Exhibit 10(d)
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
By and Among
XCEED, INC.,
5th FLOOR INTERACTIVE, LLC,
and
THE MEMBERS OF 5th FLOOR INTERACTIVE, LLC
September 28, 1999
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT (the "Agreement") is entered into as of this 28th day of
September, 1999, by and among Xceed, Inc., a Delaware corporation ("Xceed"), 5th
Floor Interactive, LLC, a New York limited liability company (the "Company"),
and Jonathan Molod, Fabian Tabibian, Jeffrey Caldwell and Thomas Barton (each
individually referred to hereinafter as a "Member" and collectively referred to
hereinafter as the "Members").
WITNESSETH:
WHEREAS, the authorized units of membership interest of the Company consist
of 300 units of membership interest (the "Company Membership Interest"), all of
which are issued and outstanding as of the date hereof;
WHEREAS, Jonathan Molod owns 95 units of Company Membership Interest,
representing thirty-one and 67/100 percent (31.67%) of the issued and
outstanding units of Company Membership Interest;
WHEREAS, Fabian Tabibian owns 95 units of Company Membership Interest,
representing thirty-one and 67/100 percent (31.67%) of the issued and
outstanding units of Company Membership Interest;
WHEREAS, Jeffrey Caldwell owns 95 units of Company Membership Interest,
representing thirty-one and 67/100 percent (31.67%) of the issued and
outstanding units of Company Membership Interest;
WHEREAS, Thomas Barton owns 15 units of Company Membership Interest,
representing five percent (5%) of the issued and outstanding units of Company
Membership Interest;
WHEREAS, the Members are the sole members of the Company, and as such, each
Member desires to sell, assign, transfer and convey to Xceed all of each
Member's right, title and interest in and to the issued and outstanding units of
Company Membership Interest pursuant to the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, it is the desire of Xceed to purchase, obtain and acquire from the
Members all of each of such individual's right, title and interest in and to all
of the issued and outstanding units of Company Membership Interest pursuant to
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the authorized capital stock of Xceed consists of 30,000,000
shares of common stock, par value $.01 per share (the "Xceed Stock"), and
1,000,000 shares of preferred stock, par value $.05 per share (the "Preferred
Stock"), of which 16,864,840 shares of Xceed Stock were issued and outstanding
as of the date hereof and no shares of Preferred Stock are issued and
outstanding as of the date hereof;
WHEREAS, the Board of Directors of Xceed and Jonathan Molod, Fabian
Tabibian and Jeffrey Caldwell (each individually referred to hereinafter as a
"Manager" and collectively
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referred to hereinafter as the "Managers") deem it advisable and in the best
interests of Xceed and the Company, respectively and their respective
stockholders and Members that the Company merge with and into Xceed (the
"Merger") pursuant to the terms of this Agreement and the applicable provisions
of the laws of the State of Delaware and the State of New York;
WHEREAS, the Members are currently the only members of the Company entitled
to vote on the Merger and have unanimously voted in favor of the Merger; and
WHEREAS, the Merger is intended to qualify as a reorganization pursuant to
the provisions of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the premises and mutual covenants,
conditions and agreements contained herein and for such other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, each intending to be legally bound hereby, agree as follows:
ARTICLE I
TERMS OF MERGER
1.1 Merger. Upon the terms and subject to the conditions set forth in
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this Agreement, on the Closing Date (as hereinafter defined in Section 2.1), the
Company shall be merged with and into Xceed and the Members shall transfer and
convey to Xceed all of the Members' right, title and interest in and to all of
the issued and outstanding units of Company Membership Interest. The Members
hereby agree, upon the terms and subject to the conditions set forth herein, to
transfer and deliver to Xceed (for cancellation) at the Closing (as hereinafter
defined in Section 2.1) certificates, properly endorsed in blank or accompanied
by a properly executed stock power, representing all of the issued and
outstanding units of Company Membership Interest.
1.2 Merger Consideration. In consideration of and in exchange for all of
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the issued and outstanding units of Company Membership Interest as set forth in
Section 1.1 above, Xceed shall pay to the Members the merger consideration as
set forth below (the "Merger Consideration"). The Merger Consideration shall be
payable in cash and shares of Xceed Stock, in accordance herewith.
(a) Stock Portion of Merger Consideration. At the Closing, Xceed shall
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issue to the Members, in the respective amounts set forth on Schedule 1.2
hereto, Xceed Stock having an aggregate value of One Million Six Hundred Fifty
Thousand Dollars ($1,650,000) (the "Stock Portion"). The number of shares of
Xceed Stock issuable in connection with the Stock Portion shall be determined by
dividing (i) the Stock Portion by (ii) the average of the closing transaction
price of the Xceed Stock for the five (5) business days immediately preceding
the Closing Date (as hereinafter defined), as quoted by the NASDAQ National
Market System; and
(b) Cash Portion of Merger Consideration. At the Closing, Xceed shall
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pay to the Members, in the respective amounts set forth on Schedule 1.2 hereto,
an aggregate of Two
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Hundred Thousand Dollars ($200,000) in cash, by certified cashier's check or
bank wire transfer of legal currency of the United States in immediately
available funds.
1.3 Effective Time of Merger. Subject to the terms and conditions of this
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Agreement, the certificate of merger, in substantially the form of Exhibit
1.3(a) (the "Delaware Certificate of Merger"), required by Section 252 of the
Delaware General Corporation Law (the "DGCL") and the certificate of merger in
substantially the form of Exhibit 1.3(b) (the "New York Certificate of Merger"),
required by Section 904 of the New York Business Corporation Law (the "NYBCL")
shall be duly executed and acknowledged by the Constituent Entities (as
hereinafter defined in Section 1.4) and thereafter delivered to the Secretary of
the State of Delaware and the New York Department of State for filing pursuant
to the DGCL and the NYBCL, respectively, on the Closing Date (as hereinafter
defined). The Merger shall become effective (the "Effective Time") upon the
filing of the Delaware Certificate of Merger with the Secretary of the State of
Delaware and the filing of the Delaware Certificate of Merger and the New York
Certificate of Merger with the New York Department of State. Xceed and the
Company will use their best efforts to assure the Delaware Certificate of Merger
and the New York Certificate of Merger are filed with the Secretary of the State
of Delaware and the New York Department of State in accordance herewith as soon
as practicable on or before the Closing Date. In furtherance thereof, Xceed and
the Company shall prepare and deliver the final, executed Delaware Certificate
of Merger and New York Certificate of Merger to the appropriate states with
instructions to: (i) file such certificates of merger immediately upon
instruction from Xceed's counsel to do so; and (ii) deliver notice to Xceed's
counsel that such certificates of merger were filed and accepted.
1.4 Effects of the Merger.
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(a) At the Effective Time: (i) the separate existence of the Company
shall cease and the Company shall be merged with and into Xceed (the Company and
Xceed are sometimes referred to herein as the "Constituent Entities" and Xceed
is sometimes referred to herein as the "Surviving Corporation"); (ii) the
Certificate of Incorporation of Xceed as in effect immediately prior to the
Effective Time shall continue to be the Certificate of Incorporation of the
Surviving Corporation; and (iii) the Bylaws of Xceed as in effect immediately
prior to the Effective Time shall continue to be the Bylaws of the Surviving
Corporation.
(b) At and after the Effective Time, the Merger shall have the effects
set forth in Section 259 of the DGCL and Section 906 of the New York Business
Corporation Law. Without limiting the foregoing, at the Effective Time, Xceed
as the Surviving Corporation shall possess all the rights, privileges, powers
and franchises of a public as well as a private nature, and be subject to all
the restrictions, disabilities and duties of each of the Constituent Entities,
and all singular rights, privileges, powers and franchises of each of the
Constituent Entities, and all property, real, personal and mixed, and all debts
due to either of the Constituent Entities on whatever account, as well as for
stock subscriptions and all other things in action or belonging to each of the
Constituent Entities, shall be vested in Xceed as the Surviving Corporation and
all property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the Constituent Entities, and the title to any real
estate vested by deed or otherwise, in either of the Constituent Entities, shall
not revert or be in any way impaired; but all rights of creditors and all liens
upon any property of either of the Constituent Entities shall thenceforth attach
to Xceed as the
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Surviving Corporation, and may be enforced against it to the same extent as if
said debts and liabilities had been incurred by it.
1.5 Directors and Officers of the Surviving Corporation. The directors
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and officers of Xceed immediately prior to the Effective Time shall continue to
be the directors and officers of Xceed as the Surviving Corporation until their
successors shall have been duly elected, appointed and/or qualified or until
their earlier death, resignation or removal in accordance with the Certificate
of Incorporation and Bylaws of Xceed.
1.6 Conversion of Capital Stock and Units. As of the Effective Time, by
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virtue of the Merger and without any action on the part of any holder of units
of Company Membership Interest or shares of Xceed Stock:
(a) Xceed Stock. Each issued and outstanding share of Xceed Stock
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shall continue to be issued and outstanding and shall not be affected by the
Merger.
(b) Conversion of Company Membership Interest. Each unit of Company
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Membership Interest issued and outstanding as of the Effective Time shall be
exchanged into cash and shares of Xceed Stock as set forth on Schedule 1.2
hereto. All such units of Company Membership Interest, when so exchanged, shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
units shall cease to have any rights with respect thereto, except the right to
receive the cash and shares of Xceed Stock to be issued or paid in consideration
therefor upon the surrender of such certificate for exchange to Xceed at the
Closing (as hereinafter defined).
1.7 Registration Rights of Members. The Members owning at least fifty-one
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percent (51%) of the shares of Xceed Stock issued in connection with the Merger
(the "Requesting Members") shall be entitled on one (1) occasion, commencing six
(6) months from the Closing Date, to cause Xceed to: (i) include for resale such
shares of Xceed Stock in a registration statement filed with the Securities and
Exchange Commission (the "Commission"); and (ii) use its best efforts to have
such registration statement declared effective by the Commission under the
Securities Act of 1933, as amended (the "Securities Act") as soon as practicable
thereafter, by providing to Xceed written notice (the "Demand Notice") demanding
that Xceed file such a registration statement. Xceed shall, upon receipt of the
Demand Notice, notify the remaining Members in writing of its receipt of the
Demand Notice (the "Registration Notice") and shall indicate therein that such
other Members may include in such registration statement the shares of Xceed
Stock issued to them in connection with the Merger. Those Members seeking to
include their shares of Xceed Stock shall, within five (5) calendar days of the
date of the Registration Notice (the "Notice Period"), notify Xceed in writing
of their desire to be included in such registration. Xceed shall thereafter,
within thirty (30) calendar days of expiration of the Notice Period, file a
registration statement (on a form deemed appropriate by Xceed's counsel) with
the Commission including all of the Xceed Stock which the Members shall request
in writing (the "Demand Rights"). In the event that the subject registration
statement relates to a public offering of Xceed's securities and the underwriter
advises Xceed in writing that marketing factors require a limitation on the
number of shares to be included in a registration statement, the Xceed Stock
proposed to be included in such registration may be limited in whole or in part
and the Members may be prohibited from selling any of their Xceed Stock for a
period of time following the effective date of the registration statement.
Additionally, in the event that Xceed receives the
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Demand Notice during a period in which it has imposed restrictions on the
ability of its employees to effect trading in Xceed's securities, Xceed shall
not be required to effect registration of the shares of Xceed Stock subject to
the foregoing Demand Notice until such time as the restrictions have expired.
Inclusion of all or any portion of a Member's shares of Xceed Stock pursuant to
the Demand Notice shall constitute exercise of such Member's Demand Rights in
full. Notwithstanding such registration, the Members will not, while employees
of Xceed, sell their shares of Xceed Stock during a period in which Xceed has
imposed restrictions on the ability of its employees to effect trading in Xceed
Stock.
1.8 Lockup. Shares of Xceed Stock issuable hereunder to each Member shall
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be subject to a lockup for a period of two (2) years from the Closing Date, one-
third (1/3) of which shares of Xceed Stock shall be released from the lockup on
each of the dates 180 days, 485 days and 730 days from the Closing Date,
respectively.
1.9 Restrictions on Resale of Xceed Stock. Notwithstanding Section 1.7,
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the shares of Xceed Stock received by the Members pursuant to this Agreement
shall be issued by Xceed in reliance upon exemptions from the registration
requirements of the Securities Act and may not be sold, assigned, pledged,
hypothecated or transferred, or any interest therein conveyed to any other
person, except in accordance with the registration provisions of the federal and
state securities laws or applicable exemption therefrom, and the certificates
representing such shares shall contain an appropriate legend to that effect.
1.10 Tax-Free Reorganization. The parties intend that the Merger qualify
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as a tax-free reorganization under Section 368(a)(1)(A) of the Code. Unless
required by a final determination of the Internal Revenue Service (or other
governing body having jurisdiction over these matters) or a court of competent
jurisdiction, the parties shall not take any position on any subsequently filed
tax return inconsistent with this section. Each party hereto represents to each
other that there exists no indebtedness between Xceed and the Company and that
such party is not an investment company as defined in Subsections
368(a)(2)(F)(iii) and (iv) of the Code. The parties hereby agree to comply with
the reporting requirements of Treasury Regulation Section 1.368.3.
In furtherance of the foregoing, Xceed hereby represents, warrants and
covenants that:
(a) it has no plan or intention to reacquire any Xceed Stock issued to the
Members;
(b) it has no plan or intention to sell or otherwise dispose of any of the
assets of the Company, except for transfers described in Section
368(a)(2)(C) of the Code;
(c) there is no plan or intention by Xceed to acquire, directly or through
parties related to Xceed (within the meaning of Section 1.368-1(c)(1)
and (2) of the Treasury Regulations) shares of Xceed Stock issued to
the Members hereunder such that the continuity of interest requirement
set forth in Section 1.368-1(e) of the Treasury Regulations (the
"Continuity of Interest Requirement") would be violated;
(d) following the Closing, Xceed will continue the business of the Company
in accordance with Section 1.368-1 of the Treasury Regulations;
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(e) prior to the Closing, the liabilities of the Company were incurred by
the Company in the ordinary course of business;
(f) the Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code;
(g) as of the date hereof, the fair market value of the assets of the
Company equal or exceed the sum of the liabilities of the Company; and
(h) there is no plan or intention by the Members to sell, exchange or
otherwise dispose of shares of Xceed Stock received by them hereunder
to Xceed or persons or parties related to Xceed such that the
Continuity of Interest Requirement would be violated.
ARTICLE II
CLOSING
2.1 Date and Time of Closing. Subject to satisfaction of the
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conditions set forth in this Agreement and compliance with the other provisions
hereof, the closing of the transactions contemplated by this Agreement (the
"Closing") shall take place on October 1, 1999 at 10:00 a.m. (eastern daylight
savings time) at the law offices of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue, New York, New York 10022, or at such other place and time
thereafter as shall be mutually agreeable to the parties hereto, but in no event
later than October 15, 1999, unless otherwise extended by mutual agreement of
the parties hereto (the "Closing Date").
2.2 Closing Documents. Upon fulfillment of the conditions set forth
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herein, on the Closing Date, the parties hereto shall cause the Delaware
Certificate of Merger and the New York Certificate of Merger to be filed as
contemplated in Section 1.3 hereof and each party hereto will execute and
deliver to the other parties hereto such other documents and instruments as are
contemplated herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company and the Members. The
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Company and the Members, jointly and severally, except as specifically provided
herein, represent and warrant to Xceed as follows:
(a) Authorization. The execution, delivery and performance of this
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Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the Managers of the Company and by each
of the Members. The Company has taken all necessary limited liability company
action and has all of the necessary limited liability company power to enter
into this Agreement and to consummate the transactions contemplated
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hereby. This Agreement has been duly and validly executed and delivered by an
officer of the Company on its behalf and assuming that this Agreement is the
valid and binding obligation of Xceed, is the valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect, or
by legal or equitable principles, relating to or limiting creditors' rights
generally and except that the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
Each Member severally represents and warrants that he has the ability to
consummate the transactions contemplated hereby, that this Agreement has been
duly executed and validly delivered by him and that this Agreement is the valid
and binding obligation of such Member, enforceable against each such Member in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect, or by legal or equitable principles, relating
to or limiting creditors' rights generally and except that the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(b) Organization; Subsidiaries. The Company is a limited liability
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company duly organized, validly existing and in good standing under the laws of
the State of New York. The Company has timely and validly made an election to be
classified as an association by filing Form 8832, Entity Classification Election
with the Internal Revenue Service (the "IRS") for federal income tax purposes,
which election shall have been accepted by the IRS on or before the Closing
Date. The Company has the corporate power and authority to own and lease its
properties and assets and to carry on its business as it is now being conducted
and is duly qualified to do business as a foreign corporation in each
jurisdiction where it owns or leases real property or conducts business, except
where the failure to be so qualified would not have a material adverse effect on
the business, operations, earnings, prospects, assets or condition (financial or
otherwise) of the Company. Set forth on Schedule 3.1(b) hereto is a true and
correct list of each jurisdiction in which the Company is qualified to do
business. The Company does not own any shares of capital stock or other
interest in any corporation, partnership, association or other entity.
(c) Capitalization. The number of authorized, issued and outstanding
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units of Company Membership Interest as of the date hereof is as set forth above
in the recitals to this Agreement. The outstanding units of Company Membership
Interest have been duly authorized, validly issued and are fully paid and non-
assessable. Each Member hereby severally represents and warrants that he is the
sole legal and beneficial owner of the number of units of Company Membership
Interest as set forth in the recitals, which units, in the aggregate, represent
one hundred percent (100%) of the issued and outstanding units of Company
Membership Interest. Each Member hereby severally represents and warrants that
the issued and outstanding units of Company Membership Interest owned by such
Member are owned free of preemptive rights and free and clear of any and all
adverse claims, liens, mortgages, charges, security interests, encumbrances and
other restrictions or limitations of any kind whatsoever. The Company has not
issued any units of Company Membership Interest which could give rise to claims
for violation of any federal or state securities laws (including any rules or
regulations promulgated thereunder) or the securities laws of any other
jurisdiction (including any rules or regulations promulgated thereunder). As of
the date hereof, there are no options, warrants, calls, convertible securities
or
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commitments of any kind whatsoever relating to the units of Company
Membership Interest subject hereto or any of the unissued units of Company
Membership Interest, and there are no voting trusts, voting agreements,
stockholder agreements or other agreements or understandings of any kind
whatsoever which relate to the voting of the units of Company Membership
Interest.
(d) Financial Statements. The Company has heretofore delivered to
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Xceed: (i) unaudited financial statements of the Company as at December 31, 1998
(the "Unaudited Statements"); (ii) interim unaudited financial statements of the
Company for the six months ended June 30, 1999, and (iii) monthly unaudited
financial statements of the Company for each month after June 30, 1999 until the
Closing (the "Interim Statements") (all of the foregoing, including the notes
thereto, may collectively be referred to hereinafter as the "Financial
Statements"). The Financial Statements present fairly, in all material respects,
the financial position of the Company as of the respective dates indicated and
the results of operations and cash flows of the Company for the respective
periods indicated.
(e) Owned Real Property. The Company does not own (of record or
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beneficially), nor does it have any interest in, any real property other than
the leased real property set forth below.
(f) Leased Real Property; Tenancies. Set forth on Schedule 3.1(f)
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hereto is a true, correct and complete list of all of the leases and subleases
(the "Real Property Leases") with respect to real property leased by the Company
as lessee and used in the conduct of its business or otherwise (the "Leased Real
Property"). Also set forth on Schedule 3.1(f) is a true, correct and complete
list of the monthly or annual rental payments due thereunder as of the date
hereof and the expiration dates thereof. The Company has delivered to Xceed
true, correct and complete copies of each of the Real Property Leases. Except
as set forth on Schedule 3.1(f), the Company is not required pursuant to the
provisions of any of the Real Property Leases (or otherwise) to obtain the
consent of any lessor with respect to the Leased Real Property prior to or in
connection with consummation of the transactions contemplated hereby. Neither
the Company nor, to the Company's or the Members' knowledge, any third party is
in default under any of the Real Property Leases. There are no subleases or
subtenancies for any part of the Leased Real Property that shall remain in
effect after the Closing Date and there is no third party which has any right to
purchase, use or otherwise possess all or any part of the Leased Real Property.
(g) Title. The Company: (i) holds a valid and enforceable leasehold
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interest in the Leased Real Property; and (ii) owns good and marketable title to
all of the assets and properties reflected on the balance sheet of the Unaudited
Statements and the balance sheet of the Interim Statements or purchased by the
Company after the date thereof, except supplies consumed or assets or properties
sold in the ordinary course of business subsequent to the date thereof. To the
Company's or the Members' knowledge, the Leased Real Property is leased free of
all adverse claims, liens, mortgages, charges, security interests, encumbrances
and other restrictions or limitations of any kind whatsoever, except: (A) as
stated in the Financial Statements (including the notes thereto); (B) for liens
for taxes or assessments not yet due and payable or which are being contested by
the Company in good faith; (C) for minor liens imposed by law for sums not yet
due or which are being contested by the Company in good faith; and (D) for
imperfections of title, adverse claims, charges, restrictions, limitations,
encumbrances, liens or security interests that are minor and which do not
detract from the value of the Leased Real Property subject thereto or which do
not impair the operations of the Company or affect the
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present use of the Leased Real Property. There is no condemnation or eminent
domain proceeding pending or, to the Company's or the Members' knowledge,
threatened against the Leased Real Property (or any part thereof). The Company
has not made any commitments or received any notice, oral or written, from any
public authority or other entity with respect to the taking or use of the Leased
Real Property (or any part thereof), whether temporarily or permanently, for
easements, rights-of-way or other public or quasi-public purposes or for any
other purpose whatsoever nor is there any proceeding pending or, to the
Company's or the Members' knowledge, threatened which could adversely affect the
zoning classification relating to such property or its use by the Company as of
the date hereof. The assets reflected on the balance sheet of the Unaudited
Statements and the balance sheet of the Interim Statements and those purchased
by the Company after the date thereof, are owned free and clear of all adverse
claims, liens, mortgages, charges, security interests, encumbrances and other
restrictions or limitations of any kind whatsoever, except: (A) as stated in the
Financial Statements (including the notes thereto); (B) for liens for taxes or
assessments not yet due and payable or which are being contested by the Company
in good faith; (C) for minor liens imposed by law for sums not yet due or which
are being contested by the Company in good faith; and (D) for imperfections of
title, adverse claims, charges, restrictions, limitations, encumbrances, liens
or security interests that are minor and which do not detract in any material
respect from the value of any of the assets subject thereto or which do not
impair the operations of the Company in any material respect or affect the
present use of the assets in any material respect. The Company has not made any
commitments or received any notice, oral or written, from any public authority
or other entity with respect to the taking or use of any of the Company's
assets, whether temporarily or permanently, for any purpose whatsoever, nor is
there any proceeding pending or, to the Company's or the Members' knowledge,
threatened which could adversely affect any asset owned or used by the Company
as of the date hereof.
(h) Condition of Assets. The Real Property Leases and all other
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documents and agreements pursuant to which the Company has obtained the right to
use or occupy any real property, personal property or assets, are valid and
enforceable in all respects in accordance with their respective terms, except as
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect, or
by legal or equitable principles, relating to or limiting creditors' rights
generally and except that the remedy of specific performance and injunctive and
other forms of equitable relief are subject to certain equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
All licenses, permits and authorizations related to the location or operation of
the business of the Company are in good standing and are valid and enforceable
in all respects in accordance with their respective terms. There is not, under
any of the foregoing instruments, documents or agreements, any existing default,
nor is there any event which, with notice or lapse of time or both, would
constitute a default arising through the Company or any third party which could:
(i) have a material adverse effect on the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of the Company; or
(ii) materially adversely affect its use of the Leased Real Property or the
title to its assets. To the Company's or the Members' knowledge, the Company is
not in violation of and has complied with all applicable zoning, building or
other codes, statutes, regulations, ordinances, notices and orders of any
governmental authority with respect to the occupancy, use, maintenance,
condition, operation and improvement of the Leased Real Property or assets,
except where the failure to comply would not have a material adverse effect on
the business, assets, operations, earnings, prospects or condition (financial or
otherwise) of the Company. The Company's use of any improvements for the
purposes for which any of the
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Leased Real Property or assets are being used as of the date hereof does not
violate any such code, statute, regulation, ordinance, notice or order. The
Company possesses all licenses, certificates of occupancy, permits and
authorizations required to be obtained by the Company with respect to the
Company's operation and maintenance of the Leased Real Property or assets for
all uses for which such property is or assets are operated or used by the
Company as of the date hereof, except where the failure to do so would not have
a material adverse effect on the business, assets, operations, earnings,
prospects or condition (financial or otherwise) of the Company. All of the
Leased Real Property or assets (whether owned or leased by the Company) are in
good operating condition and repair, subject to normal wear and use and each
such item is usable in a manner consistent with current use by the Company.
(i) Intellectual Property.
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(i) Schedule 3.1(i) hereto sets forth a true, correct and
complete list (including where applicable, the date of registration and the
serial or registration number) of all registered and unregistered trademarks,
service marks and trade names (including any applications for the same), trade
secrets, registered and unregistered copyrights, and computer programs and
software (whether or not protected by patent, copyright or otherwise) which are
owned by, licensed by, used in or are material to the business of the Company
(the "Intellectual Property") . With respect to each of the foregoing items,
there is listed on Schedule 3.1 (i) hereto the following: (A) the extent of the
Company's interest therein; (B) each agreement and all other documents
evidencing the Company's interest therein; (C) the extent of the interest of any
third party therein; and (D) each agreement and all other documents evidencing
the interest of any third party therein.
(ii) Except as set forth on Schedule 3.1(i) hereto, the
Company's right, title or interest in the Intellectual Property is free and
clear of adverse claims, liens, mortgages, charges, security interests and
encumbrances or other restrictions or limitations of any kind whatsoever.
(iii) To the Company's and the Members' knowledge, the Company
has not committed any acts of unfair competition or directly, indirectly,
contributorily or by inducement, infringed upon any patent, trademark, service
mark, trade name, copyright, computer program or software, or any other
intellectual property, nor has the Company misappropriated any of the foregoing
from any other person or entity or received from any other person or entity any
notice, charge, claim or other assertion with respect thereto.
(iv) The Company has not sent or otherwise communicated to any
other person or entity any notice, charge, claim or other assertion of, nor has
the Company any knowledge of, any present, impending or threatened infringement
upon any of the Intellectual Property by any other person or entity, or
misappropriation of any of the foregoing by any other person or entity, or any
commission of acts of unfair competition by any other person or entity.
(j) Accounts Receivable. Schedule 3.1(j) hereto sets forth a true,
-------------------
correct and complete list of the Company's accounts receivable (the "Accounts
Receivable") as of September 17, 1999. Such schedule accurately, correctly and
completely reflects the Accounts Receivable as of such date. The Accounts
Receivable are valid, arose out of bona fide transactions in the ordinary course
of business, and are the valid and binding obligations of and
11
are enforceable against the respective account debtors thereunder, except as
such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect.
There is no contest, claim or right of set-off contained in any written
agreement with any account debtor relating to the amount or validity of any
Account Receivable.
(k) Accounts Payable. Schedule 3.1(k) hereto sets forth a true,
----------------
correct and complete list of the Company's accounts payable (the "Accounts
Payable") as of September 17, 1999. Such schedule accurately, correctly and
completely reflects the aggregate amount of Accounts Payable as of such date.
Prior to the Closing Date, all outstanding Accounts Payable will have been paid
by the Company in a manner consistent with past practice.
(l) Absence of Undisclosed Liabilities. Other than as set forth on
----------------------------------
the Financial Statements, the Company has not had nor does it have any
indebtedness, loss or liability of any nature whatsoever (other than as incurred
in the ordinary course of business), whether accrued, absolute, contingent or
otherwise and whether due or become due, which is material to the Company's
business or the assets, or the operations, prospects, earnings or condition
(financial or otherwise) of the Company.
(m) Absence of Certain Changes or Events. Except as set forth on
------------------------------------
Schedule 3.1(m) and except as expressly set forth in this Agreement, the Company
has not, since August 31, 1999:
(i) issued, sold, granted or contracted to issue, sell or grant
any of its units of Company Membership Interest, notes, bonds, other
securities or any option to purchase any of the same;
(ii) amended its articles of organization or operating agreement;
(iii) made any capital expenditures or commitments for the
acquisition or construction of any property, plant or equipment other than
in the ordinary course of business of the Company;
(iv) entered into any material transaction in any way
inconsistent with the past practices of its business or conducted its
business in any manner inconsistent with its past practices;
(v) incurred any damage, destruction or any other loss to any of
its property or assets in an aggregate amount exceeding Fifty Thousand
Dollars ($50,000) whether or not covered by insurance;
(vi) suffered any loss in an aggregate amount exceeding Fifty
Thousand Dollars ($50,000) and, neither the Company nor the Members has
become aware of any intention on the part of any client, dealer or supplier
to discontinue its current relationship with the Company, the loss or
discontinuance of which, alone or in the aggregate, could have a material
adverse effect on the Company's business or the assets, or the operations,
earnings, prospects or condition (financial or otherwise) of the Company;
12
(vii) modified, amended or altered any contractual arrangement
with any client, dealer or supplier, the modification, amendment or
alteration of which, alone or in the aggregate, could have a material
adverse effect on the Company's business or the assets, or the operations,
earnings, prospects or condition (financial or otherwise) of the Company;
(viii) incurred any material liability or obligation (absolute or
contingent) or made any material expenditure other than in the ordinary
course of business of the Company;
(ix) experienced any material adverse change in the Company's
business or the assets, or the operations, earnings, prospects or condition
(financial or otherwise) of the Company or experienced or have knowledge of
any event which could have a material adverse effect on the Company's
business or the assets, or the operations, earnings, prospects or condition
(financial or otherwise) of the Company; provided, however, that during the
-------- -------
period from the date hereof and prior to the Closing Date, the Company may
distribute: (x) cash to the Members in an amount not to exceed in the
aggregate $40,000 (the "Member Bonuses"), and (y) cash to the Company
Employees (as hereinafter defined in Section 5.2(j)) in an amount not to
exceed in the aggregate $30,000 (the "Employee Bonuses"), and that the
Company has been and is able to timely satisfy its liabilities as the same
become due;
(x) declared, set aside or paid any dividend or other
distribution in respect of the units of Company Membership Interest, not
including the Member Bonuses;
(xi) redeemed, repurchased, or otherwise acquired any of its
units of Company Membership Interest or securities convertible into or
exchangeable for its units of Company Membership Interest or entered into
any agreement with respect to any of the foregoing;
(xii) granted, conveyed, transferred, assigned or made any sale
of Accounts Receivable or any accrual of liabilities outside of the
ordinary course of its business;
(xiii) granted, conveyed, transferred, assigned or made any sale
of any material interest in the Intellectual Property;
(xiv) purchased, disposed of or contracted to purchase or dispose
of, or granted or received an option or any other right to purchase or
sell, any of its property or assets, except in the ordinary course of
business;
(xv) increased the rate of compensation payable or to become
payable to the officers or employees of the Company, or increased the
amounts paid or payable to such officers or employees under any bonus,
insurance, pension or other benefit plan, or made any arrangements therefor
with or for any of said officers or employees except for: (x) increases
consistent with the Company's ordinary course of business, (y) increases
resulting from the application of existing formulas under existing plans,
agreements or
13
policies relating to employee compensation, or (z) the Member
Bonuses or Employee Bonuses;
(xvi) adopted or amended any collective bargaining, bonus,
profit-sharing, compensation, stock option, pension, retirement, deferred
compensation or other plan, agreement, trust, fund or arrangement for the
benefit of its employees, except as otherwise required or permitted herein;
or
(xvii) changed any material accounting principle, procedure or
practice followed by the Company or changed the method of applying such
principle, procedure or practice.
(n) Agreements. Set forth on Schedule 3.1(n) hereto is a true,
----------
correct and complete list of all contracts, agreements and other instruments
material to the business or operation of the Company, including without
limitation, those to which the Company is a party and those by which any of its
property or the assets are bound. Copies of all such contracts, agreements and
other instruments have heretofore been delivered or made available by the
Company to Xceed. Other than as set forth on Schedule 3.1(n) and 3.1(f), there
is no contract, agreement or other instrument to which the Company or any Member
is a party or which affects the assets, liabilities or outstanding securities of
the Company, which is material to the business, assets or operations of the
Company. None of the foregoing agreements limits the freedom of the Company to
compete in any line of business or with any person or other entity in any
geographic region within or outside of the United States of America.
Neither the Company, the Members (each severally and not jointly), nor
any third party is in material default and no event has occurred which, with
notice or lapse of time or both, could cause or become a material default by the
Company, the Members or any third party, under any contract, agreement, document
or instrument to which the Company or any Member is a party which is material to
the business, assets or operations of the Company. Each contract, agreement,
document or instrument to which the Company or any Member (each severally and
not jointly) is a party which is material to the business or operations of the
Company is enforceable, in accordance with its terms, against all other parties
thereto, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect, or by legal or equitable principles, relating to or limiting creditors'
rights generally and except that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(o) Non-Contravention; Consents. Neither the execution and delivery
---------------------------
of this Agreement by the Company and each of the Members, nor consummation of
the transactions contemplated hereby, does or will: (i) violate or conflict with
any provision of the articles of organization or operating agreement of the
Company; (ii) violate or, with the passage of time, result in the violation of
any provision of, or result in the acceleration of or entitle any party to
accelerate any obligation under, or result in the creation an imposition of any
lien, charge, pledge, security interest or other encumbrance upon any of the
property or assets, which are material to the business or operation of the
Company, pursuant to any provision of any mortgage, lien, lease, agreement,
permit, indenture, license, instrument, law, order, arbitration award, judgment
or decree to which the Company is a party or by which it or any of such property
or
14
assets are bound, the effect of which violation, acceleration, creation or
imposition could have a material adverse effect on the business, assets,
operations, earnings, prospects or (financial or otherwise) of the Company;
(iii) violate or conflict with any other restriction of any kind whatsoever to
which the Company or any Member is subject or by which any of their properties
or assets may be bound, the effect of any of which violation or conflict could
have a material adverse effect on the business, assets, operations, earnings,
prospects or (financial or otherwise) of the Company; or (iv) constitute an
event permitting termination by a third party of any agreement to which the
Company or any Member is a party or is subject, which termination could have a
material adverse effect on the business, assets, operations, earnings, prospects
or condition (financial or otherwise) of the Company. Except as set forth on
Schedule 3.1(o) hereto, no consent, authorization, order or approval of, or
filing or registration with, any governmental commission, board or other
regulatory body is required in connection with the execution, delivery and
performance of the terms of this Agreement and consummation of the transactions
contemplated hereby.
(p) Employee Benefit Plans. Schedule 3.1(p) hereto sets forth a true,
----------------------
correct and complete list of all "employee benefit plans" as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (the "Benefit Plans") covering the employees of the Company
(the "Employees"). Each Benefit Plan is in compliance in all material respects
with all applicable provisions of law, including ERISA and the Code. There are
no pending or, to the Company's or the Members' knowledge, threatened claims
against any Benefit Plan (except for claims for benefits payable in the normal
operation of the Benefit Plans) that could give rise to any material liability
to the Company. All material reports, notices and returns required to be filed
with any governmental agency or provided to any person or entity with respect to
the Benefit Plans have been timely filed. The Company has never had and does not
now have any Benefit Plan that is an employee pension plan (as defined in
Section 3(2) of ERISA) nor does the Company contribute to any multiemployer
pension or multiemployer welfare benefit plan (within the meaning of Section
3(37) of ERISA).
(q) Labor Relations. There are no agreements with or pending
---------------
petitions for recognition of any labor union or association as the exclusive
bargaining agent for any or all of the employees of the Company and no such
petition has been pending at any time during the two (2) years prior to the date
hereof. To the Company's or the Members' knowledge, there has not been any
organizing effort by any union or other group seeking to represent any employees
of the Company as its exclusive bargaining agent at any time during the two (2)
years prior to the date hereof. There are no labor strikes, work stoppages or
other labor disputes now pending or threatened against the Company, nor has
there been any such labor strike, work stoppage or other labor dispute or
grievance at any time during the two (2) years prior to the date hereof. Neither
the Company nor the Members has any knowledge that any executive, key employee
or any group of employees of the Company has any plans to terminate his/her
employment with the Company.
(r) Insurance. Schedule 3.1(r) hereto sets forth a true, correct and
---------
complete list of all insurance policies or binders of insurance or programs of
self-insurance which relate to the business of the Company as of the date
hereof. The coverage under each such policy and binder is in full force and
effect. Neither the Company nor the Members have knowledge of nor has the
Company or the Members received any notice of cancellation, termination,
nonrenewal or disallowance of any claim thereunder or with respect thereto.
Neither the Company nor the
15
Members have knowledge of any claim against the Company relating to its
business, assets, properties or operations which could increase the insurance
premiums payable by the Company under such policy or binder in excess of normal
increases consistent with industry practices.
(s) Tax Matters. The Company and each of the Members have timely
-----------
filed with the appropriate taxing authorities all returns (including, without
limitation, information returns and other material information) in respect of
Taxes required to be filed through the date hereof. The information contained
in such returns is complete and accurate in all material respects. Neither the
Company nor any of the Members have requested any extension of time within which
to file returns (including, without limitation, information returns) in respect
of any Taxes. The Company and each of the Members have accurately computed and
timely paid all Taxes of any kind that have become due and payable for periods
beginning before the date hereof that, if unpaid could result in a lien upon the
assets of the Company, or an adequate reserve has been established therefor, as
set forth in Schedule 3.1(s). No liens for Taxes exist against any assets of
the Company to be acquired by Xceed in the Merger. The Company has withheld or
collected from each payment made to each of its employees, consultants,
contractors and other payees the amount of Taxes required to be withheld and
collected therefrom for all periods through the date hereof. Any liability for
Taxes due and payable through the date of this Agreement for which no returns
are due or have been filed (including, without limitation, property, payroll and
withholding taxes) have been properly reflected or provided for on the books of
the Company and will be paid by the Company or the Members. No material
deficiencies for Taxes have been claimed, proposed, or assessed by any taxing or
other governmental authority against the Company. There are no pending or, to
the best knowledge of the Company and each of the Members, threatened audits,
investigations or claims for or relating to any material liability in respect of
Taxes, and there are no matters under discussion with any governmental
authorities with respect to Taxes that, in the reasonable judgment of the
Company, the Members, or the Company's counsel is likely to result in a material
amount of Taxes. The federal, state and local returns of the Company and each
of its Members have never been audited, and neither the Company nor any of the
Members have been notified that any taxing authority intends to audit a return
for any other period. No extension of a statute of limitations relating to
Taxes is in effect with respect to the Company. The Company: (i) has not been an
includible corporation in an affiliated group that files consolidated income tax
returns; (ii) is not a party to any tax-sharing agreements or similar
arrangements; or (iii) has not made or become obligated to make, and will not,
as a result of the Merger, make or become obligated to make, an "excess
parachute payment" as defined in section 280G of the Code. Neither the Company
nor any of the Members is a "foreign person" as defined in section 1445(f)(3) of
the Code. The Company is a New York limited liability company that has timely
and validly filed an election with the IRS to be classified as an association
and treated as a corporation for federal income tax purposes, which election
shall have been accepted by the IRS on or before the Closing Date.
The term "taxes" or "tax" as used in this section or referred to
elsewhere in this Agreement shall mean all taxes, charges, fees, levies,
penalties, or other assessments, including without limitation, income, capital
gain, profit, gross receipts, ad valorem, excise, property, payroll,
withholding, employment, severance, social security, workers' compensation,
occupation, premium, customs duties, windfall profits, sales, use, and franchise
taxes, imposed by the United States, or any state, county, local or foreign
government or any subdivision or agency thereof, and including any interest,
penalties. or additions attributable thereto.
16
(t) Compliance with Applicable Law. The Company has been and is in
------------------------------
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations applicable to the business, except where the
failure to comply with which would not materially adversely affect the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
the Company or which would subject any officer or Manager of the Company to
civil or criminal penalties or imprisonment. The Company has complied with the
rules and regulations of all governmental agencies having authority over its
business or its operations, including without limitation, agencies concerned
with intra-state and interstate commerce, occupational safety and employment
practices, except where the failure to comply would not have a material adverse
effect on the business, operations, earnings, prospects, assets or condition
(financial or otherwise) of the Company. Neither the Company nor the Members has
any knowledge of or received any notice of violation of any such rule or
regulation during the two (2) years prior to the date hereof which could result
in any liability of the Company for penalties or damages or which could subject
the Company to any injunction or government writ, order or decree. To the
Company's or the Members' knowledge, there are no facts, events or conditions
that could interfere with, prevent continued compliance with or give rise to any
liability under any foreign, federal, state or local governmental laws,
statutes, ordinances or regulations applicable to the business, assets,
operations, earnings, prospects or condition (financial or otherwise) of the
Company, except where the failure to do so would not have a material adverse
effect on the business, operations, earnings, prospects, assets or condition
(financial or otherwise) of the Company.
(u) Litigation. Except as set forth on Schedule 3.1(u) hereto, there
----------
is no action, suit, proceeding or investigation pending or, to the Company's or
the Members' knowledge, threatened, which could: (i) restrict the Company or the
Members' ability to perform his respective obligations hereunder or could have a
material adverse effect on the business, assets, operations, earnings, prospects
or condition (financial or otherwise) of the Company; or (ii) result in material
damages to the Company during the thirty-six (36) months following the date
hereof. Neither the Company nor any of the Members is in default in respect of
any judgment, order, writ, injunction or decree of any court or any federal,
state, local or other governmental agency, authority, body, board, bureau,
commission, department or instrumentality which could have a material adverse
effect on the business, assets, operations, earnings, prospects or condition
(financial or otherwise) of the Company.
(v) Permits. The Company holds all permits, licenses, orders and
-------
approvals of all federal, state or local governmental or regulatory authorities,
agencies or bodies required for the conduct and operation of the Company's
business as currently conducted, except where the failure to do so would not
have a material adverse effect on the business, operations, earnings, prospects,
assets or condition (financial or otherwise) of the Company. All such permits,
licenses, orders, and approvals are in full force and effect and no suspension,
termination or revocation of any of the foregoing is threatened. None of such
permits, licenses, orders or approvals will be materially adversely affected by
consummation of the transactions contemplated by this Agreement. The Company
has no knowledge of nor has it received any notice of violation of any of such
rules or regulations during the two (2) years prior to the date hereof which
would result in any liability of the Company for penalties or damages or which
would subject the Company to any injunction or governmental writ, order or
decree.
17
(w) Unlawful Payments. Neither the Company, the Members, nor any
-----------------
officer, Manager, employee, agent or representative of the Company (other than
the Members acting in their respective capacities as any of the foregoing) has
made, directly or indirectly, any bribe or kickback, illegal political
contribution, payment from corporate funds which was incorrectly recorded on the
books and records of the Company, unlawful payment from corporate funds to
governmental or municipal officials in their individual capacities for the
purpose of affecting their action or the actions of the jurisdiction which they
represent to obtain favorable treatment in securing business or licenses or to
obtain special concessions of any kind whatsoever, or illegal payment from
corporate funds to obtain or retain any business.
(x) Warranties. Except as required or implied by federal or state law
----------
or as otherwise disclosed on Schedule 3.1(x) hereto, the Company has not made,
extended or otherwise represented that it would provide any express warranty
with respect to the products or services sold, distributed or leased to its
clients or customers.
(y) Officers, Managers and Employees. Schedule 3.1(y) hereto sets
--------------------------------
forth a true, correct and complete list of all of the officers, Managers and
employees of the Company as of the date hereof, including their respective
names, titles, salaries and bonuses for the last three (3) years. The Company
has also provided true, correct and complete copies of any employment agreements
between the Company and any of the foregoing officers, Managers and employees of
the Company in effect as of the date hereof.
(z) Loans to or from Affiliates. Except as set forth on Schedule
---------------------------
3.1(z) hereto, there exist no outstanding loans by the Company to any current or
former officer, Manager, employee, consultant or stockholders of the Company or
any affiliate of any of the foregoing. There are no outstanding loans to the
Company by any current or former officer, Manager, employee, consultant or
stockholders of the Company.
(aa) Clients, Vendors, Suppliers and Service Providers. The Company
-------------------------------------------------
has provided to Xceed a true, correct and complete list of the clients, vendors,
suppliers and service providers of the Company. Since December 31, 1998, there
has not been any material adverse change in the business relationship of the
Company with any of the persons or entities listed on Schedule 3.1(aa).
(bb) Books and Records.
-----------------
(i) The books of account and other financial records of the
Company are complete and correct and have been maintained in accordance with
good business practices.
(ii) All material corporate action of the Company's Managers
(including any committees) and stockholders of the Company since the date of the
Company's incorporation has been authorized, approved and/or ratified in the
minute books of the Company.
(cc) Bank Accounts. Set forth on Schedule 3.1(cc) is a true, correct
-------------
and complete list of the names of each bank, savings and loan, or other
financial institution, at which the Company maintains any account (including any
cash contribution or similar accounts) and the names of all persons authorized
to draw thereon or who have access thereto. Schedule 3.1 (cc) includes a true,
correct and complete list of each credit or loan facility or guaranty
18
established and/or maintained by or on behalf of the Company, including the
amounts available to the Company under each such facility, the outstanding
principal balance thereunder as of the date hereof, the interest rate applicable
thereto and the maturity date thereof.
(dd) Solvency of the Company. Since its formation and through the
-----------------------
Closing Date, the Company has been and will be solvent. "Solvent" shall mean,
for purposes of application of this provision, that: (i) the fair saleable value
of the Company's property is in excess of the total amount of its debts; and
(ii) the Company is able to pay its debts as they mature.
(ee) Investment Purpose. Each Member represents that each such Member
------------------
is acquiring and will acquire, as the case may be, the shares of Xceed Stock
issuable to him pursuant hereto solely for his own account for investment
purposes only and not with a view toward resale or distribution thereof other
than pursuant to an effective registration statement or applicable exemption
from the registration requirements of the Securities Act. Each Member
understands that such shares of Xceed Stock will be issued in reliance upon an
exemption from the registration requirements of the Securities Act and that
subsequent sale or transfer of such securities is prohibited absent registration
or exemption from the provisions of the Securities Act. Each Member hereby
agrees, severally and not jointly, that he will not sell, assign, transfer,
pledge or otherwise convey any of the shares of the Xceed Stock issuable to him
pursuant hereto, except in compliance with the provisions of the Securities Act
and in accordance with any transfer restrictions or similar terms set forth on
the certificates representing such securities or otherwise set forth herein.
(ff) Agreements with Affiliates. Except as set forth on Schedule
--------------------------
3.1(ff) hereto, the Company is not a party to any instrument, license, lease or
other agreement, written or oral, with any officer, Manager or stockholders of
the Company.
(gg) Accuracy of Information Furnished. The Company and the Members
---------------------------------
(severally and not jointly with respect to those statements, representations and
warranties made severally and not jointly by such Members) represent that no
statement by the Company or the Members set forth herein or in the exhibits or
the schedules hereto, and no statement set forth in any certificate or other
instrument or document required to be delivered by or on behalf of the Company
or the Members pursuant hereto or in connection with the consummation of the
transactions contemplated hereby, contained, contains or will contain any untrue
statement of a material fact, or omits, omitted or will omit to state any
material fact which is necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading.
3.2 Representations and Warranties of Xceed. Xceed represents and warrants
---------------------------------------
to the Company and the Members as follows:
(a) Authorization. The execution, delivery and performance of this
-------------
Agreement and consummation of the transactions contemplated hereby have been
duly authorized, adopted and approved by the board of directors of Xceed. Xceed
has taken all necessary corporate action and has all of the necessary corporate
power to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the officers of Xceed on behalf of Xceed and, assuming that this
Agreement is the
19
valid and binding obligation of the Company and the Members, is the valid and
binding obligation of Xceed, enforceable against it in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect, or by legal or equitable principles, relating to or limiting creditors'
rights generally and except that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) Organization. Xceed is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware. Xceed has
the corporate power and authority to own and lease its properties and assets,
and to carry on its business as it is now being conducted. Xceed is duly
qualified to do business as a foreign corporation in each jurisdiction where it
owns or leases real property or conducts business, except where the failure to
be so qualified would not have a material adverse effect on the business,
operations, earnings, prospects, assets or condition (financial or otherwise) of
Xceed.
(c) Capitalization. The number of authorized, issued and outstanding
--------------
shares of capital stock of Xceed as of the date hereof is as set forth above in
the recitals to this Agreement. The outstanding shares of Xceed Stock have been
duly authorized and validly issued and are fully paid and nonassessable. As of
the date hereof, the number of shares of capital stock that Xceed is currently
authorized to issue is adequate to permit Xceed to fulfill its obligations
hereunder with respect to issuance of the shares of Xceed Stock to the Members
pursuant hereto. On the Closing Date, the shares of Xceed Stock issuable to the
Members pursuant to Section 1.2 will be duly authorized, validly issued, fully
paid and nonassessable. Xceed has not issued any shares of capital stock which
would give rise to claims for violation of any federal or state securities laws
(including any rules or regulations promulgated thereunder) or the securities
laws of any other jurisdiction (including any rules or regulations promulgated
thereunder). As of the date hereof, there are no options, warrants, calls,
convertible securities or commitments of any kind whatsoever relating to the
shares of Xceed Stock subject hereto.
(d) Non-Contravention; Consents. Neither the execution and delivery
---------------------------
of this Agreement, nor consummation of the transactions contemplated hereby,
does or will: (i) violate or conflict with any provision of the certificate of
incorporation or bylaws of Xceed; (ii) violate or conflict with any material
provision of any mortgage, lien, lease, agreement, permit, indenture, license,
instrument, law, order, arbitration award, judgment or decree to which Xceed is
a party or by which it or the property or assets which are material to its
business or operation are bound, the effect of any of which violation would have
a material adverse effect on the business, assets, operations, earnings,
prospects (financial or otherwise) of the Company; (iii) violate or conflict
with any other restriction to which Xceed is subject or by which any of the
property or assets which are material to the business or operation of Xceed may
be bound, the effect of any of which violation or conflict would have a material
adverse effect on the business, assets, operations, earnings, prospects
(financial or otherwise) of the Company; or (iv) constitute an event permitting
termination of any agreement to which Xceed is subject by any other party
thereto, if in any such circumstance such termination would have a materially
adverse on the ability of Xceed to fulfill its respective obligations hereunder.
Other than as provided herein, no consent, authorization, order or approval of,
or filing or registration with, any governmental commission, board or other
regulatory body is required in connection with the execution,
20
delivery and performance of the terms of this Agreement by Xceed and
consummation by Xceed of any of the transactions contemplated hereby.
(e) Litigation. There is no action, suit, proceeding or investigation
----------
pending against or related to Xceed, nor, to the best knowledge of Xceed, has
Xceed been threatened with any such action, suit, proceeding or investigation,
which would restrict the ability of either to perform its respective obligations
hereunder or which would have a material adverse effect on the business, assets,
operations, earnings, prospects or condition (financial or otherwise) of Xceed.
Xceed is not in default in respect of any judgment, order, writ, injunction or
decree of any court or any federal, state, local or other governmental agency,
authority, body, board, bureau, commission, department or instrumentality which
could have a material adverse effect on the business, assets, operations,
earnings, prospects or condition (financial or otherwise) of Xceed.
(f) Accuracy of Information Furnished. No statement by Xceed set
---------------------------------
forth herein or in the exhibits or the schedules hereto, and no statement set
forth in any certificate or other instrument or document required to be
delivered by or on behalf of Xceed pursuant hereto or in connection with
consummation of the transactions contemplated hereby, contained, contains or
will contain any untrue statement of a material fact, or omitted, omits or will
omit to state any material fact which is necessary to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading.
(g) Compliance with Applicable Law. Xceed has been and is in
------------------------------
compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules and regulations (including without limitation the Securities
Act and the Securities Exchange Act of 1934, as amended) as of the date hereof,
the failure to comply with which could materially adversely affect the business,
assets, operations, earnings, prospects or condition (financial or otherwise) of
Xceed or which would subject any officer or director of Xceed to civil or
criminal penalties or imprisonment. Xceed has complied with the rules and
regulations of all governmental agencies having authority over its business or
its operations, including without limitation, agencies concerned with intra-
state and interstate commerce, occupational safety, environmental protection and
employment practices, except where the failure to comply would not have a
material adverse effect on the business, operations, earnings, prospects, assets
or condition (financial or otherwise) of Xceed. Xceed has no knowledge of and
has not received any notice of violation of any such rule or regulation during
the two (2) years prior to the date hereof which could result in any liability
of Xceed for penalties or damages or which could subject it to any injunction or
government writ, order or decree. To the best knowledge of Xceed, there are no
facts, events or conditions that could interfere with, prevent continued
compliance with or give rise to any liability under any foreign, federal, state
or local governmental laws, statutes, ordinances or regulations applicable to
the business, assets, operations, earnings, prospects or condition (financial or
otherwise) of Xceed, except where the failure to do so would not have a material
adverse effect on the business, operations, earnings, prospects, assets or
condition (financial or otherwise) of Xceed.
(h) No Material Adverse Change. No material adverse change in the
--------------------------
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits or condition (financial or
otherwise) of Xceed has occurred since August 31, 1999.
21
(i) Employee Benefit Plans. Schedule 3.2(i) hereto sets forth a true,
----------------------
correct and complete list of all "employee benefit plans" as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (the "Xceed Benefit Plans") covering the employees of the
Xceed (the "Xceed Employees"). Each Xceed Benefit Plan is in compliance in all
material respects with all applicable provisions of law, including ERISA and the
Code. There are no pending or, to Xceed's knowledge, threatened claims against
any Xceed Benefit Plan (except for claims for benefits payable in the normal
operation of the Xceed Benefit Plans) that could give rise to any material
liability to the Xceed. All material reports, notices and returns required to be
filed with any governmental agency or provided to any person or entity with
respect to the Xceed Benefit Plans have been timely filed. Xceed has never had
and does not now have any Xceed Benefit Plan that is an employee pension plan
(as defined in Section 3(2) of ERISA) nor does Xceed contribute to any
multiemployer pension or multiemployer welfare benefit plan (within the meaning
of Section 3(37) of ERISA).
3.3 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties set forth in Sections 3.1 and 3.2 hereof shall survive until the
close of business on the sixtieth (60th) day following the first anniversary of
the Closing Date, provided that, notice or demand with respect to any alleged
breach thereof is given as required pursuant to Article VI hereof; and further
provided that, with respect to claims for damages arising out of any
misrepresentation or breach of warranty made by the Company and the Members
relating to taxes, notice shall have been given on or before the close of
business on the sixtieth (60) day following the later to occur of: (i) the
expiration date of the statute of limitations applicable to any indemnified
federal, state or local tax liability; and (ii) the final determination of any
such tax liability, including the final administrative and/or judicial
determination thereof.
ARTICLE IV
COVENANTS
4.1 Covenants of the Company and the Members.
----------------------------------------
(a) Notification. Each of the Company and the Members shall give
------------
prompt notice to Xceed of: (i) any notice or other communication received by the
Company or the Members prior to the Closing Date relating to a material default
or an event which, with notice or lapse of time or both would become a material
default under this Agreement or under any other material contract, agreement or
instrument to which the Company is a party, by which it or any of its properties
or assets are bound or to which it or any of its properties or assets are
subject; (ii) any event which, with notice or lapse of time or both, would cause
any warranty or representation of the Company or the Members under this
Agreement to be inaccurate, untrue, incomplete or misleading in any respect;
(iii) any notice or other communication from any third party alleging that the
consent of such third party was, is or may be required in connection with the
transactions contemplated by this Agreement; and (iv) any material adverse
change in the business, assets, operations, earnings, prospects or condition
(financial or otherwise) of the Company.
22
(b) Additional Financial Statements. The Company shall furnish to
-------------------------------
Xceed, by the Closing Date, an unaudited monthly balance sheet and statements of
operations and retained earnings for the Company for the month ending September
30, 1999.
(c) Additional Summaries of Accounts Receivable. The Company shall
-------------------------------------------
deliver to Xceed, by the Closing Date, a summary of all Accounts Receivable
(including a complete aging in such form as may be requested by Xceed) for the
month ending September 30, 1999.
(d) Additional Summaries of Accounts Payable. Upon request, the
----------------------------------------
Company shall deliver to Xceed, by the Closing Date, a summary of all Accounts
Payable for the month ending September 30, 1999.
(e) Additional Summaries of Inventory. The Company shall deliver to
---------------------------------
Xceed, by the Closing Date, a summary (prepared consistent with present
practices) of all inventory for the month ending September 30, 1999, if
applicable.
(f) Conduct of Business; Certain Covenants. Prior to and through the
--------------------------------------
Closing Date, the Company shall conduct and operate its business and will not,
without prior written consent of Xceed, which consent shall not be unreasonably
withheld, take any action other than in accordance with the ordinary and usual
course of business. The Company will use its best efforts to preserve intact its
business, operation, organization and relationships with its employees,
independent contractors, agents, suppliers, clients and others having business
dealings with it. Prior to and through the Closing Date, without the prior
written consent of Xceed, which consent shall not be unreasonably withheld, the
Company shall not, and the Members shall not permit the Company to:
(i) amend its articles of organization or operating agreement;
(ii) issue or otherwise grant or enter into any agreement
relating to the issuance or grant of any stock options, warrants or other rights
calling for or permitting the issue, transfer, sale or delivery of its units of
Company Membership Interest:
(iii) pay or declare any cash dividend or other dividend or
distribution with respect to its units of Company Membership Interest, not
including the Member Bonuses;
(iv) issue, transfer, sell or deliver any units of Company
Membership Interest or any securities convertible into or exchangeable for, with
or without additional consideration, such units;
(v) redeem, purchase or otherwise acquire for any
consideration any outstanding units of Company Membership Interest or any
securities convertible into or exchangeable for, with or without additional
consideration, such units;
(vi) incur any indebtedness for borrowed money, except in the
ordinary course of business or pursuant to existing agreements which the Company
or the Members have previously disclosed or made available to Xceed;
23
(vii) permit the occurrence or continuance of any material
default under any material agreement to which the Company is a party;
(viii) make any acquisition of the capital stock or all or
substantially all of the assets of any entity;
(ix) merge or consolidate with any corporation or enter into
any joint venture arrangement with any third party;
(x) enter into any employment or similar contract with or
increase the compensation payable to any officer or employee of the Company,
except for the Member Bonuses or the Employee Bonuses in the ordinary course of
business of the Company and in a manner consistent with the Company's past
practices;
(xi) alter, amend or otherwise modify any material term or
provision of any material contract or agreement with any of its clients,
suppliers or vendors, other than in the ordinary course of business;
(xii) adopt, amend or modify in any material respect or
terminate any Benefit Plan, severance plan or collective bargaining agreement or
make awards or distributions under any Benefit Plan or severance plan except in
a manner consistent with the Company' s past practices or as otherwise
contemplated herein;
(xiii) sell, enter into any contract to sell or grant any option
to purchase, any of its assets other than in the ordinary course of business;
(xiv) create, assume or permit to exist any lien, pledge,
security interest, encumbrance or mortgage of any kind whatsoever on any of its
properties or assets other than:
(A) liens existing on the date hereof which the Company or
the Members previously disclosed to Xceed or which are otherwise permitted
hereby;
(B) any mortgage, pledge, lien or other security interest
in or upon any property or asset hereafter acquired by the Company in the
ordinary course of business, which mortgage, pledge, lien or other security
interest is entered into contemporaneously with such acquisition to secure or
provide for the payment of any part of the purchase price therefor, or the
assumption by the Company of any mortgage, pledge, lien or other security
interest in or upon any property or asset hereafter acquired by the Company
which mortgage, pledge, lien or other security interest existed at the time of
such acquisition; provided that, each such mortgage, pledge, lien or other
security interest shall not extend to or cover any property or asset of the
Company other than such property or asset hereafter acquired;
(C) any mortgage, pledge, lien or other security interest
created for the sole purpose of renewing or refunding any mortgage, pledge, lien
or other security interest allowed under clause (B) above; provided that, the
principal amount of indebtedness secured thereby shall not exceed the principal
amount of indebtedness so secured at the time of such renewal or refunding and
that such renewed or refunded mortgage, pledge, lien or other security interest
shall not extend the mortgage, pledge, lien or other security
24
interest renewed or refunded to any additional property or asset;
(D) the pledge by the Company of any property or asset as
security required by law or governmental regulation as a condition to the
transaction of any business or the exercise of any privilege, license or right;
(E) a banker's lien or right of offset on funds of the
Company deposited with a lender or holder in the ordinary course of business in
favor of any lender of funds or holder of the Company's commercial paper in the
ordinary course of business;
(F) liens for taxes, assessments and governmental charges
or levies imposed upon the Company or upon its income or profit, or upon any of
its property or assets if the same shall not at the time be due or are being
contested in good faith in appropriate proceedings; and
(G) liens imposed by law, such as those of carriers,
warehousemen and mechanics, for sums not yet due or are being contested in good
faith in appropriate proceedings.
(xv) except in the ordinary course of business, enter into any
contract, including but not limited to assignments, licenses, transfers of
exclusive rights, "work for hire" agreements, special commissions, employment
contracts, purchase orders, sales orders, mortgages and security agreements,
which:
(A) contain a grant or other transfer, whether present,
retroactive, prospective or contingent, by the Company of any rights in any
Intellectual Property;
(B) contain a promise made by or to the Company to pay any
consideration, lump sum, royalty or other payment with respect to the
acquisition, practice or use of any rights in any Intellectual Property;
(xvi) except in the ordinary course of business or arising out
of or relating to this Agreement, initiate any legal proceedings involving the
Company, including suits and administrative proceedings in the United States or
any foreign country;
(xvii) file with any federal, state or local governmental agency
or regulatory body, any cancellation, reduction, modification, change or
amendment of or addition to any schedule of tariffs currently on file with such
agency or regulatory body, or file with such governmental agency or regulatory
body any schedule of tariffs for services which are not covered by the tariff
schedules on file therewith as of the date hereof; or
(xviii) take any action that would cause any representation or
warranty contained herein to be inaccurate, untrue, incomplete or misleading.
(g) Proposals; Other Offers. Prior to the Closing Date, neither the
-----------------------
Company nor the Members shall, directly or indirectly (whether through an
employee, a representative, an agent or otherwise) solicit or encourage any
inquiries or proposals, engage in negotiations for or
25
consent to or enter into any agreement providing for the acquisition of the
units of Company Membership Interest or all or any part of the assets or the
business of the Company. The Company shall promptly notify Xceed upon its
receipt or other knowledge of any such request, inquiry or proposal. Neither the
Company nor the Members shall, directly or indirectly (whether through an
employee, a representative, an agent or otherwise) disclose any nonpublic
information relating to the Company or afford access to any of the books,
records or other properties of the Company to any person or entity that is
considering, has considered or is making any such acquisition inquiry or
proposal.
(h) Best Efforts and Cooperation; Further Assurances. Prior to the
------------------------------------------------
Closing Date, with the cooperation of Xceed where appropriate, the Company
shall:
(i) timely comply with all filing requirements which federal,
state or local law may impose on the Company with respect to the transactions
contemplated by this Agreement;
(ii) use its diligent efforts to take all actions necessary to
be taken, make any filing and obtain any consent, authorization or approval of
or exemption by any governmental authority, regulatory agency or any other third
party (including, without limitation, any landlord or lessor of the Company and
any party to whom notification is required to be delivered or from whom any form
of consent is required) which is required to be filed or obtained by the Company
in connection with the transactions contemplated by this Agreement;
(iii) make full and timely payment of all fees and annuities and
take all other action appropriate to maintain in full force and effect any and
all patent, trademark and service mark registrations and applications for
registration as set forth in Schedule 3.1(i) or otherwise owned or controlled by
the Company.
(i) Access to Additional Agreements and Information. Prior to the
-----------------------------------------------
Closing Date, the Company shall deliver to Xceed at Xceed's request any and all
agreements, contracts, documents and other instruments material to the business
or operation of the Company, including, without limitation, those to which the
Company is a party and those by which any of its property or assets are bound
and including without limitation, any and all materials relating to the
Intellectual Property referred to in Subsection 3.1(i), the agreements set forth
in Subsection 3.1(n), the consents and waivers referred to in Subsection 3.1(o),
the Benefit Plans set forth in Subsection 3.1(p), the insurance materials
referred to in Subsection 3.1(r), the Tax Returns set forth in Subsection
3.l(s), the licenses and permits referred to in Subsection 3.l(v), any documents
relating to the loans referred to in Subsection 3.1(z), the invoices, purchase
orders or other similar documents pertaining to the Company's clients, vendors,
suppliers and service providers set forth in Subsection 3.l(aa), and any
materials relating to the Company's bank accounts and credit facilities referred
to in Subsection 3.1(cc).
(j) Confidentiality. Prior to the Closing Date, or at all times
---------------
hereafter in the event that the transactions contemplated hereby are not
consummated or this Agreement is otherwise terminated, the Company shall, except
as may be otherwise required by applicable law: (i) hold confidential all
information obtained in connection with the transactions contemplated by this
Agreement (the "Information") with respect to Xceed; and (ii) not interfere with
any business of Xceed through the use of any Information nor use any such
Information for
26
its own account. In the event that this Agreement is terminated, the Company
shall return to Xceed all of such information as shall be in documentary or
other tangible form, including all copies thereof.
4.2 Covenants of Xceed.
------------------
(a) Notification. Xceed shall give prompt notice to the Company and
------------
the Members of: (i) any notice or other communication received by Xceed prior to
the Closing Date relating to a default hereunder or event which, with notice or
lapse of time or both, would become a default hereunder or under any material
contract, agreement or instrument to which Xceed is a party, by which it or any
of its properties or assets are bound or to which it or any of its properties or
assets are subject which would prevent the consummation of the transactions
contemplated hereby; (ii) any event which, with notice or lapse of time or both,
would cause any representation or warranty of Xceed under this Agreement to be
inaccurate or misleading in any respect; (iii) any notice or other communication
by any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement; and
(iv) any adverse change in the business, assets, operations, earnings, prospects
or conditions (financial or otherwise) of Xceed.
(b) Third Party Consents. Xceed shall use its best efforts to obtain
--------------------
any consent, authorization or approval of, or exemption by, any governmental
authority or agency or other third party required to be obtained or made by it
in connection with this Agreement or the consummation of the transactions
contemplated hereby.
(c) Best Efforts and Cooperation; Further Assurances. Prior to the
------------------------------------------------
Closing Date, with the cooperation of the Company and the Members where
appropriate, Xceed shall:
(i) timely comply with all filing requirements which federal,
state or local law may impose on Xceed with respect to the transactions
contemplated by this Agreement;
(ii) use its diligent efforts to take all actions necessary to
be taken, make any filing and obtain any consent, authorization or approval of
or exemption by any governmental authority, regulatory agency or any other third
party which is required to be filed or obtained by Xceed in connection with the
transactions contemplated by this Agreement; and
(iii) not take any action that would cause any representation or
warranty contained herein to be inaccurate, untrue, incomplete or misleading.
(d) Access to Additional Information and Agreements. Prior to the
-----------------------------------------------
Closing Date, Xceed shall make available or otherwise deliver to the Company or
the Members, upon its or his request, any and all agreements, contracts,
documents or other information material to its business or operations.
(e) Confidentiality. Prior to the Closing Date, or at all times
---------------
hereafter in the event that the transactions contemplated hereby are not
consummated or this Agreement is otherwise terminated, Xceed shall, except as
may be otherwise required by applicable law: (i) hold confidential all
information obtained in connection with the transactions contemplated by this
Agreement (the "Information") with respect to the Company; and (ii) not
interfere with any
27
business of the Company through the use of any Information nor use any such
Information for its own account. In the event that this Agreement is terminated,
Xceed shall return to the Company all of such information as shall be in
documentary or other tangible form, including all copies thereof.
4.3 Governmental Filings and Consents. The Company, the Members and Xceed
---------------------------------
shall cooperate with one another in filing any necessary applications, reports
or other documents with any federal or state agencies, authorities or bodies
having jurisdiction with respect to the business of the Company or the
transactions contemplated by this Agreement, and in seeking any necessary
approval, consultation or prompt favorable action of, with or by any of such
agencies, authorities or bodies.
4.4 Publicity. The Company, the Members and Xceed will consult with each
---------
other party hereto prior to making, releasing or otherwise disseminating any
public announcements with respect to the transactions contemplated by this
Agreement. Any public announcements permitted hereunder shall be made only at
such time and in such manner as the Company and the Members (collectively acting
as one) and Xceed shall mutually agree, except that any party hereto shall be
free to make such public announcements as it shall reasonably deem necessary to
comply with federal or state laws, provided that such announcement is
simultaneously delivered to the other parties hereto.
4.5 Right to Investigate.
--------------------
(a) Obligation of the Company and the Members. The Company shall
-----------------------------------------
afford to the officers and authorized representatives and agents of Xceed,
during what are currently the regular business hours of the Company and upon
prior notice, free and full access to any office, warehouse, plant, property,
inventory, accounts, books and records of the Company such as to afford Xceed
the full opportunity to make such investigations as it shall desire or deem
appropriate with respect to the affairs of the Company. The officers of the
Company shall furnish Xceed with such additional financial and operating data
and other information relating to the assets, property, business and operation
of the Company as Xceed shall from time to time request.
(b) Effectiveness of Representations Notwithstanding Investigation.
--------------------------------------------------------------
Notwithstanding any party's undertaking or conduct of any investigation pursuant
hereto, or any party's failure to so investigate, the representations,
warranties and agreements of each of the parties hereto shall be operative and
effective and shall survive the Closing Date to the extent previously set forth
in Section 3.3. In the event that a party hereto becomes aware or knows prior to
the Closing that a representation or warranty made herein by another party
hereto is untrue, such party shall express such knowledge by written notice
thereof to the party rendering such representation or warranty on or prior to
the Closing Date. Knowledge on the part of Xceed on or prior to the Closing that
a representation or warranty of the Company or the Members is untrue or
knowledge on the part of the Company or the Members on or prior to the Closing
Date that a representation or warranty of Xceed is untrue, shall render that
specific representation or warranty inoperative and ineffective and such other
party shall not have any liability in respect thereof pursuant to Article VI
hereof; provided that, such knowledge is expressed by written notice thereof to
the party rendering such representation or warranty on or prior to the Closing
Date.
28
ARTICLE V
CONDITIONS
5.1 Conditions to Obligations of Xceed. The obligation of Xceed to
----------------------------------
consummate the transactions contemplated by this Agreement is subject to the
fulfillment of each of the following conditions, which may be waived in whole or
in part by Xceed to the extent permitted by applicable law:
(a) No Material Adverse Change. Since December 31, 1998, no material
--------------------------
adverse change in the business, assets, operations, earnings, prospects or
condition (financial or otherwise) of the Company, and no event which would
materially and adversely affect the business, assets, operations, earnings,
prospects or condition (financial or otherwise) of the Company shall have
occurred, except for the Member Bonuses and the Employee Bonuses.
(b) Copies of Resolutions. At the Closing, the Company shall have
---------------------
furnished Xceed with certified copies of resolutions duly adopted by the
Managers of the Company and the Members authorizing the execution, delivery and
performance of the terms of this Agreement and all other necessary or proper
corporate action to enable the Company to comply with the terms of this
Agreement.
(c) Certificates of Good Standing. At the Closing, the Company shall
-----------------------------
have furnished Xceed with certified copies of certificates of good standing of
the Company dated not more than five (5) business days prior to the Closing
Date.
(d) Opinion of the Company's and Members' Counsel. The Company shall
---------------------------------------------
have furnished Xceed, at the Closing, with an opinion of Steven Masur, Esq.,
counsel to the Company, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit 5.1(d).
(e) Accuracy of Representations and Warranties; Performance of
----------------------------------------------------------
Covenants. Each of the representations and warranties of the Company and each of
- ---------
the Members set forth in this Agreement was true, correct and complete in all
material respects when made and shall also be true, correct and complete in all
material respects at and as of the Closing Date, with the same force and effect
as if made at and as of the Closing Date. The Company and the Members shall have
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed by the Company and each of
the Members at or prior to the Closing Date.
(f) Delivery of Officers' Certificates. The Company and each of the
----------------------------------
Members shall have delivered to Xceed certificates, dated the Closing Date, and
signed by an executive officer of the Company (with respect to the Company), and
by each of the Members individually, representing and affirming that: (i) the
representations and warranties made by each of the Company and the Members
jointly and/or severally as set forth in Section 3.1 of this Agreement and
referred to in Subsection 5.1(e) above were and are true, correct and complete
as required by Subsection 5.1(e) above and the conditions set forth in this
Section 5.1 have been satisfied. The
29
Company shall also have delivered a certificate signed by the Secretary of the
Company with respect to the authority and incumbency of the officers of the
Company executing this Agreement and any documents required to be executed or
delivered in connection therewith.
(g) Delivery of Unit Certificates. At the Closing, the Members shall
-----------------------------
have delivered to Xceed certificates representing all of the issued and
outstanding units of Company Membership Interest, which certificates shall be
properly endorsed in blank or shall be accompanied by a properly executed
assignments.
(h) Consents and Waivers. On or prior to the Closing Date, any and all
--------------------
necessary consents, authorizations, orders or approvals described in Subsection
3.1(o) above shall have been obtained, except as the same shall have been waived
by Xceed.
(i) Litigation. On the Closing Date, there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to the Company or the Members issued by a court or
governmental agency (or other governmental or regulatory authority) of competent
jurisdiction restraining or prohibiting the consummation of the transactions
contemplated hereby or making consummation thereof unduly burdensome to the
Company or the Members. On the Closing Date and immediately prior to
consummation of the transactions contemplated by this Agreement, no proceeding
or lawsuit shall have been commenced, be pending or have been threatened by any
governmental or regulatory agency or authority or any other person with respect
to the transactions contemplated by this Agreement.
(j) Employment Agreements with Members. Each of the Members shall have
----------------------------------
entered into an employment agreement (collectively referred to hereinafter as
the "Employment Agreements"), dated as of the Closing Date, having an initial
term of three (3) years and providing for each such Member's employment with
Xceed, such terms as to salary, bonus, benefits, termination and severance as
afforded other employees of Xceed serving in similar or like capacity as the
Members. The Employment Agreements shall also provide for: (i) an aggregate
annual base salary for the Members equal to Four Hundred Seventy-Five Thousand
Dollars ($475,000), which amount shall be allocated among the Members in the
sole discretion of the Members; (ii) a performance and salary review after the
first anniversary of the date of each Employment Agreement; (iii) the grant of
options to purchase shares of Xceed Stock, in accordance with Xceed's 1999 Long-
Term Stock Option Plan (the "Plan"), if, in the sole judgment of the board of
directors of Xceed, the performance and services of each Member merit such
options; and (iv) non-compete provisions each having a term not to exceed one
(1) year.
(k) Delivery of Documents and Other Information. Prior to the Closing
-------------------------------------------
Date, the Company shall have delivered to Xceed all of the agreements,
contracts, documents and other instruments required to be delivered pursuant to
the provisions of this Agreement; including without limitation Schedule 3.1(i)
hereof.
(l) Access and Due Diligence. Prior to the Closing Date, the Company
------------------------
shall have afforded Xceed, Xceed's legal counsel and Xceed's auditors full and
free access to the personnel, properties, contracts, financial statements,
books, records and all other documents and data of the Company used and
currently in use in the operation of the Company's business (the "Due Diligence
Investigation").
30
(m) Tax Status. On or prior to the Closing Date, the Company shall
----------
have received final clearance and acceptance from the IRS of its Form 8832,
Entity Classification Election filing, which clearance and acceptance from the
IRS shall confirm that the Company shall have been treated as a corporation for
federal income tax purposes since May 26, 1999.
5.2 Conditions to Obligations of the Company and the Members. The
--------------------------------------------------------
obligations of the Company and the Members to consummate the transactions
contemplated by this Agreement are subject to the fulfillment of each of the
following conditions, which may be waived in whole or in part by the Company
and/or the Members to the extent permitted by law:
(a) Copies of Resolutions. At the Closing, Xceed shall have furnished
---------------------
the Company with certified copies of resolutions duly adopted by the board of
directors of Xceed authorizing the execution, delivery and performance of the
terms of this Agreement (including the execution, delivery and performance of
the Employment Agreements referred to in Section 5.1(j) above and the Xceed
Stock referred to in Section 5.2(f) below) and all other necessary or proper
corporate action to enable Xceed to comply with the terms of this Agreement.
(b) Certificates of Good Standing. At the Closing, Xceed shall have
-----------------------------
furnished the Company with certified copies of certificates of good standing of
Xceed dated not more than five (5) business days prior to the Closing Date.
(c) Opinion of Xceed's Counsel. Xceed shall have furnished to the
--------------------------
Company, at the Closing, with an opinion of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., counsel to Xceed, dated as of the Closing Date, substantially in the
form attached hereto as Exhibit 5.2(c).
(d) Accuracy of Representations and Warranties; Performance of
----------------------------------------------------------
Covenants. Each of the representations and warranties of Xceed was true, correct
- ---------
and complete in all material respects when made and shall also be true, correct
and complete in all material respects at and as of the Closing Date, with the
same force and effect as if made at and as of the Closing Date. Xceed shall have
performed and complied with in all material respects all agreements and
covenants required by this Agreement to be performed by Xceed at or prior to the
Closing Date.
(e) Delivery of Officers' Certificates. Xceed shall have delivered to
----------------------------------
the Company certificates, dated the Closing Date and signed by an executive
officer of Xceed, affirming that: (i) the representations and warranties of
Xceed as set forth in Section 3.2 of this Agreement and referred to in
Subsection 5.2(d) above were and are true, correct and complete as required by
Subsection 5.2(d) above; and (ii) the conditions set forth in this Section 5.2
have been satisfied. Xceed shall also have delivered a certificate signed by the
Secretary of Xceed with respect to the authority and incumbency of the officers
of Xceed executing this Agreement and any documents required to be executed or
delivered in connection therewith.
(f) Stock Certificates. At the Closing, Xceed shall have issued and
------------------
delivered to the Members certificates representing the shares of Xceed Stock
issuable pursuant hereto, which certificates shall be in the respective names of
the Members.
(g) Consents and Waivers. On or prior to the Closing Date, any and all
--------------------
necessary consents, authorizations, orders or approvals described in Subsection
3.2(d) above
31
shall have been obtained, except as the same shall have been waived
by the Company and the Members.
(h) Litigation. On the Closing Date, there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to Xceed issued by a court or governmental agency (or
other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated
herein or making the consummation thereof unduly burdensome to Xceed. On the
Closing Date and immediately prior to consummation of the transactions
contemplated by this Agreement, no proceeding or lawsuit shall have been
commenced, be pending or have been threatened or by any governmental or
regulatory agency or authority or any other person with respect to the
transactions contemplated by this Agreement.
(i) Employment Agreements with Members. Xceed shall have entered into
----------------------------------
an Employment Agreement with each of the Members, dated as of the Closing Date,
having the initial term set forth in Section 5.1(j) herein and providing for
each such Member's employment with Xceed.
(j) Retention of Company Employees. Xceed shall employ the five (5)
------------------------------
employees of the Company listed on Schedule 5.2(j) hereto (the "Company
Employees"), each at his or her current salary as of the date hereof, or at an
increased salary, which increase shall be determined at the sole discretion of
Xceed.
(k) Retention Options. Xceed shall set aside for issuance to the
-----------------
Company Employees, options to purchase an aggregate of Ten Thousand (10,000)
shares of Xceed Stock, in accordance with the Plan, which options shall be
allocated among the Company Employees in the amounts set forth on Schedule
5.2(j) hereto.
ARTICLE VI
INDEMNIFICATION AND CLAIMS
6.1 Indemnification by the Members.
------------------------------
(a) Subject to Sections 6.1(b) and 6.1(c) hereof, the Members hereby
agree, jointly and severally, except as otherwise specifically provided
throughout this Agreement with respect to representations and warranties made
severally and not jointly by each Member as to which each such Member hereby
severally and not jointly agrees, to indemnify and hold harmless Xceed against
and in respect of all damages, claims, losses and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) reasonably incurred by
Xceed (all such amounts may hereinafter be referred to as the "Damages") arising
out of: (i) any misrepresentation or breach of any representation or warranty
made by the Company or the Members pursuant to the provisions of this Agreement
or in any statement, certificate or other document furnished by the Company or
the Members pursuant to this Agreement; and (ii) the nonperformance or breach of
any covenant, agreement or obligation of the Company or the Members contained in
this Agreement which has not been waived by Xceed in writing. The
32
Members shall have no right to seek contribution from the Company in the event
that they are required to make any payments hereunder.
(b) Subject to Section 3.3 hereof, the Members shall be obligated to
indemnify Xceed pursuant to this Section 6.1 with respect to claims for Damages
as to which Xceed shall have given written notice to the Company and the Members
on or before the close of business on the sixtieth (60) day following the first
anniversary of the Closing Date. The Members shall be obligated to indemnify
Xceed with respect to claims for Damages arising out of any misrepresentation or
breach of warranty made by the Company or the Members relating to Subsection
3.1(s) as to which Xceed shall have given notice on or before the close of
business on the sixtieth (60) day following the later of: (i) the expiration
date of the statute of limitations applicable to any indemnified federal, state,
foreign or local tax liability; or (ii) the final determination of any such tax
liability, including the final administrative and/or judicial determination
thereof.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.1 (a) and 6.1(b) above, no amount shall be payable by the Members
in indemnification hereunder or under any other provision of this Agreement
unless the aggregate amount of such Damages in respect of which the Company or
the Members would be liable, but for operation and application of the provisions
of this Section 6.1(c), exceeds on a cumulative basis Fifty Thousand Dollars
($50,000) and then only to the extent of such excess.
(d) In any case where the Members have indemnified Xceed for any
Damages and Xceed recovers from a third party all or any part of the amount so
indemnified by the Members, Xceed shall promptly reimburse to the Members the
amount so recovered.
6.2 Claims Against Xceed. With respect to claims or demands by third
--------------------
parties, whenever Xceed shall have received notice that such a claim or demand
has been asserted or threatened which, if valid, would be subject to
indemnification under Section 6.1 hereof, Xceed shall as soon as reasonably
possible and in any event within thirty (30) days of receipt of such notice,
notify the Members of such claim or demand and of all relevant facts within its
knowledge which relate thereto. The Members shall then have the right at their
own expense to undertake the defense of any such claims or demands utilizing
counsel selected by the Members and approved by Xceed, which approval shall not
be unreasonably withheld. In the event that the Members should fail to give
notice of the intention to undertake the defense of any such claim or demand
within sixty (60) days after receiving notice that it has been asserted or
threatened, Xceed shall have the right to defend, satisfy and discharge the same
by payment, compromise or otherwise. Any such payment, compromise or settlement
shall be subject to the approval of the Members acting by a majority in
interest, which approval shall not be unreasonably withheld.
6.3 Indemnification by Xceed.
------------------------
(a) Subject to Section 6.3(b) hereof, Xceed hereby agrees to indemnify
and hold harmless the Company and the Members against and in respect of all
damages, claims, losses and expenses (including without limitation, reasonable
attorneys' fees and disbursements) reasonably incurred by the Members with
respect thereto (all such amounts may hereinafter be referred to as "Member
Damages") arising out of: (i) any misrepresentation or breach of any
representation or warranty made by Xceed pursuant to the provisions of this
Agreement or in any
33
statement, certificate or other document furnished by Xceed pursuant to this
Agreement; and (ii) the nonperformance or breach of any covenant, agreement or
obligation of Xceed which has not been waived by the Members collectively in
writing.
(b) Subject to Section 3.3 hereof, Xceed shall be obligated to
indemnify the Members pursuant to this Section 6.3 only with respect to claims
for Member Damages as to which the Members shall have given written notice to
Xceed on or before the close of business on the sixtieth (60) day following the
first anniversary of the Closing Date.
(c) Notwithstanding the indemnification provided pursuant to
Subsection 6.3(a) above, no amount shall be payable by Xceed in indemnification
hereunder or under any other provision of this Agreement unless the aggregate
amount of Member Damages in respect of which Xceed would be liable, but for
operation and application of the provisions of this subsection, exceeds on a
cumulative basis Fifty Thousand Dollars ($50,000) and then only to the extent of
such excess.
(d) In any case where Xceed has indemnified the Members for any Member
Damages and the Members recover from a third party all or any part of the amount
so indemnified by Xceed, the Members shall promptly reimburse to Xceed the
amount so recovered.
6.4 Claims Against the Members. With respect to claims or demands by third
--------------------------
parties, whenever the Members shall have received notice that such a claim or
demand has been asserted or threatened, which, if valid, would be subject to
indemnification under Section 6.4 hereof, the Members shall as soon as
reasonably possible and in any event within thirty (30) days of receipt of such
notice, notify Xceed of such claim or demand and of all relevant facts within
its knowledge which relate thereto. Xceed shall have the right at their own
expense to undertake the defense of any such claim or demand utilizing counsel
selected by Xceed and approved by the Members. In the event that Xceed should
fail to give notice of its intention to undertake the defense of any such claim
or demand within sixty (60) days after receiving notice that it has been
asserted or threatened, the Members shall have the right to defend, satisfy and
discharge the same by payment, compromise or otherwise. Any such payment,
compromise or settlement shall be subject to the approval of Xceed, which
approval shall not be unreasonably withheld.
ARTICLE VII
TERMINATION AND REMEDIES FOR BREACH OF THIS AGREEMENT
7.1 Termination by Mutual Agreement. This Agreement may be terminated at
-------------------------------
any time prior to the Closing by unanimous consent of the parties hereto,
provided that such consent to terminate is manifested in writing and is signed
by each of the parties hereto.
7.2 Termination for Failure to Close. This Agreement may be terminated by
--------------------------------
any of the parties hereto if the Closing shall not have occurred by October 15,
1999, provided that, the right to terminate this Agreement pursuant to this
section shall not be available to any party whose failure to fulfill any of its
obligations hereunder has been the cause of or resulted in the failure to
consummate the transactions contemplated hereby by the foregoing date.
34
7.3 Termination by Operation of Law. This Agreement may be terminated by
-------------------------------
any of the parties hereto if, in the reasonable opinion of counsel to the
respective parties hereto, there shall be any statute, rule or regulation that
renders consummation of the transactions contemplated hereby illegal or
otherwise prohibited, or a court of competent jurisdiction or any government (or
governmental authority) shall have issued an order, decree or ruling, or has
taken any other action restraining, enjoining or otherwise prohibiting the
consummation of such transactions and such order, decree, ruling or other action
shall have become final and nonappealable.
7.4. Termination for Failure to Perform Covenants or Conditions. This
----------------------------------------------------------
Agreement may be terminated prior to the Closing Date:
(a) by Xceed if: (i) any of the representations and warranties made in
this Agreement by the Company or the Members shall not be true and correct, when
made or at any time prior to consummation of the transactions contemplated
hereby as if made at and as of such time; (ii) any of the conditions set forth
in Section 5.1 hereof have not been fulfilled or waived by the Closing Date;
(iii) the Company or the Members shall have failed to observe or perform any of
their respective obligations under this Agreement; or (iv) as otherwise set
forth herein; or
(b) by the Company or the Members if: (i) any of the representations
and warranties of Xceed shall not be true and correct when made or at any time
prior to consummation of the transactions contemplated hereby as if made at and
as of such time; (ii) any of the conditions set forth in Section 5.2 hereof have
not been fulfilled by the Closing Date; (iii) Xceed shall have failed to observe
or perform any of its respective material obligations under this Agreement; or
(iv) as otherwise set forth herein.
7.5 Effect of Termination or Default; Remedies. In the event of
------------------------------------------
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any Non-Defaulting
Party (as defined below). The foregoing shall not relieve any Defaulting Party
from liability for damages actually incurred as a result of such party's breach
of any term or provision of this Agreement.
7.6 Remedies; Specific Performance. In the event that any party shall fail
------------------------------
or refuse to consummate the transactions contemplated by this Agreement (except
pursuant to Sections 7.1, 7.2 or 7.3 above) or if any default under or breach of
any representation, warranty, covenant or condition of this Agreement on the
part of any party (the "Defaulting Party") shall have occurred that results in
the failure to consummate the transactions contemplated hereby, then in addition
to the other remedies provided herein, the non-defaulting party (the "Non-
Defaulting Party") shall be entitled to seek and obtain money damages from the
Defaulting Party and/or may seek to obtain an order of temporary or permanent
injunctive relief or specific performance thereof against the Defaulting Party
from a court of competent jurisdiction, provided that, the Non-Defaulting party
seeking any injunctive relief or specific performance such protection must file
its request with such court within forty-five (45) days after it becomes aware
of the Defaulting Party's failure, refusal, default or breach and further
provided, that in no event shall a Defaulting Party be liable for special,
incidental or consequential damages. In addition, the Non-Defaulting Party shall
be entitled to obtain from the Defaulting Party court costs and attorneys' fees
incurred in connection with or in pursuit of enforcing the rights and remedies
provided hereunder.
35
ARTICLE VIII
MISCELLANEOUS
8.1 Fees and Expenses. The Members and the Company shall respectively pay
-----------------
the Company's and their own expenses and Xceed shall pay its own expenses
incident to negotiation, execution, delivery and performance of the terms of
this Agreement and the consummation of the transactions contemplated hereby.
8.2 Modification, Amendments and Waiver. The parties hereto may amend,
-----------------------------------
modify or otherwise waive any provision of this Agreement by unanimous consent,
provided that such consent and any amendment, modification or waiver is in
writing and is signed by each of the parties hereto.
8.3 Assignment. None of the parties hereto shall have the authority to
----------
assign its respective rights or obligations under this Agreement without the
prior written consent of the other parties hereto, except that Xceed may assign
all or any portion of its respective rights hereunder without the prior written
consent of the Company or the Members in the event of a change in control as
defined herein, and the Company and the Members shall execute such documents as
are necessary in order to effectuate such assignments.
The term "change in control" as used in this section or referred to
elsewhere in this Agreement shall mean: (i) the sale of all or substantially all
of the assets of Xceed; (ii) the acquisition of Xceed capital stock by any
person or group of persons resulting in ownership of more than forty percent
(40%) of the issued and outstanding shares of capital stock of Xceed; (iii) any
plan for the liquidation or dissolution of Xceed; or (iv) any merger or
consolidation of Xceed in which Xceed is not the surviving company.
8.4 Burden and Benefit. This Agreement shall be binding upon and, to the
------------------
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective successors and assigns. In the event of a default by the
Company or the Members of any of their respective obligations hereunder, the
sole and exclusive recourse and remedy of Xceed shall be against the Company and
the Members, as the case may be, and any of the Company's or the Member's
assets; under no circumstances shall any officer or Manager of the Company be
liable in law or equity for any obligations of the Company or the Members
hereunder. In the event of a default by Xceed of any of its obligations
hereunder, the sole and exclusive recourse and remedy of the Members and the
Company shall be against Xceed and its assets; under no circumstances shall any
officer, director, stockholder or affiliate of Xceed be liable in law or equity
for any obligations of Xceed hereunder.
8.5 Brokers. The Company and the Members represent and warrant to Xceed
-------
that there are no brokers or finders entitled to any brokerage or finder's fee
or other commission or fee based upon arrangements made by or on behalf of the
Company or the Members or any other person in connection with this Agreement or
any of the transactions contemplated hereby. Xceed represents and warrants to
the Company and the Members that no broker or finder is entitled to
36
any brokerage or finder's fee or other commission or fee based upon arrangements
made by or on behalf of Xceed in connection with this Agreement or any of the
transactions contemplated hereby, other than fees or commissions for which Xceed
shall be solely responsible.
8.6 Entire Agreement. This Agreement and the schedules, exhibits, lists
----------------
and other documents referred to herein contain the entire agreement among the
parties hereto with respect to the transactions contemplated hereby and
supersede all prior agreements with respect thereto, whether written or oral.
8.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
8.8 Notices. Any notice, request, instruction or other document to be
-------
given hereunder by any party hereto shall be in writing and delivered
personally, by facsimile transmission or telex, or sent by commercial expedited
delivery service or registered or certified mail (return receipt requested),
postage prepaid, addressed as follows:
If to the Company
or the Members: 5th Floor Interactive, LLC
636 Broadway
Suite 204
New York, New York 10012
Attn: Jonathan Molod
Facsimile: (212) 780-2328
E-Mail: jon@5thfloor.com
with a copy to: Steven Masur, Esq.
Law Office of Steven Masur
101 East 15th Street, Second Floor
New York, New York 10003
Facsimile: (212) 979-2038
E-Mail: masur@entmedia.com
If to the Xceed: Xceed, Inc.
488 Madison Avenue
3rd Floor
New York, New York 10022
Attn: Werner Haase
Facsimile: (212) 688-3434
E-Mail: whaase@xceed.com
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attn: Victoria A. Baylin, Esq.
Facsimile: (202) 887-4288
37
E-Mail: vbaylin@akingump.com
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If sent as aforesaid, the date any such notice
shall be deemed to have been delivered on the date of transmission of a
facsimile or telex, the day after delivery to a commercial overnight delivery
service, or five days after delivery into a United States Postal facility.
8.9 Counterparts. This Agreement may be executed in two (2) or more
------------
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
8.10 Rights Cumulative. All rights, powers and privileges conferred
-----------------
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
8.11 Severability of Provisions. The provisions of this Agreement shall be
--------------------------
considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
8.12 Headings. The headings set forth in the articles and sections of this
--------
Agreement and in the exhibits and the schedules to this Agreement are inserted
for convenience of reference only and shall not be deemed to constitute a part
hereof.
8.13 Knowledge Standard. When used in this Agreement, the phrase "to the
------------------
best knowledge of, " "knowledge of, " "known to" or similar phrases shall mean
the actual knowledge of: (i) with respect to Xceed, the officers and directors
of Xceed; (ii) with respect to the Company, the officers and Mangers of the
Company; and (iii) each Member.
8.14 Joint Preparation. This Agreement was jointly prepared by Xceed, the
-----------------
Company and the Members and is not to be construed against any party hereto.
Should any provision of this Agreement be found to be illegal or unenforceable
by any court of competent jurisdiction and cannot be modified to be enforceable,
such provision shall immediately become null and void leaving the remainder of
this Agreement in effect.
* * * * *
38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date and year first above written.
ATTEST: XCEED, INC.
By: /s/Werner Haase
- --------------------------------- ------------------------------------
Werner Haase, Chief Executive Officer
ATTEST: 5th FLOOR INTERACTIVE, LLC
By: /s/Johnathan Molod
- --------------------------------- ------------------------------------
Jonathan Molod, President
WITNESS: MEMBERS
By: /s/Johnathan Molod
- --------------------------------- ------------------------------------
Jonathan Molod
WITNESS:
By: /s/Fabian Tabibian
- --------------------------------- ------------------------------------
WITNESS:
By: /s/Jeffrey Caldwell
- --------------------------------- ------------------------------------
Jeffrey Caldwell
WITNESS:
By: /s/Thomas Barton
- --------------------------------- ------------------------------------
Thomas Barton
39