TSET, Inc.
000 Xxxxx Xxxxx Xxxxxx, XXX 000
Xxxx Xxxxxx, XX 00000
April 11, 2001
Board of Directors
Atomic Soccer USA, Ltd.
0000 Xxxxxx Xxxxx
Xxxxxxx, XX 00000
This letter agreement will set forth the terms and
conditions upon which TSET, Inc. ("TSET") will sell to Atomic
Soccer USA, LTD. ("Atomic") all of the shares of its capital
stock owned by TSET. The terms and conditions set forth herein
were originally outlined in a confidential memorandum dated
February 3, 2001 and discussed thereafter from time to time, most
recently on February 22, at which time TSET and Atomic reached
agreement for the transaction contemplated herein.
1. For $1,000.00 and other good and valuable consideration, the
delivery, receipt, and sufficiency of which is hereby
acknowledged, TSET agrees to sell, assign, transfer, and convey
to Atomic 87.75 shares of Class A Voting Capital Stock and
1,274.25 shares of Class B Non-voting Capital Stock of Atomic
(the "Atomic Shares"), representing 100% of Atomic's issued and
outstanding capital stock, owned by TSET as of the date hereof.
To the extent TSET is unable to locate the certificates
representing the Atomic Shares originally transferred to TSET
pursuant to the Stock Purchase Agreement dated as of March 6,
2000 (the "Stock Purchase Agreement"), TSET shall indemnify and
hold Atomic harmless with respect thereto. The transfer of the
Atomic Shares described in this paragraph 1 shall constitute
TSET's complete relinquishment of any ownership interest in
Atomic.
2. In recognition of the significant capital contributions made
by TSET to Atomic, TSET shall receive, as additional
consideration for Atomic'stock, cash payments equal to 15% of the
amount of Atomic's "adjusted profit" for each of the next seven
fiscal years ended October 31 (the "Profits Participation
Interest"), in which Atomic's adjusted profit for the year is
$50,000 or more (the "Minimum Profits"). Notwithstanding the
foregoing and without any prejudice to or diminution of its
rights under this paragraph 2, TSET may, at its sole and absolute
discretion, elect to forego
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receipt of, and defer to a future year, the Profits
Participation Interest, for any year in which the Atomic's
profits are less than $100,000. Any such deferral shall not
be counted against TSET's right to receive payment of the
Profits Participation Interest for seven years. No Profits
Participation Interest shall be payable in any year in which
Atomic has not achieved the Minimum Profits. Whether Atomic
has achieved the Minimum Profits in any year shall be
determined with reference to Atomic's "adjusted profit,"
i.e., Atomic's profit before income taxes plus depreciation,
plus amortization, plus increases and minus decreases in
reserves/allowances, plus interest, calculated as of the end
of Atomic's financial year. In any year in which the
Profits Participation Interest is payable to TSET, Atomic
shall make such payment in full by wire transfer of
immediately available funds within 30 days of the tax return
due date for the year in which the Minimum Profits have been
achieved (the "Payment Period"). In the event Atomic fails
to pay the Profits Participation Interest prior to the lapse
of the Payment Period for the year in question, Atomic shall
immediately issue to TSET that number of shares as will
equal 5% of Atomic's issued and outstanding capital stock.
The issuance of a like number of shares shall occur each
time Atomic fails to pay the Profits Participation Interest
to TSET when due. TSET shall have the right, at its sole
expense, during normal business hours and upon 24 hours'
prior notice, to audit the financial books and records of
Atomic to ensure Atomic's compliance with its obligations
regarding the Profits Participation Interest. In addition,
Atomic shall provide TSET with quarterly financial
statements setting forth, among other things, a complete and
accurate presentation of Atomic's financial condition as of
the date thereof. The Profits Participation Interest shall
be in the nature of a covenant associated with Atomic and
its business and shall continue in full force and effect in
the event of any subsequent sale of any interest in Atomic
by you, or any merger or consolidation involving Atomic
(collectively, or in any individual case, a "Transaction"),
until TSET has received the full benefit thereof. Atomic
shall ensure that the terms and conditions of any
Transaction include an assumption of and agreement to timely
comply with the Profits Participation Interest. In order to
protect TSET's rights to the Profits Participation Interest,
Atomic shall not execute any documents relating to a
Transaction without TSET's prior written consent, which
consent shall not be unreasonably conditioned, withheld, or
delayed so long as the Profits Participation Interest is a
recognized legal obligation of Atomic and compliance
therewith is an integral part of the terms of such
Transaction.
3. Atomic hereby acknowledges that TSET has satisfied all of
its obligations to Atomic contained in the Stock Purchase
Agreement. The execution and delivery of this letter agreement
shall effect a complete, final, and mutual release of TSET and
Atomic from and against any and all liabilities, claims, and
causes of action of Atomic relating to any aspect of any
obligation under the Stock Purchase Agreement or other matters of
any nature whatsoever. Atomic further acknowledges that Atomic
has received full disclosure of all material facts and
information relating to Atomic and the transaction contemplated
herein and, accordingly, are entering into such transaction on a
fully informed basis.
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4. In order to protect and enhance TSET's rights and
expectancies under the Profits Participation Interest, Atomic
agrees that it will exert its good faith best efforts to continue
the Corporate Business and seek to maximize the value thereof,
and fully observe and perform all fiduciary duties applicable
thereto.
5. TSET represents and warrants to Atomic that it has all
requisite corporate power and authority to execute, deliver, and
perform its obligations hereunder, and the execution, delivery,
and performance by TSET hereof has been or will be duly
authorized by all necessary corporate action on its part or is
otherwise within the authority of the person executing and
delivering the same. This letter agreement constitutes the
valid, legal, and binding obligation of TSET, enforceable against
it according to the terms hereof, except as may be limited by
applicable bankruptcy, insolvency, reorganization, or other
similar laws affecting creditors' rights and general principles
of equity.
6. Atomic represents and warrants to TSET as follows:
(a) neither the execution of this letter agreement nor the
performance of its obligations hereunder does or will conflict
with, violate, or result in the breach or termination of, or
constitute a default, event of default (or an event which with
notice, lapse of time, or both, would constitute a default or
event of default), under the terms of any material agreement to
which Atomic is a party or by which Atomic (or any of Atomic's
securities, properties, or businesses) is bound;
(b) there is no proceeding (whether or not the defense thereof
or liability with respect thereto is covered by policies of
insurance) pending, or, to Atomic's knowledge, threatened,
against Atomic which could reasonably be expected to prevent
Atomic from consummating the transaction contemplated herein;
(c) Atomic has all necessary legal capacity and authority to
execute, deliver, and perform the obligations hereunder;
(d) no consent of any other person is required for Atomic to
execute, deliver, and perform your obligations hereunder; and
(e) this letter agreement constitutes the legal, valid, and
binding obligation of Atomic, enforceable against it in
accordance with the terms hereof, except as may be limited by
applicable bankruptcy, insolvency, reorganization, or other
similar laws affecting creditors' rights and general principles
of equity.
7. Upon execution and delivery of this letter agreement by the
parties, TSET shall have no further performance obligations of
any kind to any person whatsoever under the Stock Purchase
Agreement including, without limitation, he provisions of
Sections 6 and 7 thereof. To the extent deemed necessary or
prudent by TSET, Atomic shall procure any written release or
consent of any signatory to the Stock Purchase
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Agreement necessary to give effect to the provisions of this
paragraph 7. In the absence of such release or consent,
Atomic shall indemnify, defend, and hold harmless TSET from
and against any and all claims, damages, charges, penalties,
causes of action, costs, and expenses (including, without
limitation, reasonable attorney's fees) arising out of any
obligations contained in the Stock Purchase Agreement.
8. The provisions of Section 11 of the Stock Purchase Agreement
(arbitration) are incorporated herein by this reference and made
a part hereof for all purposes.
9. Certificates representing a certain agreed number of shares
of the capital stock of TSET shall be delivered to Xxxx Xxx and
Xxxxx Xxxxxxxx, issued in exchange for forgiveness and
cancellation of indebtedness owed to such individuals, prior to
or contemporaneously with your execution and delivery of this
letter agreement. TSET represents and warrants that the issuance
of such shares have been authorized and approved by TSET's board
of directors and appropriate instructions regarding the same have
been provided to TSET's transfer agent.
10. TSET and Atomic represent and warrant to each other that no
compensation or finder's fee is payable by TSET or Atomic, as the
case may be, to any person relating to the transactions
contemplated herein.
11. The provisions of Section 13 of the Stock Purchase Agreement
(general provisions) are incorporated herein by this reference
and made a part hereof for all purposes, except that (a) the
mailing address of TSET under Section 13(f) thereof shall be 000
Xxxxx Xxxxx Xxxxxx XXX 000, Xxxx Xxxxxx, XX 00000, Tel.
000.000.0000 and Fax 000.000.0000 and (b) Atomic's mailing
address shall be 0000 Xxxxxx Xxxxx, Xxxxxxx, XX 00000, Tel.
000.000.0000 and Fax 000.000.0000.
12. Atomic agrees that it shall provide to TSET, on an "at cost"
basis, a reasonable quantity of apparel to be requested by TSET
from time to time.
Atomic's execution, in the space provided below, will
evidence its agreement and acceptance of the transaction
contemplated herein, effective as of the date indicated. TSET
wishes Atomic the best of luck and good fortune as you strive to
carry forward Atomic's business.
Sincerely,
/s/Xxxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
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AGREED AND ACCEPTED: April 11, 2001
ATOMIC SOCCER USA, LTD.
By:
/s/Xxxxxxx X. Xxxxxxxxx, President/Secretary
/s/Xxxx X. Xxxxxxxx, Director
/s/Xxxx Xxxxx, Chairman of the Board
/s/Xxxxx Xxxx Xxxxxxxx, Director
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