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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BETWEEN
X-CEED, INC. AND X-CEED ACQUISITIONS, INC.
AND
RESET, INC.
AND THE SHAREHOLDERS OF RESET, INC.
AUGUST 5, 1998
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TABLE OF CONTENTS
1. The Merger.................................................................2
2. Consideration and Conversion of Securities.................................3
3. Representations and Warranties of the Company and the Reset Shareholders...4
4. Representations and Warranties of X-ceed..................................16
5. Conduct of the Business of the Company and Sub Pending the Closing Date...26
6. Survival of Representations and Warranties................................28
7. Conditions Precedent to X-ceed's Obligations..............................28
8. Conditions Precedent to Reset's and the Reset Shareholders' Obligations...32
9. Indemnification and Resolution of Disputes................................34
10. Purchase Price Adjustment.................................................36
11. Termination and Abandonment...............................................38
12. Closing Date..............................................................38
13. Post-Closing Covenants....................................................40
14. Brokerage.................................................................40
15. Investment Representation.................................................40
16. Restriction on Negotiation................................................41
17. Miscellaneous.............................................................42
Schedules
A Owners of Issued and Outstanding Stock
3(a)(1) States in which Qualified
3(b) Financial Statements
3(b)(3)(iv) Increases in Compensation
3(e)(1) Real Property; Mortgages, Liens, etc.; Leases, Subleases, Options
Rights of Possession/Occupancy
3(e)(2) Consents and Approval of Lessors
3(f) Inventories; Exceptions to Usability and Salability
3(g) Contracts and Commitments
3(h) Banks
3(i)(l) Payroll Roster
3(i)(1)(a) Increases in Compensation
3(i)(2) Employment and Consulting Agreements
3(i)(3) Non-Compliance with Employment Related Laws
3(i)(4) Benefit Plans
3(k) Litigation
3(l) Patents and Trademarks
3(m) Trademark Indemnification
3(n) Undisclosed Liabilities
3(o) Insurance
3(p) Loans and Advances
4(a)(3) Existing Agreements with Regard to X-ceed's Stock
ii
4(b) Financial Statements
4(b)(2) Increase in Compensation
4(e)(1) Real Property; Mortgages, Liens, etc.; Leases, Subleases, Options
Rights of Possession/Occupancy
4(f) Inventories; Exceptions to Usability and Salability
4(g) Contracts and Commitments
4(h)(3) Benefit Plans
7(d) Employees Continuing in Employment
Exhibits
A. Employment Agreements
B. Lease Guaranty
iii
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BETWEEN
X-CEED, INC. AND X-CEED ACQUISITIONS, INC.
AND
RESET, INC. AND
THE SHAREHOLDERS OF RESET, INC.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION made as of the
5th day of August, 1998, by and among X-ceed, Inc. ("X-ceed"), a corporation
duly organized, validly existing and in good standing under and by virtue of the
laws of the State of Delaware, with executive offices at 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, XX 00000, and X-ceed Acquisitions, Inc. ("Sub"), a Delaware corporation
and subsidiary of X-ceed with offices c/o X-ceed, and Reset, Inc. ("Reset" or
the "Company"), a corporation duly organized, validly existing and in good
standing under and by virtue of the laws of the State of New York, with
executive offices at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000, and Xxxxx
Xxxxxxxx, Xxxxxx Maitenaz and Xxxxxx Xxxxxxx, constituting the owners of all of
the outstanding capital stock (the "Company Stock") of Reset (the "Reset
Shareholders").
WHEREAS, the Board of Directors of X-ceed, in accordance with Delaware
General Corporation Law (the "DGCL"), and the Board of Directors of Reset, in
accordance with the New York Business Corporation Law (the "NYBCL"), have
determined that it is advisable and in the best interests of their respective
stockholders to consummate and have approved the business combination
transaction provided for herein in which Reset will merge with and into Sub (the
"Merger"); and
WHEREAS, X-ceed, Sub and Reset desire to make certain representations,
warranties and agreements in connection with the Merger and also proscribe
various conditions to the Merger; and
WHEREAS, it is the express intention of X-ceed, Sub and Reset that this
Agreement constitute a plan of reorganization intended to qualify for federal
income tax purposes as a
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"reorganization" within the meaning of Section 368(a)(1)(b) of the Internal
Revenue Code of 1986, as amended from time to time and any successor statute
thereto (the "Code");
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth in this Agreement and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. The Merger.
(a) Terms of the Merger. At the Effective Time (as hereinafter
defined in Section 1(b)) and upon the terms and subject to the conditions of
this Agreement, Reset shall be merged with and into Sub in accordance with the
DGCL. Sub shall be the surviving corporation in the Merger. As a result of the
Merger, the Company Stock shall be exchanged for shares of X-ceed as provided
for in Section 2 hereof.
(b) Effective Time. At the closing (as hereinafter defined), a
certificate of merger shall be duly prepared and executed by Sub and delivered
to the Secretary of State of the State of Delaware for filing. The Merger shall
become effective at the time of filing of the Certificate of Merger, hereinafter
referred to as the "Effective Time." Sub shall also file with the Secretary of
the State of New York all necessary documentation.
(c) Certificate of incorporation and by-laws of the Surviving
Corporation. At the Effective Time, (i) the certificate of incorporation of Sub
immediately in effect prior to the Effective Time shall be amended to change the
name of Sub to Reset, Inc. and shall thereafter constitute the certificate of
incorporation of the surviving corporation, and (ii) the by-laws of Sub as in
effect immediately prior to the Effective Time shall be the by-laws of the
surviving corporation.
(d) From and after the Effective Time, the directors of Sub
shall be Xxxxxx Xxxxx, Xxxxx Xxxxxxxx and Xxxxxx Maitenaz, and they shall serve
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
surviving corporation's certificate of incorporation and by-laws.
2
2. Consideration and Conversion of Securities.
(a) Stock of Reset. The Company Stock, as represented by 100
shares of Common Stock, no par value, issued and outstanding as of the Effective
Date shall, by virtue of the Merger and without any action on the part of the
holders thereof, be converted into the Common Stock of X-ceed having a value of
six million two hundred fifty thousand dollars ($6,250,000). The exact number of
shares of X-ceed Common Stock into which the Reset Common Stock shall be
converted (the "Conversion") shall be determined by taking the average of the
closing bid price and asking price of X-ceed Common Stock as quoted on the
NASDAQ SmallCap Market or the NASDAQ National Market, if the X-ceed Common Stock
is then trading on that market, at the close of business on the day preceding
the Closing (the "Average Price") and dividing the sum of 6,250,000 by the
Average Price. In no event and notwithstanding anything to the contrary
contained herein shall the number of shares of X-ceed Common Stock to be issued
in the Conversion be less than 1,250,000 shares except that the number of shares
to be issued in the Conversion may be adjusted pursuant to Section 11 of this
Agreement.
(b) Delivery of Shares. At or before the Closing, the Reset
Shareholders shall deliver to Sub all of their shares of Reset, duly endorsed in
blank, together with instructions to Sub setting forth the number of shares of
X-ceed Common Stock that each shareholder shall be entitled to receive and at
the closing Sub shall deliver duly issued certificates of the Common Stock of
X-ceed in the names and denominations as instructed by the Reset Shareholders,
which certificates shall bear a restrictive legend.
(c) Merger Consideration. The merger consideration, which
consists of X-ceed Common Stock issued upon the surrender for exchange of the
Company Stock, shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of the Company Stock.
(d) Terms and Conditions of the Stock. As soon as practicable,
but not later than six (6) months after Closing Date, X-ceed shall cause a
registration statement (the "Registration Statement") to be filed with the
Securities and Exchange Commission covering the registration of that number of
shares of X-ceed Common Stock received by the Reset Shareholders which, should
the Reset Shareholders sell all of the shares so registered, would be equivalent
to gross proceeds to
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the Reset Shareholders from the sale thereof of not more than $625,000. X-ceed
shall use the average of the closing bid price and ask price of X-ceed Common
Stock as quoted on the NASDAQ SmallCap Market, or the NASDAQ National Market in
the event X-ceed Common stock is then trading on that market, at the close of
business on the day preceding the first filing of the Registration Statement to
calculate the number of shares to be registered. X-ceed shall bear all expenses
of the registration. The registration rights shall be subject to customary
provisions for delaying or reducing the participation of selling shareholders if
in the opinion of the managing underwriter, if any, of such offering,
participation by selling shareholders would materially adversely affect the
distribution of any other securities by X-ceed. X-ceed Stock issued to Reset
Shareholders upon the Conversion will be "restricted securities" under Rule 144
of the Securities Act of 1933 (the "Securities Act") and will (other than those
so registered) be subject to the resale provisions of Rule 144 in the event that
none of X-ceed Stock is registered pursuant to a registration statement under
the Securities Act.
3. Representations and Warranties of the Company and the Reset
Shareholders. The Company represents, warrants and agrees with X-ceed as follows
:
(a) Corporate.
(1) The Company is a corporation duly organized, validly existing and in
good standing under and by virtue of the laws of its state of incorporation. The
Company is qualified to do business as a foreign corporation in such other
states in which the ownership of its respective assets or the nature and conduct
of its business requires such qualification and which are set forth in Schedule
3(a)(1).
(2) The Company has the power to own its properties and to carry on its
business as and where such business is now conducted. The Company does not have
any equity interest in any other corporation, partnership, joint venture or
association or control, directly or indirectly, any other entity. All of the
Company Stock has been duly authorized and validly issued, is fully paid and
nonassessable, was not issued in violation of or subject to any preemptive or
similar rights and there are no other existing outstanding rights, warrants or
options to acquire, or
4
instruments convertible into or exchangeable for or agreements or understandings
with respect to the sale or issuance of, any other shares of capital stock or
other equity interests in the Company.
(3) The Reset Shareholders own all of the Company Stock as set forth on
Schedule A and all of such shares are duly authorized, validly issued, fully
paid and nonassessable. All of such shares of the Company Stock are owned free
and clear of all liens, claims, charges, encumbrances, security agreements,
restrictive agreements and assessments and are not subject to any restrictions
with respect to transferability. Upon transfer and delivery of said shares of
the Company Stock to Sub, Sub will receive good and absolute title thereto free
from all liens, charges, encumbrances, equities, restrictive agreements and
claims of any nature whatsoever.
(4) The authorized capital stock of the Company consists of One Thousand
(1,000) shares of common stock, no par value, of which 100 shares are presently
issued and outstanding. There are no preemptive rights on the part of any holder
of any class of securities of the Company and no options, warrants, conversion
or other rights, agreements or commitments of any kind obligating the Company,
contingently or otherwise, to issue or sell any shares of its capital stock of
any class or any securities convertible into or exchangeable for any such shares
and no authorization therefor has been given.
(5) This Agreement has been duly executed and delivered by the Reset
Shareholders and the Company and constitutes the legal, valid and binding
obligation of the Reset Shareholders and the Company, enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium or laws affecting the rights and remedies of
creditors generally, and by general principles of equity. The execution,
delivery and performance of this Agreement, and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate or other action on the part of the Reset Shareholders and
the Company, and no other corporate or other proceedings on their part are
necessary to authorize this Agreement.
5
(b) Financial.
(1) The summary of the books of original entry of the Company for the
twelve months ended December 31, 1997 and the corporate tax returns for the year
ended December 31, 1997 (hereinafter collectively referred to as the "1997
Financial Information"), previously delivered to Sub and attached hereto as
Schedule 3(b)(1), are complete and correct and present fairly the gross revenues
and net income before interest, taxes and amortization, hereinafter defined as
"Net Income from Operations," of the Company as of such date.
(2) The Statement of Revenues and Expenses of the Company for five (5)
months ended May 30, 1998 and Statement of Revenues for the six (6) months ended
June 30, 1998, all collectively hereinafter defined as the "1998 Financial
Information," and previously delivered to Sub and attached hereto as Schedule
3(b)(2) are true and correct and present fairly the gross revenues and Net
Income from Operations of the Company.
(3) Since June 30, 1998, the business of the Company has been carried
on in the ordinary course in substantially the same manner as prior to that
date, and there has not been:
(i) any material adverse change (as hereinafter defined) in the
financial condition or in the operations or the business of the Company from
that shown on the 1998 Financial Information, or any event which has occurred
that may result in such a material adverse change. "Material Adverse Effect" or
"Material Adverse Change" shall mean any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities, or operations or any event,
condition, or state of facts which would, with the passage of time, constitute a
"Material Adverse Effect" or "Material Adverse Change."
(ii) any damages, destruction or loss, whether covered by insurance
or not, which have materially and adversely affected the business, property or
assets of the Company;
6
(iii) any declaration, setting aside or payment of any dividend, or any
distribution with respect to the capital stock of the Company or any direct or
indirect redemption, purchase or other acquisition by the Company of any such
stock other than the repurchase of stock from Xxxxxx X. Xxxxxx;
(iv) any increase in the compensation payable or to become payable by the
Company to directors, officers or employees, other than as set forth on Schedule
3(b)(3)(iv).
(v) any other event or condition of any character, not in the ordinary
course of business, that has materially and adversely affected the
results of operations or business or financial condition of the Company.
(c) Undisclosed Liabilities.
(1) The Company has no liabilities or obligations, either accrued,
absolute, contingent or otherwise, except:
(i) to the extent reflected or reserved against in the 1997 Financial
Information, and not heretofore paid or discharged ; and
(ii) those incurred in or as a result of the normal and ordinary course of
business since January 1, 1998, all of which have been consistent with past
practices and none of which (x) arise out of, relate to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement or
violation of law or (y) individually or in the aggregate is material to the
business, properties, financial condition or results, of operation of the
Company.
(2) Neither the Company nor the Reset Shareholders are aware of any basis
for any present or future action, suit, proceeding, hearing, investigation
charge, complaint, demand or claim against the Company or any liability of any
nature in any amount not fully set forth in either of the 1997 and 1998
Financial Information.
7
(d) Tax Returns.
(1) The Company has filed with the appropriate governmental agencies all
tax returns (or filed requests for extensions to file) required to be filed by
it or with respect to its business ("such returns") and has paid, or made
provision for the payment of, all taxes as well as penalties and interest
related thereto, if any, which are due pursuant to said tax returns, except
taxes which have not yet accrued or otherwise become due, or for which adequate
provision has been made on the books of the Company.
(2) None of such returns has been examined and settled, and no waivers of
statutes of limitation have been given or requested.
(3) All such returns and reports have been prepared for the year 1997, and
all federal, state, city and foreign income, profits, franchise, sales, use,
occupation, property, excise or other taxes due in connection with the Company's
business for the year 1997 has been fully paid.
(4) No deficiency or assessment with respect to or proposed adjustment of
the Company's Federal, state, county or local taxes is pending or, to the best
of the Company's knowledge, threatened. There are no tax liens, whether imposed
by any Federal, state, county or local taxing authority, outstanding against the
assets, properties or businesses of the Company.
(e) Title to Property.
(1) The Company does not lease any real or personal property as lessee,
except as set forth in Schedule 3(e)(1), attached hereto. Each of these leases
(the "Company Leases") is in good standing, valid, binding, and in full force
and effect and has not been modified. The Company is not in default under any of
the Company Leases and has not received any notice of its default under any of
the Company Leases and the Company has not given any notice of any, and, to the
best of Reset Shareholders' knowledge, there is no default by any other party
under any of the Company Leases, nor has any event occurred which, with notice
or the passage of time, or both, would constitute a default by any other party
under any of the Company Leases. Except as set forth on Schedule 3(e)(1), the
Company's rights in the property covered under the Company Leases (including any
improvements and appurtenances thereto) are paramount to the rights of any other
8
person or entity other than the landlords under the Company Leases. No consent
or approval of any third party is required with respect to such Company Leases
in order to avoid a default thereunder by reason of the transactions
contemplated by this Agreement, except as set forth on Schedule 3(e)(2). The
Company has received no notices other than periodic rent, common area
maintenance and other operating expense bills from the landlord under each lease
other than as described in Schedule 3(e)(2).
(2) All real property in which the Company has an ownership or leasehold
interest, and all tangible personal property owned by the Company is in all
material respects in good operating condition and repair and in all material
respects conforms to all applicable laws, including without limitation building
and zoning laws, statutes, ordinances or regulations and no notice of any
violation of such matters relating to the business, property or assets of the
Company has been received by the Company. Except as set forth on Schedule
3(e)(1) or (2), none of the premises owned or leased by the Company are in need
of maintenance or repairs except for reasonable wear and tear and ordinary
routine maintenance and repairs that are not material in nature or cost.
(3) Neither the whole nor any portion of any of the Company Properties has
been condemned or otherwise taken by a public authority, nor do the Reset
Shareholders know or have any reasonable grounds to believe that any such
condemnation or taking is threatened or contemplated.
(f) Inventories. The inventories of the Company consist of
items of a quality and quantity usable or saleable in the normal course of its
business, subject to usability and salability exceptions described on attached
Schedule 3(f) which are consistent with past business experience. The present
inventories of the Company are maintained at levels that are consistent with
past practices and are not excessive.
(g) Contracts and Commitments. Except as set forth on attached
Schedule 3(g):
(1) The Company has no written or oral contracts or commitments involving a
consideration in excess of $10,000.
9
(2) The Company has not received any written notice under any contract
whether express or implied, between the customers or clients of the Company and
the Company that the Company is in default of such contract or that the services
to be provided by the Company under the Contract fail to comply with the
contract or that any material contracts have been terminated or that the Company
has received notice under any contract that its customers or clients intend to
terminate any contract or materially reduce purchases for the Company's
services.
(3) The Company has not given any revocable or irrevocable power of
attorney to any person, firm or corporation for any purpose whatsoever.
(4) The Company is not restricted by agreement from carrying on its
business in any state.
(5) No director, officer or stockholder of the Company, or member of the
family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or any member of the family of any such person,
or to the best knowledge of the Company, any employee, is an officer, director,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof, in an entity who is a competitor, customer, supplier or other entity,
or who, during the past 12 months, has been a party to any transaction with the
Company, including any contract, agreement or other arrangement providing for
the employment of, furnishing of services by, rental of real or personal
property from or otherwise requiring payments to any such person or firm.
(6) The Company is not in default, nor is there any known basis for any
claim of default, under any contracts or commitments made or obligations owed by
it, which default is reasonably likely to have a Material Adverse Effect on the
Company. The Company has no present expectation or intention of not fully
performing all its obligations under any lease, contract or other agreement to
which it is a party, and the Company has no knowledge of any breach or
anticipated breach by the other party to any lease, contract or commitment to
which the Company is a party. The Company is in full compliance with all of the
terms and provisions of its Charter and by-laws, as amended, except as otherwise
set forth herein. No consent or approval of any third party
10
is required with respect to such contract in order to avoid a default thereunder
by reason of the transactions contemplated by this Agreement.
(7) All accounts receivable of the Company are current and collectible in
the ordinary course of business consistent with past practices of the Company,
except to the extent reserved against in the 1997 Financial Information and 1998
Financial Information.
(8) The Company has no further obligations to make any additional payments
to Xxxxxx X. Xxxxxx with respect to the repurchase of shares of stock of the
Company pursuant to the Common Stock Repurchase Agreement, dated May 1, 1998, by
and among the Company, the Reset Shareholders and Xxxxxx X. Xxxxxx (the "Xxxxxx
Agreement").
(h) Bank Accounts. Set forth in Schedule 3(h) are the names and addresses
of all banks in which the Company has accounts and the names of persons
authorized to sign checks, drafts or other instruments drawn thereon.
(i) Employee Relations.
(1) Annexed hereto as Schedule 3(i)(1) is a true and complete payroll
roster of all employees of the Company for the six months ending June 30, 1998
showing the rate of pay for each such person entitled to receive compensation
from the Company, and the gross payments made to each such person for the period
set forth above. No increases in such salaries, other than as set forth on
Schedule 3(i)(1)(a), have been given since June 30, 1998.
(2) (i) The Company is not a party to any collective bargaining agreement
covering or relating to any of its employees. The Company is not required to
recognize and has not received a demand for recognition by any collective
bargaining representative.
(ii) The Company is not a party to any contract with any of its employees,
agents, consultants, officers, salesmen, sales representatives, distributors or
dealers that is not cancelable by the Company without penalty or premium on not
more than thirty days' notice; and
11
(iii) The Company is not a party to any employment agreement or consulting
agreement providing for compensation in excess of $75,000 per annum except as
set forth in Schedule 3(i)(2); and
(iv) The Company has not promulgated any policy or entered into any
agreements relating to the payment of severance pay to employees whose
employment is terminated or suspended, voluntarily or otherwise.
(3) Except as set forth in the schedules attached hereto, the Company (i)
has complied in all material respects with all applicable laws, rules or
regulations relating to employment, including those relating to wages, hours,
collective bargaining and the withholding and payment of taxes and
contributions, and (ii) has complied in all material respects with the National
Labor Relations Act, as amended, Title VII of the Civil Rights Act of 1964, as
amended, the Civil Rights Act of 1991, the Occupational Safety and Health Act,
Executive Order 11246, the regulations under such acts and all other Federal and
state laws relating to the employment of labor, including any provisions thereof
relating to discrimination or harassment. The Company has, and will have at the
Closing Date, withheld all amounts required by law or agreement to be withheld
from the wages or salaries of its employees and there are no arrearages of
wages, payments under any pension or insurance plan or any other benefit, or any
tax or penalty for failure to comply with the foregoing owed by all of them with
respect to employees which are not either accrued or adequately reserved for in
the unaudited financial statements. There are no material controversies pending
or threatened, between the Company and any of its employees or any labor unions
or other collective bargaining agents representing or purporting to represent
its employees.
(4) The Company has not promulgated any bonus, profit-sharing, retirement,
stock purchase, deferred compensation, medical, hospitalization, life insurance
or other similar plan providing benefits for its employees and the Company has
not announced the prospective promulgation thereof except as set forth in
Schedule 3(i)(4). There is no unfunded past service credit liability or any
other liability with respect to any such plans other than as set forth on
Schedule 3(i)(4). No reportable event as defined in Title IV of the Employee
Retirement Income Security Act of 1974, as amended by the Multi employer Pension
Plan Amendments Act of 1980,
12
has occurred with respect to any such plan subject to the minimum funding
requirement of Section 412 of the Internal Revenue Code of 1986, as amended.
(j) No Breach of Statute or Contract. Neither the execution
and delivery of this Agreement, nor compliance with the terms and provisions of
this Agreement on the part of the Company or the Reset Shareholders, will (i)
violate any statute, license, or regulation of any governmental authority,
domestic or foreign, (ii) result in the default by the Company or any of the
Reset Shareholders of any judgment, order, writ, decree, rule or regulation of
any court or administrative agency, (iii) breach, conflict with, or result in a
breach of any of the terms, conditions or provisions of any material agreement
or instrument to which either the Company or the Reset Shareholders is a party,
or by which any of them is or may be bound, or constitute a default or require
any notice thereunder, (iv) violate any provision of the Company's certificate
of incorporation or by-laws, (v) result in the creation or imposition of any
claim, lien, charge or encumbrance of any nature whatsoever upon, or (vi) give
to others any claim, interest or rights, including rights of termination,
modification, acceleration, or cancellation in, or with respect to, any of their
property, assets, contracts, licenses or businesses. The conduct of the
Company's business does not violate any law or regulation applicable to such
business. The Company has complied with all laws, rules, regulations and orders
applicable to its business, operations, properties, assets, products and
services, and the Company has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted. There is no existing law, rule, regulation or order, and the
Company is not aware of any proposed law, rule, regulation or order, whether
Federal or state, which would prohibit or materially restrict the Company from,
or otherwise materially adversely affect the Company in, conducting its business
in any jurisdiction in which it is now conducting business.
(k) No Litigation. Except as set forth in Schedule 3(k), there
is no suit, action or legal, administrative, arbitration or other proceeding or
governmental investigation, or any change in the zoning or building ordinances
affecting the real property or leasehold interests of the Company, pending or to
the best of the Reset Shareholders' knowledge threatened against the Company.
The Company has not received any opinion or memorandum or legal advice from
legal counsel to the effect that it is exposed, from a legal standpoint, to any
liability or disadvantage which
13
may be material to its business, financial condition, operations, property or
affairs. The Company is not in default with respect to any order, writ,
injunction or decree known to or served upon the Company of any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is no action or
suit by the Company pending or threatened against others. The Company and the
Reset Shareholders have no knowledge of any unasserted claim, the assertion of
which is likely and that, if asserted, will be for legal or equitable relief
that, if granted, would have a Material Adverse Effect on the Company. No
injunction, stay or restraining order is in effect prohibiting the consummation
of any of the transactions contemplated by this Agreement.
(l) Patents and Trademarks. Schedule 3(l) correctly sets forth
a list of all letters patent, patent applications, inventions upon which patent
applications have not yet been filed, trade names, trademarks, trademark
registrations and applications, copyrights, copyright registrations and
applications, both domestic and foreign, presently owned, possessed, used or
held by the Company and, except as otherwise indicated in such Schedule, the
Company owns the entire right, title and interest in and to the same. Such
Schedule also correctly sets forth all patents, patent applications, inventions
upon which patent applications have not yet been filed, trade names, trademarks,
trademark registration and applications, and licenses, both domestic and
foreign, which materially relate to the businesses of the Company, and which are
owned or controlled by any director, officer, stockholder or employee of the
Company. Such Schedule also correctly sets forth a list of all licenses
materially relating to the business of the Company granted to the Company by
others, and to others by the Company. The Company has not received written
notice of any pending or threatened challenges regarding letters patent, patent
applications, trade names, trademark registrations and applications, copyrights,
copyright registrations and applications, or the licenses set forth in such
Schedule 3(l), except as set forth in said Schedule. The Company has not
received written notice that, its business as heretofore carried on infringes
upon the patents, trademarks, trade name rights, copyrights or publication
rights of others, except as set forth in said Schedule 3(l), no such
infringement exits.
(m) Trademark Indemnification. Except as set forth in Schedule 3(m), the
Company has not given any indemnification for, patent, trademark or copyright
infringement as to
14
any equipment, materials or supplies manufactured, produced, used or sold by it
or with respect to services rendered by it.
(n) Absence of Undisclosed Liabilities. The Company has no
obligations or liabilities (whether accrued, absolute, contingent, liquidated or
otherwise, including without limitation any tax liabilities due or to become
due) which are not fully disclosed and adequately provided for in the 1997
Financial Information or in the 1998 Financial Information, except as set forth
in Schedule 3(n) and except current liabilities incurred since the date of such
financial information and obligations under agreements entered into in the usual
and ordinary course of business, none of which (individually or in the
aggregate) is material to the business, properties, financial condition or
results of operations of the Company considered as a whole, and contingent
liabilities that are not (individually or in the aggregate) material to the
business, properties, financial condition or results of operations of the
Company considered as a whole.
(o) Insurance. The Company holds policies in the amounts and
for the coverage set forth on Schedule 3(o), all of which policies are in full
force and effect, and which coverage is consistent with Company's past business
practices covering all of the insurance required to be maintained by it and
which is customary for businesses similar to the Company. Except as disclosed on
the Schedule 3(o) hereto, Company has received no written notice of any claims
pending against the Company under any insurance policies currently in effect and
covering the property, business or employees of the Company, and all premiums
with respect to the policies maintained by the Company due and payable through
the date hereof have been paid by the Company. The Company has not been refused
any insurance coverage sought or applied for, and the Company has no reason to
believe that it will be unable to renew its existing insurance coverage upon
terms at least as favorable as those presently in effect, other than possible
increases in premiums that do not result from any act or omission of the
Company. Set forth in Schedule 3(o) are all insurance policies and bonds in
force with respect to the Company and the date on which such policies were to be
in force and the date on which such policies expire.
(p) Loans and Advances. The Company does not have any
outstanding loans or advances to any person and is not obligated to make any
such loans or advances, except, in each
15
case, for advances to employees of the Company in respect of reimbursable
business expenses anticipated to be incurred by them in connection with their
performance of services for the Company or as set forth in Schedule 3(p) annexed
hereto.
4. Representations and Warranties of X-ceed. X-ceed represents and
warrants to the Reset Shareholders and the Company as follows:
(a) Corporate.
(1) X-ceed and each of its subsidiaries, including Sub, is a corporation
duly organized, validly existing and in good standing under and by virtue of the
laws of its states of incorporation. X-ceed and each of its subsidiaries,
including Sub, is qualified to do business as a foreign corporation in such
other states in which the ownership of its assets or the nature and conduct of
its business requires such qualification.
(2) X-ceed and each of its subsidiaries, including Sub, has the power to
own its properties and to carry on its businesses as and where such are now
conducted. X-ceed does not have any equity interest in any other corporation,
partnership, joint venture or association or control, directly or indirectly, of
any other entity except for its interests in the subsidiaries.
(3) The authorized capital stock of X-ceed consists of 30,000,000 shares of
common stock, par value $.01 per share, of which approximately 8,983,943 shares
are presently outstanding immediately prior to the date hereof and Two Million
(2,000,000) shares of Preferred Stock, par value $.05 per share, of which no
shares of Preferred Stock are issued and outstanding. The authorized capital
stock of Sub consists of 100 shares of Common Stock, no par value, of which 100
shares are issued and outstanding in the name of X-ceed. All of the issued and
outstanding shares of Sub are duly authorized, validly issued, fully paid and
non-assessable. All of the issued and outstanding shares of X-ceed's Common
Stock are duly authorized, validly issued, fully paid and non assessable. There
are no preemptive rights on the part of any holder of any class of securities of
X-ceed or any of its subsidiaries, including Sub, and no options, warrants,
conversion or other rights, agreements, or commitments of any kind obligating
X-ceed or any of its subsidiaries, including Sub, contingently or otherwise, to
issue or sell any shares of its capital stock of any class
16
or any securities convertible into or exchangeable for any such shares and no
authorization therefor has been given, except as set forth on Schedule 4(a)(3).
(4) This Agreement has been duly executed and delivered by X-ceed and Sub
and constitutes the legal, valid and binding obligation of X-ceed and Sub,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or laws affecting the rights
and remedies of creditors generally, and by general principles of equity. The
execution, delivery and performance of this Agreement, and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporation action on the part of X-ceed, and no other corporate
proceedings on its part are necessary to authorize this Agreement.
(b) Financial.
(1) The audited balance sheet of X-ceed as of August 31, 1997, the related
audited statement of earnings and cash flows for the twelve months ended August
31, 1997, the unaudited balance sheet of X-ceed as of May 31, 1998, the related
unaudited statement of earnings and cash flows for the nine months ended May 31,
1998, all as set forth in Schedule 4(b) (hereinafter collectively referred to as
the "X-ceed financial statements") and previously delivered to the Company, are
complete and correct and present fairly the financial condition of X-ceed as of
such date, and the results of its operations for the periods then ended, in
conformity with generally accepted accounting principles applied on a basis
consistent with that of preceding periods.
(2) Since May 31, 1998, the business of X-ceed has been carried on in the
ordinary course in substantially the same manner as prior to that date, and
there has not been:
(i) any Material Adverse Change in the financial condition or in the
operations or the business of X-ceed from that shown on X-ceed financial
statements, or any event which has occurred that may result in such a Material
Adverse Change;
(ii) any damages, destruction or loss, whether covered by insurance or not,
which have materially and adversely affected the business, property or assets of
X-ceed;
17
(iii) any declaration, setting aside or payment of any dividend, or any
distribution with respect to the capital stock of X-ceed or any direct or
indirect redemption, purchase or other acquisition by X-ceed of any such stock;
(iv) any increase in the compensation payable or to become payable by
X-ceed to directors, officers or employees other than as set forth on Schedule
4(b)(2) annexed hereto, or as mandated by law with respect to minimum wages, or
in the payment of any bonus, or in any insurance, pension or other benefit plan,
payment or arrangement made to, for or with any of such officers, employees or
agents; or
(v) any other event or condition of any character, not in the ordinary
course of business, that has materially and adversely affected the results of
operations or business or financial condition of X-ceed.
(c) Undisclosed Liabilities.
(1) X-ceed has no liabilities or obligations, either accrued, absolute,
contingent or otherwise, except:
(i) to the extent reflected or reserved against in the X-ceed financial
statements, and not heretofore paid or discharged; and
(ii) those incurred in or as a result of the normal and ordinary course of
business since May 31, 1998, all of which have been consistent with past
practices and none of which (x) arise out of, relate to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement or
violation of law or (y) individually or in the aggregate is material to the
business, properties, financial condition or results of operations of X-ceed.
(2) There is no basis for any present or future action, suit, proceeding,
hearing, investigation charge, complaint, demand or claim against X-ceed or any
liability of any nature in any amount not fully set forth in X-ceed financial
statements.
18
(d) Tax Returns.
(1) X-ceed has filed with the appropriate governmental agencies all the
returns required to be filed by it or with respect to its business ("such
returns") and has paid, or made provision for the payment of, all taxes as well
as penalties and interest related thereto, if any, which have or may become due
pursuant to said returns, except taxes which have not yet accrued or otherwise
become due or for which adequate provision has been made on the books of X-ceed.
(2) None of such returns has been examined and settled, and no waivers of
statutes of limitation have been given or requested.
(3) All such returns and reports have been prepared on the same basis as
those of previous years, and all federal, state, city and foreign income,
profits, franchise, sales, use, occupation, property, excise or other taxes due
in connection with X-ceed's business has been fully paid or accrued or
adequately reserved for in the X-ceed financial statements.
(4) No deficiency or assessment with respect to or proposed adjustment of
X-ceed's Federal, state, county or local taxes is pending or, to the best of
X-ceed's knowledge, threatened. There are no tax liens, whether imposed by any
Federal, state, county or local taxing authority, outstanding against the
assets, properties or businesses of X-ceed.
(e) Title to Property.
(1) X-ceed owns all right, title and interest in and to all of X-ceed's
Properties, and all other properties and assets used by X-ceed, free and clear
of all mortgages, liens, pledges, charges or encumbrances of any nature
whatsoever, except as set forth in Schedule 4(e)(1); and has taken all steps
necessary or otherwise required to perfect and protect its rights in and to
X-ceed's Properties.
(2) X-ceed does not lease any real or personal property as lessee, except
as set forth in X-ceed's Annual Report on Form 10-KSB. Each of these leases (the
"X-ceed Leases") is in good standing, valid, binding, and in full force and
effect and has not been modified. X-ceed is not in default under any of X-ceed's
Leases and has not received any notice of its default under
19
any of X-ceed's Leases and X-ceed has not given any notice of any, and, to the
best of X-ceed's knowledge, there is no default by any other party under any of
X-ceed's Leases, nor has any event occurred which, with notice or the passage of
time, or both, would constitute a default by any other party under any of
X-ceed's Leases. Except as set forth on Schedule 4(e)(2), X-ceed's rights in the
property covered under X-ceed's Leases (including any improvements and
appurtenances thereto) are paramount to the rights of any other person or entity
other than the landlords under X-ceed's Leases. No consent or approval of any
third party is required with respect to such X-ceed's Leases in order to avoid a
default thereunder by reason of the transactions contemplated by this Agreement,
except as set forth on Schedule 4(e)(2). X-ceed has received no notices other
than periodic rent, common area maintenance and other operating expense bills
from the landlord under each lease.
(3) All real property in which X-ceed has an ownership or leasehold
interest, and all tangible personal property owned by X-ceed are is in all
material respects in good operating condition and repair and in all material
respects conforms to all applicable laws, including without limitation building
and zoning laws, statutes, ordinances or regulations and no notice of any
violation of such matters relating to the business, property or assets of X-ceed
has been received by X-ceed. Except as set forth on Schedule 4(e)(1) or (2),
none of the premises owned or leased by X-ceed are in need of maintenance or
repairs except for reasonable wear and tear and ordinary routine maintenance and
repairs that are not material in nature or cost.
(4) Neither the whole nor any portion of any of X-ceed's Properties has
been condemned or otherwise taken by a public authority, nor does X-ceed know or
have any reasonable grounds to believe that any such condemnation or taking is
threatened or contemplated.
(f) Inventories. The inventories of X-ceed consist of items of
a quality and quantity usable or saleable in the normal course of its business,
subject to usability and salability exceptions described on attached Schedule
4(f) which are consistent with past business experience. The present inventories
of X-ceed are maintained at levels that are consistent with past practices.
(g) Contracts and Commitments. Except as set forth on attached
Schedule 4(g):
20
(1) X-ceed is not restricted by agreement from carrying on its business
anywhere in the states or provinces in which it operates;
(2) No director, officer, employee or stockholder of X-ceed, or member of
the family of any such person, or any corporation, partnership, trust or other
entity in which any such person, or any member of the family of any such person,
has a substantial interest or in which any such person is an officer, director,
trustee, partner or holder of more than 5% of the outstanding capital stock
thereof in an entity who is, a competitor, customer, supplier or other, entity,
or who, during the past 12 months has been a party to any transaction with
X-ceed, including any contract, agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
from or otherwise requiring payments to any such person or firm;
(3) X-ceed is not in default, nor is there any known basis for any claim of
default, under any contracts or commitments made or obligations owed by it which
default is reasonably likely to have a Material Adverse Effect on X-ceed. X-ceed
has no present expectation or intention of not fully performing all its
obligations under any lease, contract or other agreement to which it is a party,
and X-ceed has no knowledge of any breach or anticipated breach by the other
party to any lease, contract or commitment to which X-ceed is a party. X-ceed is
in full compliance with all of the terms and provisions of its Charter and
by-laws, as amended. No consent or approval of any third party is required with
respect to such contract in order to avoid a default thereunder by reason of the
transactions contemplated by this Agreement.
(4) All accounts receivable of X-ceed are current and collectible, except
to the extent reserved against in X-ceed financial statements.
(h) Employee Relations.
(1) (i) X-ceed is not a party to any collective bargaining agreement
covering or relating to any of its employees. X-ceed is not required to
recognize and has not received a demand for recognition by any collective
bargaining representative.
(ii) X-ceed is not a party to any employment agreement or consulting
agreement providing for compensation in excess of $75,000 per annum, except as
set
21
forth in X-ceed's Annual Report on Form 10-KSB ("Form 10-KSB") for the year
ended August, 1997 and except for the employment agreement between X-ceed and
Xxxxx Xxxxxxx, X-ceed's chairman.
(iii) X-ceed has not promulgated any policy or entered into any agreements
relating to the payment of severance pay to employees whose employment is
terminated or suspended, voluntarily or otherwise.
(2) X-ceed has complied in all material respects with all applicable laws,
rules or regulations relating to employment, including those relating to wages,
hours, collective bargaining and the withholding and payment of taxes and
contributions, and (ii) X-ceed has complied in all material respects with the
National Labor Relations Act, as amended, Title VII of the Civil Rights Act of
1964, as amended, the Civil Rights Act of 1991, the Occupational Safety and
Health Act, Executive Order 11246, the regulations under such acts and all other
Federal and state laws relating to the employment of labor, including any
provisions thereof relating to discrimination or harassment. X-ceed has, and
will have at the Closing Date, withheld all amounts required by law or agreement
to be withheld from the wages or salaries of its employees and there are no
arrearages of wages, payments under any pension or insurance plan or any other
benefit, or any tax or penalty for failure to comply with the foregoing owed by
all of them with respect to employees which are not either accrued or adequately
reserved for in X-ceed's financial statements. There are no material
controversies pending or threatened, between X-ceed and any of its employees or
any labor unions or other collective bargaining agents representing or
purporting to represent its employees.
(3) X-ceed has not promulgated any profit-sharing, retirement, stock
purchase, deferred compensation medical, hospitalization, life insurance or
other similar plan providing benefits for its employees and X-ceed has not
announced the prospective promulgation thereof except as set forth in Schedule
4(h)(3). There is no unfunded past service credit liability or any other
liability with respect to any such plans other than as set forth on Schedule
4(h)(3). No reportable event as defined in Title IV of the Employee Retirement
Income Security Act of 1974, as amended by the Multi Employer Pension Plan
Amendments Act of 1980, has occurred with
22
respect to any such plan subject to the minimum funding requirement of Section
412 of the Internal Revenue Code of 1986, as amended.
(i) No Breach of Statute or Contract. Neither the execution
and delivery of this Agreement, nor compliance with the terms and provisions of
this Agreement on the part of X-ceed or Sub, will (i) violate any statute,
license, or regulation of any governmental authority, domestic or foreign, (ii)
result in the default by X-ceed of any judgment, order, writ, decree, rule or
regulation of any court or administrative agency, (iii) breach, conflict with,
or result in a breach of any of the terms, conditions or provisions of any
material agreement or instrument to which X-ceed or Sub is a party, or by which
it is or may be bound, or constitute a default or require any notice thereunder,
(iv) violate any provision of X-ceed's and Sub's certificates of incorporation
or by-laws or (v) result in the creation or imposition of any claim, lien,
charge or encumbrance of any nature whatsoever upon, or (vi) give to others any
claim, interest or rights, including rights of termination, modification,
acceleration or cancellation in, or with respect to, any of their property,
assets, contracts, licenses or businesses.
The conduct of X-ceed business does not violate any law or regulation
applicable to such business. X-ceed's has complied with all laws, rules,
regulations and orders applicable to its business, operations, properties,
assets, products and services, and X-ceed has all necessary permits, licenses
and other authorizations required to conduct its business as conducted and as
proposed to be conducted. There is no existing law, rule, regulation or order,
and X-ceed is not aware of any proposed law, rule, regulation or order, whether
Federal or state, which would prohibit or materially restrict X-ceed from, or
otherwise materially adversely affect X-ceed in, conducting its business in any
jurisdiction in which it is now conducting business.
(j) No Litigation. Except as set forth in X-ceed's Form 10-KSB
for the year ended August 31, 1997, a copy of which has been delivered to the
Company, there is no suit, action or legal, administrative, arbitration or other
proceeding or governmental investigation, or any change in the zoning or
building ordinances affecting the real property or leasehold interests of
X-ceed, pending or to the best of X-ceed's knowledge threatened against X-ceed.
X-ceed has not received any opinion or memorandum or legal advice from legal
counsel to the effect that it is exposed, from
23
a legal standpoint, to any liability or disadvantage which may be material to
its business, financial condition, operations, property or affairs. X-ceed is
not in default with respect to any order, writ, injunction or decree known to or
served upon X-ceed or its subsidiaries, including Sub, of any court or of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign. There is no action or
suit by X-ceed or its subsidiaries, including Sub, pending or threatened against
others. X-ceed has no knowledge of any unasserted claim, the assertion of which
is likely and that, if asserted, will be for legal or equitable relief that, if
granted, would have a Material Adverse Effect. No injunction, stay or
restraining order is in effect prohibiting the consummation of any of the
transactions contemplated by this Agreement.
(k) Patents and Trademarks. X-ceed has not received written
notice of and to the best of X-ceed's knowledge, there does not exist any
pending or threatened challenges regarding any letters patent, patent
applications, trade names, trademark registrations and applications, copyrights,
copyright registrations and applications, or licenses except as set forth in
X-ceed's Form 10-KSB. Except as set forth in X-ceed's Form 10-KSB, X-ceed has
not received written notice that its business as heretofore carried infringes
upon the patents, trademarks, trade name rights, copyrights or publication
rights of others.
(l) Trademark Indemnification. Except as set forth in the
Company's 10-KSB, X-ceed has not given any indemnification for, patent,
trademark or copyright infringement as to any equipment, materials or supplies
manufactured, produced, used or sold by it or with respect to services rendered
by it.
(m) Absence of Undisclosed Liabilities. X-ceed has no
obligations or liabilities (whether accrued, absolute, contingent, liquidated or
otherwise, including without limitation any tax liabilities due or to become
due) which are not fully disclosed and adequately provided for in X-ceed
financial statements and except current liabilities incurred since the date of
such financial statements and obligations under agreements entered into in the
usual and ordinary course of business, none of which (individually or in the
aggregate) is material to the business, properties, financial condition
24
or results of operations of X-ceed and contingent liabilities that are not
(individually or in the aggregate) material to the business, properties,
financial condition or results of operations of X-ceed.
(n) Insurance. X-ceed holds insurance policies consistent with
X-ceed's past business practices, covering all of the insurance required to be
maintained by it and which is customary for businesses similar to the Company.
X-ceed has received no written notice of any claims pending against X-ceed under
any insurance policies currently in effect and covering the property, business
or employees of X-ceed, and all premiums with respect to the policies maintained
by X-ceed due and payable through the date hereof have been paid by X-ceed.
X-ceed has not been refused any insurance coverage sought or applied for, and
has no reason to believe that it will be unable to renew its existing insurance
coverage upon terms at least as favorable as those presently in effect, other
than possible increases in premiums that do not result from any act or omission
of X-ceed.
(o) Loans and Advances. X-ceed does not have any outstanding
loans or advances to any person and is not obligated to make any such loans or
advances, except, in each case, for advances to employees of X-ceed in respect
of reimbursable business expenses anticipated to be incurred by them in
connection with their performance of services for X-ceed.
(p) Significant Customers and Suppliers. No customer or
supplier to X-ceed of more than $50,000 of products or services for any month
which was significant to X-ceed during the period covered by X-ceed financial
statements or which has been significant to X-ceed thereafter, has terminated,
materially reduced or provided written notice of its intent or threatened to
terminate or materially reduce its purchases from or provision of products or
services to X-ceed or any subsidiary, as the case may be.
(q) Environmental Protection. Except as set forth in X-ceed's
10-KSB, no notice, notification, demand, request for information, citation,
summons or order has been issued, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or threatened by any
governmental or other entity with respect to any alleged failure by X-ceed to
have any permit, license or authorization required in connection with the
conduct of its business or with respect to any Environmental Laws, including
without limitation, Environmental Laws relating to
25
the generation, treatment, storage, recycling, transportation, disposal or
release of any hazardous materials.
(r) Disclosure. No representation or warranty by X-ceed or Sub
in this Agreement, nor any statement, certificate or Schedule furnished, or to
be furnished, by or on behalf of X-ceed and Sub pursuant to this Agreement, nor
any document or certificate delivered to Company or Reset Shareholders pursuant
to this Agreement, or in connection with actions contemplated hereby, contains
or shall contain any untrue statement of a material fact, or omits, or shall
omit to state a material fact necessary to make the statements contained therein
not misleading. X-ceed has no knowledge of any unasserted claim, the assertion
of which is likely and that, if asserted, will be for legal or equitable relief
that, if granted, would have a Material Adverse Effect. No injunction, stay or
restraining order is in effect prohibiting the consummation of any of the
transactions contemplated by this Agreement.
5. Conduct of the Business of the Company and Sub Pending the Closing
Date. From and after the date of this Agreement and until the Closing Date:
(a) Full Access. X-ceed and its respective authorized
representatives shall have full access, during normal business hours, to all
properties, books, records, contracts and documents of the Company, and the
Company shall furnish or cause to be furnished to X-ceed and its authorized
representatives all information with respect to its affairs and business as
X-ceed may reasonably request.
(b) Carry On In Regular Course. The Company shall carry on its
business diligently and substantially in the same manner as heretofore and shall
not make or institute any unusual or novel methods of trade, purchase, sale,
lease, management, accounting or operation.
(c) Contracts and Commitments. The Company shall not enter
into any contract or commitment or engage in any transaction not in the usual
and ordinary course of its business and consistent with past practices without
the prior written consent of X-ceed.
(d) Indebtedness. The Company will not create any
indebtedness, other than that incurred in the usual and ordinary course of
business, that incurred pursuant to existing contracts
26
disclosed in the Schedules attached hereto, that incurred pursuant to
commitments permitted hereby, and that reasonably incurred in doing the acts and
things contemplated by this Agreement.
(e) Investments. The Company will not make any investments,
loans, advances or contributions to any other person, corporation, partnership,
joint venture or association; provided, however, that the Company may invest in
United States government obligations, certificates of deposit and commercial
paper rated a-1 by Standard & Poor's Corporation or P-1 by Xxxxx'x.
(f) Dividends and Distributions. The Company will not declare
or pay any dividend or make any distribution with respect to its capital stock,
or directly or indirectly redeem, purchase or otherwise acquire any of its
capital stock or issue or in any way dispose of any shares of its capital stock
or any rights therein or thereto.
(g) Amendment of Charter. The Company will not amend its
certificate of incorporation or by-laws or make any change in the authorized or
unissued capital stock or its officers or directors without the prior written
consent of X-ceed.
(h) Insurance. All property, real and personal, owned or
leased by the Company will be insured by reputable insurance companies against
all insurable risks normally insured against by companies conducting a business
the same as, or similar to, the business conducted by the Company, and all
property shall be used, operated and maintained in a normal businesslike manner.
(i) Preservation of Organization and Employees. The Company
will use its best efforts (without making any commitments on behalf of X-ceed)
to preserve its business organization intact, to keep available to X-ceed its
key officers and employees, and to preserve for X-ceed the present relationships
of the Company and its clients and others having business relations with it. The
Company will not change its present relationships with its employees.
(j) No Default. The Company shall not do any act or omit to do
any act, or permit any act or omission to act, which will cause a breach of any
contract, lease commitment or obligation by it.
27
(k) Compliance with Laws. The Company and the Reset
Shareholders will duly comply with all applicable laws as may be required for
the valid and effective transfer of the Company Stock as contemplated by this
Agreement.
(l) Tax Returns. The Company will prepare and file all state,
federal and other tax returns, and amendments thereto (or extensions to file the
foregoing) required to be filed between the date of this Agreement and the
Closing Date. X-ceed shall have a reasonable opportunity to review all such
returns, and amendments and extensions thereto, prior to their being filed.
(m) Sale of Capital Assets. The Company will not sell or
dispose of any single capital asset with an original cost in excess of $5,000
without the prior written consent of X-ceed or capital assets in the aggregate
with an original cost of $10,000 without the prior written consent of X-ceed.
(n) Sub's Business. Sub will not take any non-organizational
actions or conduct any business.
6. Survival of Representations and Warranties. All representations,
warranties, and agreements of the Reset Shareholders, the Company and X-ceed
contained herein (including all schedules annexed hereto) or in any document,
statement, certificate or other instrument referred to herein or delivered
hereunder in connection with the transactions contemplated hereby shall survive
until eighteen (18) months after the Closing Date, except that all
representations and warranties relating to taxes and tax returns shall survive
for a period equal to the applicable statute of limitations period.
7. Conditions Precedent to X-ceed's Obligations. Each and every
obligation of X-ceed to be performed on the Closing Date or thereafter, as the
case may be, shall be subject to the satisfaction prior thereto of the following
conditions:
(a) Representations and Warranties True at the Closing Date.
The representations and warranties made by the Company and the Reset
Shareholders in this Agreement or given on their behalf hereunder shall be true
on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date.
28
(b) No Material Adverse Change. There shall not have occurred
any Material Adverse Changes in the financial condition, capitalization,
business, operations, properties or investments of the Company or in the ability
of the Company to perform or on the ability of the Company to perform its
obligations under this Agreement.
(c) Compliance with Agreement. The Company shall have
performed and complied with all of its obligations under this Agreement which
are to be performed or complied with by it prior to or on the Closing Date.
(d) Employees Continuing in Employment. X-ceed shall have
entered into employment agreements with the individuals listed on Schedule 7(d)
substantially in the form annexed hereto in Exhibit A.
(e) Certificate of Fulfillment of Conditions. There shall be
delivered to X-ceed a certificate of the Company certifying in such detail as
X-ceed may specify, the fulfillment of conditions set forth in subsections (a),
(b), (c) and (d) of this Section 7.
(f) Opinion of Counsel for Reset and the Reset Shareholders.
X-ceed shall have received a written opinion of counsel of the Company and the
Reset Shareholders dated as of the Closing Date, addressed to X-ceed in form and
substance to the effect that (1) the Company is a corporation duly organized,
validly existing and in good standing under and by virtue of the laws of its
state of incorporation; (2) the Company has no subsidiaries except as set forth
in the Schedules attached hereto and the Company is entitled to own or lease its
property; (3) counsel does not know of any pending litigation to which the
Company is a party or any threatened litigation against the Company; (4) the
Reset Shareholders own and hold all of the outstanding shares of the Company
Stock free and clear of any liens, charges, encumbrances, restrictive agreements
and assessments and the Reset Shareholders have full power and authority to
sell, assign, transfer, convey and deliver to Sub said Company Stock as
contemplated by this Agreement; (5) the shares of Company Stock are not subject
to any restrictions on transferability and upon transfer and delivery of said
shares of Company Stock to Sub as contemplated by this Agreement, Sub will
receive good and absolute title thereto free from any liens, charges,
encumbrances, restrictive agreements, equities, claims and restrictions
whatsoever, except such restrictions as may be imposed by federal or state
securities
29
laws; (6) to the best of such counsel's knowledge, after reasonable
investigation, the Company own its respective properties and assets including
intangibles free and clear of any and all liens, charges, encumbrances,
restrictive agreements and assessments of any nature whatsoever, except as set
forth in the Schedules attached to this Agreement; (7) to the best of counsel's
knowledge, after reasonable investigation, all of the leases, contracts and
commitments listed or otherwise set forth in the schedules and financial
statements furnished by Reset to X-ceed pursuant to this Agreement are valid and
subsisting agreements enforceable in accordance with their respective terms and
counsel has no knowledge of any default by the Company in respect to any
provisions thereof; (8) none of the transactions contemplated by this Agreement
will be a violation of or constitute a default or ground for revocation under
any provisions of any lease, contract, agreement, indenture, license or any
instrument to which the Company or the Reset Shareholders are bound and which is
disclosed in a Schedule to this Agreement or will violate any of the above which
is or purports to be binding upon the Company or its assets; and (9) this
Agreement is a valid and binding obligation of the Reset Shareholders and the
Company enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or laws affecting the rights
and remedies of creditors generally, and by general principles of equity.
(g) Certificates of Good Standing. The Company shall have
delivered to Sub a certificate issued by appropriate governmental authorities
evidencing the good standing of the Company as of a date or not more than thirty
(30) days prior to the Closing Date as corporation of the state of its
incorporation and in each state where it is qualified to do business and a
confirming telegram as of a date not more than four (4) days prior to the
Closing Date.
(h) Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transaction contemplated
by this Agreement, and all documents incident thereto, shall be satisfactory in
form and substance to X-ceed and Sub, and the Company shall have made available
to X-ceed and Sub for examination the originals or true and correct copies of
all records and documents relating to the business and affairs of the Company,
which X-ceed or Sub may request in connection with said transaction. The Company
and the Reset Shareholders shall have complied with all statutory requirements
for the valid consummation by the Company and the Reset Shareholders of the
transaction contemplated by this Agreement.
30
(i) No Litigation. No investigation, suit, action or other
proceeding shall be threatened or pending before any court or governmental
agency which in the opinion of X-ceed's counsel is likely to result in the
restraint, prohibition or the obtaining of damages or other relief in connection
with this Agreement or the consummation of the transactions contemplated hereby,
or in connection with any claim against the Company or the Reset Shareholders,
not disclosed by the Schedules attached hereto.
(j) All Documents. All documents required by Section 12(a) of
this Agreement shall have been delivered to Sub.
(k) No Material Limitations. There shall not have occurred any
enactment, promulgation or entry of any order, rule, regulation or statute that
could in the reasonable judgment of X-ceed, impose material limitations upon the
ability of Sub to hold or exercise effectively all rights of ownership with
respect to the stock of Reset.
(l) Regulatory Approvals. The Company shall have obtained all
necessary consents, approvals, authorizations, registration, filings and
declarations from all appropriate federal, state or local governmental bodies in
connection with the transactions contemplated hereby.
(m) Financial Statements. The Company shall have retained
independent auditors to prepare audited consolidated balance sheets of the
Company for the year ended December 31, 1997 and the related audited
consolidated statements of operations, stockholders' equity and cash flows, in
each case prepared in accordance with generally accepted accounting principles,
consistently applied (the "audited financial statements").
(n) Options, Warrants. There shall be no outstanding options
or warrants to purchase securities of the Company or any other rights or
securities which are convertible or exchangeable for securities of the Company.
(o) Fairness Opinion. X-ceed and Sub shall have obtained an
opinion from an independent financial institution or an investment banking
institution that the consideration to be paid by Sub for the Company Stock is
fair and reasonable.
31
(p) No Obligations to Xxxxxx X. Xxxxxx. The Company shall have
no further obligations to make any payments to Xxxxxx X. Xxxxxx ("Xxxxxx")
arising from his prior interest in the Company or out of the transactions
contemplated by this Agreement, except that the Company may be required to pay
Weiner certain commissions on any business that Weiner has generated or will
generate for the benefit of the Company.
8. Conditions Precedent to Reset's and the Reset Shareholders'
Obligations. Each and every obligation of Reset and the Reset Shareholders to be
performed on the Closing Date shall be subject to the satisfaction prior thereto
of the following conditions:
(a) Representations and Warranties True at the Closing Date.
X-ceed's representations and warranties contained in this Agreement shall be
true at and as of the Closing Date as though such representations and warranties
were made at and as of the Closing Date.
(b) Compliance with Agreement. X-ceed and Sub shall have
performed and complied with its obligations under this Agreement which are to be
performed or complied with prior to or on the Closing Date.
(c) No Material Adverse Change. There shall not have occurred
any Material Adverse Change in the financial condition, capitalization, business
operations, properties or investments of X-ceed or on the ability of X-ceed
and/or Sub to perform its obligations under this Agreement since May 31, 1998.
(d) Employees Continuing in Employment. X-ceed shall have
entered into employment agreements with Xxxxx Xxxxxxxx, Xxxxxxx Maitenaz and
Xxxxxx Xxxxxxx on terms mutually acceptable to X-ceed and such individuals
substantially in the form appearing in Schedule 7(d).
(e) Business of Sub. Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has not engaged in any business, other than certain organizational matters,
since it was incorporated.
32
(f) Certificate of Fulfillment of Conditions. There shall be
delivered to the Company a certificate of X-ceed and Sub certifying in such
detail as Reset Shareholders may specify the fulfillment of conditions set forth
in subsections (a), (b), (c) and (d) of this Section 8.
(g) Opinion of Counsel for X-ceed. Reset and the Reset
Shareholders shall have received a written opinion of counsel of X-ceed and Sub
dated as of the Closing Date, addressed to Reset and the Reset Shareholders in
form and substance to the effect that (1) X-ceed and its subsidiaries, including
Sub, are corporations duly organized, validly existing and in good standing
under and by virtue of the laws of their respective states of incorporation; (2)
upon transfer and delivery of said shares of X-ceed's Common Stock to the Reset
Shareholders as contemplated by this Agreement, the Reset Shareholders will
receive good and absolute title thereto free from any liens, charges,
encumbrances, restrictive agreements, equities, claims and restrictions
whatsoever, except such restrictions as are imposed by federal or state
securities laws; (3) to the best of counsel's knowledge, after reasonable
investigation, all of the leases, contracts and commitments listed or otherwise
set forth in the schedules and financial statements furnished by X-ceed to Reset
and the Reset Shareholders pursuant to this Agreement are valid and subsisting
agreements enforceable in accordance with their respective terms and counsel has
no knowledge of any default by X-ceed or its subsidiaries, including Sub, in
respect to any provisions thereof; (4) none of the transactions contemplated by
this Agreement will be a violation of or constitute a default or ground for
revocation under any provisions of any lease, contract, agreement, indenture,
license or any instrument to which X-ceed or its subsidiaries, including Sub, is
bound and which is disclosed in a Schedule to this Agreement, or will violate
any of the above which is or purports to be binding upon X-ceed and subsidiaries
or their respective assets; and (5) this Agreement is a valid and binding
obligation of X-ceed enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or laws affecting
the rights and remedies of creditors generally, and by general principles of
equity.
(h) All Documents. All documents required by Section 12(b) of
this Agreement shall have been delivered to Reset and the Reset Shareholders.
33
9. Indemnification and Resolution of Disputes.
(a) Indemnification by Reset Shareholders. Each of the Reset
Shareholders shall jointly and severally indemnify, defend and hold harmless
X-ceed and/or Sub, and shall reimburse X-ceed and/or Sub for, any loss,
liability, claim, damage, expense (including, but not limited to, reasonable
cost of investigation and defense and reasonable attorneys' fees) (collectively,
"Damages") arising from or in connection with (a) any inaccuracy in any of the
representations and warranties of the Reset Shareholders or the Company set
forth in this Agreement or in any certificate delivered by the Reset
Shareholders or the Company pursuant to this Agreement, or any actions,
omissions or states of facts inconsistent with any such representations or
warranties, or (b) any failure by Reset or the Reset Shareholders to perform or
comply with any provision of this Agreement. Notwithstanding the foregoing, the
Reset Shareholders shall not be liable for Damages unless such Damages in the
aggregate exceed $25,000. The term "Damages" includes Damage incurred or
sustained in the absence of third party claims. The obligations of the Reset
Shareholders to indemnify and hold harmless X-ceed and/or Sub shall also apply
to any action, claim or suit with arises from the operations of the Company
prior to the Closing Date, to the extent that the Company's liability therefore
is not covered by insurance and to the extent that such action, claim, suit or
matter is not disclosed in this Agreement or the Schedules attached hereto. The
Reset Shareholders shall not be obligated to indemnify X-ceed and/or Sub for any
claim asserted more than eighteen (18) months after the Closing Date. In the
event of any such third party claim, the procedure set forth in subparagraph
8(c) below shall apply, except that no settlement shall be effective without the
Reset Shareholders' consent and approval.
(b) Indemnification by X-ceed. X-ceed shall indemnify, defend
and hold harmless the Reset Shareholders, and shall reimburse the Reset
Shareholders for any Damages arising from or in connection with (a) any
inaccuracy in any of the representations and warranties of X-ceed or Sub set
forth in this Agreement or in any certificate delivered by X-ceed or Sub
pursuant to this Agreement, or any actions, omissions or states of facts
inconsistent with any such representation or warranty, or (b) any failure by
X-ceed or Sub to perform or comply with any provision of this Agreement. X-ceed
shall not be liable for the amount of any such Damages unless the aggregate
amount of Damages payable by X-ceed pursuant to this Section 9 attributable to
any
34
breach of any representation or warranty exceeds $250,000 multiplied by the
percentage that the shares of X-ceed's Common Stock issued to the Reset
Shareholders bears to the total number of issued and outstanding shares of
X-ceed's Common Stock as of the Closing Date. Such Damages may be payable in
cash or in X-ceed's Common Stock at the option of the Reset Shareholders based
upon a value per share equal to the average of the closing bid and asked prices
for a share of Common Stock of X-ceed as quoted on NASDAQ for the five days
prior to the date payment of such Damages by X-ceed is required to be made.
(c) Procedure for Indemnification. Promptly after receipt by
an indemnified party under Section 9(a) or 9(b) above, of notice of the
commencement of any action, such indemnified party shall, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the defense of such action by the
indemnifying party is prejudiced thereby. In case any such action shall be
brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, to assume
the defense thereof with counsel reasonable satisfactory to such indemnified
party and, after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party under such section for any fees of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation. If an indemnifying party assumes the defense of such an
action, (a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's consent (which shall not be
unreasonably withheld) unless (i) such compromise or settlement includes an
unconditional release of the indemnified party from all liability that may arise
out of such action, (ii) there is no finding or admission of any violation of
law or any violation of the rights of any person which is not fully remedied by
the payment referred to in clause (iii) below and such compromise or settlement
does not have any adverse effect on any other claims that may be made by or
against the indemnified party, and (iii) the sole relief provided is monetary
damages that are paid in full by the indemnifying party, (b) the indemnifying
party shall have no liability with respect to any compromise or settlement
35
thereof effected without its consent (which shall not be reasonably withheld)
and (c) the indemnified party will reasonably cooperate with the indemnifying
party in the defense of such action. If notice is given to an indemnifying party
of the commencement of any action and it does not, within 15 days after the
indemnified party's notice is given, give notice to the indemnified party of its
election to assume the defense thereof, the indemnifying party shall be bound by
any determination made in such action or any compromise or settlement thereof
effected by the indemnified party. Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that an action may materially and adversely affect it or its
affiliates other than as a result of monetary damages, such indemnified party
may, by notice to the indemnifying party, assume the exclusive right to defend,
compromise or settle such action, but the indemnifying party shall not be bound
by any determination of an action so defended or any compromise or settlement
thereof effected without its consent (which shall not be unreasonably withheld).
All fees of counsel and costs of litigation of the indemnified party will be
paid by the indemnifying party as incurred.
10. Purchase Price Adjustment.
(a) Adjustment of Stock Issuance. Notwithstanding anything to
the contrary herein, in the event the Company's audited financial statements for
the period ending December 31, 1997 reflect that either (i) gross revenues for
such period (the "1997 Actual Gross Revenues") is less than 80% of the gross
revenues as set forth in the 1997 Financial Information (the "1997 Preliminary
Gross Revenues') or (ii) net income from operations for such period (the "1997
Actual Net Income from Operations") is less than 80% of the net income from
operations as set forth in the 1997 Financial Information (the "1997 Preliminary
Net Income from Operations"), or, in the event the Company's un-audited
statement of operations for the period ending June 30, 1998 (as prepared by the
auditing firm retained by the Company) reflect that gross revenues for such
period (the "1998 Actual Gross Revenues") is less than 90% of the gross revenues
as set forth in the 1998 Financial Information (the "1998 Preliminary Gross
Revenues"), then any such discrepancy shall be deemed a breach of the financial
representations given by the Reset Shareholders and the Company to X-ceed and
Sub herein. In the event of such a breach, the purchase price set forth in
Section 2 above shall be adjusted as set forth below.
36
(b) Definitions. For purposes of this Section 10, the
following terms shall have the meanings ascribed thereto:
(1) "1997 Gross Revenue Percentage Adjustment" shall mean an amount equal
to eighty (80%) percent minus the percentage obtained by dividing the 1997
Actual Gross Revenues by the 1997 Preliminary Gross Revenues.
(2) "1997 Income Percentage Adjustment" shall mean an amount equal to
eighty (80%) percent minus the percentage obtained by dividing the 1997 Actual
Net Income from Operations by the 1997 Preliminary Net Income from Operations.
(3) "1998 Gross Revenue Percentage Adjustment" shall mean an amount equal
to ninety (90%) percent minus the percentage obtained by dividing the 1998
Actual Gross Revenues by the 1998 Preliminary Gross Revenues.
In the event one or more of the 1997 Gross Revenue Percentage
Adjustment, the 1997 Income Percentage Adjustment, or the 1998 Gross Revenue
Percentage Adjustment is a positive number, the Reset Shareholders shall return
to Sub that number of shares of X-ceed Stock received pursuant to Section 2(b)
(the "Originally Issued Shares") equal to the greater of (I) the 1997 Gross
Percentage Adjustment, (II) the 1997 Net Percentage Adjustment, or (III) the
1998 Gross Percentage Adjustment multiplied by the Originally Issued Shares.
The return of shares described above, if any, shall be an
adjustment to the purchase price and shall be X-ceed's and Sub's only remedy
with respect to a breach by the Reset Shareholders or the Company of the
representations set forth in Sections 3(b) (1) and 3(b) (2).
(c) Recision. In the event the discrepancy between (i) 1997
Actual Gross Revenues and 1997 Preliminary Gross Revenues, (ii) 1997 Actual Net
Income from Operations and 1997 Preliminary Net Income from Operations, or (iii)
1998 Actual Gross Revenues and 1998 Preliminary Gross Revenues is in excess of
fifty (50%) percent, then the transactions contemplated by this agreement, may,
at the sole option of X-ceed and/or Sub (to be exercised by delivery of written
notice to the Reset Shareholders within three (3) business days of the issuance
of the audited financial statements), be rescinded. In the event X-ceed or Sub
elects to rescind this
37
agreement and the transactions contemplated hereby, the X-ceed Stock delivered
to the Reset Shareholders shall be cancelled on X-ceed's stock records, the
employment agreements set forth as Schedule 7(d)(a) shall thereupon be rescinded
and terminated (without any further right or obligation of either party thereto)
and Sub shall deliver Reset Stock and all of the issued and outstanding stock of
Sub and all organization records of Sub to the Reset Shareholders.
11. Termination and Abandonment. This Agreement may be terminated and
the sale provided for by this Agreement may be abandoned without liability on
the part of any party to the other, on or before the Closing Date:
(a) by mutual consent of X-ceed and Sub and Reset and the Reset
Shareholders;
(b) by X-ceed or Sub if any of the conditions provided for in
Section 7 of this Agreement have not been met on or before August 15, 1998 and
have not been waived by X-ceed and Sub in writing;
(c) by Reset and the Reset Shareholders on or before if any of
the conditions provided for in Section 8 of this Agreement have not been met on
or before August 15, 1998 and have not been waived by the Reset Shareholders in
writing.
In the event of termination and abandonment by any party, as
above provided in this Section 11, prompt written notice shall be given to the
other party.
12. Closing Date. The closing with respect to the transactions
contemplated hereunder (the "Closing") shall take place at the offices of
XxXxxxxxxx & Xxxxx, LLP, 260 Madison Avenue, New York, New York, at 10:00 a.m.
local time on August 15, 1998, or at such earlier date as may be set by X-ceed,
on at least two (2) days' prior written notice to the Reset Shareholders. Such
date (or such earlier date) is hereinafter referred to as the "Closing Date". At
the Closing,
(a) Reset shall deliver to X-ceed the following:
38
(1) a certificate of fulfillment of conditions signed by the President and
Treasurer of the Company, referred to in subsection (e) of Section 7 hereof;
(2) the opinion of counsel for the Company, described in subsection (f) of
Section 7 hereof;
(3) certificates of good standing and telegram, referred to in subsection
(g) of Section 7 hereof;
(4) certificates representing all of the Company Stock as set forth in
Section 2(b) hereof;
(5) a general release executed by Xxxxxx X. Xxxxxx, or an acknowledgment by
Xxxxxx X. Xxxxxx that he has received full payment for his stock pursuant to the
Weiner Agreement.
(6) consents of any party to any lease or contract whose consent is
required by reason of the transactions contemplated by this Agreement;
(7) estoppel certificates from the landlord which provide that the Company
is not in default and no event has occurred, which, with notice or the passage
of time, would constitute a default by the Company;
(8) employment agreements in accordance with Section 8(d); and
(9) such other and further documents, instruments and certificates not
inconsistent with the provisions of this Agreement, executed by Reset and/or the
Reset Shareholders as X-ceed shall reasonably require to carry out and
effectuate the purposes and terms of this Agreement.
(b) X-ceed and Sub shall deliver to the Reset Shareholders the
following:
(1) that number of shares of X-ceed's Common Stock as provided for in
Section 2(a).
39
(2) employment agreements in accordance with Section 8(d).
13. Post-Closing Covenants.
(a) X-ceed agrees that for so long as it owns Sub, it shall
vote for the nomination of Xxxxx Xxxxxxxx, Xxxxxx Maitenaz and Xxxxxx Xxxxx or
their respective nominees as directors of the Company.
(b) Audited Statements. Reset covenants and agrees with X-ceed
as follows: As soon as practical after Closing, but in no event later than 50
days after Closing, Reset or its agent shall deliver to X-ceed audited financial
statements of the Company for the year ended December 31, 1997 and unaudited
statements for the six months ended June 30, 1998, prepared in conformity with
generally accepted accounting principles consistently applied.
(c) X-ceed does upon the Closing agree to indemnify and hold
harmless from any liability, cost, damage or expense arising out of or pursuant
to the Guaranty issued by Michel Maitenaz in favor of the Company's landlord, a
copy of which is attached hereto as Exhibit B.
14. Brokerage. Reset and the Reset Shareholders represent and warrant
that they have not engaged the services of any broker or finder hereunder, and
agree to indemnify and hold X-ceed harmless against any claim for brokers' or
finders' fees or compensation in connection with the transactions herein
provided for by any person, firm or corporation claiming a right to the same
because engaged by Reset or the Reset Shareholders. X-ceed and Sub represent and
warrant to Reset and the Reset Shareholders that it has not engaged the services
of any broker or finder in connection with the transactions herein provided for
and agrees to indemnify and hold harmless Reset Shareholders against any claims
for brokers' or finders' fees or compensation in connection with the
transactions herein provided for by any other person, firm or corporation
claiming a right to the same because engaged by X-ceed or its subsidiaries,
including Sub,.
15. Investment Representation.
(a) Each of the Reset Shareholders agrees not to sell,
transfer, pledge, hypothecate or otherwise dispose of, or offer to dispose of,
the Common Stock, unless the
40
Common Stock has been registered under the Securities Act of 1933 (the "Act")
and applicable state securities laws or such registration is not required in the
opinion of counsel for the Reset Shareholders reasonably acceptable to X-ceed.
Any routine sale of the Common Stock may require compliance with some exemption
under the Act prior to resale.
(b) Each of the Reset Shareholders represents that (i) he is
acquiring the Common Stock after having made adequate investigation of the
business, finances and prospects of X-ceed; (ii) he has been furnished any
information and materials relating to the business, finances and operation of
X-ceed and any information and materials relating to the offer and sale of the
Common Stock which he has requested; and (iii) he has been given an opportunity
to make any further inquiries desired of the management and any other personnel
of X-ceed and has received satisfactory responses to such inquiries. Each of the
Reset Shareholders has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Common Stock. Each of the Reset Shareholders acknowledge that each
certificate for the shares of Common Stock will bear the following legend:
The Shares represented by this certificate have not been
registered under the Securities Act of 1933. The Shares have been
acquired for investment and may not be offered, sold or otherwise
transferred in the absence of an effective Registration Statement for
the Shares under the Securities Act of 1933, or a prior opinion of
counsel satisfactory to the issuer, that registration is not required
under that Act.
16. Restriction on Negotiation. Reset and the Reset Shareholders agree
that until the earlier of (a) the Closing Date, (b) the termination of this
Agreement in accordance with its terms, or (c) September 30, 1998, neither the
Company nor the Reset Shareholders will (i) solicit, initiate, or encourage the
submission of any proposal or offer from any person, or enter into or consummate
any transactions, relating to the acquisition of any capital stock or other
voting securities, or any substantial portion of the assets, of the Company
(other than sales of inventory for a fair value in the ordinary course of
business) (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any persons to do or
seek any of the foregoing. The Company
41
and the Reset Shareholders will notify X-ceed and Sub orally and in writing
immediately if any person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing. The Company shall immediately cease and cause
to be terminated any existing discussions or negotiations with any person (other
than X-ceed and Sub) conducted heretofore with respect to any of the foregoing.
17. Miscellaneous.
(a) Nature and Survival of Representations. All statements
contained in any certificate, instrument, schedule or document delivered by or
on behalf of any of the parties pursuant to this Agreement and the transactions
contemplated hereby shall be deemed representations and warranties by the
respective parties hereunder. All representations and warranties made by the
parties each to each other in this Agreement or pursuant hereto shall survive,
except to the extent waived in writing by the parties hereto, the consummation
of the transactions contemplated by this Agreement to the extent provided in
Section 6, notwithstanding any investigation heretofore or hereafter made by any
of them or on behalf of any of them. Each Schedule delivered in accordance with
this Agreement shall be deemed to include and refer to every other Schedule
hereto.
(b) Entire Agreement. This Agreement, together with the
Schedules or Exhibits delivered pursuant to this Agreement, sets forth the
entire agreement and understanding between the parties as to the subject matter
hereof, and merges and supersedes all prior discussions, agreements and
understandings of every and any nature between them, and no party shall be bound
by any condition, definition, warranty, or representation, other than expressly
set forth or provided for in this Agreement, or as may be, on or subsequent to
the date hereof, set forth in writing and signed by the party to be bound
thereby. This Agreement may not be changed or modified, except by agreement in
writing, signed by all of the parties hereto.
(c) Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors in interest of the respective parties hereto.
42
(d) Laws Governing. This Agreement shall be construed and
interpreted according to the law of the State of New York as applied to
contracts executed and performed in the State of New York, without regard to
principles of conflicts of law.
(e) Assignment. This Agreement shall not be assigned by the
Reset Shareholders or X-ceed.
(f) Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand, or overnight courier, telecopied or mailed,
certified or registered mail, with first-class postage page, (a) if to the Reset
Shareholders and Reset, Xxxxx Xxxxxxxx, c/o Reset, Inc., 00 X. 00xx Xxxxxx, Xxx
Xxxx, XX 00000, or to such other person and place as Reset or the Reset
Shareholders shall furnish to X-ceed in writing, with a copy to Xxx & Xxxxxx,
LLP, Attention Xxxxxx X. Xxxxxxxx, Esq., 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000;
and, (b) if to X-ceed, Xxxxxx Xxxxx, X-ceed, Inc., 000 Xxxxxxx Xxx, Xxx Xxxx, XX
00000, or to such other person and place as X-ceed shall furnish to the Reset
Shareholders in writing with a copy to Xxxxxxx X. Xxxxxxxx, Esq., XxXxxxxxxx &
Xxxxx, LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000. All notices shall be
deemed given upon receipt.
(g) Further Instruments. Reset and the Reset Shareholders
will, on the Closing Date or such other date as X-ceed or Sub may request,
without cost or expense to X-ceed, execute and deliver or cause to be executed
and delivered to X-ceed or Sub such other documents as X-ceed or Sub may
reasonably request to more effectively consummate the transactions contemplated
by this Agreement and confirm and assure Sub's title thereto. Effective as of
the Closing Date, the Reset Shareholders hereby constitute and appoint X-ceed
and/or Sub and their successors and assigns as their true and lawful attorney in
fact in connection with the transactions contemplated by this instrument, with
full power of substitution, in the name and stead of Reset and the Reset
Shareholders but on behalf of and for the benefit of X-ceed or Sub and their
successors and assigns, to demand and receive any and all of the assets,
properties, rights and business hereby conveyed, assigned, and transferred or
intended so to be, and to give receipt and releases for and in respect of the
same and any part thereof, and from time to time to institute and
43
prosecute, in the name of Reset or the Reset Shareholders or otherwise, for the
benefit of X-ceed or Sub or their successors and assigns, proceedings at law, in
equity, or otherwise, which X-ceed or Sub or their successors or assigns
reasonably deem proper in order to collect or reduce to possession any of the
assets of the Company and to do all acts and things in relation to the assets
which X-ceed or Sub or their successors or assigns reasonably deem desirable.
(h) Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(i) Headings. The headings in the sections of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
(j) Expenses. X-ceed and Sub, on one hand, and the Reset
Shareholders and Company on the other hand, shall bear their own respective
expenses, including professional fees, incurred in connection with this
Agreement, provided, however, that (i) the fees of Xxxxx Xxxxxxxxxx & Co. LLP
incurred in connection with the preparation of the Company's audited financial
statements for the years ended December 31, 1997 and unaudited statements for
the six months ended June 30, 1998 and the (ii) appraisals required pursuant to
Section 5(p) shall be paid by X-ceed.
(k) Confidentiality. Each party shall maintain the existence
of this Agreement, and the terms and conditions described herein ("Confidential
Information") strictly confidential. No party may disclose any Confidential
Information to any third party (other than to its legal, accounting or financial
advisors) without the prior consent of the other party. Any press release will
be subject to the prior consent of the parties. However, the parties acknowledge
that X-ceed and Sub shall have the right to make any press release or other
disclosure required to be made by X-ceed and Sub, in their discretion, in order
for them to comply with any federal or state securities laws and that the
contents of such disclosure shall be at X-ceed's and Sub's discretion; however,
X-ceed shall deliver a copy thereof to Reset prior to any such release.
44
(l) Severability. If any provision of this Agreement is held
by any court of competent jurisdiction to be illegal, invalid or unenforceable,
such provision shall be of no force and effect, but the illegality, invalidity
or unenforceability shall have no effect upon and shall not impair the
enforceability of any other provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
X-CEED, INC.
By: /s/ Xxxxxx Xxxxx
Name: Xxxxxx Xxxxx
Title: President
X-CEED ACQUISITIONS, INC.
By: /s/ Xxxxxx Xxxxx
Name: Xxxxxx Xxxxx
Title: President
RESET, INC.
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: President
RESET SHAREHOLDERS:
/s/ Xxxxx Xxxxxxxx
Xxxxx Xxxxxxxx
/s/ Michel Maitenaz
Michel Maitenaz
/s/ Xxxxxx Xxxxxxx
Xxxxxx Xxxxxxx
45
