Gen-X Required Consents.
8.3 Advice of Changes. Between the date of this Agreement and the
-----------------
Closing Date, Global shall promptly advise the Owners in writing of any fact of
which it obtains knowledge and which, if existing or known as of the date of
this Agreement, would have been required to be set forth or disclosed in or
pursuant to this Agreement or the Ancillary Agreements (it being understood that
any such advice shall not be deemed to modify the representations, warranties or
covenants of Global contained in this Agreement or the Ancillary Agreements or
any written statement, document or certificate delivered by Global under or in
connection with this Agreement or the Ancillary Agreements).
8.4 Reasonable Efforts. Global shall use all reasonable efforts to
------------------
consummate the transactions contemplated by this Agreement and the Ancillary
Agreements.
SECTION 9: CONDITIONS PRECEDENT TO CLOSING BY THE OWNERS
- --------- ---------------------------------------------
Each obligation of the Owners to be performed on the Closing Date shall be
subject to the satisfaction of each of the following conditions, except to the
extent that such satisfaction is waived by DMJ in writing:
9.1 Representations of Global.
-------------------------
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(a) Subject to Section 9.1(b) each representation and warranty
individually, and all of the representations and warranties taken together, of
Global contained in this Agreement, the Ancillary Agreements or in any written
statement, document or certificate delivered by Global under or in connection
with this Agreement or the Ancillary Agreements shall have been true in all
material respects on and as of the date made and shall be true in all material
respects on and as of the Closing Date, with the same force and effect as though
made on and as of the Closing Date, except that any representation or warranty
made as of a specified date shall be true in all material respects on and as of
such date, in each case without giving effect to any advice given by Global
under Section 8.3.
(b) Each representation and warranty of Global contained in this
Agreement, the Ancillary Agreements or in any written statement, document or
certificate delivered by Global under or in connection with this Agreement or
the Ancillary Agreements that is qualified by materiality shall have been true
in all respects on the date of this Agreement and shall be true in all respects
on and as of the Closing Date, except that any such representation or warranty
made as of a specified date shall be true in all respects on and as of such
date, in each case without giving effect to any advice given by Global under
Section 8.3.
9.2 Performance by Global. All of the covenants, terms, obligations
---------------------
and conditions of this Agreement to be satisfied or performed by Global on or
before the Closing Date shall have been substantially satisfied or performed.
9.3 Absence of Adverse Changes. There shall not have been any adverse
--------------------------
change or casualty loss (whether or not covered by insurance) that is Material
to Global between the date of this Agreement and the Closing Date.
9.4 Absence of Proceedings. No Proceeding shall have been instituted or
----------------------
threatened on or before the Closing Date by any Person (other than any Owner
and/or any of the Gen-X Companies), no Judgment shall have been issued, and no
new Law shall have been enacted, that seeks to or does prohibit or restrain, or
that seeks damages as a result of, the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
SECTION 10: CONDITIONS PRECEDENT TO CLOSING BY GLOBAL
- ---------- -----------------------------------------
Each obligation of Global to be performed on the Closing Date shall be
subject to the satisfaction of each of the following conditions, except to the
extent that such satisfaction is waived by Global in writing:
10.1 Representations of the Owners.
-----------------------------
(a) Subject to Section 10.1 (b) each representation and warranty
individually, and all of the representations and warranties taken together, of
the Owners contained in this Agreement, the Ancillary Agreements or in any
written statement, document or certificate delivered by any
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Owner under or in connection with this Agreement or the Ancillary Agreements
shall have been true in all material respects on and as of the date made and
shall be true in all material respects on and as of the Closing Date, with the
same force and effect as though made on and as of the Closing Date, except that
any representation or warranty made as of a specified date shall be true in all
material respects on and as of such date, in each case without giving effect to
any advice given by any Owner under Section 7.5.
(b) Each representation and warranty of the Owners contained in
Sections 4.3 and 6.1 of this Agreement, and each representation and warranty of
the Owners contained in this Agreement, the Ancillary Agreements or in any
written statement, document or certification delivered by any Owner under or in
connection with this Agreement or the Ancillary Agreements that is qualified by
materiality, shall have been true in all respects on the date of this Agreement
and shall be true in all respects on and as of the Closing Date, except that any
such representation or warranty made as of a specified date shall be true in all
respects on and as of such date, in each case without giving effect to any
advice given by any Owner under Section 7.5.
10.2 Performance by the Owners. All of the covenants, terms,
-------------------------
obligations and conditions of this Agreement to be satisfied or performed by the
Owners on or before the Closing Date shall have been substantially satisfied or
performed.
10.3 Absence of Adverse Changes. There shall not have been any adverse
--------------------------
change or casualty loss that is Material to either Gen-X Holdings or Gen-X
Equipment between the date of this Agreement and the Closing Date.
10.4 Absence of Proceedings. No Proceeding shall have been instituted
----------------------
or threatened on or before the Closing Date by any Person (other than Global),
no Judgment shall have been issued, and no new Law shall have been enacted, that
seeks to or does prohibit or restrain, or that seeks damages as a result of, the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements.
SECTION 11: CLOSING
- ---------- -------
11.1 Closing. Unless this Agreement is terminated in accordance with
-------
Section 14, the closing of the sale of the Gen-X Equipment Stock to Global and
the other transactions contemplated by this Agreement ("Closing") shall be held
at 10:00 A.M. Philadelphia, Pennsylvania time on May 12, 1998, or such other
time and date as is agreed upon by the Owners and Global ("Closing Date"). The
Closing shall be held at the offices of Blank Rome Comisky & McCauley LLP,
Philadelphia, Pennsylvania, or such other location as is agreed upon by the
Owners and Global.
11.2 Obligations of the Owners at Closing. At the Closing, the Owners
------------------------------------
shall deliver or cause to be delivered to Global the following:
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(a) The Gen-X Holdings Stock and Gen-X Equipment Stock. Certificates
--------------------------------------------------
representing all of the Gen-X Holdings Stock and Gen-X Equipment Stock, with any
required transfer stamps affixed, together with evidence of payment of any
transfer taxes relating thereto, and with assignments separate from certificates
duly executed by the Owners to transfer all of the Gen-X Holdings Stock and the
Gen-X Equipment Stock to Global or to Gen-X Holdings, as the case may be.
(b) Resignations. Resignations of such directors and officers of the
------------
Gen-X Companies as Global shall designate in writing to the Owners, effective on
the Closing Date or such other date as Global shall determine, duly executed by
such directors and officers.
(c) Minute Books. All of Gen-X Equipment's minute books and stock
------------
books containing all of the items described in Section 4.5.
(d) Consents. The original copies of all of the Gen-X Required
--------
Consents obtained by the Owners and/or the Gen-X Companies.
(e) Closing Certificate. A certificate dated the Closing Date and
-------------------
duly executed by the Owners, in which each Owner, jointly and severally,
represents and warrants to Global that the conditions set forth in Sections
10.1, 10.2, 10.3 and 10.4 have been satisfied.
(f) Resolutions. Copies of the resolutions duly adopted by the board
-----------
of directors and/or shareholders of Gen-X Holdings and Gen-X Equipment
authorizing Gen-X Holdings and Gen-X Equipment, as the case may be, to enter
into and perform this Agreement and the Ancillary Agreements (to the extent they
are a party thereto or bound thereby), certified by proper officers of Gen-X
Holdings and Gen-X Equipment, as the case may be, as in full force and effect on
and as of the Closing Date.
(g) Good Standing. Good standing certificates, certificates of
-------------
authority or similar evidence of good standing or authority for each of the Gen-
X Companies from their respective jurisdictions of organization and each
respective jurisdiction, dated no earlier than 15 days before the Closing Date.
(h) Opinion of Counsel. Opinions of Baker & McKenzie, David Stewart
------------------
and Clarke & Co., counsel to DMJ, Salter, Finkelstein, Gen-X Holdings and Gen-X
Equipment, addressed to Global, dated the Closing Date, in the form attached
hereto as Exhibit "E".
-----------
(i) Documents of Transfer. All instruments or documents necessary to
---------------------
change the names of the individuals authorized to draw on or have access to the
accounts and safe deposit boxes described on Schedule 4.5, and all keys and
------------
combinations to all safes, lock boxes and other depositories described on
Schedule 4.5.
- ------------
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(j) Registration Rights Agreement. The registration rights agreement
-----------------------------
in the form attached hereto as Exhibit "F", dated the Closing Date (the
-----------
"Registration Rights Agreement"), duly executed by the Owners.
(k) Employment Agreements. The employment agreements in the forms
---------------------
attached hereto as Exhibits "G" and "H", dated the Closing Date, duly executed
------------ ---
by Salter and Finkelstein, respectively (individually, the "Salter Employment
Agreement" and the "Finkelstein Employment Agreement", respectively, and
collectively, the "Employment Agreements").
(l) Releases. Release in the form attached hereto as Exhibit "I",
-------- -----------
signed by each of the Owners.
(m) Hongkong Bank Certificate. A certificate from the Hongkong Bank
-------------------------
(the "Hongkong Bank Certificate") stating that as of the Closing Date, Gen-X
Equipment is in compliance with all the covenants contained in the Loan
Agreement.
(n) Non-Competition Agreement. The non-competition agreement in the
-------------------------
form attached hereto as Exhibit "J", dated to Closing Date (the "Non-Competition
Agreement"), duly executed by Salter and Finkelstein.
(o) Other Documents. All other agreements, certificates, instruments
---------------
and documents reasonably requested by Global in order to fully consummate the
transactions contemplated by this Agreement and the Ancillary Agreements and
carry out the purposes and intent of this Agreement and the Ancillary
Agreements.
11.3 Obligations of Global at Closing. At the Closing, Global shall
--------------------------------
deliver to the Owners the following:
(a) Global's Stock and Notes. Certificates representing the shares
------------------------
of Global Common Stock and Global Preferred Stock in the amounts required by
Section 3.1(a) and the Global/Gen-X Holdings Notes and the Global/Gen-X
Equipment Notes in the amounts required by Section 3.1(a) and (b).
(b) Closing Certificate. A certificate dated the Closing Date and
-------------------
duly executed by proper officers of Global, in which the Global represents and
warrants to the Owners that the conditions set forth in Sections 9.1, 9.2, 9.3
and 9.4 have been satisfied.
(c) Resolutions. Copies of the resolutions duly adopted by the board
-----------
of directors Global authorizing Global to enter into and perform this Agreement
and the Ancillary Agreements (to the extent they are a party thereto or bound
thereby), certified by proper officers of Global as in full force and effect on
and as of the Closing Date.
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(d) Good Standing. Good standing certificates, certificates of
-------------
authority or similar evidence of good standing or authority for Global from the
State of Delaware dated no earlier than 15 days before the Closing Date.
(e) Opinion of Counsel. An opinion of Blank Rome Comisky & McCauley
------------------
LLP, counsel to Global, addressed to the Owners, dated the Closing Date, in the
form attached hereto as Exhibit "K".
-----------
(f) Registration Rights Agreement. The Registration Rights Agreement,
-----------------------------
dated the Closing Date, duly executed by Global.
(g) Employment Agreements. The Employment Agreements, dated the
---------------------
Closing Date, duly executed by Global.
(h) Other Documents. All other agreements, certificates, instruments
---------------
and documents reasonably requested by DMJ in order to fully consummate the
transactions contemplated by this Agreement and the Ancillary Agreements and
carry out the purposes and intent of this Agreement and the Ancillary
Agreements.
SECTION 12: CERTAIN OBLIGATIONS AFTER CLOSING
- ---------- ---------------------------------
12.1 Obligations of the Owners.
-------------------------
(a) Further Assurances. At any time and from time to time after the
------------------
Closing Date, at Global's request, and without further consideration, the Owners
shall promptly execute and deliver all such further agreements, certificates,
instruments and documents, and perform such further actions, as Global may
reasonably request in order to fully consummate the transactions contemplated by
this Agreement and the Ancillary Agreements and carry out the purposes and
intent of this Agreement and the Ancillary Agreements.
(b) Nondisclosure.
-------------
(i) At all times after the Closing Date, except with Global's express
prior written consent, no Owner shall, directly or indirectly, in any capacity,
communicate, disclose or divulge to any Person, or use for the benefit of any
Person, any confidential or proprietary knowledge or information, no matter when
or how acquired, concerning any of the Gen-X Companies or their businesses,
Assets or financial condition. For purposes of this Section 12.1(b),
confidential information shall not include any information that is now known by
the general public or becomes known by the general public other than as a result
of any improper act or omission of any Owner.
(ii) Each Owner expressly acknowledges that any breach by any of them
of the covenant contained in Section 12.1(b)(i) (the "Covenant") may result in
irreparable injury to
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Global for which money damages could not adequately compensate. If there is such
a breach, Global shall be entitled, in addition to all other rights and remedies
it may have at law or in equity, to have an injunction issued by any competent
court enjoining and restraining such Owner and all other Persons involved
therein, from continuing such breach. The existence of any claim or cause of
action which such Owner or any such other Person may have against Global shall
not constitute a defense or bar to the enforcement of the Covenant.
(iii) If any portion of the Covenant or its application is construed
to be invalid, illegal or unenforceable, then the other portions and their
application shall not be affected thereby and shall be enforceable without
regard thereto. If any portion of the Covenant is determined to be
unenforceable due to its scope, duration, geographical area or similar factor,
then the court making such determination shall have the power to reduce or limit
such scope, duration, area or other factor, and such Covenant shall then be
enforceable in its reduced or limited form.
(c) Enforcement. The Owners expressly acknowledge that any breach by
-----------
any of them of any of the Covenants will result in irreparable injury to Global
for which money damages could not adequately compensate. If there is such a
breach, Global shall be entitled, in addition to all other rights and remedies
it may have at law or equity, to have an injunction issued by any competent
court enjoining and restraining the Owners and all other Persons involved
therein from continuing such breach. The existence of any claim or cause of
action which any of the Owners or any such other Person may have against Global
shall not constitute a defense or bar to the enforcement of any of the
Covenants. If Global must resort to litigation to enforce any of the Covenants
that has a fixed term, then such term shall be extended for a period of time
equal to the period during which a breach of such Covenant was occurring,
beginning on the date of a final court order (without further right of appeal)
holding that such a breach occurred or, if later, the last day of the original
fixed term of such Covenant.
(d) Scope. If any portion of any Covenant or its application is
-----
construed to be invalid, illegal or unenforceable, then the other portions and
their application shall not be affected thereby and shall be enforceable without
regard thereto. If any of the Covenants is determined to be unenforceable due
to its scope, duration, geographical area or similar factor, then the court
making such determination shall have the power to reduce or limit such scope,
duration, are or other factor, and such Covenant shall then be enforceable in
its reduced or limited form.
SECTION 13 INDEMNIFICATION, SETOFF AND PAYMENT OF ADJUSTMENTS
- ---------- --------------------------------------------------
13.1 Indemnification Obligations of DMJ, Salter and Finkelstein. From
----------------------------------------------------------
and after the Closing, DMJ, Salter and Finkelstein shall, jointly and severally,
indemnify and hold harmless Global and its directors, officers, employees,
affiliates, successors and assigns, from and against any and all Proceedings,
Judgments, Obligations, losses, damages, deficiencies, settlements, assessments,
charges, costs and expenses (including, but not limited to, reasonable
attorneys' fees, investigation expenses, court costs, interest and penalties)
arising out of or in connection with, or caused by, directly or indirectly, any
or all of the following:
-41-
(a) Any misrepresentation, breach or failure of any representation or
warranty made by DMJ, Salter and Finkelstein in this Agreement, the Ancillary
Agreements or any written statement, document or certificate delivered to Global
by DMJ, Salter, Finkelstein or any of the Gen-X Companies under or in connection
with this Agreement or the Ancillary Agreements.
(b) Any failure or refusal by the Owners to satisfy or perform any
covenant, term, obligation or condition of this Agreement required to be
satisfied or performed by any of them.
(c) Any Obligation of any of the Gen-X Companies which arose or was
incurred at any time on or before the Closing Date, other than (i) those
Obligations which are set forth on Schedule 4.14 or on the Gen-X Financial
-------------
Statements or in the notes thereto and which do not constitute a breach of any
of the representations of Section 4, (ii) those Contract Obligations which are
not required to be set forth on the Gen-X Financial Statements and which do not
constitute a breach of any of the representations of Section 4, (iii) those
Obligations which are incurred between March 31, 1998 and the Closing Date and
which do not constitute a breach or violation of any of the representations of
Section 4.10 or the provisions of Section 7.2, and (iv) Tax Obligations
described in Section 13.1(d).
(d) Any Obligation resulting from the failure of any of the Gen-X
Companies to timely file all Tax Returns required to be filed by them and any
Obligation for any Tax imposed directly upon any of the Gen-X Companies with
respect to any period ending on or before the Closing Date and which was not set
forth on the Gen-X Financial Statements including, without limitation, any Taxes
which may arise directly or indirectly as a result of the transactions
contemplated herein (including the disposition by Gen-X Holdings of its
ownership interest in Gen-X Equipment prior to the Closing Date). Any such
deficiency or adjustment shall be subject to indemnification under this Section
13.1(d) notwithstanding that the same may be assessed against or imposed upon
Global as a result of the fact that, after the Closing Date, Gen-X Holdings and
Gen-X Equipment will be a member of the consolidated group of which Global is
the parent company.
13.2 Indemnification Obligations of Global. From and after the Closing,
-------------------------------------
Global shall indemnify and hold harmless the Owners and their respective
directors, officers, employees, affiliates, successors and assigns, from and
against any and all Proceedings, Judgments, Obligations, losses, damages,
deficiencies, settlements, assessments, charges, costs and expenses (including,
but not limited to, reasonable attorneys' fees, investigation expenses, court
costs, interest and penalties) arising out of or in connection with, or caused
by, directly or indirectly, any or all of the following:
(a) Any misrepresentation, breach or failure of any representation or
warranty made by Global in this Agreement, the Ancillary Agreements or any
written statement, document or certificate delivered to the Owners by Global
under or in connection with this Agreement or the Ancillary Agreements.
(b) Any failure or refusal by Global to satisfy or perform any
covenant, term, obligation or condition of this Agreement required to be
satisfied or performed by Global.
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13.3 Indemnification Obligations of the Minority Shareholders. From and
--------------------------------------------------------
after the Closing, each Minority Shareholder shall severally indemnify and hold
harmless Global and its directors, officers, employees, affiliates, successors
and assigns, from and against any and all Proceedings, Judgments, Obligations,
losses, damages, deficiencies, settlements, assessments, charges, costs and
expenses (including, but not limited to, reasonable attorneys' fees,
investigation expenses, court costs, interest and penalties) arising out of or
in connection with, or caused by, directly or indirectly, any or all of the
following:
(a) Any misrepresentation, breach or failure of any representation or
warranty made by such Minority Shareholder in this Agreement, the Ancillary
Agreements or any written statement, document or certificate delivered to Global
by the Owners under or in connection with this Agreement or the Ancillary
Agreements.
(b) Any failure or refusal by such Minority Shareholders to satisfy or
perform any covenant, term, obligation or condition of this Agreement required
to be satisfied or performed by any of them.
13.4 Indemnification Notice. With respect to each event, occurrence or
----------------------
matter ("Indemnification Matter") and with respect as to which Global on the one
hand, or the Owners on the other hand (referred to as the "Indemnitee"), is
entitled to indemnification from the other (referred to as the "Indemnitor")
under this Section 13, within ten days after the Indemnitee receives any written
documents underlying the Indemnification Matter, or, if the Indemnification
Matter does not involve a third party action, suit, claim or demand, promptly
after the Indemnitee first has actual knowledge of the Indemnification Matter,
the Indemnitee shall give notice to the Indemnitor of the nature of the
Indemnification Matter and the amount demanded or claimed in connection
therewith ("Indemnification Notice").
13.5 Defense of Indemnification Matters. If an Indemnification Matter
----------------------------------
involves a third party action, suit, claim or demand, then, upon receipt of the
Indemnification Notice, the Indemnitor shall, at its expense and through counsel
of its choice, promptly assume and have sole control of the litigation, defense
or settlement of the Indemnification Matter (referred to as the "Defense"),
except that:
(a) The Indemnitee may, at its option and expense and through counsel
of its choice, participate in (but not control) the Defense.
(b) If the Indemnitee reasonably believes that the handling of the
Defense by the Indemnitor may have a material adverse effect on the Indemnitee's
business or its relationship with any customer, supplier, employee, contractor,
salesman, agent or representative, then the Indemnitee may, at its option and
expense and through counsel of its choice, assume control of the Defense;
provided that the Indemnitor shall continue to be obligated to indemnify the
Indemnitee with respect thereto and shall be entitled to participate in the
Defense at its expense and through counsel of its choice.
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(c) The Indemnitor shall not consent to any Judgment or agree to any
settlement without the Indemnitee's prior written consent; provided that if the
Indemnitee withholds its consent to any monetary Judgment or settlement that is
acceptable to the Indemnitor, then (a) the Indemnitor's liability with respect
to such Indemnification Matter shall be limited to such monetary amount, and (b)
the Indemnitee shall be responsible for any additional costs reasonably incurred
by the Indemnitor in connection therewith.
(d) If the Indemnitor does not promptly assume control over the
Defense diligently and in good faith or, after doing so, does not continue to
prosecute the Defense in good faith, the Indemnitee may, at its option and
through counsel of its choice, but at the Indemnitor's expense, assume control
over the Defense; provided that the Indemnitor shall continue to be obligated to
indemnify the Indemnitee with respect thereto.
(e) In any event, the Indemnitor and the Indemnitee shall fully
cooperate with each other in connection with the Defense, including, but not
limited to, furnishing all available documentary or other evidence as is
reasonably requested by the other.
13.6 Limits on Indemnification Matters and Owners' Payments.
------------------------------------------------------
(a) Limits on Owners' Payments. The amounts, if any, collectively
--------------------------
owed by the Owners to Global (i) as Indemnitor pursuant to Sections 13.1 and
13.3, (ii) for the Purchase Price Adjustments pursuant to Section 3.4 and (iii)
for the Owners' Expense pursuant to Section 15.3 (collectively, the "Owners'
Payment"), shall be subject to the following:
(i) Deductible. No amount shall be payable by the Owners to Global
----------
for the Owners' Payment, unless and until the aggregate amount of the Owners'
Payment exceeds Five Hundred Thousand Dollars ($500,000), in which event such
amount in excess of Five Hundred Thousand Dollars ($500,000) and all future
amounts payable by the Owners shall be payable in full.
(ii) Exceptions. The limitation in Sections 13.6(a)(i) shall not
----------
apply in case of any Indemnification Matter or other adjustment involving (A)
intentional breach, fraud, willful misconduct or criminal matters, (B) any
failure or refusal to comply with Section 6.3, (C) any breach of the Non-
Competition Agreement, (D) any misrepresentation, breach or failure of any
representation or warranty in Sections 4.1, 4.3 or 6.1 or (E) any Tax payable by
any Owner or any of the Gen-X Companies which arises directly or indirectly as a
result of the transactions contemplated herein (including the disposition by
Gen-X Holdings of its ownership interest in Gen-X Equipment prior to the Closing
Date) or any Tax required to be withheld by Global in connection with such
transaction.
(iii) Duration. With respect to any Indemnification Matter, the
--------
Owners shall have no liability unless the Owners give an Indemnification Notice
in accordance with Section 13.4 within 60 months after the Closing Date.
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(b) Limits on Global's Indemnification. The amount, if any, owed by
----------------------------------
Global to the Owners as Indemnitor pursuant to Sections 13.2 shall be subject to
the following:
(i) Deductible. No amount shall be payable by Global to the Owners
----------
under this Section 13, unless and until the aggregate amount otherwise payable
by Global under this Section 13 exceeds Five Hundred Thousand Dollars
($500,000), in which event such amount in excess of Five Hundred Thousand
Dollars ($500,000) and all future amounts payable by Global shall be payable in
full.
(ii) Exceptions. The limitation in Sections 13.6(b)(i) shall not
----------
apply in case of any Indemnification Matter involving intentional breach, fraud,
willful misconduct or criminal matters.
(iii) Duration. With respect to any Indemnification Matter, Global
--------
shall have no liability unless Global gives an Indemnification Notice in
accordance with Section 13.4 within 60 months after the Closing Date.
(c) If the Owners are obligated to pay Global any amounts under
Section 13.1 and/or 13.3 after taking into account the application of the
limitations contained in Section 13.6(a)(i), then any such amount payable by the
Owners to Global shall be reduced by any amounts Global would have been required
to pay to the Owners under Section 13.2 but for the application of the
limitations contained in Section 13.6(b)(i). If Global is obligated to pay the
Owners any amounts under Section 13.2 after taking into account the limitations
contained in Section 13.6(b)(i), then any such amounts payable by Global to the
Owners shall be reduced by any amounts the Owners would have been required to
pay to Global under Sections 13.1 and 13.3 but for the application of the
limitations contained in Section 13.6(a)(i).
13.7 Indemnification Payment and Owners' Payment. All amounts owed by
-------------------------------------------
the Indemnitor (for purposes of this Section 13.7, with respect to the Owners'
Payment the term Indemnitee shall include Global and the term Indemnitor shall
include the Owners) to the Indemnitee (if any) shall be paid in full within ten
(10) days after a final settlement or agreement as to the amount owed is
reached, or after a final Judgment (without further right of appeal) determining
the amount owed is rendered; provided, however, that if, during the period
commencing on the Closing Date and ending May 31, 1999, the Owners shall be
required to make one or more Owners' Payments, then the following shall apply:
(i) if such Owners' Payments are in an aggregate amount equal to or less than
$900,000, such Owners' Payments shall be paid no later than May 31, 1999, and
(ii) if such Owners' Payments are in the aggregate amount greater than $900,000,
the amount of such Owners' Payments in excess of $900,000 shall be paid when due
and the balance shall be paid no later than May 31, 1999. Any amount paid under
this Section 13 is intended by all parties and shall be considered to be and
treated as an adjustment to the Purchase Price. Any payment by the Owners to
Global in respect of an Indemnification Matter described in Section
13.6(a)(ii)(E) shall be accompanied by interest from the Closing Date,
calculated at an annual rate equal to the Prime Rate.
-45-
13.8 Setoff and Holdback. In addition to all other rights and remedies
-------------------
that the Indemnitee (for purposes of this Section 13.8, with respect to the
Owners' Payment the term Indemnitee shall include Global and the term Indemnitor
shall include the Owners) may have, the Indemnitee shall have the right to
setoff, against any monies due to the Indemnitor (whether under this Agreement
or otherwise), any sums for which the Indemnitee is entitled to indemnification
under this Section 13 or any other sums which the Indemnitor may owe to the
Indemnitee (whether under this Agreement or otherwise). The Indemnitee's rights
to indemnification under this Section 13 shall under no circumstances be in any
manner limited by this right of setoff. If any Indemnification Matters are
pending at the time the Indemnitee is required to make any payment to the
Indemnitor (whether under this Agreement or otherwise), then the Indemnitee
shall have the right, upon notice to the Indemnitor, to withhold from such
payment, until final determination (within the meaning of Section 13.6) of such
Indemnification Matters, the total amount for which the Indemnitor may become
liable as a result thereof, determined by the Indemnitee reasonably and in good
faith.
SECTION 14: TERMINATION
- ---------- -----------
14.1 Termination. This Agreement, and the transactions contemplated
-----------
hereby, may be terminated at any time before Closing in accordance with any of
the following methods:
(a) By the mutual written consent of Global and the Owners.
(b) By written notice from Global to the Owners, or from the Owners to
Global, if the Closing does not occur on or before May 31, 1998 for any reason
other than a breach of this Agreement by the party giving such notice.
(c) By written notice from Global to the Owners, if it becomes
certain, for all practical purposes, that any of the conditions to the Closing
Obligations of Global cannot be satisfied for a reason other than Global's
breach of this Agreement, and Global is not willing to waive the satisfaction of
such condition.
(d) By written notice from the Owners to Global if it becomes certain,
for all practical purposes, that any of the conditions to the Closing
Obligations of the Owners cannot be satisfied for a reason other than any
Owners' breach of this Agreement, and the Owners are not willing to waive the
satisfaction of such condition.
(e) By written notice from Global to the Owners if any Owner breaches
any of its representations, warranties, covenants or agreements contained in
this Agreement.
(f) By written notice from the Owners to Global if Global breaches any
of its representations, warranties, covenants or agreements contained in this
Agreement.
14.2 Effect of Termination. Upon termination of this Agreement pursuant
---------------------
to Section 14.1, this Agreement shall forthwith become void, and there shall be
no liability on the part of any party
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hereto, except for the obligations of the parties under Sections 15.1, 15.2,
15.3 and 15.17, and except that no such termination shall relieve any party from
any breach of this Agreement prior to such termination.
SECTION 15: OTHER PROVISIONS
- ---------- ----------------
15.1 Confidentiality. During the period from the date of this Agreement
---------------
to the Closing Date, (a) each of the parties shall maintain the confidentiality
of all confidential information which is disclosed to them in connection with
this Agreement, and (b) none of the parties will discuss the existence or nature
of this Agreement or the transaction contemplated hereby with any of the other
parties' customers, prospects, suppliers, employees, contractors, salesmen,
agents or representatives. If this Agreement is terminated in accordance with
Section 14, then each party shall promptly return all confidential information
and materials of the other parties, and the provisions of the foregoing sentence
shall survive such termination indefinitely.
15.2 Publicity. All voluntary public announcements concerning the
---------
transactions contemplated by this Agreement shall be mutually acceptable to both
Global and the Owners. Unless required by Law, neither any Owner or any of the
Gen-X Companies, on the one hand, nor Global, on the other hand, shall make any
public announcement or issue any press release concerning the transactions
contemplated by this Agreement without the prior written consent of Global or
the Owners, respectively. With respect to any announcement that any of the
parties is required by Law to issue, such party shall, to the extent possible
under the circumstances, review the necessity for and the contents of the
announcement with the other parties before issuing the announcement.
15.3 Expenses. All of the costs and expenses incurred by the Owners
--------
(the "Owners' Expenses") in negotiating and preparing this Agreement (and all
other agreements, certificates, instruments and documents executed in connection
herewith), in performing their obligations under this Agreement, and in
otherwise consummating the transactions contemplated by this Agreement, and all
legal fees and other fees of Gen-X Holdings and Gen-X Equipment shall be accrued
and paid by Gen-X Holdings and/or Gen-X Equipment and shall be reflected on the
Closing Date Balance Sheets. To the extent the Owners' Expenses exceed the sum
of $75,000, the Owners shall pay to Global such excess amount in accordance with
Section 13.
15.4 Notices. All notices, consents or other communications required or
-------
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) three business
days after being mailed by first class certified mail, return receipt requested,
postage prepaid, or (c) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the first page or the signature pages of
this Agreement. Notices may also be given by prepaid telegram or facsimile and
shall be effective on the date transmitted if confirmed
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within 24 hours thereafter by a signed original sent in the manner provided in
the preceding sentence. Notice to Gary Glassman at 273 Lytton Blvd., Toronto,
Ontario M5N-1R7, Canada shall suffice as notice to all of the Minority
Shareholders. A copy of each notice to the Owners, Gen-X Holdings or Gen-X
Equipment shall be simultaneously sent to Baker & McKenzie, BCE Place, 181 Bay
Street, Suite 2100, P.O. Box 874, Toronto, Ontario, M5J 2T3, Attn: Daniel F.
Hirsh, Esquire. A copy of each notice to Global shall be simultaneously sent to:
Blank Rome Comisky & McCauley LLP, One Logan Square, Philadelphia, Pennsylvania
19103, Attn: Arthur H. Miller, Esquire. Any party may change its address for
notice and the address to which copies must be sent by giving notice of the new
addresses to the other parties in accordance with this Section 14.4, except that
any such change of address notice shall not be effective unless and until
received.
15.5 Amendment. This Agreement may be amended, modified or supplemented
---------
by the parties hereto, provided that any such amendment, modification or
supplement shall be in writing and signed by Global, and the Owners.
15.6 Waivers. No waiver with respect to this Agreement shall be
-------
enforceable against Global unless in writing and signed by Global. No waiver
with respect to this Agreement shall be enforceable against the Owners unless in
writing and signed by the Owners. Except as otherwise expressly provided
herein, no failure to exercise, delay in exercising, or single or partial
exercise of any right, power or remedy by any party, and no course of dealing
between or among any of the parties, shall constitute a waiver of, or shall
preclude any other or further exercise of the same or any other right, power or
remedy.
15.7 Reliance. Notwithstanding the right of Global, on the one hand,
--------
and the Owners, on the other hand, to investigate the businesses, Assets and
financial condition of the Gen-X Companies and Global, respectively, and
notwithstanding any knowledge or facts determined or determinable by Global or
the Owners, as the case may be, as a result of any such investigation or right
of investigation, Global, on the one hand, and the Owners, on the other hand,
have the unqualified right to rely, and have relied, upon the representations
and warranties of the other.
15.8 Survival of Representations. All representations, warranties and
---------------------------
covenants made in or pursuant to this Agreement shall survive the date hereof,
the Closing Date and the consummation of the transactions contemplated hereby
and thereby.
15.9 Interpretation of Representations. Each warranty and
---------------------------------
representation made by Global, on the one hand, and by the Owners, on the other
hand, in this Agreement, the Ancillary Agreements or any written statement,
document or certificate delivered by Global, on the one hand, or by the Owners,
Gen-X Holdings or Gen-X Equipment, on the other hand, to the other under or in
connection with this Agreement or the Ancillary Agreements is independent of all
other warranties and representations made by the same parties (whether or not
covering related or similar matters) and must be independently and separately
satisfied. Exceptions or qualifications to any such warranty or representation
shall not be construed as exceptions or qualifications to any other warranty or
representation.
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15.10 Entire Understanding. This Agreement and the Ancillary
--------------------
Agreements, together with the Exhibits and Schedules hereto and thereto, state
the entire understanding among the parties with respect to the subject matter
hereof and thereof, and supersede all prior oral and written communications and
agreements, and all contemporaneous oral communications and agreements, with
respect to the subject matter hereof and thereof.
15.11 Parties in Interest. This Agreement shall bind, benefit, and be
-------------------
enforceable by and against each party hereto and its successors and assigns. No
Owner shall in any manner assign any of its rights or obligations under this
Agreement without the express prior written consent of Global, and Global shall
not in any manner assign any of its rights or obligations under this Agreement
without the express prior written consent of the Owners.
15.12 Time of the Essence. Time shall be of the essence in this
-------------------
Agreement.
15.13 Severability. If any provision of this Agreement is construed to
------------
be invalid, illegal or unenforceable, then the remaining provisions hereof shall
not be affected thereby and shall be enforceable without regard thereto.
15.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered shall constitute an
original hereof, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one original counterpart hereof; provided,
however, that if acceptable to Global and the Owners, the Closing may be
effected by facsimile transmission of executed copies of the signature pages to
this Agreement delivered at the Closing and by sending original copies of
signature pages to this Agreement delivered at the Closing by reputable
overnight delivery service, postage or delivery charges prepaid, for delivery to
the parties at their addresses stated on the first page or signature pages of
this Agreement by the third business day following the Closing Date.
15.15 Section Headings. The section and subsection headings in this
----------------
Agreement are for convenience of reference only, do not constitute a part of
this Agreement, and shall not affect its interpretation.
15.16 References. All words used in this Agreement shall be construed
----------
to be of such number and gender as the context requires or permits. Unless a
particular context clearly provides otherwise, the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection hereof.
15.17 Controlling Law. This Agreement is made under, and shall be
---------------
construed and enforced in accordance with, the laws of the Commonwealth of
Pennsylvania applicable to agreements made and to be performed solely therein,
without giving effect to principles of conflicts of law.
15.18 Jurisdiction and Process. Each of the parties (a) irrevocably
------------------------
consents to the exclusive jurisdiction of the Courts of Common Pleas of
Montgomery County, Pennsylvania, or the United
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States District Court for the Eastern District of Pennsylvania, in any and all
actions between or among any of the parties, whether arising hereunder or
otherwise, (b) irrevocably waives its right to trial by jury in any such action,
and (c) irrevocably consents to service of process by first class certified
mail, return receipt requested, postage prepaid, to the address at which such
party is to receive notice in accordance with Section 15.4. In any and all
actions between or among any of the parties, whether arising hereunder or
otherwise, the prevailing party or parties shall be entitled to recover their
reasonable attorneys' fees and legal expenses from the other party or parties.
15.19 No Third Party Beneficiaries. No provision of this Agreement is
----------------------------
intended to or shall be construed to grant or confer any right to enforce this
Agreement, or any remedy for breach of this Agreement, to or upon any Person
other than the parties hereto, including, but not limited to, any customer,
prospect, supplier, employee, contractor, salesman, agent or representative of
any of the parties hereto.
15.20 Appointment of Agent.
--------------------
(a) Agent for Minority Shareholders. Each of the Minority
-------------------------------
Shareholders hereby irrevocably designates and appoints Gary Glassman to act as
agent for the Minority Shareholders and expressly grants to Gary Glassman the
full power and authority, with full power of substitution, to represent such
Minority Shareholders and to take any and all actions with respect to this
Agreement and the Ancillary Agreements on behalf of such Minority Shareholders
including, but not limited to: (a) the Backlog Statement, the Inventory
Statement and Closing Date Audits; and (b) approving the Closing Date Balance
Sheets and the amount of the Purchase Price Adjustment, the Closing Date
Adjustment, the Tangible Net Worth Adjustment, the Initial Backlog Adjustment,
the Six Month Adjustment, the Accounts Receivable Adjustment, the Inventory
Adjustment, the Accounts Payable Adjustment and the Supplemental Backlog
Adjustment; (c) selecting counsel for and administering the Defense of any
Indemnification Matter, and otherwise handling and negotiating Indemnification
Matters; (d) receiving all notices, consents and similar communications from
Global to the Minority Shareholders under this Agreement or the Ancillary
Agreements; (e) executing and delivering any certificates required from the
Minority Shareholders under this Agreement; (f) agreeing to any waiver, consent
or amendment under or to this Agreement; (g) acting as agent and nominee for
such Minority Shareholders to receive and hold on their behalf the certificate
evidencing the Global Common Stock and the Global Preferred Stock issued to them
pursuant to this Agreement and to transfer or submit for redemption such
Preferred Stock and receive payment therefor and otherwise act on behalf of such
Minority Shareholders with respect to such Preferred Stock; (h) acting as agent
for such Minority Shareholders to receive and hold on their behalf the
Global/Gen-X Holdings Notes, the Global/Gen-X Equipment Notes and the Gen-X
Holdings Notes issued to them pursuant to this Agreement and transfer or submit
for cancellation such Notes and receive payment therefor and otherwise act on
behalf of such Minority Shareholders with respect to such Notes; and (i)
executing and delivering a subordination agreement between Foothill Capital
Corporation and, among others, the Minority Shareholders, pursuant to which the
Minority Shareholders will subordinate indebtedness owned by Global and the Gen-
X Holdings to them under the Global/Gen-X Holdings Note, the Global/Gen-X
Equipment Note and the Gen-X
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Holdings Note to the indebtedness owed by Global to Foothill Capital
Corporation. All of the Minority Shareholders shall be bound by any and all
actions taken or not taken on their behalf by the Minority Shareholders' Agent.
(b) Agent for Salter and Finkelstein. Each of Salter and Finkelstein
--------------------------------
hereby irrevocably designates and appoints DMJ to act as their agent and
expressly grants to DMJ the full power and authority to receive and hold on
their behalf the Global/Gen-X Holdings Notes issued to them pursuant to this
Agreement and transfer or submit for cancellation such Notes and receive payment
therefore and otherwise act on their behalf with respect to such Notes and
acting as their agent and nominee to receive and hold on their behalf the
certificate evidencing the Global Common Stock and the Global Preferred Stock
issued to them pursuant to this Agreement and to transfer or submit for
redemption such Preferred Stock and receive payment therefore and otherwise act
on their behalf with respect to such Preferred Stock.
IN WITNESS WHEREOF, the parties have executed, or have caused this
Agreement to be executed on their behalf by their duly authorized officers, as
of the date first stated above.
GLOBAL SPORTS, INC. DMJ FINANCIAL, INC.
By: /s/ Michael G. Rubin By: /s/ James J. Salter
-------------------- ---------------------
Name: Michael G. Rubin Name: James J. Salter
Title: Chairman and CEO Title: CEO
GEN-X EQUIPMENT INC. GEN-X HOLDINGS INC.
By: /s/ James J. Salter By: /s/ James J. Salter
------------------- ---------------------
Name: James J. Salter Name: James J. Salter
Title: CEO Title: CEO
/s/ Kenneth J. Finkelstein /s/ James J. Salter
-------------------------- --------------------
KENNETH J. FINKELSTEIN JAMES J. SALTER
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MINORITY SHAREHOLDER SIGNATURE PAGE TO
STOCK PURCHASE AGREEMENT
By its execution and delivery of this signature page, the undersigned
Minority Shareholder (i) confirms its execution as of the date of the first
written thereon of the Stock Purchase Agreement among Global Sports, Inc, a
Delaware corporation, DMJ Financial, Inc., A Barbados limited company, James J.
Salter, Kenneth J. Finkelstein, and the Minority Shareholders (as defined
therein), dated May 12, 1998 (the "Purchase Agreement"), (ii) joins in and
agrees to be bound by the terms and conditions of the Stock Purchase Agreement,
and (iii) authorizes this signature page to be attached to the Stock Purchase
Agreement or counterparts thereof.
________________________________
Name of Minority Shareholder
________________________________
Signature of Minority Shareholder
Address:_________________________
_________________________
_________________________
Telephone:_______________________
Fax: ____________________________
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