<PAGE>
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Global Sports, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
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(2) Aggregate number of securities to which transaction applies:
Not Applicable
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
Purchase Price of $17,160,000 comprised of cash ($13,200,000) and
assumption of liabilities ($3,960,000)
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(4) Proposed maximum aggregate value of transaction:
$17,160,000
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(5) Total fee paid:
$3,432
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
April 17, 2000
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Global Sports, Inc. which will be held on Monday, May 15, 2000 at 10:00 a.m.
(Philadelphia Time) at the Omni Hotel, 401 Chestnut Street, Philadelphia, PA
19106. The official notice of the Annual Meeting together with a proxy
statement and proxy card are enclosed. Please give this information your
careful attention.
At the meeting, shareholders of Global are being asked to elect six
directors of Global, to approve the sale of Global's Off-Price and Action
Sports Division, to approve indemnification agreements to be entered into with
Global's directors and certain of its officers, to approve Global's 2000
Employee Stock Purchase Plan and to act upon such other business as may
properly come before the meeting.
The Board of Directors has considered and approved the sale of the Off-Price
and Action Sports Division, the Indemnification Agreements and the 2000
Employee Stock Purchase Plan and has determined that they are fair to and in
the best interests of the Company and its shareholders. The Board of Directors
unanimously recommends that you vote for approval of the Acquisition
Agreement, as amended, and the sale of the Off-Price and Action Sports
Division, for approval of the Indemnification Agreements, and for approval of
Global's 2000 Employee Stock Purchase Plan. Because each member of the Board
of Directors will be a party to and, as such, a beneficiary of the rights
contained in the Indemnification Agreements, there is an inherent conflict of
interest in the Board's recommending the Indemnification Agreements.
Nonetheless, for the reasons set forth in the accompanying Proxy Statement,
the Board of Directors unanimously recommends that you vote for approval of
the Indemnification Agreements.
Whether or not you expect to attend the meeting in person, it is important
that your shares be voted at the meeting. I urge you to specify your choices
by marking the enclosed proxy and returning it promptly.
Sincerely,
/s/ Michael G. Rubin
Chairman of the Board and
Chief Executive Officer
1075 First Avenue, King of Prussia, PA 19406 (610) 265-3229
<PAGE>
Global Sports, Inc.
1075 First Avenue
King of Prussia, PA 19406
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 15, 2000
----------------
TO OUR SHAREHOLDERS:
Notice is hereby given that a Annual Meeting of Shareholders (the "Annual
Meeting") of Global Sports, Inc. ("Global") will be held on Monday, May 15,
2000, at 10:00 a.m. (Philadelphia Time), at the Omni Hotel, 401 Chestnut
Street, Philadelphia, PA 19106, for the following purposes:
1. To elect six directors named herein to serve for terms described in the
accompanying Proxy Statement and until their successors are elected and
qualified, as more fully described in the accompanying Proxy Statement;
2. To approve (i) the Acquisition Agreement, dated September 24, 1999, as
amended, among Global, Gen-X Acquisition (U.S.), Inc., Gen-X Acquisition
(Canada) Inc., DMJ Financial, Inc., James J. Salter and Kenneth J.
Finkelstein (a copy of the Acquisition Agreement, without all exhibits, is
attached as Appendix A to the accompanying Proxy Statement and a complete
copy of the Acquisition Agreement can be obtained by accessing Global's
Form 10-Q/A for the period ended September 30, 1999, filed March 21, 2000),
relating to the sale of Global's Off-Price and Action Sports Division,
including the sale of all of the issued and outstanding capital stock of
Global's wholly-owned subsidiaries Gen-X Holdings Inc. and Gen-X Equipment
Inc., and (ii) the sale of Global's Off-Price and Action Sports Division;
3. To approve Indemnification Agreements to be entered into with Global's
directors and certain of its officers (a copy of the form of
Indemnification Agreements is attached as Appendix C to the accompanying
Proxy Statement);
4. To approve Global's 2000 Employee Stock Purchase Plan (a copy of the
2000 Employee Stock Purchase Plan is attached as Appendix D); and
5. To act upon such other business as may properly come before the Annual
Meeting or any postponement or adjournment thereof.
The Board of Directors is not aware of any other business to come before the
Annual Meeting.
The Board of Directors has fixed March 30, 2000 as the record date for the
determination of shareholders entitled to vote at the Annual Meeting. Only
shareholders of record at the close of business on that date will be entitled
to notice of, and to vote at, the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
By Order of the Board of Directors,
/s/ Arthur H. Miller
Secretary
King of Prussia, Pennsylvania
April 17, 2000
<PAGE>
Global Sports, Inc.
1075 First Avenue
King of Prussia, PA 19406
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of Global Sports, Inc. ("Global" or the "Company") for the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on Monday, May 15,
2000, at 10:00 a.m. (Philadelphia Time), for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders, and at any postponement
or adjournment thereof. The Annual Meeting will be held at the Omni Hotel, 401
Chestnut Street, Philadelphia, PA 19106. Unless the context requires
otherwise, all references herein to Global refer to Global Sports, Inc. and
its subsidiaries. This Proxy Statement, the Notice of Annual Meeting and the
Proxy are first being mailed to shareholders on or about April 17, 2000.
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or fax by directors, officers or employees of Global without
additional compensation. Upon request by brokers, dealers, banks or voting
trustees, or their nominees who are record holders of Global's Common Stock,
Global will pay the reasonable expenses incurred by such record holders for
mailing proxy materials to any beneficial owners of the Common Stock.
Record Date and Quorum
Only shareholders of record at the close of business on March 30, 2000 (the
"Record Date") will be entitled to notice of, and to vote at, the Annual
Meeting. As of the Record Date, the Company had [18,489,463] shares of Common
Stock issued and outstanding and 8,000 shares of Series A Preferred Stock
issued and outstanding. Each share of Common Stock outstanding is entitled to
one vote on each matter which may be brought before the Annual Meeting. The
shares of Series A Preferred Stock outstanding have no voting rights with
respect to any matter which may be brought before the Annual Meeting.
In order for a quorum to be present at the Annual Meeting, a majority of the
outstanding shares of Global's Common Stock as of the close of business on the
Record Date must be present in person or represented by proxy at the Annual
Meeting. All such shares that are present in person or represented by proxy at
the Annual Meeting including abstentions and broker non-votes will be counted
in determining whether a quorum is present.
Voting of Shares
A Proxy is enclosed. If properly executed and received in time for voting,
and not revoked, the enclosed Proxy will be voted in accordance with the
instructions indicated by the shareholders. If no instructions to the contrary
are indicated, the persons named in the enclosed Proxy will vote all shares of
Common Stock represented by such Proxy:
(i) FOR election of all nominees for director hereinafter named;
(ii) FOR approval of (A) the Acquisition Agreement, dated September 24,
1999, as amended, among Gen-X Acquisition (U.S.), Inc. and Gen-X
Acquisition (Canada) Inc. (collectively, the "Purchaser"), DMJ
Financial, Inc. ("DMJ Financial"), James J. Salter, Kenneth J.
Finkelstein and Global (the "Acquisition Agreement"), relating to the
sale of Global's Off-Price and Action Sports Division, including the
sale of all of the issued and outstanding capital stock of Global's
wholly-owned subsidiaries Gen-X Holdings Inc. and Gen-X Equipment
Inc., and (B) the sale of Global's Off-Price and Action Sports
Division;
(iii) FOR approval of the Indemnification Agreements;
(iv) FOR approval of Global's 2000 Employee Stock Purchase Plan; and
(v) in the discretion of the persons named in the enclosed Proxy as to
any other matter that may properly come before the Annual Meeting.
<PAGE>
The election of directors will be determined by a plurality vote. The
affirmative vote of a majority of the shares of Common Stock outstanding on
the Record Date is required to approve the Acquisition Agreement and the sale
of the Off-Price and Action Sports Division. The affirmative vote of a
majority of the shares of Common Stock present or represented by proxy at the
Annual Meeting is required to approve the Indemnification Agreements and to
approve the 2000 Employee Stock Purchase Plan. An abstention, withholding of
authority to vote or broker non-vote on any proposal, other than the election
of directors, will have the same legal effect as an "against" vote.
As of the Record Date, directors and executive officers of Global, and their
affiliates, owned in the aggregate issued and outstanding shares of Global
Common Stock representing approximately [78.7]% of the shares of Global Common
Stock issued and outstanding as of the Record Date. Michael G. Rubin, Chairman
and Chief Executive Officer of Global, and certain affiliates of SOFTBANK
America Inc. (collectively, "SOFTBANK"), who beneficially owned shares of
Global Common Stock representing approximately [43.4]% and [33.3]%,
respectively, of the shares of Global Common Stock issued and outstanding as
of the Record Date, have indicated that they intend to vote for approval of
the Acquisition Agreement and the sale of the Off-Price and Action Sports
Division, for approval of the Indemnification Agreements and for approval of
the 2000 Employee Stock Purchase Plan. If Mr. Rubin and SOFTBANK vote
together, they will control the outcome of each of these proposals being
submitted to the shareholders at the Annual Meeting.
Revocation of Proxies
Sending in a signed Proxy will not affect the shareholder's right to attend
the Annual Meeting and vote in person since the Proxy is revocable. Any
shareholder giving a Proxy has the power to revoke it by delivering a later
dated Proxy or giving written notice to the Secretary of Global at any time
before the Proxy is exercised. Attendance at the Annual Meeting will not, by
itself, revoke a Proxy.
Change in Fiscal Year End
Beginning with the fiscal year commencing January 1, 1999, Global operates
on a 52-53 week year so that each fiscal year end is the Saturday closest to
December 31. As used in this Proxy Statement, "fiscal 1995", "fiscal 1996",
"fiscal 1997", "fiscal 1998", "fiscal 1999" and "fiscal 2000" refer to
Global's fiscal years ended or ending December 31, 1995, December 31, 1996,
December 31, 1997, December 31, 1998, January 1, 2000 and December 30, 2001,
respectively.
FORWARD-LOOKING STATEMENTS
This Proxy Statement contains certain "forward-looking" statements,
including, among others, the statements regarding the ability to consummate
the sale of the Off-Price and Action Sports Division, industry conditions and
prospects and Global's future operating results. Without limiting the
foregoing, words such as "anticipates", "believes", "expects", "intends",
"plans" and similar expressions are intended to identify "forward-looking"
statements. All of these "forward-looking" statements are inherently
uncertain, and shareholders must recognize that actual events could cause
actual results to differ materially from management's expectations. Key risk
factors that could, in particular, have an adverse impact on the Company's
ability to effect the sale of the Off-Price and Action Sports Division on a
timely basis include satisfaction or waiver of all closing conditions.
2
<PAGE>
RISK FACTORS
Set forth below is a summary of certain risks related to the sale of the
Off-Price and Action Sports Division. For a summary of certain risks
particular to Global and risks typical of the internet industry, see Global's
Annual Report on Form 10-K for fiscal 1999 filed on [ ], 2000.
Upon consummation of the sale of the Off-Price and Action Sports Division,
Global will have sold the two divisions which, until the fourth quarter of
1999, accounted for 100% of Global's revenues.
On December 29, 1999, Global consummated the sale of its Branded Division,
through which Global designed, marketed and distributed two footwear products,
the "RYKA" brand and the "Yukon" brand. Until the fourth quarter of 1999, when
Global launched the websites it operates for certain sporting goods retailers,
100% of Global's revenues had been generated by the Branded Division and the
Off-Price and Action Sports Division. Upon consummation of the sale of the
Off-Price and Action Sports Division, 100% of Global's revenues will be
generated through its e-Commerce business. To date, Global's e-Commerce
business has generated limited revenues while incurring substantial expenses
for its development. If Global is not successful implementing and operating
its e-Commerce business, it will have a material adverse effect on Global's
business, results of operations and financial condition.
The Company expects to recognize a loss on the sale of its Branded Division
and Off-Price and Action Sports Division.
Management initially expected to recognize a gain on the sale of its Branded
Division and Off-Price and Action Sports Division. The Company now expects to
recognize a loss on the sale of these divisions. For a more complete
discussion on the expected loss on the sale of the Branded Division and Off-
Price and Action Sports Division, see "Selected Financial Data."
Certain conditions may prevent the closing of the sale of the Off-Price and
Action Sports Division.
There are several conditions precedent to the closing of the sale of the
Off-Price and Action Sports Division, including, but not limited to the
truthfulness of the parties' representations and warranties, satisfaction of
the parties' obligations to be satisfied on or before the closing and the
absence of proceedings, judgments and laws that prohibit the sale of the Off-
Price and Action Sports Division. Even if the sale is approved by the
shareholders, there can be no assurance that all of the other conditions will
be met or waived by the parties. In such event, the sale of the Off-Price and
Action Sports Division would not be completed and Global would be forced to
either search for another prospective purchaser or to continue to operate the
Off-Price and Action Sports Division. Searching for another prospective
purchaser could be costly and time consuming and there is no guarantee that
Global would find another prospective purchaser to acquire the Off-Price and
Action Sports Division on terms acceptable to Global. If Global is required to
continue to operate the Off-Price and Action Sports Division and Global's
senior management might be prevented from focusing exclusively on its e-
Commerce business, Global's capital resources may not be sufficient to fund
the e-Commerce business while maintaining and growing the Off-Price and Action
Sports Division, which business might create a conflict of interest with
Global's e-Commerce business. For a more complete description of such
conditions and such potential conflict, see "Proposal 2 -Approval of the
Acquisition Agreement and the Sale of the Off-Price and Action Sports
Division--Terms of Acquisition Agreement" and "Background and Reasons for the
Sale" and the Acquisition Agreement included with this Proxy Statement as
Appendix A.
The Purchaser is controlled by a group led by the Chief Executive Officer and
the President and Chief Financial Officer of the Off-Price and Action Sports
Division.
The Purchaser of the Off-Price and Action Sports Division is controlled by a
group led by James J. Salter, who is currently the Chief Executive Officer of
the Off-Price and Action Sports Division, and Kenneth J. Finkelstein, who is
the President and Chief Financial Officer of the Off-Price and Action Sports
Division. The duties owed by Messrs. Salter and Finkelstein to Global's
shareholders conflict with their desire to pay Global the lowest possible
purchase price for the Off-Price and Action Sports Division.
3
<PAGE>
Global shareholders are not entitled to appraisal rights in connection with
the sale of the Off-Price and Action Sports Division.
Under Delaware law, Global shareholders are not entitled to appraisal rights
for their shares of Global Common Stock in connection with the sale of the
Off-Price and Action Sports Division or to any similar rights under Delaware
law.
PROPOSAL 1--ELECTION OF DIRECTORS
The Company's Bylaws, as amended, provide that the number of directors shall
be as established by the Board of Directors. The Board of Directors increased
the number of Directors from four to five in July 1999 in connection with the
investment in the Company by SOFTBANK and from five to six in March 2000. The
stock purchase agreement pursuant to which SOFTBANK acquired its shares of
Global Common Stock provides that SOFTBANK has the right to designate up to
two members of Global's Board of Directors, depending on the number of shares
of Global Common Stock held by SOFTBANK. Additionally, one of the SOFTBANK
directors will be entitled to serve as a member of each committee of the Board
of Directors. Charles R. Lax and Ronald D. Fisher were elected as directors of
the Company to serve as SOFTBANK nominees.
The following table sets forth certain information regarding the Company's
nominees for election to the Board of Directors to serve for one-year terms
until the 2001 Annual Meeting and until their respective successors are
elected and qualified.
<TABLE>
<CAPTION>
Term
Position(s) Held in the Director to
Name Age(1) Company Since Expire
------------------- ----- ------------------------- -------- ------
<S> <C> <C> <C> <C>
Michael G. Rubin 27 Chairman of the Board and 1995 2001
Chief Executive Officer
Kenneth J. Adelberg 47 Director 1995 2001
Harvey Lamm 64 Director 1998 2001
Jeffrey F. Rayport 40 Director 1999 2001
Charles R. Lax 40 Director 1999 2001
Ronald D. Fisher 52 Director 2000 2001
</TABLE>
- --------
(1) As of March 30, 2000.
The principal occupation of each director of the Company is set forth below.
Michael G. Rubin has served as Chairman of the Board and Chief Executive
Officer of the Company since July 31, 1995 and as President and Director of
KPR Sports International, Inc., Apex Sports International, Inc. and MR
Management, Inc. since their formation in 1990. Mr. Rubin received the 1995
Entrepreneur of the Year Award for the Delaware Valley Region, which is
sponsored by Inc. magazine and Ernst & Young. Mr. Rubin attended Villanova
University, Villanova, Pennsylvania.
Kenneth J. Adelberg has served as President and Chief Executive Officer of
HiFi House Group of Companies, a privately-held company based in Broomall,
Pennsylvania, since 1987. Mr. Adelberg is a director and founding stockholder
of US Wats, Inc., a publicly-traded company specializing in business
telecommunications services, located in Bala Cynwyd, Pennsylvania, which was
established in 1989. Mr. Adelberg is a founding stockholder and director of
Republic Bank, Philadelphia, Pennsylvania, a publicly-traded bank which has
been in operation since 1989. Mr. Adelberg holds Bachelor of Science degrees
in Biophysics and Physiological Psychology from Pennsylvania State University
and attended the MBA program at Drexel University, Philadelphia, Pennsylvania.
Harvey Lamm has served as a director and Chief Executive Officer of Vintek
Corporation, a privately-held company based in Philadelphia, Pennsylvania
since 1996. Vintek specializes in automated title management and the
development of tools to reduce cost and manage risk for automotive finance
institutions. From 1990 to 1996, Mr. Lamm spent his time managing his
investments. From 1967 until 1990, Mr. Lamm served as Chairman of the Board,
Chief Executive Officer, President and Chief Operating Officer of Subaru of
America, Inc., until its acquisition by Fuji Heavy Industries Ltd. Mr. Lamm
helped found Subaru of America, which was the exclusive importer of Subaru
brand vehicles in the United States and was a publicly traded company listed
on the Nasdaq National Market. Mr. Lamm holds degrees from Pennsylvania State
University and Drexel University.
4
<PAGE>
Jeffrey F. Rayport has been executive director of the Monitor Marketspace
Center, a technology and e-commerce media unit based at Monitor Company, a
global strategy consulting firm headquartered in Cambridge, Massachusetts,
since September, 1998. Dr. Rayport has also been a faculty member in the
Service Management Interest Group at the Harvard Business School since prior
to 1995. Dr. Rayport went on leave from the Harvard Business School in
September, 1998. Dr. Rayport earned an A.B. from Harvard College, an M.Phil.
in International Relations at the University of Cambridge and an A.M. in the
History of American Civilization and a Ph.D. in Business History at Harvard
University.
Charles R. Lax has been one of Global's directors since July, 1999. Mr. Lax
is a general partner and a co-founder of SOFTBANK Capital Partners, an
investment group founded in July 1999. Mr. Lax has also been a general partner
of SOFTBANK Technology Ventures IV, L.P. since November 1997. From March 1996
to November 1997, he was Vice President at SOFTBANK Holdings Inc. Mr. Lax was
previously a venture partner at Vimac Partners LLC, a venture capital firm
specializing in investments in the information technology and Internet-related
industries, from June 1993 to March 1996. Mr. Lax is also a director of Art
Technology Group, Inc., 1-800-Flowers.com, Inc., Interliant, Inc., Webhire,
Inc. and a number of private companies, including ThirdAge Media, Inc.,
LIMITrader Securities, Inc., Gamesville.com and Reciprocal, Inc. Mr. Lax holds
a bachelor of science degree from Boston University.
Ronald D. Fisher has been one of Global's directors since March 2000. Mr.
Fisher has been managing general partner of SOFTBANK Capital Partners since
October 1995. From January 1990 to September 1995, Mr. Fisher was chief
executive officer of Phoenix Technologies, Ltd., a developer and marketer of
system software products. Mr. Fisher is also a director of InsWeb Corporation,
Ziff Davis Publishing, PeoplePC and OptiMark Technologies. Mr. Fisher received
a Bachelor of Commerce degree from the University of Witwatersand in South
Africa and an MBA from Columbia University.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
NOMINEES FOR DIRECTORS.
Board, Committees and Attendance at Meetings
The Board of Directors of Global held seven meetings during fiscal 1999.
During fiscal 1999, no director attended fewer than 75% of the aggregate of
the total number of Board meetings and the total number of meetings held by
committees of the Board of Directors on which he served. The following is a
description of each of the committees of the Board of Directors of Global.
Audit Committee. The members of the Audit Committee are Messrs. Adelberg, Lamm
and Lax. The Audit Committee reviews Global's audited financial statements and
makes recommendations to the Board of Directors concerning Global's accounting
practices and policies and the selection of independent accountants. No
meetings of the Audit Committee were held during fiscal 1999.
Compensation Committee. The members of the Compensation Committee are Messrs.
Adelberg, Lax and Rayport. The Compensation Committee is responsible for
establishing salaries, bonuses and other compensation for the executive
officers and administers the Company's stock option plans. No meetings of the
Compensation Committee were held during fiscal 1999.
Compensation of Directors
Under the Company's current policy, upon election to the Board of Directors,
non-employee directors of the Company receive an option to purchase 30,000
shares of the Company's Common Stock as compensation for their services to the
Company. The directors do not receive any cash compensation for their services
on behalf of the Company but are reimbursed for reasonable travel and lodging
expenses incurred in attending meetings of the Board of Directors and any
Committee. Mr. Rubin, the only director who is also an officer of the Company,
does not receive any separate fee for acting in his capacity as a director.
On September 19, 1995, the Board of Directors adopted, and on November 15,
1995, the shareholders approved, the 1995 Non-Employee Directors' Stock Plan
(the "Directors' Plan"). Pursuant to the Directors' Plan, options originally
could be granted with respect to an aggregate of 12,500 shares of Common
Stock. Effective December 31, 1997, the Board of Directors terminated the
Directors' Plan, which remains in effect only as to unexercised options
granted thereunder.
5
<PAGE>
PROPOSAL 2--APPROVAL OF THE ACQUISITION AGREEMENT
AND THE SALE OF THE OFF-PRICE AND ACTION SPORTS DIVISION
General
On September 24, 1999, the Company entered into the Acquisition Agreement
providing for the sale of the Company's Off-Price and Action Sports Division,
including the sale of all of the issued and outstanding capital stock of the
Company's wholly-owned subsidiaries Gen-X Holdings Inc. and Gen-X Equipment
Inc. (collectively, the "Gen-X Companies"). On March 13, 2000, the Acquisition
Agreement was amended to, inter alia, (i) extend the date after which either
party could terminate the Acquisition Agreement, (ii) provide for a larger
portion of the purchase price to be paid in cash instead of a combination of
cash and promissory notes, (iii) to reduce the purchase price as a result of
more of the purchase price being paid in cash, (iv) to provide Purchaser with
a breakup fee of $1.5 million, and (v) to accelerate the vesting of options to
purchase an aggregate of 281,930 shares of Global Common Stock held by certain
employees of Global, of which options to acquire 80,000 shares are held by
each of Messrs Salter and Finkelstein. Pursuant to the terms of the
Acquisition Agreement, as amended, the aggregate purchase price for the Off-
Price and Action Sports Division is approximately $17.2 million, consisting of
a cash payment of $6.0 million deposited in an escrow account by the Purchaser
on March 13, 2000, a cash payment at closing of $7.2 million and assumption of
certain notes payable by Global in the aggregate principal amount of
approximately $4.0 million.
A copy of the Acquisition Agreement, as amended, without all exhibits, is
attached as Appendix A to this Proxy Statement. A complete copy of the
Acquisition Agreement, as amended, can be obtained by accessing Global's Form
10-Q/A for the period ended September 30, 1999, filed March 21, 2000.
The Off-Price and Action Sports Division accounted for approximately 60.5%
and 66% of the Company's net sales in fiscal 1999 and fiscal 1998,
respectively, and approximately 27.0% and 31.5% of the Company's assets as of
the end of fiscal 1999 and the end of fiscal 1998, respectively. As a result,
the sale of the Off-Price and Actions Sports Division may be considered to be
a sale of substantially all of the Company's assets under applicable law.
Shareholders are, therefore, being asked to approve the sale of the Off-Price
and Action Sports Division.
Background and Reasons for the Sale
During the fourth quarter of 1998, the Company began to investigate whether
it would be beneficial for the Company to expand its business to include the
sale of athletic footwear and sporting goods through the internet. At that
time, electronic commerce ("e-Commerce") was rapidly growing, and Global
believed the internet provided a unique opportunity for it to leverage its
existing relationships with vendors and sporting goods retailers.
By the end of 1998, the Company had developed a business model in which the
Company would enter into exclusive contracts with land-based sporting goods
retailers to operate their e-Commerce businesses and pay the retailers a share
of sales made through the websites. The business model provided that Global
would develop the retailer's website, maintain the website, buy and warehouse
inventory, ship customer orders and provide customer service. Global believed
that such retailers were well suited to compete in the internet sporting goods
industry due to their established brand names, existing customer traffic and
existing relationships with and access to merchandise from vendors. Global's
business model enabled it to leverage the marketing and advertising budgets of
these retailers by requiring integration of the retailers' website addresses
into their marketing and communications materials.
In January 1999, the Company formed Global Sports Interactive, Inc. ("GSI")
to implement its e-Commerce strategy and began to market its business model to
land-based retailers in the sporting goods industry. During the first quarter
of 1999, Global was successful in signing exclusive agreements to operate the
internet businesses of multiple sporting goods retailers, including The Sports
Authority, Inc., The Athlete's Foot Stores, Inc., Sport Chalet, Inc., Michigan
Sporting Goods Distributors, Inc. (MC Sports) and Dunham's Athleisure
Corporation.
6
<PAGE>
While marketing its business model, Global realized that the amount of
management time necessary to launch and operate its e-Commerce business would
be substantial. As a result, the Company began to recruit a senior management
team from both the e-Commerce and sporting goods industries to develop and
manage its new e-Commerce business. Although Global was successful in
expanding its senior management team, the operation of Global's existing
businesses prevented senior management from focusing exclusively on its e-
Commerce business.
Global also realized that its capital resources would not be sufficient to
fund its rapidly growing e-Commerce business while maintaining and growing its
existing businesses and that its existing businesses might create a conflict
of interest with its e-Commerce business.
As a result, Global concluded that it should focus exclusively on its e-
Commerce business. On April 20, 1999, Global formalized a plan to divest its
non-internet businesses which consisted of its Off-Price and Action Sports
Division and its Branded Division.
Based on its decision to focus exclusively on its e-Commerce business,
Global began preliminary discussions in early April,1999 with Deutsche Bank
Securities Inc. ("Deutsche Bank") (formerly BT Alex. Brown Incorporated). On
April 17, 1999, Global's Board of Directors engaged Deutsche Bank to
familiarize itself with Global's operations, properties and financial
condition and assist Global in identifying and evaluating prospective
purchasers of the Company's Off-Price and Action Sports Division and the
Company's Branded Division.
Between April 20, 1999 and June 20, 1999, Global worked with Deutsche Bank
to prepare an offering memorandum for the sale of the Off-Price and Action
Sports Division. Twenty-two parties were contacted regarding their interest in
acquiring the Off-Price and Action Sports Division. The offering memorandum
was circulated to 12 prospective purchasers between June 21, 1999 and July 15,
1999. All prospective purchasers were required to execute confidentiality
agreements prior to receiving a copy of the offering memorandum.
Prospective purchasers were also provided with certain publicly available
financial information and confidential information regarding the Off-Price and
Action Sports Division and Global such as data on significant customers and
suppliers and financial projections for fiscal 1999.
Based upon the information contained in the offering memorandum, Global
received one proposal for the Off-Price and Action Sports Division. The
proposal was submitted by a management group led by James J. Salter and
Kenneth J. Finkelstein. Mr. Salter is currently the Chief Executive Officer of
the Off-Price and Action Sports Division and Mr. Finkelstein is the President
and Chief Financial Officer of the Off-Price and Action Sports Division. In
May 1998, Global had acquired the capital stock of the Gen-X Companies, which
comprise part of the Off-Price and Action Sports Division, from Messrs. Salter
and Finkelstein and other shareholders of the Gen-X Companies.
Approval by Board of Directors
Global and its financial advisors negotiated the specific terms of the sale
of the Off-Price and Action Sports Division with Messrs. Salter and
Finkelstein from mid June, 1999 through July, 1999. During such period of
time, the parties had several meetings and numerous telephone conversations
regarding the purchase price and the payment terms for the sale. During
August, 1999 through September 15, 1999, counsel for the parties drafted and
negotiated the specific terms of the Acquisition Agreement and the related
agreements. See "--Terms of the Acquisition Agreement." The negotiations of
the specific terms of the Acquisition Agreement included one meeting in which
Mr. Rubin, Steven A. Wolf, Vice President of Global, and Messrs. Salter and
Finkelstein were present along with legal counsel and financial advisors for
Global and legal counsel for the management group led by Messrs. Salter and
Finkelstein. Several telephone conference calls were also held by the above
individuals during such negotiations.
7
<PAGE>
On September 15, 1999, Global and Messrs. Salter and Finkelstein
preliminarily agreed to the terms and conditions of the sale of the Off-Price
and Action Sports Division and the Acquisition Agreement, subject to certain
customary closing conditions, including approval by Global's Board of
Directors, approval by Global's shareholders and a review of the Purchaser's
documents relating to the Purchaser's proposed restructuring of the Off-Price
and Action Sports Division. The Purchaser contemplated a restructuring which
was to occur immediately prior to and immediately following the consummation
of the sale of the Off-Price and Action Sports Division. However, the
documents necessary to effectuate the restructuring had not at that time been
provided to Global or its legal counsel for review.
On September 16, 1999, Global's Board of Directors held a meeting to review
and consider the sale of the Off-Price and Action Sports Division. The meeting
was attended by all of the members of Global's Board of Directors,
representatives of Deutsche Bank, Global's legal counsel, Global's Chief
Financial Officer and Global's Senior Vice President of Strategic Development.
The Board of Directors deferred approval of the sale of the Off-Price and
Action Sports Division to the Purchasers until Global and its legal counsel
were provided with and were able to review the Purchaser's proposed
restructuring documents.
Global and its legal counsel were provided with copies of the restructuring
documents on September 20, 1999. Between September 20, 1999 and September 23,
1999, Global and its legal counsel reviewed and negotiated the restructuring
documents of the Purchaser. The restructuring documents, as executed, provide
for the following:
. the redemption by Global of 7,200 of the 8,000 outstanding shares of
Series A Preferred Stock of Global in exchange for a promissory note in
the principal amount of $360,000, which note will be convertible into an
obligation of Gen-X Holdings Inc.;
. the amendment and restatement of the contingent notes with an aggregate
outstanding principal balance of $3.6 million issued by Global in
connection with the acquisition of the Gen-X Companies in May, 1998 to
make such notes convertible into obligations of Gen-X Holdings Inc.;
. conversion of the above notes into a promissory note from Gen-X Holdings
Inc. in the principal amount of approximately $4.0 million;
. cancellation of the note in the approximate amount of $4.0 million in
exchange for Gen-X Holdings Inc. issuing a promissory note convertible
into preferred stock of Gen-X Holdings Inc.;
. Global's issuance of a promissory note in favor of Gen-X Holdings Inc.
in the principal amount of approximately $4.0 million, which note will
be assumed by the Purchaser in connection with the sale of the Off-Price
and Action Sports Division; and
. certain other transactions between the Purchaser and its affiliates
which will occur after the consummation of the sale of the Off-Price and
Action Sports Division and which will not affect Global.
On September 24, 1999, Global's Board of Directors held another meeting to
review and consider the sale of the Off-Price and Action Sports Division to
the Purchaser. The meeting was attended by all of the members of Global's
Board of Directors other than Jeffrey Rayport, representatives of Deutsche
Bank, Global's General Counsel, Chief Financial Officer and Senior Vice
President of Strategic Development. After a review of the terms and conditions
of the Acquisition Agreement and related agreements by Global's General
Counsel and a review of the financial terms of the proposed sale of the Off-
Price and Action Sports Division by a representative of Deutsche Bank, the
Board of Directors unanimously determined that the terms and conditions of the
sale of the Off-Price and Action Sports Division to the Purchaser are fair to,
and in the best interests of, the Company and approved the sale of the Off-
Price and Action Sports Division and the Acquisition Agreement and related
agreements.
The Acquisition Agreement was executed on September 24, 1999. Pursuant to
its original terms, the Acquisition Agreement could be terminated by either
party if the closing did not occur on or before February 28, 2000. On or
around March 1, 2000, Global and the Purchaser decided to extend the date
after which either party could terminate the Acquisition Agreement and to
amend the purchase price and payment terms for the sale. Between March 1, 2000
and March 7, 2000, Global and Messrs. Salter and Finkelstein negotiated the
terms of the amendment to the Acquisition Agreement.
8
<PAGE>
On March 12, 2000, Global's Board of Directors held a meeting to review and
consider the proposed amendment to the Acquisition Agreement. The meeting was
attended by all of the members of Global's Board of Directors, representatives
of Deutsche Bank, Global's General Counsel, Chief Financial Officer and Senior
Vice President of Strategic Development. After a review of the terms and
conditions of the amendment to the Acquisition Agreement by Global's General
Counsel and a review of the revised financial terms of the proposed sale of
the Off-Price and Action Sports Division by a representative of Deutsche Bank,
the Board of Directors unanimously determined that the revised terms and
conditions of the sale of the Off-Price and Action Sports Division to the
Purchaser are fair to, and in the best interests of, the Company and approved
the amendment to the Acquisition Agreement.
Terms of the Acquisition Agreement
The following is a summary of the material provisions of the Acquisition
Agreement, dated September 24, 1999, as amended, between Global, Gen-X
Acquisition (U.S.), Inc., Gen-X Acquisition (Canada) Inc., DMJ Financial,
James J. Salter and Kenneth J. Finkelstein. A copy of the Acquisition
Agreement, as amended, without all exhibits, is attached as Appendix A to this
Proxy Statement. A complete copy of the Acquisition Agreement, as amended, can
be obtained by accessing Global's Form 10-Q/A for the period ended September
30, 1999, filed March 21, 2000. The Acquisition Agreement is incorporated into
this Proxy Statement by reference and should be read carefully.
General
The Acquisition Agreement provides for the sale by Global to Gen-X
Acquisition (U.S.), Inc. of all of the issued and outstanding shares of
capital stock of Gen-X Holdings and the sale by Global to Gen-X Acquisition
(Canada), Inc. of all of the issued and outstanding shares of capital stock of
Gen-X Equipment. The sale of the Off-Price and Action Sports Division will be
consummated only if the Acquisition Agreement and the transactions
contemplated by the Acquisition Agreement are approved and adopted by the
affirmative vote of a majority of the shares of Global Common Stock
outstanding on the Record Date. If approved, the closing of the sale of the
Off-Price and Action Sports Division will take place shortly after the Annual
Meeting. There can be no assurance, however, that the conditions to the
closing will be satisfied by that time, or at all, or that the Acquisition
Agreement will not be terminated. See "--Conditions to Closing."
Purchase Price
The purchase price to be paid to Global for the capital stock of Gen-X
Holdings consists of the following: (i) a cash payment in the amount of $6.0
million deposited in an escrow account by the Purchaser on March 13, 2000, to
be delivered to Global at closing, (ii) a cash payment at closing in the
amount of $3.6 million, and (iii) the assumption of certain notes, payable by
Global to Gen-X Holdings, in the aggregate principal amount of approximately
$4.0 million, together with all accrued and unpaid interest thereon. This
purchase price is subject to certain adjustments in the event the Purchaser
sells or otherwise transfers the capital stock of the Gen-X Companies within
certain periods of time following the closing. The purchase price to be paid
to Global for the capital stock of Gen-X Equipment consists of a cash payment
at closing in the amount of $3.6 million.
Related Agreements
In connection with the Acquisition Agreement, Global has agreed to enter
into a Right of First Offer Agreement and a Non-Competition Agreement, each
effective as of the closing of the sale of the Off-Price and Action Sports
Division.
Under the Noncompetition Agreement, Global and Michael G. Rubin will not
compete, for a period of five years following the closing of the sale of the
Off-Price and Action Sports Division, in the action sports and off-price
sporting goods business, as currently conducted by the Gen-X Companies. Global
will not be prohibited or restricted under the Noncompetition Agreement from
conducting its e-Commerce business. The Noncompetition Agreement may be
terminated prior to the end of its five year term upon the occurrence of
certain defaults or breaches by the parties to the Acquisition Agreement.
9
<PAGE>
In addition, Global and the other parties to the Acquisition Agreement have
agreed to enter into agreements to terminate, as of the closing of the sale of
the Off-Price and Action Sports Division, the employment agreements of Messrs.
Salter and Finkelstein and the noncompetition agreement entered into by
Merssrs Salter and Finkelstein and DMJ Financial in connection with the
purchase by Global of the Gen-X Companies in May, 1998.
In order to secure the obligations to Global under the Notes, the Purchaser
and its operating subsidiaries have agreed to execute and deliver to Global
guarantees, security agreements, pledge agreements and trademark security
agreements.
Representations and Warranties
The Acquisition Agreement contains certain representations and warranties by
Global relating to, among other things: (i) the due organization, valid
existence and power of the Gen-X Companies, (ii) the capitalization and
ownership of the Gen-X Companies, (iii) the authorization, execution,
delivery, enforceability and performance of the Acquisition Agreement and
related agreements by Global, (iv) no conflicts under Global's charter or
bylaws or violations of agreements or applicable laws or judgments, (v) the
absence of legal proceedings and judgments, and (vi) brokerage fees.
The Acquisition Agreement also contains certain representations and
warranties by the Purchaser, DMJ Financial and Messrs. Salter and Finkelstein
relating to, among other things: (i) the due organization, valid existence and
power of the Purchaser and DMJ Financial, (ii) the authorization, execution,
delivery, enforceability and performance of the Acquisition Agreement and
related agreements by the Purchaser, DMJ Financial and Messrs. Salter and
Finkelstein, (iii) the absence of any business activities, operations or
obligations of the Purchaser prior to closing of the sale of the Off-Price and
Action Sports Division, (iv) the absence of proceedings and judgments, (v)
brokerage fees, (vi) representations as to investment matters, (vii) the
absence of any obligations incurred by DMJ Financial or Messrs. Salter or
Finkelstein on behalf of Global or any of its subsidiaries other than the Gen-
X Companies, and (viii) the non-applicability of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and the
Competition Act (Canada).
Conditions to Closing
Unless otherwise waived, the obligations of Global to be performed at the
closing of the sale of the Off-Price and Action Sports Division are subject to
the satisfaction of certain conditions, including the following: (i) the
representations and warranties of the Purchaser, DMJ Financial and Messrs.
Salter and Finkelstein must have been true in all material respects when made
and must be true in all material respects on and as of the date of the
closing, (ii) all of the obligations to be satisfied or performed by the
Purchaser on or before the closing must have been substantially satisfied or
performed, (iii) approval of the sale of the Off-Price and Action Sports
Division must have been obtained from the shareholders of Global, (iv) no
proceeding, judgment or law has been instituted, issued or enacted that
prohibits the transactions contemplated by the Acquisition Agreement and
related agreements, and (v) Global has received the written opinion of its
financial advisor that the consideration to be received by Global is fair,
from a financial point of view, to Global.
Unless otherwise waived, the obligations of the Purchaser, DMJ Financial and
Messrs. Salter and Finkelstein to be performed at the closing of the sale of
the Off-Price and Action Sports Division are subject to the satisfaction of
certain conditions, including the following: (i) the representations and
warranties of Global must have been true in all material respects when made
and must be true in all material respects on and as of the date of the
closing, and (ii) all of the obligations to be satisfied or performed by
Global on or before the closing must have been substantially satisfied or
performed.
Nondisclosure and Noncompetition Obligations
In connection with the sale of the Off-Price and Action Sports Division,
Global has agreed not to disclose any confidential information about the Gen-X
Companies and the Purchaser, DMJ Financial and Messrs. Salter and Finkelstein
have agreed not to disclose any confidential information about Global.
10
<PAGE>
Indemnification
Pursuant to the terms of the Acquisition Agreement, Global has agreed to
indemnify the Purchaser, DMJ Financial and Messrs. Salter and Finkelstein from
and against any damages arising out of or in connection with certain matters,
including the following: (i) any misrepresentation, breach or failure of any
representation or warranty made by Global in the Acquisition Agreement or any
of the related agreements, and (ii) any failure or refusal by Global to
satisfy or perform any covenant, term, obligation or condition of the
Acquisition Agreement or any of the related agreements required to be
satisfied or performed by it.
The Purchaser, DMJ Financial and Messrs. Salter and Finkelstein, jointly and
severally, have agreed to indemnify Global from and against any damages
arising out of or in connection with certain matters, including the following:
(i) any misrepresentation, breach or failure of any representation or warranty
made by the Purchaser, DMJ Financial or Messrs. Salter or Finkelstein in the
Acquisition Agreement or any of the related agreements, (ii) any failure or
refusal by the Purchaser, DMJ Financial, Salter or Finkelstein to satisfy or
perform any covenant, term, obligation or condition of the Acquisition
Agreement or any of the related agreements required to be satisfied or
performed by them, (iii) any act or omission of the Gen-X Companies or their
representatives at any time after the closing, and (iv) any claim against
Global by Customs Canada.
Termination
The Acquisition Agreement may be terminated under any of the following
circumstances: (i) upon the mutual written consent of Global and the
Purchaser, (ii) by Global or the Purchaser if the closing does not occur on or
before May 31, 2000, (iii) by the Purchaser if it becomes certain that any of
the conditions to the closing obligations of the Purchaser, DMJ Financial or
Messrs. Salter and Finkelstein cannot be satisfied, (iv) by Global if it
becomes certain that any of the conditions to the closing obligations of
Global cannot be satisfied, (v) by the Purchaser if Global breaches any of its
representations, warranties, covenants or agreements contained in the
Acquisition Agreement, (vi) by Global if the Purchaser, DMJ Financial or
Messrs. Salter or Finkelstein breach any of their representations, warranties,
covenants or agreements contained in the Acquisition Agreement, or (vii) by
Global if Global receives an offer from a third party to acquire the Gen-X
Companies and the Board of Directors of Global determines, in good faith, that
its fiduciary duties require Global to accept such offer. If Global terminates
the Acquisition Agreement because it has received an offer from a third party
to acquire the Gen-X Companies and the Board of Directors of Global
determines, in good faith, that its fiduciary duties require Global to accept
such offer, and Purchaser is not then in breach of the Acquisition Agreement,
Global will be required to pay Purchaser a nonrefundable fee in the amount of
$1.5 million.
Opinion of Deutsche Bank Securities Inc.
Deutsche Bank has acted as financial advisor to Global in connection with
the proposed sale of the Company's Off-Price and Action Sports Division,
including the sale of the Gen-X Companies.
At the March 12, 2000 meeting of Global's Board of Directors, Deutsche Bank
delivered its oral opinion, subsequently confirmed in writing as of the same
date, to the Global Board of Directors to the effect that, as of the date of
such opinion, based upon and subject to the assumptions made, matters
considered and limits of the review undertaken by Deutsche Bank, the
consideration to be received by Global in connection with the sale of the Off-
Price and Action Sports Division is fair, from a financial point of view, to
Global.
The full text of Deutsche Bank's written opinion, dated March 12, 2000 (the
"Deutsche Bank Opinion"), which sets forth, among other things, the
assumptions made, matters considered and limits on the review undertaken by
Deutsche Bank in connection with the opinion is attached as Appendix B to this
Proxy Statement and is incorporated herein by reference. Global shareholders
are urged to read the Deutsche Bank Opinion in its entirety. The summary of
the Deutsche Bank Opinion set forth in this Proxy Statement is qualified in
its entirety by reference to the full text of the Deutsche Bank Opinion.
11
<PAGE>
In connection with Deutsche Bank's role as financial advisor to Global, and
in arriving at its opinion, Deutsche Bank has, among other things, reviewed
certain publicly available financial information and other information
concerning the Off-Price and Action Sports Division and certain internal
analyses and other information furnished to it by the Off-Price and Action
Sports Division and Global such as accounts receivable aging reports,
available-to-sell inventory reports, inventory aging reports and data on
significant customers and suppliers. Deutsche Bank also held discussions with
the members of the senior management of the Off-Price and Action Sports
Division and Global regarding the businesses and prospects of the Off-Price
and Action Sports Division. In addition, Deutsche Bank has (i) reviewed the
financial performance of the Off-Price and Action Sports Division, (ii)
reviewed the financial terms of certain recent acquisitions which it deemed
comparable in whole or in part, (iii) reviewed the terms of the Acquisition
Agreement and certain related documents and (iv) performed such other studies
and analyses and considered such other factors as it deemed appropriate.
Deutsche Bank found no publicly-traded companies that are comparable to the
Off-Price and Action Sports Division. Accordingly, Deutsche Bank was unable to
value the Off-Price and Action Sports Division based upon comparable market
valuations. In addition, based upon the nature of the Off-Price and Action
Sports Division's business, management of the Off-Price and Action Sports
Division and Global believe it is impractical to produce financial
projections; consequently, Deutsche Bank was unable to perform a discounted
cash flow valuation analysis or leveraged buyout valuation analysis.
Deutsche Bank has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning the Off-Price and Action Sports
Division, including, without limitation, any financial information or
forecasts considered in connection with the rendering of its opinion.
Accordingly, for purposes of its opinion, Deutsche Bank has assumed and relied
upon the accuracy and completeness of all such information and Deutsche Bank
has not conducted a physical inspection of any of the properties or assets and
has not prepared or obtained any independent evaluation or appraisal of any of
the assets or liabilities of the Off-Price and Action Sports Division.
Deutsche Bank's opinion is necessarily based upon economic, market and other
conditions as in effect on, and the information made available to it as of,
the date of such opinion.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analysis, the representations and warranties of
the Off-Price and Action Sports Division, Global and the Purchaser contained
in the Acquisition Agreement are true and correct and that Global and the
Purchaser will each perform all of the covenants and agreements to be
performed by it under the Acquisition Agreement and all conditions to the
obligations of each of Global and the Purchaser to consummate the sale of the
Off-Price and Action Sports Division will be satisfied without any waiver
thereof. Deutsche Bank has also assumed that all material governmental,
regulatory or other approvals and consents required in connection with the
consummation of the sale of the Off-Price and Action Sports Division will be
obtained and that in connection with obtaining any necessary governmental,
regulatory or other approvals and consents, or any amendments, modifications
or waivers to any agreements, instruments or orders to which Global is a party
or is subject or by which it is bound, no limitations, restrictions or
conditions will be imposed or amendments, modifications or waivers made that
would have a material adverse effect on Global.
Set forth below is a brief summary of all material financial analyses
performed by Deutsche Bank in connection with its opinion and reviewed with
the Global Board of Directors at its meeting on March 12, 2000.
Discussion of the Total Aggregate Consideration for the Off-Price and Action
Sports Division.
12
<PAGE>
Deutsche Bank reviewed the proposed form and terms of financial
consideration to Global by the Purchaser and based on Deutsche Bank's
analysis, valued the proposed total aggregate consideration at $46.0 million.
The total aggregate consideration is comprised of the following:
<TABLE>
<CAPTION>
($ in millions)
Consideration Value
------------- -----
<S> <C>
Retention by Global of insured
accounts receivable.................. $10.5
Cash payment for inventory............ $ 1.0
Cash purchase price................... 13.2
Assumption of Global's contingent
liability............................ 3.4(1)
Assumption of long-term debt.......... 2.7
Assumption of short-term debt......... 15.2
-----
Total............................... $46.0
=====
</TABLE>
- --------
(1) Fair market value. The $4.0 million face value of contingent consideration
liability to be assumed by the Purchaser has been discounted at 11%.
The "total aggregate consideration" of $46.0 million for the Off-Price and
Action Sports Division differs from the $17.2 million purchase price to be
received by Global for the Gen-X Companies for the following reasons: (i) the
contingent notes to be assumed by the Purchaser in the aggregate principal
amount of $4.0 million have been discounted, and (ii) the amount of cash
received by the Company for inventory, the value of accounts receivable held
in the Off-Price and Action Sports Division to be retained by the Company, and
the amount of the liabilities held by the Gen-X Companies have been added to
the purchase price.
Analysis of Selected Precedent Transactions.
Deutsche Bank reviewed the financial terms, to the extent publicly
available, of five pending or completed merger and acquisition transactions
since January 1994 involving companies in the off-price distribution industry
and action sports industry (the "Selected Transactions"). Deutsche Bank
calculated various financial multiples based on the Transaction Value (the
market value of the equity plus net debt and preferred securities) and certain
publicly available information for each of the Selected Transactions and
compared them to corresponding financial multiples for the proposed sale of
the Off-Price and Action Sports Division. The transactions reviewed and the
multiples were as follows:
. the August 8, 1994 purchase of C.A.S. Sports International by Ride,
Inc.;
. the October 11, 1996 purchase of C.A.S. Sports International, Inc. by
Gen-X Corporation;
. the May 12, 1999 purchase of the Gen-X Companies by Global Sports, Inc.;
. the March 26, 1999 purchase of Morrow Snowboards, Inc. by K2 Inc.; and
. the October 7, 1999 purchase of Ride Inc. by K2 Inc.
<TABLE>
<CAPTION>
Multiples
-----------------------------------
<S> <C> <C> <C> <C> <C>
Multiple of Transaction value to: Low Mean High Proposed Transaction
LTM Revenues 0.1x 0.4x 0.6x 0.6x
LTM EBITDA (1) 1.6x 4.1x 5.4x 11.9x
LTM EBIT (2) 1.9x 4.4x 5.9x 14.9x
Multiple of Equity value to:
Book Value 0.9x 1.8x 3.3x 1.5x
</TABLE>
- --------
(1) Trailing twelve months EBITDA (earnings before interest, taxes,
depreciation and amortization)
(2) Trailing twelve months EBIT (earnings before interest and taxes)
13
<PAGE>
All multiples for the Selected Transactions were based on public information
available at the time of announcement of such transaction, without taking into
account differing market and other conditions during the five-year period
during which the Selected Transactions occurred. The purchase of Morrow
Snowboards, Inc. by K2 Inc. and the purchase of Ride Inc. by K2 Inc. only
provided multiples of revenue and book value as neither target generated
positive EBIT or EBITDA during the 12 months prior to the transaction.
In addition to the above analyses, Deutsche Bank considered the following
additional material factors in rendering its opinion to Global's Board of
Directors. First, the Off-Price and Action Sports Division missed its original
net sales budget for the second quarter of 1999 by 16.7%, or $2.7 million,
generating losses of $1.9 million and $1.7 million at the EBIT and EBITDA
levels, respectively. The projected financial performance for this business
had been for EBIT and EBITDA of $1.8 million and $2.0 million, respectively.
In addition, the projected financial results were revised substantially
downward resulting in a $3.0 million, or 36.0% reduction in EBITDA compared to
the original forecast, for the third and fourth quarter of 1999. These
factors, in turn, increased concerns potential buyers expressed during the
marketing process about the future financial performance of the business
without the participation of Michael G. Rubin, the Chief Executive Officer of
Global. Second, the significant contribution Michael Rubin made to the Off-
Price and Action Sports Division. Mr. Rubin played an integral role in the
management of the Off-Price and Action Sports Division until May 1999 when
Global announced a change in strategic focus. Thereafter, Mr. Rubin focused on
the Company's e-commerce initiative and assumed a diminished role in the
management of Global's non-internet businesses. Deutsche Bank partially
attributed the significant decline in the financial performance of the Off-
Price and Action Sports Division to Mr. Rubin's reduced involvement. Third,
management is the primary asset of the off-price sporting goods businesses.
Due to the importance of the industry relationships that existing management
has developed, the current management team is integral to the value of the
Off-Price and Action Sports Division. Furthermore, unlike integrated off-price
retailers, close-out distribution businesses have no captive retail
distribution through which they can sell off-price goods, no franchise value,
no infrastructure and no name recognition. Finally, the Company's actual 1999
calendar year financial results significantly underperformed the revised
projections for calendar year 1999; 1999 actual EBITDA totalled $[ ] million
versus the revised projection of $6.4 million.
The foregoing summary describes all analyses and factors that Deutsche Bank
deemed material in its presentation to Global's Board of Directors, but is not
a comprehensive description of all analyses performed and factors considered
by Deutsche Bank in connection with preparing its opinion. The preparation of
a fairness opinion is a complex process involving the application of
subjective business judgment in determining the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances and, therefore, is not readily susceptible to summary
description. Deutsche Bank believes that its analyses must be considered as a
whole and that considering any portion of such analyses and of the factors
considered without considering all analyses and factors could create a
misleading view of the process underlying the opinion.
In conducting its analyses and arriving at its opinion, Deutsche Bank
utilized generally accepted valuation methods. The analyses were prepared
solely for the purpose of enabling Deutsche Bank to provide its opinion to
Global's Board of Directors as to the fairness of the consideration to Global
for the sale of the Off-Price and Action Sports Division and does not purport
to be appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold, which are inherently subject to uncertainty.
Deutsche Bank was not requested to render an opinion regarding the fairness of
the terms of the sale of the Off-Price and Action Sports Division to the
Company's unaffiliated shareholders or to the Company's shareholders generally
because such shareholders are not parties to the Acquisition Agreement. The
consideration to be received by the Company in connection with the sale of the
Off-Price and Action Sports Division is not going to be distributed to any of
the shareholders of the Company and Deutsche Bank's opinion was therefore
limited to the fairness of the sale, from a financial point of view, to the
Company.
14
<PAGE>
The terms of the sale of the Off-Price and Action Sports Division were
determined through negotiations between Global and the Purchaser and were
approved by Global's Board of Directors. Although Deutsche Bank provided
advice to Global during the course of these negotiations, the decision to
enter into the sale of the Off-Price and Action Sports Division was solely
that of Global's Board of Directors. As described above, the opinion and
presentation of Deutsche Bank to Global's Board of Directors were only one of
a number of factors taken into consideration by the Global Board of Directors
in making its determination to approve the sale of the Off-Price and Action
Sports Division. Deutsche Bank's opinion was provided to Global's Board of
Directors to assist it in connection with its consideration of the sale of the
Off-Price and Action Sports Division and does not constitute a recommendation
to any holder of Global Common Stock as to how to vote with respect to the
sale of the Off-Price and Action Sports Division.
Global selected Deutsche Bank as financial advisor in connection with the
sale of the Off-Price and Action Sports Division based on Deutsche Bank's
qualifications, expertise, reputation and experience in retailing and mergers
and acquisitions. Global had retained BT Alex. Brown Incorporated pursuant to
a letter agreement dated April 20, 1999 (the "Engagement Letter"). Deutsche
Bank is the successor to the investment banking and client advisory businesses
of BT Alex. Brown and has assumed BT Alex. Brown's rights and responsibilities
under the Engagement Letter. As compensation for Deutsche Bank's services in
connection with the sale of the Off-Price and Action Sports Division, Global
has paid Deutsche Bank a cash fee of $225,000 and has agreed to pay an
additional cash fee of $663,000 if the sale of the Off-Price and Action Sports
Division is consummated. Regardless of whether the sale of the Off-Price and
Action Sports Division is consummated, Global has agreed to reimburse Deutsche
Bank for reasonable fees and disbursements of Deutsche Bank's counsel and all
of Deutsche Bank's reasonable travel and other out-of-pocket expenses incurred
in connection with the sale of the Off-Price and Action Sports Division or
otherwise arising out of the retention of Deutsche Bank under the Engagement
Letter. Global has also agreed to indemnify Deutsche Bank and certain related
persons to the full extent lawful against certain liabilities, including
certain liabilities under the federal securities laws arising out of its
engagement or the sale of the Off-Price and Action Sports Division. Deutsche
Bank is an internationally recognized investment banking firm experienced in
providing advice in connection with mergers and acquisitions and related
transactions. Deutsche Bank is an affiliate of Deutsche Bank AG (together with
its affiliates, the "DB Group").
One or more members of the DB Group have, from time to time, provided
investment banking and other financial services to Global or its affiliates
for which it has received compensation. During the past two years neither
Deutsche Bank nor its affiliates has had a material relationship with Global
or its affiliates other than Deutsche Bank's services in connection with the
sale of the Off-Price and Action Sports Division described above and Deutsche
Bank's representing Global as exclusive sale agent in the divestiture of its
Branded Division. As compensation for Deutsche Bank's services in connection
with the sale of the Branded Division, Global has paid or agreed to pay
Deutsche Bank a cash fee of $500,000 and has agreed to reimburse Deutsche Bank
for out-of-pocket expenses incurred in connection with the sale of the Branded
Division in the aggregate amount of approximately $20,000.
In the ordinary course of business, members of the DB Group may actively
trade in the securities and other instruments and obligations of Global for
their own accounts and for the accounts of their customers. Accordingly, the
DB Group may at any time hold a long or short position in such securities,
instruments and obligations.
Projections
Prospective purchasers of Global's Off-Price and Action Sports Division were
provided with the financial projections set forth below. The projections were
excerpted from information provided by Global management. Global does not as a
matter of course publicly disclose projections as to future revenues or
earnings. The projections are included in this Proxy Statement only because
the information was made available to prospective purchasers of Global's Off-
Price and Action Sports Division. The initial projections were prepared in the
second quarter of 1999 and the revised projections were prepared in the third
quarter of 1999 based on management's estimates and assumptions regarding the
Off-Price and Action Sports Division at that time.
15
<PAGE>
The projections set forth below were not prepared with a view to public
disclosure or compliance with the published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public
Accountants regarding projections. The projections do not purport to present
operations in accordance with generally accepted accounting principles.
Neither Global nor any of its financial advisors or any of their respective
directors or officers has verified or provides any assurances with respect to
the accuracy of the projections. Global's independent accountants have not
examined or compiled the projections presented herein and, accordingly, assume
no responsibility for them and do not express an opinion or any other form of
assurance with respect thereto. In addition, because the estimates and
assumptions, many of which are not set forth herein, underlying the
projections are inherently subject to significant economic and competitive
uncertainties and contingencies which are difficult or impossible to predict
accurately and are beyond Global's control, there can be no assurance that the
projections will be realized at the times or in the amounts indicated.
The projections and information set forth below are not based on historical
facts and, as such, constitute "forward looking statements" that involve
uncertainties and risk. There can be no assurance that actual results will not
differ materially from Global's projections.
Initial 1999 Projected Quarterly Financial Results for Off-Price & Action
Sports Division
The following table sets forth the projections provided by Global during the
second quarter of fiscal 1999 for fiscal 1999.
<TABLE>
<CAPTION>
For the
For the Quarter Ended Year Ended
-------------------------------------------------- -----------
March 31, June 30, September January 1, January 1,
1999 1999 30, 1999 2000 2000
(actual) (estimated) (estimated) (estimated) (estimated)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Sales............... $20,565,666 $15,909,334 $34,000,000 $20,000,000 $90,475,000
Cost of Sales........... 15,410,868 11,732,907 25,112,371 14,700,000 66,956,146
----------- ----------- ----------- ----------- -----------
Gross Profit.......... 5,154,798 4,176,427 8,887,629 5,300,000 23,518,854
Margin................ 25.1% 26.3% 26.1% 26.5% 26.0%
G&A..................... 1,366,217 1,366,217 1,366,217 1,366,217 5,464,868
Selling and Marketing... 729,481 565,095 1,236,211 756,583 3,287,370
Distribution............ 519,735 402,615 880,767 539,045 2,342,162
Development and Design.. 21,700 21,700 21,700 21,700 86,800
----------- ----------- ----------- ----------- -----------
Total Operating
Expenses............. 2,637,133 2,355,627 3,504,895 2,683,544 11,181,199
Operating Profit...... 2,517,665 1,820,800 5,382,734 2,616,456 12,337,655
+ Depreciation........ 49,590 49,590 49,590 49,590 198,358
+ Amortization........ 177,506 177,506 177,506 177,506 710,024
EBITDA................ 2,744,761 2,047,896 5,609,830 2,843,552 13,246,037
Ending Inventory...... 12,278,330 15,240,000 12,127,629 12,127,629 12,127,629
Average Inventory..... 13,631,425 13,759,165 13,683,815 12,127,629 13,556,074
Inventory Turnover.... 1.1x 0.9x 1.8x 1.2x 4.9x
Accounts Receivable..... $26,818,627 $22,727,961 $32,977,961 $25,977,961 $25,977,961
Receivables Turnover.... 0.8x 0.7x 1.0x 0.8x 3.5x
Receivables Days........ 117.4 128.6 87.3 116.9 104.8
</TABLE>
16
<PAGE>
Revised 1999 Projected Quarterly Financial Results for Off-Price & Action
Sports Division
The following table sets forth the projections provided by Global during the
third quarter of fiscal 1999 for fiscal 1999.
<TABLE>
<CAPTION>
For the Quarter Ended For the Year Ended
-------------------------------------------------- ------------------------
September
March 31, June 30, 30, January 1, January 1, January 1,
1999 1999 1999 2000 2000 2000
(actual) (actual) (estimated) (estimated) (estimated) (actual)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............... $20,565,666 $13,252,045 $25,000,000 $15,000,000 $73,817,711 $71,789,523
Cost of Sales........... 15,410,868 12,468,373 19,000,000 11,400,000 58,279,241 59,508,276
----------- ----------- ----------- ----------- ----------- -----------
Gross Profit............ 5,154,798 783,672 6,000,000 3,600,000 15,538,470 12,281,247
Margin.................. 25.07% 5.91% 24.00% 24.00% 21.05% 17.11%
General &
Administrative......... 1,366,217 930,689 1,150,000 1,050,000 4,496,906 5,010,122
Selling and Marketing... 729,481 903,237 900,000 500,000 3,032,718 3,829,256
Distribution............ 519,735 828,746 625,000 375,000 2,348,481 1,433,760
Development & Design.... 21,700 57,346 21,700 21,700 122,446 220,230
----------- ----------- ----------- ----------- ----------- -----------
Operating Expenses...... 2,637,133 2,720,018 2,696,700 1,946,700 10,000,551 10,493,368
----------- ----------- ----------- ----------- ----------- -----------
Operating Profit(loss).. 2,517,665 (1,936,346) 3,303,300 1,653,300 5,537,919 1,787,879
Plus:
Depreciation............ 49,590 50,000 50,000 50,000 199,590 168,113
Amortization............ 177,506 175,000 175,000 175,000 702,506 576,137
----------- ----------- ----------- ----------- ----------- -----------
EBITDA.................. $ 2,744,761 $(1,711,346) $ 3,528,300 $ 1,878,300 $ 6,440,015 2,532,129
=========== =========== =========== =========== =========== ===========
</TABLE>
Absence of Appraisal Rights
Under Delaware law, the shareholders of Global are not entitled to appraisal
rights for their shares of Global's capital stock in connection with the
transactions contemplated by the sale of the Off-Price and Action Sports
Division, or to any similar rights under Delaware law.
Market Price Information
Global's Common Stock is currently included for quotation on the Nasdaq
National Market. On September 24, 1999, the trading date immediately prior to
the public announcement of the transactions contemplated by the Acquisition
Agreement, Global Common Stock closed at $21.625 per share and the high and
low trading prices were 22.9375 and 21.1875, as reported on the Nasdaq
National Market.
Accounting Treatment
The sale of the Off-Price and Action Sports Division has been reflected on
Global's financial statements as the disposal of a segment of a business
within the meaning of Accounting Principles Board Opinion No. 30.
Federal Income Tax Consequences
The following is a summary of all material federal income tax consequences
of the sale of the Off-Price and Action Sports Division by Global and is not
intended to be tax advice to any person, nor is it binding upon the Internal
Revenue Service. In addition, no information is provided herein with respect
to the tax consequences of the sale of the Off-Price and Action Sports
Division under applicable foreign, state, local or other laws.
Except as otherwise discussed below, Global will generally recognize taxable
loss on the sale of the Off-Price and Action Sports Division equal to the
difference between (i) the amount realized by Global from the sale and (ii)
Global's adjusted tax basis in the capital stock of the Gen-X Companies. The
amount realized will equal the sum of cash payments received by Global for the
capital stock of the Gen-X Companies plus the amount of the liabilities
assumed by the Purchaser. The sale of the Off-Price and Action Sports Division
will not result in any federal income tax consequences to shareholders of
Global.
17
<PAGE>
EACH HOLDER OF SHARES OF COMMON STOCK IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER OF
THE SALE OF THE OFF-PRICE AND ACTION SPORTS DIVISION (INCLUDING THE
APPLICABILITY AND EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS).
Government and Regulatory Approvals
Global does not believe any regulatory approvals are required in connection
with the sale of the Off-Price and Action Sports Division. Based on the
representations made by the Purchasers, DMJ Financial and Messrs. Salter and
Finkelstein in the Acquisition Agreement relating to the size of the
Purchasers' operations and the size of the Purchasers' ultimate parents, the
Company does not believe that any filings are required under the HSR Act.
Interests of Certain Persons
Other than James J. Salter and his business partner Kenneth J. Finkelstein,
no director or executive officer of Global, or associate of any such director
or executive officer, has any substantial interest in the sale of the Off-
Price and Action Sports Division, other than any interest arising from the
ownership of Global's securities (in which case each such owner receives no
extra or special benefit not shared on a pro rata basis by all other holders
of the same class of securities). For a description of the holdings of
Global's securities by the directors and certain of the executive officers of
Global, see "Principal Shareholders".
Mr. Salter, along with Mr. Finkelstein, is leading the group of investors
which is proposing to purchase all of the issued and outstanding capital stock
of the Gen-X Companies from Global. On May 12, 1998, Global acquired all of
the issued and outstanding stock of the Gen-X Companies from Messrs. Salter
and Finkelstein and substantially the same group of investors. The Gen-X
Companies, which are headquartered in Toronto, Ontario, specialize in (i)
selling off-price sporting goods and winter sports equipment (including ski
and snowboard equipment), in-line skates, sunglasses, skateboards and
specialty athletic footwear and (ii) designing and distributing product orders
specifically designed for selected retailers.
The consideration paid by Global for the capital stock of the Gen-X
Companies in May, 1998 consisted of (i) 1,500,000 shares of Global's Common
Stock, (ii) 10,000 shares of Global's preferred stock, mandatorily redeemable
over 5 years in the maximum aggregate amount of $500,000, and (iii)
noninterest-bearing contingent notes payable over 5 years in the maximum
aggregate amount of $4.5 million. The Company valued the Common Stock issued
in the May, 1998 transaction based on the average market price of the Common
Stock during the 5-day period beginning two trading days before and ending two
trading days after May 12, 1998. The redemption price of the preferred stock
and the payment amount of the contingent notes are dependent upon the
Company's Off-Price and Action Sports Division achieving certain sales and
gross profit targets. In June, 1999, the Company redeemed 2,000 shares of the
preferred stock for an aggregate of $100,000 and paid $900,000 of the
principal amount of the contingent notes in accordance with the terms of such
stock and notes.
Subsequent to the purchase of the Gen-X Companies in May, 1998, the Company
has effectively consolidated its Off-Price and Action Sports Division into the
Gen-X Companies. As a result, a comparison of the purchase price of the
capital stock of the Gen-X Companies in May, 1998 and the consideration to be
paid under the Acquisition Agreement for the capital stock of the Gen-X
Companies would not be meaningful.
Recommendation of Board of Directors
Before concluding that Global should divest its Off-Price and Action Sports
Division in order to focus exclusively on its e-Commerce business, the Board
of Directors considered the following alternatives: (i) liquidating the Off-
Price and Action Sports Division; and (ii) continuing to operate the Off-Price
and Action Sports Division. The Board of Directors decided against liquidation
of the Off-Price and Action Sports Division
18
<PAGE>
because a greater value could be obtained by selling the Off-Price and Action
Sports Division as a going concern. The Board of Directors decided against
continuing the operation of the Off-Price and Action Sports Division because:
(i) the current operating performance and competitive position of the Off-
Price and Action Sports Division were declining; (ii) the close-out
distribution business is highly dependent upon personal relationships and
Michael Rubin, Global's Chief Executive Officer, had reduced his involvement
in the management of Global's non-internet businesses; and (iii) close-out
distribution businesses have no captive retail distribution through which they
can sell off-price goods, no franchise value, no infrastructure and no name
recognition.
In arriving at the conclusion that the sale of the Off-Price and Action
Sports Division is in the best interest of Global and its shareholders, the
Board of Directors considered the following factors: (i) the process used to
procure prospective purchasers described above; (ii) the alternatives to the
sale of the Off-Price and Action Sports Division discussed above; (iii) the
overall value of the proposal made by the Purchaser and the opinion of
Deutsche Bank that the consideration to be received by Global under the
Acquisition Agreement is fair, from a financial point of view, to Global; and
(iv) the payment terms of the consideration to be received by Global under the
Acquisition Agreement.
Global's Board of Directors concluded that the sale of the Off-Price and
Action Sports Division is in the best interests of Global and its
shareholders. All of the factors considered by the Board supported the Board's
conclusion. Accordingly, the Board of Directors unanimously approved the sale
of the Off-Price and Action Sports Division at a meeting held on September 24,
1999.
THE BOARD OF DIRECTORS OF GLOBAL UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE "FOR" APPROVAL OF ACQUISITION AGREEMENT AND THE SALE OF THE OFF-PRICE AND
ACTION SPORTS DIVISION.
19
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with Global's Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference to Global's Form 10-K for fiscal 1999
filed on [ ], 2000.
On December 15, 1997, the Company (then named RYKA, Inc.) completed a
reorganization among the Company, certain companies controlled by Michael G.
Rubin (the "KPR Companies"), the Company's Chairman and Chief Executive
Officer, and Mr. Rubin. The reorganization was accounted for as a reverse
purchase under generally accepted accounting principles, and the KPR Companies
were considered to be the acquired entity for accounting purposes, even though
the Company was the surviving legal entity. Accordingly, references to the
Company's financial statements refer to the financial statements of the KPR
Companies prior to the reorganization and to the financial statements of the
KPR Companies, including RYKA, Inc., after the reorganization. The following
statement of operations data for fiscal 1999, fiscal 1998 and fiscal 1997 and
the balance sheet data as of January 1, 2000 and December 31, 1998 are derived
from the audited consolidated financial statements of Global incorporated by
reference into this Proxy Statement, and the statement of operations data for
fiscal 1996 and fiscal 1995 and the balance sheet data as of December 31,
1997, 1996 and 1995 are derived from the audited financial statements of the
Company not incorporated into this Proxy Statement.
On April 20, 1999, Global formalized a plan to sell its Branded Division and
its Off-Price and Action Sports Division in order to focus exclusively on its
e-Commerce business. Accordingly, for financial statement purposes, the
assets, liabilities, results of operations and cash flows of these divisions
have been segregated from that of continuing operations and are presented in
Global's consolidated financial statements as discontinued operations. The
accompanying financial statements have been reclassified to reflect this
presentation.
Upon initial adoption of the plan, management expected to recognize a gain
upon the disposal of its historical businesses. During the second quarter of
fiscal 1999, management revised its estimates and recorded a loss on disposal
of approximately $5.6 million. During the fourth quarter of fiscal 1999, the
Company consummated the sale of its Branded Division; the proceeds from the
sale were substantially lower than formerly anticipated. As a result of this
transaction and the renegotiation of the purchase price for the Off-Price and
Action Sports Division, management made further revisions to its estimates and
recognized additional losses on disposal of approximately $11.7 million during
the fourth quarter of fiscal 1999.
20
<PAGE>
<TABLE>
<CAPTION>
Fiscal Years
-----------------------------------------------------------
1999 1998 1997 1996 1995
----- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Costs and expenses:
General and
administrative....... $3,452,914 $2,389,223 $2,852,623 $5,644,090
Equity compensation... -- -- -- --
Web-site development.. -- -- -- --
Interest expense
(income)............. 2,366,935 2,013,028 1,152,473 795,849
----- ----------- ------------ ------------ -----------
Loss from continuing
operations before
income taxes........... (5,819,849) (4,402,251) (4,005,096) (6,439,939)
----- ----------- ------------ ------------ -----------
Benefit from income
taxes.................. (1,978,749) -- -- --
----- ----------- ------------ ------------ -----------
Loss from continuing
operations............. (3,841,100) (4,402,251) (4,005,096) (6,439,939)
Income from discontinued
operations............. 9,664,956 246,956 3,260,783 6,464,749
----- ----------- ------------ ------------ -----------
Loss on disposition of
discontinued
operations............. -- -- -- --
Net income (loss)....... $ 5,823,856 $ (4,155,295) $ (744,313) $ 24,810
===== =========== ============ ============ ===========
Basic earnings (losses)
per common share(1) :
Loss from continuing
operations........... $ (.34) $ (1.47) $ (1.56) $ (3.75)
Income from
discontinued
operations........... $ .85 $ .08 $ 1.27 3.76
----- ----------- ------------ ------------ -----------
Loss on disposition of
discontinued
operations........... -- -- -- --
----- ----------- ------------ ------------ -----------
Net income (loss)..... $ .51 $ (1.39) $ (.29) $ .01
===== =========== ============ ============ ===========
Diluted earnings
(losses) per common
share(1):
Loss from continuing
operations........... $ (.34) $ (1.47) $ (1.56) $ (3.75)
Income from
discontinued
operations........... .85 .08 1.27 3.76
Loss on disposition of
discontinued
operations........... -- -- -- --
----- ----------- ------------ ------------ -----------
Net income (loss)..... $ .51 $ (1.39) $ (.29) $ .01
===== =========== ============ ============ ===========
Weighted average common
shares outstanding(1)
Basic................. 11,378,918 2,996,027 2,568,431 1,717,033
===== =========== ============ ============ ===========
Diluted............... 11,378,918 2,996,027 2,568,431 1,717,033
===== =========== ============ ============ ===========
Number of common
shares
outstanding(1)....... 11,925,378 10,418,111 2,831,766 2,306,766
===== =========== ============ ============ ===========
BALANCE SHEET DATA:
Net assets of
discontinued
operations............. $41,127,839 $ 24,128,879 $ 11,797,458 $12,673,048
Total assets............ 45,052,572 28,043,089 16,434,931 15,030,008
Total long-term debt 20,993,421 20,975,479 5,905,225 5,000,725
Net working capital..... 34,845,581 19,747,778 2,021,552 2,838,705
Stockholders' equity
(deficiency)........... 17,094,400 2,157,349 (552,133) 92,787
</TABLE>
- --------
(1) All share and per share amounts give effect to the December 15, 1997 1-for-
20 reverse stock split as if it had occurred for all periods presented.
21
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of March 30, 2000, the beneficial
ownership of Global's Common Stock: (i) by each person known by Global to be
the beneficial owner of five percent or more of Global's outstanding Common
Stock, (ii) by each director and nominee for director of Global, (iii) by each
executive officer whose compensation exceeded $100,000 during fiscal 1999 (the
"Named Officers"), and (iv) by the directors and executive officers of Global
as a group. Unless otherwise specified, all persons listed below have sole
voting and investment power with respect to their shares. The business address
of the officers and directors of Global is that of Global.
<TABLE>
<CAPTION>
Number of
Shares
Name, Position and Address Beneficially Percentage
of Beneficial Owner Owned(1) of Class
-------------------------- ------------ ----------
<S> <C> <C>
Michael G. Rubin ................................. 8,025,046 [43.4]%
Chairman of the Board and Chief Executive
Officer of Global
Michael Golden(2)................................. 67,500(3) *
Executive Vice President, E-Commerce
Michael R. Conn................................... 26,500(4) *
Senior Vice President, Strategic Development
Steven A. Wolf ................................... 22,750(5) *
Vice President
Kenneth J. Adelberg .............................. 101,900(6) *
Director
Harvey Lamm ...................................... 80,000(7) *
Director
Charles Lax ...................................... 6,168,850(8) [33.4]%
Director
Ronald D. Fisher ................................. 6,168,850(9) [33.4]%
Director
Jeffrey Rayport .................................. 15,000(10) *
Director
SOFTBANK Affiliates (11).......................... 6,153,850(12) [33.3]%
All executive officers and directors as a group
( persons)....................................... [14,569,356](13) [78.7]%
</TABLE>
- --------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the SEC. Accordingly, they may include securities owned by
or for, among others, the wife and/or minor children of the individual and
any other relative who has the same home as such individual, as well as
other securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock
options within 60 days of the date of this table. Beneficial ownership may
be disclaimed as to certain of the securities.
(2) In February, 2000, Mr. Golden's employment with Global terminated and Mr.
Golden was appointed to Global's Advisory Board.
(3) Consists of 67,500 shares of Common Stock issuable pursuant to options
awarded to Mr. Golden under Global's 1996 Equity Incentive Plan, which
options are exercisable as of the date of the table.
(4) Includes of 25,000 shares of Common Stock issuable pursuant to options
awarded to Mr. Conn under Global's 1996 Equity Incentive Plan, which
options are exercisable within 60 days of the date of the table. Does not
include 55,000 shares of Common Stock issuable pursuant to options awarded
to Mr. Conn which are not exercisable within 60 days of the date of this
table.
(5) Consists of 22,750 shares of Common Stock issuable pursuant to options
awarded to Mr. Wolf under Global's 1996 Equity Incentive Plan, which
options are exercisable within 60 days of the date of the table. Does not
include 16,250 shares of Common Stock issuable pursuant to options awarded
to Mr. Wolf which are not exercisable within 60 days of the date of this
table.
(6) Includes 56,250 shares of Common Stock issuable pursuant to options
awarded to Mr. Adelberg under Global's 1996 Equity Incentive Plan, which
options are exercisable within 60 days of the date of this table.
22
<PAGE>
(7) Includes 80,000 shares of Common Stock issuable pursuant to options
awarded to Mr. Lamm under Global's 1996 Equity Incentive Plan, which
options are exercisable within 60 days of the date of this table. Does not
include 70,000 shares of Common Stock issuable pursuant to options awarded
to Mr. Lamm which are not exercisable within 60 days of the date of this
table.
(8) Includes 15,000 shares of Common Stock issuable pursuant to options
awarded to Mr. Lax under Global's 1996 Equity Incentive Plan, which
options are exercisable within 60 days of the date of this table,
6,069,542 shares of Common Stock held by SOFTBANK Capital Partners LP and
84,308 shares of Common Stock held by SOFTBANK Capital Advisors Fund LP.
Mr. Lax is a Managing Director of the general partner of each of these
SOFTBANK entities. Mr. Lax disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest. Does not include 15,000
shares of Common Stock issuable pursuant to options awarded to Mr. Lax
which are not exercisable within 60 days of the date of this table.
(9) Includes 15,000 shares of Common Stock issuable pursuant to options
awarded to Mr. Fisher under Global's 1996 Equity Incentive Plan, which
options are exercisable within 60 days of the date of this table,
6,069,542 shares of Common Stock held by SOFTBANK Capital Partners LP and
84,308 shares of Common Stock held by SOFTBANK Capital Advisors Fund LP.
Mr. Fisher is a Managing Director of the general partner of eachof these
SOFTBANK entities. Mr. Fisher disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest. Does not include
15,000 shares of Common Stock issuable pursuant to options awarded to Mr.
Fisher which are not exercisable within 60 days of the date of this table.
(10) Includes 15,000 shares of Common Stock issuable pursuant to options
awarded to Mr. Rayport under Global's 1996 Equity Incentive Plan, which
options are exercisable within 60 days of the date of this table. Does
not include 15,000 shares of Common Stock issuable pursuant to options
awarded to Mr. Rayport which are not exercisable within 60 days of the
date of this table.
(11) The business address of SOFTBANK is 10 Langley Road, Suite 403, Newtown
Center, MA 02159.
(12) Consists of 6,069,542 shares of Common Stock held by SOFTBANK Capital
Partners LP and 84,308 shares of Common Stock held by SOFTBANK Capital
Advisors Fund LP.
(13) Includes an aggregate of 347,000 shares of Common Stock issuable pursuant
to options awarded to Global's executive officers and directors, which
options are exercisable within 60 days of the date of this table. Does
not include an aggregate of 221,250 shares of Common Stock issuable
pursuant to options awarded to Global's executive officers and directors
which are not exercisable within 60 days of the date of this table.
* Less than one percent.
PROPOSAL 3--APPROVAL OF INDEMNIFICATION AGREEMENTS
Director Liability and Indemnification
The potential liability of directors and officers of public companies has
been the subject of substantial publicity and concern. Court decisions, the
vagaries of public policy and conflicting interpretations of ambiguous
statutes have contributed to the publicity and concern about director and
officer liability. Directors and officers may be subject to potential claims
and lawsuits, even when they act in good faith and in the best interests of
the public companies which they serve. These claims and lawsuits can involve
substantial personal expenses, including legal fees, settlements and even
judgments. The amount of damages often bears no reasonable relationship to the
compensation received by directors and officers, and the costs of defending
these suits, whether or not meritorious, are beyond the resources of many
directors and officers. Although the liability and expense of defending claims
and lawsuits may be covered by insurance, there often are significant coverage
exclusions and large deductibles.
Global believes that as a result of these factors, it often is difficult to
attract and retain qualified individuals to serve on corporate boards of
directors. In order to attract and retain qualified directors and officers,
the Company believes that it is in the best interests of Global and its
shareholders that the Company provide to its directors and officers the
maximum protection against the risks and expenses of claims and lawsuits
outlined above.
Global's directors and officers currently are protected by a directors' and
officers' liability insurance policy and certain indemnification rights under
Delaware law and Global's Bylaws. The insurance policy provides for a
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<PAGE>
$75,000 deductible and certain significant exclusions, including, among others,
violations of federal and state securities laws, violations of certain duties
imposed by the Employee Retirement Income Security Act (ERISA), libel and
slander, and claims that a director received a personal profit or advantage to
which he was not legally entitled. Furthermore, the policy limits the insurer's
liability to $5.0 million for all losses incurred during the policy year. This
policy will expire on October 28, 2000, and Global has no assurance that
similar coverage will then be available at a reasonable cost or without
substantial new exclusions.
Claims which exceed the coverage provided under Global's insurance policy or
which are excluded from the policy's coverage would have to be personally paid
by the directors and officers involved. In certain instances, the directors and
officers may be entitled to indemnification from Global under Delaware law and
Global's Bylaws, but Global's existing indemnification obligation will not
necessarily absorb all liabilities and expenses to which directors and officers
may be exposed.
Accordingly, the Board believes that certain measures are appropriate. While
no current director or officer has indicated that he will resign if the
proposal described below is not approved by the shareholders, Global believes
that the adoption of this proposal could be a significant factor in encouraging
existing directors and officers to continue to serve in these capacities and
attracting new directors and officers in the future.
Proposed Indemnification Agreements
The Board of Directors is seeking approval of Indemnification Agreements for
the benefit of members of the Board of Directors and certain officers of
Global, as more fully discussed below. Although the Board believes that
shareholder approval is not required under Delaware law, the Board considers it
appropriate that the Indemnification Agreements be submitted to the
shareholders of Global for their consideration. Because each member of the
Board of Directors will be a party to and, as such, a beneficiary of the rights
contained in the Indemnification Agreements, there is an inherent conflict of
interest in the Board's recommending the Indemnification Agreements. In
addition, because the Indemnification Agreements will result in greater
indemnification protection for directors and officers against the risks and
expenses of litigation, they may result in greater potential monetary exposure
to Global for indemnification claims.
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock represented and entitled to vote at the Annual Meeting will be
required to approve the Indemnification Agreements. Although Global intends to
continue to indemnify its directors pursuant to its Bylaws and the Delaware
General Corporation Law to the fullest extent permitted, no determination has
been made as to what other action the Board would take if shareholders do not
approve the proposed Indemnification Agreements. If approved, it is presently
anticipated that Global will enter into Indemnification Agreements with all
current and future directors and with certain current and future officers of
Global, without further submission of these agreements to the shareholders for
approval. If the Indemnification Agreements are approved by the shareholders, a
shareholder may be estopped from asserting at a later date that these
agreements are invalid, whether or not the shareholder voted for or against
this approval or abstained from voting.
Section 145 of the Delaware General Corporation Law contains detailed
provisions governing the indemnification of directors, officers and key
employees, which, among other things, permit the adoption of indemnification
agreements generally to effect the policy of that indemnification. Pursuant to
Section 145 of the Delaware General Corporation Law, Global has adopted Bylaw
provisions which indemnify its directors and officers to the fullest extent
permitted by Delaware law. However, the Board believes that the existing
indemnification protection is inadequate in certain respects, and the
Indemnification Agreements are intended to supplement that protection.
The proposed Indemnification Agreements are intended to provide greater
protection than that currently provided under the Delaware General Corporation
Law and Global's Bylaws. Accordingly, Global's potential monetary exposure to
claims for indemnification will be greater if the Indemnification Agreements
are approved. However, since Michael G. Rubin acquired a controlling interest
in the Company in 1995, there have been no claims for indemnification by
directors against Global, and Global is not aware of any pending or threatened
24
<PAGE>
litigation in which directors may be named as defendants or of any claims by
directors for indemnification which are likely to result from any past, pending
or threatened litigation.
Set forth below is a summary of all the material terms of the Indemnification
Agreements, the proposed form of which is attached as Appendix C to this Proxy
Statement. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS
ENTIRETY BY THE DETAILED PROVISIONS OF THE FORM OF INDEMNIFICATION AGREEMENT
WHICH IS INCORPORATED BY REFERENCE HEREIN. PLEASE READ THE ATTACHED AGREEMENT
WHICH IS INCORPORATED BY REFERENCE HEREIN CAREFULLY BEFORE COMPLETING AND
RETURNING YOUR PROXY CARD.
The proposed Indemnification Agreements will (i) confirm the present
indemnity provided by Global's Bylaws and provide that this indemnity will
continue despite future changes in the Company's Bylaws as they will be
contractual obligations of Global, unlike Global's Bylaws which may be amended
by Global's shareholders or its Board, and (ii) provide further indemnification
to the fullest possible extent permitted by law against all expenses (including
attorneys' fees), judgments, fines and settlement amounts paid or incurred by a
director or officer in any action or proceeding, including any action by or in
the right of Global, on account of service as a director, officer, employee,
attorney or agent of Global, or any subsidiary of Global or any other company
or enterprise at the request of Global. The Indemnification Agreements will
cover all such actions and proceedings, including actions or proceedings
resulting from the sale of the Off-Price and Action Sports Division and the
Branded Division, even if they arise from acts or omissions by a director or
officer occurring before the execution of the agreement. The contractual
arrangements will continue in force so long as the individual continues to
serve in such capacity on behalf of Global and will cover liabilities related
to his activities in any such capacity regardless of future changes to Global's
corporate documents. However, the Indemnification Agreements will not indemnify
any director or officer unless such director or officer acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests
of Global. In addition, no indemnification will be provided in respect of any
suit in which judgment is rendered against a director or officer for an
accounting of profits from a purchase or sale of securities of Global in
violation of Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or of any successor statute or for expenses or
liabilities which have been paid directly to a director or officer by an
insurance carrier under a policy of directors' and officers' liability
insurance.
The Indemnification Agreements provide for payment of expenses in advance of
a final disposition of the action or suit, regardless of the recipient's
ability to make repayments, and all such advances will be unsecured and
interest-free. Management believes that Global should be obligated to advance
expenses because indemnification after the conclusion of an action is virtually
meaningless if a person cannot pay the expenses as they become due, especially
in view of the fact that the expenses of providing a defense and the length of
legal proceedings may be significant.
The Indemnification Agreements also provide directors and officers who are
parties thereto with protection during the determination process in the event
there is a change of control of Global or its Board and grant such directors
and officers certain rights to appeal a denial of indemnification to a court of
competent jurisdiction. Except as discussed above with respect to violations of
Section 16(b) of the Exchange Act and expenses or liabilities which are covered
by insurance, the Indemnification Agreements provide that directors or officers
who rely on the records of Global or upon information supplied by the officers
of Global, legal counsel, outside accountants or appraisers are deemed to have
acted in a manner which would entitle such directors or officers to
indemnification under the Indemnification Agreements.
In addition to the matters described above, the Indemnification Agreements
provide a scheme of indemnification that is broader than that specifically
provided by the Delaware General Corporation Law.
First, the Indemnification Agreements do not require a finding by the Board
of Directors, a committee of the Board of Directors, independent legal counsel
or the shareholders that the indemnified party has met the applicable standard
of conduct required for indemnification. The Delaware General Corporation Law
requires a finding by the Board of Directors, a committee of the Board of
Directors, independent legal counsel or the shareholders that the applicable
standard of conduct has been met.
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<PAGE>
Second, the Indemnification Agreements explicitly provide that the
indemnification provisions applicable to a third party suit cover amounts paid
in settlement where the indemnified party meets the applicable standard of
conduct. The Delaware General Corporation Law does not provide for such
indemnification.
Third, in the event Global does not pay a requested indemnification amount,
the Indemnification Agreements allow an indemnified party, among other things,
to contest this determination by petitioning a court to make an independent
determination as to whether such indemnified party is entitled to
indemnification under the Indemnification Agreements. In the event of such
contest, the burden of proving that the indemnified party did not meet the
applicable standard of conduct will be on Global. If Global fails to establish
that the applicable standard of conduct has not been met in such case, the
indemnified party will be entitled to indemnification which will include
reimbursement for the expenses incurred by the indemnified party in such
contest. The Delaware General Corporation Law does not set forth the procedure
for contesting a corporation's determination of an indemnified party's right
to indemnification.
Fourth, the Indemnification Agreements explicitly provide for partial
indemnification of costs and expenses in the event an indemnified party is not
entitled to full indemnification under the terms of the Indemnification
Agreement. The Delaware General Corporation Law does not specifically address
this issue. It does, however, provide that to the extent an indemnified party
has been successful on the merits, he shall be entitled to such
indemnification.
Conflict of Interests of Certain Persons
Each of the directors and executive officers of Global will be a party to
and, as such, a beneficiary of the rights contained in the Indemnification
Agreements. Approval of the Indemnification Agreements will result in greater
indemnification protection for such directors and executive officers against
the risks and expenses of litigation and may result in greater potential
monetary exposure to Global for indemnification claims. Because each member of
the Board of Directors will be a party to and, as such, a beneficiary of the
rights contained in the Indemnification Agreements, there is an inherent
conflict of interest in the Board's recommending the Indemnification
Agreements.
Recommendation of Board of Directors
The Board of Directors has concluded that it is in the best interests of the
Company and its shareholders to enter into Indemnification Agreements with its
directors and certain officers to provide the maximum protection permitted by
law. Accordingly, the Board unanimously approved the Indemnification
Agreements at a meeting held on November 16, 1999. There is an inherent
conflict of interest in the Board's recommending the Indemnification
Agreements. See "B Conflict of Interests of Certain Persons."
THE BOARD OF DIRECTORS OF GLOBAL UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE INDEMNIFICATION AGREEMENTS.
PROPOSAL 4--APPROVAL OF 2000 EMPLOYEE STOCK PURCHASE PLAN
Description of the Proposal
On March 12, 2000, the Board adopted the Company's 2000 Employee Stock
Purchase Plan (the "2000 Purchase Plan"). The Company's shareholders are being
asked to approve the 2000 Purchase Plan. If approved, the 2000 Purchase Plan
will take effect March 12, 2000. The total number of shares authorized for
issuance under the 2000 Purchase Plan is 400,000 shares, plus an annual
increase on the date of the annual meeting of shareholders equal to the lesser
of (i) 50,000 shares, or (ii) such smaller number of shares as determined by
the Board; provided, however, the total aggregate number of shares issuable
under the 2000 Purchase Plan will not exceed 900,000 shares. A copy of the
2000 Employee Stock Purchase Plan is attached as Appendix D to this Proxy
Statement. The 2000 Employee Stock Purchase Plan is incorporated into this
Proxy Statement by reference and should be read carefully.
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Description of the 2000 Employee Stock Purchase Plan
Purpose
The purpose of the 2000 Purchase Plan is to provide a means by which
employees of the Company (and any parent or subsidiary of the Company
designated by the Board to participate in the 2000 Purchase Plan) may be given
an opportunity to purchase Common Stock of the Company through payroll
deductions, to assist the Company in retaining the services of its employees,
to secure and retain the services of new employees, and to provide incentives
for such persons to exert maximum efforts for the success of the Company. All
of the Company's approximately 184 employees are eligible to participate in
the 2000 Purchase Plan, other than employees who own (or hold stock options to
purchase) or who, as a result of participation in the 2000 Purchase Plan,
would own (or hold stock options to purchase), stock of the Company possessing
5% or more of the total combined voting power or value of all classes of stock
of the Company.
The rights to purchase Common Stock granted under the 2000 Purchase Plan are
intended to qualify as options issued under an "employee stock purchase plan"
as that term is defined in Section 423(b) of the Internal Revenue Code of
1986, as amended (the "Code").
Administration
The Board administers the 2000 Purchase Plan and has the final power to
construe and interpret both the 2000 Purchase Plan and the rights granted
under it. The Board has the power, subject to the provisions of the 2000
Purchase Plan, to determine when and how rights to purchase Common Stock of
the Company will be granted, the provisions of each offering of such rights
(which need not be identical), and whether employees of any parent or
subsidiary of the Company will be eligible to participate in the 2000 Purchase
Plan. The Board also may impose vesting restrictions, restrictions on
transferability or other similar conditions on shares purchased under the
Plan, as it determines to be appropriate.
The Board has the power to delegate administration of the 2000 Purchase Plan
to a committee composed of not fewer than two members of the Board. The Board
has delegated administration of the 2000 Purchase Plan to the Compensation
Committee of the Board. As used herein with respect to the 2000 Purchase Plan,
the "Board" refers to any committee the Board appoints, as well as to the
Board itself.
Offerings
The 2000 Purchase Plan is implemented by periodic offerings of rights to all
eligible employees from time to time, as determined by the Board. The maximum
period of time for an offering is 27 months. The Board, when establishing an
offering, will determine the specific terms for such offering within the
criteria permitted by the 2000 Purchase Plan, including the length of the
offering and the date or dates on which purchases will occur during the
offering.
The Board also may provide for additional benefits to be extended to
participants outside the scope of Section 423 of the Code, in addition to or
in conjunction with an offering under the 2000 Purchase Plan, in the form of
vested or unvested shares of Common Stock awarded outside of the 2000 Purchase
Plan, cash or other property. The receipt of any such additional benefits, if
provided, may be conditioned on continued employment, the holding of shares
purchased under the 2000 Plan for a specified period or other events
determined by the Board to be appropriate. Any such additional benefits will
be fully taxable to participants under the Code and shall not be eligible for
the favorable treatment available to rights granted under an employee stock
purchase plan provided by Section 423 of the Code (see "Federal Income Tax
Information" below).
Eligibility
The Board has the discretion, from time to time, and within the parameters
specified in the 2000 Purchase Plan, to establish the eligibility requirements
for employees to participate in any offering under the 2000
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<PAGE>
Purchase Plan, including whether employees of any of the Company's
subsidiaries are eligible and the length of time (if any) an employee must
have been employed by the Company or a participating subsidiary in order to
become eligible. However, the period of employment for eligibility may not
exceed two years. In addition, the Board may exclude employees who customarily
work 20 or fewer hours per week or five or fewer months per year.
No employee is eligible to participate in the 2000 Purchase Plan if,
immediately after the grant of purchase rights, the employee would own,
directly or indirectly, stock possessing 5% or more of the total combined
voting power or value of all classes of stock of the Company or of any parent
or subsidiary of the Company (including any stock which such employee may
purchase under all outstanding rights and options). In addition, no employee
may accrue rights to purchase Common Stock under the 2000 Purchase Plan at an
annual rate that would exceed $25,000 worth of shares of Common Stock
(determined at the fair market value of the shares at the time such rights are
granted) under all employee stock purchase plans of the Company and its
affiliates.
Participation in the Plan
Eligible employees will enroll in the 2000 Purchase Plan by delivering to
the Company, prior to the date selected by the Board as the offering date for
the offering, an agreement authorizing payroll deductions from such employees'
compensation during the offering. The Board for each offering shall define
"'compensation" that will be taken into account for such purpose (for example,
as base salary only or as total compensation, including bonuses and
commissions, etc.). The Board also shall designate the maximum amount of such
compensation, not exceeding 20 percent thereof, that a participant may have
withheld and contributed during the offering.
Purchase Price
The purchase price per share at which shares of Common Stock are sold in an
offering under the 2000 Purchase Plan will be established by the Board prior
to the commencement of the offering, but such price shall in no event be less
than the lower of (i) 85 percent of the fair market value of a share of Common
Stock on the date the right to purchase such shares was granted (generally the
first day of the offering) or (ii) 85 percent of the fair market value of a
share of Common Stock on the applicable purchase date.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by payroll deductions over
the course of an offering. A participant may increase, reduce, or terminate
his or her payroll deductions during an offering to the extent provided by the
Board in the terms of the offering. The Board also may provide the extent to
which eligible employees, including employees who were not yet eligible at the
start of the offering, may commence participating in an offering after the
offering already has begun.
All payroll deductions made for a participant will be credited to his or her
account under the 2000 Purchase Plan and deposited with the general funds of
the Company. A participant may not make additional payments into such account,
unless specifically provided for in the offering terms and only if the maximum
permitted amount has not already been withheld.
Purchase of Stock
On each purchase date under the 2000 Purchase Plan, the balance of payroll
deductions then held by the Company for the account of each participant will
be applied to the purchase of shares of Common Stock for the participant. In
connection with each offering under the 2000 Purchase Plan, the Board may
specify a maximum number of shares of Common Stock an employee may be granted
the right to purchase on each purchase date or during an offering and a
maximum aggregate number of shares of Common Stock that may be purchased by
all participants. If the aggregate number of shares to be purchased upon
exercise of rights granted in the offering
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<PAGE>
would exceed the maximum aggregate number of shares of Common Stock available,
then the Board will make a pro rata allocation of available shares in a
uniform and equitable manner. Unless the employee's participation is
discontinued (see "Withdrawal" below), his or her right to purchase shares is
exercised automatically on each purchase date at the applicable price.
Withdrawal
A participant may withdraw from a given offering under the 2000 Purchase
Plan by terminating his or her payroll deductions and by delivering to the
Company a notice of such withdrawal. The terms of an offering established by
the Board may limit withdrawals to specified periods prior to a purchase date.
Upon any withdrawal from an offering by the employee, the Company will
distribute to the employee his or her accumulated payroll deductions without
interest, less any accumulated deductions previously applied to the purchase
of shares of Common Stock on the employee's behalf during such offering, and
such employee's interest in the offering will be automatically terminated. The
employee is not entitled to again participate in that offering. However, an
employee's withdrawal from an offering will not have any effect upon such
employee's eligibility to participate in subsequent offerings under the 2000
Purchase Plan.
Termination of Employment
Rights granted pursuant to any offering under the 2000 Purchase Plan
terminate immediately upon cessation of an employee's employment for any
reason, and the Company will distribute to such employee all of his or her
accumulated payroll deductions, without interest.
Restrictions on Transfer
Rights granted under the 2000 Purchase Plan are not transferable and may be
exercised only by the person to whom such rights are granted.
Duration, Amendment and Termination
The Board may suspend or terminate the 2000 Purchase Plan at any time.
The Board may amend the 2000 Purchase Plan at any time. Any amendment of the
2000 Purchase Plan must be approved by the Company's shareholders within 12
months of its adoption by the Board if the amendment would require shareholder
approval in order for the 2000 Purchase Plan to comply with Section 423 of the
Code or Rule 16b-3 under the Exchange Act.
Rights granted before amendment or termination of the 2000 Purchase Plan may
not be impaired by any amendment or termination of the 2000 Purchase Plan
without consent of the employee to whom such rights were granted, except as
may be necessary to comply with any applicable law or Section 423 of the Code.
Effect of Certain Corporate Events
In the event of a dissolution, liquidation or specified type of merger of
the Company, the surviving corporation either will assume the rights under the
2000 Purchase Plan or substitute similar rights, or the purchase date under
any ongoing offering will be accelerated such that the outstanding rights may
be exercised immediately prior to, or concurrent with, any such event.
Stock Subject to 2000 Purchase Plan
Subject to approval of this proposal by the Company's shareholders, an
aggregate of 200,000 shares of Common Stock is reserved for issuance under the
2000 Purchase Plan. If rights granted under the 2000 Purchase Plan expire,
lapse or otherwise terminate without being exercised, the shares of Common
Stock not purchased under such rights again becomes available for issuance
under the 2000 Purchase Plan.
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Federal Income Tax Information
Rights granted under the 2000 Purchase Plan are intended to qualify for
favorable federal income tax treatment associated with rights granted under an
employee stock purchase plan which qualifies under provisions of Section 423
of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
of Common Stock as if such amounts were actually received. Otherwise, no
income will be taxable to a participant until the sale or disposition of the
acquired shares, and the method of taxation will depend upon the holding
period of the acquired shares.
If the stock is sold or otherwise disposed of more than two years after the
granting of the right to purchase the stock (typically, the beginning of the
offering period) and more than one year after the purchase date on which the
stock is sold to the participant, then the lesser of (i) the excess of the
fair market value of the stock at the time of such disposition over the
purchase price or (ii) the excess of the fair market value of the stock as of
the time the right was granted over the purchase price (determined as of the
time the right was granted) will be treated as ordinary income. Any further
gain or any loss will be taxed as a long-term capital gain or loss. Such
capital gains currently are generally subject to lower tax rates than ordinary
income.
If the stock is sold or otherwise disposed of before the expiration of
either of the holding periods described above, then the excess of the fair
market value of the stock on the purchase date over the purchase price will be
treated as ordinary income at the time of such disposition. The balance of any
gain will be treated as capital gain. Even if the stock is later disposed of
for less than its fair market value on the purchase date, the same amount of
ordinary income is recognized by the participant, and a capital loss is
realized equal to the difference between the sales price and the fair market
value of the stock on such purchase date. Any capital gain or loss will be
short-term or long-term, depending on how long the stock has been held. There
are no federal income tax consequences to the Company by reason of the grant
or exercise of rights under the 2000 Purchase Plan. The Company is entitled to
a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness and the satisfaction
of tax reporting obligations).
THE BOARD OF DIRECTORS OF GLOBAL UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" APPROVAL OF THE 2000 EMPLOYEE STOCK PURCHASE PLAN
NEW PLAN BENEFITS
The purchase of Common Stock pursuant to the 2000 Purchase Plan is within
the discretion of the participants therein. The Company cannot forecast the
extent to which shares of Common Stock will be purchased under the 2000
Purchase Plan. Because of the discretionary nature of purchases of Common
Stock pursuant to the plan, the Company has omitted the tabular disclosure of
the benefits or amounts to be allocated under the plan.
EXECUTIVE COMPENSATION
Compensation Committee Report
The Company's Compensation Committee of the Board of Directors is comprised
of Messrs. Adelberg, Lax and Rayport. For fiscal 1999, the Board of Directors
reviewed the compensation of executive officers, made decisions regarding
executive compensation and administered the Company's employee equity
incentive plans.
The Company's compensation policies for executive officers are to (i)
provide compensation packages to attract, motivate and retain executives, (ii)
link a significant portion of compensation to financial results to reward
successful performance, and (iii) provide long-term equity based compensation
to further align the interests of executives with those of the shareholders
and further reward success and performance. The principal components of the
Company's executive compensation are base salary, incentive compensation and
stock options or awards.
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In determining compensation levels, the Company considers compensation
packages offered by similar sized companies within the athletic footwear and
e-commerce industries. Compensation levels for individual executive officers
may be more or less than those offered by such other companies, depending on a
subjective assessment of individual factors, such as the executive's position,
skills, achievements, tenure with the Company and historical compensation
levels.
The Company has employment agreements with the following Named Officers:
Michael G. Rubin, Michael Conn and Steven A. Wolf. The Company had an
employment agreement with Mr. Golden which was terminated in connection with
the termination of Mr. Golden's employment with the Company. Pursuant to the
agreements, total compensation is divided into three primary components: base
salary, bonus and stock options or awards. The award of bonuses and stock
options serve as incentives for superior performance and are based upon both
the performance of the executives and the Company. Compensation of the Named
Officers for fiscal 1999 was determined in accordance with these employment
agreements as described herein.
Under the stock option plans established by the Company, stock options are
periodically granted to employees at the discretion of the Board of Directors
or Compensation Committee. It is contemplated that executives of the Company
will be eligible to receive stock option grants, subject to individual
performance and the performance of the Company as a whole.
During 1999, the Company's Named Officers were granted a total of 185,000
options to purchase Common Stock at exercise prices ranging from $11.25 to
$15.00 per share.
Section 162(m) of the Code generally denies a deduction to any publicly held
company, such as the Company, for certain compensation exceeding $1,000,000
paid in any taxable year to the chief executive officer and the four other
highest paid executive officers, excluding, among other things, certain
performance-based compensation. The Board of Directors has not yet recommended
any change to the Company's executive compensation policies and plans as a
result of Section 162(m), but the Compensation Committee will continue to
evaluate the impact of recently finalized tax regulations to ensure that the
Company's executive compensation plans most effectively serve the interests of
the Company and its shareholders.
Kenneth J. Adelberg
Charles R. Lax
Jeffrey Rayport
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Compensation Committee Interlocks and Insider Participation
None of the members of the Board's Compensation Committee is or has been an
officer or employee of the Company. Mr. Lax is a Managing Director of the
general partner of SOFTBANK Capital Partners LP and SOFTBANK Capital Advisors
Fund LP, the SOFTBANK affiliates through which SOFTBANK acquired an aggregate
of 6,153,850 shares of the Company's Common Stock. These shares were acquired
by SOFTBANK on July 23, 1999 at a price of $13.00 per share (the closing price
on May 26, 1999, the day prior to the day the Company and SOFTBANK agreed in
principle to the transaction) for an aggregate purchase price of approximately
$80.0 million.
Summary Compensation Table
The following table sets forth information regarding compensation paid by
the Company and its subsidiaries to each Named Officer.
<TABLE>
<CAPTION>
Annual Compensation(1) Long Term Compensation
------------------------------------------ ---------------------------------------
Awards
-----------------------
Securities
Restricted Underlying
Name and Fiscal Other Annual Stock Options / All Other
Principal Position Year Salary Bonus Compensation(1) Award(s) SARS (#) Compensation
- ------------------------ ------ -------- -------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael G. Rubin ....... 1999 $450,000(2) -- -- -- -- --
Chairman of the Board
and 1998 398,269 -- -- -- -- --
Chief Executive Officer 1997 297,115 -- -- -- -- --
Michael Golden(3)....... 1999 124,038 $120,000 -- -- 105,000(4) $2,034(5)
Executive Vice
President, 1998 -- -- -- -- -- --
E-Commerce 1997 -- -- -- -- -- --
Michael R. Conn(6)...... 1999 133,269 45,000 -- $18,563(7) 80,000(8) 2,260(5)
Senior Vice President, 1998 -- -- -- -- -- --
Strategic Development 1997 -- -- -- -- -- --
Steven A. Wolf ......... 1999 138,020 20,625 -- -- -- 9,492(9)
Vice President 1998 124,481 37,500 -- -- -- 7,422(5)
1997 112,178 20,000 -- -- 50,000(10) 7,422(5)
</TABLE>
- --------
(1) Excludes perquisites and other personal benefits that do not, in the
aggregate, exceed $50,000 or 10% of each officer's total salary and bonus.
(2) Includes amounts paid by the KPR Companies until December 15, 1997, the
date of the Company's reorganization, and paid by the Company thereafter.
(3) Mr. Golden's employment with Global commenced in March 1999 and terminated
in February 2000.
(4) Represents options to purchase 32,000, 43,000 and 30,000 shares of Common
Stock granted to Mr. Golden in fiscal 1999 at exercise prices of $11.25,
$11.25 and $15.00 per share, respectively. As of the date of termination
of Mr. Golden's employment with Global, such options were vested with
respect to the following amounts: 19,200 shares, 25,800 shares and 22,500
shares, respectively.
(5) Represents the value of insurance premiums paid by Global with respect to
term life insurance.
(6) Mr. Conn's employment with Global commenced on February 24, 1999.
(7) Amount consists of market value of award on date of grant. As of the end
of fiscal 1999, Mr. Conn held 1,500 restricted shares with a value of
$18,844. On February 24, 1999, restricted stock was awarded in the amount
of 1,500 shares to Mr. Conn which vests on February 24, 2001.
(8) Represents (i) an option to purchase 50,000 shares of Common Stock granted
to Mr. Conn in fiscal 1999 at an exercise price of $12.375 per share,
vesting at a rate of 20% per year over a five year period with the first
portion vesting on February 5, 2000, and (ii) an option to purchase 30,000
shares of Common Stock granted to Mr. Conn in fiscal 1999 at exercise
price of $15.00 per share, vesting at the following rate: 15,000 shares on
August 9, 1999 and 3,750 shares on each of the first four anniversaries of
August 9, 1999.
32
<PAGE>
(9) Consists of (i) Global's matching contribution under its 401(k) Profit
Sharing Plan in the amount of $2,070, and (ii) insurance premiums paid by
Global with respect to term life insurance in the amount of $7,422.
(10) Represents an option to purchase 32,500 shares of Common Stock granted to
Mr. Wolf in fiscal 1997 at an exercise price of $3.20 per share and
options to purchase 7,500 shares and 10,000 shares of Common Stock
granted to Mr. Wolf in prior periods which were repriced from $4.00 and
$9.375, respectively, to $3.20 in fiscal 1997. Such options vest at a
rate of 20%, 20% and 33 1/3%, respectively, over five, five and three
year periods.
Option/SAR Grants in Last Fiscal Year
The following table sets forth information regarding options to purchase
shares of Common Stock granted to the Named Officers during fiscal 1999. No
SAR's were granted during fiscal 1999.
<TABLE>
<CAPTION>
Potential Realized
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
- ---------------------------------------------------------------------- -------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------------------ ------------ ------------ -------- ---------- -------- ---------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael G. Rubin........ -- -- -- -- -- --
Chairman of the Board
and Chief
Executive Officer of
Global
Michael Golden.......... 75,000(1) 9.1% $ 11.25 3/18/09 $530,630 $1,344,720
Executive Vice
President, 30,000(2) 3.7% $ 15.00 8/9/09 $283,003 $ 717,184
E-Commerce
Michael R. Conn......... 50,000(3) 6.1% $12.375 2/24/09 $389,129 $ 986,128
Senior Vice President, 30,000(4) 3.7% $ 15.00 8/9/09 $283,003 $ 717,184
Strategic Development
Steven A. Wolf ......... -- -- -- -- -- --
Vice President
</TABLE>
- --------
(1) Represents options which originally vested in the aggregate as follows:
15,000 shares on December 31, 1999 and 15,000 shares on each of the first
four anniversaries of December 31, 1999. Upon termination of Mr. Golden's
employment with Global, such options were vested with respect to 45,000
shares.
(2) Such option originally vested as follows: 15,000 shares on August 9, 1999
and 3,750 shares on each of the first four anniversaries of August 9,
1999. Upon termination of Mr. Golden's employment with Global, such option
was vested with respect to 22,500 shares.
(3) Such option vests as follows: 10,000 shares on February 5, 2000 and 10,000
shares on each of the first four anniversaries of February 5, 2000.
(4) Such option vests as follows: 15,000 shares on August 9, 1999 and 3,750
shares on each of the first four anniversaries of August 9, 1999.
33
<PAGE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
The following table sets forth information regarding options to purchase
shares of Common Stock exercised by the Named Officers during fiscal 1999
under the Company's stock option plans and the values of options held by such
individuals at fiscal year end.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options/SARs at
Options/ SARs at Fiscal Year End
Shares Acquired on Value Fiscal Year End Exercisable/
Name Exercise(#) Realized($) Exercisable/Unexercisable Unexercisable (1)
---- ------------------ ---------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Michael G. Rubin........ -- -- -- --
Chairman of the Board
and
Chief Executive Officer
of Global
Michael Golden.......... -- -- 30,000 / 75,000 $19,695 / $78,780(2)
Executive Vice
President,
E-Commerce
Michael R. Conn......... -- -- 15,000 / 65,000 -- / $9,400(3)
Senior Vice President,
Strategic Development
Steven A. Wolf ......... 11,000 $176,204 22,750 / 16,250 $213,008 / $152,149(4)
Vice President
</TABLE>
- --------
(1) Represents the aggregate market value (market price of the Common Stock
less the exercise price) of the options granted based upon the closing
sales price per share of $12.563 at the end of fiscal 1999.
(2) The exercise prices of options to purchase 75,000 and 30,000 shares held
by Mr. Golden are $11.25 per share and $15.00 per share, respectively.
Such options originally vested as follows: 15,000 shares on December 31,
1999 and 15,000 shares on each of the first four anniversaries of December
31, 1999; and 15,000 shares on August 9, 1999 and 3,750 shares on each of
the first four anniversaries of August 9, 1999. Upon termination of Mr.
Golden's employment with Global, such options were vested with respect to
67,500 shares.
(3) The exercise prices of options to purchase 50,000 and 30,000 shares held
by Mr. Conn are $12.375 per share and $15.00 per share, respectively. Such
options vest as follows: 20% per year over a five year period with the
first portion vesting on February 5, 2000; and 15,000 shares on August 9,
1999 and 3,750 shares on each of the first four anniversaries of August 9,
1999.
(4) The exercise price of options to purchase 32,500 shares, 7,500 shares and
10,000 shares held by Mr. Wolf are $3.20 per share. Such options vest at
rates of 20%, 20% and 33 1/3%, respectively, of the initial awards per
year over five, five and three year periods commencing on December 15,
1998.
Employment Agreements
Michael G. Rubin. On September 25, 1996, the Company entered into an
agreement with Mr. Rubin for an initial term of five years commencing on
December 15, 1997, subject to automatic annual extensions, to serve as the
Company's Chairman and Chief Executive Officer. Pursuant to the terms of the
employment agreement, Mr. Rubin is entitled to receive (i) an annual base
salary of $450,000 during the fiscal 1999, increasing by $50,800 effective
January 1, 2000 and $49,280 effective January 1, 2001, (ii) an annual bonus
based upon the achievements of Mr. Rubin and the results of operations of the
Company, (iii) other benefits similar to those provided to Global's other
officers. The agreement was entered into in anticipation of the Company
completing a reorganization on or about January 1, 1997, which reorganization
did not occur until December 15, 1997. The terms of the agreement specified
that in the event that the reorganization did not occur prior to June 30,
1997,
34
<PAGE>
the agreement would become null and void. On the date of the reorganization,
the employment agreement was amended such that the terms of the original
agreement were adopted.
Mr. Rubin's employment agreement may be terminated by Global with cause,
which is defined to include, among other things, the willful failure or
refusal by Mr. Rubin to comply with explicit directions of the Board of
Directors or Executive Committee or to render the services required by the
employment agreement, willful breach or habitual neglect in the performance of
his duties, conviction of a felony or fraud or embezzlement involving assets
of Global. In the event of termination by Global for any other reason, Mr.
Rubin will be entitled to receive any unpaid salary and benefits through the
date of termination. Under the employment agreement, for a period of one year
following his termination, Mr. Rubin is prohibited from engaging in the
planning, research, development, production, manufacturing, marketing, sales
or distribution of athletic footwear, rugged outdoor footwear, sportswear,
licensed products, related products, equipment or services or any other line
of business engaged in or under demonstrable development by the Company. In
addition, Mr. Rubin is prohibited from enticing, inducing or encouraging other
employees of the Company to engage in any other activity which done by them
would violate any provision of the contract.
Steven A. Wolf. On August 1, 1995, the Company entered into an employment
agreement with Steven A. Wolf, Vice President of Global, for an initial term
of three years, subject to automatic annual extensions after the initial term.
Mr. Wolf's compensation is comprised of the following: (i) an annual base
salary of $137,500 during fiscal 1999 increasing by $12,500 effective January
1, 2000 and $5,000 effective January 1, 2001 and January 1, 2002, (ii) stock
option grants, (iii) incentive compensation up to 30% of Mr. Wolf's base
salary based upon the achievements of Mr. Wolf and the results of operations
of the Company, and (iv) other benefits similar to those provided to Global's
other officers.
Michael R. Conn. On February 24, 1999, the Company entered into an
employment agreement with Michael R. Conn, Senior Vice President, Strategic
Development of Global, for an initial term of five years, subject to automatic
annual extensions after the initial term. Mr. Conn's compensation is comprised
of the following: (i) an annual base salary of $150,000 during fiscal 1999
increasing by $12,500 effective January 1, 2000 and January 1, 2001, (ii)
stock option grants, (iii) a restricted stock award, (iv) incentive
compensation up to 30% of Mr. Conn's base salary based upon the achievements
of Mr. Conn and the results of operations of the Company, and (v) other
benefits similar to those provided to Global's other officers.
Each of Mr. Wolf's and Mr. Conn's employment agreements may be terminated by
Global with cause, which is defined the same as in Mr. Rubin's agreement. In
the event of termination by Global for any other reason, they would also be
entitled to receive any unpaid salary and benefits through their respective
dates of termination. Mr. Wolf's employment agreement contains a three year
restrictive covenant similar to the one in Mr. Rubin's agreement while Mr.
Conn's employment agreement contains a one year restrictive covenant similar
to the one in Mr. Rubin's agreement.
35
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total return for
the Company's Common Stock, the ISDEX Internet Stock Index and the NASDAQ
Stock Market, assuming an investment of $100 in each on December 30, 1994, and
the reinvestment of all dividends.(/1/) The data points used for the
performance graph are listed below.
[PERFORMANCE CHART OF TOTAL RETURN TO STOCKHOLDERS]
<TABLE>
<CAPTION>
Performance Graph Data
Points 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
---------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Global.................. $100.00 $ 38.89 $ 44.44 $ 24.44 $770.00 $111.67
ISDEX Internet Stock
Index.................. $100.00 $100.00 $199.50 $199.87 $437.00 $960.35
NASDAQ.................. $100.00 $140.98 $173.45 $211.86 $297.02 $552.81
</TABLE>
Note: Stock price performance shown in the Stock Performance Graph for
Global's Common Stock is historical and not necessarily indicative of future
price performance.
- --------
(1) The Company elected to discontinue presenting the peer group comparison it
has provided in previous years due to the change in the nature of the
Company's business. A comparison of the cumulative total return for the
Company's Common Stock to that of the companies in the peer group (which
consisted of K-Swiss Inc., Rocky Shoes & Boots, Inc., Saucony, Inc., The
Timberland Company and Wolverine World Wide, Inc.) would no longer be
meaningful.
36
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Global does not have any formal policy concerning the direct or indirect
pecuniary interest of any of its officers, directors, security holders or
affiliates in any investment to be acquired or disposed of by the Company or
in any transaction to which the Company is a party or has an interest. Global
will not enter into any such transactions unless approved by a majority of the
entire Board of Directors, not including any interested director.
Prior to moving to its current location, Global's main executive offices and
warehouse were located in a 75,000 square foot facility leased from Mr. Rubin,
Global's Chief Executive Officer. Pursuant to its terms, the lease expires on
September 30, 2009; however, Mr. Rubin is in the process of selling the
facility, at which time the lease would be terminated. Global pays
approximately $29,000 per month, plus maintenance and utilities, for the
facility. Payments by Global to Mr. Rubin under the lease totalled $349,008 in
fiscal 1999.
In July, 1999, Global repaid the entire balance of a note in connection with
a loan by Mr. Rubin to the Company. The outstanding principal balance of the
note at the time of repayment was $1,805,841 and accrued interest (at prime
rate plus 3%) for fiscal 1999 was $82,661.
On July 23, 1999, SOFTBANK acquired an aggregate of 6,153,850 shares of
Global's Common Stock at a price of $13.00 per share (the closing price on May
26, 1999, the day prior to the day Global and SOFTBANK agreed in principle to
the transaction) for an aggregate purchase price of approximately $80.0
million. Messrs. Lax and Fisher are Managing Directors of the general partner
of SOFTBANK Capital Partners LP and SOFTBANK Capital Advisors Fund LP, the
SOFTBANK affiliates through which SOFTBANK acquired such shares.
On January 5, 1999, Harvey Lamm was granted a non-incentive stock option to
purchase 50,000 shares of Global's Common Stock at an exercise price of $7.625
per share, the closing price on the date of grant. The option was granted to
Mr. Lamm in connection with his services to Global above and beyond his duties
as a member of the Board of Directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act ("Section 16(a)") requires the Company's
directors, executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during fiscal 1999, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with, except that Messrs. Conn, Rayport,
Adelberg and Lax and SOFTBANK failed to file their Form 3's on a timely basis
and Messrs Conn, Adelberg, Lamm and Lax failed to file Form 4's on a timely
basis.
OTHER MATTERS
As of the date of this Proxy Statement, Global knows of no other business
that will be presented for consideration at the Annual Meeting (other than
procedural matters). However, the enclosed proxy confers discretionary
authority to vote with respect to any and all of the following matters that
may come before the Annual Meeting: (i) matters that Global's Board of
Directors does not know, a reasonable time before proxy solicitation, are to
be presented for approval at the Annual Meeting; (ii) approval of the minutes
of a prior meeting of shareholders, if such approval does not constitute
ratification of the action at the meeting; (iii) the election of any person to
any office for which a bona fide nominee is unable to serve or for good cause
will not serve; (iv) any proposal omitted from this Proxy Statement and the
form of proxy pursuant to Rules 14a-8 or
37
<PAGE>
14a-9 under the Exchange Act; and (v) matters incident to the conduct of the
Annual Meeting. If any such matters come before the Annual Meeting, the proxy
agents named in the accompanying proxy card will vote in accordance with their
judgment.
INDEPENDENT PUBLIC ACCOUNTANTS
The appointment of an independent public accountant is approved annually by
the Board of Directors based upon the recommendation of the Audit Committee.
The accounting firm of Deloitte & Touche LLP acted as Global's independent
public accountants for fiscal 1999. No independent public accountant has been
selected for fiscal 2000 as the Audit Committee has not yet made its
recommendation. A representative of Deloitte & Touche LLP is expected to be
present at the Annual Meeting and to have the opportunity to make a statement,
if he or she desires to do so, and is expected to be available to respond to
appropriate questions.
ADDITIONAL INFORMATION
Global is subject to the reporting requirements of the Exchange Act, and in
accordance therewith files periodic reports and other information with the
SEC. Such reports, proxy statements and other information concerning Global
may be inspected and copies may be obtained (at prescribed rates) at Public
Reference Room maintained by the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and at
Northwest Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. In addition, electronically
filed documents, including reports, proxy and information statements and other
information regarding Global, can be obtained from the SEC's website at
http://www.sec.gov.
SHAREHOLDER PROPOSALS
A shareholder proposal for Global's 2001 Annual Meeting must be submitted to
Global at its office located at 1075 First Avenue, King of Prussia,
Pennsylvania, 19406, by December 13, 2000 to receive consideration for
inclusion in Global's 2001 proxy materials. Any such proposal must also comply
with the proxy rules under the Exchange Act, including Rule 14a-8.
ANNUAL REPORT
This Proxy Statement is accompanied by the Company's Annual Report to
Shareholders for fiscal 1999 (the "Annual Report"). The Annual Report contains
the Company's audited financial statements for fiscal 1999.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the SEC are
incorporated by reference in this Proxy Statement:
(i) the Company's Annual Report on Form 10-K for fiscal 1999 filed on
[ ], 2000; and
(ii) all other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since the end of the fiscal year covered by
the Annual Report on Form 10-K referred to in (i) above.
All documents subsequently filed by the Company with the pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, after the date of this
Proxy Statement, and prior to the date of the Annual Meeting shall be deemed
to be incorporated by reference in this Proxy Statement and to be a part
thereof from the date of the filing of such documents.
38
<PAGE>
THE COMPANY SHALL FURNISH WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROXY
STATEMENT IS DELIVERED, A COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED BY
REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS (UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE TO THE INFORMATION THAT IS
INCORPORATED), UPON THE WRITTEN REQUEST OF SUCH PERSON. REQUESTS SHOULD BE
SENT TO:
Paul D. Cataldo
Assistant Secretary
1075 First Avenue
King of Prussia, PA 19406
(610) 491-7006
By Order of the Board of Directors,
/s/ Arthur H. Miller
Secretary
39
<PAGE>
ACQUISITION AGREEMENT
Parties: GLOBAL SPORTS, INC.,
a Delaware corporation ("Global")
1075 First Avenue
King of Prussia, PA 19406
GEN-X ACQUISITION (U.S.), INC.,
a Washington corporation ("U.S. Co.")
701 5th Avenue
Suite 3300
Seattle, Washington
98104-7082
GEN-X ACQUISITION (CANADA) INC.,
an Ontario corporation ("Canadian Co.")
25 Vanley Crescent
North York, Ontario
M3J 2B7
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
Date: September 24, 1999, as amended March 13, 2000
Background: Global owns beneficially and of record all of the issued and
outstanding shares of capital stock of Gen-X Equipment Inc., an Ontario
corporation ("Gen-X Equipment") and Gen-X Holdings Inc., a Washington
corporation ("Gen-X Holdings"). Gen-X Holdings is a Washington corporation
also in the business of distributing excess inventories of sports equipment
and accessories. Gen-X Equipment and Gen-X Holdings (along with each of their
direct or indirect Subsidiaries (as defined herein)) are collectively referred
to herein as the "Gen-X Companies". Salter and Finkelstein own beneficially
and of record all of the issued and outstanding shares of capital stock of
DMJ. DMJ and the individuals set forth on Schedule A own beneficially and of
record all of the issued and outstanding shares of capital stock of U.S. Co.
U.S. Co. owns beneficially and of record all of the issued and outstanding
shares of Canadian Co. (U.S. Co. and Canadian Co. shall be referred to
individually as "Buyer" and collectively as "Buyers"). The parties desire that
Global sell and Buyers purchase all of the issued and outstanding shares of
capital stock of the Gen-X Holdings and Gen-X Equipment, all on and subject to
the terms and conditions of this Agreement.
A-1
<PAGE>
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. DEFINED TERMS
Certain defined terms used in this Agreement and not specifically defined in
context are defined in this Section 1, as follows:
1.1. "Acquisition Agreements" means this Agreement and the Ancillary
Agreements (as defined in Section 1.3).
1.2. "Affiliate" means any Person (as defined in Section 1.17) which
controls, is controlled by or is under common control with, the designated
party, either directly or indirectly through one or more intermediaries.
1.3. "Ancillary Agreements" means: (a) the Purchase Price Escrow Agreement,
(b) the Termination Agreements, (c) the Right of First Offer Agreement, (d)
the Non-Competition Agreement, (e) the Termination of Non-Competition
Agreement, (f) the Assignment and Assumption Agreement and (g) the Escrow
Agreement, each as hereinafter defined.
1.4. "Asset" means any real, personal, mixed, tangible or intangible
property of any nature.
1.5. "Consent" means any consent, approval, order or authorization of, or
any declaration, filing or registration with, or any application 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 legally necessary in order
to take a specified action or actions in a specified manner and/or to achieve
a specified result.
1.6. "Contract" means any written or oral contract, agreement, instrument,
order, arrangement, commitment or understanding of a legally binding nature,
including, but not limited to, 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.
1.7. "Encumbrance" means any lien, security interest, pledge, mortgage,
easement, covenant, restriction, reservation, conditional sale, prior
assignment, or other encumbrance, claim, burden or charge of any nature.
1.8. "GAAP" means, in respect of a United States entity, generally accepted
accounting principles under United States accounting rules and regulations, as
in effect from time to time, consistently applied and, in respect of a
Canadian entity, accounting principles generally 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.
1.9. "Gen-X Material Adverse Effect" means a material adverse effect on the
business, results of operations or financial condition of the Gen-X Companies
taken as a whole; provided, however, that the term "Gen-X Material Adverse
Effect" shall not include any effect attributable to changes in the economy
(of the United States or any other country) generally, changes in the
industries in which the Gen-X Companies operate, or seasonality of the
businesses of the Gen-X Companies.
1.10. "Global Management" means the officers and directors of Global other
than Salter, Finkelstein or any employee reporting to Salter or Finkelstein.
1.11. "Inventory" means, with respect to a Person, all inventory,
merchandise, goods, packaging, supplies, boxes and other personal property
held for sale or rental in the business conducted by the Person and its
Subsidiaries, wherever such property is located, and any prepaid deposits for
any of the same.
A-2
<PAGE>
1.12. "Judgment" means any order, writ, injunction, citation, award, decree
or other judgment of any nature of any foreign, federal, state, provincial or
local court, governmental body, administrative agency, regulatory authority or
arbitration tribunal.
1.13. "Law" means any provision of any foreign, federal, state, provincial
or local law, statute, ordinance, charter, constitution, treaty, rule or
regulation.
1.14. "Obligation" means any debt, liability or obligation of any nature,
whether secured, unsecured, recourse, nonrecourse, liquidated, unliquidated,
accrued, absolute, fixed, contingent, ascertained, unascertained, known,
unknown or otherwise.
1.15. "Original Investor Group" means DMJ and the individuals set forth on
Schedule A.
1.16. "Permitted Encumbrance" means (a) any lien for Taxes which are not yet
due or which are being contested in good faith by appropriate proceedings
diligently prosecuted, in either case provided that adequate reserves therefor
have been established in accordance with GAAP; (b) any carrier's,
warehouseman's, mechanic's, materialman's, repairman's, landlord's or similar
statutory or inchoate lien incidental to the ordinary conduct of business
which involves an obligation that is not more than sixty (60) days past due or
which is being contested in good faith by appropriate proceedings diligently
prosecuted, in either case provided that adequate reserves therefor have been
established in accordance with GAAP; or (c) any interest of a governmental
agency in any lawfully made pledge or deposit under workers' compensation,
unemployment insurance or other social security statutes. Notwithstanding the
foregoing, Permitted Encumbrances shall not include any Encumbrance that was
incurred or arose in connection with any Obligation to pay or guarantee the
payment of borrowed funds including, but not limited to, funds obtained as a
result of bank debt, capitalized lease, installment purchase or other
financing activity.
1.17. "Person" means any individual, sole proprietorship, joint venture,
partnership, corporation, association, cooperative, trust, estate,
governmental body, administrative agency, regulatory authority or other entity
of any nature.
1.18. "Prime Rate" means the prime rate of general application as set forth
in the "Money Rates" section (or such future section as shall replace it) of
The Wall Street Journal (Eastern Edition), as published on a specified date or
dates, or, if no date(s) are specified, as the same shall be published from
time to time.
1.19. "Proceeding" means any suit, action, litigation, governmental
investigation, arbitration, administrative hearing or other legal proceeding
of any nature.
1.20. "Restructuring Plan" means the restructuring plan set forth on
Schedule 1.20.
1.21. "Subsidiary" means, with respect to any Person, any other Person as 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.
1.22. "Tax" means (a) any foreign, federal, provincial, state or local
income, earnings, profits, gross receipts, franchise, capital stock, net
worth, sales, use, occupancy, general property, real property, personal
property, intangible property, transfer, fuel, excise, payroll, withholding,
unemployment compensation, social security or other tax of any nature, (b) any
foreign, federal, state, provincial or local organization fee, qualification
fee, annual report fee, filing fee, occupation fee, assessment, sewer rent or
other fee or charge of any nature, or (c) any deficiency, interest or penalty
imposed with respect to any of the foregoing.
1.23 "Amendment Date" means the date on which Amendment No. 1 to this
Agreement is made and entered into.
A-3
<PAGE>
2. THE TRANSACTION
2.1. Sale of Gen-X Equipment and Gen-X Holdings. On the Closing Date (as
defined in Section 10.1), (i) Global shall sell, transfer, assign and convey
to U.S. Co., and U.S. Co. shall purchase, all right, title and interest in and
to all of the issued and outstanding shares of capital stock of Gen-X
Holdings, and (ii) Global shall sell, transfer, assign and convey to Canadian
Co, and Canadian Co. shall purchase, all right, title and interest in and to
all of the issued and outstanding shares of capital stock of Gen-X Equipment
(the issued and outstanding shares of capital stock of Gen-X Holdings and Gen-
X Equipment are collectively referred to herein as the "Gen-X Stock").
3. PURCHASE PRICE AND CLOSING FINANCIAL STATEMENTS
3.1. Purchase Price. Subject to the adjustments and provisions of Sections
3.2 and 3.3, the total purchase price (the "Purchase Price") for the Gen-X
Stock shall consist of the following:
(a) Gen-X Holdings Stock. On the Amendment Date, U.S. Co. shall, and DMJ,
Salter and Finkelstein shall cause U.S. Co. to, deliver to Borden Ladner
Gervais LLP as escrow agent, to be held by such escrow agent pursuant to
the escrow agreement (the "Purchase Price Escrow Agreement") attached
hereto as Exhibit "T", a cash payment in the amount of Six Million Dollars
($6,000,000) and on the Closing Date, U.S. Co. shall, and DMJ, Salter and
Finkelstein shall cause U.S. Co. to (i) deliver to Global a cash payment in
the amount of Three Million Six Hundred Thousand Dollars ($3,600,000) (the
"Gen-X Holdings Closing Payment"), and (ii) assume Global's non-negotiable
subordinated notes in the original aggregate principal amount of Three
Million Nine Hundred Sixty Thousand Dollars ($3,960,000) payable to Gen-X
Holdings, dated as of the Closing Date (the "Replacement Notes"), together
with all accrued and unpaid interest thereon; and
(b) Gen-X Equipment Stock. On the Closing Date, Canadian Co. shall, and
U.S. Co., DMJ, Salter and Finkelstein shall cause Canadian Co. to, deliver
to Global a cash payment (together with the Gen-X Holdings Closing Payment,
the "Closing Payment") in the amount of Three Million Six Hundred Thousand
Dollars ($3,600,000).
3.2 Purchase Price Adjustment.
(a) If, during the two hundred seventy-three (273) day period following
the Closing Date, either Buyer or any of the Gen-X Companies enter into an
agreement, option or understanding or executes a letter of intent,
agreement in principle or definitive agreement with any of the parties set
forth on Schedule 3.2(a) (a "Sale Transaction Agreement") with respect to
or that is likely to result in a Sale Transaction (as defined below), then
the Purchase Price shall be increased by an amount (the "Purchase Price
Adjustment") determined as follows:
(1) If the Company enters into or executes a Sale Transaction
Agreement within ninety-one (91) days following the Closing Date, the
Purchase Price Adjustment shall be equal to seventy-five percent (75%)
of the amount, if any, by which (i) the Sale Transaction Consideration
(as defined below) exceeds (ii) Thirteen Million Two Hundred Thousand
Dollars ($13,200,000);
(2) If the Company enters into or executes a Sale Transaction
Agreement on or after ninety-two (92) days and prior to one hundred
eighty-two (182) days following the Closing Date, the Purchase Price
Adjustment shall be equal to fifty percent (50%) of the amount, if any,
by which (i) the Sale Transaction Consideration exceeds (ii) Thirteen
Million Two Hundred Thousand Dollars ($13,200,000); and
(3) If the Company enters into or executes a Sale Transaction
Agreement on or after one hundred eighty three (183) days and prior to
two hundred seventy-three (273) days following the Closing Date, the
Purchase Price Adjustment shall be equal to fifteen percent (15%) of
the amount, if any, by which (i) the Sale Transaction Consideration
exceeds (ii) Thirteen Million Two Hundred Thousand Dollars
($13,200,000).
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(b) For the purposes of this Agreement, a Sale Transaction shall mean (i)
any transaction or series of related transactions in which either Buyer or
any of the Gen-X Companies sells, assigns, transfers, leases or licenses
all or a substantial portion of its Assets, (ii) any transaction or series
of related transactions (including any reorganization, merger,
consolidation or other business combination) in which either Buyer or any
of its Subsidiaries sells, assigns or transfers 50% or more of the
outstanding capital stock (or other outstanding ownership interests) of any
of the Gen-X Companies, (iii) any transaction or series of related
transactions (including any reorganization, merger, consolidation or other
business combination, but not including public offerings of equity
securities) in which DMJ, Salter and/or Finkelstein sells, assigns or
transfers 50% or more of the outstanding capital stock (or other
outstanding ownership interests) of either Buyer, (iv) any transaction or
series of related transactions (other than public offerings of equity
securities) in which any Person or group of Persons acquires "beneficial
ownership" within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), of 50% or more of the capital
stock of either Buyer or any of the Gen-X Companies, (v) any liquidation,
dissolution or winding up of either Buyer or any of the Gen-X Companies, or
(vi) any other transaction or series of related transactions the purpose or
effect of which is to sell, assign or transfer control or a majority of the
ownership of either Buyer or any of the Gen-X Companies or to sell, assign
or transfer the business or goodwill of either Buyer or any of the Gen-X
Companies; provided, however, that the implementation of the Restructuring
Plan shall not in and of itself constitute a Sale Transaction.
(c) For purposes of this Agreement, Sale Transaction Consideration shall
mean the total amount of cash and the fair market value (on the date of the
closing of the Sale Transaction) of all other securities and/or property
paid or payable directly or indirectly to either Buyer and/or any of the
Gen-X Companies or any of its securityholders (or holders of ownership
interests) in connection with the Sale Transaction (including (i) amounts
paid to holders of any warrants or convertible securities of either Buyer
and/or any of the Gen-X Companies or to holders of any options or stock
appreciation rights issued by either Buyer and/or any of the Gen-X
Companies, whether or not vested; (ii) the fair market value of any assets
of either Buyer and/or any of the Gen-X Companies which are retained by or
otherwise distributed to their securityholders (or holders of ownership
interests) or Affiliates in anticipation of or in connection with the Sale
Transaction; (iii) amounts characterized as deferred compensation,
consulting fees, non-competition payments and private pension benefits
unless the payments are for actual bona fide services and are commercially
reasonable in amount for such services); and (iv) assumption of the
outstanding amounts due under the U.S. Co. Promissory Note and/or the
Canadian Co. Promissory Note.
(d) No adjustment under this Section 3.2 shall result in a decrease to
the Purchase Price. Any amount paid under this Section 3.2 is intended by
all parties to be, and shall be treated by the parties as, an adjustment to
the Purchase Price.
(e) The Purchase Price Adjustment shall be paid in full in cash by Buyers
to Global contemporaneously with the closing of the Sale Transaction;
provided, however, that if the Sale Transaction Consideration is payable in
installments and/or consists of non-cash consideration Global shall have
the right, but not the obligation, to receive the Purchase Price Adjustment
as and when each installment of the Sale Transaction Consideration is
payable and/or in the form of such non-cash consideration.
(f) Buyers, DMJ, Salter and Finkelstein shall notify Global in writing
within three (3) business days after either Buyer, DMJ, Salter, Finkelstein
or any of the Gen-X Companies enter into or execute a Sale Transaction
Agreement. Notwithstanding the immediately preceding sentence, Buyers, DMJ,
Salter and Finkelstein shall notify Global in writing at least thirty (30)
days prior to the consummation of a Sale Transaction.
(g) If the Sale Transaction Consideration shall consist in whole or in
part of non-cash consideration, the fair market value of such consideration
shall be determined by agreement between Global and Buyers. If Global and
Buyers cannot agree upon the fair market value of such consideration within
ten (10) days after the consummation of the Sale Transaction, Global and
Buyers shall each select an appraiser who shall determine within thirty
(30) days after the closing date of the sale the fair market value of such
consideration as of the closing date of the Sale Transaction. If the two
appraisers agree upon the fair market value of such
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consideration, the agreed upon value shall be the fair market value of such
consideration. If the appraisers do not agree upon the fair market value of
such consideration, the higher of the two appraisals is not more than 110%
of the lower of the appraisals, the fair market value of such consideration
shall be the mean of the two appraisals. If the higher of the two
appraisals is greater than 110% of the lower appraisal, the two appraisers
shall jointly select a third appraiser who independently shall determine
within sixty (60) days after the closing date of the Sale Transaction the
fair market value of such consideration as of the closing date of the Sale
Transaction. The fair market value of such consideration as determined by
the third appraiser will be arithmetically averaged with the two appraisals
determined by the prior two appraisers, and the appraisal farthest from the
average of the three appraisals will be disregarded. The fair market value
of such consideration shall be the average of the two remaining appraisals.
3.3. 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 unless otherwise agreed
by both the payor and the payee: (a) any payment may be made by wire transfer
of immediately available United States federal funds; (b) any payment
exceeding $100,000 shall be made by wire transfer of immediately available
United States federal funds; (c) any payment not exceeding $100,000 may be
made by ordinary check.
4. REPRESENTATIONS OF GLOBAL
Knowing that Buyers are relying thereon, Global, represents and warrants to
Buyer as follows:
4.1. Organization and Authority. Gen-X Equipment is a corporation duly
organized and validly existing under the Laws of Ontario. 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 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.
4.2. 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 Global, free and clear of all Encumbrances, except as set forth on Schedule
4.2. Subject to obtaining the required consents set forth on Schedule 4.4,
Global has 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, Buyers will acquire good title
thereto, free and clear of all Encumbrances. Except for this Agreement, none
of the Global Management has entered into any outstanding Contract relating to
the issuance, sale, redemption, ownership or disposition of any of the Gen-X
Equipment Stock or other securities of Gen-X Equipment. None of the Global
Management has entered into any contract relating to any stock appreciation
rights, phantom shares, cash performance units or other similar rights issued
by Gen-X Equipment.
4.3. 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 Global,
free and clear of all Encumbrances, except as set forth on Schedule 4.3, 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 Global, 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"). Global has 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,
Buyers will acquire good title thereto, free and clear of all Encumbrances.
Except for this Agreement, none of the Global Management has entered into any
outstanding Contract relating to the issuance, sale, redemption, ownership or
disposition of any of the Gen-X Holdings Stock or other securities of
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Gen-X Holdings. None of the Global Management has entered into any contract
relating to any 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 the
Acquisition Agreements by Global (to the extent it is a party thereto or bound
thereby), and the consummation by it of the transactions contemplated hereby
and thereby, (a) have been duly authorized by all necessary corporate actions
by its board of directors and shareholders, except that Global is required to
obtain the approval of this Agreement and the transactions contemplated hereto
by its shareholders (the "Global Shareholder Approval"), (b) do not constitute
a breach or violation of, or a default under, the certificate of
incorporation, bylaws or other organizational document of Global, (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 is bound or its assets or business, (d)
do not constitute a violation of any Law or Judgment applicable to Global or
its assets or business, (e) do not result in the creation of any Encumbrance
upon, or give to any other Person any interest in, the Gen-X Equipment Stock
or the Gen-X Holdings Stock, and (f) except as may be required under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Bylaws of the National Association of Securities Dealers, Inc. (the "NASD")
and for the Global Shareholder Approval and the Consents set forth on Schedule
4.4 (the "Global Required Consents"), do not require the Consent of any
Person; except in the case of clauses (c), (d), and (f) for breaches,
violations, defaults, interests or Consents which would not have a material
adverse effect on the ability of Global to consummate the transactions
contemplated by this Agreement. This Agreement constitutes, and the Ancillary
Agreements when executed and delivered will constitute, the valid and legally
binding agreements of Global enforceable against it (to the extent it is a
party thereto or bound thereby) in accordance with their respective terms.
4.5. Proceedings and Judgments. Except as described on Schedule 4.5, to the
knowledge of Global, (a) no Proceeding is currently pending or threatened, to
which any of the Gen-X Companies are a party, except any such Proceeding that
would not have a Gen-X Material Adverse Effect, or by which the Gen-X Holdings
Stock or the Gen-X Equipment Stock is affected, and (b) no Judgment is
currently outstanding against any of the Gen-X Companies, except any such
Judgment that would not have a Gen-X Material Adverse Effect, or by which the
Gen-X Holdings Stock or the Gen-X Equipment Common Shares is affected.
4.6. Brokerage Fees. Except for Deutsche Bank Alex. Brown, the fees of which
will be paid by Global, no Person acting on behalf of Global is entitled to
any brokerage, finder=s or other similar fee or commission in connection with
the transactions contemplated by this Agreement.
4.7. 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.
5. REPRESENTATIONS OF BUYERS, DMJ, SALTER AND FINKELSTEIN
Knowing that Global is relying thereon, Buyers, DMJ, Salter and Finkelstein,
jointly and severally, represent and warrant to Global as follows:
5.1. Organization and Authority. Each Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. DMJ is a limited liability company duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Buyers and DMJ each possess the full corporate power and
authority to own their respective Assets, conduct their respective businesses
as 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. Salter and Finkelstein each have the full capacity, power and
authority to enter into and perform this Agreement and the transactions
contemplated hereby and the Ancillary Agreements to which they are a party and
by which they are bound and the transactions contemplated thereby.
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5.2. Effect of Agreement. The execution, delivery and performance of the
Acquisition Agreements by Buyers, DMJ, Salter and Finkelstein (to the extent
they are parties thereto or bound thereby), and the consummation by them of
the transactions contemplated hereby and thereby, (a) in the case of Buyers
and DMJ, have been duly authorized by all necessary corporate actions by their
boards of directors and shareholders, (b) in the case of Buyers and DMJ, do
not constitute a breach or violation of, or a default under, the certificate
of incorporation or bylaws (or other organization documents) of Buyers, (c) do
not constitute a breach or violation of, or a default under, any Contract to
which Buyers, DMJ, Salter or Finkelstein are parties or by which Buyers are
bound, (d) do not constitute a violation of any Law or Judgment applicable to
Buyers, DMJ, Salter or Finkelstein (e) do not result in the creation of any
Encumbrance upon, or give to any other Person any interest in, Buyers' capital
stock or in the business or Assets of Buyers, and (f) except as may be
required under the HSR Act, the Exchange Act, and the Bylaws of the NASD and
for the Consents set forth on Schedule 5.2 (the "Buyer Required Consents"), do
not require the Consent of any Person; except in the case of clauses (c), (d)
and (f) for breaches, violations, defaults, Encumbrances, interests or
Consents which would not have a material adverse effect on the ability of
Buyers, DMJ, Salter or Finkelstein to consummate the transactions contemplated
by this Agreement. This Agreement constitutes, and the Ancillary Agreements
when executed and delivered will constitute, the valid and legally binding
agreements of Buyers, DMJ, Salter and Finkelstein enforceable against them (to
the extent they are parties thereto or bound thereby) in accordance with their
respective terms.
5.3. Global Preferred Stock and Contingent Notes. DMJ owns, free and clear
of all Encumbrances and has the full right to sell and transfer all right,
title and interest in and to Seven Thousand Two Hundred (7,200) shares of
Global preferred stock, par value $.01 per share (the "Global Preferred
Stock") Global's non-negotiable subordinated contingent notes in the aggregate
original principal amount of Four Million Five Hundred Thousand Dollars
($4,500,000), dated May 12, 1998 (the "Contingent Notes"), and upon delivery
of the Global Preferred Stock and the Contingent Notes as provided in the
Restructuring Plan, Global will acquire good title thereto, free and clear of
all Encumbrances.
5.4. Operations and Obligations of Buyer. Except as set forth on Schedule
5.4, Buyers were formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and the Ancillary Agreements, and neither Buyer
has other than the transactions, engaged in any business activities, conducted
any operations or incurred or agreed to incur any obligation.
5.5. Proceedings and Judgments. Except as described on Schedule 5.5, (a) no
Proceeding is currently pending, or to the knowledge of DMJ, Salter and
Finkelstein, threatened, to which Buyers DMJ, Salter or Finkelstein are
parties, or by which Buyers' capital stock or the business or Assets of Buyers
are affected, and (b) no Judgment is currently outstanding against Buyers,
DMJ, Salter or Finkelstein or by which Buyers' capital stock or the business
or Assets of Buyers are affected other than the transactions.
5.6. Brokerage Fees.No Person acting on behalf of Buyers DMJ, Salter or
Finkelstein is entitled to any brokerage or finder's fee in connection with
the transactions contemplated by this Agreement.
5.7. Investment Matters. The Gen-X Stock to be received by Buyers hereunder
is 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"). Buyers have had access to
or been furnished with all information about the Gen-X Companies which they
believe is necessary to evaluate the purchase of the Gen-X Stock. Buyers
believe that they are fully knowledgeable or have been fully apprised of all
facts and circumstances necessary to permit them to make an informed decision
about the Gen-X Stock to be received by Buyers hereunder, that they has
sufficient knowledge and experience in business and financial matters, that
they are capable of evaluating the merits and risks of an investment in such
securities, and that they have the capacity to protect their own interests in
connection with the transactions contemplated hereby. Buyers are "accredited
investors" as defined in Regulation D under the 1933 Act. Buyers have been
advised by Global and understand that (a) the Gen-X Stock to be received by
Buyers hereunder will not be registered under the 1933 Act or any securities
Law of any Governmental Authority, and (b) such securities must be held
indefinitely
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unless and until they are subsequently registered under the 1933 Act and all
other applicable securities Laws or an exemption from registration becomes
available.
5.8. Obligations. Neither of DMJ, Salter or Finkelstein has incurred any
Obligation on behalf of Global or any of its Subsidiaries other than the Gen-X
Companies.
5.9. Negotiations. Neither Salter, Finkelstein nor any of their Affiliates
or representatives have engaged in the past six (6) months in any discussion
with any Person or any Subsidiary, Affiliate, representative or advisor of any
Person listed on Schedule 5.9 regarding (i) the sale, conveyance or
disposition of all or substantially all of the assets of the Gen-X Companies
or any transaction in which more than fifty percent (50%) of the voting power
of the Gen-X Companies is disposed of, or (iii) regarding any other form of
acquisition, liquidation, dissolution or winding up of the Gen-X Companies.
5.10. Global Representations. To the knowledge of DMJ, Salter and
Finkelstein, no representation or warranty made by Global in any of the
Acquisition Agreements or pursuant 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.
5.11. Competition Act. There is no requirement to make any filing, give any
notice, or obtain any authorization, in connection with the Competition Act
(Canada) as a condition to the lawful completion of the transactions
contemplated by this Agreement.
5.12. Full Disclosure. No representation or warranty made by Buyers, DMJ,
Salter or Finkelstein 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.
5.13. Hart-Scott-Rodino. Buyers are their own "ultimate parent entity" as
such term is defined pursuant to the HSR Act. Except for Buyers, no other
person or entity is an ultimate parent entity of Buyers. Buyers and all
entities controlled by them, on a consolidated basis, do not (i) hold
$10,000,000 in total assets (as shown on Buyers' most recent regularly
prepared balance sheet) or (ii) have $10,000,000 in annual net sales (as shown
on Buyers' most recent regularly prepared annual statement of income and
expense), as such amounts are determined under HSR. For purposes of this
Section 5.7, the terms "controlled", "annual net sales", "regularly prepared
annual statement of income and expense", "total assets" and "regularly
prepared balance sheet" shall have the meanings ascribed to them pursuant to
the HSR Act.
6. CERTAIN OBLIGATIONS OF GLOBAL PENDING CLOSING
6.1. Global Shareholders' Meeting. Promptly after the date of this
Agreement, Global shall prepare and cause to be filed with the SEC a proxy
statement (the "Proxy Statement") to be sent to the shareholders of Global in
connection with the Global Shareholders' Meeting (as defined below). Subject
to the exercise by the board of directors of Global of its fiduciary duties
under applicable Law, Global shall take all action reasonably necessary under
all applicable Law to call, give notice of, convene and hold a meeting of
Global's shareholders (the "Global Shareholders' Meeting") to consider, act
upon and vote upon the approval of this Agreement and the transactions
contemplated hereby.
6.2. Conduct Pending Closing. During the period from the date of this
Agreement to the Closing Date, except with the express prior written consent
of Buyers, Global shall cause the Gen-X Companies to conduct their respective
businesses in the ordinary course and shall cause the Gen-X Companies not make
any changes in the business of the Gen-X Companies that would have a Gen-X
Material Adverse Effect or to pay any dividend or distribution to Global.
6.3. Consents. Between the date of this Agreement and the Closing Date,
Global shall, and Global shall cause the Gen-X Companies to, in good faith,
use all reasonable efforts to obtain as promptly as practicable the
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Global Required Consents, including all required filings under the HSR Act,
and cooperate with Buyers in obtaining the Buyer Required Consents.
6.4. Advice of Changes. Between the date of this Agreement and the Closing
Date, Global shall promptly advise Buyers 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 any of the Acquisition Agreements (it being understood that any
such advice shall not be deemed to modify the representations, warranties or
covenants of Global contained in the Acquisition Agreements or any written
statement, document or certificate delivered by Global under or in connection
with the Acquisition Agreements).
6.5. Reasonable Efforts. Global shall, and Global shall cause the Gen-X
Companies to, use all reasonable efforts to consummate the transactions
contemplated by the Acquisition Agreements as promptly as practicable.
6.6. Investment Canada Notice. Global, within thirty (30) days after the
Closing Date, will make, or cause to be made, together with Buyers, DMJ,
Salter and Finkelstein, the filing of any requisite notice under the
Investment Canada Act.
7. CERTAIN OBLIGATIONS OF BUYERS, DMJ, SALTER AND FINKELSTEIN PENDING CLOSING
7.1. Consents. Between the date of this Agreement and the Closing Date,
Buyers, DMJ, Salter and Finkelstein shall, in good faith, use all reasonable
efforts to obtain as promptly as practicable, the Buyer Required Consents,
including all required filings under the HSR Act, and shall cooperate with
Global in obtaining the Global Required Consents.
7.2. Advice of Changes. Between the date of this Agreement and the Closing
Date, Buyers, DMJ, Salter and Finkelstein shall promptly advise Global 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 any of the Acquisition Agreements (it
being understood that any such advice shall not be deemed to modify the
representations, warranties or covenants of Buyers contained in any of the
Acquisition Agreements or any written statement, document or certificate
delivered by Buyers under or in connection with any of the Acquisition
Agreements).
7.3. Reasonable Efforts. Buyers, DMJ, Salter and Finkelstein shall use all
reasonable efforts to consummate the transactions contemplated by the
Acquisition Agreements.
7.4. 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, Salter and Finkelstein shall cause the Gen-X Companies to conduct
their respective businesses in the ordinary course and shall not make any
changes in the business of the Gen-X Companies that would have a Gen-X
Material Adverse Effect.
7.5. Investment Canada Notice. Each of Buyers, DMJ, Salter and Finkelstein,
within thirty (30) days after the Closing Date, will make, or cause to be
made, together with Global, the filing of any requisite notice under the
Investment Canada Act.
7.6. This Section Intentionally Left Blank.
7.7. Certain Obligations. Buyers, DMJ, Salter and Finkelstein shall cause
Global and all of its subsidiaries other than the Gen-X Companies to be
released from any and all obligations that Global has to Ride, Inc., RoyNat
and their Affiliates.
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8. 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:
8.1. Representations of Buyers, DMJ, Salter and Finkelstein.
8.1.1 Subject to Section 8.1.2, the representations and warranties of
Buyers, DMJ, Salter and Finkelstein contained in this Agreement 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 Buyers under Section 7.2.
8.1.2 The representations and warranties of Buyers, DMJ, Salter and
Finkelstein contained in this Agreement that are 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 Buyers under Section 7.2.
8.2. Performance by Buyers, DMJ, Salter and Finkelstein. All of the
covenants, terms, obligations and conditions of this Agreement to be satisfied
or performed by Buyers, DMJ, Salter and Finkelstein on or before the Closing
Date shall have been substantially satisfied or performed.
8.3. This Section Intentionally Left Blank.
8.4. Global Shareholder Approval. The Global Shareholder Approval shall have
been obtained.
8.5. Restructuring. The Restructuring shall be in form and substance
reasonably satisfactory to Global.
8.6. Removal from Obligations. Global and all of its Subsidiaries other than
the Gen-X Companies shall have been released from any and all obligations to
Ride, Inc., RoyNat and their Affiliates.
8.7. Absence of Proceedings. No Proceeding shall have been instituted on or
before the Closing Date by any Person (other than Global 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
material damages as a result of, the consummation of the transactions
contemplated by the Acquisition Agreements.
8.8. Fairness Opinion. Global shall have received the written opinion of its
financial advisor to the effect that, as of the date of approval by the board
of directors of Global of the Acquisition Agreements, the consideration to be
received by Global for the Gen-X Stock in connection with the transactions
contemplated by the Acquisition Agreements is fair, from a financial point of
view, to Global, which written opinion shall not have been withdrawn, modified
or changed.
9. CONDITIONS PRECEDENT TO CLOSING BY BUYERS
Each obligation of Buyers 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 Buyers in writing:
9.1. Representations of Global.
9.1.1 Subject to Section 9.1.2, the representations and warranties of
Global contained in this Agreement 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 6.4.
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9.1.2 The representations and warranties of Global contained in this
Agreement that are 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 6.4.
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 Proceedings. No Proceeding shall have been instituted on or
before the Closing Date by any Person (other than Buyers, DMJ, Salter or
Finkelstein), 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
material damages as a result of, the consummation of the transactions
contemplated by the Acquisition Agreements.
9.4. Acceleration of Vesting of Options. Global shall have accelerated (a)
the vesting of all of the options to purchase shares of Global common stock,
par value $.01 per share ("Global Common Stock"), held as of the date hereof
by Salter and Finkelstein, so that such options shall become exercisable as of
the Amendment Date; and (b) the vesting of the options granted to the
employees set forth on Schedule 9.4 in the aggregate amount of 281,930 shares
of Global Common Stock, so that such options shall become exercisable as of
the Amendment Date.
10. CLOSING
10.1. Closing. Unless this Agreement is terminated in accordance with
Section 13, the closing of the transactions contemplated by this Agreement
("Closing") shall be held at 10:00 A.M. Philadelphia, Pennsylvania time on
such date and at such time as is agreed upon by Global and Buyers which shall
be no later than the second business day after the satisfaction or waiver of
all conditions set forth in Sections 8 and 9 hereof, unless another date and
time is agreed upon by Global and Buyers ("Closing Date"). The Closing shall
be held at the offices of Blank Rome Comisky & McCauley LLP, One Logan Square,
Philadelphia, PA 19103 or such other location as is agreed upon by Global and
Buyers.
10.2. Obligations of Global. At the Closing, Global shall deliver or cause
to be delivered the following to Buyers:
10.2.1 Gen-X Equipment Stock. Stock certificates representing all of the
Gen-X Equipment Stock, together with assignments separate from certificate
in blank, dated the Closing Date and duly executed by Global, and stamps or
other proper evidence of the payment of any stock transfer or similar Taxes
due as a result of the transfer of such stock, to transfer all of the Gen-X
Equipment Stock.
10.2.2 Gen-X Holdings Stock. Stock certificates representing all of the
Gen-X Holdings Stock, together with assignments separate from certificate
in blank, dated the Closing Date and duly executed by Global, and stamps or
other proper evidence of the payment of any stock transfer or similar Taxes
due as a result of the transfer of such stock, to transfer all of the Gen-X
Holdings Stock.
10.2.3 This Section Intentionally Left Blank.
10.2.4 Corporate Records and Minute Books. All of the original minute
books and stock books of the Gen-X Companies.
10.2.5 Certified Resolutions. Copies of the resolutions duly adopted by
the board of directors, and if necessary the shareholders, of Global,
authorizing Global to execute, deliver and perform this Agreement and to
consummate the transactions contemplated by this Agreement, certified by an
officer of Global as in full force and effect, without modification or
rescission, on and as of the Closing Date.
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10.2.6 Termination of Employment Agreements. Termination Agreements in
the forms attached hereto as Exhibit "C" and Exhibit "D", relating to the
Employment Agreements of Salter and Finkelstein, duly executed by Global as
of the Closing Date.
10.2.7 This Section Intentionally Left Blank.
10.2.8 Right of First Offer Agreement. Right of First Offer Agreement in
the form attached hereto as Exhibit "F", duly executed by Global as of the
Closing Date.
10.2.9 Non-Competition Agreement. Non-Competition Agreement in the form
attached hereto as Exhibit "G", dated the Closing Date, duly executed by
Global and Michael G. Rubin.
10.2.10 Termination of Non-Competition Agreement. Termination of Non-
Competition Agreement in the form attached hereto as Exhibit "H", relating
to the Non-Competition Agreement of DMJ, Salter and Finkelstein duly
executed by Global as of the Closing Date.
10.2.11 Closing Certificate. A certificate dated the Closing Date and
duly executed by Global, in which Global represents and warrants to Buyers
that the conditions set forth in Sections 9.1, 9.2, 9.3 and 9.4 have been
satisfied.
10.2.12 Legal Opinion. Legal Opinion of Blank Rome Comisky & McCauley
LLP, counsel to Global in the form attached hereto as Exhibit AI A.
10.2.13 This Section Intentionally Left Blank.
10.2.14 Consents. The Global Required Consents.
10.2.15 Other Documents. All other agreements, certificates, instruments,
opinions and documents reasonably requested by Buyers in order to fully
consummate the transactions contemplated by the Acquisition Agreements.
10.3. Obligations of Buyers at Closing. At the Closing, Buyers, DMJ, Salter
and Finkelstein shall deliver or cause to be delivered the following to
Global:
10.3.1 Closing Payment. The Closing Payment in the amount set forth in
Section 3.1, paid in the manner set forth in Section 3.3.
10.3.2 This Section Intentionally Left Blank.
10.3.3 Proxy of DMJ. A voting proxy in favor of Global in connection with
the 800 shares of Global Preferred Stock registered in the name of DMJ.
10.3.4 Preferred Stock. Stock certificates representing 7,200 shares of
Global Preferred Stock, together with assignments separate from certificate
duly executed by DMJ to transfer such shares to Global.
10.3.5 Assignment and Assumption of Replacement Notes. Assignment and
Assumption Agreement in the form attached hereto as Exhibit "K", relating
to the Replacement Notes, duly executed by DMJ as of the Closing Date.
10.3.6 Termination of Employment Agreements. Termination Agreements in
the forms attached hereto as Exhibit "C" and Exhibit "D", relating to the
Employment Agreements of Salter and Finkelstein, duly executed by Salter
and Finkelstein, respectively, as of the Closing Date.
10.3.7 This Section Intentionally Left Blank.
10.3.8 This Section Intentionally Left Blank.
10.3.9 This Section Intentionally Left Blank.
10.3.10 This Section Intentionally Left Blank.
10.3.11 This Section Intentionally Left Blank.
10.3.12 This Section Intentionally Left Blank.
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10.3.13 Preferred Stock Purchase Agreement. Preferred Stock Purchase
Agreement in the form attached hereto as Exhibit "Q", duly executed by DMJ,
Gen-X Holdings and Gen-X Equipment as of the Closing Date.
10.3.14 Gen-X Holdings Stock. Stock certificates representing all of the
Gen-X Holdings Stock, together with assignments separate from certificate
in blank, dated the Closing Date and duly executed by U.S. Co., to be held
by the pledgeholder under the Pledge and Security Agreement to be executed
by U.S. Co.
10.3.15 This Section Intentionally Left Blank.
10.3.16 This Section Intentionally Left Blank.
10.3.17 This Section Intentionally Left Blank.
10.3.18 Certified Resolutions. Copies of the resolutions duly adopted by
the boards of directors of Buyers, authorizing such companies to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated by this Agreement, certified by an officer of such company as
in full force and effect, without modification or rescission, on and as of
the Closing Date.
10.3.19 Closing Certificate. A certificate dated the Closing Date and
duly executed by Buyers, DMJ, Salter and Finkelstein, in which they
represent and warrant to Global that the conditions set forth in Sections
8.1, 8.2, 8.3, 8.4, 8.5, 8.6 and 8.7 have been satisfied.
10.3.20 Legal Opinion. Legal Opinion of Borden & Elliot, counsel to
Buyers, DMJ, Salter and Finkelstein, in the form attached hereto as Exhibit
"R".
10.3.21 Consents. The Buyers Required Consents.
10.3.22 Other Documents. All other agreements, certificates, instruments,
opinions and documents reasonably requested by Global in order to fully
consummate the transactions contemplated by the Acquisition Agreements.
11. CERTAIN POST-CLOSING OBLIGATIONS
11.1. Further Assurances. At any time and from time to time after the
Closing Date, at Buyers' request, and without further consideration, Global
shall promptly execute and deliver all such further agreements, certificates,
instruments and documents, and perform such further actions, as Buyers may
reasonably request in order to fully consummate the transactions contemplated
by the Acquisition Agreements and carry out the purposes and intent of the
Acquisition Agreements. At any time and from time to time after the Closing
Date, at Global's request, and without further consideration, Buyers, DMJ,
Salter and/or Finkelstein 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 the Acquisition Agreements and carry out the
purposes and intent of the Acquisition Agreements.
11.2. Nondisclosure
11.2.1 At all times after the Closing Date, except with Buyers' express
prior written consent, Global shall not, 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 of the Gen-X Companies. For purposes of this Section 11.2.1,
confidential information shall not include any information that (i) is now
available to the public or which becomes available to the public other than
as a result of disclosure by Global, (ii) is or becomes available to Global
on a non-confidential basis from a source other than the Gen-X Companies,
or (iii) has been independently acquired or developed by Global without
violating any of its obligations under this Agreement.
11.2.2 At all times after the Closing Date, except with Global=s express
prior written consent, neither Buyers, DMJ, Salter nor Finkelstein 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 of Global. For purposes of this
Section 11.2.2, confidential information shall not include any
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information that (i) is now available to the public or which becomes
available to the public other than as a result of disclosure by Buyers,
DMJ, Salter or Finkelstein, (ii) is or becomes available to Buyers, DMJ,
Salter or Finkelstein on a non-confidential basis from a source other than
the Global, or (iii) has been independently acquired or developed by
Buyers, DMJ, Salter or Finkelstein without violating any of its obligations
under this Agreement.
11.2.3 Global, on the one hand, and Buyers, DMJ, Salter nor Finkelstein
on the other, expressly acknowledge that any breach by it of the covenant
contained in Section 11.2.1 or 11.2.2, as the case may be (the "Covenant"),
may result in irreparable injury to the other party for which money damages
could not adequately compensate. If there is such a breach, the aggrieved
party 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 the breaching party and all other Persons
involved therein, from continuing such breach.
11.2.4 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.
11.3. Noncompetition
11.3.1 During the period beginning on the date hereof and ending on the
date when Buyers' obligations under the U.S. Co. Promissory Note and the
Canadian Co. Promissory Note have been completely and indefeasibly
satisfied (the "Restrictive Period"), except with Global's prior written
consent, none of Buyers, DMJ, Salter or Finkelstein shall, directly or
indirectly, in any capacity, at any location where any of the Gen-X
Companies currently conducts or proposes to conduct business as of the date
hereof (the "Territory"):
(A) Communicate with or solicit any Person who is or during the one-
year period prior to the Closing Date was, or during the Restrictive
Period becomes, a customer, supplier, employee, salesman, agent or
representative of, or a consultant to, any of the Gen-X Companies, in
any manner which interferes or might interfere with such Person's
relationship with any of the Gen-X Companies, or in an effort to obtain
any such Person as a customer, employee, salesman, agent or
representative of, or a consultant to, any other Person that conducts a
business competitive with or similar to all or any part of the business
of any of the Gen-X Companies as currently conducted, or
(B) Establish, own, manage, operate, finance or control, or
participate in the establishment, ownership, management, operation,
financing or control of, or be a director, officer, employee, salesman,
agent or representative of, or be a consultant to, any Person that
conducts a business competitive with or similar to all or any part of
the business of any of the Gen-X Companies as currently conducted.
11.3.2 Buyers, DMJ, Salter and Finkelstein expressly acknowledge that (a)
the restrictive covenants of this Section 11.3 (the "Covenants") are a
material part of the consideration bargained for by Global, and (b) without
the agreement of Buyers, DMJ, Salter and Finkelstein to be bound by the
Covenants, Global would not have agreed to enter into this Agreement and
consummate the transactions contemplated hereby.
11.3.3 Buyers, DMJ, Salter and Finkelstein 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 Buyers,
DMJ, Salter, Finkelstein and all other Persons involved therein from
continuing such breach. The existence of any claim or cause of action which
any of Buyers, DMJ, Salter, Finkelstein or any such other Person may have
against Global shall not constitute a defense or bar to the enforcement of
any
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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.
11.3.4 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.
11.3.5 Buyers, DMJ, Salter and Finkelstein expressly acknowledge that the
provisions of this Section 11.3 of the Agreement are reasonable and valid
in all respects and irrevocably waive (and irrevocably agree not to raise)
as a defense any issue of reasonableness (including the reasonableness of
the noncompetition covenant insofar as it relates to the business of the
Gen-X Companies, the Territory or the duration or scope of the Covenants)
in any proceeding to enforce any provision of this Section 11.3 of the
Agreement, the intention of the parties being to provide for the legitimate
and reasonable protection of the interests of Global and by providing,
without limitation, for the broadest scope, the longest duration and the
widest territory allowable by law.
11.4. Removal of Assets. Buyers shall, at their expense, within ninety (90)
days after the Closing Date, remove all of the Assets owned by Gen-X Holdings
and Gen-X Equipment (including any Inventory and warehouse and racking
equipment sold by KPR Sports International, Inc. to Gen-X Holdings, or its
Affiliates, prior to the date hereof) from Global's premises, FOB King of
Prussia, without any disruption of Global's operation, and at such times as
shall be reasonably satisfactory to Global. If not so removed during such time
period, Global may, at its option, have such items shipped to Buyers at
Buyers' expense, or agree to store such items for Buyers, in which case Buyers
shall pay to Global a reasonable storage charge for such period of time that
Global stores such items. In the event Global stores such items for Buyers,
Buyers agree that Global shall have no liability with respect to such items
and hereby releases and holds harmless Global from any such liability.
11.5. Investigation
11.5.1 During the period beginning on the date hereof and ending on the
date when Buyers= obligations under the U.S. Co. Promissory Note and the
Canadian Co. Promissory Note shall have been completely and indefeasibly
satisfied:
(A) Buyers shall permit Global and its authorized representatives to
have full access to the Gen-X Companies' facilities during normal
business hours, to observe the Gen-X Companies' business operations, to
meet with the Gen-X Companies' officers and employees engaged in the
Gen-X Companies' business, and to audit, examine and copy all of the
Gen-X Companies' files, books and records, and other documents and
papers relating to the Gen-X Companies' business, and
(B) Buyers shall provide to Global and its authorized representatives
all information concerning the Gen-X Companies and the Gen-X Companies'
business and Assets, and all information concerning the financial
condition of the Gen-X Companies and the Gen-X Companies' business,
that is reasonably requested by Global.
11.5.2 The expense of any investigation by Global pursuant to this
Section 11.5 shall be borne solely by Global; provided, however, that if
there has been: (a) a misrepresentation, breach or failure of any
representation or warranty made by Buyers, DMJ, Salter or Finkelstein in
any of the Acquisition Agreements or (b) a failure or refusal by Buyers,
DMJ, Salter or Finkelstein to satisfy or perform any covenant, term,
obligation or condition of any of the Acquisition Agreements required to be
satisfied or
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performed by Buyers, DMJ, Salter or Finkelstein, then Buyers shall
reimburse Global for all reasonable fees and expenses incurred by or on
behalf of Global in connection with such investigation.
11.6. Accounting Matters, Books and Records. Commencing on the Closing Date
and continuing for a period of one year thereafter, the Gen-X Companies shall,
and DMJ, Salter, Finkelstein and U.S. Co shall cause the Gen-X Companies to,
(a) give Global, its counsel, accountants and other representatives access to
the accounting books, records and accounts of the Gen-X Companies during
regular business hours.
12. INDEMNIFICATION, SETOFF AND PAYMENT OF ADJUSTMENTS
12.1. Indemnification Obligations of Global. From and after the Closing,
Global shall indemnify and hold harmless Buyers and their 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:
12.1.1 Any misrepresentation, breach or failure of any representation or
warranty made by Global in any of the Acquisition Agreements or any written
statement, document or certificate delivered to Buyers by Global under or
in connection with the Acquisition Agreements.
12.1.2 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 any of them.
12.1.3 Amounts due to Just for Feet, Inc. resulting from purchases by
Global from Just for Feet, Inc. prior to August 1, 1999.
12.2.Indemnification Obligations of Buyers, DMJ, Salter and
Finkelstein. From and after the Closing, Buyers, DMJ, Salter and Finkelstein,
jointly and severally, shall indemnify and hold harmless Global and its
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:
12.2.1 Any misrepresentation, breach or failure of any representation or
warranty made by Buyers, DMJ, Salter or Finkelstein in any of the
Acquisition Agreements or any written statement, document or certificate
delivered to Global by Buyers, DMJ, Salter or Finkelstein under or in
connection with any of the Acquisition Agreements.
12.2.2 Any failure or refusal by Buyers, DMJ, Salter or Finkelstein to
satisfy or perform any covenant, term, obligation or condition of any of
the Acquisition Agreements required to be satisfied or performed by Buyers,
DMJ, Salter or Finkelstein.
12.2.3 Any action, suit or claim arising out of, caused by or based in
whole or in part upon any act or omission of Gen-X Holdings or Gen-X
Equipment, or any of their respective shareholders, partners, directors,
executives, officers, employees, agents or representatives at any time
after the Closing or any event which occurs after the Closing.
12.2.4 Any liability of or claim against Global in connection with any
Customs Canada detailed adjustment statement issued against any of the Gen-
X Companies, including, but not limited to the Customs Canada detailed
adjustment statements issued against Gen-X Equipment: (a) dated January 27,
1999, assessing duties in the amount of Cdn$303,548, GST in the amount of
Cdn$233,650 together with interest in the amount of Cdn$72,416; and (b)
dated March 1, 1999, assessing duties in the amount of Cdn$625,985, GST in
the amount of Cdn$526,240 together with interest in the amount of
Cdn$60,232.
12.2.5 Any action, suit or claim by any of the Minority Shareholders (as
defined in the Stock Purchase Agreement, dated May 12, 1998, by and among
Global, DMJ, Salter, Finkelstein and certain other individuals and
entities) or any of their respective shareholders, partners, directors,
executives, officers,
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employees, agents, representatives, heirs, executors, administrators,
personal representatives or assigns arising out of, caused by or based in
whole or in part upon any act or omission of DMJ, Salter, Finkelstein, Gen-
X Holdings or Gen-X Equipment, or any of their respective shareholders,
partners, directors, executives, officers, employees, agents,
representatives, heirs, executors, administrators, personal representatives
or assigns.
12.2.6 Amounts due to Just for Feet, Inc. resulting from purchases by any
of the Gen-X Companies from Just for Feet, Inc. on or after August 1, 1999.
12.2.7 Any action, suit or claim related to, arising out of or resulting
from Gen-X Holdings' indebtedness to Ride, Inc. and its successors or
assigns, pursuant to promissory notes in the original principal amounts of
$977,624 and $1,022,376.
12.2.8 Any action, suit or claim related to, arising out of or resulting
from Gen-Holdings' indebtedness to Bert LaMar, Jerome F. Sheldon, Eric J.
Sheldon and Jeffrey M. Sheldon and their respective heirs or assigns,
pursuant to promissory notes in the original principal amounts of $113,889,
$381,705, 293,094 and $211,302, respectively.
12.2.9 Any action, suit or claim related to, arising out of or resulting
from Gen-X Equipment's alleged infringement of HYI's EVEREST trademark.
12.3. Indemnification Notice. With respect to each event, occurrence or
matter ("Indemnification Matter") and with respect as to which Buyers, DMJ,
Salter or Finkelstein on the one hand, or Global on the other hand (referred
to as the "Indemnitee"), is entitled to indemnification from another party
(referred to as the "Indemnitor") under this Section 12, 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").
12.4. 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:
12.4.1 The Indemnitee may, at its option and expense and through counsel
of its choice, participate in (but not control) the Defense.
12.4.2 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, provided further that Indemnitee shall not
consent to any Judgment or agree to any settlement without Indemnitor's
prior written consent.
12.4.3 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.
12.4.4 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, provided
further that Indemnitee shall not consent to any Judgment or agree to any
settlement without Indemnitor's prior written consent.
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12.4.5 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.
12.5. Limits on Indemnification Matters and Global's Payment.
12.5.1 Limits on Global's Payment. The amounts, if any, owed by Global to
Buyers as Indemnitor pursuant to Section 12.1 ("Global's Payment"), shall
be subject to the following:
(A) Deductible. No amount shall be payable by Global to Buyers for
Global's Payment, unless and until the aggregate amount of Global's
Payment exceeds Fifty Thousand Dollars ($50,000), in which event Global
shall pay such aggregate amount and all future amounts payable by
Global under this Section 12.
(B) Exceptions. The limitation in Sections 12.5.1(A) shall not apply
in case of any Indemnification Matter or other adjustment involving
fraud, willful misconduct or criminal matters.
(C) Duration. With respect to any Indemnification Matter, Global
shall have no liability unless Buyers give an Indemnification Notice in
accordance with Section 12.3 within 12 months after the Closing Date,
provided, however, that the limitation contained in this Section
12.5.1(C) shall not apply to any Indemnification Matter that arises
from any failure or refusal by Global to satisfy or perform any
covenant, term, obligation or condition of any of the Acquisition
Agreements required to be satisfied or performed by Global after the
Closing Date.
12.5.2 Limits on Buyers' Indemnification. The amount, if any, owed by
Buyers, DMJ, Salter and Finkelstein to Global as Indemnitor pursuant to
Section 12.2 shall be subject to the following:
(A) Deductible. No amount shall be payable by Buyers, DMJ, Salter and
Finkelstein to Global under this Section 12, unless and until the
aggregate amount otherwise payable by Buyers, DMJ, Salter and
Finkelstein under this Section 12 exceeds Fifty Thousand Dollars
($50,000), in which event Buyers, DMJ, Salter and Finkelstein shall pay
such aggregate amount and all future amounts payable by Buyers, DMJ,
Salter and Finkelstein under this Section 12.
(B) Exceptions. The limitation in Sections 12.5.2(A) shall not apply
in case of any Indemnification Matter involving fraud, willful
misconduct or criminal matters.
(C) Duration. With respect to any Indemnification Matter, Buyers
shall have no liability unless Global gives an Indemnification Notice
in accordance with Section 12.3 within 12 months after the Closing
Date, provided, however, that the limitation contained in this Section
12.5.2(C) shall not apply to any Indemnification Matter that arises
from any failure or refusal by Buyers, DMJ, Salter or Finkelstein to
satisfy or perform any covenant, term, obligation or condition of any
of the Acquisition Agreements that is required to be satisfied or
performed after the Closing Date or that arises under Section 12.2.3.
12.5.3 If Global is obligated to pay Buyers any amounts under Section
12.1 after taking into account the application of the limitations contained
in Section 12.5.1(A), then any such amount payable by Global to Buyers
shall be reduced by any amounts Buyers would have been required to pay to
Global under Section 12.5.2 but for the application of the limitations
contained in Section 12.5.2(A). If Buyers, DMJ, Salter or Finkelstein is
obligated to pay Global any amounts under Section 12.2 after taking into
account the limitations contained in Section 12.5.2(A), then any such
amounts payable by Buyers to Global shall be reduced by any amounts Global
would have been required to pay to Buyers under Sections 12.1 but for the
application of the limitations contained in Section 12.5.1(A).
12.6. Indemnification Payment and Buyers' Payment. All amounts owed by the
Indemnitor to the Indemnitee (if any) shall be paid in full within twenty (20)
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. Any amount paid under this Section 12 is intended by
all parties and shall be considered to be and treated as an adjustment to the
Purchase Price.
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<PAGE>
12.7. Setoff and Holdback. In addition to all other rights and remedies that
the Indemnitee 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 12 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 12 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 pay the total amount for which the Indemnitor may become
liable as a result thereof, determined by the Indemnitee reasonably and in
good faith, to Borden & Elliot, as escrow agent, to be held by such escrow
agent pursuant to the escrow agreement (the "Escrow Agreement") attached
hereto as Exhibit "S", until final determination of such Indemnification
Matter, and shall pay the balance, if any, of such payment to the Indemnitor.
13. TERMINATION
13.1. Termination. This Agreement, and the transactions contemplated hereby,
may be terminated at any time before Closing in accordance with any of the
following methods:
13.1.1 By the mutual written consent of Global and Buyers.
13.1.2 By written notice from Global to Buyers, or from Buyers to Global,
if the Closing does not occur on or before May 31, 2000 for any reason
other than a breach of this Agreement by the party giving such notice.
13.1.3 By written notice from Buyers to Global, if it becomes certain,
for all practical purposes, that any of the conditions to the Closing
Obligations of Buyers, DMJ, Salter or Finkelstein cannot be satisfied for a
reason other than Buyers', Salter's or Finkelstein's breach of this
Agreement, and Buyers are not willing to waive the satisfaction of such
condition.
13.1.4 By written notice from Global to Buyers 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.
13.1.5 By written notice from Buyers to Global if Global breaches any of
its representations, warranties, covenants or agreements contained in this
Agreement.
13.1.6 By written notice from Global to Buyers if Buyers, DMJ, Salter or
Finkelstein breaches any of its representations, warranties, covenants or
agreements contained in this Agreement.
13.1.7 By written notice from Global to Buyers if Global receives an
offer from a third party to acquire Gen-X Holdings and Gen-X Equipment and
the board of directors of Global determines, in good faith, that its
fiduciary duties under applicable Law require Global to accept such offer.
13.2. Effect of Termination. Upon termination of this Agreement pursuant to
Section 13.1, this Agreement shall forthwith have no further force or effect,
and there shall be no liability on the part of any party hereto; provided,
however, that (i) this Section 13.2 and Section 14 (other than Section 14.7),
shall survive the termination of this Agreement and shall remain in full force
and effect, and (ii) the termination of this Agreement shall not relieve any
party from any breach of this Agreement prior to such termination; further
provided, however, that if Global terminates this Agreement pursuant to
Section 13.1.7, and neither Buyers, DMJ, Salter nor Finkelstein is in breach
of the Agreement, then Global shall pay to DMJ, within five business days
after the termination of this Agreement, a nonrefundable fee in the amount of
$1.5 million.
14. OTHER PROVISIONS
14.1. 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
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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
13, 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.
14.2. Publicity. All voluntary public announcements concerning the
transactions contemplated by this Agreement shall be mutually acceptable to
both Global and Buyers. Unless required by Law, neither Global, on the one
hand, nor Buyers, DMJ, Salter or Finkelstein, 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
Buyers, 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.
14.3. Expenses. Global shall pay all of the fees and expenses incurred by it
in negotiating and preparing the Acquisition Agreements and in consummating
the transactions contemplated by the Acquisition Agreements. The Gen-X
Companies shall pay all of the fees and expenses incurred by Buyers, DMJ,
Salter and Finkelstein in negotiating and preparing the Acquisition Agreements
and in consummating the transactions contemplated by the Acquisition
Agreements. Notwithstanding the foregoing, Buyers, DMJ, Salter and Finkelstein
(and not the Gen-X Companies) shall pay all of the fees and expenses incurred
by Buyers, DMJ, Salter and Finkelstein in negotiating and preparing the
Acquisition Agreements and in consummating the transactions contemplated by
the Acquisition Agreements if this Agreement, and the transactions
contemplated hereby, are terminated pursuant to Section 13.1.6 of this
Agreement.
14.4. 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 within 24 hours thereafter by a signed original sent in the manner
provided in the preceding sentence. A copy of each notice to Buyers, DMJ,
Salter or Finkelstein shall be simultaneously sent to Borden & Elliot, Scotia
Plaza, 40 King Street West, Toronto, Ontario M5H 3Y4, Canada, Attn: Daniel F.
Hirsh. A copy of each notice to Global shall be simultaneously sent to: Blank
Rome Comisky & McCauley LLP, One Logan Square, Philadelphia, Pennsylvania
19103, Attn: Francis E. Dehel, 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.
14.5. 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 Buyers, DMJ, Salter
and Finkelstein.
14.6. 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 Buyers, DMJ, Salter and/or
Finkelstein unless in writing and signed by Buyers, DMJ, Salter and/or
Finkelstein, as the case will be. 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.
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<PAGE>
14.7. Survival of Representations. 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.
14.8. Entire Understanding. Entire Understanding. The Acquisition
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.
14.9. Parties in Interest. Parties in Interest. This Agreement shall bind,
benefit, and be enforceable by and against each party hereto and its
successors and assigns. Global shall not in any manner assign any of its
rights or obligations under this Agreement without the express prior written
consent of Buyers, and neither Buyers, DMJ, Salter nor Finkelstein shall in
any manner assign any of its rights or obligations under this Agreement
without the express prior written consent of Global.
14.10. Severability. I 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.
14.11. 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, Buyers, DMJ, Salter and
Finkelstein, 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.
14.12. 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.
14.13. 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, (i) the words "hereof" and
"hereunder" and similar references refer to this Agreement in its entirety and
not to any specific section or subsection hereof, and (ii) the word
"including" shall mean including but not limited to.
14.14. 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.
14.15. 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 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 14.4. 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.
14.16. 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
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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.
14.17. Construction. The parties agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of the Acquisition
Agreements or any other agreements or documents delivered in connection with
the transactions contemplated by the Acquisition Agreements.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
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/ Kenneth J. Finkelstein
-------------------------------- --------------------------------
Name: Michael G. Rubin Name:
Title: Chairman and CEO Title:
GEN-X ACQUISITION (U.S.), INC. GEN-X ACQUISITION (CANADA) INC.
By: /s/ James J. Salter By: /s/ James J. Salter
-------------------------------- --------------------------------
Name: Name:
Title: Title:
/s/ Kenneth J. Finkelstein /s/ James J. Salter
- ------------------------------------ ------------------------------------
KENNETH J. FINKELSTEIN JAMES J. SALTER
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<PAGE>
March 12, 2000
Board of Directors
Global Sports, Inc.
1075 First Avenue
King of Prussia, PA 19406
Gentlemen:
Deutsche Bank Securities Inc. ("Deutsche Bank") has acted as financial
advisor to Global Sports, Inc. ("Global Sports") in connection with the
proposed sale of Gen-X Holdings Inc., Gen-X Equipment Inc. and the off-price
division of KPR Sports International, Inc. (collectively, the "Company")
pursuant to an acquisition agreement dated September 24, 1999, as amended (the
"Acquisition Agreement") between (i) Global Sports and (ii) Gen-X Acquisition
(US), Inc., Gen-X Acquisition (Canada) Inc., and DMJ Financial Inc., entities
controlled by James Salter and Kenneth Finkelstein, (collectively, the
"Buyer"), which provides, among other things, for the acquisition of the
Company by the Buyer (the "Transaction"). As set forth more fully in the
Acquisition Agreement, as a result of the Transaction, the Buyer will purchase
the Company for aggregate consideration (the "Consideration") of $17.2 million
payable in the form of (i) $13.2 million in cash, and (ii) $4.0 million
through the assumption of certain liabilities owing from Global Sports to DMJ
Financial, Inc. The terms and conditions of the Transaction are more fully set
forth in the Acquisition Agreement.
You have requested Deutsche Bank's opinion, as investment bankers, as to the
fairness, from a financial point of view, to Global Sports of the
Consideration to be received by Global Sports for the Company in connection
with the Transaction.
In connection with Deutsche Bank's role as financial advisor to Global
Sports, and in arriving at its opinion, Deutsche Bank has reviewed certain
publicly available financial and other information concerning the Company and
certain internal analyses and other information furnished to it by the Company
and Global Sports. Deutsche Bank has also held discussions with members of the
senior managements of the Company and Global Sports regarding the business and
prospects of the Company. In addition, Deutsche Bank has (i) reviewed the
financial performance of the Company, (ii) reviewed the financial terms of
certain recent acquisitions which it deemed comparable in whole or in part,
(iii) reviewed the terms of the Acquisition Agreement and certain related
documents, and (iv) performed such other studies and analyses and considered
such other factors as it deemed appropriate. We found no publicly-traded
companies that are comparable to the Company. Accordingly, we were unable to
value the Company based upon comparable market valuations. In addition, based
upon the nature of the Company's business, management of the Company and
Global Sports believes it is impractical to produce financial projections;
consequently, we were unable to perform a discounted cash flow valuation
analysis or leveraged buyout valuation analysis.
Deutsche Bank has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning the Company, including, without
limitation, any financial information or forecasts considered in connection
with the rendering of its opinion. Accordingly, for purposes of its opinion,
Deutsche Bank has assumed and relied upon the accuracy and completeness of all
such information and Deutsche Bank has not conducted a physical inspection of
any of the properties or assets, and has not prepared or obtained any
independent evaluation or appraisal of any of the assets or liabilities, of
the Company. Deutsche Bank's opinion is necessarily based upon economic,
market and other conditions as in effect on, and the information made
available to it as of, the date hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analysis, the representations and warranties of
Global Sports, the Company and the Buyer contained in the Acquisition
Agreement are true and correct and that Global Sports, the Company and the
Buyer will each
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<PAGE>
perform all of the covenants and agreements to be performed by it under the
Acquisition Agreement and all conditions to the obligations of each of Global
Sports and the Buyer to consummate the Transaction will be satisfied without
any waiver thereof. Deutsche Bank has also assumed that all material
governmental, regulatory or other approvals and consents required in
connection with the consummation of the Transaction will be obtained and that
in connection with obtaining any necessary governmental, regulatory or other
approvals and consents, or any amendments, modifications or waivers to any
agreements, instruments or orders to which Global Sports is a party or is
subject or by which it is bound, no limitations, restrictions or conditions
will be imposed or amendments, modifications or waivers made that would have a
material adverse effect on Global Sports.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Global Sports and is not a recommendation to the stockholders of
Global Sports to approve the Transaction. This opinion is limited to the
fairness, from a financial point of view, to Global Sports of the
Consideration to be received by Global Sports for the Company in connection
with the Transaction, and Deutsche Bank expresses no opinion as to the merits
of the underlying decision by Global Sports to engage in the Transaction.
Deutsche Bank will be paid a fee for its services as financial advisor to
Global Sports in connection with the Transaction, a substantial portion of
which is contingent upon consummation of the Transaction. We are an affiliate
of Deutsche Bank AG (together with its affiliates, the "DB Group"). One or
more members of the DB Group have, from time to time, provided investment
banking and other financial services to Global Sports or its affiliates for
which it has received compensation, including representing Global Sports as
exclusive sale agent in its divestiture of its branded footwear business. In
the ordinary course of business, members of the DB Group may actively trade in
the securities and other instruments and obligations of Global Sports for
their own accounts and for the accounts of their customers. Accordingly, the
DB Group may at any time hold a long or short position in such securities,
instruments and obligations.
Based upon and subject to the foregoing, it is Deutsche Bank's opinion as
investment bankers that the Consideration to be received by Global Sports for
the Company in connection with the Transaction is fair, from a financial point
of view, to Global Sports.
Very truly yours,
DEUTSCHE BANK SECURITIES INC.
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<PAGE>
INDEMNIFICATION AGREEMENT
APPENDIX C
Parties: GLOBAL SPORTS, INC.,
- -------
a Delaware corporation (the "Company")
555 South Henderson Road
King of Prussia, PA 19406
_____________________ ("Indemnitee")
_____________________
_____________________
Date:
- ----
Background: The Company and Indemnitee recognize that in the present business
- ----------
environment, officers and directors of public companies are subject to the risk
of expensive corporate and other litigation. Indemnitee does not regard the
current protection provided by the Company as adequate given the present
circumstances and Indemnitee and other officers and directors of the Company may
not be willing to serve as officers and directors without adequate protection.
The Company desires to attract and retain the services of highly qualified
individuals, such as Indemnitee to serve as officers and/or directors of the
Company and to indemnify its officers and/or directors so as to provide them
with the maximum protection permitted by law.
INTENDING T0 BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below and other good and valuable consideration, the Company
and Indemnitee agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify Indemnitee
-----------------------
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) (i) by reason of the fact that Indemnitee is or was a
director, officer, employee, attorney, or agent of the Company, or any
subsidiary of the Company, (ii) by reason of any action or inaction on the part
of Indemnitee while an officer, director, employee, attorney or agent, or (iii)
by reason of the fact that Indemnitee is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, in each case against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement (if such settlement is approved pursuant to Section 2(f) hereof)
actually and reasonably incurred by Indemnitee in connection with such action,
suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best
<PAGE>
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that Indemnitee's conduct was
unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor (i) by reason of the fact that Indemnitee is or was a director,
officer, employee, attorney or agent of the Company, or any subsidiary of the
Company, (ii) by reason of any action or inaction on the part of Indemnitee
while an officer, director, employee, attorney or agent, or (iii) by reason of
the fact that Indemnitee is or was serving at the request of the Company as a
director, officer, employee, attorney or agent of another corporation,
partnership, joint venture, trust or other enterprise in each case against
expenses (including attorneys' fees) and amounts paid in settlement (if such
settlement is approved pursuant to Section 2(f) hereof) actually and reasonably
incurred by Indemnitee in connection with the defense or settlement of such
action or suit if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification shall be made in respect of any claim,
issue or matter as to which Indemnitee shall have been adjudged to be liable to
the Company, unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that despite the adjudication of liability but in
view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the State
of Delaware or such other court shall deem proper.
(c) Mandatory Indemnification. To the extent that Indemnitee has been
-------------------------
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1(a) and 1(b) or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith. For purposes of this Section 1(c), the term "successful on
the merits or otherwise" shall include, but not be limited to, (i) any
termination, withdrawal or dismissal (with or without prejudice) of any claim,
action, suit or proceeding against Indemnitee without any express finding of
liability or guilt against him, or (ii) the expiration of a reasonable period of
time after the making of any claim or threat of an action, suit or proceeding
without the institution of the same and without any promise or payment made to
induce a settlement.
2. Expenses and Indemnification Procedure.
--------------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referenced in
Section 1(a) or (b) hereof. For purposes of any advancement hereunder, the
Indemnitee shall be deemed to have acted (i) in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and (ii) with respect to any criminal action or procedure, to have had
no reasonable cause to believe his conduct was unlawful, if under either (i) or
(ii), his action is based on the records or books of account of the Company, or
the records or books of account of another corporation, partnership, joint
venture, trust or another enterprise (collectively, the "other enterprises"),
including financial
2
<PAGE>
statements, or on information supplied to him by the officers of the Company or
other enterprises in the course of their duties, or on the advice of legal
counsel for the Company or other enterprises or on information or records given
or reports made to the Company or other enterprises by an independent certified
public accountant or by an appraiser or other expert selected with reasonable
care by the Company or other enterprises. Indemnitee hereby undertakes to repay
such amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee no later than forty-five (45) days following delivery of a
written request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his right to be indemnified under this Agreement, give
the Company notice in writing as soon as practicable of any claim against
Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed as provided in Section 14.
In addition, Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 hereof and this Section 2 shall be made no later than forty-five (45)
days after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or Bylaws providing for indemnification is not paid
in full by the Company within forty-five (45) days after written request for
payment thereof has first been received by the Company, Indemnitee may, but need
not, at any time thereafter bring an action against the Company to recover the
unpaid amount of the claim and, subject to Section 13 hereof, Indemnitee shall
also be entitled to be paid for the expenses (including attorneys' fees) of
bringing such action. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in connection with any
action, suit or proceeding in advance of its final disposition) that Indemnitee
has not met the standards of conduct which make it permissible under applicable
law for the Company to indemnify Indemnitee for the amount claimed, but the
burden of proving such defense shall be on the Company, and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Section 2(a) hereof
unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) that Indemnitee has not met such applicable standard of
conduct, shall create a presumption that Indemnitee has or has not met the
applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 2(b) hereof, the Company has directors' and
officers' liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in
3
<PAGE>
accordance with the procedures set forth in the respective policies. The Company
shall thereafter take all necessary or desirable action to cause such insurers
to pay, on behalf of Indemnitee, all amounts payable as a result of such
proceeding in accordance with the terms of such policies.
(e) Selection of Counsel. If the Company shall be obligated under
--------------------
Section 2(a) hereof to pay the expenses of any proceeding against Indemnitee,
the Company, if appropriate, shall be entitled to assume the defense of such
proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee
of written notice of its election to do so. After delivery of such notice,
approval of such counsel by Indemnitee and the retention of such counsel by the
Company, the Company will not be liable to Indemnitee under this Agreement for
any fees of counsel subsequently incurred by Indemnitee with respect to the same
proceeding; provided that (i) Indemnitee shall have the right to employ separate
counsel in any such proceeding at Indemnitee's expense; and (ii) if (A) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the reasonable fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
(f) Settlements. The Company shall not be liable to Indemnitee under
-----------
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action
or claim in any manner which would impose any penalty or limitation on
Indemnitee without Indemnitee's written consent. Neither the Company nor
Indemnitee will unreasonably withhold consent to any proposed settlement.
(g) Change In Control. If, at any time subsequent to the date of this
-----------------
Agreement, continuing directors do not constitute a majority of the members of
the Board of Directors, or there is otherwise a change in control of the Company
(as contemplated by Item 403(c) of Regulation S-K under the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended), then
upon the request of Indemnitee, the Company shall cause the determination of
indemnification and advances required by Section 2 hereof to be made by a third-
party (mutually agreed upon by the parties). The fees and expenses incurred by
the third party in making the determination of indemnification and advances
shall be borne solely by the Company. If such third party is unwilling and/or
unable to make the determination of indemnification and advances, then the
Company shall cause the indemnification and advances to be made by a majority
vote or consent of a Board committee consisting solely of continuing directors.
For purposes of this Agreement, a "continuing director" means either a member of
the Board at the date of this Agreement or a person nominated to serve as a
member of the Board by a majority of the then-continuing directors.
3. Additional Indemnification Rights.
---------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement, the
-----
Company shall indemnify Indemnitee to the fullest extent permitted by law,
whether or not such indemnification is specifically authorized by the other
provisions of this Agreement, the Company's Certificate of Incorporation, the
Company's Bylaws or by statute. In the event of any change, after the date of
this Agreement, in any applicable law, statute, or rule which expands the right
of a
4
<PAGE>
Delaware corporation to indemnify a member of its board of directors or an
officer, such changes shall be, ipso facto, within the purview of Indemnitee's
rights and Company's obligations under this Agreement. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, such changes (to the extent not otherwise required by such law, statute
or rule to be applied to this Agreement) shall have no effect on this Agreement
or the parties' rights and obligations hereunder.
(b) Non-exclusivity. The indemnification provided by this Agreement
---------------
shall not be deemed exclusive of any rights to which an Indemnitee may be
entitled under the Company's Certificate of Incorporation or Bylaws, any
agreement, any vote of stockholders or disinterested directors, the Delaware
General Corporation Law, or otherwise, both as to action in Indemnitee's
official capacity and as to action in another capacity while holding such
office.
4. Continuation of Indemnity. All agreements and obligations of the
-------------------------
Company contained herein shall continue during the period Indemnitee is a
director, officer, employee or agent of the Company (or is or was serving at the
request of the Company as a director, officer, employee or agent of other
enterprises) and shall continue thereafter so long as Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that Indemnitee was a director, officer, employee or agent of the Company, or
serving in any other capacity referred to herein.
5. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action, suit or proceeding, but not for the total amount thereof,
the Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that, in certain instances, federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken with the SEC to submit the question
of indemnification to a court in certain circumstances for a determination of
the Company's right under public policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
directors' and officers' liability insurance,
5
<PAGE>
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director, or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer, or one of the Company's key employees, if Indemnitee is not an officer
or director but is a key employee. Notwithstanding the foregoing, the Company
shall have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit, or Indemnitee is covered by similar
insurance maintained by a parent of subsidiary of the Company.
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Notwithstanding any other provision herein to the
----------
contrary, the Company shall not be obligated pursuant to the terms of this
Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement, the Company's Certificate of Incorporation or Bylaws, any
agreement, any vote of stockholders or disinterested directors, the Delaware
General Corporation Law or any other statute or law, but such indemnification or
advancement of expenses may be provided by the Company in specified cases if the
Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company or other
enterprises; or
6
<PAGE>
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Construction of Certain Phrases.
-------------------------------
(a) Company. For purposes of this Agreement, references to the
-------
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that if Indemnitee is or was a director, officer, employee,
attorney or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee,
attorney or agent of other enterprises, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) Other Definitions. For purposes of this Agreement, references to
-----------------
"other enterprises"shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to any
employee benefit plan; and references to "serving at the request of the Company"
shall include any service as a director, officer, employee, attorney or agent of
the Company which imposes duties on, or involves services by, Indemnitee with
respect to an employee benefit plan, its participants, or beneficiaries; and, if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Entire Understanding. This Agreement sets forth the entire
--------------------
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous, oral or written, express or
implied, agreements and understandings.
13. Attorneys' Fees. If any action is instituted by Indemnitee under this
---------------
Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be
entitled to be paid all court costs and expenses, including reasonable
attorneys' fees, incurred by Indemnitee with respect to such action, unless as
a part of such action, the court of competent jurisdiction determines that each
of the material assertions made by Indemnitee as a basis for such action was not
made in good faith or was frivolous. In the event of an action instituted by or
in the name of the Company under this Agreement or to enforce or interpret any
of the terms of this Agreement, Indemnitee shall be entitled to be paid all
court costs and expenses, including attorneys' fees, incurred by Indemnitee in
defense of such action (including with respect to Indemnitee's counterclaims and
cross-claims made in such action), unless as a part of such action the court
determines that each of Indemnitee's material defenses to such action was made
in bad faith or was frivolous.
7
<PAGE>
14. Notice. 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 (i) when delivered personally, (ii) three
business days after being mailed by first class certified mail, return receipt
requested, postage prepaid, or (iii) one business day after being sent by a
nationally recognized express courier service, postage or delivery charges
prepaid, to the parties at their respective addresses stated on the first page
of this Agreement. Notices may also be given by prepaid telegram or facsimile
and shall be effective on the date transmitted if confirmed within 24 hours
thereafter by a signed original sent in the manner provided in the preceding
sentence. Either 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
party in accordance with this Section 14, provided that any such change of
address notice shall not be effective unless and until received.
15. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the substantive laws (and not the choice of laws rules) of the
State of Delaware applicable to contracts made and to be performed entirely
therein. Each of the parties irrevocably consents to service of process by
certified mail, return receipt requested, postage prepaid, to the address at
which such party is to receive notice in accordance herewith. Each of the
parties irrevocably consents to the jurisdiction of the state courts in Delaware
and the federal courts in Delaware in any and all actions between the parties
arising hereunder.
16. Amendment and Waiver. This Agreement shall not be amended, modified
--------------------
or terminated unless in writing and signed by Indemnitee and a duly authorized
representative of Company other than Indemnitee. No waiver with respect to this
Agreement shall be enforceable unless in writing and signed by the parties
against which enforcement is sought (which, in the case of the Company, must be
a duly authorized representative of the Company other than Indemnitee). Neither
the failure nor any delay on the part of either party to exercise any right,
remedy, power or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the same or of any other
right, remedy, power or privilege, nor shall any waiver of any right, remedy,
power or privilege with respect to any occurrence by construed as a waiver of
such right, remedy, power or privilege with respect to any other occurrence.
17. Section Headings. Any headings preceding the text of any of the
----------------
Sections or Subsections of this Agreement are inserted for convenience of
reference only, and shall neither constitute a part of this Agreement nor affect
its construction, meaning, or effect.
18. Definitions. As used herein, the term "Person" means any individual,
-----------
sole proprietorship, joint venture, partnership, corporation, association,
cooperative, trust, estate, government body, administrative agency, regulatory
authority or other entity of any nature.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
GLOBAL SPORTS, INC.
By: ________________________ ________________________
Name: INDEMNITEE
Title:
9
<PAGE>
GLOBAL SPORTS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
Adopted March 12, 2000
Approved by the Stockholders on , 2000
Effective Date: March 12, 2000
1. Purpose.
(a) The purpose of this 2000 Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Global Sports, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. Administration.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
committee as provided in subparagraph 2(c). Whether or not the Board has
delegated administration the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which
need not be identical).
(ii) To designate from time to time which Affiliates of the Company shall
be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it, and
to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully
effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Board or the Committee deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent
that the Plan be treated as an "employee stock purchase plan" within the
meaning of Section 423 of the Code.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore
possessed by the Board, subject,
D-1
<PAGE>
however, to such resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Board. The Board may abolish
the Committee at any time and revest in the Board the administration of the
Plan.
3. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the shares of the Company's common stock (the "Common
Stock") that may be sold pursuant to rights granted under the Plan shall not
exceed four hundred thousand (400,000) shares Common Stock. If any right
granted under the Plan shall for any reason terminate without having been
exercised, the shares of Common Stock not purchased under such right shall
again become available for the Plan.
(b) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, on the date of each annual meeting of the stockholders of
the Company, commencing in 2001, the aggregate number of shares of Common
Stock specified in subparagraph 3(a) above shall be increased by the lesser of
(1) fifty thousand (50,000) shares or (2) such fewer number of shares
determined by the Board. Notwithstanding the foregoing, the automatic share
reserve increases, provided in this subparagraph 3(b), in the aggregate shall
not exceed five hundred thousand (500,000) shares.
(c) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. Grant of Rights; Offering.
(a) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form
and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all employees granted rights to purchase stock
under the Plan shall have the same rights and privileges. The terms and
conditions of an Offering shall be incorporated by reference into the Plan and
treated as part of the Plan. The provisions of separate Offerings need not be
identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering
or otherwise) the period during which the Offering shall be effective, which
period shall not exceed twenty-seven (27) months beginning with the Offering
Date, and the substance of the provisions contained in paragraphs 5 through 8,
inclusive.
(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right
with a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.
5. Eligibility.
(a) Rights may be granted only to employees of the Company or, as the Board or
the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no
event shall the required period of continuous employment be greater than two
(2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee
of the Company or any Affiliate shall be eligible to be granted rights under
the Plan unless, on the Offering Date,
D-2
<PAGE>
such employee's customary employment with the Company or such Affiliate is for
more than twenty (20) hours per week and more than five (5) months per
calendar year.
(b) The Board or the Committee may provide that each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering Date"
of such right for all purposes, including determination of the exercise
price of such right;
(ii) the period of the Offering with respect to such right shall begin on
its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights under the Plan
if, immediately after any such rights are granted, such employee would own
stock possessing five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Company or of any Affiliate. For
purposes of this subparagraph 5(c), the rules of Section 424(d) of the Code
shall apply in determining the stock ownership of any employee, and stock
which such employee may purchase under all outstanding rights and options
shall be treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the
Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at
the time such rights are granted) for each calendar year in which such rights
are outstanding at any time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
or the Committee may provide in an Offering that certain employees who are
highly compensated employees within the meaning of Section 423(b)(4)(D) of the
Code shall not be eligible to participate.
6. Rights; Purchase Price.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number
of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding twenty percent (20%) of
such employee's Earnings (as defined by the Board for each Offering) during
the period which begins on the Offering Date (or such later date as the Board
or the Committee determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering. The Board or the Committee shall establish one or more dates during
an Offering (each of which is hereinafter referred to as a "Purchase Date") on
which rights granted under the Plan shall be exercised and purchases of Common
Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains more than one Purchase Date, the
Board or the Committee may specify a
D-3
<PAGE>
maximum aggregate number of shares which may be purchased by all eligible
employees on any given Purchase Date under the Offering. If the aggregate
purchase of shares upon exercise of rights granted under the Offering would
exceed any such maximum aggregate number, the Board or the Committee shall
make a pro rata allocation of the shares available in as nearly a uniform
manner as shall be practicable and as it shall deem to be equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market value
of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. Participation; Withdrawal; Termination.
(a) An eligible employee may become a participant in the Plan pursuant to an
Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each
such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board or the Committee of such employee's Earnings
(as defined by the Board for each Offering) during the Offering. The payroll
deductions made for each participant shall be credited to an account for such
participant under the Plan and shall be deposited with the general funds of
the Company. A participant may reduce (including to zero) or increase such
payroll deductions, and an eligible employee may begin such payroll
deductions, after the beginning of any Offering only as provided for in the
Offering. A participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the participant
has not had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
right to acquire Common Stock under that Offering shall be automatically
terminated. A participant's withdrawal from an Offering will have no effect
upon such participant's eligibility to participate in any other Offerings
under the Plan but such participant will be required to deliver a new
participation agreement in order to participate in subsequent Offerings under
the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of a participant's employment with the Company and
any designated Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire
stock for the terminated employee), under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a participant
other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a
participant's lifetime, shall be exercisable only by such participant.
8. Exercise.
(a) On each Purchase Date specified in the relevant Offering, each
participant's accumulated payroll deductions and any other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and
the applicable Offering, at the purchase price specified in the Offering.
Unless otherwise provided for in the applicable Offering, no fractional shares
shall be issued
D-4
<PAGE>
upon the exercise of rights granted under the Plan. The amount, if any, of
accumulated payroll deductions remaining in each participant's account after
the purchase of shares which is less than the amount required to purchase one
share of stock on the final Purchase Date of an Offering shall be held in each
such participant's account for the purchase of shares under the next Offering
under the Plan, unless such participant withdraws from such next Offering, as
provided in subparagraph 7(b), or is no longer eligible to be granted rights
under the Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after such final Purchase Date, without
interest. The amount, if any, of accumulated payroll deductions remaining in
any participant's account after the purchase of shares which is equal to the
amount required to purchase whole shares of Common Stock on the final Purchase
Date of an Offering shall be distributed in full to the participant after such
Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and
other securities and other laws applicable to the Plan. If on a Purchase Date
in any Offering hereunder the Plan is not so registered or in such compliance,
no rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is
subject to such an effective registration statement and such compliance,
except that the Purchase Date shall not be delayed more than twelve (12)
months and the Purchase Date shall in no event be more than twenty-seven (27)
months from the Offering Date. If on the Purchase Date of any Offering
hereunder, as delayed to the maximum extent permissible, the Plan is not
registered and in such compliance, no rights granted under the Plan or any
Offering shall be exercised then all payroll deductions accumulated during the
Offering (reduced to the extent, if any, such deductions have been used to
acquire stock) shall be distributed to the participants, without interest.
9. Covenants of the Company.
(a) During the terms of the rights granted under the Plan, the Company shall
at all times make reasonable efforts to keep available the number of shares of
stock required to satisfy such rights, provided that this section shall not
require the Company to take any action that would result in adverse tax,
accounting or financial consequences to the Company.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise
of the rights granted under the Plan. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved from
any liability for failure to issue and sell stock upon exercise of such rights
unless and until such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock to participants pursuant to rights granted
under the Plan shall constitute general funds of the Company.
11. Rights as a Stockholder.
A participant shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to rights granted under
the Plan unless and until the participant's shares acquired upon exercise of
rights hereunder are recorded in the books of the Company (or its transfer
agent).
12. Adjustments upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than
D-5
<PAGE>
cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares
subject to the Plan and the class(es) and number of shares and price per share
of stock subject to outstanding rights. Such adjustments shall be made by the
Board or the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
or (3) a reverse merger in which the Company is the surviving corporation but
the shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then, as determined by the Board in its sole
discretion, (i) any surviving or acquiring corporation may assume outstanding
rights or substitute similar rights for those under the Plan, (ii) such rights
may continue in full force and effect, or (iii) participants' accumulated
payroll deductions may be used to purchase Common Stock immediately prior to
the transaction described above and the participants' rights under the ongoing
Offering terminated.
13. Amendment of the Plan.
(a) The Board or the Committee at any time, and from time to time, may amend
the Plan. However, except as provided in paragraph 12 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved by the
stockholders of the Company within twelve (12) months before or after the
adoption of the amendment if such amendment requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.
(b) The Board or the Committee may amend the Plan in any respect the Board
or the Committee deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of
the Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under it into
compliance therewith.
(c) Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at any
time by written notice in the form prescribed by the Company. In the event of
the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's
death, the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the
Company, in its sole discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
D-6
<PAGE>
15. Termination or Suspension of the Plan.
(a) The Board or the Committee in its discretion, may suspend or terminate
the Plan at any time. No rights may be granted under the Plan while the Plan
is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
as expressly provided in the Plan or with the consent of the person to whom
such rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under the Plan comply with the requirements of Section 423 of
the Code.
16. Effective Date of Plan.
The Plan shall become effective on March 12, 2000 (the "Effective Date"),
but no rights granted under the Plan shall be exercised unless and until the
Plan has been approved by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board, which date
may be prior to the Effective Date.
D-7
<PAGE>
GLOBAL SPORTS, INC.
Annual Meeting of Shareholders -- May 15, 2000
SOLICITED ON BEHALF OF THE COMPANY AND APPROVED
BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael G. Rubin and Kenneth J. Adelberg to
act as attorneys and proxies for the undersigned, with full powers of
substitution, to appear at the Annual Meeting of Shareholders of Global Sports,
Inc. (the "Company") to be held on the 15th day of May, 2000 at the Omni Hotel,
401 Chestnut Street, Philadelphia Pennsylvania 19106 and at any postponement or
adjournment thereof, and to vote all of the shares of the Company that the
undersigned is entitled to vote, with all the powers and authority the
undersigned would possess if personally present. The undersigned hereby directs
that this proxy be voted as specified on the reverse side of this card.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED "FOR" ELECTION OF ALL NOMINEES FOR DIRECTOR LISTED IN
THE ACCOMPANYING PROXY STATEMENT, "FOR" APPROVAL OF THE OFF-PRICE AND ACTION
SPORTS SALE, "FOR" APPROVAL OF THE INDEMNIFICATION AGREEMENTS AND "FOR" APPROVAL
OF THE COMPANY'S 2000 EMPLOYEE STOCK PURCHASE PLAN. A MAJORITY OF THE PROXY
AGENTS PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTES (OR IF ONLY ONE IS
PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL THE POWERS CONFERRED HEREBY.
DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS TO CERTAIN MATTERS DESCRIBED IN
THE COMPANY'S PROXY STATEMENT.
Should the undersigned be present and choose to vote at the Meeting or at
any adjournments or postponements thereof, and after notification to the
Secretary of the Company at the Meeting of the shareholder's decision to
terminate this proxy, then the power of such attorneys or proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by filing a written notice or revocation with the Secretary of the
Company or by duly executing a proxy bearing a later date.
Receipt of the Notice of the Annual Meeting and Proxy Statement relating
thereto is hereby acknowledged.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
(Continued and to be SIGNED on Reverse Side)
<PAGE>
[X] Please mark your
votes as in this DO NOT PRINT IN
example using THIS AREA
dark ink only
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
FOR
the nominees WITHHOLD
listed below (except AUTHORITY
as indicated below) to vote for all nominees
1. To elect six [_] [_] The Board of Directors recommends a vote "FOR"
directors, each to election of all nominees for director, "FOR"
hold office for one- approval of the Off-Price and Action Sports Sale,
year terms and until "FOR" approval of the indemnification
their successors Agreements and "FOR" approval of the
are elected and Company's 2000 Employee Stock Purchase Plan.
qualified.
Nominees: Michael G. Rubin, Kenneth J. Adelberg, Harvey Lamm, Jeffrey R. Rayport, Charles R. Lax and
Ronald D. Fisher.
(Instruction: To withhold a authority to vote for any nominee write that nominee's name in this space:
- -----------------------------------------------------------------------------------------------------------------
DO NOT PRINT
IN THIS AREA
- -----------------------------------------------------------------------------------------------------------------
Date: , 2000
- ----------------------------------------------------------------- -------------------------
(Signature(s) of Shareholder(s)) (Please date this proxy)
Please sign exactly as your name(s) appear(s) to the left. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If shares are held jointly, each holder should sign.
FOR AGAINST ABSTAIN
2. To approve (1) the Acquisition [_] [_] [_]
Agreement, dated September 24,
1999, as amended, among the
Company, Gen-X Acquisition (U.S.),
Inc., Gen-X Acquisition (Canada) Inc.,
DMJ Financial, Inc., James J. Salter
and Kenneth J. Finkelstein (a copy of
the Acquisition Agreement is attached
as Appendix A to the accompanying
Proxy Statement) relating to the sale
of the Company's Off-Price and Action
Sports Division, including the sale of
all of the issued and outstanding capi-
tal stock of the Company's wholly-
owned subsidiaries Gen-X Holdings
Inc. and Gen-X Equipment Inc., and (8)
the sale of the Company's Off-Price
and Action Sports Division.
3. To approve indemnification [_] [_] [_]
Agreements to be entered into with the
Company's directors and certain of its
officers.
4. To approve the Company's 2000 [_] [_] [_]
Employee Stock Purchase Plan.
</TABLE>
