Exhibit 2.1
PURCHASE AGREEMENT
by and between
MYESP ACQUISITION CORPORATION
and
LIVEWORLD, INC.
TABLE OF CONTENTS
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ARTICLE I THE PURCHASE..................................... 1
1.1 Sale and Delivery of the Acquired Assets......... 1
1.2 Assumption of Liabilities........................ 1
1.3 Purchase Price................................... 2
1.4 Closing Payment.................................. 2
1.5 Post Closing Payments............................ 2
1.6 Post Closing Adjustments......................... 3
1.7 The Closing...................................... 3
1.8 Further Assurances............................... 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER..... 4
2.1 Organization, Qualification and Corporate Power.. 5
2.2 Authorization.................................... 5
2.3 Ownership and Condition of Acquired Assets....... 6
2.4 Absence of Certain Changes....................... 6
2.5 Intellectual Property............................ 6
2.6 Contracts........................................ 7
2.7 Acquired Assets.................................. 8
2.8 Insurance........................................ 8
2.9 Litigation....................................... 9
2.10 Compliance with Agreements and Laws.............. 9
2.11 Advertisers...................................... 9
2.12 Financial Statements............................. 10
2.13 Brokers' Fees.................................... 10
2.14 Disclosure....................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER...... 10
3.1 Organization and Authority....................... 10
3.2 Authorization.................................... 11
3.3 Regulatory Approvals............................. 11
3.4 Broker's Fees.................................... 11
3.5 Litigation....................................... 11
3.6 Absence of Certain Changes....................... 11
ARTICLE IV CONDITIONS TO CLOSING............................ 12
4.1 Conditions to Obligations of the Buyer........... 12
4.2 Conditions to Obligations of the Seller.......... 13
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TABLE OF CONTENTS
(continued)
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ARTICLE V POST-CLOSING COVENANTS............................ 13
5.1 Proprietary Information........................... 13
5.2 Sharing of Data................................... 14
5.3 Use of Name....................................... 14
5.4 Cooperation in Litigation......................... 14
5.5 Enforcement of Insurance Claims................... 14
5.6 Late Payments..................................... 15
5.7 Conduct of Business............................... 15
5.8 Information Rights................................ 15
5.9 Consents.......................................... 15
5.10 Foreign Language Versions of the Acquired Assets.. 16
ARTICLE VI INDEMNIFICATION................................... 16
6.1 Indemnification................................... 16
6.2 Indemnification Claims............................ 16
6.3 Limitations....................................... 18
6.4 Survival.......................................... 18
ARTICLE VII DEFINITIONS....................................... 19
ARTICLE VIII MISCELLANEOUS..................................... 20
8.1 Press Releases and Announcements.................. 20
8.2 No Third Party Beneficiaries...................... 21
8.3 Entire Agreement.................................. 21
8.4 Succession and Assignment......................... 21
8.5 Counterparts...................................... 21
8.6 Headings.......................................... 21
8.7 Notices........................................... 21
8.8 Governing Law..................................... 22
8.9 Amendments and Waivers............................ 22
8.10 Severability...................................... 22
8.11 Expenses.......................................... 22
8.12 Specific Performance.............................. 22
8.13 Arbitration....................................... 22
8.14 Construction...................................... 23
8.15 Incorporation of Exhibits and Schedules........... 23
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TABLE OF CONTENTS
(continued)
Schedule 1.1(a) Acquired Assets
Schedule 1.2(a) Assumed Liabilities
Schedule 1.5(a) Preparation of Quarterly Cash Flow Statement and Definitions of
Related Terms
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PURCHASE AGREEMENT
Agreement entered into as of May 16, 2001 by and between myESP Acquisition
Corporation, a Delaware corporation (the "Buyer"), and LiveWorld, Inc., a
Delaware corporation (the "Seller"). The Buyer and the Seller are individually
referred to herein as a "Party" and collectively referred to herein as the
"Parties."
Preliminary Statement
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The Buyer desires to purchase, and the Seller desires to sell, certain
assets, as described below, related to the business of providing chat, home
pages, discussion boards, and related consumer-created and staff-created
editorial material through the website ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ (the "Business"). The
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website ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ and any existing or contemplated foreign language
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versions or other variations thereof are collectively referred to herein as the
"Web Site."
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
THE PURCHASE
1.1 Sale and Delivery of the Acquired Assets.
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(a) Subject to and upon the terms and conditions of this Agreement,
at the Closing (as defined in Section 1.7(a)), the Seller shall sell, transfer,
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convey, assign and deliver to the Buyer, and the Buyer shall purchase from the
Seller for the consideration specified below in this Article I, all right, title
and interest of the Seller in and to all of the acquired assets, consisting of
the properties, assets and other claims, rights and interests owned by the
Seller that are used or held for use in the operations of the Business and that
are listed on Schedule 1.1(a), all as the same shall exist on the date of the
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Closing, free and clear of all Encumbrances, as defined hereafter (the "Acquired
Assets").
(b) At any time and from time to time after the Closing, and upon
request by either Party and without further consideration, each Party shall
promptly execute and deliver such instruments of sale, transfer, conveyance,
assignment and confirmation, and take such other action, as each Party may with
commercial reasonableness request to more effectively transfer, convey and
assign to the Buyer, and to confirm the Buyer's title to, all of the Acquired
Assets, to put the Buyer in actual possession and operating control thereof, to
assist the Parties in exercising all rights with respect thereto and to carry
out the purpose and intent of this Agreement.
1.2 Assumption of Liabilities.
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(a) Upon and subject to the terms and conditions of this Agreement,
the Buyer shall assume and become responsible for, from and after the Closing,
all of the liabilities of the Seller listed on Schedule 1.2(a) (collectively,
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the "Assumed Liabilities").
(b) The Buyer shall not assume or become responsible for, and the
Seller shall remain liable for, any and all liabilities or obligations (whether
known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, whether due or to become due) that are not Assumed Liabilities
(collectively, the "Retained Liabilities").
1.3 Purchase Price. The purchase price to be paid by the Buyer for the
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Acquired Assets shall be One Million Six Hundred Thousand Dollars ($1,600,000)
payable pursuant to Section 1.4 and Section 1.5 below, without interest and
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subject to adjustment pursuant to Section 6.3 (the "Purchase Price").
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1.4 Closing Payment. At the Closing, the Buyer and the Seller shall
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instruct State Street Bank and Trust Company (the "Escrow Agent") to release Two
Hundred Thousand ($200,000) (the "Closing Payment") held in escrow pursuant to
the terms of the Escrow Agreement attached hereto as Exhibit C and deliver the
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Closing Payment to the Seller by one or more cashiers or certified checks or by
wire transfers of immediately available funds to an account designated by the
Seller.
1.5 Post Closing Payments.
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(a) Thirty days after Buyer's fiscal quarter ending June 30, 2001 and
the end of every fiscal quarter thereafter, until payment of the remaining One
Million Four Hundred Thousand ($1,400,000) of the Purchase Price (subject to
adjustment pursuant to Section 6.3) (the "Post Closing Payment") has been paid
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to the Seller in full, the Buyer shall prepare and deliver to the Seller a cash
flow statement of the Buyer (the "Quarterly Cash Flow Statement"), prepared in
accordance with Schedule 1.5(a).
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(b) The Seller shall deliver to the Buyer within ten (10) days after
receiving the Quarterly Cash Flow Statement a detailed statement describing its
objections (if any) thereto (the "Quarterly Cash Flow Statement Objection
Notice"). Failure of the Seller to so object to the Quarterly Cash Flow
Statement shall constitute acceptance thereof. The Buyer and the Seller shall
use reasonable efforts to resolve any such objections, but if they do not reach
a final resolution within thirty (30) days after the Buyer has received the
Quarterly Cash Flow Statement Objection Notice, the Buyer and the Seller shall
select an accounting firm mutually acceptable to them to resolve any remaining
objections. If the Buyer and the Seller are unable to agree on the choice of an
accounting firm, they shall select a nationally-recognized accounting firm by
lot (after excluding their respective regular independent accounting firms).
Such accounting firm shall determine whether the objections raised by the Seller
are appropriate. The Quarterly Cash Flow Statement shall be adjusted in
accordance with such firm's determination and, as so adjusted, shall be the
"Final Quarterly Cash Flow Statement" for that fiscal period. Such determination
by such accounting firm shall be conclusive and binding upon the Buyer and the
Seller.
(c) The Buyer and the Seller shall share the fees and expenses of
such accounting firm if the use of such accounting firm becomes necessary after
the Seller delivers a Quarterly Cash Flow Statement Objection Notice.
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(d) Subject to the terms of this Section 1.5(d), if a Quarterly Cash
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Flow Statement Objection Notice has not been received by the Buyer within
fifteen (15) days after delivering the Quarterly Cash Flow Statement to the
Seller, and the Buyer, as evidenced by the Quarterly Cash Flow Statement, is
"Cash Flow Positive", as defined below, the Buyer shall on that fifteenth (15th)
day, pay to the Seller by one or more cashiers or certified checks or by wire
transfers of immediately available funds to an account designated by the Seller,
an amount equal to twenty-five percent (25%) of any "Cash Flow Positive Amount".
"Cash Flow Positive" and "Cash Flow Positive Amount" shall have the meanings
ascribed to them on Schedule 1.5(a).
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(e) Subject to the terms of this Section 1.5(e), if the Seller has
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delivered a Quarterly Cash Flow Statement Objection Notice to the Buyer, and the
Buyer is Cash Flow Positive as evidenced by the Final Quarterly Cash Flow
Statement, the Buyer shall pay to the Seller within three (3) business days
after the date on which the Final Quarterly Cash Flow Statement is determined
pursuant to Section 1.5(b) of this Agreement by one or more cashiers or
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certified checks or by wire transfers of immediately available funds to an
account designated by the Seller an amount equal to twenty-five percent (25%) of
any Cash Flow Positive Amount.
1.6 Post Closing Adjustments. The Purchase Price set forth in Section 1.3
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shall be subject to further adjustment pursuant to Section 6.3 of this
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Agreement.
1.7 The Closing.
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(a) The closing shall take place at the offices of ▇▇▇▇ and ▇▇▇▇ LLP,
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Closing") and shall occur on
the later of May 16, 2001 or two (2) business days following the satisfaction
and/or waiver of all conditions to close set forth in Section 4 of this
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Agreement or on such other date as is mutually agreeable to the Buyer and the
Seller (the "Closing Date"). The Closing may occur by facsimile counterparts,
and the Seller need not travel to Boston for the Closing. The execution and
delivery of this Agreement shall take place simultaneously with the Closing. The
transfer of the Acquired Assets by the Seller to the Buyer shall be deemed to
occur at 4:00 p.m., Boston time, on the Closing Date.
(b) At the Closing:
(i) the Seller shall deliver to the Buyer the various
certificates, instruments and documents referred to in Section 4.1;
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(ii) the Buyer shall deliver to the Seller the various
certificates, instruments and documents referred to in Section 4.2;
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(iii) the Seller shall execute and deliver to the Buyer a ▇▇▇▇
of sale attached hereto as Exhibit A and such other instruments of conveyance
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(e.g., a trademark assignment) as the Buyer may reasonably request in order to
effect the sale, transfer, conveyance and assignment to the Buyer of valid
ownership of the Acquired Assets;
(iv) the Buyer shall execute and deliver to the Seller an
instrument of assumption attached hereto as Exhibit B and such other instruments
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as the Seller may reasonably request in order to effect the assumption by the
Buyer of the Assumed Liabilities;
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(v) the Buyer shall deliver to the Seller the Closing Payment
pursuant to Section 1.4;
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(vi) the Buyer and Seller shall execute and deliver the Web
Site Services and Maintenance Agreement attached hereto as Exhibit D and the
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Loan and Security Agreement attached hereto as Exhibit E;
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(vii) the Seller shall deliver to the Buyer the Opinion of
Delaware Counsel, attached hereto as Exhibit F.
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(viii) the Seller shall deliver to the Buyer the Opinion of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, attached hereto as
Exhibit G;
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(ix) the Buyer shall deliver to the Seller the Opinion of ▇▇▇▇
and ▇▇▇▇ LLP attached hereto as Exhibit H;
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(x) the Buyer and Seller shall execute and deliver all
documents necessary to put the Buyer in possession and control of all of the
Acquired Assets of a tangible nature; and
(xi) the Buyer and the Seller shall execute and deliver to each
other a cross-receipt evidencing the transactions referred to above.
(c) The Agreements provided for in Section 1.7(vi) together with the
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Escrow Agreement attached hereto as Exhibit C, are collectively referred to
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herein as the "Ancilliary Agreements".
1.8 Further Assurances. At any time and from time to time after the
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Closing, at the request of the Buyer and without further consideration, the
Seller shall take all commercially reasonable actions to execute and deliver
such other instruments of sale, transfer, conveyance and assignment and take
such commercially reasonable actions as the Buyer may reasonably determine is
necessary to transfer, convey and assign to the Buyer, and to confirm Buyer's
rights to, title in and ownership of, the Acquired Assets and to place the Buyer
in actual possession and operating control thereof, including without limitation
taking such commercially reasonable action as the Buyer may reasonably request
to transfer to the Buyer and the Buyer's designated employees and agents all
information and know-how included in the Acquired Assets.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Seller to the Buyer on the date hereof and
accepted in writing by the Buyer (the "Disclosure Schedule"). The Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article II, and the disclosures in any
paragraph of the Disclosure Schedule shall be deemed to be disclosed and
incorporated in any
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other paragraph of the Disclosure Schedule when such disclosure would be
appropriate and the relevance of such disclosure reasonably clear from the
context of the disclosure. For purposes of this Article II, the phrase "to the
knowledge of the Seller" or any phrase of similar import shall be deemed to
refer to the actual knowledge of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇.
2.1 Organization, Qualification and Corporate Power. The Seller is a
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corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Seller is duly qualified
to conduct the Business and is in corporate and tax good standing under the laws
of each jurisdiction in which the nature of the Business or requires such
qualification, except where the failure to be so qualified or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Seller Material Adverse Effect (as defined below). The
Seller has all requisite corporate power and authority to carry on the Business.
The Seller has furnished to the Buyer complete and accurate copies of its
Certificate of Incorporation and By-laws. The Seller is not in default under or
in violation of any provision of its Certificate of Incorporation or By-laws.
For purposes of this Agreement, "Seller Material Adverse Effect" means a
material adverse effect, financial or otherwise, on the Business or its results
of operations.
2.2 Authorization. The execution and delivery of this Agreement by the
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Seller, and the agreements and instruments provided for herein to which the
Seller is a party (the "Seller's Closing Documents"), and the consummation by
the Seller of all transactions contemplated hereby, have been duly authorized by
all requisite corporate action and the Seller has all requisite right, power,
authority and capacity to execute, deliver and perform its obligations under the
Seller's Closing Documents. The Seller's Closing Documents and obligations
entered into and undertaken in connection with the transactions contemplated
hereby and thereby will constitute the valid and legally binding obligations of
the Seller, enforceable against the Seller in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws of
general application affecting enforcement of creditors' rights generally, and
(ii) that the availability of the remedy of specific performance or injunctive
or other forms of equitable relief may be subject to equitable defenses and
would be subject to the discretion of the court before which any proceeding
therefore may be brought. The execution, delivery and performance by the Seller
of this Agreement and the Ancilliary Agreements provided for herein, and the
consummation by the Seller of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both:
(a) to the knowledge of the Seller, violate the provisions of any law, rule or
regulation applicable to the Seller; (b) violate the provisions of the charter
or Bylaws of the Seller; (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator that names the Seller or is binding on
any of its properties or assets; or (d) conflict with or result in the breach or
violation of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Seller pursuant to (or with the giving of
notice or lapse of time result in any of the foregoing), any indenture,
mortgage, deed of trust, note, bond, license, contract or other instrument or
agreement to which the Seller is a party or by which the Seller or any of its
respective properties is or may be bound.
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2.3 Ownership and Condition of Acquired Assets. The Seller is the true
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and lawful owner, and has good title to, all of the Acquired Assets, free and
clear of all Encumbrances, except as set forth in Section 2.3 of the Disclosure
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Schedule. Upon execution and delivery by the Seller to the Buyer of the
instruments of conveyance referred to in Section 1.7(b)(iii), the Buyer will
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become the true and lawful owner of, and will receive good title to, the
Acquired Assets, free and clear of all Encumbrances other than those set forth
in Section 2.3 of the Disclosure Schedule. As used in this Agreement,
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"Encumbrance" means with respect to the Acquired Assets, any mortgage, lien,
claim, restriction, pledge, charge, security interest or encumbrance of any
kind, whether or not filed, recorded or otherwise perfected under applicable law
(including any voting trust, voting agreement or Sellers' agreement or
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
any of the Acquired Assets and any filing of, or agreement to give, any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
2.4 Absence of Certain Changes. Except as set forth on Section 2.4 of the
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Disclosure Schedule, since March 31, 2001 there has occurred no event or
development which has had, or could reasonably be expected to have in the
future, a Seller Material Adverse Effect.
2.5 Intellectual Property.
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(a) The Seller owns or has the right to use all (A) patents, patent
applications, patent disclosures and all related continuation, continuation-in-
part, divisional, reissue, re-examination, utility, model, certificate of
invention and design patents, patent applications, registrations and
applications for registrations, (B) trademarks, service marks, trade drafts,
logos, trade names, domain names and corporate names and registrations and
applications for registration thereof, (C) copyrights and registrations and
applications for registration thereof, (D) computer software, data and
documentation, including without limitation all software developed or acquired
for use in connection with the Business even if such software has not been used
in the Business within the past twenty four (24) months, (E) trade secrets and
confidential business information, whether patentable or nonpatentable and
whether or not reduced to practice, know-how, manufacturing and product
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data, pricing and cost information,
business and marketing plans and customer, advertiser and supplier lists and
information, (F) all data, information and lists relating to, collected from or
compiled about users of the Web Site, (G) other proprietary rights relating to
any of the foregoing (including without limitation remedies against
infringements thereof and rights of protection of interest therein under the
laws of all jurisdictions) and (H) copies and tangible embodiments thereof,
which are sold to Buyer as Acquired Assets (collectively, the "Intellectual
Property"). The Seller has taken all reasonable measures to protect the
Intellectual Property. To the knowledge of the Seller, (x) no other person or
entity has any rights to any of the Intellectual Property (except pursuant to
agreements or licenses specified in Section 2.5(c) of the Disclosure Schedule),
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and (y) no other person or entity is infringing, violating or misappropriating
any of the Intellectual Property. Section 2.5(a) of the Disclosure Schedule
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lists each patent, patent application, copyright registration or application
therefor, mask work registration or application therefor, and trademark, service
▇▇▇▇ and domain name registration or application therefor, which are part of the
Intellectual Property.
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(b) To Seller's knowledge, neither the Acquired Assets, nor the
operation of the Web Site, infringes or violates, or constitutes a
misappropriation of, any intellectual property rights of any other person or
entity. To the Seller's knowledge, none of the Intellectual Property, or the use
thereof, or advertising activities or other commercial activities of the
Business, infringes or violates, or constitutes a misappropriation of, any
intellectual property rights of any other person or entity. Section 2.5(b) of
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the Disclosure Schedule lists any complaint, claim or notice, or written threat
thereof, received by the Seller alleging any such infringement, violation or
misappropriation; and the Seller has provided to the Buyer complete and accurate
copies of all written documentation in the possession of the Seller relating to
any such complaint, claim, notice or threat. The Seller has provided to the
Buyer complete and accurate copies of all written documentation in the Seller's
possession relating to claims or disputes known to the Seller concerning any
Intellectual Property.
(c) Section 2.5(c) of the Disclosure Schedule identifies each license
or other agreement (or type of license or other agreement) pursuant to which the
Seller has licensed, distributed or otherwise granted any rights to any third
Party with respect to, any Intellectual Property.
(d) Section 2.5(d) of the Disclosure Schedule identifies each item of
Intellectual Property that is owned by a Party other than the Seller, and the
license or agreement pursuant to which the Seller uses it (excluding off-the-
shelf software programs licensed by the Seller pursuant to "shrink wrap"
licenses). Such license or agreement is assignable by the Seller to the Buyer
without the consent or approval of any Party and such license or agreement will
continue to be enforceable and in full force and effect immediately following
the Closing in accordance with in accordance with its terms thereof as in effect
prior to the Closing.
(e) To the Seller's knowledge, all of the copyrightable materials
owned by the Seller which are being acquired by Buyer as Intellectual Property
and are used in the operation of the Web Site or any existing or contemplated
foreign language versions or other variations of the Web Site or used in the
advertising activities and other commercial activities of the Business have been
created by employees of the Seller within the scope of their employment by the
Seller or by independent contractors of the Seller who have executed agreements
expressly assigning all right, title and interest in such copyrightable
materials to the Seller. No portion of such copyrightable materials was jointly
developed with any third Party.
2.6 Contracts.
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(a) Section 2.6(a) of the Disclosure Schedule lists and describes
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those contracts, agreements, licenses and other instruments to which the Seller
is a party and which are necessary for the Business (each, a "Contract", and
collectively, the "Contracts").
(b) Except as set forth on Section 2.6(b) of the Disclosure Schedule:
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(i) each Contract is a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, and the
Seller does not have any knowledge that any Contract is not a valid and binding
agreement of the other parties thereto;
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(ii) the Seller has fulfilled all material obligations required
pursuant to the Contracts to have been performed by the Seller on its part prior
to the date hereof;
(iii) the Seller is not in material breach of or default under
any Contract, and no event has occurred which with the passage of time or giving
of notice or both would constitute such a material default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance, thereunder
or pursuant thereto;
(iv) to the Seller's knowledge, there is no existing material
breach or material default by any other party to any Contract, and no event has
occurred which with the passage of time or giving of notice or both would
constitute a material default by such other party, result in a loss of rights or
result in the creation of any lien, charge or encumbrance thereunder or pursuant
thereto; and
(v) to the Seller's knowledge, the Seller is not restricted by
any Contract from carrying on the Business anywhere in the world.
(c) Except as set forth on Section 2.6(c) of the Disclosure
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Schedule, the continuation, validity and effectiveness of each Contract will not
be materially and adversely affected by the transfer thereof to Buyer under this
Agreement and all such Contracts are assignable to Buyer without a consent.
(d) Copies of all Contracts referred to in Section 2.6(a) of the
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Disclosure Schedule have previously been delivered by the Seller to the Buyer.
2.7 Acquired Assets. Except for corporate overhead and administrative
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assistance heretofore provided by the Seller, the Acquired Assets and licenses
granted pursuant to the Web Site Services and Maintenance Agreement (the
"Services Agreement") comprise all of the business properties, rights, licenses
and assets owned or used by the Seller that are necessary for Buyer to operate
the Business as presently being conducted by Seller.
2.8 Insurance. Copies of all fire, theft, casualty, general liability,
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workers compensation, business interruption, environmental impairment, product
liability, automobile and other insurance policies currently insuring the
Acquired Assets or the Business have been previously been made available to the
Buyer. Section 2.8 of the Disclosure Schedule lists each insurance policy
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(including fire, theft, casualty, general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Seller is a party. Such
insurance policies are of the type and in amounts customarily carried by
organizations conducting businesses or owning assets similar to those of the
Seller. There is no material claim pending under any such policy as to which
coverage has been questioned, denied or disputed by the underwriter of such
policy. All premiums due and payable under all such policies have been paid,
the Seller is not liable for retroactive premiums or similar payments, and the
Seller is otherwise in compliance in all material respects with the terms of
such policies. The Seller has no knowledge of any threatened termination of, or
material premium increase with respect to, any such policy. Each such policy is
assignable by the Seller to the Buyer without the consent or approval of any
party and will
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continue to be enforceable and in full force and effect immediately following
the Closing in accordance with the terms thereof as in effect immediately prior
to the Closing.
2.9 Litigation. Except as set forth on Section 2.9 of the Disclosure
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Schedule, the Seller is not a party to, or to the Seller's knowledge threatened
with, and none of the Acquired Assets are subject to, any litigation, suit,
action, arbitration, mediation, audit, hearing, investigation, proceeding or
controversy before any court, administrative agency or other governmental
authority (each, a "Proceeding") relating to or affecting the Acquired Assets or
the Business or challenging or otherwise seeking to interfere with any of the
transactions contemplated by this Agreement. The Seller is not in violation of
or in default with respect to any judgment, order, writ, injunction, decree or
rule of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority which names
the Seller and which is related to the Business.
2.10 Compliance with Agreements and Laws.
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(a) The Seller has all requisite licenses, permits and certificates,
including environmental, health and safety permits, from federal, state, local
and foreign authorities necessary to conduct the Business and own and operate
the Acquired Assets, other than those the failure to obtain which could not have
a Seller Material Adverse Effect (collectively, the "Permits"). Section
-------
2.10(a) (i) of the Disclosure Schedule lists all such Permits, copies of which
-----------
have previously been delivered by the Seller to the Buyer. The Seller is in
material compliance with all of the terms and conditions of its Permits, and no
suspension or cancellation of any Permit is pending or, to the knowledge of the
Seller, threatened. Except as set forth on Section 2.10(a)(ii) of the Disclosure
-------------------
Schedule, the Seller is in compliance with each federal, state, local,
municipal, foreign or other constitution, order, award, decision, ruling, writ,
judgment, injunction, decree, law, statute, ordinance, rule or regulation (each,
an "Order") of any governmental, administrative or regulatory body, authority,
agency or commission, including courts of competent jurisdiction, domestic or
foreign (each, a "Governmental Entity"), that is or was applicable to it or the
conduct or operation of its business or the ownership or use of any of its
assets or properties, except for such non-compliance that, in the aggregate,
would not have a Seller Material Adverse Effect.
(b) Except as set forth on Section 2.10(b) of the Disclosure
---------------
Schedule, there is no award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any Governmental Entity
or any arbitrator against, or binding on, the Seller which does have or may
cause a Seller Material Adverse Effect, or which does or may limit or control
the conduct or operations of the Business or the ownership or use of any of the
Acquired Assets.
2.11 Advertisers. Section 2.11 of the Disclosure Schedule contains a
----------- ------------
complete and accurate list of the ten largest advertisers of the Business in
terms of revenues during the fiscal quarter ended March 31, 2001, showing the
approximate total revenues earned by the Seller from each such advertiser during
each such period, net of refunds accrued on a basis consistent with GAAP. Since
March 31, 2001, there has been no material adverse change in or termination of
the business relationship of the Seller with any such advertiser. On a timely
basis after the
-9-
Closing, the Seller will provide to the Buyer a list of all advertisers of the
Business within the last twelve (12) months.
2.12 Financial Statements. The financial statement prepared on or about
--------------------
April 6, 2001 and set forth in Section 2.12 of the Disclosure Schedule and
------------
previously provided by the Seller to the Buyer were prepared by the Seller in
good faith using the best information available to management of the Seller as
of the date thereof. The information set forth in Seller's financial statements
does not constitute financial statements prepared in accordance with GAAP. The
Seller makes no representation or warranty regarding the accuracy of such
financial statements, except that the Company represents and warrants that such
financial statements were prepared in good faith.
2.13 Brokers' Fees. The Seller has no liability or obligation to pay any
-------------
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.14 Disclosure. No representation or warranty by the Seller in this
----------
Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading. No statement
with respect to the Acquired Assets and the Business in any document filed by
the Seller pursuant to the Securities Exchange Act of 1934 (the "Exchange Act")
contained, at the time it was made, any such material misstatement or admission
(except as subsequently corrected or superseded by subsequently filed
disclosures).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
3.1 Organization and Authority. The Buyer is a corporation duly
--------------------------
organized, validly existing and in corporate and tax good standing under the
laws of the State of Delaware. The Buyer is duly qualified to conduct its
business and is in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its business or requires such qualification,
except where the failure to be so qualified or in good standing, individually or
in the aggregate, has not had and would not reasonably be expected to have a
Buyer Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority (corporate and other) to carry on its business, to
execute and deliver this Agreement and the Buyer's Instrument of Assumption and
to consummate the transactions contemplated hereby and thereby. The Buyer has
furnished to the Seller complete and accurate copies of its Certificate of
Incorporation and By-laws. The Buyer is not in default under or in violation of
any provision of its Certificate of Incorporation or By-laws. For purposes of
this Agreement, "Buyer Material Adverse Effect" means a material adverse effect,
financial or otherwise, on the Buyer's business or its results of operations.
-10-
3.2 Authorization. The execution and delivery of this Agreement by the
-------------
Buyer, and the agreements and instruments provided for herein to which the Buyer
is a party (the "Buyer's Closing Documents"), and the consummation by the Buyer
of all transactions contemplated hereby, have been duly authorized by all
requisite corporate action and the Buyer has all requisite right, power,
authority and capacity to execute, deliver and perform its obligations under the
Buyer's Closing Documents. The Buyer's Closing Documents and obligations entered
into and undertaken in connection with the transactions contemplated hereby and
thereby constitute the valid and legally binding obligations of the Buyer,
enforceable against the Buyer in accordance with their respective terms. The
execution, delivery and performance of this Agreement and the agreements
provided for herein, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Buyer; (b) violate the provisions of the Buyer's
Certificate of Incorporation or Bylaws; (c) violate any judgment, decree, order
or award of any court, governmental body or arbitrator; or (d) conflict with or
result in the breach or violation of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Buyer pursuant
to, any indenture, mortgage, deed of trust, note, bond, license, contract or
other instrument or agreement to which the Buyer is a party or by which the
Buyer or any of its properties is or may be bound. No consents and approvals of
third parties are required in connection with the consummation by the Buyer of
the transactions contemplated by this Agreement.
3.3 Regulatory Approvals. All consents, approvals, authorizations and
--------------------
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the consummation
of the transactions contemplated by this Agreement have been obtained and
satisfied.
3.4 Broker's Fees. The Buyer has no liability or obligation to pay any
-------------
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.5 Litigation. The Buyer is not a party to, or to the Buyer's knowledge
----------
threatened with, any Proceeding relating to or affecting the Acquired Assets or
the Business or challenging or otherwise seeking to interfere with any of the
transactions contemplated by this Agreement. The Buyer is not in violation of
or in default with respect to any judgment, order, writ, injunction, decree or
rule of any court, administrative agency or governmental authority or any
regulation of any administrative agency or governmental authority which names
the Buyer.
3.6 Absence of Certain Changes. The Buyer has previously provided the
--------------------------
Seller with all contracts entered into since Buyer's inception. Since April 24,
2001, the Buyer has not entered into any agreements or conducted any business
that could adversely affect the transactions contemplated by this Agreement or
the ability of Buyer to be Cash Flow Positive.
-11-
ARTICLE IV
CONDITIONS TO CLOSING
4.1 Conditions to Obligations of the Buyer. The obligation of the Buyer
--------------------------------------
to consummate the transactions to be performed by it in connection with the
Closing is subject to the satisfaction of the following conditions:
(a) Truth of Representations and Warranties of the Seller,
------------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties
-----------------------------------------
of the Seller in this Agreement that are qualified as to materiality shall be
true and correct in all respects, and all other representations and warranties
of the Seller in this Agreement shall be true in all material respects, in each
case on the date of this Agreement, except for any changes permitted by the
terms hereof or consented to in writing by the Buyer. The Seller shall have
performed and complied in all material respects with each of the terms,
conditions, covenants, obligations, agreements and restrictions required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date;
(b) Corporate Proceedings. All corporate and other proceedings
---------------------
required to be taken on the part of the Seller to authorize or carry out this
Agreement and to convey, assign, transfer and deliver the Acquired Assets shall
have been taken;
(c) no action, suit or proceeding shall be pending or threatened
before any Governmental Entity wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
materially adversely affect the right of the Buyer to own, operate or control
the Business or any of the Acquired Assets following the Closing, and no such
judgment, order, decree, stipulation or injunction shall be in effect;
(d) the Seller shall have delivered to the Buyer a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clauses (a) through (c) of this
Section 4.1 is satisfied in all respects;
-----------
(e) the Buyer shall have received from Delaware counsel to the Seller
an opinion with respect to the matters set forth in Exhibit F attached hereto,
---------
addressed to the Buyer and dated as of the Closing Date;
(f) the Buyer shall have received from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ &
▇▇▇▇▇▇, Professional Corporation, counsel to the Seller, an opinion with respect
to the matters set forth in Exhibit G attached hereto, addressed to the Buyer
---------
and dated as of the Closing Date;
(g) the Seller shall have delivered to the Buyer all tax lien waivers
available under California law; and
(h) all actions to be taken by the Seller in connection with the
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments and other
-12-
documents, including the Ancillary Agreements, required to effect the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to the Buyer.
4.2 Conditions to Obligations of the Seller. The obligation of the
---------------------------------------
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to the satisfaction of the following conditions:
(a) Truth of Representations and Warranties of the Buyer;
-----------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties
-----------------------------------------
of the Buyer in this Agreement shall be true in all material respects on the
date of this Agreement. The Buyer shall have performed and complied in all
material respects with each of the terms, conditions, obligations, agreements
and restrictions required by this Agreement to be performed or complied with by
it prior to or at the Closing Date.
(b) Corporate Proceedings. All corporate and other proceedings
---------------------
required to be taken on the part of the Buyer to authorize or carry out this
Agreement and to convey, assign, transfer and deliver the Acquired Assets shall
have been taken;
(c) no action, suit or proceeding shall be pending or threatened
before any Governmental Entity wherein an unfavorable judgment, order, decree,
stipulation or injunction would (i) prevent consummation of any of the
transactions contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation or (iii)
materially adversely affect the right of the Buyer to own, operate or control
the Business or any of the Acquired Assets following the Closing, and no such
judgment, order, decree, stipulation or injunction shall be in effect;
(d) the Buyer shall have delivered to the Seller a certificate
(without qualification as to knowledge or materiality or otherwise) to the
effect that each of the conditions specified in clause (a) through (c) of this
Section 4.2 is satisfied in all respects;
-----------
(e) the Seller shall have received from ▇▇▇▇ and ▇▇▇▇ LLP, counsel to
the Buyer, an opinion with respect to the matters set forth in Exhibit H
---------
attached hereto, addressed to the Seller and dated as of the Closing Date;
(f) all actions to be taken by the Buyer in connection with the
consummation of the transactions contemplated hereby and all certificates,
instruments and other documents, including the Ancillary Agreements, required to
effect the transactions contemplated hereby shall be reasonably satisfactory in
form and substance to the Seller; and
(g) the Buyer shall have delivered to the Seller all documents
relating to and evidencing the financing of the Buyer.
ARTICLE V
POST-CLOSING COVENANTS
5.1 Proprietary Information. From and after the Closing, the Seller and
-----------------------
the Buyer shall hold in confidence, all knowledge, information and documents of
a confidential nature or
-13-
not generally known to the public with respect to the Seller or the Buyer or
their respective businesses and shall not disclose or make use of the same
without the written consent of the other Party, except to the extent that such
knowledge, information or documents shall have become public knowledge other
than through a breach of this Agreement by the Party seeking to disclose the
information.
5.2 Sharing of Data.
---------------
(a) The Seller shall have the right for a period of seven years
following the Closing Date to have reasonable access to such books, records and
accounts, including financial information, correspondence and other records that
are transferred to the Buyer pursuant to the terms of this Agreement for the
limited purposes of concluding its involvement in the business conducted by the
Seller prior to the Closing Date and for complying with its obligations under
applicable securities or other laws and regulations. The Buyer shall have the
right for a period of seven years following the Closing Date to have reasonable
access to those books, records and accounts, including financial and tax
information, correspondence, production records, employment records and other
records that are retained by the Seller pursuant to the terms of this Agreement
to the extent that any of the foregoing is needed by the Buyer in order to
comply with its obligations under applicable securities or other laws and
regulations. Neither the Buyer nor the Seller shall destroy any such books,
records or accounts retained by it without first providing the other Party with
the opportunity to obtain or copy such books, records, or accounts.
(b) Promptly upon request by the Buyer made at any during the three
(3) year period following the Closing Date, the Seller shall authorize the
release to the Buyer of all files pertaining to the Acquired Assets held by any
federal, state, county or local authorities, agencies or instrumentalities.
5.3 Use of Name. The Seller agrees not to use or attempt to register the
-----------
name TALK CITY and ▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇ or any name confusingly similar thereto
after the Closing Date.
5.4 Cooperation in Litigation. From and after the Closing Date, each
-------------------------
Party shall fully cooperate with the other in the defense or prosecution of any
litigation or proceeding already instituted or which may be instituted hereafter
against or by such other Party relating to the Business prior to or after the
Closing Date (other than litigation arising out the transactions contemplated by
this Agreement). The Party requesting such cooperation shall pay the reasonable
out-of-pocket expenses incurred in providing such cooperation (including legal
fees and disbursements) by the Party providing such cooperation and by its
officers, directors, employees and agents, but shall not be responsible for
reimbursing such Party or its officers, directors, employees and agents, for
their time spent in such cooperation.
5.5 Enforcement of Insurance Claims. The Seller hereby assigns to the
-------------------------------
Buyer the right to pursue and enforce, and hereby irrevocably appoints the Buyer
as its true and lawful attorney-in-fact with full power in the name of and on
behalf of the Seller for the purpose of pursuing and enforcing, any and all
rights of the Seller under any insurance policies of the Seller with respect to
any occurrence, claim or loss (including without limitation any product
liability claim) which is the subject of an indemnity obligation by the Seller
to the Buyer under Article VI of this Agreement; provided that the Buyer may not
exercise such right or power unless the
-14-
Seller fails to promptly and expeditiously pursue and enforce its rights under
its insurance policies with respect to such occurrence, claim or loss. The power
of attorney conferred upon the Buyer by the Seller pursuant to this Section 5.5
-----------
is an agency coupled with an interest and all authority conferred hereby shall
be irrevocable, and shall not be terminated by the dissolution or the
liquidation of the Seller or any other act of the Seller.
5.6 Late Payments. In addition to any other remedies available to the
-------------
Buyer at law or provided in this Agreement or in the Ancillary Agreements, if
the Buyer does not make timely Post Closing Payments as set forth in Section 1.5
-----------
of this Agreement (any such late payment referred to as an "Unpaid Amount"),
interest shall accrue annually at the rate of the greater of ten percent (10%)
or the maximum amount allowable under law on the Unpaid Amount until the Unpaid
Amount and any accrued interest are paid in full.
5.7 Conduct of Business. Following the Closing, Buyer shall use its
-------------------
commercially reasonable efforts to operate the Business in a prudent manner so
as to preserve the value of the Acquired Assets and the Business, generally; to
preserve the goodwill of the employees, representatives and customers of the
Business, and other persons with which there are significant relationships
essential to the operation of the Business; and to go Cash Flow Positive.
5.8 Information Rights.
------------------
(a) Until ninety (90) days after the date of this Agreement, the
Buyer will use its best efforts to share all income statements, cash flow
statements and balance sheets prepared for internal purposes for use in the
Business with the Seller. Thereafter, and until the Post Closing Payment has
been paid to the Seller in full: (i) within fifteen (15) days after the end of
each calendar month after the Closing, the Buyer shall prepare and deliver to
the Seller an unaudited income statement and statement of cash flows for such
month and an unaudited balance sheet as of the end of such month; (ii) within
forty-five (45) days after the end of each fiscal quarter after the Closing, the
Buyer shall prepare and deliver to the Seller an unaudited income statement and
statement of cash flows for such quarter and an unaudited balance sheet as of
the end of such quarter; and (iii) within ninety (90) days after the end of each
fiscal year after the Closing, the Buyer shall prepare and deliver to the Seller
audited consolidated financial statements of the Buyer for such year, prepared
in accordance with generally accepted accounting principles and certified by
independent public accountants selected by the Buyer's Board of Directors.
(b) Until the Post Closing Payment has been paid to the Seller in
full, but not more frequently than once during each fiscal quarter, the Buyer
shall permit the Seller to visit and inspect the Buyer's properties, to examine
its books of account and records and to discuss the Buyer's affairs, finances
and accounts with its officers, all at such reasonable times as may be
reasonably requested by the Seller. In connection with this right, the Seller
agrees to hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with the rights granted
in this Section 5.8(b).
--------------
5.9 Consents. To the extent not received prior to the Closing, the Seller
--------
shall use commercially reasonable efforts to obtain the consents of those
parties to the Contracts listed on Section 2.6(a) of the Disclosure Schedule on
--------------
a timely basis following the Closing.
-15-
5.10 Foreign Language Versions of the Acquired Assets. To the extent not
------------------------------------------------
received prior to the Closing, the Seller shall use commercially reasonable
efforts to transfer any and all foreign language versions of the Acquired Assets
to the Buyer.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification.
---------------
(a) The Seller shall indemnify the Buyer in respect of, and hold the
Buyer harmless against, any and all debts, obligations and other liabilities
(whether absolute, accrued, contingent, fixed or otherwise), monetary damages,
fines, fees, penalties, interest obligations, deficiencies, losses and expenses
(including without limitation amounts paid in settlement, interest, court costs,
costs of investigators, fees and expenses of attorneys, accountants, financial
advisors and other experts, and other expenses of litigation) ("Damages")
incurred or suffered by the Buyer thereof resulting from, relating to or
constituting: (i) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Seller contained in this Agreement; or
(ii) any Retained Liabilities.
(b) The Buyer shall indemnify the Seller in respect of, and hold the
Seller harmless against, any and all Damages incurred or suffered by the Seller
thereof resulting from, relating to or constituting: (i) any misrepresentation,
breach of warranty or failure to perform any covenant or agreement of the Buyer
contained in this Agreement; or (ii) the Buyer's failure to satisfy any Assumed
Liabilities.
6.2 Indemnification Claims.
----------------------
(a) If any Party seeks to assert rights to indemnification under this
Article VI (the "Indemnified Party"), the Indemnified Party shall give written
notification to the Party from whom indemnification is sought (the "Indemnifying
Party") of the commencement of any suit or proceeding relating to a third-party
claim for which indemnification pursuant to this Article VI may be sought. Such
notification shall be given within twenty (20) business days after receipt by
the Indemnified Party of notice of such suit or proceeding, and shall describe
in reasonable detail (to the extent known by the Indemnified Party) the facts
constituting the basis for such suit or proceeding and the amount of the claimed
damages; provided, however, that no delay on the part of the Indemnified Party
in notifying the Indemnifying Party shall relieve the Indemnifying Party of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within twenty (20) days
after delivery of such notification, the Indemnifying Party may, upon written
notice thereof to the Indemnified Party, assume control of the defense of such
suit or proceeding with counsel reasonably satisfactory to the Indemnified
Party; provided that the Indemnifying Party may only assume control of such
defense if it acknowledges in writing to the Indemnified Party that any damages,
fines, costs or other liabilities that may be assessed against the Indemnified
Party in connection with such suit or proceeding constitute Damages for which
the Indemnified Party may be indemnified pursuant to this Article VI and that
any assumption of control of a defense by the Indemnifying Party shall not,
solely by such assumption of control, be an admission or concession of any
liability under
-16-
this Article VI on the part of the Indemnifying Party. If the Indemnifying Party
does not so assume control of such defense, the Indemnified Party shall control
such defense. The Party not controlling such defense (the "Non-controlling
Party") may participate therein at its own expense; provided that if the
Indemnifying Party assumes control of such defense and the Indemnified Party
reasonably concludes that the Indemnifying Party and the Indemnified Party have
conflicting interests or different defenses available with respect to such suit
or proceeding, the reasonable fees and expenses of counsel to the Indemnified
Party shall be considered "Damages" for purposes of this Agreement. The Party
controlling such defense (the "Controlling Party") shall keep the Non-
controlling Party advised of the status of such suit or proceeding and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such suit or proceeding (including copies of any summons, complaint or other
pleading which may have been served on such Party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
suit or proceeding. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any such suit or proceeding without
the prior written consent of the Indemnified Party, which shall not be
unreasonably withheld or delayed; provided that the consent of the Indemnified
Party shall not be required if the Indemnifying Party agrees in writing to pay
any amounts payable pursuant to such settlement or judgment and such settlement
or judgment includes a complete release of the Indemnified Party from further
liability and has no other adverse effect on the Indemnified Party. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld or
delayed.
(b) In order to seek indemnification under this Article VI, the
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains (i) a description and the amount (the "Claimed
Amount") of any Damages incurred or reasonably expected to be incurred by the
Indemnified Party and (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article VI for such Damages and a reasonable
explanation of the basis therefor.
(c) Within twenty (20) days after delivery of a Claim Notice,
the Indemnifying Party shall deliver to the Indemnified Party a written response
(the "Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which
case and subject to Section 6.3, the Buyer (if it is the Indemnified Party)
-----------
shall be entitled to withhold a portion of the Purchase Price otherwise payable
to the Seller equal to the Claimed Amount); (ii) agree that the Indemnified
Party is entitled to receive part, but not all, of the Claimed Amount (the
"Agreed Amount") (in which case and subject to Section 6.3, the Buyer (if it is
-----------
the Indemnified Party) shall be entitled to withhold a portion of the Purchase
Price otherwise payable to Seller equal to the Agreed Amount) or (iii) dispute
that the Indemnified Party is entitled to receive any of the Claimed Amount. If
the Indemnifying Party in the Response disputes its liability for all or part of
the Claimed Amount, the Parties shall follow the procedures set forth in Section
-------
6.2(d) for the resolution of such dispute (a "Dispute").
------
-17-
(d) During the thirty (30) day period following the delivery of
a Response that reflects a Dispute, the Parties shall use good faith efforts to
resolve the Dispute. If the Dispute is not resolved within such thirty (30) day
period, the Parties shall submit the Dispute to binding arbitration (the "ADR
Procedure"). In the event the Parties pursue the ADR Procedure, the Parties
shall, in consultation with the chosen dispute resolution service (the "ADR
Service"), promptly agree upon a format and timetable for the ADR Procedure,
agree upon the rules applicable to the ADR Procedure, and promptly undertake the
ADR Procedure. All statements, offers, opinions and disclosures (whether written
or oral) made in the course of the ADR Procedure by or on behalf of the Parties
or the ADR Service shall be treated as confidential. The fees and expenses of
any ADR Service used by the Parties shall be shared equally by the Parties.
(e) Notwithstanding the other provisions of this Section 6.2, if
-----------
a third party asserts (other than by means of a lawsuit) that the Indemnified
Party is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which Indemnified Party may be entitled to
indemnification pursuant to this Article VI, and Indemnified Party reasonably
determines that it has a valid business reason to fulfill such obligation, then
(i) the Indemnified Party shall be entitled to satisfy such obligation, without
prior notice to or consent from the Indemnifying Party, (ii) the Indemnified
Party may subsequently make a claim for indemnification in accordance with the
provisions of this Article VI, and (iii) the Indemnified Party shall be
reimbursed, in accordance with the provisions of this Article VI, for any such
Damages for which it is entitled to indemnification pursuant to this Article VI
(subject to the right of the Indemnifying Party to dispute the Indemnified
Party's entitlement to indemnification, or the amount for which it is entitled
to indemnification, under the terms of this Article VI).
6.3 Limitations. Notwithstanding anything to the contrary herein,
-----------
(i) any amounts payable to Buyer pursuant to this Article VI shall be treated as
a reduction in the Purchase Price, provided, however, that in no event shall the
Buyer be entitled to collect any portion of the Purchase Price that has already
been paid to the Seller; (ii) the aggregate liability of the Seller or the Buyer
for Damages under this Article VI shall be limited to the lesser of (x) twenty
percent (20%) of any unpaid portion of the Purchase Price or (y) $280,000, in
either case such amount to be the sole and exclusive remedy for any
indemnification claims arising from this Agreement and the transactions
contemplated herein provided however that the limitation of liability under this
Section 6.3(ii) shall not apply to the Buyer's obligation to pay the Purchase
Price or to satisfy the Assumed Liabilities; and (iii) the Seller shall not be
liable under this Article VI unless and until the aggregate Damages for which it
would otherwise be liable exceeds $25,000 (at which point the Seller shall
become liable for the aggregate Damages, and not just amounts in excess of
$25,000).
6.4 Survival.
--------
(a) The representations, warranties, covenants and agreements of
the Seller set forth in this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby and continue until twelve
(12) months after the Closing Date and shall not be affected by any examination
made for or on behalf of the Buyer or the knowledge of any of the Buyer's
officers, directors, stockholders, employees or agent. Notwithstanding the
foregoing,
-18-
the representations contained in Section 2.3 relating to the Seller's authority
to engage in the transactions contemplated hereby shall survive without limit.
(b) The indemnification obligations of the Seller set forth in
this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby and continue until twelve (12) months after the
Closing Date and shall not be affected by any examination made for or on behalf
of the Seller or the knowledge of any of the Seller's officers, directors,
stockholders, employees or agent.
(c) If the Indemnified Party delivers to the Indemnifying Party,
before the end of the twelve (12) month period after the Closing Date, either a
Claim Notice based upon a breach of such representation or warranty or the
failure to satisfy any Assumed Liabilities, or a notice that, as a result of a
legal proceeding instituted by or written claim made by a third party, the
Indemnified Party reasonably expects to incur Damages as a result of a breach of
such representation or warranty or failure to satisfy an Assumed Liability (an
"Expected Claim Notice"), then such representation or warranty or indemnity
obligation shall survive until, but only for purposes of, the resolution of the
matter covered by such notice. If the legal proceeding or written claim with
respect to which an Expected Claim Notice has been given is definitively
withdrawn or resolved in favor of the Indemnified Party, the Indemnified Party
shall promptly so notify the Indemnified Party.
ARTICLE VII
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
------------ ---------
Acquired Assets 1.1(a)
ADR Procedure 6.2(d)
ADR Service 6.2(d)
Agreed Amount 6.2(c)
Ancillary Agreements 1.7(c)
Assumed Liabilities 1.2(a)
Business Preliminary Statement
Buyer Introduction
Buyer's Closing Documents 3.2
Cash Flow Positive Schedule 1.5(a)
Cash Flow Positive Amount Schedule 1.5(a)
Claim Notice 6.2(b)
Claimed Amount 6.2(b)
Closing 1.7(a)
Closing Date 1.7(a)
Closing Payment 1.4
Contract 2.6(a)
-19-
Controlling Party 6.2(a)
Damages 6.1
Disclosure Schedule Article II
Dispute 6.2(c)
Encumbrance 2.3(a)
Escrow Agent 1.4
Exchange Act 2.14
Expected Claim Notice 6.5(b)
Final Quarterly Cash Flow Statement 1.5(b)
Governmental Entity 2.10(a)
Individually Material Consents 4.1(c)
Intellectual Property 1.1(a)(i)
Non-Controlling Party 6.2(a)
Order 2.10(a)
Party Introduction
Parties Introduction
Permits 2.10(a)
Post Closing Payment 1.5(a)
Proceeding 2.9
Purchase Price 1.3
Quarterly Cash Flow Statement 1.5(a)
Quarterly Cash Flow Statement Objection Notice 1.5(b)
Response 6.2(c)
Retained Liabilities 1.2(b)
Rules 8.13(a)
Seller Introduction
Seller's Closing Documents 2.2
Seller Material Adverse Effect 2.1
Seller Trademarks 2.5(a)
Services Agreement 2.7
Unpaid Amount 5.6
Web Site Preliminary Statement
ARTICLE VIII
MISCELLANEOUS
8.1 Press Releases and Announcements. Neither Party shall issue any press
--------------------------------
release or announcement relating to the subject matter of this Agreement without
the prior written approval of the other Party; provided, however, that such
-------- -------
approval shall not be unreasonably withheld or delayed, and provided further,
----------------
however, that either Party may make any public disclosure it believes in good
-------
faith is required by law or regulation, in which case the disclosing Party shall
advise the other Party and provide it with a copy of the proposed disclosure no
less than two (2) business days prior to making the disclosure.
-20-
8.2 No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
8.3 Entire Agreement. This Agreement (including the documents referred to
----------------
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, that may have related in any way to the subject matter hereof.
8.4 Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. Neither Party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other Party.
8.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signatures.
8.6 Headings. The section headings contained in this Agreement are
--------
inserted interpretation of this Agreement.
8.7 Notices. All notices, requests, demands, claims, and other
--------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two (2)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one (1) business day after it is sent via a
reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
If to the Seller: Copy to:
---------------- -------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
LiveWorld, Inc. ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ Attn: Page ▇▇▇▇▇▇▇▇▇, Esq.
Attn: Corporate Counsel
If to the Buyer: Copy to:
--------------- -------
myESP Acquisition Corporation ▇▇▇▇ and ▇▇▇▇ LLP
▇▇▇▇▇▇▇ Center ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇-▇▇, ▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Attn: ▇▇▇▇ ▇.▇. ▇▇▇▇▇, III, Esq.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Either Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand,
-21-
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the individual for whom it is intended. Either
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws (and not the law of conflicts) of the State of
Delaware.
8.9 Amendments and Waivers. The Parties may mutually amend any provision
----------------------
of this Agreement at any time prior to the Closing with the prior authorization
of their respective Boards of Directors. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
of the Parties. No waiver by either Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
8.10 Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
8.11 Expenses. Each Party shall bear its own costs and expenses (including
--------
legal fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
8.12 Specific Performance. Each Party acknowledges and agrees that the
--------------------
other Party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each Party agrees that the other Party
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the Parties and the matter
(subject to the provisions of Section 8.13), in addition to any other remedy to
------------
which it may be entitled, at law or in equity.
8.13 Arbitration.
-----------
(a) Subject to Section 8.12, the Parties agree that any dispute or
------------
controversy arising out of, relating to, or in connection with this
Agreement, or the interpretation, validity, construction, performance,
breach, or termination thereof, shall be settled by binding arbitration
-22-
to be held in accordance with the American Arbitration Association Commercial
Arbitration Rules, and Supplemental Procedures for Large Complex Disputes
(together the "Rules"). If the Buyer initiates the arbitration, such arbitration
shall be held in the county of Santa Clara, California. If the Seller initiates
the arbitration, such arbitration shall be held in the city of Boston,
Massachusetts. Such dispute or controversy shall be settled by arbitration
conducted by one arbitrator mutually agreeable to the Seller and the Buyer. In
the event that within fifteen (15) days after submission of any dispute to
arbitration, the Seller and the Buyer cannot mutually agree on one arbitrator,
the Seller and the Buyer shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The decision of the
arbitrator or a majority of the three arbitrators, as the case may be, shall be
final, binding and conclusive upon the parties to the arbitration. Judgment may
be entered on the arbitrator(s)' decision in any court having jurisdiction.
(b) At the request of either Party, the arbitrator(s) will enter an
appropriate protective order to maintain the confidentiality of information
produced or exchanged in the course of the arbitration proceedings.
(c) The arbitrator(s) shall apply Delaware law to the merits of any
dispute or claim, without reference to rules of conflicts of law.
(d) THE PARTIES HAVE READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. THE PARTIES UNDERSTAND THAT BY SIGNING THIS AGREEMENT,
THEY AGREE, EXCEPT AS SET FORTH IN SECTION 8.12 ABOVE, TO SUBMIT ANY CLAIMS
------------
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE
INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION
THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A
WAIVER OF THE PARTY'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES ARISING OUT OF, RELATING TO OR IN CONNECTION WITH THIS AGREEMENT.
8.14 Construction. The language used in this Agreement shall be
------------
deemed to be the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict construction shall be applied against either
Party. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
8.15 Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
[Remainder of page intentionally left blank]
-23-
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
MYESP ACQUISITION CORPORATION
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President
LIVEWORLD, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Executive Officer
-24-
Schedule 1.1(a)
---------------
Acquired Assets
---------------
Subject to the terms and conditions of the attached Agreement, Buyer is
acquiring, effective from and after the Closing, all of the following assets:
1. Hardware:
---------------------------------------------------------------------------------------------------------------------
Network Name Make Serial Asset Service Contract
------------ ---- ------ ----- ----------------
---------------------------------------------------------------------------------------------------------------------
Ad Master Adserv1 Enterprise 250 850F393C 002668
---------------------------------------------------------------------------------------------------------------------
admaster disks Storedge D1000 007H348B 002088
---------------------------------------------------------------------------------------------------------------------
Ad Servers Adserv2 Enterprise 250 909H33D3 002667 Expired
---------------------------------------------------------------------------------------------------------------------
Adserv3 Enterprise 2 926H49B4 002586 Expired
---------------------------------------------------------------------------------------------------------------------
Adserv4 Enterprise 2 931H29FE 002656 Expired
---------------------------------------------------------------------------------------------------------------------
Adserv5 Enterprise 2 931H29F7 002663 Expired
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Load Balancer Big IP 1 F5 Big IP BIP01608S 002536 Jun-01
---------------------------------------------------------------------------------------------------------------------
Big IP 2 F5 Big IP BIP01607S 002531 Jun-01
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Bots machines Bots1 Netra t1 019A0ACF 002644
---------------------------------------------------------------------------------------------------------------------
Bots3 Netra t1 019A0BF4 002494
---------------------------------------------------------------------------------------------------------------------
Mickey 2 Enterprise 2 931H2A12 002266 Expired NK20052322
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Chat Network Chat Hub QES * 002581 Expired
---------------------------------------------------------------------------------------------------------------------
Chat1 QES * 002615 Expired
---------------------------------------------------------------------------------------------------------------------
Chat2 QES * 002614 Expired
---------------------------------------------------------------------------------------------------------------------
Chat3 QES * 002608 Expired
---------------------------------------------------------------------------------------------------------------------
Chat4 QES * 002584 Expired
---------------------------------------------------------------------------------------------------------------------
Chat5 QES * 002641 Expired
---------------------------------------------------------------------------------------------------------------------
Chat6 QES * 002632 Expired
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Windows 2000 BC (W2K) QES * 002522 Expired
chat network
---------------------------------------------------------------------------------------------------------------------
Chat 4 (W2K) QES * 002228 Expired
---------------------------------------------------------------------------------------------------------------------
Chat3 (W2k) QES * 002226 Expired
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Database server DBS002 Enterprise 4500 912H2F7A 002598 GOLD Mar-01 NK20073629
---------------------------------------------------------------------------------------------------------------------
DBS002 Array Disk array for 4500 026H4405 002601 GOLD Mar-01 NK20073630
3
---------------------------------------------------------------------------------------------------------------------
DBS002 Array Disk array for 4500 944H319D 002063 GOLD Mar-01 NK20073631
4
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
NetApps NetDisk NetApps F760 14386 Jan-02
---------------------------------------------------------------------------------------------------------------------
Network Appliance Disks S99078169 Jan-02
---------------------------------------------------------------------------------------------------------------------
Network Appliance Disks S98516166 Jan-02
---------------------------------------------------------------------------------------------------------------------
Network Appliance Disks S99150909 Jan-02
---------------------------------------------------------------------------------------------------------------------
Network Appliance Disks * Jan-02
---------------------------------------------------------------------------------------------------------------------
Network Appliance Disks * Jan-02
---------------------------------------------------------------------------------------------------------------------
Network Appliance Disks * Jan-02
---------------------------------------------------------------------------------------------------------------------
Tiger NetApps F760 21708 002580 Jan-02
---------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Network Appliance Disks 348183 002573 Jan-02
-----------------------------------------------------------------------------------------------------------------------
f70 Network Appliance Disks S99500165 002579 Jan-02
-----------------------------------------------------------------------------------------------------------------------
f71 Network Appliance Disks S99499023 002578 Jan-02
-----------------------------------------------------------------------------------------------------------------------
f72 Network Appliance Disks S99500227 002577 Jan-02
-----------------------------------------------------------------------------------------------------------------------
f73 Network Appliance Disks S99498639 002576 Jan-02
-----------------------------------------------------------------------------------------------------------------------
f74 Network Appliance Disks ▇▇▇▇▇▇▇▇▇ 002575 Jan-02
-----------------------------------------------------------------------------------------------------------------------
f75 Network Appliance Disks S99500777 002574 Jan-02
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Frontpage 2000 Frontpage 1 Netra T1 031C0323 002224
server
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Frontpage servers Setter QES * 002683 Expired
-----------------------------------------------------------------------------------------------------------------------
Healer QES * 002662 Expired
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Home1 Enterprise 2 926H49B5 002709 Expired
-----------------------------------------------------------------------------------------------------------------------
Home2 Netra T1 941A4671 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
Home3 Enterprise 2
-----------------------------------------------------------------------------------------------------------------------
Home5 Netra T1 *499 002509 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
home ftp servers homeftp1 Netra T1 020C0F75 002100 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
homeftp2 Netra T1 030C002A 002043 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
image servers images1 Netra T1 024C02B4 002604 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Jservs jserv1 Enterprise 420R 027H260C 002175 Warranty Sep-01
-----------------------------------------------------------------------------------------------------------------------
jserv2 Enterprise 420R 027H263C 002179 Warranty Sep-01
-----------------------------------------------------------------------------------------------------------------------
jserv3 Enterprise 420R 026H4B70 002183 Warranty Sep-01
-----------------------------------------------------------------------------------------------------------------------
jserv4 Enterprise 420R 026H4BCD 002187 Warranty Sep-01
-----------------------------------------------------------------------------------------------------------------------
jserv5 Enterprise 420R 011H44D0 002115 Gold May-01 NK20085101
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Proxy Servers Proxy1 Enterprise 220R 026H491C 002178 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
Proxy2 Enterprise 220R 026H49EA 002182 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
Proxy3 Enterprise 220R 026H49DE 002186 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
Proxy4 Enterprise 220R 026H49F4 002190 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
Proxy5 Enterprise 220R 026H49EF 002194 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
Proxy6 Enterprise 220R 026H491F 002197 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Firewall Chat Pix2 Cisco Pix 18028175 2221 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
Chat Pix1 Cisco PIX 18031445 2222 Warranty Aug-01
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
webservers www1 Enterprise 420R 026H4BE6 002177 Warranty Sep-01
▇▇▇.▇▇▇▇▇▇▇▇.▇▇▇
----------------
-----------------------------------------------------------------------------------------------------------------------
www2 Enterprise 420R 027H266D 002181 Warranty Sep-01
-----------------------------------------------------------------------------------------------------------------------
www3 Enterprise 420R 027H2642 002185 Warranty Sep-01
-----------------------------------------------------------------------------------------------------------------------
www4 Enterprise 420R 027H263D 002189 Warranty Sep-01
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Admin Servers wwwadmin Netra T1 024C02B5 002613 Warranty 01-Aug
-----------------------------------------------------------------------------------------------------------------------
homeadmin Netra T1 024C0286 002605 Warranty 01-Aug
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
DNS ns2 Netra T1 018A1565 002330 Warranty 01-Aug
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Mail ??
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Boards Server boards1 Netra T1 *
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Console Switches Cisco 2500 251284572 002203 Jul-01
---------------------------------------------------------------------------------------------------------------------
Cisco 2500 251289523 002202 Jul-01
---------------------------------------------------------------------------------------------------------------------
Cisco 2500 251235741 002205 Jul-01
---------------------------------------------------------------------------------------------------------------------
Cisco 2500 251235735 002551 Jul-01
---------------------------------------------------------------------------------------------------------------------
Cisco 2500 251284573 002200 Jul-01
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Cabinet Switches Foundry Fast Iron 1815 002206 Jun-01
Workgroup
---------------------------------------------------------------------------------------------------------------------
Foundry Fast Iron 1827 002233 Jun-01
Workgroup
---------------------------------------------------------------------------------------------------------------------
Foundry Fast Iron 1814 002211 Jun-01
Workgroup
---------------------------------------------------------------------------------------------------------------------
Foundry Fast Iron 1816 002234 Jun-01
Workgroup
---------------------------------------------------------------------------------------------------------------------
Foundry Fast Iron 1824 002208 Jun-01
Workgroup
---------------------------------------------------------------------------------------------------------------------
Foundry Fast Iron 1818 002210 Jun-01
Workgroup
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Core Switch Fast Iron 2 Foundry Fast Iron 2 1061 2217 Jun-01
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Edge switches ISI-SW1 Cisco Catalyst 2900 FAA0327I0AK 002525 expired
---------------------------------------------------------------------------------------------------------------------
ISI-SW2 Cisco Catalyst 2900 FAB0421V167 002212 expired
---------------------------------------------------------------------------------------------------------------------
* Denotes systems with no visible serial number. Either the number was partially
erased, or couldn't be seen without powering down the system and removing it
from the racks.
2. Intellectual Property and Other Data:
(a) All of Seller's right, title and interest in and to the Internet domain
names ▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇-▇▇▇▇.▇▇▇, TALK-
▇▇▇▇.▇▇▇, ▇▇▇▇-▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇,
▇▇▇▇▇▇-▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇.▇▇▇, ▇▇▇▇▇▇-▇▇▇▇▇▇▇▇.▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, and ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇.
(b) Data collected from registered members of Talk City during registration
and in response to subsequent requests for information (including, but not
limited to, opt-in newsletter subscriptions) that is necessary for the proper
functioning of the Web Site. Data includes first and last name, nickname,
password, email address, zip code, and gender, and where appropriate, street
address, newsletter subscriptions, income, occupation and selected other
demographic information. All data was collected under privacy agreement that
limits the site's ability to share individual information with third-parties
without the express permission of the user.
(c) All of Seller's right, title and interest in the ▇▇▇▇ "TALK CITY" and
any ▇▇▇▇ incorporating the phrase "TALK CITY," including the following
registered and unregistered trademarks, including all goodwill and going concern
value associated with such trademarks:
------------------------------------------------------------------------------------------------------
Country Trademark Class File Date Application Reg. Reg. Status
Name Name Number Date Number
------------------------------------------------------------------------------------------------------
Australia TALK CITY 35, 42 04-Apr-00 830820 Filed
--------------------------------------------------------------------------------------------------------
Brazil TALK CITY 35 07-Apr-00 822622106 Published
--------------------------------------------------------------------------------------------------------
Brazil TALK CITY 42 07-Apr-00 822622114 Published
--------------------------------------------------------------------------------------------------------
Canada TALK CITY 35, 42 10-Apr-00 1054535 Filed
--------------------------------------------------------------------------------------------------------
Chile TALK CITY 35 06-Jun-00 489.103 24-Oct-00 580.035 Registered
--------------------------------------------------------------------------------------------------------
Chile TALK CITY 42 06-Jun-00 489.106 17-Nov-00 582.729 Registered
--------------------------------------------------------------------------------------------------------
China TALK CITY 35 10-May-00 2000062243 Filed
--------------------------------------------------------------------------------------------------------
China TALK CITY 42 10-May-00 ▇▇▇▇▇▇▇▇▇▇ Filed
--------------------------------------------------------------------------------------------------------
European TALK CITY 9,35,38 04-Apr-00 1592245 Filed
Community 42
--------------------------------------------------------------------------------------------------------
Hong Kong TALK CITY 35 06-Apr-00 7437/2000 Filed
--------------------------------------------------------------------------------------------------------
Hong Kong TALK CITY 42 06-Apr-00 7438/2000 Filed
--------------------------------------------------------------------------------------------------------
India TALK CITY 16 13-Jul-00 Filed
--------------------------------------------------------------------------------------------------------
India TALK CITY 16 13-Jul-00 Filed
--------------------------------------------------------------------------------------------------------
India TALK CITY 16 13-Jul-00 Filed
--------------------------------------------------------------------------------------------------------
Israel TALK CITY 35 05-Apr-00 136598 Filed
--------------------------------------------------------------------------------------------------------
Israel TALK CITY 42 05-Apr-00 136599 Filed
--------------------------------------------------------------------------------------------------------
Japan TALK CITY 35, 42 06-Apr-00 035788/2000 Filed
--------------------------------------------------------------------------------------------------------
Korea TALK CITY 35,42 11-Apr-00 2000-10641 Filed
(South)
--------------------------------------------------------------------------------------------------------
Malaysia TALK CITY 35 17-Apr-00 2000/04551 Filed
--------------------------------------------------------------------------------------------------------
Malaysia TALK CITY 42 17-Apr-00 2000/04550 Filed
--------------------------------------------------------------------------------------------------------
Mexico TALK CITY 35 08-May-00 424104 Filed
--------------------------------------------------------------------------------------------------------
Mexico TALK CITY 42 08-May-00 424105 Filed
--------------------------------------------------------------------------------------------------------
New Zealand TALK CITY 35 06-Apr-00 612013 06-Apr-00 Registered
--------------------------------------------------------------------------------------------------------
New Zealand TALK CITY 42 06-Apr-00 612014 06-Apr-00 612014 Registered
--------------------------------------------------------------------------------------------------------
Philippines TALK CITY 35, 42 26-Apr-00 ▇-▇▇▇▇-▇▇▇▇▇ Filed
-------------------------------------------------------------------------------------------------------
Switzerland TALK CITY 35, 42 06-Apr-00 04136/2000 Filed
-------------------------------------------------------------------------------------------------------
Taiwan TALK CITY 35 05-Apr-00 89018149 Filed
-------------------------------------------------------------------------------------------------------
Taiwan TALK CITY 42 05-Apr-00 89018150 Filed
-------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
United TALK CITY 42 12-Aug-96 75/148,205 14-Oct-97 2105063 Registered
States
---------------------------------------------------------------------------------------------------------
United TALK CITY 35, 38 1-Oct-99 75/812,746 Filed
States 41, 42
---------------------------------------------------------------------------------------------------------
United TALK CITY 42 15-Dec-99 75/872,566 Filed
States SHOPPING
NETWORK
---------------------------------------------------------------------------------------------------------
3. Inventory:
To the extent possible after the use of reasonable commercial efforts, all
physical items containing the TALK CITY or Web Site name or logo, including
without limitation all inventories of clothing items, marketing collateral,
stationery, logo gear and similar items to which any such name or logo has been
affixed.
4. Assigned Contracts:
(a) WebTV. WebTV Networks, Inc. - Talk City Content and Services
-----
Agreement, dated July 19, 1998, by and between WebTV Networks, Inc. ("WebTV")
-----
and Talk City, Inc., as amended by the First Amendment to WebTV Networks, Inc. -
Talk City Content and Services Agreement, effective as of July 27, 2000.
(b) Juno. Talk City Chat Link Partner Agreement, dated November 10,
----
2000, by and between Juno Online Services, Inc. ("Juno") and Talk City, Inc.
----
(c) Earthlink. Talk City Chat Link Partner Agreement, dated [_______],
---------
by and between Earthlink Network, Inc. ("Earthlink") and Talk City, Inc.
---------
(d) DoubleClick. Netgravity Adserver License Agreement, dated August
-----------
29, 1996, between Netgravity, Inc. and Liveworld. (Netgravity was sold to
DoubleClick, Inc. "DoubleClick").)
-----------
(e) adReady. Media Representation Agreement, dated as of March 7,
-------
2001, by and between ▇▇▇▇▇▇▇.▇▇▇, Inc. ("adReady") and Talk City Marketing
-------
Group.
(f) L90. Internet Advertising and Ad Serving Agreement, dated February
---
27, 2001, by and between L90, Inc. ("L90") and Talk ▇▇▇▇.▇▇▇.
---
(g) 24/7. Network Affiliation Agreement, no date, but faxed on March
----
23, 1998 and bearing a January 30, 1998 date in the right-hand footer, by and
between 24/7 Media, Inc. ("24/7") and Liveworld Productions.
----
(h) InPhonic. Confidential Marketing and Distribution Agreement,
--------
dated February 8, 2000, by and between ▇▇▇▇▇▇▇▇.▇▇▇, Inc. ("InPhonic") and Talk
--------
City, Inc.
(i) iSyndicate. Content User Agreement, dated November 22, 1999, by
----------
and between iSyndicate Inc. ("iSyndicate") and Talk City, Inc.; and Renewal
----------
Content User Agreement, signed by Talk City on February 7, 2001, by and between
iSyndicate and Talk City, Inc.
(j) ▇▇ ▇▇▇▇▇. Licensing agreement covering the development and use of
--------
a downloadable chat client (Windows) for use in participating in chats on the
Talk City site. (Seller cannot find a copy of this contract, but has been
billed for the services.)
(k) TC Ircle. Licensing agreement covering the development and use of a
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downloadable chat client (Macintosh) for use in participating in chats on the
Talk City site. (Seller cannot find a copy of this contract, but has recently
paid for the services.)
(l) WebCrossing. This is a discussion board utility license.(Seller cannot
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find a copy of this contract. However, Seller has purchased numerous upgrades
from Web Crossing and believes that the parties are in oral agreement that
Seller has the right to use the Web Crossing license to build discussion boards
for the Web Site and for third-parties.)
(m) Avenue A. Advertising contract, by and among Avenue A and Talk City.
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This contract is unsigned.
(n) I/PRO. (Seller cannot find a copy of this contract.)
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Schedule 1.2(a)
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Assumed Liabilities
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Subject to the terms and conditions of the attached Agreement, Buyer shall
assume and become responsible for, from and after the Closing, all liabilities
related to, arising out of or associated with the use, conduct, or operation of
Acquired Assets, including but not limited to, the following:
. liabilities and costs associated with Hardware, including any and all
maintenance contracts relating to such Hardware, but only to the extent
that Buyer wishes to keep the maintenance contracts in effect after the
Closing;
. liabilities under the Assigned Contracts arising after the Closing Date;
. any and all advertising commissions that relate to the Web Site which
arise after the Closing;
. all costs, charges and fees associated with the operation of the Web
Site after the Closing, including, but not limited to, any fees or costs
due in accordance with the Web Site Services and Maintenance Agreement
executed by Buyer and Seller contemporaneously with this Agreement, and
any and all employee, independent contractor and/or volunteer claims
that (i) arise after the Closing and (ii) relate to operation of the Web
Site after the Closing;
. all fees, charges, taxes or other costs relating to the Web Site that
are assessed by any governmental agencies in connection with the post-
Closing operation of the Web Site;
. all post-Closing fees, charges, or other costs relating to the
registration, preservation, maintenance and/or protection of the domain
names, trademarks, copyrighted materials and/or registrable Intellectual
Property;
. any costs, obligations, expenses or liabilities arising out of the
consummation of the transactions contemplated hereby, including, without
limitation, any transfer, sales or other taxes which become payable as a
result thereof;
. any damages or sums that may be or become payable to any third parties
resulting from the use or operation of the Acquired Assets after the
Closing Date;
. to the extent that Seller is unable to secure a release from UUNET
Technologies, Inc. ("UUNET") of that portion of the existing UUHost
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Multi-Megabit Colocation Services Agreement, dated as of March 17, 2000,
by and between UUNET Technologies, Inc. and Talk City, Inc.
(hereinafter, the "UUNET Agreement") that applies to the Business, Buyer
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shall be assume and be responsible for all payments and other
obligations under the UUNET Agreement
that are attributable to, or can be apportioned to the maintenance and
operation of the Web Site. As soon as reasonably practicable, Seller
shall ask UUNET to issue separate bills on a going-forward basis that
detail only those bandwidth and related charges that relate to the
operation of the Web Site. Until UUNET is capable of issuing separate
billing in this manner, the parties shall use good faith efforts to
agree upon an equitable division of UUNET's bills in order to most
accurately reflect the Web Site's portion of UUNET bandwidth charges.
After UUNET separates its billing, Seller shall deliver to Buyer copies
of the monthly UUNET bills relating to the Web Site, and Buyer shall pay
the bills in full no later than thirty (30) days after receipt. At the
completion or expiration of the current term of the UUNET Agreement,
Buyer may move to another bandwidth service provider, and all bills
relating to such services shall be billed directly to Buyer.
Notwithstanding the foregoing, Buyer is not assuming and shall not be
responsible for any claims, costs or fees relating to the above categories that
arise solely from the pre-Closing operation and/or maintenance of the Web Site.
Schedule 1.5(a)
Preparation of Quarterly Cash Flow Statement and
Definitions of Related Terms
1. Each Quarterly Cash Flow Statement shall show the earnings of the Buyer for
the period in question before the deduction of interest, taxes, depreciation
and amortization, determined by reference to the unaudited financial
statements of the Buyer for such period prepared in accordance with
generally accepted accounting principles consistently applied (the
"Quarterly EBITDA"), provided that the Quarterly EBITDA shall include the
operating profit or loss of only those businesses acquired by Buyer after
the Closing Date that are directly related to the Business.
2. "Cash Flow Positive" shall mean Quarterly EBITDA in an amount greater than
$0.00, and "Cash Flow Positive Amount" shall mean any such amount.