User Agreement - GenX Roll Up InsiderTM

This agreement (this “Agreement”) is by and between GenX Capital Group (“GenX”) and the user (whether paid or free, the “Member” or “User” or “Participant”) of (“GRI” or generally this Offering as defined in the Terms), and is effective immediately upon the User’s purchasing, using, or otherwise participating in GRI, and is effective immediately upon the User’s purchasing, using, or otherwise participating in GRI, and User hereby consents to the such action by User as its intended execution of, and assent to, this Agreement as equivalent to a hand written signature. Furthermore, this Agreement hereby incorporates by reference the General Terms and Conditions (the “Terms”) agreed to by User upon purchasing or using any Offering as defined therein, and made effective as stated therein. Any capitalized word not defined herein has the same meaning as defined in the Terms. The parties hereto acknowledge, understand, and agree to the following:

1. GRI Overview. GRI is a proprietary process designed and created by GenX for GenX’s own portfolio companies to multiply the resale value of those companies. Only certain companies are eligible for GRI. GenX grooms and prepares its own portfolios for GRI. Additionally, GenX will accept companies coming from GenX’s Ultimate Members and Acquisitions Pilot Project (APP) Members. Non-Member buyers of GRI must have their companies approved and accepted by GenX prior to their purchase of GRI (such Ultimate, APP, and approved non-Member companies hereafter, the “Companies”).

2. Ownership vs Profit Sharing. GRI is an exit strategy. Members and customers participating in GRI do so for the purpose of selling their company by, in effect, borrowing a roll up platform exclusively created, owned, and operated by GenX. Participants in GRI retain the financial equivalent of 100% their ownership (shared ownership in some cases) of the cash flow and enterprise value of their own companies, while GenX retains 100% ownership in GRI. GenX takes no pre-GRI financial interest in customers’ or Members’ companies. Participating companies require substantial operational and management improvement projects in order to make them “roll up ready” with GenX portfolio companies. It is only because of the 2-4X value GRI is designed to create that GenX can recoup its substantial time and financial investment in each company in GRI and still offer its customers and Members GRI profit sharing, which ranges from 10% to 80%. The actual percentage in each case is a direct function of (i) whether Participants require cash partners (if not then higher % share), and (ii) their membership status (lower share for free Participants, higher for paid) as shown in the GenX Roll Up InsiderTM Participation Options Table below.

   1. As is typical in the structure of a roll up, each participating company in the roll up requires transferring into the portfolio. Despite this, the equivalent cash flow and equity from each Member’s or customer’s companies continues to be disbursed to them in the ordinary course as customary in the industry.

   2. Member agrees to execute all documents relating to GRI for Member’s Company to be added to the GenX roll up portfolio, and be managed by GenX until sale.

3. GRI Services. As part of the GRI, whether paid or free as a part of APP, GenX designs a customized plan to prepare companies so that they meet the following criteria: (i) they have a minimum EBITDA of $1.7M, (ii) they have well systemized operations and management structures, (iii) they are a complimentary fit with GenX portfolio companies, and (iv) they have strategic and organizational alignment with GenX portfolio companies. This represents a substantial investment of GenX’s time, money and bandwidth to accomplish, and includes the following components as determined by GenX at its discretion:

   1. Partners and JVs for Minimum EBITDA. Achieving minimum EBITDA of $1.7M generally means acquiring a company at a price point of no less than $3M, which would require about $300,000 in cash funds to acquire. However, GenX can provide and structure cash partner deals and/or JVs which would enable Members to contribute as little as $50,000.

   2. The following Staffing

      1. Project Director – For each Company, there is a GenX M&A project specialist who manages and oversees the entire acquisition and post-acquisition process.

      2. GenX Growth TeamTM Dedicated strategic team.

      3. GenX Roll Up TeamTM Dedicated strategic team.

      4. GenX Integration TeamTM Dedicated strategic team.

      5. Third Party Consultants. Dedicated strategic team.

   3. Proof of Funds (as needed). Members requiring JVs or partners may also need POF.

   4. LOIs. For acquisition purposes (Members only).

   5. Transactional Legal Support. This is for transactional purposes to facilitate the business, functional, and administrative objectives of GRI and related GenX activities to acquire and roll up companies. It is not for the exclusive representation of customer or Member legal or financial interests. User waives any claims of a conflict of interest in such legal support, and represents that it has had an opportunity to obtain its own legal counsel or waived it.

   6. Roll up Meetings. These meeting will be at GenX’s discretion as needed.

4. APP  Requirement. With the exception of the Acquisitions Pilot Project (APP), GenX’s paying customers and Members are free to manage Companies independently of GenX and hold them indefinitely. However, because APP is being offered for free, APP Members are required to follow various guidelines to ensure their success and the success of APP, which is the only way for GenX to recover the cost of its substantial time and financial investment in the Project and realize a profit. This includes a structured sale of the Companies via GenX’s roll up process called GenX Roll Up InsiderTM (GRI). Accordingly, APP was designed for its Members to both acquire Companies and sell them via GRI. GRI is free of cost for APP Members, but is a paid standalone service for Ultimate members and non-members.

5. Role of GenX. The role of GenX in the Venture is extensive, and includes the following activities: (a) coordination, oversight, and management of the Venture and its Participants, (b) Company analysis and selection, (c) SBA lender management if applicable, (d) roll up management, (e) staffing decisions, (f) growth strategies and value creation, and (g) corporate development.

6. Role of Participant in GRI. GenX may at its discretion cancel this Agreement if Member does not perform the Member GRI roles specified below:

   1. Acquisition. The primary role of Participant in GRI is to close on the acquisition of a Company to be funded by an SBA lender. Participant’s role during the acquisition stage includes (i) tendering to GenX, SBA personnel or representatives of Companies, proof of funds (POF) and cover letter (form provided by GenX) authorizing GenX to represent Member in the acquisition process as Member’s JV partner, or other related documents, in the amount equal to or exceeding the Down Payment amount stated in this Agreement, and hereby consents to submission by GenX of such POF to SBA personnel or representatives of Companies, including collective submission of POFs with other Participants (not visible by other Participants), at the discretion of GenX, for the purpose of evaluating and pursuing prospective Companies, (ii) signing letters of intent, purchase agreements, and other customary documents required to buy a Company, and (iii) cooperating with the SBA lender in this process which is a key element of Participant’s role.

   2. Following the Strategic Plan. There may be several viable strategic approaches to acquisitions and roll ups, and with many Participants in APP, there may be differing opinions during the course of the venture. So it is important that Participants cooperate with GenX in following the venture’s strategy and business model, notwithstanding any strategic preferences by Participant. This is especially important during the roll up phase. The GenX team and third parties engaged by GenX are highly experienced, and GenX incorporates redundancies for quality control. GenX is happy to consider input and concerns raised by Participants, but ultimately GenX will need to make final decisions. Roll ups are successful only when the constituent companies are strategically aligned. Accordingly, Participant hereby acknowledges and agrees (i) to the role of GenX as general partner, managing member, or similar managing position in GRI related entities, all of which GenX holds a financial interest in, including Participant’s Company, and (ii) that Member will execute any and all documents before, during, or after acquisition of a Company to formalize or ratify any such position of GenX, including amendments or supplemental documents for such purpose. 

7. Roll up implementation is a costly, time and labor intensive, 1-2 year endeavor and requires supplemental expertise both in-house and from third parties. To pay for this until sale of the Companies, GenX charges a rollup fee payable by the Company (not Participant), which is to be deducted from GenX’s share of rollup profits upon sale of the Company, to the extent such profit is sufficient upon sale to do so.

8. Cost of GRI. Prices of GRI vary based on Membership status, as set forth in the table below titled GenX Roll Up InsiderTM Participation Options.