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EXHIBIT E
SHARE EXCHANGE AGREEMENT
BETWEEN
GLOBAL ONE DISTRIBUTION & MERCHANDISING INC.
AND
EREKESEF SECURITIES LIMITED
DATED AS OF OCTOBER 24, 1997
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made and entered
into as of October 24, 1997, by and between Erekesef Securities Limited, a
British Virgin Islands company, and Global One Distribution & Merchandising
Inc., a Delaware corporation ("Global"). Certain capitalized terms used herein
are defined in Section 8 hereof.
R E C I T A L S
A. Erekesef is the owner of all the outstanding shares (the "LJR
Shares") of the Common Stock of L.J.R. Trading, Inc., a California corporation
("LJR");
B. Erekesef desires to sell to Global and Global desires to
purchase from Erekesef, the LJR Shares, on the terms and subject to the
conditions set forth herein;
C. In consideration for the LJR Shares, Global will issue to
Erekesef Common Stock, par value $0.01 per share, of Global (the "Global
Shares") as described in Section 1.2; and
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and mutual
representations, warranties and covenants herein contained, Global and Erekesef
hereby agree as follows:
I. SHARE EXCHANGE.
A. AGREEMENT TO SELL AND PURCHASE LJR SHARES. Subject
to the terms and conditions of this Agreement, Erekesef agrees to sell, and
Global agrees to purchase from Erekesef, the LJR Shares, in exchange for the
Global Shares described in Section 1.2.
B. AGREEMENT TO SELL AND PURCHASE GLOBAL SHARES.
Subject to the terms and conditions of this Agreement, Global agrees to issue,
and Erekesef agrees to purchase from Global, in exchange for the LJR Shares,
eight million (8,000,000) Global Shares.
C. SHARES TO BE DELIVERED AT CLOSING. The purchase and
sale of the LJR Shares and the Global Shares shall take place at a closing (the
"Closing") to be held at the offices of Kinsella, Boesch, Fujikawa & Xxxxx, LLP
at 11:00 A.M., local time, on October 24, 1997, or on such other date as may be
agreed upon in writing by Global and Erekesef (the "Closing Date"). At the
Closing, (a) Erekesef shall deliver to Global a certificate or certificates
representing the LJR Shares and stock powers executed in favor of Global
sufficient to validly transfer title to the LJR Shares, and ownership thereof,
to Global, and (b) Global shall deliver to Erekesef a certificate or
certificates representing the Global Shares to be issued at the Closing to
Erekesef.
D. LEGENDS. All certificates representing the LJR
Shares and the Global Shares shall bear a legend in substantially the following
form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT")
OR ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE ACT AND THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION
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THEREUNDER AND WITH APPLICABLE STATE LAWS AND REGULATIONS.
II. REPRESENTATIONS AND WARRANTIES OF GLOBAL. As a material
inducement to Erekesef to enter into and execute this Agreement and to perform
its covenants, agreements, duties and obligations hereunder, and in
consideration therefor, Global hereby makes the following representations and
warranties (as used in this Section 2 the term "Global" shall be deemed to
refer also to any Subsidiary of Global (as defined in Section 2.3)).
A. ORGANIZATION, ETC. OF GLOBAL; AUTHORIZATION;
ENFORCEABILITY. Global is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has all requisite
corporate power and authority to own and hold under lease the properties and
assets it purports to own and hold under lease and to carry on its business as
now being conducted and as presently proposed to be conducted, and is duly
qualified or licensed as a foreign corporation and is in good standing in each
jurisdiction where the character of the properties owned or leased by it or the
nature of the business transacted by it makes qualification therein necessary,
except where the failure to be so licensed or qualified would not have a
material adverse effect on the business or properties of Global. Global has
heretofore delivered to Erekesef accurate and complete copies of Global's
certificate of incorporation and bylaws, together, in each case, with any
amendments thereto to the date hereof. All corporate and other actions
required to be taken by or on the part of Global to authorize Global to execute
and deliver this Agreement (including, without limitation, approval by the
Board of Directors of Global) and to perform its obligations hereunder have
been duly and validly taken. This Agreement constitutes the legal, valid and
binding obligation of Global and is enforceable against Global in accordance
with its terms, subject to applicable bankruptcy, insolvency or other similar
laws or proceedings limiting creditors' rights generally and to general
equitable principles.
B. CAPITAL STRUCTURE OF GLOBAL; ISSUANCE OF SECURITIES.
The authorized and outstanding capital stock of Global is as set forth on
Schedule 2.2 hereto. All outstanding shares are validly issued, fully paid and
non-assessable. Except as set forth on Schedule 2.2, there do not exist any
other authorized or outstanding securities, options, warrants, calls,
commitments, rights to subscribe or other instruments, agreements or rights of
any character convertible into or exchangeable for, or requiring or relating to
the issuance, transfer or sale of, any shares of capital stock or other
securities (collectively, "Equity Securities") of Global. The issuance and
sale of the Global Shares to Erekesef has been duly authorized and if, when and
as delivered to Erekesef, the Global Shares will be duly and validly issued and
outstanding, fully paid and nonassessable and will be free of any Lien, other
than those imposed pursuant to this Agreement and securities laws of general
application.
C. SUBSIDIARIES OF GLOBAL. Schedule 2.3 sets forth a
list of all Persons in which Global has an equity or profit interest (each a
"Subsidiary"). The Company owns 100% of the capital stock of each Subsidiary.
Except for the Subsidiaries, Global does not hold any equity or profit interest
in any other Person.
D. FINANCIAL STATEMENTS.
1. Global has provided to Erekesef complete and accurate
copies of Global's Annual Report on Form 10-K for the year ended December 31,
1996, the Quarterly Reports on Form 10-Q for the two fiscal quarters ending
June 30, 1997, and its Current Reports on Form 8-K dated October 6, 1997 and
October 8, 1997, each, as amended to date (collectively, the "Reports"), which
include the consolidated financial statements of Global for the fiscal year
ended December 31, 1996 and for the quarters ended June 30, 1997 (collectively,
the "Global Financial Statements"). Each of the Reports complied in all
material respects with the rules of the SEC applicable to such Report on the
date filed with the SEC, and none of the Reports contained, on the date of
filing with the SEC, any untrue statement of a material fact, or omitted to
state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not materially misleading. Except
for the Reports, Global has not
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filed any other report with the SEC since June 30, 1997. All of the Global
Financial Statements (subject to year-end accruals in the case of the 1997
financial statements): (i) have been prepared from and on the basis of, and
are in accordance with, the books and records of Global and with generally
accepted accounting principles applied on a basis consistent with prior
accounting periods; (ii) fairly and accurately present the financial condition
of Global as of the date of each such Global Financial Statement and the
results of its operations for the periods therein specified; and (iii) except
in the case of the 1997 financial statements, are accompanied by the audit
opinion of Global's independent public accountants. There are no undisclosed
liabilities which should be disclosed in the Global Financial Statements
pursuant to generally accepted accounting principles.
E. AFFILIATE TRANSACTIONS. Except as set forth in the
Reports or in Schedule 2.5, Global is not a party to any transaction involving,
and has no direct or indirect obligation or liability to, any of its Affiliates
(as defined in Section 8).
F. ABSENCE OF CHANGES. Except (a) as set forth on
Schedule 2.6, (b) as disclosed in Reports filed with the SEC and (c) the Public
Sale referred to in Section 3.5, since June 30, 1997, there has not been nor is
there currently pending any material change in the business, business plan,
operations, commercial practices, prospects, properties, assets or condition,
financial or otherwise, of Global other than changes in the ordinary course of
business, none of which, singly or in the aggregate, has been materially
adverse;
G. TAX RETURNS AND AUDITS. Global has paid all
employment withholding taxes required to be paid by it to date.
H. PENDING LITIGATION OR PROCEEDINGS. Except as
disclosed in the Reports or as set forth on Schedule 2.8, there is not pending,
or, to the best knowledge of Global, threatened, any action, suit, or legal,
administrative, arbitration or other proceeding or Governmental investigation,
or any change in zoning or building ordinances affecting the real property or
leasehold interests of Global, its properties, assets or business, nor any
facts which might result in such action, which may result in any adverse change
in the business, operations, prospects, properties, assets or conditions,
financial or otherwise, of Global.
I. EMPLOYEE BENEFITS. Global is not, and has never been
subject to any retirement, pension, profit sharing or other similar plan which
is or was subject to the Employee Retirement Income Securities Act of 1974, as
amended ("ERISA"); no "prohibited transaction" within the meaning of Section
406(a) of ERISA, and no "reportable event" within the meaning of Section
4043(b) of ERISA, has occurred with respect to any employee benefit plan of
Global; all employee benefit plans have been established and operated in full
compliance with all applicable laws, rules and regulations.
J. INVESTMENT REPRESENTATION; RESTRICTIONS UPON RESALE.
Global shall acquire the LJR Shares only for Global's own account for
investment and not with a view to, or for resale in connection with, any
"distribution" thereof for purposes of the United States Securities Act of
1933, as amended (the "Act") or in violation of applicable state securities
laws. Global acknowledges that the LJR Shares have not been registered under
the Act and can be transferred only if so registered or if an exemption from
such registration is available. Global has such knowledge and experience in
financial and business matters that it is capable of protecting its own
interests in connection with the acquisition of the LJR Shares. Global has
executed and delivered to Erekesef a letter of investment intent in the form
attached as Exhibit "A" hereto.
III. REPRESENTATIONS AND WARRANTIES OF EREKESEF. As a material
inducement to Global to enter into and execute this Agreement and to perform
its covenants, agreements, duties and obligations hereunder, and in
consideration therefor, Erekesef hereby makes the following representations and
warranties, each of which (a) is material and is being relied upon by Global as
a material inducement to
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enter into this Agreement and (b) is true at and as of the date hereof and
shall be true at and as of the Closing Date with the same effect as if such
representations and warranties had been made at and as of the Closing Date.
A. ORGANIZATION, ETC. OF LJR. LJR is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, has all requisite corporate power and authority to own and hold
under lease the properties and assets it purports to own and hold under lease
and to carry on its business as now being conducted and as presently proposed
to be conducted, and is in good standing in each jurisdiction where the
character of the properties owned or leased by it or the nature of the business
transacted by it makes qualification therein necessary, except where the
failure to be so licensed or qualified would not have a material adverse effect
on the business or properties of LJR.
B. CAPITAL STRUCTURE OF LJR. The LJR Shares have been
validly issued, are fully paid and non-assessable and are owned by Erekesef,
free and clear of any Liens. Except for the LJR Shares, there do not exist any
other authorized or outstanding securities, options, warrants, calls,
commitments, rights to subscribe or other instruments, agreements or rights of
any character convertible into or exchangeable for, or requiring or relating to
the issuance, transfer or sale of, any shares of capital stock or other
securities of LJR.
C. SUBSIDIARIES OF LJR. LJR does not have an equity or
profit interest in any other Person.
D. BUSINESS OPERATIONS. Except for the assets and
liabilities described in Section 3.5 and Section 3.6, LJR has conducted no
operations, and has no material assets or liabilities.
E. OWNERSHIP OF ASSETS. LJR is the owner of all of the
following assets (the "OSP Assets") acquired by Senoral, Inc. ("Senoral") from
OSP Publishing Inc. at a public sale conducted on October 8, 1997 (the "Public
Sale"):
1. all receivables outstanding and not paid on
October 22, 1997, at 6:00 p.m., plus any amounts in the OSP lockbox account, in
each case acquired by Senoral at the Public Sale, subject to the obligation of
LJR to pay to Xxxxxx X. Xxxxxx, if, as and when collected, 45% of the
receiveables, up to the total amount of approximately $720,000 due to Xxxxxx X.
Xxxxxx pursuant to an intercreditor agreement between Angard and Senoral;
2. all goods, merchandise and other personal
property acquired by Senoral at the Public Sale;
3. all machinery, equipment, furniture and
fixtures acquired by Senoral at the Public Sale;
4. all ledger sheets, files, records, documents
and instruments (including but not limited to computer programs, tapes and
related electronic data processing software) evidencing an interest in or
relating to the above, in each case to the extent acquired by Senoral at the
Public Sale; and
5. all patents, patent applications, copyrights,
and royalties acquired by Senoral at the Public Sale.
Notwithstanding the foregoing, the OSP Assets do not include any assets
acquired from Senoral to the extent that such assets have been physically
altered, damaged, lost or converted. Global acknowledges that it has
maintained possession of all such assets at all times since the Public Sale.
F. TITLE TO PROPERTIES OF LJR. Subject to receipt of
all consents described in
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Section 4.3, LJR has title to all of the OSP Assets, free and clear of all
Liens other than Liens for sales taxes and Liens on the OSP Assets which
existed immediately prior to the Public Sale or which attached to the OSP
Assets as a result of actions taken by the owner or owners of such assets prior
to the Public Sale. Global acknowledges that except as set forth above,
Erekesef makes no representations regarding the assets of LJR, and, through
ownership of the LJR Shares, Global shall acquire indirect title to the OSP
Assets on an "as is" basis. Global acknowledges that no agent, employee or
representative of Erekesef has made any representation or warranty concerning
the OSP Assets, and it is the intent of the parties to provide in this
Agreement an effective disclaimer of all express warranties with respect to the
OSP Assets. Both parties are represented by counsel and have reduced the
entire agreement of the parties to this writing. No statement of fact,
promise, representation, affirmation or other indication has been made with
respect to the quality of the OSP Assets, the collectibility of the
receivables, the enforceability of intellectual property rights, the condition
of the machinery, equipment, furniture and fixtures, the condition of the
records or any other matter, except as is expressly set forth in this
Agreement.
G. PENDING LITIGATION OR PROCEEDINGS. There is not
pending, or, to the best knowledge of Erekesef, threatened, any action, suit,
or legal, administrative, arbitration or other proceeding or Governmental
investigation, or any change in zoning or building ordinances affecting the
real property or leasehold interests of LJR, its properties, assets or
business, nor any facts which might result in such action, which may result in
any adverse change in the business, operations, prospects, properties, assets
or conditions, financial or otherwise, of LJR.
H. AUTHORITY OF EREKESEF TO SELL THE SHARES. This
Agreement has been duly executed and delivered by Erekesef and constitutes
Erekesef's legal, valid and binding agreement, enforceable against Erekesef in
accordance with its terms, except to the extent that enforceability may be
limited by applicable reorganization, insolvency, liquidation, readjustment of
debt or other similar laws and judicial decisions generally affecting the
enforcement of rights of creditors and by general principles of equity.
Erekesef owns and holds of record the LJR Shares to be delivered by Erekesef at
the Closing in accordance with Section 1.2 hereof, and Erekesef has full voting
power over such shares, subject to no proxy, shareholders' agreement or voting
trust, and has full right, power and authority to sell and deliver such shares
to Global in the manner provided for in this Agreement. Upon delivery of the
certificates representing the LJR Shares by Erekesef to Global, Erekesef will
transfer to Global and Global will acquire good title to the LJR Shares, free
and clear of all Liens other than Liens created by this Agreement and by
securities laws of general application.
I. INVESTMENT REPRESENTATION; RESTRICTIONS UPON RESALE.
Erekesef shall acquire the Global Shares only for Erekesef's own account for
investment and not with a view to, or for resale in connection with, any
"distribution" thereof for purposes of the United States Securities Act of
1933, as amended (the "Act") or in violation of applicable state securities
laws. Erekesef acknowledges that the Global Shares have not been registered
under the Act and can be transferred only if so registered or if an exemption
from such registration is available. Erekesef has executed and delivered to
Global a Letter of Investment Intent in the form attached as Exhibit "B"
hereto.
IV. CONDUCT PENDING CLOSING.
A. CONDUCT OF THE AFFAIRS OF GLOBAL PENDING THE CLOSING.
From the date of this Agreement until October 31, 1997, Global is authorized,
without notice to Erekesef, to purchase from Erekesef such items of inventory
included in the OSP Assets as it actually ships during such period, in exchange
for a payment to LJR equal to one-half the net sales price received for such
inventory by Global; provided, that upon the Closing of the transactions
contemplated hereby, such assets shall instead be deemed to be sold to Global
in consideration of the Global Shares described herein. The purchase of
Inventory by Global shall be made upon the following terms and conditions:
1. Global shall only purchase such Inventory as it
ships, on a day-to-day basis, in
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the ordinary course of business, consistent with past practices;
2. Global shall not sell any Inventory for less than 75%
of the customary sales price of such Inventory;
3. Global shall not sell any Inventory in a bulk sale or
to any Affiliate of Global. As used herein, the term, "Affiliate" means (1)
any person who is an "affiliate" of a person as defined in Rule 12b-2 of the
United States Securities Exchange Commission under the United States Securities
and Exchange Act of 1934, as amended, (2) any person who is a director, officer
or partner or holds a similar position with any entity in which such person has
a 10% or greater equity or profit interest, and (3) any family member of a
person referred to in (1) or (2);
4. Global shall provide to LJR a weekly report, within 3
business days following the end of each week, describing all items of Inventory
purchased hereunder and setting forth Global's sales price therefore;
5. Global covenants and agrees that it shall not
purchase any item of Inventory until it has received and provided to LJR proof
that it has received adequate written consents to sell the Inventory from the
copyright holders, licensors and others with intellectual property rights
relating to the Inventory;
6. Global agrees to fully indemnify and hold LJR and
Erekesef harmless from and to defend LJR and Erekesef and their affiliates (the
"Indemnified Parties") against, any and all Damages (as defined below) incurred
or suffered by the Indemnified Parties arising out of Global's failure to
obtain all consents described in Section 4.1(e). No investigation by LJR or
Erekesef at or prior to the date hereof shall relieve Global of any liability
hereunder. "Damages" as used herein shall mean any and all claims, actions,
demands, losses, costs, expenses, liabilities, damages and recoveries to the
full amount of the actual damage occasioned by each deficiency,
misrepresentation, inaccuracy, omission or breach in each case including
interest, penalties or other damage (including, without limitation, reasonable
attorneys' fees and other costs and expenses reasonably incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof or of enforcing this indemnity); and
(g) Subject to receipt of all consents described in Section
4.1(e), LJR shall convey to Global title to each item of Inventory purchased
hereunder, free and clear of any lien other than liens for sales taxes or liens
created as a result of actions taken prior to the public sale of the Inventory
on October 8, 1997.
If the Closing does not occur within seven days following the date
hereof, all payments for inventory due under this Section 4.1 shall be
immediately due and payable. Subject to the express limitations and
restrictions set forth in this Agreement, Global shall not act or fail to act
in a manner which is likely to result in any representation or warranty of
Global hereunder not to be true and correct as of the Closing or which, if
occurring after the Closing Date, would violate the covenants of Global set
forth herein or require the approval of Erekesef pursuant to the terms hereof.
B. COVENANT TO USE BEST EFFORTS TO CLOSE. Erekesef and
Global hereby covenant and agree to use their respective best efforts to
perform each of their obligations hereunder, to satisfy all of the conditions
set forth in this Agreement and to close the transactions contemplated by this
Agreement on the Closing Date.
C. CONSENTS TO SALES. Global covenants and agrees that
it shall not sell any item of Inventory until it has received and provided to
LJR proof that it has received adequate written consents to sell the Inventory
from the copyright holders, licensors and others with intellectual property
rights relating to the Inventory.
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V. COVENANTS OF GLOBAL. Global covenants and agrees with
Erekesef that during the term of this Agreement, unless otherwise consented to
in writing by Erekesef:
A. BOARD OF DIRECTORS; VOTING OF GLOBAL SHARES.
1. APPOINTMENTS. At the Closing, Global shall cause
three persons nominated by Erekesef to be appointed to the Board of Directors
of Global, and shall set and maintain the size of the Board of Directors of
Global at seven (7). In addition, Global shall cause the Board of Directors to
be maintained as a classified board of three classes, with directors of each
class serving for a period of three years. Each of Erekesef's nominees shall
be appointed to serve in a separate class. At least one of Erekesef's nominees
shall be appointed to and maintained as a member of each Board of Directors of
each Subsidiary of Global, and of each Committee of the Board of Directors of
Global and each Subsidiary of Global.
2. VOTING. For a period of three years and for so long
as Erekesef maintains at least a 5% interest in the Equity Securities of
Global, at the request of Erekesef, from time to time, up to three designees of
Erekesef shall be appointed to the Board of Directors of Global: (i) upon
expiration of the term of any such designee, Global shall include and support a
designee of Erekesef as part of management's nominees for Directors, and (ii)
upon the termination of either such designee's services as a director other
than upon the expiration of term of office, Global shall appoint in the place
of such director a replacement designated by Erekesef. Notwithstanding the
foregoing, if Erekesef's interest in the outstanding Global Shares falls below
20%, it shall be entitled to have only two nominees appointed, maintained and
supported as nominees to be directors of Global, as described above, and if
Erekesef's interest in the outstanding Global Shares falls below 10%, it shall
be entitled to have only one nominee appointed, maintained and supported as a
director of Global, as described above.
3. ATTENDANCE AT BOARD MEETINGS. For a period of three
years, and at any time when Erekesef does not have a nominee sitting on the
Board of Directors of Global, then Erekesef shall have the right, directly or
through an agent, to attend all meetings of the Board of Directors of Global
and each Subsidiary, and all committees thereof, and shall be provided prior
written notice of all such meetings in the manner notices are provided to
directors, provided that if advance notice is not provided to directors, Global
shall provide advance notice to Erekesef, via fax as set forth below and shall
use its best efforts to allow Erekesef or its agent to attend such meetings
telephonically or otherwise. In addition, Global shall deliver to Erekesef
copies of all actions by written consent of the directors of Global and each
subsidiary, and each committee thereof. Erekesef shall execute a
confidentiality agreement in form reasonably acceptable to Global.
Notwithstanding the foregoing, Erekesef may be excluded from those portions of
meetings which are conducted solely for the purpose of (a) discussing
transactions between the company and/or any Subsidiary, on one hand, and
Erekesef and its affiliates, on the other hand, or (b) communicating to and
receiving advice from counsel.
B. REGISTRATION RIGHTS.
1. RESALE REGISTRATION. Until the earlier of the third
anniversary of the Closing Date and the date Erekesef shall become entitled to
sell the Global Shares pursuant to subsection (k) of Rule 144, Erekesef shall
have the right to require Global to file with the Securities and Exchange
Commission (the "SEC"), a registration statement on Form S-3 (or such other
form as the SEC may from time to time prescribe for such purposes) covering the
Global Shares (the "Resale Registration Statement") and to cause the Resale
Registration Statement to be declared effective by the SEC within 90 days
thereafter and to maintain the effectiveness of the Resale Registration
Statement until the earlier of (i) the completion of the offering covered by
the Resale Registration Statement, and (ii) the date Erekesef shall become
entitled to sell the Global Shares pursuant to subsection (k) of Rule 144; in
the event Global proposes to register an underwritten offering of its Common
Stock for its own account under the Act, it
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shall have the right to delay or suspend the filing or effectiveness of the
Resale Registration Statement for up to an aggregate of 104 days in any
12-month period to facilitate such registration. If Erekesef proposes to
effect an underwritten offering, Global shall enter into an underwriting
agreement in customary form with the managing underwriter selected by Erekesef.
Notwithstanding the foregoing, in the event of a material development
in the business of Global, Global shall advise Erekesef of such event and
Erekesef shall cease using the prospectus included in the Resale Registration
Statement until forty-eight (48) hours following the public disclosure of such
event. Global shall promptly disclose all such material developments provided
that it shall be entitled to delay such disclosure for a reasonable period of
time for valid business purposes, not to exceed five (5) business days without
the consent of Erekesef, not to be unreasonably withheld.
Erekesef shall pay the registration filing fee and legal costs related
to the preparation of the Resale Registration Statement (provided that Global
shall use lawyers reasonably designated by Erekesef for such purpose), and
Global shall pay all expenses related to the preparation and filing of reports
to the Securities and Exchange Commission under the Securities Exchange Act of
1934 and all other documents incorporated by reference into the registration
statement, including the cost of responding to comments of the SEC relating to
the documents which have been incorporated by reference into the registration
statement.
2. PIGGY BACK REGISTRATION RIGHTS. If, at any time or
from time to time, Global determines to register any of its securities for its
own account or the account of any other shareholder, other than a registration
relating to employee benefit plans (or the resale of securities acquired
pursuant thereto) or a transaction pursuant to Rule 145 of the SEC, Global
shall include in such registration such number of the Global Shares as Erekesef
shall elect in writing (which election may be rescinded at any time prior to
the sale of such securities) within twenty (20) business days following receipt
of notice of such registration, provided that, if such registration is
underwritten, it shall be a condition that Erekesef participate in such
underwriting and enter into an underwriting agreement in customary form with
the managing underwriter selected by Global. If the managing underwriter
determines that market forces require limitation of the number of shares to be
underwritten, then, so long as Global is not in violation of its obligations
pursuant to Section 5.2(a), the number of Global Shares owned by Erekesef to be
included in the registration may be limited to no less on a pari passu basis
with other shareholders; if Global is in violation of such obligations, then
Erekesef shall be entitled to cause all Global Shares held by it to be included
in the registration in preference to all other shareholders of Global.
Erekesef shall have the right to approve the underwriter of any offering by
Global, such approval not to be unreasonably withheld.
All registration expenses (excluding the cost of special legal counsel
to be retained by Erekesef) in connection with the registrations contemplated
by this Section 5.2 shall be borne by Global, but all direct selling expenses
of Erekesef (including broker fees and underwriting commissions) shall be borne
by Erekesef. In connection with any such registration statement, Erekesef
shall promptly furnish Global with such written representations, information
and consents regarding Erekesef, the Global Shares and the intended method of
distribution of the Global Shares as shall be necessary for inclusion in the
Registration Statement.
C. MANAGEMENT MEETINGS. At the request of Erekesef, no
more than four (4) times per year, management of Global shall meet (the
"Management Meetings") with Erekesef at Global's offices to discuss the
performance, prospects and strategies of Global. The Management Meetings shall
be utilized to discuss the general business and prospects of Global and its
Subsidiaries. The management of Global shall attend such meetings, and Global
shall use good faith efforts to discuss any concerns of Erekesef with respect
to the business and prospects of Global. Erekesef shall bear its own expenses
in connection with such meetings.
D. PREEMPTIVE RIGHTS.
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1. RIGHT TO PURCHASE. Except for the transaction
currently contemplated between Global and Xxxxxxx Xxxx, substantially on the
terms set forth in the draft provided to Erekesef's counsel on October 15, 1997
(the "Xxxx Transaction"), for three years following the date hereof, in the
event Global determines to issue additional debt securities or Equity
Securities or rights therefor, Global shall so inform Erekesef, and Erekesef
shall have the right, exercisable within twenty (20) days of receipt of written
notice from Global, to elect to purchase (which election may be rescinded at
any time prior to the issuance of such securities), at a price per share equal
to the purchase price at which such securities are proposed to be offered by
Global, a percentage of such securities equal to Erekesef's then current
percentage ownership interest in the Global Shares. The foregoing rights shall
not apply to an issuance of Equity Securities which are outstanding on the date
hereof or which are issuable upon the exercise, exchange or conversion of such
outstanding Equity Securities in accordance with their terms on the date
hereof.
2. NON-CASH CONSIDERATION. If Global proposes to issue
Global Shares for non-cash consideration, Global shall be deemed to have issued
such Global Shares for cash in an amount equal to the fair market value of the
cash, securities and other property received by Global for such Global Shares.
If Global proposes to issue Shares for non-cash consideration, Global shall
provide to Erekesef a description of the transaction which shall specify
Global's estimate of the fair market value of such consideration, which
estimate shall conclusively bind Global, but not Erekesef. Erekesef may, by
giving written notice to Global, challenge such estimate in which case the
parties shall endeavor in good faith to negotiate and agree upon the fair
market value of the non-cash consideration. Erekesef shall have the right to
request and receive responses to inquiries and such other information from
Global as it may reasonably request to allow it to ascertain the fair market
value of the non-cash consideration. All such documents and information shall
be supplied promptly. If the parties are unable to reach agreement on such
issue within ten (10) days following the delivery of notice to Global of the
challenge of the fair market value of the non- cash consideration, the parties
shall submit such issue for resolution to a mutually agreeable national
accounting firm with whom neither party then has a professional relationship
(the "Independent Accountant") for final determination using the following
procedures. Each party shall submit its determination of the fair market value
of the non-cash consideration, together with reasonable supporting materials,
including materials reasonably requested by the Independent Accountant. The
Independent Accountant shall promptly thereafter choose between the submitted
valuations and declare one valuation as the conclusive and binding valuation.
No party may challenge, dispute or otherwise contest the Independent
Accountant's choice (judicially or otherwise) except on the grounds of actual
fraud or manifest error. Erekesef shall have ten (10) days following the
determination by the Independent Accountant to elect to exercise its right to
purchase securities as described above. The party whose valuation is not
selected shall pay the costs and fees of the Independent Accountant.
E. AFFILIATE TRANSACTIONS. Except for the Xxxx
transaction, for a period of three years following the date hereof, neither
Global nor any Subsidiary shall enter into any transaction (other than the
employment relationships currently existing) with any director, officer,
shareholder or any of their Affiliates other than transactions in the ordinary
course of business on terms no less favorable to Global or such Subsidiary, as
the case may be, than could be obtained from an independent third party.
F. ANTIDILUTION RIGHTS. Except for the Xxxx
transaction, prior to the date of the next shareholders meeting, Global shall
not issue or sell, or enter into any agreement to issue or sell, any debt or
equity securities, or rights therefor, or amend its certificate of
incorporation or bylaws in a manner which affects its outstanding securities,
without the prior written consent of Erekesef, which consent may be withheld in
its absolute discretion.
VI. CONDITIONS TO THE OBLIGATIONS OF EREKESEF. The obligation of
Erekesef to consummate the transactions under this Agreement shall be subject
to the satisfaction of each of the conditions set forth in this Section 6,
unless waived by Erekesef.
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A. ACCURACY OF REPRESENTATIONS AND WARRANTIES OF GLOBAL
AND RELATED CERTIFICATE. The representations and warranties of Global set
forth in Section 2 shall be true and correct as of the Closing Date as though
made on and as of such date; and Erekesef shall have received from Global a
certificate to such effect, dated the Closing Date, signed by an officer duly
authorized to act on its behalf.
B. PERFORMANCE AND RELATED CERTIFICATES. Global shall
have performed all obligations and complied with all covenants required to be
performed or to be complied with by Global under this Agreement on or prior to
the Closing Date, and all conditions to the obligations of Erekesef shall have
been satisfied, and Erekesef shall have received from Global a certificate to
such effect, dated the Closing Date, signed by an officer duly authorized to
act on its behalf.
C. NO PENDING OR THREATENED LEGAL ACTION. No order,
injunction, decree or other action or legal, administrative, arbitration or
other proceeding or investigation by any Government shall be pending or
threatened, challenging or imposing a material limitation on the execution,
delivery or performance of this Agreement, the consummation of any of the
transactions contemplated hereby or the operation by Global of its business as
now conducted or as presently proposed to be conducted.
D. AUTHORIZATION OF AGREEMENTS BY GLOBAL. Global shall
deliver to Erekesef resolutions of the Board of Directors of Global authorizing
the Global to enter into the agreements contemplated by this Agreement,
accompanied by a certificate of the Secretary of the Company certifying that
such resolutions have been duly adopted by the Board of Directors of Global,
have not been amended or superseded by any other action of the Board of
Directors of Global, and remain in full force and effect.
E. PROCEEDINGS AND DOCUMENTS. All proceedings taken in
connection with the transactions contemplated hereby and all documents incident
to such transactions shall be reasonably satisfactory in form and substance to
Erekesef and its counsel.
F. APPOINTMENT OF DIRECTORS. Nominees of Erekesef shall
have been appointed to the Board of Directors of Global as specified in Section
5.1(a).
VII. CONDITIONS TO THE OBLIGATIONS OF GLOBAL. The obligations of
Global to consummate the transactions under this Agreement shall be subject to
the satisfaction of each of the conditions set forth in this Section 7, unless
waived by Global.
A. ACCURACY OF REPRESENTATIONS AND WARRANTIES OF
EREKESEF; PERFORMANCE OF OBLIGATIONS AND RELATED CERTIFICATES. The
representations and warranties of Erekesef set forth in Section 3 shall be true
and correct as of the Closing Date as though made on and as of such date;
Erekesef shall have performed all obligations and complied with all covenants
required to be performed or complied with by it under this Agreement and Global
shall have received on the Closing Date from Erekesef a certificate dated the
Closing Date, to such effect, which certificate or certificates shall be signed
by Erekesef.
B. PERFORMANCE AND RELATED CERTIFICATES. Erekesef shall
have performed all obligations and complied with all covenants required to be
performed or to be complied with by it under this Agreement on or prior to the
Closing Date and all conditions to the obligations of Global shall have been
satisfied, and Global shall have received from Erekesef a certificate to such
effect, dated the Closing Date, signed by Erekesef.
C. NO PENDING OR THREATENED LEGAL ACTION. No order,
injunction, decree or other action or legal, administrative, arbitration or
other proceeding or investigation by any Government shall be pending or
threatened, challenging or imposing a material limitation on the execution,
delivery or
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performance of this Agreement, or the consummation of any of the transactions
contemplated hereby.
D. PROCEEDINGS AND DOCUMENTS. All proceedings taken in
connection with the transactions contemplated hereby and all documents incident
to such transactions shall be reasonably satisfactory in form and substance to
Global and its counsel.
VIII. DEFINITIONS
A. "AFFILIATE" means, with respect to any Person: (A)
any Person who is an "affiliate" of such Person as defined in Rule 12b-2 of the
United States Securities Exchange Commission under the United States Securities
and Exchange Act of 1934, as amended, (B) any Person who is a director, officer
or partner or holds a similar position with any entity in which such Person has
a 10% or greater equity or profit interest, and (C) any family member of a
person referred to in (A) or (B).
B. "CONTRACTUAL OBLIGATION" means, in respect of any
Person, any agreement or instrument, written or oral, to which such Person is a
party or by which it or any of its properties or assets are bound, including,
without limitation, (i) any charter, bylaw, trust instrument, indenture or
evidence of indebtedness and (ii) any lease, contract, guarantee, indemnity or
other obligation or commitment either by the Person or by any other person
which relates to the property, assets, obligations or commitments of the
Person.
C. "GOVERNMENT" means the government of the United
States of America, or any political subdivision of the United States of America
(including, without limitation, any state, territory, federal district, county,
municipality or possession), and any department, agency or instrumentality of
any of the foregoing; and "Governmental" means of, by, or pertaining to any
Government.
D. "INTANGIBLE" means any trademark, service xxxx, trade
name (whether registered or unregistered), copyright, license, patent or design
patent, or pending application therefor, trade secret, process, recipe or
formula, and any right with respect to the foregoing and with respect to the
use of any brand name, distinctive emblem or devices of merchandising and
design.
E. "LIEN" means any mortgage, lien, charge, security
interest, encumbrance, pledge, adverse claim, interest of third parties or
other encumbrance or restriction of any nature whatsoever, including, without
limitation, any of the foregoing arising under any title retention or
conditional sale agreement but does not include Liens for current Taxes not yet
due and payable or being contested in good faith by appropriate proceedings
(and for which adequate reserves have been set aside on the books of the person
subject to such taxes).
F. "PERSON" means any individual, corporation,
partnership, joint venture, trust, estate, unincorporated organization,
Government or Governmental body.
G. "REQUIREMENT OF LAW" in respect of any Person means
(i) any law, rule, regulation, restriction, order, writ, judgment, award,
determination, injunction or decree of any court or Government, or any decision
or ruling of any arbitrator, applicable to such Person or any of its properties
or assets, and (ii) the certificate of incorporation or other charter document
or bylaws of such Person.
H. "TAXES" means all Governmental taxes, assessments,
fees, levies, imposts, duties, license and registration fees, charges or
withholdings of any nature whatsoever arising in connection with or in respect
of any assets, income, profits, businesses or other properties of any nature
whatsoever.
IX. BROKERS AND FINDERS. Neither Global nor Erekesef, or any of
them (whether individually or as a representative), nor any Person acting on
behalf of any of them has employed any broker, agent or
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finder, or incurred any liability for any brokerage fees, agents' commissions,
finders' fees or advisory fees in connection with the transactions contemplated
hereby; and Erekesef agrees that it shall indemnify and hold Global harmless in
respect of any damages (as defined in Section 10.4) arising out of any
agreements or arrangements or understandings claimed to have been made by
Erekesef, or any Person acting on its behalf, with any third party; and Global
shall indemnify and hold Erekesef harmless in respect of any damages arising
out of any agreements or arrangements or understandings claimed to have been
made by Global, or any Person acting on its behalf, with any third party.
X. INDEMNIFICATION.
A. INDEMNIFICATION BY EREKESEF. Erekesef hereby
indemnifies Global and/or its Affiliates (collectively the "Erekesef
Indemnified Parties" and each individually a "Erekesef Indemnified Party")
against, and agrees to hold the Erekesef Indemnified Parties harmless from, and
to defend Erekesef Indemnified Parties against, any and all Damages (as defined
below) incurred or suffered by the Erekesef Indemnified Parties arising out of
any misrepresentation, inaccuracy or omission in any representation or warranty
made by Erekesef under this Agreement or any agreement delivered in connection
herewith, or any breach of any warranty, covenant or agreement made or to be
performed by Erekesef pursuant to this Agreement. No investigation by Global
at or prior to the date hereof shall relieve Erekesef of any liability
hereunder.
B. INDEMNIFICATION BY GLOBAL. Global hereby indemnifies
Erekesef and/or its Affiliates (collectively, the "Global Indemnified Parties"
and each individually a "Global Indemnified Party") against, and agrees to hold
the Global Indemnified Parties from, and to defend the Global Indemnified
Parties against, any and all Damages incurred or suffered by the Global
Indemnified Parties arising out of any misrepresentation, inaccuracy or
omission in any representation or warranty of Global under this Agreement or
any agreement delivered in connection herewith, or any breach of any warranty,
covenant or agreement made or to be performed by Global pursuant to this
Agreement. No investigation by Erekesef at or prior to the date hereof shall
relieve Global of any liability hereunder.
C. RIGHTS CUMULATIVE; SEVERABILITY. No right granted to
the parties hereunder on default or breach is intended to be in full or
complete satisfaction of any damages arising out of such default or breach, and
each and every such right hereunder, or under any other document delivered
hereunder, or allowed by law or equity, shall be cumulative and may be
exercised from time to time. If any provision of this Agreement or the
application thereof to any person or circumstance is held unconstitutional or
otherwise invalid, the unconstitutionality or invalidity thereof shall not
affect other provisions or applications which can be given reasonable effect
without the unconstitutional or invalid provision or application, and to this
end the provisions of this Agreement are severable.
D. DAMAGES. "Damages" as used herein shall mean any and
all claims, actions, demands, losses, costs, expenses, liabilities, damages and
recoveries to the full amount of the actual damage occasioned by each
deficiency, misrepresentation, inaccuracy, omission or breach in each case
including interest, penalties or other damage (including, without limitation,
reasonable attorneys' fees and other costs and expenses reasonably incurred in
investigating or in attempting to avoid the same or oppose the imposition
thereof or of enforcing this indemnity).
E. RIGHT TO DEFEND, ETC. If the facts giving rise to
any such indemnification shall involve any actual claim or demand by any third
Person against an Erekesef Indemnified Party or a Global Indemnified Party
(referred to hereinafter as an "Indemnified Party"), the indemnifying party
shall be entitled to notice of and entitled (without prejudice to the right of
any Indemnified Party to participate at its own expense through counsel of its
own choosing) to defend or prosecute such claim at its expense and through
counsel of its own choosing and to control such defense if it gives written
notice of its intention to do so no later than the time by which the interests
of the Indemnified Party would be materially prejudiced as a result of its
failure to have received such notice; provided, however, that if the defendants
in any
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action shall include both the indemnifying party and an Indemnified Party, and
the Indemnified Party shall have reasonably concluded that counsel selected by
the indemnifying party has a conflict of interest because of the availability
of different or additional defenses to the Indemnified Party, each Indemnified
Party shall have the right to select separate counsel to participate in the
defense of such action on its behalf, at the expense of the indemnifying party.
The Indemnified Party shall cooperate fully in the defense of such claim and
shall make available to the indemnifying party pertinent information under its
control relating thereto, but shall be entitled to be reimbursed, as provided
in this Section 10, for all costs and expenses incurred by it in connection
therewith.
F. SUBROGATION. If the Indemnified Party receives
payment or other indemnification from the indemnifying party hereunder with
respect to any claim or demand by any third Person against the Indemnified
Party, the indemnifying party shall be subrogated to the extent of such payment
or indemnification to all rights in respect of the subject matter of such claim
to which the Indemnified Party may be entitled, to institute appropriate action
for the recovery thereof, and the Indemnified Party agrees to provide
reasonable levels of assistance and cooperation to the indemnifying party (but
only if such does not involve expense to the Indemnified Party) in enforcing
such rights.
XI. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under
or by reason of this Agreement on any persons other than the parties hereto and
their respective successors and assigns, nor relieve or discharge the
obligation or liability of any third party to either party to this Agreement,
nor give any third party any right of subrogation or action against any party
to this Agreement.
XII. TERM. The term of this Agreement shall commence on the date
hereof and shall terminate upon date that Erekesef owns less than 5% of the
issued and outstanding equity securities of the Corporation.
XIII. TERMINATION. The transactions contemplated herein may be
terminated at any time prior to the Closing, by mutual written consent of
Global and Erekesef or by either party if the satisfaction of the conditions to
the obligation of such party to effect the transactions contemplated hereby
becomes impossible.
XIV. WAIVER AND AMENDMENT. Any of the terms and provisions of this
Agreement may be waived at any time by the party which is entitled to the
benefit thereof, but only by a written instrument executed by such party. This
Agreement may be amended only by an agreement in writing executed by Global and
Erekesef.
XV. NOTICES. All notices, requests, demands, deliveries and other
communications hereunder shall be in writing and, except as otherwise
specifically provided in this Agreement, shall be deemed to have been duly
given, upon receipt, if delivered personally or via fax, or ten business days
after deposit in the mail, if mailed, first class with postage prepaid
(confirmed by telex if the addressee is in a country other than that of the
sender) to the parties at the following addresses:
If to Global:
Global One Distribution & Merchandising Inc.
0000 Xxxxxxxxx Xxxx
Xxxx, Xxxxxxxxxx 00000
Attn: President
Fax (000) 000-0000
with a copy to:
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Kampf & Associates, Inc.
Suite 901
000 Xxxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attn: Xx. Xxxxxxx X. Xxxxx, Esq.
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Xxxxxx Xxxxxx LLP
000 Xxxx Xxxxxxxx Xxxxxxxxx
Xxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
If to Seller:
Erekesef Securities Limited
0000 Xxxxxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Kinsella, Boesch, Fujikawa & Xxxxx, LLP
1901 Avenue of the Stars, Xxxxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Fax: (000) 000-0000
Any of the parties hereto may, from time to time, change its address for
receiving notices by giving written notice thereof in the manner outlined
above.
XVI. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
XVII. ENTIRE AGREEMENT. This Agreement and the other agreements
entered into in connection herewith supersede all prior and contemporaneous
negotiations and agreements (whether written or oral) and constitute the entire
understanding among the parties hereto.
XVIII. SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon the parties named herein and their respective successors and
assigns.
XIX. HEADINGS. The section headings contained in this Agreement
are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
XX. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of California applicable to Agreements
to be entered into and entirely performed within such State.
XXI. ARBITRATION.
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A. RULES OF ARBITRATION. All disputes arising in
connection with this Agreement, other than matters pertaining to injunctive
relief, shall be finally settled by arbitration by the American Arbitration
Association ("AAA") in Los Angeles, California, in accordance with the rules of
the AAA provided that to the extent necessary to render the decision of the
Arbitrator enforceable in the courts of the State of California, the
arbitration rules set forth in the California Code of Civil Procedure, Section
1280 et seq. (the "Rules of Arbitration") and the provisions of Section 1283.05
of the Rules of Arbitration concerning rights of discovery shall govern.
Judgment on the award rendered by the arbitration panel (the "Arbitration
Panel") may be entered in any court of competent jurisdiction.
B. INITIATION OF ARBITRATION. Any party which desires
to initiate arbitration proceedings may do so by delivering written notice to
the other party (the "Arbitration Notice") specifying (x) the nature of the
dispute or controversy to be arbitrated; (y) the name and address of the
arbitrator appointed by the party initiating such arbitration; and (z) such
other matters as may be required by the Rules of Arbitration. The party who
receives an Arbitration Notice shall appoint an arbitrator and notify the
initiating party of such arbitrator's name and address within 30 days after
delivery of the Arbitration Notice; otherwise, a second arbitrator shall be
appointed at the request of the party who delivered the Arbitration Notice.
The two arbitrators so appointed shall appoint a third arbitrator who shall be
chairman of the Arbitration Panel and the "neutral arbitrator" for purposes of
the Rules of Arbitration.
C. DECISIONS FINAL. All decisions of the Arbitration
Panel shall be final, conclusive and binding on all parties and shall not be
subject to judicial review except to the extent set forth in the California
Code of Civil Procedure, Section 1285 et seq.
D. INJUNCTIVE RELIEF. Any proceeding for injunctive
relief (including temporary restraining orders, preliminary injunctions and
permanent injunctions) may be brought in any court of competent jurisdiction,
and the parties consent to the non-exclusive jurisdiction of the California
courts for such purpose.
XXII. DELAY, ETC. No delay or omission to exercise any right, power
or remedy accruing to any party hereto shall impair any such right, power or
remedy of such party nor be construed to be a waiver of any such right, power
or remedy nor constitute any course of dealing or performance hereunder.
XXIII. COSTS AND ATTORNEYS' FEES. If any action, suit, arbitration
proceeding or other proceeding is instituted arising out of this Agreement, the
prevailing party shall recover all of such party's costs, including, without
limitation, the court costs and attorneys' fees incurred therein, including any
and all appeals or petitions therefrom. As used herein, "attorneys' fees"
shall mean the full and actual costs of any legal services actually rendered in
connection with the matters involved, calculated on the basis of the usual fee
charged by the attorneys performing such services.
XXIV. SPECIFIC PERFORMANCE. The parties hereto agree that the
parties will be irreparably damaged in the event that this Agreement is not
specifically enforced. Accordingly, in the event of any controversy concerning
the LJR Shares or the Global Shares which are the subject of this Agreement,
such rights or obligations shall be enforceable in a court of equity by a
decree of specific performance. Such remedy shall be cumulative and not
exclusive, and shall be in addition to any and all remedies which the parties
hereto may have hereunder at law or in equity.
XXV. ASSIGNMENT. Neither this Agreement nor any right pursuant
hereto or interest herein shall be assignable by Global without the prior
written consent of Erekesef, which may be withheld in Erekesef's absolute
discretion; Erekesef may assign its rights hereunder to any person.
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IN WITNESS WHEREOF, the undersigned parties hereto have duly
executed this Agreement as of the date first above written.
Global One Distribution & Merchandising Inc.
By /s/ Xxxxxxxx X. Xxx
------------------------------------------
Title: Chief Executive Officer
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Erekesef Securities Limited
By /s/ Xxxxx Xxxxxxxxxx
-----------------------------------------
Title: President
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