EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
Dated as of December 18, 2000
by and between
GAMESPY INDUSTRIES, INC.
and
HEARME
TABLE OF CONTENTS
Page
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Article I. - Definitions................................................... 1
1.1 Defined Terms............................................... 1
1.2 Other Defined Terms......................................... 5
Article II. - Purchase and Sale of Assets.................................. 6
2.1 Transfer of Assets.......................................... 6
2.2 Purchase Price.............................................. 6
2.3 Assumed Liabilities........................................ 6
2.4 Taxes and Other Costs....................................... 7
2.5 Adjustment to Stock Consideration........................... 7
Article III. - Closing..................................................... 7
3.1 Closing..................................................... 7
3.2 Deliveries at Closing....................................... 7
3.3 Consents to Assignment...................................... 8
Article IV. - Representations and Warranties of Seller..................... 9
4.1 Organization................................................ 9
4.2 Authorization............................................... 9
4.3 Brokers..................................................... 9
4.4 Assumed Contracts........................................... 9
4.5 Litigation, Proceedings and Applicable Law.................. 9
4.6 No Conflict or Violation.................................... 10
4.7 Consents and Approvals...................................... 10
4.8 Intellectual Property....................................... 10
4.9 Financial Statements........................................ 11
4.10 Absence of Certain Changes.................................. 11
4.11 Assets...................................................... 12
4.12 Major Contracts............................................. 13
4.13 Licenses and Permits........................................ 14
4.14 Employees................................................... 14
4.15 Employee Benefit and Compensation Plans.................... 15
4.16 Taxes....................................................... 15
4.17 Compliance with Law......................................... 15
4.18 Purchase Entirely for Own Account........................... 15
4.19 Disclosure of Information................................... 15
4.20 Restricted Securities....................................... 16
4.21 No Public Market............................................ 16
4.22 Legends..................................................... 16
4.23 Accredited Investor......................................... 16
4.24 Privacy..................................................... 16
Article V. - Representations and Warranties of Buyer....................... 17
5.1 Organization of Buyer....................................... 17
TABLE OF CONTENTS
(continued)
Page
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5.2 Authorization............................................... 17
5.3 Brokers..................................................... 17
5.4 No Conflict or Violation.................................... 17
5.5 Consents and Approvals...................................... 17
5.6 Litigation, Proceedings and Applicable Law.................. 18
5.7 Capitalization.............................................. 18
5.8 Subsidiaries................................................ 19
5.9 Valid Issuance of Stock Consideration....................... 19
5.10 Intellectual Property....................................... 19
5.11 Compliance with Other Instruments........................... 19
5.12 Agreements; Action.......................................... 19
5.13 No Conflict of Interest..................................... 20
5.14 Rights of Registration...................................... 20
5.15 Title to Property and Assets................................ 20
5.16 Financial Statements........................................ 20
5.17 Changes..................................................... 21
5.18 Tax Returns and Payments.................................... 21
5.19 Insurance................................................... 22
5.20 Labor Agreements and Actions................................ 22
5.21 Confidential Information and Invention Assignment Agreements 22
5.22 Permits..................................................... 22
5.23 Corporate Documents......................................... 22
Article VI. - Certain Covenants............................................ 22
6.1 Covenants of Both Parties................................... 22
6.2 Seller's Covenants.......................................... 23
6.3 Buyer's Covenants........................................... 24
6.4 Employment Matters.......................................... 25
6.5 Non-Competition............................................. 25
6.6 Nondisclosure of Proprietary Data........................... 26
Article VII. - Conditions to Seller's Obligations.......................... 26
7.1 Representations, Warranties and Covenants................... 27
7.2 Consents.................................................... 27
7.3 No Governmental Proceedings or Litigation................... 27
7.4 Certificates................................................ 27
7.5 Corporate Documents......................................... 27
7.6 Opinion of Counsel.......................................... 27
7.7 Ancillary Agreement......................................... 27
7.8 Opinion of Delaware Counsel................................. 27
7.9 Rights Agreement Amendment.................................. 27
7.10 * Agreement................................................. 27
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* Material has been omitted pursuant to a request for confidential treatment
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Page
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Article VIII. - Conditions to Buyer's Obligations.......................... 28
8.1 Representations, Warranties and Covenants................... 28
8.2 Consents.................................................... 28
8.3 No Governmental Proceedings or Litigation................... 28
8.4 Certificates................................................ 28
8.5 Corporate Documents......................................... 28
8.6 No Material Adverse Change.................................. 28
8.7 Opinion of Counsel.......................................... 28
8.8 Ancillary Agreements........................................ 28
8.9 Rights Agreement Amendment.................................. 29
Article IX. - Actions by Parties After the Closing......................... 29
9.1 Books and Records........................................... 29
9.2 Resale Certificates......................................... 29
9.3 Indemnification............................................. 29
Article X. - Miscellaneous................................................. 34
10.1 Termination................................................. 34
10.2 Assignment.................................................. 35
10.3 Notices..................................................... 35
10.4 Choice of Law............................................... 36
10.5 Entire Agreement; Amendments and Waivers.................... 36
10.6 Multiple Counterparts....................................... 36
10.7 Expenses.................................................... 36
10.8 Invalidity.................................................. 36
10.9 Titles...................................................... 36
10.10 Publicity................................................... 36
10.11 Confidential Information.................................... 37
10.12 Insurance................................................... 37
10.13 Sale of Assets Only......................................... 37
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LIST OF EXHIBITS
EXHIBIT A ESCROW AGREEMENT
EXHIBIT B HEARME NON-EXCLUSIVE PATENT LICENSE AGREEMENT
EXHIBIT C RIGHTS AGREEMENT AMENDMENT
EXHIBIT D XXXXX WILCO SOURCE CODE LICENSE AGREEMENT
EXHIBIT E TECHNOLOGY AND SOURCE CODE LICENSE AGREEMENT
EXHIBIT F FORM OF PROMISSORY NOTE
EXHIBIT G XXXX OF SALE
EXHIBIT H OPINION OF COUNSEL TO BUYER
EXHIBIT I OPINION OF COUNSEL TO SELLER
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered
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into as of December 18, 2000, by and between HearMe, a Delaware corporation
("Seller"), and GameSpy Industries, Inc., a California corporation ("Buyer").
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RECITALS
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A. Seller has a business segment entitled "Live Communities" that is
engaged in the Business (as defined below) of providing online game and live
voice chat communities.
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, certain assets related to the Business, and Buyer further desires to
assume certain liabilities related to the Business, upon the terms and subject
to the conditions set forth herein.
AGREEMENT
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In consideration of the above recitals and the representations,
warranties and covenants contained herein, the adequacy of which is hereby
acknowledged, Seller and Buyer mutually agree as follows:
Article I.
Definitions
1.1 Defined Terms. As used herein, the terms below shall have the
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following meanings:
"Action" shall mean any action, claim, suit, arbitration,
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inquiry, subpoena, discovery request, proceeding or investigation by or before
any court or grand jury, any governmental or other regulatory or administrative
agency or commission or any arbitration tribunal related to, arising out of, or
resulting from (i) the operation of the Business, (ii) the Assets, (iii) the
Assumed Contracts or (iv) the Assumed Liabilities.
"Affiliate" shall mean, with respect to any Person, any other
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Person directly or indirectly controlling, controlled by or under common control
with such Person and any member, general partner, director, officer or employee
of such Person. For purposes of this definition of Affiliate, "control" shall
mean the power of one or more Persons to direct the affairs of the Person
controlled by reason of ownership of voting stock, contract or otherwise.
"Ancillary Agreements" shall mean the Escrow Agreement, the
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Note, the Patent License Agreement, the Technology License Agreement, the Xxxxx
Wilco License Agreement and the Investors' Rights Agreement, as amended by the
Rights Agreement Amendment.
"Assets" shall mean all of the properties, assets, and rights of
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any kind, whether tangible or intangible, real or personal, owned by Seller or
in which Seller has any interest (other than the Excluded Assets) in the
Contract Rights, the Personal Property, the Intangibles, the
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Books and Records, the Intellectual Property (other than the Licensed
Technology) and, to the extent transferable, the Permits, in each case as used
in the operation of the Business.
"Assumed Contracts" shall mean the Contracts listed on
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Schedule 1.1(a), for which Buyer shall be responsible following the Effective
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Time.
"Assumed Liabilities" shall mean the liabilities listed on
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Schedule 1.1(b).
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"Books and Records" shall mean all records (or true and complete
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copies thereof), including computerized books and records, owned by Seller that
relate to the Business, including, without limitation, sales and promotional
literature, manuals and data, lists of customers and suppliers, all such books
and records relating to the purchase of materials, supplies and services for the
Business, and any files relating to any Action in respect of any Assumed
Liability, but specifically excluding corporate minute and stock books and
financial information other than materials provided to Buyer prior to the date
hereof and excluding the foregoing books and records relating to the Excluded
Liabilities.
"Business" shall mean the multiplayer or online game service and
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voice chat communities operated by or for Seller, including the business segment
entitled "Live Communities," information regarding the users of such technology
and services, Seller's affiliate network, the collection of web sites and web
pages related to gaming, and the global ranking services.
"Buyer's Knowledge" shall mean Buyer's actual knowledge after
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reasonable inquiry of officers, directors and employees of Buyer reasonably
believed to have knowledge of the matter in question.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
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and the rules and regulations thereunder.
"Contract Rights" shall mean all of Seller's rights under sales
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orders in process, utility and lease deposits, prepaid items and expenses and
rights under Assumed Contracts.
"Contracts" shall mean any and all contracts, agreements,
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arrangements, leases, mortgages, bonds, notes and other instruments and
obligations, whether or not in writing.
"Damages" shall mean any and all costs, losses, damages,
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liabilities or expenses, including interest, penalties, fines and reasonable
attorneys' fees incident thereto, incurred in connection with any Claim.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
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easement, security interest, right-of-way, encumbrance or other right of third
parties.
"Escrow Agent" shall mean the escrow agent under the Escrow
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Agreement, as selected by mutual agreement of the parties.
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"Escrow Agreement" shall mean the Escrow Agreement in
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substantially the form attached hereto as Exhibit A and as subsequently amended
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by mutual agreement of the parties, including to accommodate the reasonable
comments or requirements of the Escrow Agent.
"Excluded Assets" shall mean the assets listed on Schedule
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1.1(c).
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"Excluded Liabilities" shall mean, in each case other than any
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Assumed Liabilities, obligations under Assumed Contracts or other liabilities
that are being expressly assumed by Buyer hereunder, (a) any liabilities or
obligations incurred prior to the Effective Time, arising from or out of, or in
connection with Seller's operations, the condition of its assets or places of
business, its ownership of the Assets, or the issuance, sale, repayment or
repurchase of any of its securities; (b) any liabilities or obligations
incurred, arising from or out of, in connection with or as a result of claims
made by or against Seller whether before or after the Effective Time that arise
out of events or operation of the Business prior to the Effective Time; (c) any
liabilities or obligations incurred, arising from or out of, in connection with
or as a result of any alleged or actual defect in any product or service or in
connection with any alleged or actual breach of warranty (whether express or
implied) in relation to any product sold or service provided by Seller prior to
the Effective Time; (d) any liabilities or obligations (whether assessed or
unassessed) of Seller for any Taxes, including any Taxes arising by reason of
the transactions contemplated herein, as of, or for any period ending on or
prior to, the Effective Time; (e) all fees and expenses of Seller in connection
with the transactions contemplated herein; (e) any liabilities or obligations
incurred for any period prior to the Effective Time to former or current
officers, directors, employees or Affiliates of Seller, including without
limitation any liabilities or obligations of Seller in connection with any
employee benefit plans or collective bargaining, labor or employment agreement
or other similar arrangement or obligations in respect of retiree health
benefits; (f) any liabilities or obligations to stockholders or former
stockholders of Seller; (g) any liabilities or obligations of Seller incurred,
arising from or out of, or in connection with this Agreement or the events or
negotiations leading up to this Agreement; and (h) the liabilities listed on
Schedule 1.1(d).
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"GAAP" shall mean generally accepted accounting principles set
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forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the accounting
profession), or in such other statements by such entity as may be in general use
by significant segments of the U.S. accounting profession, which are applicable
to the facts and circumstances on the date of determination.
"Intangibles" shall mean the intangibles listed on Schedule
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1.1(e).
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"Intellectual Property" shall mean: all copyrights, copyright
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registrations, proprietary processes or information, trade secrets, license
rights, specifications, technical manuals and data, drawings, inventions
(whether patentable or not), designs, patents and patent applications (together
with all reissues, divisions, renewals, extensions, provisionals, continuations
and continuations in part thereof), trade names, trademarks, service marks,
product
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information and data, know-how and development work-in-progress, customer lists,
user or member lists (together with all associated data and databases), software
(including the Xxxxx Wilco software), domain names and registrations thereof
(together with any other means of providing access to the Business over the
Internet or related or successor technology) business and marketing plans and
other intellectual or intangible property embodied in or pertaining to the
Business, whether pending, applied for or issued, whether filed in the United
States or in other countries, including the items listed in Schedule 1.1(f),
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together with all associated goodwill; all things authored, discovered,
developed, made, perfected, improved, designed, engineered, acquired, produced,
conceived or first reduced to practice by Seller or any of its employees or
agents that are embodied in, derived from or relate to the Business, in any
stage of development, including, without limitation, modifications,
enhancements, designs, concepts, techniques, methods, ideas, flow charts, coding
sheets, notes and all other information relating to the Business; any and all
design and code documentation, methodologies, processes, trade secrets,
copyrights, design information, product information, technology, formulae,
routines, engineering specifications, technical manuals and data, drawings,
inventions, know-how, techniques, engineering work papers, and notes,
development work-in-process, and other proprietary information and materials of
any kind relating to, used in, or derived from the Assets; all computer software
programs, data and associated licenses, in each of the foregoing cases, used in
connection with or constituting a part of the Business.
"Legal Requirements" shall mean any and all applicable (i)
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federal, state and local laws, ordinances and regulations and (ii) judgments,
orders, writs, injunctions and decrees.
"Licensed Technology" shall mean the Intellectual Property
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licensed to Buyer pursuant to the Technology License Agreement, the Xxxxx Wilco
License Agreement and the Patent License Agreement.
"Investors' Rights Agreement" shall mean the Investors' Rights
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Agreement by and among Buyer and certain shareholders of Buyer.
"Outside Date" shall mean January 20, 2001.
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"Patent License Agreement" shall mean the HearMe Non-Exclusive
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Patent License Agreement in substantially the form attached hereto as Exhibit B.
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"Permits" shall mean all of the licenses, permits and other
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governmental authorizations listed on Schedule 1.1(g).
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"Person" shall mean any person or entity, whether an individual,
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trustee, corporation, general partnership, limited partnership, trust,
unincorporated organization, limited liability company, business association,
firm, joint venture, governmental agency or authority or otherwise.
"Personal Property" shall mean the personal property listed on
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Schedule 1.1(h).
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"Representative" shall mean, with respect to any Person, any
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officer, director, principal, attorney, employee or other agent.
"Rights Agreement Amendment" shall mean the Amendment to the
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Investors' Rights Agreement in substantially the form attached hereto as Exhibit
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C.
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"Xxxxx Wilco License Agreement" shall mean the Xxxxx Wilco Source
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Code License Agreement in substantially the form attached hereto as Exhibit D.
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"Seller's Knowledge" shall mean Seller's actual knowledge after
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reasonable inquiry of officers, directors and employees of Seller reasonably
believed to have knowledge of the matter in question.
"Securities Act" shall mean the Securities Act of 1933, as
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amended.
"Tax" shall mean any federal, state, local, or foreign income,
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gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"Technology License Agreement" shall mean the Technology and
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Source Code License Agreement in substantially the form attached hereto as
Exhibit E.
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"Unaudited Financial Statements" shall mean the unaudited balance
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sheet for the Business and the Business profit and loss statement and
accompanying notes as of November 30, 2000, and the unaudited profit and loss
statements for the Business for the year ended December 31, 1999.
1.2 Other Defined Terms.
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(a) The following terms shall have the meanings defined for such
terms in the Sections set forth below:
Term Section
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Cash Consideration 2.2
Claim 9.3(c)
Claim Notice 9.3(c)
Closing 3.1
Effective Time 3.1
Employees 6.4(a)
Escrow Stock Consideration 2.2
Escrow Termination Date 9.3(d)
Immediate Stock Consideration 2.2
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Indemnified Party 9.3(c)
Indemnifying Party 9.3(c)
Note 2.2
Note Consideration 2.2
Notice Date 9.3(c)
Permitted Transaction 6.2(g)
Purchase Price 2.2
Retained Technology 6.2(g)
Stock Consideration 2.2
Technology Licensee 6.2(g)
Third Party Claim 9.3(d)
(b) For purposes of this Agreement, (i) "including" shall mean
"including, but not limited to," "including, without limitation," and other
phrases of similar import and (ii) "hereof," "herein," and "hereunde," and words
of similar import, refer to this Agreement as a whole (including the Exhibits
and Schedules to this Agreement) and not to any particular Section or Article
hereof.
Article II.
Purchase and Sale of Assets
2.1 Transfer of Assets. Pursuant to the terms and subject to the
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conditions of this Agreement, in exchange for the consideration set forth in
Section 2.2 below, at the Closing, Seller shall sell, convey, transfer, assign
and deliver to Buyer, and Buyer shall purchase from Seller, the Assets, free and
clear of all Encumbrances, and assume the Assumed Liabilities.
2.2 Purchase Price. In consideration of the transfer of the Assets,
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Buyer shall (a) pay to the order of Seller an amount equal to $500,000 (the
"Cash Consideration"), (b) issue to Seller a promissory note (the "Note") in the
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amount of $1,500,000 plus the dollar value of the accounts receivables of the
Business at Closing minus those receivables of the Business at Closing that are
more than 90 days past due (subject to adjustment as set forth in the Note) in
substantially the form attached hereto as Exhibit F (the "Note Consideration"),
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(c) sell and issue to Seller 2,404,890 shares of Common Stock of Buyer (the
"Stock Consideration, and, collectively with the Cash Consideration and the Note
-------------------
Consideration, the "Purchase Price") and (d) assume the Assumed Liabilities. At
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Closing, Buyer shall deliver (i) to Seller, by wire transfer of immediately
available funds, the Cash Consideration, (ii) to Seller, the executed Note,
(iii) to Seller, a certificate registered in the name of Seller representing
2,044,157 shares of the Stock Consideration (the "Immediate Stock
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Consideration"), and (iv) to the Escrow Agent, a certificate registered in the
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name of Seller representing 360,733 shares of the Stock Consideration (the
"Escrow Stock Consideration"). The Escrow Stock Consideration shall be
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beneficially owned by Seller and shall be subject to the provisions of the
Escrow Agreement.
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2.3 Assumed Liabilities. Except for the Assumed Liabilities, which
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Buyer agrees to assume as of the Effective Time, or as otherwise set forth
herein, Buyer shall not assume, shall not take subject to and shall not be
liable for, any liabilities or obligations of any kind or nature, whether
absolute, contingent, accrued, known or unknown, of Seller or any Affiliate of
Seller.
2.4 Taxes and Other Costs. In addition to payment of the Purchase
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Price, Buyer shall pay (or reimburse Seller for) 50% of any sales, use,
documentary transfer or similar taxes arising from or attributable to the
transfer of the Assets or the Business.
2.5 Adjustment to Stock Consideration. In the event that, subsequent to
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the date of this Agreement but prior to the Closing, the outstanding shares of
capital stock of Buyer shall have been changed into a different number of shares
or a different class as a result of a stock split, reverse stock split, stock
dividend, subdivision, reclassification, split, combination, exchange,
recapitalization or other similar transaction, the Stock Consideration shall be
appropriately adjusted to reflect such change.
Article III.
Closing
3.1 Closing. The closing of the transactions contemplated herein (the
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"Closing") shall be held at 10:00 a.m. California time on the business day
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following the satisfaction or waiver of the last of the conditions to Closing
set forth in Articles VII and VIII hereof at the offices at Venture Law Group,
0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, unless the parties hereto
otherwise agree to any earlier or subsequent time or date of closing; provided,
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however, that in no event will the Closing be extended to a time later than the
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Outside Date without the parties' mutual written consent, and shall be effective
as of 12:01 a.m. (California time) on the day (whether or not a business day)
following the day of the Closing (the "Effective Time"). Results of operations
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of the portion of the Business comprised of the Assets, subject to the Assumed
Liabilities, through the accounting period at 11:59 p.m. (California time) on
the day of the Closing (whether or not a business day) shall be included in the
consolidated results of operations of Seller; and, after such time, operations
for such portion of the Business shall be conducted and the results thereof
shall be for the account of Buyer.
3.2 Deliveries at Closing. At the Closing the following items shall be
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delivered by the parties:
(a) By Buyer. Buyer shall deliver to Seller:
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(i) the Cash Consideration, the Note Consideration and the
Stock Consideration, as provided in Section 2.2;
(ii) the certificates described in Article VII;
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(iii) an executed counterpart of each of the Ancillary
Agreements;
(iv) counterpart signature pages to the Rights Agreement
Amendment executed by Seller, each Purchaser (as
defined in the Investors' Rights Agreement) and the
holders of a majority of the outstanding shares of
Common Stock held by the Shareholders (as defined
in the Investors' Rights Agreement);
(v) the opinion of counsel to Buyer described in
Section 7.6; and
(vi) such other documents and instruments as are
reasonably necessary to consummate the transactions
contemplated hereby.
(b) By Seller. Seller shall deliver to Buyer:
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(i) one or more Bills of Sale, in substantially the
form attached hereto as Exhibit G, as well as such
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trademark assignments, domain name transfer
documents or other assignment agreements as are
sufficient to convey the Assets to Buyer;
(ii) the certificates described in Article VIII;
(iii) an executed counterpart of each of the Ancillary
Agreements (other than the Note);
(iv) the opinion of counsel to Seller described in
Section 8.7 hereof;
(v) a stock power executed in blank with respect to the
Escrow Stock Consideration; and
(vi) such other documents and instruments as are
reasonably necessary to consummate the transactions
contemplated hereby.
The Books and Records shall be delivered to Buyer at the Closing.
3.3 Consents to Assignment. Anything in this Agreement to the contrary
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notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract, license, sales order, purchase order or any claim or right or any
benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or in any way affect the respective rights of Buyer or Seller
thereunder. If such consent is not obtained prior to the Effective Time, or if
an attempted assignment thereof would be ineffective or would affect the rights
thereunder so that Buyer would not receive all such rights, Seller will take all
reasonable steps to provide to Buyer the benefits under any such claim,
Contract, license, sales order or purchase order, including without limitation,
enforcement for the benefit of Buyer of any and all rights of Seller against a
third party thereto arising out of the breach or cancellation by such third
party or otherwise; and any
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transfer or assignment to Buyer of any property or property rights or any
Contract or agreement which shall require the consent or approval of any third
party shall be made subject to such consent or approval being obtained.
Article IV.
Representations and Warranties of Seller
Except as described in the Seller Disclosure Schedule delivered to
Buyer prior to the execution of this Agreement, Seller hereby represents and
warrants to Buyer as follows:
4.1 Organization. Seller is a corporation duly organized, validly
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existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted. Seller is duly qualified
to transact business and is in good standing in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on its business
or properties.
4.2 Authorization. Seller has all necessary corporate power and
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authority and has taken all corporate action necessary to enter into this
Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder. This Agreement has been, and upon Closing each Ancillary Agreement
other than the Note will have been, duly executed and delivered by Seller, and
the Agreement constitutes, and upon Closing each Ancillary Agreement other than
the Note will constitute, a valid and binding obligation, enforceable against it
in accordance with its respective terms subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally and limitations
imposed by equitable principles, whether considered in a proceeding at law or in
equity and the discretion of the court before which any proceeding therefor may
be brought.
4.3 Brokers. All negotiations relating to this Agreement and the
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transactions contemplated hereby have been conducted without the intervention of
any person or entity acting on behalf of Seller in such a manner as to give rise
to any valid claim against Buyer for any broker's or finder's commission, fee or
similar compensation.
4.4 Assumed Contracts. Seller has previously delivered to Buyer true
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and correct copies of the Assumed Contracts. All Assumed Contracts are in full
force and effect. Neither Seller nor, to Seller's Knowledge, any other party, is
in default under any Assumed Contract to which Seller is a party. Seller has
identified on Schedule 4.4 of the Seller Disclosure Schedule which of the
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Assumed Contracts requires the consent of a party (other than the Seller) to the
transfer of such contract to Buyer hereunder.
4.5 Litigation, Proceedings and Applicable Law. There are no Actions,
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suits, investigations or proceedings, at law or in equity or before or by any
governmental authority or instrumentality or before any arbitrator of any kind,
pending or, to Seller's Knowledge, threatened (including by any cease and desist
letter, infringement notice under the Digital Millenium Copyright Act of 1998 or
similar communication) (a) against Seller which relate to
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the Assets or the Business or (b) seeking to delay or enjoin the consummation of
the transactions contemplated hereby. There are no outstanding orders, decrees
or stipulations issued by any federal, state, local or foreign judicial or
administrative authority in any proceeding to which Seller is or was a party
which relate to the Assets or the Business.
4.6 No Conflict or Violation. Neither the execution and delivery of
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this Agreement nor the consummation of the transactions contemplated hereby will
result in (a) a violation of or a conflict with any provision of the Certificate
of Incorporation or Bylaws of Seller, (b) a breach or termination of, or a
default under, any term or provision of any Assumed Contract or an event which,
with notice, lapse of time, or both, would result in any such breach,
termination or default, or (c) to Seller's Knowledge, a violation by Seller of
any Legal Requirement or an event which with notice, lapse of time or both,
would result in such a violation.
4.7 Consents and Approvals. No consent, waiver, approval or
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authorization of or by, or declaration, filing or registration with, any
governmental or regulatory authority is required to be made or obtained by
Seller in connection with the execution, delivery and performance of this
Agreement or any Ancillary Agreement and the consummation of the transactions
contemplated hereby or thereby.
4.8 Intellectual Property.
---------------------
(a) Seller owns, or is licensed or otherwise entitled to exercise
pursuant to the terms of a license or other similar agreement identified on
Schedule 4.8, all rights to all Intellectual Property used in the Business as
------------
currently conducted or in connection with products to be used in the Business
currently under development without any conflict or infringement of the rights
of others. Seller has taken reasonable action to protect its proprietary source
code included within the Intellectual Property as a trade secret. In addition,
Seller has taken reasonable and practicable steps (including, without
limitation, entering into proprietary information and inventions agreements with
all officers and employees of and consultants to Seller) to maintain the secrecy
and confidentiality of and its proprietary rights in, all Intellectual Property.
(b) Schedule 4.8 lists (i) all patents and patent applications and
------------
all registered copyrights, trade names, trademarks, service marks and other
company, product or service identifiers included in the Intellectual Property,
and specifies the jurisdictions in which each such Intellectual Property has
been registered, including the respective registration numbers; (ii) all
licenses, sublicenses and other agreements as to which Seller is a party and
pursuant to which Seller or any other person is authorized to use any
Intellectual Property; and (iii) all licenses relating to the Business under
which Seller is or may be obligated to make material royalty or other payments.
Copies of all licenses, sublicenses, and other agreements identified pursuant to
clauses (ii) and (iii) above have been delivered by Seller to Buyer.
(c) Seller is not in violation of any license, sublicense or
agreement described in Schedule 4.8. As a result of the execution and delivery
------------
of this Agreement or any Ancillary Agreement or the performance of Seller's
obligations hereunder or thereunder, Seller will not be
-10-
in violation of any license, sublicense or agreement described in Schedule 4.8,
------------
or lose or in any way impair any rights pursuant thereto.
(d) Seller is the absolute owner or a nonexclusive or exclusive
licensee of, with all necessary right, title and interest in and to (free and
clear of any liens, encumbrances or security interests) all non-public domain
Intellectual Property and has rights to the use, sale, license or disposal
thereof in connection with the services or products in respect of which the
Intellectual Property are being used in the Business.
(e) No claims with respect to the Intellectual Property have been
asserted to Seller, or, to Seller's Knowledge, are threatened by any person, and
Seller knows of no claims (i) to the effect that Seller in the conduct of the
Business infringes any copyright, patent, trade secret, or other intellectual
property right of any third party or violates any license or agreement with any
third party, (ii) contesting the right of Seller to use, sell, license or
dispose of any Intellectual Property, or (iii) challenging the ownership,
validity or effectiveness of any of the Intellectual Property.
(f) All trademarks, service marks, and other company, product or
service identifiers held by Seller and used in the Business are valid and
subsisting and exclusively owned by Seller.
(g) To Seller's Knowledge, there has not been and there is not now
any unauthorized use, infringement or misappropriation of any of the
Intellectual Property by any third party, including, without limitation, any
service provider of Seller; Seller has not been sued or, to Seller's Knowledge,
charged as a defendant in any claim, suit, action or proceeding that involves a
claim of infringement of any patents, trademarks, service marks, copyrights
domain names or other intellectual property rights. Seller does not have any
infringement liability due to its conduct of the Business with respect to any
patent, trademark, service xxxx, copyright, domain name or other intellectual
property right of another.
(h) No Intellectual Property is subject to any outstanding order,
judgment, decree, stipulation or agreement restricting in any material manner
the licensing thereof by Seller. Seller has not entered into any agreement to
indemnify any other person against any charge of infringement of any
Intellectual Property, except in the ordinary course of business. Seller has not
entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise to enforce rights with
respect to, any Intellectual Property. Seller has the exclusive right to file,
prosecute and maintain all applications and registrations with respect to the
Intellectual Property developed or owned by Seller.
4.9 Financial Statements. Except as set forth on Schedule 4.9, the
-------------------- ------------
Unaudited Financial Statements have been delivered to Buyer and present fairly
the financial position of the Business as of such dates and the operating
results of the Business for the periods so ended, subject to normal year-end
audit adjustments. The Unaudited Financial Statements have been prepared
consistently for all periods presented, and revenues presented on the Unaudited
Financial Statements have been recognized in accordance with GAAP, consistently
applied.
-11-
4.10 Absence of Certain Changes. Since November 30, 2000, Seller has
--------------------------
conducted the Business in the ordinary course consistent with its past practice.
Without limiting the foregoing, during such period, Seller:
(a) has not created, incurred or assumed any obligation which in any
material way adversely affects the Business, the Assets or Buyer's ability to
conduct the Business following the Closing in substantially the same manner and
condition as conducted by Seller on the date of this Agreement;
(b) has not changed in any material respect the compensation of, or
agreed to provide additional benefits to, or entered into any employment
agreement with, any Employee;
(c) has maintained insurance coverage in amounts adequate to cover
the reasonably anticipated risks of the Business;
(d) has not sold, disposed of or encumbered any of the Assets or
licensed any Assets to any Person except in the ordinary course of business
consistent with past practice;
(e) has not entered into any agreement with any third party for the
distribution of any of the Assets;
(f) has not changed or announced any change to the products or
services sold by the Business;
(g) has not violated, amended or otherwise changed in any way the
terms of any of the Assumed Contracts;
(h) has not commenced or been the subject of a lawsuit related to or
involving the Assets or the Business;
(i) has operated the Business in the ordinary course so as to use
reasonable efforts to preserve the Business intact, to keep available to Buyer
the services of the Employees, and to preserve for Buyer the goodwill of the
Business's suppliers, customers and others having business relations with it;
(j) has not permitted, incurred or suffered any change in the
condition (financial or otherwise), assets, liabilities, reserves, earnings, or
business of the Business, except for changes which have not, individually or in
the aggregate, been materially adverse to the Business; or
(k) made any agreement to do any of the foregoing.
4.11 Assets.
------
(a) The Assets and the Licensed Technology include all properties and
rights, tangible and intangible, necessary for Buyer to operate the Business
after the Effective Time in a manner substantially equivalent to the manner in
which Seller has operated the Business prior to
-12-
and through the Effective Time, and the Assets (including the Excluded Assets
and the Licensed Technology) include all properties and rights, tangible and
intangible, that relate primarily to, and are used by Seller in connection with,
the Business. Other than consents relating to the Assumed Contracts, no licenses
or other consents from, or payments to, any other Person are or will be
necessary for Buyer to operate the Business and use the Assets in substantially
the manner in which Seller has operated the same.
(b) Seller holds good and marketable title, license to or leasehold
interest in all of the Assets and has the complete and unrestricted power and
the unqualified right to sell, assign and deliver the Assets to Buyer. Upon
consummation of the transactions contemplated by this Agreement, Buyer will
acquire good and marketable title, license or leasehold interest to the Assets
free and clear of any Encumbrances and there exists no restriction on the use or
transfer of the Assets, except as may be assumed hereunder by Buyer as an
Assumed Liability. No Person other than Seller has any right or interest in the
Assets, including the right to grant interests in the Assets to third parties,
except for Assets licensed or leased from third parties which are set forth in
the Seller Disclosure Schedule and identified as such.
(c) None of the Assets that constitute tangible personal property is
held under any lease, security agreement, conditional sales contract, lien, or
other title retention or security arrangement.
(d) Except as provided in this Agreement, no restrictions will exist
on Buyer's right to sell, resell, license or sublicense any of the Assets or
engage in the Business, nor will any such restrictions be imposed on Buyer as a
consequence of the transactions contemplated by this Agreement or by any
agreement referenced in this Agreement.
(e) All of the Assets are in good operating condition and repair,
normal wear and tear excepted, as required for their use in the Business as
presently conducted, and conform to all applicable laws, and no written notice
of any violation of any law relating to any of the Assets or Assumed Liabilities
has been received by Seller.
4.12 Major Contracts. Except as set forth in Schedule 4.12, other than
--------------- -------------
the Assumed Contracts, Seller is not a party to or subject to:
(a) Any employment or consulting contract with any Employee;
(b) Any original equipment manufacturer agreement, distribution
agreement, volume or quantity purchase agreement or other similar agreement
relating to the Business or joint marketing, joint development or joint venture
contract or arrangement or any other agreement relating to the Business that has
involved or is expected to involved a sharing of profits with other persons or
provides for payments of more than $50,000 per annum;
(c) Any lease for real or personal property used in the Business
involving payments of more than $50,000 per annum;
-13-
(d) Any instrument evidencing or related in any way to indebtedness
for borrowed money which results in an Encumbrance on any Asset;
(e) Any contract containing covenants purporting to limit the freedom
of Seller directly or indirectly to operate the Business in any geographic area
or with any third party;
(f) Any agreement of indemnification in connection with the Business;
(g) Any agreement, contract or commitment relating to capital
expenditures by Seller primarily or exclusively for the Business involving
payments by Seller of more than $50,000 per annum;
(h) Any agreement, contract or commitment relating to the license,
disposition or acquisition by Seller of any Assets, other than in the ordinary
course of business;
(i) Any sole source supplier agreements with respect to the Business;
or
(j) Any existing OEM agreement, distribution agreement, volume
purchase agreement or other similar agreement relating to the Business pursuant
to which Seller has granted or received most favored customer provisions or
exclusive marketing rights related to any product, group of products or
territory.
Each agreement, Contract, mortgage, indenture, plan, lease,
instrument, arrangement, license and commitment listed on Schedule 4.12 (i) is
-------------
valid and binding on Seller, (ii) is in full force and effect, (iii) has not
been breached by Seller or, to Seller's Knowledge, any other party thereto in
any material manner.
4.13 Licenses and Permits. To Seller's Knowledge, Seller holds all
--------------------
consents, approvals, registrations, certifications, authorizations, permits and
licenses of, and has made all filings with, or notifications to, all
governmental entities pursuant to applicable requirements of all federal, state,
local and foreign laws, ordinances, governmental rules or regulations applicable
to the Business. There is no investigation or inquiry to which Seller is a party
or pending or, to Seller's Knowledge, threatened in writing, relating to the
Business and its compliance with applicable foreign, state, local or foreign
laws, ordinances, governmental rules or regulations. Except as set forth in the
Schedule 4.13, each such consent, approval, registration, certification,
-------------
authorization, permit or license is transferable and shall be transferred to
Buyer in accordance with the terms of this Agreement.
4.14 Employees. All employees, consultants and officers of Seller that
---------
have had access to the Assets are parties to Seller's form of proprietary
information and inventions agreement, a copy of which has been provided to
Buyer. To Seller's Knowledge, none of Seller's employees, consultants, officers
or directors is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would conflict with
their
-14-
obligation to promote the interests of Seller with regard to the Business or the
Assets or that would conflict with the Business or the Assets. To Seller's
Knowledge, neither the execution nor the delivery of this Agreement, nor the
carrying on of the Business by its employees and consultants, will conflict with
or result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract, covenant or instrument under which any of such
persons or entities are now obligated. Seller has entered into arrangements with
certain employees of the Business providing for certain cash bonuses (as listed
in Schedule 4.14) and an extended one-year period in which to exercise options
-------------
to purchase common stock of Seller if such employees remain employed by Buyer
for a period of 90 days following the Closing.
4.15 Employee Benefit and Compensation Plans. Buyer will incur no liability
---------------------------------------
with respect to, or on account of, and Seller will retain any liability for, and
on account of, any employee benefit plan of Seller, any of its Affiliates or any
predecessor employer of any employee, including, but not limited to, liabilities
Seller may have to such employees under all employee benefit plans, incentive
compensation plans, bonus plans, pension and retirement plans, vacation, profit-
sharing plans (including any profit-sharing plan with a cash-or-deferred
arrangement) share purchase and option plans, savings and similar plans,
medical, dental, travel, accident, life, disability and other insurance and
other plans or arrangements, whether written or oral and whether "qualified" or
"non-qualified." Seller has not, with respect to any employee, maintained or
contributed to, or been obligated or required to contribute to, any retirement
or pension plan or any employee benefit plan. Seller is not a party to any
collective bargaining agreement covering any employee and Seller knows of no
effort to organize any such employee as a part of any collective bargaining
unit.
4.16 Taxes. All Taxes (other than Taxes referred to in Section 2.4)
-----
relating to the Business or the Assets have been or will be paid by Seller with
respect to all periods (or portions thereof) prior to and including the date of
Closing. Seller and any other person required to file returns or reports of
Taxes relating to the Business or the Assets has duly and timely filed all
returns and reports of Taxes relating to the Business or the Assets required to
be filed, and all such returns and reports are true, correct and complete.
Seller has complied with all record keeping and tax reporting obligations
relating to income and employment taxes due with respect to compensation paid to
employees of the Business, including withholding of all taxes required to be
withheld. Seller has not been delinquent in the payment of any Taxes relating to
the Business or the Assets and there are no pending or threatened proceedings
against Seller with respect to such Taxes.
4.17 Compliance with Law. The operation of the Business has been conducted
-------------------
in all material respects in accordance with all applicable laws, regulations and
other requirements of governmental entities having jurisdiction over the same.
4.18 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
Seller in reliance upon Seller's representation to Buyer, which by Seller's
execution of this Agreement, Seller hereby confirms, that the Stock
Consideration will be acquired for investment for Seller's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and that Seller has no present intention of selling, granting any
participation in, or
-15-
otherwise distributing the same. By executing this Agreement, Seller further
represents that Seller does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to the Stock
Consideration. Seller has not been formed for the specific purpose of acquiring
the Stock Consideration.
4.19 Disclosure of Information. Seller has had an opportunity to discuss
-------------------------
Buyer's business, management, financial affairs and the terms and conditions of
the offering of the Stock Consideration with Buyer's management and has had an
opportunity to review Buyer's facilities. Seller understands that such
discussions, as well as any written information delivered by Buyer to Seller,
were intended to describe the aspects of Buyer's business which it believes to
be material.
4.20 Restricted Securities. Seller understands that the Stock
---------------------
Consideration has not been, and will not be, registered under the Securities
Act, by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Seller's representations as expressed
herein. Seller understands that the shares comprising the Stock Consideration
are "restricted securities" under applicable U.S. federal and state securities
laws and that, pursuant to these laws, Seller must hold the Stock Consideration
indefinitely unless it is registered with the Securities and Exchange Commission
and qualified by state authorities, or an exemption from such registration and
qualification requirements is available. Seller acknowledges that Buyer has no
obligation to register or qualify the Stock Consideration for resale, except as
set forth in the Investors' Rights Agreement. Seller further acknowledges that
if an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Stock Consideration, and on
requirements relating to Buyer which are outside of Seller's control, and which
Buyer is under no obligation and may not be able to satisfy.
4.21 No Public Market. Seller understands that no public market now exists
----------------
for any of the securities issued by Buyer, and that Buyer has made no assurances
that a public market will ever exist for the Stock Consideration.
4.22 Legends. Seller understands that the certificates representing the
-------
Stock Consideration and any securities issued in respect of or exchange for such
securities, may bear one or all of the following legends:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO BUYER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."
-16-
(b) Any legend set forth in the Investors' Rights Agreement.
(c) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
4.23 Accredited Investor. Seller is an accredited investor as
-------------------
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4.24 Privacy. Seller's records relating to registered users and data
-------
collection practices comply with all laws and regulations in each U.S. and
foreign jurisdiction in which Seller collects any information from members,
users or visitors. Seller has full power and authority to provide all such
information to Buyer. At the Effective Time, Buyer will acquire the right to use
such information and data in the operation of the Business and in meeting its
obligations under all Assumed Contracts, subject to the same restrictions to
which Seller is subject prior the Effective Time. Seller will not use, retain or
disclose any such information after it has been provided to Buyer. Seller will
not contact any user, member or visitor in any way that would lessen the value
of such user, member or visitor to Buyer.
Article V.
Representations and Warranties of Buyer
Except as described in the Buyer Disclosure Schedule delivered to Seller
prior to the execution of this Agreement, Buyer hereby represents and warrants
to Seller as follows:
5.1 Organization of Buyer. Buyer is a corporation duly organized,
---------------------
validly existing and in good standing under the laws of the State of California
and has all requisite corporate power and authority to carry on its business.
Buyer is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on its business or properties.
5.2 Authorization. Buyer has all necessary corporate power and authority
-------------
and has taken all corporate action necessary to enter into this Agreement and
the Ancillary Agreements, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. This Agreement
has been duly executed and delivered by Buyer and is a valid and binding
obligation, enforceable against it in accordance with its terms subject to the
effect of applicable bankruptcy, insolvency, reorganization, moratorium, and
other similar laws relating to or affecting the rights of creditors generally
and limitations imposed by equitable principles, whether considered in a
proceeding at law or in equity and the discretion of the court before which any
proceeding therefor may be brought.
5.3 Brokers. All negotiations relating to this Agreement and the
-------
transactions contemplated hereby have been conducted without the intervention of
any person or entity acting on behalf of Buyer in such a manner as to give rise
to any claim against Seller for any broker's or finder's commission, fee or
similar compensation.
-17-
5.4 No Conflict or Violation. Neither the execution and delivery of
------------------------
this Agreement nor the consummation of the transactions contemplated hereby will
result in (i) a violation of or a conflict with any provision of the Articles of
Incorporation or Bylaws of Buyer or (ii) a violation by Buyer of any Legal
Requirement or an event which with notice, lapse of time or both, would result
in such a violation.
5.5 Consents and Approvals. No consent, waiver, approval or authorization
----------------------
of or by, or declaration, filing or registration with, any governmental or
regulatory authority, or any other person or entity, is required to be made or
obtained by Buyer in connection with the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
except for filings pursuant to Section 25102(f) of the California Corporate
Securities Law of 1968, as amended, and the rules thereunder and Regulation D of
the Securities Act.
5.6 Litigation, Proceedings and Applicable Law. There are no actions,
------------------------------------------
suits, investigations or proceedings, at law or in equity or before or by any
governmental authority or instrumentality or before any arbitrator of any kind,
pending or, to Buyer's Knowledge, threatened (a) against Buyer which, if
determined adversely against Buyer, would materially adversely affect Buyer's
ability to operate the Assets, (b) seeking to delay or enjoin the consummation
of the transactions contemplated hereby or (c) against Buyer, that might result,
either individually or in the aggregate, in any material adverse change in the
assets, condition or affairs of Buyer, financially or otherwise, or any change
in the current equity ownership of Buyer.. There are no outstanding orders,
decrees or stipulations issued by any federal, state, local or, to Buyer's
Knowledge, foreign, judicial or administrative authority in any proceeding to
which Buyer is or was a party which would materially adversely affect Buyer's
ability to operate the Assets. There is no pending, or to the best of Buyer's
Knowledge, threatened investigation or proceeding by any governmental agency
concerning the operations of Buyer's business operations. There is no action,
suit, proceeding or investigation by Buyer currently pending or which Buyer
intends to initiate.
5.7 Capitalization. The authorized capital of Buyer consists, or will
--------------
consist, immediately prior to the Closing, of:
(a) 1,500,000 shares of Preferred Stock, of which 907,992 have been
designated Series A Preferred Stock, of which 907,992 shares are issued and
outstanding immediately prior to the Closing. The rights, privileges and
preferences of the Preferred Stock are as stated in the Amended and Restated
Articles of Incorporation (including the Certificate of Determination of
Preferences filed with respect to the Series A Preferred Stock) provided to
Seller. All of the outstanding shares of Preferred Stock have been duly
authorized, fully paid and are nonassessable and issued in compliance with all
applicable federal and state securities laws.
(b) 30,000,000 shares of Common Stock, 17,671,064 shares of which are
issued and outstanding immediately prior to the Closing. All of the outstanding
shares of Common Stock have been duly authorized, fully paid and are
nonassessable and issued in compliance with all applicable federal and state
securities laws.
-18-
(c) Buyer has reserved 5,385,000 shares of Common Stock for issuance
to officers, directors, employees and consultants of the Company pursuant to its
1999 Stock Option Plan. Of such reserved shares of Common Stock, 335,000 shares
have been issued pursuant to restricted stock purchase agreements or upon
exercise of options, 3,065,042 shares are issuable upon exercise of outstanding
options, and 1,984,958 shares of Common Stock remain available for issuance to
officers, directors, employees and consultants pursuant to the Stock Plan. All
options to purchase shares of Common Stock of Buyer have been granted in
compliance with all applicable federal and state securities laws, including,
without limitation, Rule 701 under the Securities Act.
(d) Except for outstanding options issued pursuant to the Stock Plan,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal or similar rights) or agreements,
orally or in writing, for the purchase or acquisition from Buyer of any shares
of its capital stock.
5.8 Subsidiaries. Buyer does not currently own or control, directly or
------------
indirectly, any interest in any other corporation, association, or other
business entity.
5.9 Valid Issuance of Stock Consideration. The Stock Consideration,
-------------------------------------
when issued, sold and delivered in accordance with the terms hereof for the
consideration expressed herein, will be duly and validly issued, fully paid and
nonassessable and free of restrictions on transfer other than restrictions on
transfer under this Agreement, the Investors' Rights Agreement and applicable
state and federal securities laws. Based in part upon the representations of
Seller in this Agreement and subject to the provisions of Section 5.5, the Stock
Consideration will be issued in compliance with all applicable federal and state
securities laws.
5.10 Intellectual Property. Buyer owns or possesses sufficient legal
---------------------
rights to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, licenses, information and proprietary rights and processes necessary
for its business without any conflict with, or infringement of, the rights of
others. Buyer has not received any communications alleging that Buyer has
violated or, by conducting its business, would violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets or other
proprietary rights or processes of any other person or entity. Buyer is not
aware that any of its employees is obligated under any contract (including
licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interest of Buyer or that would conflict with Buyer's business. Neither the
execution or delivery of this Agreement, nor the carrying on of Buyer's business
by the employees of Buyer, nor the conduct of Buyer's business as proposed,
will, to Buyer's Knowledge, conflict with or result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such employee is now obligated. Buyer
does not believe it is or will be necessary to use any inventions of any of its
employees (or persons it currently intends to hire) made prior to their
employment by Buyer.
5.11 Compliance with Other Instruments.
---------------------------------
-19-
(a) Buyer is not in material violation or default of any provisions
of its Articles of Incorporation or Bylaws or of any material instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound or of any provision of federal or state statute, rule or regulation
applicable to Buyer. The execution, delivery and performance of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby or thereby will not result in any such material violation or
be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision, instrument,
judgment, order, writ, decree or contract or an event which results in the
creation of any material lien, charge or encumbrance upon any assets of Buyer.
(b) Buyer has avoided every condition, and has not performed any act,
the occurrence of which would result in Buyer's loss of any material right
granted under any license, distribution agreement or other material agreement.
5.12 Agreements; Action.
------------------
(a) There are no material agreements, understandings or proposed
transactions between Buyer and any of its officers, directors, affiliates, or
any affiliate thereof.
(b) Neither Buyer nor any of its subsidiaries has (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its capital stock, (ii) incurred any indebtedness for
money borrowed or incurred any other liabilities in excess of $100,000 or (iii)
sold, exchanged or otherwise disposed of any of its assets or rights, other than
in the ordinary course of business.
5.13 No Conflict of Interest. Buyer is not indebted, directly or
-----------------------
indirectly, to any of its officers or directors or to their respective spouses
or children, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or relocation
expenses of employees. To Buyer's Knowledge, none of Buyer's officers or
directors, or any members of their immediate families, are, directly or
indirectly, indebted to Buyer (other than in connection with purchases of
Buyer's stock) or have any direct or indirect ownership interest in any firm or
corporation with which Buyer is affiliated or with which Buyer has a business
relationship, or any firm or corporation which competes with Buyer except that
officers, directors and/or shareholders of Buyer may own stock in (but not
exceeding two percent of the outstanding capital stock of) any publicly traded
companies that may compete with Buyer. To Buyer's Knowledge, none of Buyer's
officers or directors or any members of their immediate families are, directly
or indirectly, interested in any material contract with Buyer. Buyer is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
5.14 Rights of Registration. Except as contemplated in the Investors'
----------------------
Rights Agreement, Buyer has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
5.15 Title to Property and Assets. Buyer owns its property and assets
----------------------------
free and clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair Buyer's ownership or use of such
-20-
property or assets. With respect to the property and assets it leases, Buyer is
in compliance with such leases and, to its Knowledge, holds a valid leasehold
interest free of any liens, claims or encumbrances.
5.16 Financial Statements. Buyer has made available to Seller its
--------------------
unaudited financial statements (including balance sheet, income statement and
statement of cash flows) as of and for the year ended December 31, 1999 and its
unaudited financial statements (including balance sheet, income statement and
statement of cash flows) as of and for the nine months ended September 30, 2000
(collectively, the "Buyer Financial Statements"). The Buyer Financial Statements
--------------------------
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated, except that the
unaudited Buyer Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Buyer Financial Statements fairly
present the financial condition and operating results of Buyer as of the dates,
and for the periods, indicated therein, subject to normal year-end audit
adjustments. Except as set forth in the Buyer Financial Statements, Buyer has no
material liabilities, contingent or otherwise, other than (a) liabilities
incurred in the ordinary course of business subsequent to September 30, 2000,
and (b) obligations under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate are not material to the financial condition or
operating results of Buyer.
5.17 Changes. Since September 30, 2000, there has not been:
-------
(a) any change in the assets, liabilities, financial condition or
operating results of Buyer from that reflected in the Financial Statements,
except changes in the ordinary course of business that have not been, in the
aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business, properties,
prospects, or financial condition of Buyer;
(c) any waiver or compromise by Buyer of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by Buyer, except in the ordinary course of business
and that is not material to the business, properties, prospects or financial
condition of Buyer;
(e) any material change in any compensation arrangement or agreement
with any employee, officer, director or shareholder;
(f) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
-21-
(g) any resignation or termination of employment of any officer or
key employee of Buyer; and Buyer, is not aware of any impending resignation or
termination of employment of any such officer or key employee;
(h) any mortgage, pledge, transfer of a security interest in, or
lien, created by Buyer, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(i) any declaration, setting aside or payment or other distribution
in respect to any of Buyer's capital stock, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by Buyer; or
(j) any arrangement or commitment by Buyer to do any of the things
described in this Section 5.18.
5.18 Tax Returns and Payments. Buyer has filed all tax returns and
------------------------
reports as required by law. These returns and reports are true and correct in
all material respects. Buyer has paid all taxes and other assessments due.
5.19 Insurance. Buyer has in full force and effect fire and casualty
---------
insurance policies, with extended coverage, sufficient in amount (subject to
reasonable deductibles) to allow it to replace any of its properties that might
be damaged or destroyed.
5.20 Labor Agreements and Actions. Buyer is not bound by or subject to
----------------------------
(and none of its assets or properties is bound by or subject to) any written or
oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the Knowledge of Buyer, has
sought to represent any of the employees, representatives or agents of Buyer.
There is no strike or other labor dispute involving Buyer pending, or to the
Knowledge of Buyer threatened, which could have a material adverse effect on the
assets, properties, financial condition, operating results, or business of
Buyer, nor is Buyer aware of any labor organization activity involving its
employees. The employment of each officer and employee of Buyer is terminable at
the will of Buyer. To its Knowledge, Buyer has complied in all material respects
with all applicable state and federal equal employment opportunity laws and with
other laws related to employment.
5.21 Confidential Information and Invention Assignment Agreements. Each
------------------------------------------------------------
employee, consultant and officer of Buyer has executed an agreement with Buyer
regarding confidentiality and proprietary information substantially in the form
or forms delivered to the counsel for the Purchasers. Buyer is not aware that
any of its employees or consultants is in violation thereof, and Buyer will use
its best efforts to prevent any such violation.
5.22 Permits. Buyer and each of its subsidiaries has all franchises,
-------
permits, licenses and any similar authority necessary for the conduct of its
business, the lack of which could materially and adversely affect the business,
properties, prospects, or financial condition of Buyer. Buyer is not in default
in any material respect under any of such franchises, permits, licenses or other
similar authority.
-22-
5.23 Corporate Documents. The Articles of Incorporation and Bylaws of
-------------------
Buyer are in the form provided to counsel for Seller. The copy of the minute
books of Buyer provided to Seller's counsel contains minutes of all meetings of
directors and shareholders and all actions by written consent without a meeting
by the directors and shareholders since the date of incorporation and reflects
all actions by the directors (and any committee of directors) and shareholders
with respect to all transactions referred to in such minutes accurately in all
material respects.
Article VI.
Certain Covenants
6.1. Covenants of Both Parties. Buyer, on the one hand, and Seller, on
-------------------------
the other hand, each covenant to the other that:
(a) Notice. Each party shall give prompt written notice to each
------
other party to this Agreement if an event occurs which makes it reasonably
likely that a condition to the Closing set forth in Article VII or Article VIII
will not be satisfied as of the Closing; provided, however, that the giving of
-------- -------
any such notice shall not excuse such party's performance hereunder.
(b) Reasonable Best Efforts. The parties shall negotiate in good
-----------------------
faith and shall use their reasonable best efforts to fulfill all conditions to
Closing set forth in this Agreement in order to consummate the transactions
contemplated hereby by the Closing.
(c) Further Assurances. Both before and after the Closing, each
------------------
party will cooperate in good faith with the other and will take all appropriate
action and execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder. From and after the Closing, Seller will promptly refer
all inquiries with respect to the ownership of the Assets to Buyer and execute
such documents as Buyer may reasonably request from time to time to evidence
transfer of the Assets to Buyer, and Buyer will execute such documents as Seller
may reasonably request from time to time to evidence assumption of the Assumed
Liabilities.
(d) Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated among the Assets as mutually agreed by the parties and in the manner
required by Section 1060 of the Code and regulations thereunder.
6.2 Seller's Covenants. Seller covenants to Buyer that:
------------------
(a) Access by Buyer. Seller shall allow Buyer and its
---------------
Representatives, at Buyer's own expense during regular business hours and
accompanied by Seller and its Representatives if Seller so desires, to inspect
the Assets and to inspect the Books and Records, including information with
respect to current costs, prices, financial information (including inventory,
fixed assets and accruals) and promotional and marketing information and such
other matters as Buyer may reasonably request in order to conduct its due
diligence examination. All such information shall be provided to Buyer in such
form as such information may presently
-23-
exist or be readily available and, except as specifically provided in Article IV
to the contrary, without representation or warranty as to the accuracy or
completeness thereof.
(b) Management and Employee Cooperation. Upon Buyer's reasonable
-----------------------------------
request, and at Buyer's reasonable expense, Seller shall provide reasonable
cooperation and assistance in transitioning the Business from Seller to Buyer
from the Closing until the date thirty (30) days following the Closing.
(c) Conduct of Business. Except as contemplated by this
-------------------
Agreement and the nature of the transaction contemplated hereby, without the
prior written consent of Buyer, Seller shall operate the Business in a manner
consistent with the manner in which it is operating on the date hereof, and
Seller shall not dispose or commit to dispose of any Assets except in the
ordinary course of business. Specifically, and without intending to limit the
foregoing in any manner, Seller shall not take any action that would result in a
breach of Section 4.9 hereof. Notwithstanding anything to the contrary in this
Agreement, Seller may engage in a Permitted Transaction. Seller shall collect
the accounts receivable with respect to the Business outstanding on the date
hereof only in the ordinary course of business and shall not use any special or
extraordinary efforts to collect such receivables or discount any such
receivables to encourage early payment prior to the Closing.
(d) Consents. As soon as practicable following the date hereof,
--------
Seller shall commence all reasonable action to obtain all applicable Permits,
consents, approvals and agreements of, and to give all notices and make all
filings with, any third parties and governmental authorities as may be necessary
to authorize, approve or permit the full and complete sale, conveyance,
assignment or transfer of the Assets and the Business. Buyer shall cooperate in
good faith with Seller's efforts as provided in Section 6.1(c).
(e) Cooperation and Assistance with Customers of the Business.
---------------------------------------------------------
If requested by Buyer, Seller shall agree to take reasonable cooperative steps
to enable those customers of Seller who are customers of the Business to become
customers of Buyer in its operation of the Business following the Closing.
(f) Removal of Marks. Seller shall remove from the Assets all
----------------
instances of the "HearMe" name or identifying logo or other trademarks, trade
names, brand names and service marks owned by Seller that are not to be included
in the Assets, in a manner that does not detriment the functionality or
appearance of the Assets.
(g) *Use of ... Seller covenants and agrees that it will not use
------
the ... (as defined in the .... ) and the ... and ... that is ... to ...
pursuant to the ... for any purpose, other than ... to ... and ... or ... in the
... to a ... (which ... in any ... by ... to ... to the ... (as defined in the
...) and ... as may be reasonably necessary to comply with any obligations owed
to the Technology Licensees under the Technology License Agreements (the "Third
-----
Party Licenses") by and between Seller and the Technology Licensees
--------------
(collectively, "Permitted Transactions"). Seller may enter into a Permitted
----------------------
Transaction in its sole discretion. Notwithstanding anything to the contrary in
this Agreement, Buyer acknowledges that it is taking the Assets and licensing
the Licensed Technology subject to the license grants set forth in the
-24-
__________
* Material has been omitted pursuant to a request for confidential treatment
Third Party Licenses, except that Seller represents and warrants to Buyer that
none of the Third Party Licenses restrict the use of the Assets or the Licensed
Technology in connection with the conduct of the Business in the United States
in the English language. The Third Party Licenses are not Assumed Contracts and
all rights and obligations under the Third Party Licenses shall remain with
Seller. The Technology Licensees shall not be deemed or construed as third party
beneficiaries in any fashion under this Agreement.
6.3 Buyer's Covenants. Buyer covenants to Seller that:
-----------------
(a) No Trademark or Name. Buyer acknowledges that it has and
--------------------
will have no right to use the "HearMe" name or identifying logo or other
trademarks, tradenames, brand names and service marks owned by Seller (except
for those included in the Assets) or any confusingly similar name or term;
provided, however, that Buyer shall be entitled to use the intellectual property
-------- -------
of Seller described in this Section 6.3(a) for a reasonable period of time after
the Effective Time as may be necessary for Buyer to remove such names from
websites and other locations included in the Assets.
(b) User Database. Buyer acknowledges and agrees that all
-------------
information regarding users and members of the Business that is included in
Seller's database of such information has been provided to Seller upon the terms
and subject to the conditions of Seller's privacy policy and terms and
conditions. Seller agrees that it will utilize such information in accordance
with applicable Legal Requirements and such privacy policy and terms and
conditions.
6.4 Employment Matters.
------------------
(a) Employees. Effective as of the Closing, the employees
---------
identified on Schedule 6.4(a) hereto (which Schedule may be amended from time to
---------------
time until the Closing by written letter agreement between the parties) (the
"Employees") will be offered employment by Buyer. Seller shall cooperate with
---------
and provide reasonable assistance to Buyer in its efforts to secure satisfactory
employment arrangements with the Employees. Seller hereby reserves the right to
retain any persons working in the Business that are not identified on Schedule
--------
6.4(a). Seller also reserves the right to retain any of the Employees that do
------
not accept Buyer's offer of employment.
(b) Obligations. Seller shall pay all amounts due or that would
-----------
otherwise have become due to the Employees with respect to their employment by
Seller prior to the Effective Time, including accrued vacation time and amounts
payable under any pension plan of Seller, and Buyer shall not assume any of
Seller's employee benefit plans or policies or any obligation or liability
thereunder.
(c) No Third Party Beneficiary Rights. Nothing contained in this
---------------------------------
Agreement shall confer upon any Employee any right with respect to continuance
of employment by Buyer, nor shall anything herein interfere with the right of
Buyer to terminate the employment of any of the Employees at any time, with or
without cause. No provision of this Agreement shall create any third party
beneficiary rights in any Employee, any beneficiary or dependents thereof; with
-25-
respect to the compensation, terms and conditions of employment and benefits
that may be provided to any Employee by Buyer or under any benefit plan which
Buyer may maintain.
(d) Employee Benefits. Effective immediately after the Closing,
-----------------
Buyer shall cause the Employees that accept Buyer's offer of employment to be
covered by one or more benefit plans made available to Buyer's employees
generally which shall provide benefits to the Employees that accept Buyer's
offer of employment and their dependents.
6.5 Non-Competition.
---------------
(a) Restrictions on Competitive Activities. Seller agrees that,
--------------------------------------
after the Closing, Buyer shall be entitled to the goodwill and going concern
value of the Business and to protect and preserve the same to the maximum extent
permitted by law. For these and other reasons and as an inducement to Buyer to
enter into this Agreement, Seller agrees that for a period of five years after
the Closing Date Seller will not, directly or indirectly, for its own benefit or
as agent for another, carry on or participate in the ownership, management or
control of, or be employed by, or consult for or otherwise render services to
(other than in the ordinary course of its other business activities, which are
not directly related to the Business), any other present or future business
enterprise that engages in the business of providing online game and live voice
chat communities in the United States; provided, however, that Seller may (i)
-------- -------
engage in a Permitted Transaction and (ii) hold and make passive equity
investments in connection with which Seller does not render any managerial,
consulting or strategic services or advice.
(b) Special Remedies and Enforcement. Seller recognizes and
--------------------------------
agrees that a breach by Seller of any of the covenants set forth in Section
6.5(a) could cause irreparable harm to Buyer, that Buyer's remedies at law in
the event of such breach would be inadequate, and that, accordingly, in the
event of such breach a restraining order or injunction or both may be issued
against Seller, in addition to any other rights and remedies which are available
to Buyer. If the provisions of Section 6.5(a) are more restrictive than
permitted by the laws of any jurisdiction in which Buyer seeks enforcement
hereof, then Section 6.5(a) shall be limited to the extent required to permit
enforcement under such laws. In particular, the parties intend that the
covenants contained in Section 6.5(a) shall be construed as a series of separate
covenants, one for each county specified in each state of the United States.
Except for geographic coverage, each such separate covenant shall be deemed
identical in terms. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants deemed included in this paragraph, then
such unenforceable covenant shall be deemed eliminated from these provisions for
the purpose of those proceedings to the extent necessary to permit the remaining
separate covenants to be enforced.
6.6 Nondisclosure of Proprietary Data. After the Closing, neither
---------------------------------
Seller nor any of its representatives shall, at any time, make use of, divulge
or otherwise disclose, directly or indirectly, any trade secret or other
proprietary data (including, but not limited to, any customer list, user list,
member list or visitor list (together with all associated data and databases),
record or financial information) concerning the Business or the business or
policies of Seller related to the Business that Seller or any representative of
Seller may have learned as an owner or a
-26-
shareholder, employee, officer or director of the Business. In addition, neither
Seller nor any of its representatives shall make use of, divulge or otherwise
disclose, directly or indirectly, to persons other than Buyer, any confidential
information concerning the Business that may have been learned in any such
capacity. Notwithstanding the restrictions of this Section 6.6, Seller shall not
be precluded from disclosing any such confidential or proprietary information
(a) which is required to be disclosed by law, court order, governmental order or
decree; provided, that Seller has provided notice to Buyer of such disclosure
and given Buyer the opportunity to seek a protective order with respect to the
information proposed to be disclosed; or (b) to an insurance carrier or lender,
subject to appropriate confidentiality restrictions, (c) which is in the public
domain at the time of disclosure through no fault of Seller
Article VII.
Conditions to Seller's Obligations
The obligations of Seller to consummate the transactions provided for
hereby are subject to the satisfaction of or waiver by Seller, on or prior to
the Closing, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time as though such
representations and warranties were made at and as of the Effective Time, and
Buyer shall have performed in all material respects all agreements and covenants
required hereby to be performed by it prior to or at the Closing.
7.2 Consents. All material consents, waivers, approvals and
--------
authorizations of, and declarations, filings and registrations with,
governmental or regulatory authorities and other parties or entities required in
connection with the transfer by Seller of the Assets to Buyer as contemplated
hereby shall have been obtained or made.
7.3 No Governmental Proceedings or Litigation. No suit, action or
-----------------------------------------
other legal or administrative proceeding by any governmental authority or any
other party or entity shall have been instituted and remain unresolved which
questions the validity or legality of the transactions contemplated hereby.
7.4 Certificates. Buyer shall furnish Seller with such certificates
------------
of its officers and others to evidence compliance with the foregoing conditions
set forth in this Article VII as may be reasonably requested by Seller.
7.5 Corporate Documents. Seller shall have received from Buyer
-------------------
resolutions adopted by the board of directors of Buyer approving this Agreement
and the Ancillary Agreements and the transactions contemplated hereby and
thereby, certified as true and correct by its Secretary or Assistant Secretary.
-27-
7.6 Opinion of Counsel. Seller shall have received the opinion of
------------------
O'Melveny & Xxxxx LLP, counsel to Buyer, substantially in the form attached
hereto as Exhibit H and reasonably satisfactory in form and scope to Seller.
7.7 Ancillary Agreements. Each of the Ancillary Agreements shall have
--------------------
been validly executed and delivered by the parties thereto (including the Escrow
Agent, as applicable) and shall remain in full force and effect.
7.8 Opinion of Delaware Counsel. Seller shall have received the
---------------------------
opinion of Xxxxxxxx, Xxxxxx & Finger, Delaware counsel to Seller, to the effect
that the transactions contemplated by this Agreement do not require the approval
of the stockholders of Seller under Section 271 of the General Corporation Law
of the State of Delaware.
7.9 Rights Agreement Amendment. The Rights Agreement Amendment shall
--------------------------
have been duly and validly executed and delivered by the parties hereto, each
Purchaser (as defined in the Investors' Rights Agreement) and the holders of a
majority of the outstanding shares of Common Stock held by the Shareholders (as
defined in the Investors' Rights Agreement) and shall remain in full force and
effect.
7.10*... Agreement. Seller shall have reviewed Buyer's agreements
---------
relating to ... and shall be satisfied with ... ability ... to meet its
obligations ...
Article VIII.
Conditions to Buyer's Obligations
The obligations of Buyer to consummate the transactions provided for
hereby are subject to the satisfaction of or waiver by Buyer, on or prior to the
Closing, of each of the following conditions:
8.1 Representations, Warranties and Covenants. All representations
-----------------------------------------
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects at and as of the Effective Time as though such
representations and warranties were made at and as of the Effective Time, and
Seller shall have performed in all material respects all agreements and
covenants required hereby to be performed by it prior to or at the Closing.
8.2 Consents. All material consents, waivers, approvals and
--------
authorizations of or by, and declarations, filings and registrations with,
governmental or regulatory authorities and other parties or entities required in
connection with the transfer by Seller of the Assets to Buyer as contemplated
hereby shall have been obtained or made.
8.3 No Governmental Proceedings or Litigation. No suit, action or
-----------------------------------------
other legal or administrative proceeding by any governmental authority or any
other party or entity shall have been instituted and remain unresolved which
questions the validity or legality of the transaction contemplated hereby and
which could reasonably be expected to materially and adversely affect the right
or ability of Buyer to own, operate or possess the Assets after the Effective
Time.
-28-
__________
* Material has been omitted pursuant to a request for confidential treatment
8.4 Certificates. Seller shall furnish Buyer with such certificates
------------
of Sellers' officers and others to evidence compliance with the foregoing
conditions set forth in this Article VIII as may be reasonably requested by
Buyer.
8.5 Corporate Documents. Buyer shall have received from Seller
-------------------
resolutions adopted by its board of directors approving this Agreement and the
Ancillary Agreements and the transactions contemplated hereby and thereby and
certified as true and correct by its corporate secretary or assistant secretary.
8.6 No Material Adverse Change. There shall not have occurred any
--------------------------
material adverse change in the Business or the condition of the Assets from the
date of this Agreement to the Closing.
8.7 Opinion of Counsel. Buyer shall have received from Seller the
------------------
opinion of Venture Law Group, A Professional Corporation, counsel to Seller,
substantially in the form attached hereto as Exhibit I, and reasonably
satisfactory in form and scope to Buyer.
8.8 Ancillary Agreements. Each of the Ancillary Agreements shall have
--------------------
been validly executed and delivered by the parties thereto (including the Escrow
Agent, as applicable) and shall remain in full force and effect.
8.9 Rights Agreement Amendment. The Rights Agreement Amendment shall
--------------------------
have been duly and validly executed and delivered by the parties hereto, each
Purchaser (as defined in the Investors' Rights Agreement) and the holders of a
majority of the outstanding shares of Common Stock held by the Shareholders (as
defined in the Investors' Rights Agreement) and shall remain in full force and
effect.
Article IX.
Actions by Parties After the Closing
9.1 Books and Records. From and after the Closing, each party agrees
-----------------
that it will cooperate with and make available to the other party and its
Representatives, subject to Section 10.11, during normal business hours upon
prior written request specifying the need therefor, all Books and Records,
information and employees (without substantial disruption of employment)
relating to the Assets retained and remaining in existence after the Closing
which are reasonably necessary or useful in connection with any tax inquiry,
audit, investigation or dispute, any litigation or investigation or any other
reasonable business purpose. The party requesting any such Books and Records,
information or employees shall bear all of the out-of-pocket costs and expenses
(including attorneys' fees, but excluding reimbursement for salaries and
employee benefits) reasonably incurred in connection with providing such Books
and Records, information or employees.
9.2 Resale Certificates. Buyer will provide Seller with such resale
-------------------
certificates or other documents as may be required or contemplated by the laws
of the State of California or any
-29-
other applicable jurisdiction; provided, however, that the provision of such
-------- -------
certificates shall not relieve Buyer of any obligation pursuant to Section 2.4).
9.3 Indemnification.
---------------
(a) By Seller. From and after the Effective Time and subject to
---------
the limitations set forth in Section 9.3(e)(ii), Seller shall indemnify, save
and hold harmless Buyer and its Affiliates, and their respective
Representatives, from and against any and all Damages caused by, arising out of,
resulting from or incurred in connection with (i) any misrepresentation or
breach of any representation or warranty by Seller in or pursuant to this
Agreement, (ii) the non-fulfillment of any covenant or agreement made by Seller
in or pursuant to this Agreement, (iii) the Excluded Liabilities, (iv) any
liability or obligation of Seller or any of its Affiliates not assumed by Buyer
hereunder, (v) any third party claims in respect of the Assets, Assumed
Liabilities or the Business (or regarding the conduct of the Business) from
circumstances which arise prior to the Closing that are asserted after the
Closing, or (vi) any tax liability relating to the ownership of the Assets or
the operation of the Business on or prior to the Effective Time.
(b) By Buyer. From and after the Effective Time and subject to
--------
the limitations set forth in Section 9.3(e)(iii), Buyer shall indemnify, save
and hold harmless Seller and its Affiliates, and their respective
Representatives, from and against any and all Damages caused by, arising out of,
resulting from or incurred in connection with (i) any misrepresentation or
breach of any representation or warranty by Buyer in this Agreement, (ii) the
non-fulfillment of any covenant or agreement made by Buyer in or pursuant to
this Agreement, (iii) any of the Assumed Liabilities and (iv) the ownership of
the Assets from and after the Effective Time to the extent such Damages arise
out of transactions, events or inaction of Buyer occurring on or after the
Effective Time.
(c) Notice of and Defense of Third Party Claims.
-------------------------------------------
(i) For the purpose of this Article IX, the term
"Indemnifying Party" when used in connection with a particular Claim shall mean
------------------
the party having an indemnification obligation pursuant to this Article IX, and
the term "Indemnified Party" when used in connection with a particular Claim
-----------------
shall mean the persons having the right to be indemnified pursuant to this
Article IX. Each party agrees that as promptly as practical under the
circumstances after it becomes aware of facts or circumstances giving rise to a
claim by it for indemnification pursuant to this Article IX (a "Claim"),
-----
including the filing of any lawsuit or enforcement action by any third party (a
"Third Party Claim"), such party will provide notice thereof in writing (a
-----------------
"Claim Notice") to the Indemnifying Party (and the Escrow Agent, if such Claim
------------
is made by Buyer) with respect to such Claim specifying in reasonable detail the
nature and specific basis to the extent then known by the Indemnified Party for
such Claim and to the extent feasible the estimated amount of Damages
attributable thereto; provided, however, that the failure of any Indemnified
-------- -------
Party to give timely notice shall not affect its rights to indemnification
hereunder except to the extent that the Indemnifying Party demonstrates Damage,
including inability to assert rights, defenses or counterclaims, caused by such
failure.
-30-
(ii) With respect to Third Party Claims, after such notice
the Indemnifying Party shall be entitled, if it so elects, to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing to the effect that the
Indemnifying Party will indemnify the Indemnified Party from and against the
Damages caused by the Third Party Claim and (B) the Indemnifying Party conducts
the defense of the Third Party Claim actively and diligently. The Indemnified
Party shall cooperate in all reasonable respects with the Indemnifying Party and
such attorneys in the investigation, trial and defense of any lawsuit or action
with respect to any such Third Party Claim and any appeal arising therefrom,
including the filing in the Indemnified Party's name of appropriate cross claims
and counterclaims. The Indemnified Party may, at its own cost, participate in
any investigation, trial and defense of such Third Party Claim controlled by the
Indemnifying Party and any appeal arising therefrom. If the Indemnified Party
joins in any such Third Party Claim, the Indemnifying Party shall have full
authority to determine all action to be taken with respect thereto; provided,
--------
however, that the Indemnifying Party will not (y) consent to the entry of any
-------
judgment or enter into any settlement with respect to the Third Party Claim or
(z) be liable for any settlement of any such Third Party Claim without, in each
instance, the Indemnified Party's express written consent, which shall not be
unreasonably withheld. At any time after the commencement of defense of any such
Third Party Claim, the Indemnifying Party may request the Indemnified Party to
agree in writing to the abandonment of such contest or to the payment or
compromise by the Indemnifying Party of any such Third Party Claim, whereupon
such action shall be taken unless the Indemnified Party determines that the
contest should be continued and so notifies the Indemnifying Party in writing
within fifteen (15) days of such request from the Indemnifying Party. If the
Indemnified Party determines that the contest should be continued, the
Indemnifying Party shall be liable hereunder only to the extent of the lesser of
(y) the amount which the other party(ies) to the contested Third Party Claim had
agreed to accept in payment or compromise as of the time the Indemnifying Party
made its request therefor to the Indemnified Party or (z) such amount for which
the Indemnifying Party may be liable with respect to such Third Party Claim by
reason of the provisions hereof.
(iii) If the Indemnifying Party shall object to any Claim
pursuant to this Agreement, the Indemnifying Party shall give written notice of
such objection to the Indemnified Party (and the Escrow Agent, if such objection
is made by Seller) within thirty (30) days after the date that the Notice of
Claim is given to the Indemnifying Party (and the Escrow Agent, if applicable)
(the "Notice Date"). If the Indemnifying Party does not give notice of an
-----------
objection within thirty (30) days after the Notice Date, or shall have agreed
within such thirty (30)-day period that such Claim should be paid, the
Indemnifying Party (or the Escrow Agent, if the Indemnifying Party is Seller)
shall, subject to the terms and conditions of this Section 9.3 and the Escrow
Agreement, promptly cause to be transferred to the Indemnified Party an amount
equal to that set forth in the Notice of (or such lesser amount agreed in
writing by the Indemnified Party and the Indemnifying Party).
(iv) In case the Indemnifying Party shall object in
writing to any claim or claims by the Indemnified Party, the Indemnifying Party
and the Indemnified Party shall attempt in good faith for thirty (30) days
thereafter to agree upon the rights of the respective
-31-
parties with respect to each of such claims. If the Indemnifying Party and the
Indemnified Party should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties (and provided to the Escrow Agent,
if such claim is made by Buyer) and the Indemnifying Party (or the Escrow Agent,
if the Indemnifying Party is Seller) shall pay to the Indemnified Party such
agreed upon amount. If no such agreement can be reached after good faith
negotiation, either the Indemnified Party or the Indemnifying Party may, by
written notice to the other, demand that the matter be settled by arbitration
unless the amount of the damage or loss is at issue in pending litigation with a
third party, in San Mateo County, California, and, except as herein specifically
stated, in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA Rules") then in effect. However, in all events,
---------
these arbitration provisions shall govern over any conflicting rules which may
now or hereafter be contained in the AAA Rules. Any judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction over
the subject matter thereof. The arbitrator shall have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
instituted to resolve the matter. Any such arbitration shall be conducted before
a single arbitrator who shall be compensated for his or her services at a rate
to be determined by the parties or by the American Arbitration Association, but
based upon reasonable hourly or daily consulting rates for the arbitrator in the
event the parties are not able to agree upon his or her rate of compensation.
Buyer and Seller shall bear the expense of deposits and advances required by the
arbitrator in equal proportions, but either party may advance such amounts,
subject to recovery as an addition or offset to any award. The arbitrator shall
award to the prevailing party, as determined by the arbitrator, all costs, fees
and expenses related to the arbitration, including reasonable fees and expenses
of attorneys, accountants and other professionals incurred by the prevailing
party. The American Arbitration Association shall have the authority to select
an arbitrator from a list of arbitrators who are lawyers familiar with
California contract law; provided, however, that such lawyers cannot work for a
firm then performing services for either party, that each party shall have the
opportunity to make such reasonable objection to any of the arbitrators listed
as such party may wish and that the American Arbitration Association shall
select the arbitrator from the list of arbitrators as to whom neither party
makes any such objection. In the event that the foregoing procedure is not
followed, each party shall choose one person from the list of arbitrators
provided by the American Arbitration Association (provided that such person does
not have a conflict of interest), and the two persons so selected shall select
from the list provided by the American Arbitration Association the person who
shall act as the arbitrator.
(v) Payments by an Indemnified Party of amounts for which
such Indemnified Party is indemnified hereunder shall not be a condition
precedent to recovery. Seller's obligation to indemnify Buyer, and Buyer's
obligation to indemnify Seller, shall not limit any other rights, including
without limitation rights of contribution, which either party may have under
statute or common law.
(d) Limitation on Representations and Warranties.
--------------------------------------------
(i) The representations and warranties of Seller contained
in Article IV and the representations and warranties of Buyer contained in
Article V shall survive the
-32-
Closing and terminate on the first anniversary of the Closing (the "Escrow
------
Termination Date"). No action can be brought with respect to any breach of any
----------------
representation or warranty on the part of either party under this Agreement,
including under the provisions of Section 9.3(a)(i) and 9.3(b)(i), unless a
Claim Notice specifying the breach of the representation and warranty forming
the basis of such Claim has been delivered to the party alleged to have breached
such representation and warranty prior to the Escrow Termination Date.
(ii) Seller shall not be liable to Buyer under Section
9.3(a)(i) for any Damages arising out of a Claim unless the amount of Damages
exceeds $75,000, in which case Seller shall be liable to Buyer for only amounts
in excess of such sum.
(iii) Buyer shall not be liable to Seller under Section
9.3(b)(i) for any Damages arising out of a Claim unless the amount of Damages
exceeds $75,000, in which case Seller shall be liable to Buyer for only amounts
in excess of such sum.
(iv) Neither party shall be liable for any Damages that,
together with any liability under the indemnification obligations of any
Ancillary Agreement, exceed the Purchase Price in the aggregate. In the event
that Seller shall be liable for Damages in excess of the Escrow Fund or for any
liability under the indemnification obligations of any Ancillary Agreement,
Seller may, at its option, satisfy such Damages by transferring shares of the
Stock Consideration to Buyer. For the purpose of satisfaction of Damages, each
share shall be valued at $10.90 per share (as adjusted for stock splits, stock
dividends, recapitalizations and the like). The parties acknowledge and agree
that they are utilizing this valuation solely for such purpose, and such
valuation is not intended to be used as a determination of the current value of
the Common Stock of Buyer or any future estimated value of the Common Stock of
Buyer.
(v) Notwithstanding anything to the contrary in this
Section 9.3, in the event that a Third Party Claim is asserted against Buyer by
any Technology Licensee relating to (i) the transactions contemplated by this
Agreement or any Ancillary Agreement or (ii) the Assets or Licensed Technology,
any Damages arising out of such Third Party Claim shall be payable by Seller in
cash without regard to the escrow described in Section 9.3(e) or any of the
provisions of Section 9.3(d)(ii) or 9.3(d)(iv).
(e) Escrow. Subject to this Section 9.3 and the terms and
------
conditions of the Escrow Agreement, the Escrow Consideration shall be retained
by the Escrow Agent until the Escrow Termination Date. Upon the Escrow
Termination Date, the Escrow Agent shall deliver to Seller all remaining Escrow
Consideration; provided, however, that amounts may be withheld with respect to
unsatisfied Claims until the resolution of such Claims in accordance with this
Section 9.3 and the Escrow Agreement.
(f) Offset. Seller may withhold and set off against any amount
------
otherwise due Buyer any amount as to which Buyer is obligated to pay Seller
pursuant to this Agreement. Buyer may withhold and set off against any amount
otherwise due Seller any amount as to which Seller is obligated to pay Buyer
pursuant to this Agreement.
-33-
(g) No Personal Liability. No individual Representative
---------------------
of any party shall be personally liable for any Damages under the provisions of
this Section 9.3 or any other provision of this Agreement. Nothing herein shall
relieve any party of any liability to make any payment expressly required to be
made by such party pursuant to this Agreement.
(h) Tax Effect of Payments. The amount of any payments
----------------------
required to be made under this Article IX shall be reduced by the amount of any
tax or insurance benefit actually received by (including by refund or by
reduction of or offset against taxes otherwise payable) the recipient by reason
of the payment or incurrence by such recipient of the item for which the
indemnity is being sought. Each party shall notify the other of such receipt of
any such tax or insurance benefits. In addition, each party agrees to treat all
payments required to be made under this Article IX for tax purposes as an
adjustment to the Purchase Price.
(i) Bulk Sale Compliance. Subject to Buyer's rights to
--------------------
indemnification under Section 9.3(a), Buyer hereby waives compliance by Seller
with the provisions of the bulk sales laws of California and Seller shall pay
and discharge when due all claims of creditors that could be asserted against
Buyer by reason of such non-compliance to the extent that such claims are not
specifically assumed by Buyer.
Article X.
Miscellaneous
10.1 Termination. This Agreement and the transactions contemplated
-----------
hereby may be terminated or abandoned at any time prior to the Closing:
(a) by the mutual written agreement of Buyer and Seller;
(b) by the written notice from either Buyer to Seller or
from Seller to Buyer if the Closing shall not have occurred on or prior to the
Outside Date;
(c) by any party if a final nonappealable judgment has
been entered against such party or any of its Affiliates restraining,
prohibiting, or declaring illegal the consummation of this Agreement or the
transactions contemplated hereby or which imposes or awards damages which would
have a material adverse effect on the economic benefits contemplated hereby;
(d) by Buyer if there is
(i) a material breach of any representation or
warranty set forth in Article IV or any covenant or agreement to be complied
with or performed by Seller pursuant to the terms of this Agreement, Buyer has
notified Seller of the material breach, and the material breach has continued
without cure for a period of fifteen (15) days after the notice of the material
breach;
(ii) the failure of a condition set forth in
Article VIII to be satisfied (and such condition is not waived in writing by
Buyer) on the Closing (unless the failure results
-34-
primarily from Buyer itself breaching any representation, warranty, or covenant
contained in this Agreement);
(e) by Seller if there is:
(i) a material breach of any representation or
warranty set forth in Article V or any covenant or agreement to be complied with
or performed by Buyer pursuant to the terms of this Agreement, Seller has
notified Buyer of the material breach, and the material breach has continued
without cure for a period of fifteen (15) days after the notice of the material
breach; or
(ii) the failure of a condition set forth in
Article VII to be satisfied (and such condition is not waived in writing by
Seller) on or prior to the Closing (unless the failure results primarily from
Seller itself breaching any representation, warranty, or covenant contained in
this Agreement).
Notwithstanding the above, a party shall not be allowed to exercise any right of
termination pursuant to this Section 10.1 if the event giving rise to the
termination right shall be due to the failure of such party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants or agreements set forth to be performed observed by such party. If
this Agreement is terminated as permitted under this Section 10.1, such
termination shall be without liability of or to any party to this Agreement, or
any Representative or such party; provided, however, if such termination shall
-------- -------
result from the willful failure of any party to fulfill a condition to the
performance of any other party or from a material and willful breach by any
party of this Agreement, then such party shall be fully liable for any and all
damages sustained or incurred by the other party or parties in connection with
such failure or breach.
10.2 Assignment. Neither this Agreement nor any of the rights or
----------
obligations hereunder may be assigned by Buyer without the prior written consent
of Seller or by Seller without the prior written consent of Buyer. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, and no other
person shall have any right, benefit or obligation hereunder.
10.3 Notices. Unless otherwise provided herein, any notice, request,
-------
instruction or other document to be given hereunder by either party to the other
shall be in writing and delivered by telecopy or other facsimile (with receipt
acknowledged), delivered personally or by overnight courier or mailed by
certified mail, postage prepaid, return receipt requested (such mailed notice to
be effective on the date such receipt is acknowledged or refused), as follows:
-35-
If to Seller, addressed to:
HearMe
000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Fax: (000) 000-0000
With a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx
Fax: (000) 000-0000
If to Buyer, addressed to:
GameSpy Industries, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
With a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx
Fax: (000) 000-0000
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other.
10.4 Choice of Law. This agreement shall be construed, interpreted and
--------------
the rights of the parties determined in accordance with the laws of the State of
California (without reference to the choice of law provisions thereof).
10.5 Entire Agreement; Amendments and Waivers. This Agreement, together
----------------------------------------
with all exhibits and schedules hereto, and with the Non-Disclosure Agreement by
and between Seller and Buyer and the letter agreement dated November 15, 2000 by
and between Seller and Buyer, constitutes the entire agreement among the parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or
-36-
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by the party to be bound thereby. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
10.6 Multiple 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.
10.7 Expenses. Except as otherwise specified in this Agreement, each
--------
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
10.8 Invalidity. In the event that any one or more of the provisions
----------
contained in this Agreement or in any other instrument referred to herein shall,
for any reason, be held to be invalid, illegal or unenforceable in any respect,
then to the maximum extent permitted by law, such provision or provisions shall
be judicially reformed consistent with the parties' intentions so as to be
valid, legal and enforceable to the maximum extent possible and such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.9 Titles. The titles, captions or headings of the Articles and
------
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
10.10 Publicity. Unless otherwise required by law, no party shall issue
---------
any press release or make any public statement regarding the transactions
contemplated hereby, without the prior approval of the other party. If it is
determined that any press release or public statement regarding the transactions
contemplated hereby is required by law, the party required to make such
disclosure will (a) notify the other party five (5) days in advance of such
disclosure, (b) coordinate with the other party regarding the content of such
disclosure and (c) disclose only such information as is required by law to be
disclosed. Seller and Buyer shall consult with each other regarding any mutual
press release which the parties believe is necessary or desirable to issue with
respect to the transactions contemplated by this Agreement.
10.11 Confidential Information. Buyer and Seller each shall hold, and
------------------------
shall cause their respective officers, employees, agents, consultants and
advisors to hold, in strict confidence, unless compelled to disclose by judicial
or administrative process or, in the opinion of legal counsel, by other
requirements of law, all confidential information concerning any other party
hereto furnished and designated as confidential by such other party or its
representatives pursuant to this Agreement (except to the extent that such
information can be shown to have been (a) available to such party on a
non-confidential basis prior to its disclosure by such other party, (b) in the
public domain through no fault of such party or (c) later lawfully acquired from
other sources by such party), and no party shall release or disclose such
information to any other person, except to its auditors, attorneys, financial
advisors, bankers, and other consultants and
-37-
advisors who shall be advised of the provisions of this Section 10.11. Each
party shall be deemed to have satisfied its obligation to hold confidential
information concerning or supplied by any other party if it exercises the same
care as it takes to preserve confidentiality for its own similar information.
Buyer and Seller hereby expressly agree that the Purchase Price shall be
considered confidential information as contemplated by this Section 10.11.
10.12 Insurance. Seller shall continue all customary insurance policies
---------
in effect at the time of this Agreement insuring the operations of the Business
comprising the Assets until the end of the day on the day of the Closing, unless
Buyer shall have earlier obtained appropriate coverage and notified Seller in
writing to that effect. Buyer acknowledges that Seller is terminating all
insurance coverage relating to the Business, Assets and Employees as of the
Closing and that it is the responsibility of Buyer to obtain insurance policies
which will allow Buyer to make claims for any occurrence (as defined in the
applicable insurance policy or policies), whether prior to or after the Closing.
10.13 Sale of Assets Only. This Agreement constitutes a sale of certain
-------------------
assets of Seller only and is not a sale of any stock in any entity comprising
Seller.
10.14 Attorneys Fees. If any action at law or in equity is necessary to
--------------
enforce or interpret the terms of this Agreement or to protect the rights
obtained hereunder, the prevailing party, as determined by the arbitrator or the
judge, as the case may be, shall be entitled to its reasonable attorneys' fees,
costs, and disbursements in addition to any other relief to which it may be
entitled. The rights and remedies of the parties under this Agreement and the
other agreements related hereto, and all other letters, certificates or
documents executed in connection herewith and therewith are cumulative and not
exclusive of any rights, remedies, powers and privilege that may otherwise be
available to the parties hereto.
-38-
The parties hereto have caused this Agreement to be duly executed by
their respective duly authorized officers as of the date first set forth above.
SELLER:
HEARME
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
-------------------------------------
Title: Chief Executive Officer
------------------------------------
BUYER:
GAMESPY INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxx
---------------------------------------
Name: Xxxx Xxxxxx
-------------------------------------
Title: Chief Executive Officer
------------------------------------
SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT
EXHIBIT A
---------
ESCROW AGREEMENT
ESCROW AGREEMENT
This Escrow Agreement, dated as of January 19, 2001, is by and among
GAMESPY INDUSTRIES, INC., a California corporation ("Buyer"), HEARME, a Delaware
corporation (the "Seller"), and U.S. BANK TRUST, NATIONAL ASSOCIATION, as escrow
agent ("Escrow Agent").
This is the Escrow Agreement referred to in the Asset Purchase
Agreement dated December 18, 2000 (the "Purchase Agreement") between the Buyer
and the Seller. Capitalized terms used in this Escrow Agreement without
definition shall have the respective meanings given to them in the Purchase
Agreement.
The parties, intending to be legally bound, hereby agree as follows:
1. ESTABLISHMENT OF ESCROW
(a) Pursuant to Sections 2.2 and 9.3 of the Purchase Agreement, Buyer
is depositing with Escrow Agent 360,733 shares of Buyer Common Stock, together
with distributions thereof (the "Escrow Shares"). Escrow Agent acknowledges
receipt thereof.
(b) Solely for the purposes of this Escrow Agreement, each Escrow Share
shall be valued at $10.90. The parties hereto recognize that they are utilizing
this valuation solely for the purposes of this Escrow Agreement, and such
valuation is not intended to be used as a determination of the current value of
the Buyer Common Stock or any future estimated value of the Buyer Common Stock.
(c) In addition, from time to time hereunder, Buyer shall deposit with
Escrow Agent additional shares of Buyer Common Stock or other equity securities
issued or distributed by Buyer (including shares issued upon a stock split) in
respect of the Escrow Shares, and any such shares shall be treated as Escrow
Shares hereunder.
2. ESCROW AGENT
Escrow Agent hereby agrees to act as escrow agent and to hold,
safeguard and disburse the Escrow Shares pursuant to the terms and conditions
hereof.
3. CLAIMS
(a) From time to time on or before the first anniversary of the date
hereof, Buyer may give notice (a "Notice") to Seller and Escrow Agent specifying
in reasonable detail the nature and dollar amount of any claim (a "Claim") it
may have under Section 9.3 of the Purchase Agreement. If Seller gives notice to
Buyer and Escrow Agent disputing any Claim (a "Counter Notice") within 30 days
following receipt by Escrow Agent of the Notice regarding such Claim, such Claim
shall be resolved as provided in Section 3(b). If no Counter Notice is received
by Escrow Agent within such 30-day period, then the number of Escrow Shares
equal to the value of the aggregate dollar amount of damages claimed by Buyer as
set forth in its Notice shall be deemed established for purposes of this Escrow
Agreement and the Purchase Agreement and, at
the end of such 30-day period, Escrow Agent shall deliver to Buyer the number of
Escrow Shares equal to the value of the aggregate dollar amount claimed in the
Notice from (and only to the extent of) the Escrow Shares. Escrow Agent shall
not inquire into or consider whether a Claim complies with the requirements of
the Purchase Agreement.
(b) If a Counter Notice is given with respect to a claim and the parties
have not resolved the dispute hereunder (the "Dispute") within thirty (30) days,
the Dispute shall be settled by arbitration in San Mateo County, California,
and, except as herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules") then in
---------
effect. However, in all events, these arbitration provisions shall govern over
any conflicting rules which may now or hereafter be contained in the AAA Rules.
Any judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction over the subject matter thereof. The arbitrator shall
have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve a Dispute. The Escrow
Agent shall make payment or delivery with respect to the Escrow Shares only in
accordance with (i) joint written instructions of Buyer and Seller or (ii) an
executed memorandum evidencing a final, binding award of the arbitrator (the
"Award"). The Award shall be provided to the Escrow Agent and the Escrow Agent
shall be entitled to rely on any such Award and shall distribute the Escrow
Shares in accordance with the terms thereof..
(c) Any such arbitration shall be conducted before a single arbitrator who
shall be compensated for his or her services at a rate to be determined by the
parties or by the American Arbitration Association, but based upon reasonable
hourly or daily consulting rates for the arbitrator in the event the parties are
not able to agree upon his or her rate of compensation. Buyer and Seller shall
bear the expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator shall award to the prevailing
party, as determined by the arbitrator, all costs, fees and expenses related to
the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party.
(d) The American Arbitration Association shall have the authority to select
an arbitrator from a list of arbitrators who are lawyers familiar with
California contract law; provided, however, that such lawyers cannot work for a
firm then performing services for either party, that each party shall have the
opportunity to make such reasonable objection to any of the arbitrators listed
as such party may wish and that the American Arbitration Association shall
select the arbitrator from the list of arbitrators as to whom neither party
makes any such objection. In the event that the foregoing procedure is not
followed, each party shall choose one person from the list of arbitrators
provided by the American Arbitration Association (provided that such person does
not have a conflict of interest), and the two persons so selected shall select
from the list provided by the American Arbitration Association the person who
shall act as the arbitrator.
(e) No fractional shares shall be delivered to satisfy any Claims. Instead,
in the event that the Escrow Shares to be distributed would include a fractional
share, the parties hereto agree that the Escrow Agent shall round such fraction
up to a whole share.
-2-
4. TERMINATION OF ESCROW
On the first anniversary of the date hereof, Escrow Agent shall
distribute the remaining Escrow Shares to Seller, unless any Claims are then
pending, in which case the number of Escrow Shares equal to the value of the
aggregate dollar amount of Escrow Shares, rounded up to the nearest share, such
Claims (as shown in the Notices of such Claims) shall be retained by Escrow
Agent (and the balance paid to Seller) until it receives joint written
instructions of Buyer and Seller or an executed memorandum evidencing the Award
as contemplated by Section 3(b).
5. DUTIES OF ESCROW AGENT
(a) Escrow Agent shall not be under any duty to give the Escrow
Shares held by it hereunder any greater degree of care than it gives
its own similar property and shall not be required to invest any funds
held hereunder except as directed in this Agreement. Escrow Agent shall
have no duties or responsibilities other than as expressly set forth
herein.
(b) Escrow Agent shall not be liable, except for its own gross
negligence or willful misconduct and, except with respect to claims
based upon such gross negligence or willful misconduct that are
successfully asserted against Escrow Agent, the other parties hereto
shall jointly and severally indemnify and hold harmless Escrow Agent
(and any successor Escrow Agent) from and against any and all losses,
liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in
connection with this Agreement.
(c) Escrow Agent shall be entitled to rely upon any order,
judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder without being required to determine the
authenticity or the correctness of any fact stated therein or the
propriety or validity of the service thereof. Escrow Agent may act in
reliance upon any instrument or signature believed by it to be genuine
and may assume that the person purporting to give receipt or advice or
make any statement or execute any document in connection with the
provisions hereof has been duly authorized to do so. Escrow Agent may
conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power
and authority to instruct Escrow Agent on behalf of that party unless
written notice to the contrary is delivered to Escrow Agent. Escrow
Agent will not be liable or responsible for forgeries, fraud,
impersonations or determining the scope of any representative
authority.
(d) Escrow Agent may act pursuant to the advice of counsel with
respect to any matter relating to this Agreement and shall not be
liable for any action taken or omitted by it in good faith in
accordance with such advice.
(e) Escrow Agent does not have any interest in the Escrow
Shares deposited hereunder but is serving as escrow holder only and
having only
-3-
possession thereof. This Section 5(e) and Section 5(b)
shall survive notwithstanding any termination of this Agreement or the
resignation of Escrow Agent.
(f) Escrow Agent makes no representation as to the validity,
value, genuineness or the collectability of any security or other
document or instrument held by or delivered to it.
(g) Escrow Agent shall not be called upon to advise any party
as to the wisdom in selling or retaining or taking or refraining from
any action with respect to any securities or other property deposited
hereunder.
(h) Escrow Agent (and any successor Escrow Agent) may at any
time resign as such by delivering the Escrow Shares to any successor
Escrow Agent jointly designated by the other parties hereto in writing,
or to any court of competent jurisdiction, whereupon Escrow Agent shall
be discharged of and from any and all further obligations arising in
connection with this Agreement. The resignation of Escrow Agent will
take effect on the earlier of (a) the appointment of a successor
(including a court of competent jurisdiction) or (b) the day which is
30 days after the date of delivery of its written notice of resignation
to the other parties hereto. If at that time Escrow Agent has not
received a designation of a successor Escrow Agent, Escrow Agent's sole
responsibility after that time shall be to retain and safeguard the
Escrow Shares until receipt of a designation of successor Escrow Agent
or a joint written disposition instruction by the other parties hereto
or an executed memorandum evidencing the Award.
(i) In the event of any disagreement between the other parties
hereto resulting in adverse claims or demands being made in connection
with the Escrow Shares or in the event that Escrow Agent is in doubt as
to what action it should take hereunder, Escrow Agent shall not be
required to determine such disagreement or take any action regarding it
and shall be entitled to retain the Escrow Shares until Escrow Agent
shall have received (i) an executed memorandum evidencing the Award
directing delivery of the Escrow Shares or (ii) a written agreement
executed by the other parties hereto directing delivery of the Escrow
Shares, in which event Escrow Agent shall disburse the Escrow Shares in
accordance with the Award or such agreement. The Escrow Agent shall be
entitled to rely on any such Award and shall distribute the Escrow
Shares in accordance with the terms thereof. Furthermore, Escrow Agent
may, at its option, file an action of interpleader requiring Buyer and
Seller to answer and litigate any claims and rights among themselves.
Upon initiating such action, Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the
terms of this Agreement, and all costs, expenses and reasonable
attorney's fees expended or incurred by Escrow Agent in accordance
therewith shall be paid in accordance with Section 5(j) below.
-4-
(j) Buyer shall pay Escrow Agent compensation (as payment in
full) for the services to be rendered by Escrow Agent hereunder in
accordance with the Schedule of Fees attached hereto as Exhibit A (the
---------
"Schedule of Fees") and agrees to reimburse Escrow Agent for all
----------------
reasonable expenses, disbursements and advances incurred or made by
Escrow Agent in performance of its duties hereunder (including
reasonable fees, expenses and disbursements of its counsel). The
parties acknowledge and agree that the Schedule of Fees relates to
compensation for ordinary services as contemplated by this Agreement.
In the event that the conditions of this Agreement are not promptly
fulfilled, or if Escrow Agent renders any service not provided for in
this Agreement, or if Buyer and Seller request a substantial
modification of its terms, or if any controversy arises, or if Escrow
Agent is made a party to, or intervenes in, any litigation pertaining
to this escrow or its subject matter, Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel,
and expenses occasioned by such default, delay, controversy or
litigation.
(k) The other parties hereto authorize Escrow Agent, for any
securities held hereunder, to use the services of any United States
central securities depository it reasonably deems appropriate,
including, without limitation, the Depositary Trust Company and the
Federal Reserve Book Entry System.
6. Limited Responsibility
This Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties or
obligations shall be read into this agreement against Escrow Agent. Escrow Agent
shall not be bound by the provisions of any agreement among the other parties
hereto except this Agreement.
7. Notices
All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt) provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Seller: HearMe
000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
Fax: (000) 000-0000
-5-
With a copy to: Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxx Xxxx
Fax: (000) 000-0000
Buyer: GameSpy Industries, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Fax: (000) 000-0000
with a copy to: O'Melveny & Xxxxx LLP
000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxx
Fax: (000) 000-0000
Escrow Agent: Bank Trust, National Association
Corporate Trust Services
Xxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxx Xxxxxx
Facsimile No.: (000) 000-0000
8. Counterparts
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same.
9. Section Headings
The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
10. Waiver
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege
-6-
or the exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11. Exclusive Agreement And Modification
This Agreement supersedes all prior agreements among the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the Buyer, the
Seller and the Escrow Agent.
12. Governing Law
This Agreement shall be governed by the laws of the State of California,
without regard to conflicts of law principles.
13. Interpretation
The invalidity or unenforceability of any provision of this Agreement or
the invalidity or unenforceability of any provision as applied to a particular
occurrence or circumstance shall not affect the validity or enforceability of
any of the other provisions of this Agreement or the applicability of such
provision, as the case may be.
14. Attorneys' Fees
If any action at law or in equity is necessary to enforce or interpret the
terms of this Agreement or to protect the rights obtained hereunder, the
prevailing party, as determined by the arbitrator or the judge, as the case may
be, shall be entitled to its reasonable attorneys' fees, costs, and
disbursements in addition to any other relief to which it may be entitled. The
rights and remedies of the parties under this Agreement and the Purchase
Agreement and the other agreements related thereto, and all other letters,
certificates or documents executed in connection herewith and therewith are
cumulative and not exclusive of any rights, remedies, powers and privilege that
may otherwise be available to the parties hereto.
15. Automatic Succession
Any company into which Escrow Agent may be merged or with which it may be
consolidated, or any company to whom Escrow Agent may transfer a substantial
amount of its Global Escrow business, shall be the successor to Escrow Agent
hereunder without the execution
-7-
or filing of any paper or any further act on the part of any of the parties,
anything herein to the contrary notwithstanding.
-8-
In Witness Whereof, the parties have executed and delivered this Agreement
as of the date first written above.
BUYER:
Gamespy Industries, Inc.
By: /s/ Xxxx Xxxxxx
---------------------------------------------------
Name: Xxxx Xxxxxx
-------------------------------------------------
Title: President and Chief Executive Officer
-------------------------------------------------
Seller:
Hearme
By: /s/ Xxxxxx Xxxxxxx
--------------------------------------------------
Name:
Xxxxxx Xxxxxxx
------------------------------------------------------
Title: Chief Executive Officer
-----------------------------------------------
Escrow Agent:
U.S. Bank Trust, National Association
By: /s/ Xxxxx Xxxxxxxxxx
--------------------------------------------------
Name: Xxxxx Xxxxxxxxxx
------------------------------------------------
Title: Trust Officer -RS
-----------------------------------------------
EXHIBIT A
---------
SCHEDULE OF FEES
Acceptance Fee
010 The acceptance fee includes the review of all documents, initial set-up of $3,000.00
the account, and other reasonably required services up to and including the
closing. This is a one-time fee, payable at inception.
Administration/Agent Fees
Annual account administration fee covers the normal duties of the escrow
agent associated with the management of the account. Administration fees
are payable in advance and are not proratable
470 Depository Escrow Agent $1,000.00
Transaction Fees
880 Disbursement/Draw $ 20.00
Charge per item disbursed. Includes the wire or check fee.
100 Trades-Open Market/Directed $ 100.00
Charge per trade to buy or sell permitted investments.
This excludes U.S. Bank investment transactions.
101 Receipts $ 20.00
Charge per item received.
EXTRAORDINARY SERVICES
Charge for duties or responsibilities of an unusual nature not provided for
in the indenture or otherwise set forth in this schedule. A reasonable
charge will be made based on the nature of the service and the
responsibility involved. These charges will be billed as a flat fee or our
hourly rate then in effect, at our option.
EXHIBIT B
HEARME NON-EXCLUSIVE PATENT LICENSE AGREEMENT
HEARME NON-EXCLUSIVE PATENT LICENSE AGREEMENT
This Non-Exclusive Patent License Agreement ("Agreement"), effective as of
---------
January 19, 2001 (the "Effective Date"), is by and between HearMe, a Delaware
--------------
corporation ("HearMe"), with a principal office at 000 Xxxxx Xxxxxx, Xxxxxxxx
------
Xxxx, Xxxxxxxxxx 00000, and GameSpy Industries, Inc., a California corporation
("Company"), with its principal place of business at 00000 Xxx Xxxx Xxxxxx,
-------
Xxxxxx, Xxxxxxxxxx 00000.
RECITALS
WHEREAS, HearMe has intellectual property and assets relating to the Field
(as defined below);
WHEREAS, HearMe is the owner of certain Patent Rights (as later defined
herein) used in the Field and desires to grant licenses under said Patent
Rights; and
WHEREAS, HearMe and Company have entered into an Asset Purchase Agreement
dated December 18, 2000 (the "Purchase Agreement"), pursuant to which HearMe
------------------
desires to sell to Company and Company desires to purchase from HearMe the
assets related to the Field. A condition to each of HearMe's and Company's
obligations under the Purchase Agreement is that HearMe and Company enter into
this Agreement in order to provide Company with a license under the Patent
Rights on the terms and conditions hereinafter set forth.
AGREEMENT
---------
NOW, THEREFORE, HearMe and Company hereby agree as follows:
1. DEFINITIONS
--------------
1.1 "Affiliate" shall mean any legal entity (such as a corporation,
---------
partnership, or limited liability company) that is controlled by Company. For
purposes of this definition, the term "control" means (i) beneficial ownership
of at least fifty percent (50%) of the voting securities of a corporation or
other business organization with voting securities or (ii) a fifty percent (50%)
or greater interest in the net assets or profits of a partnership or other
business organization without voting securities.
1.2 "Business" shall mean the assets of HearMe related to the Field that
--------
are being purchased and sold (or licensed, as the case may be) pursuant to the
Purchase Agreement or the exhibits thereto (as defined therein).
1.3 "Confidential Information" shall mean any information disclosed by
------------------------
either party to the other party which is in written, graphic, machine readable
or other tangible form and is marked "Confidential," "Proprietary" or in some
other manner to indicate its confidential nature. Confidential Information may
also include oral information disclosed by either party to the other party
pursuant to this Agreement, provided that such information is designated as
confidential at the time of disclosure and is reduced to writing by the
disclosing party within a reasonable time
(not to exceed thirty (30) days) after its oral disclosure, and such writing is
marked in a manner to indicate its confidential nature and delivered to the
receiving.
1.4 "Field" shall mean multiplayer or online gaming and online voice chat
-----
communities and online advertising related to such gaming and chat communities.
1.5 "HearMe Patent Rights" shall mean the Patent Rights in the patents and
--------------------
patent applications set forth on Appendix B.
1.6 "Mplayer Patent Rights" shall mean the Patent Rights in the patents
---------------------
and patent applications set forth on Appendix A.
1.7 "Patent Rights" shall mean:
-------------
(a) the United States and international patents listed on Appendix A
----------
and Appendix B;
----------
(b) the United States and international patent applications and/or
provisional applications listed on Appendix A and Appendix B and the resulting
---------- ----------
patents;
(c) any patent application listed on Appendix A or Appendix B, and
---------- ----------
any divisionals, and continued prosecution applications (and their relevant
foreign or international equivalents) of the patent applications listed on
Appendix A or Appendix B to the extent the claims are directed to subject matter
---------- ----------
specifically described in the patent applications listed on Appendix A or
----------
Appendix B, and the resulting patents;
----------
(d) any patents resulting from reissues, reexaminations, or
extensions (and their relevant international equivalents) of the patents
described in (a), (b), and (c) above; and
(e) foreign (non-United States) patent applications filed after the
Effective Date and the relevant foreign equivalents to divisional and continued
prosecution applications of the patent applications to the extent the claims are
directed to subject matter specifically described in the patents or patent
applications referred to in (a), (b), (c), and (d) above, and the resulting
patents.
1.8 "Service" means any (a) multiplayer or online gaming and/or (b) online
-------
voice chat community services operated by or on behalf of Company.
1.9 "End User" means any person who uses the Service solely for his or her
--------
own personal purposes and not for any business purpose.
2. GRANT OF RIGHTS
------------------
2.1 License Grants. HearMe hereby grants to Company a fully paid-up,
--------------
worldwide, non-exclusive, royalty-free, world-wide license under the Patent
Rights to develop, make, have made, use, offer for sale, market, use,
distribute, sell, lease, import, export or otherwise dispose
-2-
of any products or services in the Field solely for use in connection with the
Service (the "License").
-------
2.2 Sublicenses. Company shall have no right to grant any sublicenses
-----------
under the HearMe Patent Rights to any third party without the prior express
written approval of HearMe other than to (a) Affiliates of Company, (b) as may
be necessary to enable End Users to use the Service, or (c) as may be necessary
to perform any obligations under the Assumed Contracts (as defined in the
Purchase Agreement) or to enable any third party game developer or publisher to
make, have made, sell or otherwise distribute games compatible with the Service.
Company shall have the right to grant sublicenses under the Mplayer Patent
Rights to any person, corporation or other entity which Company, in its sole and
absolute discretion, may choose. Any sublicenses granted pursuant to this
Section 2.2 shall be subject to the sublicensee agreeing in writing to be bound
by the terms and conditions of the License, and Company shall remain liable for
any breach of the License by any sublicensee.
2.3 Restrictions on License. Company acknowledges the existence of the
-----------------------
Third Party Licenses (as defined in the Purchase Agreement) and that the License
is subject to and limited by the Third Party Licenses, except that Licensor
represents and warrants that none of the Third Party Licenses restricts the use
of the Patent Rights in accordance with the License in connection with the
conduct of the Business in the United States in the English language. Company
shall have no rights or obligations under the Third Party Licenses, and the
Technology Licensees (as defined in the Asset Purchase Agreement) shall not be
deemed or construed as third party beneficiaries in any fashion under this
Agreement.
2.4 Reservation of Rights. Licensor reserves all rights not expressly
---------------------
granted in this Agreement, and no licenses are granted to Licensee under this
Agreement, whether by implication, estoppel or otherwise, except as expressly
set forth herein.
3. PATENT PROSECUTION OF MPLAYER PATENT RIGHTS
3.1 Responsibility for Patent Rights. HearMe shall prepare, file,
--------------------------------
prosecute, and maintain all of the Mplayer Patent Rights. The Company shall
cooperate with HearMe, in such filing, prosecution and maintenance.
3.2 Abandonment. HearMe shall notify Company in writing if HearMe wishes
-----------
to discontinue further filing, prosecution or maintenance of a particular
application or patent in the Mplayer Patent Rights ("Abandoned Patent"). Such
----------------
notice shall be provided at least sixty (60) days prior to the expiration of any
deadline affecting HearMe's continued rights in such Abandoned Patent. Such
notice shall include an offer by HearMe to assign the Abandoned Patent to
Company, which assignment shall be conditioned upon Company's acceptance of
paying any cost of further prosecution, maintenance or defense.
3.3 Payment of Expenses. Except as provided in Section 3.2 above, payment
-------------------
of all fees and costs, including attorneys fees, relating to the filing,
prosecution and maintenance of the patents and patent applications in the
Mplayer Patent Rights shall be the responsibility of HearMe.
-3-
4. INFRINGEMENT OF MPLAYER PATENT RIGHTS
----------------------------------------
4.1 Notification of Infringement. Each party agrees to provide written
----------------------------
notice to the other party promptly after becoming aware of any infringement or
alleged infringement of the Mplayer Patent Rights. Such notifying party shall
provide the other party with any available evidence of such infringement or
alleged infringement.
4.2 Right to Prosecute Infringements. In the event that either party
--------------------------------
becomes aware of any third party infringement or threatened infringement of any
Mplayer Patent Rights, HearMe shall have the first right to enforce any patent
or patent application within the Patent Rights against such infringement or
threatened infringement. HearMe may, in its sole judgment and at its own
expense, institute suit against any such infringer or alleged infringer and
control, settle and defend such suit and recover, for its account, any damages,
awards or settlements therefrom. HearMe shall at all times keep Company
reasonably informed as to the status of any such enforcement action. Company
shall reasonably cooperate and use its best efforts to assist HearMe in any such
litigation at HearMe's expense, including without limitation by joining in such
litigation if requested by HearMe. If HearMe elects not to so enforce any patent
or patent application within the Mplayer Patent Rights, then it shall so notify
Company in writing as soon as practicable but in no event in a manner than
prejudices Company's ability or right to institute such enforcement proceeding
or more than six (6) months after receipt of notice that an infringement or
alleged infringement exists, and Company may, in its sole judgment and at its
own expense, take steps to enforce any such patent or patent application and
control, settle and defend such suit and recover, for its account, any damages,
awards or settlements therefrom.
4.3 Actions Against Company. In the event that an action is brought
-----------------------
against Company by a third party alleging invalidity, unenforceability, or non-
infringement of the Mplayer Patent Rights, HearMe, at its option, shall have the
right within twenty (20) days after notice of such action to take over the sole
defense of the action at its own expense. If HearMe does not exercise this
right, Company may take over the sole defense of the action at Company's sole
expense.
4.4 Cooperation. Each party agrees to cooperate in any action under this
-----------
Article that is controlled by the other party, provided that the controlling
party reimburses the cooperating party promptly for any costs and expenses
incurred by the cooperating party in connection with providing such assistance.
4.5 Reservation of Rights. Nothing in this Agreement shall obligate HearMe
---------------------
to file, prosecute, perfect, maintain or defend any patents or patent
applications within the HearMe Patent Rights.
5. REPRESENTATIONS AND WARRANTIES
---------------------------------
5.1 HearMe Representations. HearMe hereby represents that:
----------------------
-4-
(a) HearMe is the sole owner of the Patent Rights and has the
right and authority to grant the License and the other rights granted to Company
as set forth in this Agreement,
(b) To HearMe's knowledge, the Patent Rights are not subject
to or involved in any litigation and are not the subject of a governmental
investigation, and
(c) Except as otherwise set forth in Section 2.3, HearMe has
not entered into and is not bound by any agreements of any kind inconsistent
with or contrary to this Agreement and has not granted any rights of any nature
to any third party that are inconsistent with or would be violated by the
provisions or intent of this Agreement or that are inconsistent with the rights
granted to Company under this Agreement, including without limitation granting
any exclusive licenses rights to the Patent Rights that would prohibit in any
way Company's exploitation of the Patent Rights in the provision of gaming and
advertising services.
The representations and warranties of Licensor contained in this
Section 4 shall survive the Effective Date and terminate on the first
anniversary of the Effective Date.
5.2 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS
-------------------------
SECTION 5, HEARME MAKES NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND
CONCERNING THE PATENT RIGHTS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NONINFRINGEMENT, VALIDITY OF PATENT RIGHTS CLAIMS, WHETHER ISSUED OR PENDING,
AND THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE.
5.3 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE
-----------------------
FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGES
OR INJURY TO PROPERTY AND LOST PROFITS, REGARDLESS OF WHETHER SUCH PARTY SHALL
BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE
POSSIBILITY OF THE FOREGOING. Except to the extent that such liability is to be
paid by an assignee of HearMe's rights and obligations under this Agreement, the
liability of either party hereunder shall be subject to the limitations of, and
shall be payable in the manner set forth in, Section 9.3(d) of the Purchase
Agreement.
6. ASSIGNMENT
-------------
6.1 By HearMe. Nothing in this Agreement shall restrict HearMe's
---------
right to assign this Agreement or assign or transfer its interest in any of the
HearMe Patents or the Mplayer Patents, or any portion thereof.
6.2 By Company. Company shall not assign any of its rights,
----------
obligations or privileges (by operation of law or otherwise) under this
Agreement without the prior written consent of Company; provided, however, that
-------- -------
this Agreement may be assigned without such consent in
-5-
connection with any merger, consolidation, sale of all or substantially all of
substantially all the assets of Company relating to this Agreement or any
merger, consolidation or similar transaction in which more than fifty percent
(50%) of Company's voting securities are transferred.
7. TERM AND TERMINATION
-----------------------
7.1 Term. This Agreement shall commence as of the Effective Date and
----
shall remain in effect until the expiration or abandonment of all issued patents
and filed patent applications within the Patent Rights, unless earlier
terminated in accordance with the provisions of this Agreement.
7.2 Voluntary Termination by Company. Company shall have the right to
--------------------------------
terminate this Agreement, for any reason, upon at least ninety (90) days prior
written notice to HearMe, such notice to state the date at least ninety (90)
days in the future upon which termination is to be effective.
7.3. Cessation of Business. If Company ceases to carry on the
---------------------
Business, HearMe shall have the right to terminate this Agreement immediately
upon written notice to Company. HearMe acknowledges and agrees that HearMe's
sole remedy for breach of this Agreement by Company shall be an action for
damages, and not termination of the licenses granted hereunder.
7.4 Effect of Termination. The following provisions shall survive
---------------------
the expiration or termination of this Agreement: Articles 1, 5, 8 and 9, and
this Section 7.4.
8. CONFIDENTIALITY
------------------
Each party shall treat as confidential all Confidential Information,
shall not use such Confidential Information except as set forth in this
Agreement, and shall use reasonable efforts not to disclose such Confidential
Information to any third party except as such may specifically authorized
herein. Without limiting the foregoing, each party hall use at least the same
degree of care which it uses to prevent the disclosure of its own confidential
information of like importance to prevent the disclosure of Confidential
Information. Each party shall promptly notify the other party of any actual or
suspected misuse or unauthorized disclosure of any of the Confidential
Information. Notwithstanding the above, each party shall not be liable to the
other party with regard to any Confidential Information of the other which the
receiving party can prove: (a) was in the public domain at the time it was
disclosed or has entered the public domain through no fault of such party, (b)
was known to the receiving party, without restriction, at the time of
disclosure, as demonstrated by files in existence at the time of disclosure, (c)
is disclosed with the prior written approval of the disclosing party, (d) was
independently developed by the receiving party without any use of the
Confidential Information and by employees of the receiving party who did not
have access to the Confidential Information, as demonstrated by files created at
the time of such independent development, (e) becomes known to the receiving
party , without restriction, from a source other than the disclosing party
without breach of this Agreement by the receiving party and otherwise not in
violation of the disclosing party's rights, (f) is disclosed generally to third
parties by the disclosing party without restrictions similar to those contained
in this Agreement; or (g) is disclosed pursuant to the order or requirement of a
-6-
court, administrative agency, or other governmental body; provided, however,
that the receiving party shall provide prompt notice thereof to the disclosing
party to enable the disclosing party to seek a protective order or otherwise
prevent or restrict such disclosure. Upon expiration or termination of this
Agreement, each party shall return all Confidential Information received from
the other party. Each party shall be entitled to disclose the existence of this
Agreement, but agrees that the terms and conditions of this Agreement shall be
treated as Confidential Information and shall not be disclosed to any third
party; provided, however, that each party may disclose the terms and conditions
of this Agreement: (i) as required by any court or other governmental body; (ii)
as otherwise required by law; (iii) to legal counsel of the parties; (iv) in
confidence, to accountants, banks, and financing sources and their advisors; (v)
in connection with the enforcement of this Agreement or rights under this
Agreement; or (vi) in confidence, in connection with an actual or proposed
merger, acquisition, or similar transaction.
9. MISCELLANEOUS
----------------
9.1 Notice. Any notices required or permitted under this Agreement
------
shall be in writing, shall specifically refer to this Agreement, and shall be
sent by hand, recognized national overnight courier, confirmed facsimile
transmission, confirmed electronic mail, or registered or certified mail,
postage prepaid, receipt requested, to the following addresses or facsimile
numbers of the parties:
If to HearMe: 000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Chief Financial Officer
Fax: (000) 000-0000
If to Company: GameSpy Industries, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attention : Chief Executive Officer
Fax: (000) 000-0000
All notices under this Agreement shall be deemed effective upon
receipt. A party may change its contact information immediately upon written
notice to the other party in the manner provided in this Section.
9.2 Governing Law. This Agreement and all disputes arising out of or
-------------
related to this Agreement, or the performance, enforcement, breach or
termination hereof, and any remedies relating thereto, shall be construed,
governed, interpreted and applied in accordance with the laws of the State of
California, U.S.A., and the United States of America, without regard to conflict
of laws principles, except that questions affecting the construction and effect
of any patent shall be determined by the law of the country in which the patent
shall have been granted.
9.3 Force Majeure. Neither party will be responsible for delays
-------------
resulting from causes beyond the reasonable control of such party, including
without limitation fire, explosion, flood, war, strike, or riot, provided that
the nonperforming party uses commercially reasonable efforts
-7-
to avoid or remove such causes of nonperformance and continues performance under
this Agreement with reasonable dispatch whenever such causes are removed.
9.4 Amendment and Waiver. This Agreement may be amended,
--------------------
supplemented, or otherwise modified only by means of a written instrument signed
by both parties. Any waiver of any rights or failure to act in a specific
instance shall relate only to such instance and shall not be construed as an
agreement to waive any rights or fail to act in any other instance, whether or
not similar.
9.5 Severability. In the event that any provision of this Agreement
------------
shall be held invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect any other provision of this Agreement, and the
parties shall negotiate in good faith to modify the Agreement to preserve (to
the extent possible) their original intent.
9.6 Binding Effect. This Agreement shall be binding upon and inure
--------------
to the benefit of the parties and their respective permitted successors and
permitted assigns.
9.7 Headings. All headings are for convenience only and shall not
--------
affect the meaning of any provision of this Agreement.
9.8 Entire Agreement. This Agreement, together with the Purchase
----------------
Agreement and the exhibits and schedules thereto, constitutes the entire
agreement between the parties with respect to its subject matter and supersedes
all prior agreements or understandings, oral or written, between the parties
relating to its subject matter.
9.9 Counterparts. This Agreement may be executed in two counterparts,
------------
both of which taken together shall constitute a single instrument. Execution and
delivery of this Agreement may be evidenced by facsimile transmission.
9.10 Independent Contractor. Neither party shall, for any purpose, be
----------------------
deemed to be an agent of the other party and the relationship between the
parties shall only be that of independent contractors. Neither party shall have
any right or authority to assume or create any obligations or to make any
representations or warranties on behalf of any other party, whether express or
implied, or to bind the other party in any respect whatsoever.
-8-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
HEARME GAMESPY INDUSTRIES, INC.
By: /s/Xxxxxx Xxxxxxx By: /s/Xxxx Xxxxxx
--------------------------------- --------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxx Xxxxxx
------------------------------- -----------
Title: Chief Executive Officer Title: President and Chief Executive
------------------------------ -----------------------------
Officer
-------
-9-
APPENDIX A *
----------
__________
* Material has been omitted pursuant to a request for confidential treatment
APPENDIX B *
----------
__________
* Material has been omitted pursuant to a request for confidential treatment
EXHIBIT C
---------
RIGHTS AGREEMENT AMENDMENT
GAMESPY INDUSTRIES, INC.
ADDENDUM TO INVESTORS' RIGHTS AGREEMENT
---------------------------------------
This Addendum to Investors' Rights Agreement (the "Addendum") is made
--------
as of the 19th day of January, 2001 by and among GameSpy Industries, Inc., a
California corporation (the "Company"), and the individuals and entities listed
-------
on the signature page attached hereto.
On October 22, 1999, the Company entered into an Investors' Rights
Agreement (the "Rights Agreement") with certain Shareholders (as defined
----------------
therein). The Rights Agreement provides in Section 5.3 thereof that any
provision of the Rights Agreement may be amended, and compliance with any
covenant or provision therein omitted or waived, with the written consent of (i)
the Company, (ii) each Purchaser (as defined therein), and (iii) persons holding
more than 50% of the Common Stock held by the Shareholders.
It is a condition to the obligations of HearMe (the "Additional
----------
Purchaser") under the Asset Purchase Agreement dated December 18, 2000 by and
---------
between the Additional Purchaser and the Company (the "Purchase Agreement") that
------------------
this Addendum be executed by the parties hereto, and the parties are willing to
execute this Addendum and to be bound by the provisions hereof.
AGREEMENT
---------
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. Inclusion of Additional Purchaser Under Certain Provisions of the
-----------------------------------------------------------------
Rights Agreement.
----------------
(a) The Additional Purchaser, by its and the other necessary
signatures hereto, shall hereby become a party only to the following
sections of the Rights Agreement:
(i) 1. Board of Directors;
(ii) 2.6 Transfers by Purchaser or Shareholder to
Competitors of the Company;
(iii) 3. Registration Rights;
(iv) 4. Covenants; and
(v) 5. Miscellaneous.
(b) With respect to Section (a)(i) above, the Additional
Purchaser hereby agrees to vote its shares of Common Stock of the
Company in the same manner as the
holders of Series A Preferred Stock in accordance with Section 1 of
the Rights Agreement; and
(c) With respect to Section (a)(iii) above, the shares acquired by
the Additional Purchaser under the Purchase Agreement shall be
considered "Registrable Shares".
------------------
(d) Except as otherwise set forth herein, the Additional Purchaser
shall be considered a "Purchaser" for all purposes under the Rights
---------
Agreement and have all the rights and obligations of a Purchaser
thereunder.
2. Miscellaneous.
-------------
2.1 Full Force and Effect. Except as otherwise set forth herein,
---------------------
the Rights Agreement shall remain in full force and effect, enforceable against
the parties thereto upon the terms contained therein.
2.1 Counterparts. This Addendum may be executed in any number of
------------
counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
[Signature Page Follows]
-2-
The parties hereto have executed this Addendum as of the date first set
forth above.
GAMESPY INDUSTRIES, INC.
By: /s/Xxxx Xxxxxx
--------------------------------------
Name: Xxxx Xxxxxx
--------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
ADDITIONAL PURCHASER:
HEARME
By: /s/Xxxxxx Xxxxxxx
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------------
Title: Chief Executive Officer
--------------------------------------
PURCHASER:
ZDNET, A DIVISION OF ZD INC.
By: /s/ Xxxxxxx Xxxxx
--------------------------------------
Name: Xxxxxxx Xxxxx
--------------------------------------
Title: EVP
--------------------------------------
PURCHASER AND SHAREHOLDER:
MULTI ACCOUNTS, LLC
By: /s/ Xxxxxx Xxxxxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxxxxx
--------------------------------------
Title: V.P and Sec
--------------------------------------
SHAREHOLDERS:
XXXX X. XXXXXX
By: /s/ Xxxx Xxxxxx
--------------------------------------
Name: Xxxx Xxxxxx
--------------------------------------
Title: President and CEO
--------------------------------------
THE BERKUS TRUST DTD 9/17/93
By: /s/ Xxxxx X. Xxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxx
--------------------------------------
Title: Trustee
--------------------------------------
INTERNATIONAL TECHNOLOGIES INSURANCE GROUP,
INC.
By: /s/ Xxxx Xxxxxx
--------------------------------------
Name: Xxxx Xxxxxx
--------------------------------------
Title: President
--------------------------------------
XXXXX VENTURES INVESTMENT PARTNERSHIP II
By: /s/ Xxxxxxxx X. Xxxxx
--------------------------------------
Name: Xxxxxxxx X. Xxxxx
--------------------------------------
Title: General Partner
--------------------------------------
EXHIBIT D
---------
XXXXX WILCO SOURCE CODE LICENSE AGREEMENT
XXXXX WILCO SOURCE CODE LICENSE AGREEMENT
-----------------------------------------
This Agreement is made and entered into as of January 19, 2001 (the
"Effective Date") by and between HearMe, a Delaware corporation ("Licensor"),
-------------- --------
with its principal place of business at 000 Xxxxx Xxxxxx, Xxxxxxxx Xxxx, XX
00000, and GameSpy Industries, Inc., a California corporation, with its
principal place of business at 00000 Xxx Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000
("Licensee").
--------
RECITALS
--------
Licensor has acquired and developed proprietary software and technology.
Pursuant to an Asset Purchase Agreement dated December 18, 2000 by and between
Licensor and Licensee (the "Purchase Agreement"), Licensor has agreed to sell,
------------------
and Licensee has agreed to purchase, certain assets related to the Business (as
defined below). In addition, it is a condition to the consummation of the
transactions contemplated by the Purchase Agreement that Licensor license to
Licensee certain propriety software and technology of the Business upon the
terms and subject to the conditions of this Agreement. The parties desire to set
forth the terms and conditions under which Licensee will License such software
and technology from Licensor. In addition, concurrently with the execution of
this Agreement, the parties are executing and delivering a Technology and Source
Code License Agreement (the "Technology Agreement") pursuant to which Licensee
--------------------
is licensing from Licensor the HearMe Technology (as defined in the Technology
Agreement).
AGREEMENT
---------
The parties agree as follows:
1. Definitions. As used herein, the following terms shall be defined as
-----------
follows:
(a) "Affiliate" shall mean, with respect to a party, all entities
---------
at least fifty percent (50%) owned or controlled by such party, an entity which
directly or indirectly owns or controls more than fifty percent (50%) of the
voting stock of such party, and any entity, the majority ownership of which is
directly or indirectly common to the ownership of such party.
(b) "Confidential Information" shall mean any information disclosed
------------------------
by either party to the other party which is in written, graphic, machine
readable or other tangible form and is marked "Confidential," "Proprietary" or
in some other manner to indicate its confidential nature. Confidential
Information may also include oral information disclosed by either party to the
other party pursuant to this Agreement, provided that such information is
designated as confidential at the time of disclosure and is reduced to writing
by the disclosing party within a reasonable time (not to exceed thirty (30)
days) after its oral disclosure, and such writing is marked in a manner to
indicate its confidential nature and delivered to the receiving party.
Notwithstanding any failure to so identify it, however, all Software and
Documentation shall be Confidential Information of Licensor.
(c) "Documentation" shall mean any documentation, manuals or other
-------------
supporting materials relating to the Software owned by, possessed by or licensed
to Licensor.
(d) "Modified Software" shall mean the Source Code modified by
-----------------
Licensee under Section 2 and any resulting Object Code.
(e) "Object Code" shall mean the computer executable embodiment of
-----------
any computer code for any software (including the Software), which is derived
from the Source Code by a process generally known as "compilation" or any other
process that translates the Source Code or some intermediate code derived from
the Source Code into a form that can be executed by a computer.
(f) "Proprietary Rights" shall mean all rights held by a party in
------------------
its software (including without limitation Source Code and Object Code) and its
Confidential Information, including, but not limited to, patents, copyrights,
authors' rights, trademarks, tradenames, know-how and trade secrets,
irrespective of whether such rights arise under U.S. or international
intellectual property, unfair competition or trade secret laws.
(g) "Service" means any (a) multiplayer or online gaming and/or (b)
-------
online voice chat community services operated by or on behalf of Licensee.
(h) "Software" shall mean any and all Object Code and Source Code
--------
that is the Xxxxx Wilco software described on the attached Exhibit A.
---------
(i) "Source Code" shall mean the human readable embodiment of any
-----------
computer code for any software (including the Software), which must be
translated by a process generally known as "compilation" into Object Code before
such software can be executed by a computer.
2. License.
-------
(a) Grant of License. Subject to the terms and conditions of this
----------------
Agreement, Licensor hereby grants to Licensee a worldwide, non-transferable,
non-exclusive, non-sublicensable (except to an Affiliate), fully paid-up,
royalty-free, perpetual license to: (i) use, copy, modify, create derivative
works based on, and incorporate the Software, and Documentation into other
products solely for use in connection with the Service, and to market any of the
foregoing; (ii) perform any obligations under the Assumed Contracts (as defined
in the Purchase Agreement); and (iii) to have third party developers, publishers
and distributors incorporate the Modified Software (in Object Code form only)
into products, and to distribute and market such products solely for use in
connection with the Service. Any sublicenses granted pursuant to this Section
2(a) shall be subject to the sublicensee agreeing in writing to be bound by the
applicable terms and conditions of this Agreement, and Licensee shall remain
liable for any breach by such sublicensee.
(b) License Restrictions. Licensee shall not disclose, distribute
--------------------
or sublicense the Software (in either Source Code or Object Code form), the
Modified Software (in either Source Code or Object Code form) or the
Documentation, or any portion thereof, to any third party in any circumstances
or manner except as expressly authorized herein or as expressly permitted by
Licensor in writing. Licensee acknowledges the existence of the Third Party
Licenses (as defined in the Purchase Agreement) and that the license grant set
forth in this Section 2 is subject to and limited by such Third Party Licenses,
except that Licensor represents and warrants that none of the Third Party
Licenses restrict the use of the Software in the United States in connection
with conducting the Service in the English language. Licensee shall have no
rights or obligations under the Third Party Licenses, and the Technology
Licensees (as defined in the Asset Purchase Agreement) shall not be deemed or
construed as third party beneficiaries in any fashion under this Agreement.
(c) Proprietary Notices. Licensee agrees to reproduce and include
-------------------
any copyright or other proprietary rights notices of Licensor in all copies, in
whole or in part, of the Software or the Documentation. Licensor shall not
remove any copyright or other proprietary rights notices from any materials
provided by Licensor to Licensee. Licensee shall have the right to use the
trademarks, service marks or trade names related to the Software ("Marks") in
-----
connection with the exercise of the licenses granted hereunder. All such use
shall be in accordance with Licensor's reasonable policies regarding advertising
and trademark usage as established from time to time. Licensee
-2-
will not use the Marks in a manner that disparages or portrays in a false or
poor light Licensor, the Marks or the Software. Licensee's use of the Marks and
any goodwill associated therewith or that may accrue as a result of such use
will inure solely to the benefit of the party that owns the Marks.
(d) Import and Export Requirements. Licensee shall not export,
------------------------------
directly or indirectly, any Software, Documentation or related information
without first obtaining all required licenses and approvals from the appropriate
government agencies.
(e) No Support. Licensee acknowledges that Licensor shall have no
----------
maintenance or support obligations with respect to this Agreement or the
Software licensed hereunder.
(f) Reservation of Rights. Licensor reserves all rights not
---------------------
expressly granted in this Agreement, and no licenses are granted to Licensee
under this Agreement, whether by implication, estoppel or otherwise, except as
expressly set forth herein.
(g) Technology License. The parties expressly agree that all rights
------------------
in the Software that are not discrete from, or have been integrated in or relied
upon by, the HearMe Technology (as defined in the Technology Agreement) have
been licensed to Licensee pursuant to the Technology License.
3. Delivery. Within two (2) days of the Effective Date, Licensor will
--------
deliver to Licensee (i) two copies (2) of the Software stored electronically on
magnetic media, (ii) two (2) copies of the Software in hardcopy format and (iii)
two electronic copies of any Documentation (if available) and (iv) two (2)
copies of any Documentation in hardcopy format.
4. Representations and Warranties. Licensor hereby represents and
------------------------------
warrants that as of the Effective Date:
(a) Licensor is the owner or licensee of any and all intellectual
and other property and rights relating to the Documentation and the Software,
and possesses sufficient rights in such property and authority to permit
Licensor to grant the licenses and carry out its obligations hereunder;
(b) To Licensor's knowledge, the Documentation and the Software are
not subject to or involved in any litigation and are not the subject of a
governmental investigation;
(c) The Documentation and the Software do not violate or infringe
any U.S. copyright or trade secret, or, to Licensor's knowledge, any U.S.
patent, of any third party;
(d) To Licensor's knowledge, the Software is free of any computer
virus, "time bomb," "trap door" or any other similar harmful, malicious or
hidden program or data, and
(e) Except as otherwise set forth in Section 2(d), Licensor has not
entered into and is not bound by any agreements of any kind inconsistent with or
contrary to this Agreement and has not granted any rights in the Software and
the Documentation to any third party that are inconsistent with or would be
violated by the provisions or intent of this Agreement or that are inconsistent
with the rights in the Software and the Documentation granted to Licensee under
this Agreement, including without limitation granting any exclusive licenses to
the Software and the Documentation that would prohibit in any way Licensee's
exploitation of the Documentation and the Software in the provision of gaming
and advertising services.
The representations and warranties of Licensor contained in this Section 4
shall survive the Effective Date and terminate on the first anniversary of the
Effective Date.
5. Disclaimer of Warranties. OTHER THAN AS EXPRESSLY PROVIDED IN SECTION
------------------------
4, EACH PARTY HEREBY DISCLAIMS ALL WARRANTIES WITH RESPECT
-3-
TO THE SOFTWARE AND DOCUMENTATION, WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT
LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND NONINFRINGEMENT.
6. Ownership. As between Licensor and Licensee, the Software (including
---------
Source Code and Object Code) and Documentation and all Proprietary Rights
therein are and shall remain the exclusive property of Licensor. Nothing herein
shall be construed to require Licensor to provide or license to Licensee any
upgrades, updates, or derivative works of or to the Software. As between
Licensor and Licensee, the Modified Software shall be the exclusive property of
Licensor, and Licensee hereby assigns to Licensor all of Licensee's right, title
and interest in the Modified Software, including all Proprietary Rights therein,
except that Licensee shall retain a license to such Modified Software as set
forth in Section 2 above. Licensee shall perform all acts and sign all documents
necessary or appropriate to secure in Licensor all ownership rights, including
all Proprietary Rights, in such Modified Software.
7. Confidentiality.
---------------
(a) Nondisclosure. Each party shall treat as confidential all
-------------
Confidential Information, shall not use such Confidential Information except as
set forth in this Agreement, and shall use reasonable efforts not to disclose
such Confidential Information to any third party except as such may specifically
authorized herein. Without limiting the foregoing, each party hall use at least
the same degree of care which it uses to prevent the disclosure of its own
confidential information of like importance to prevent the disclosure of
Confidential Information. Each party shall promptly notify the other party of
any actual or suspected misuse or unauthorized disclosure of any of the
Confidential Information.
(b) Exceptions. Notwithstanding the above, each party shall not be
----------
liable to the other party with regard to any Confidential Information of the
other which the receiving party can prove: (i) was in the public domain at the
time it was disclosed or has entered the public domain through no fault of
Licensee; (ii) was known to the receiving party, without restriction, at the
time of disclosure, as demonstrated by files in existence at the time of
disclosure; (iii) is disclosed with the prior written approval of the disclosing
party; (iv) was independently developed by the receiving party without any use
of the Confidential Information and by employees of the receiving party who did
not have access to the Confidential Information, as demonstrated by files
created at the time of such independent development; (v) becomes known to the
receiving party , without restriction, from a source other than the disclosing
party without breach of this Agreement by the receiving party and otherwise not
in violation of the disclosing party's rights; (vi) is disclosed generally to
third parties by the disclosing party without restrictions similar to those
contained in this Agreement; or (vii) is disclosed pursuant to the order or
requirement of a court, administrative agency, or other governmental body;
provided, however, that the receiving party shall provide prompt notice thereof
to the disclosing party to enable the disclosing party to seek a protective
order or otherwise prevent or restrict such disclosure.
(c) Return of Confidential Information. Upon expiration or
----------------------------------
termination of this Agreement, each party shall return all Confidential
Information received from the other party.
(d) Remedies. Any breach of the restrictions contained in this
--------
Section 6 is a breach of this Agreement which may cause irreparable harm to the
nonbreaching party. Any such breach shall entitle the nonbreaching party to
injunctive relief in addition to all legal remedies.
-4-
(e) Confidentiality of Agreement. Each party shall be entitled to
----------------------------
disclose the existence of this Agreement, but agrees that the terms and
conditions of this Agreement shall be treated as Confidential Information and
shall not be disclosed to any third party; provided, however, that each party
may disclose the terms and conditions of this Agreement: (i) as required by any
court or other governmental body; (ii) as otherwise required by law; (iii) to
legal counsel of the parties; (iv) in confidence, to accountants, banks, and
financing sources and their advisors; (v) in connection with the enforcement of
this Agreement or rights under this Agreement; or (vi) in confidence, in
connection with an actual or proposed merger, acquisition, or similar
transaction.
8. Term and Termination. This Agreement shall continue in full force and
--------------------
effect from the Effective Date unless earlier terminated (a) by Licensee by
written notice to Licensor or (b) by Licensor following a willful material
breach of this Agreement which remains uncured 30 days following written notice
of such breach. Licensor acknowledges and agrees that, except in the event of a
willful material breach, Licensor's sole remedy for breach of this Agreement by
Licensee shall be an action for damages or as otherwise expressly provided in
this Agreement, and not termination of the license granted hereunder. If this
Agreement is terminated, then the Licensee's rights under the license set forth
in Section 2 shall immediately terminate. The provisions of Sections 4, 5, 6, 7,
8, 9, 10 and 11 of this Agreement shall survive the termination of this
Agreement for any reason.
9. Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
-----------------------
PARTY FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, LOST PROFITS,
LOSS OF DATA OR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES,
HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING TORT OR STRICT
LIABILITY), ARISING OUT OF THIS AGREEMENT. Except to the extent that such
liability is to be paid by an assignee of Licensor's rights and obligations
under this Agreement the liability of either party hereunder shall be subject to
the limitations of, and shall be payable in the manner set forth in, Section
9.3(d) of the Purchase Agreement.
10. Mutual Indemnification. Each party shall indemnify, defend and hold
----------------------
harmless the other party and its respective officers, directors and employees
from any and all third party claims, suits and proceedings and all resulting
damages, penalties, liabilities, costs and expenses, including reasonable legal
fees and expenses, arising out of or relating to the breach of any warranty,
representation or covenant in this Agreement. Each party shall give the other
party prompt written notice of any claim, action or demand for which indemnity
is claimed. Each party agrees to reasonably cooperate with the other party with
the defense and/or settlement of any such claim and to permit the indemnifying
party sole control over the investigation, defense and settlement of such claim;
provided that, if any settlement requires an affirmative obligation of, results
in any ongoing liability to or prejudices or detrimentally impacts a party in
any way and such obligation, liability, prejudice or impact can reasonably be
expected to be material, then such settlement shall require the other party's
written consent (not to be unreasonably withheld or delayed) and the indemnified
party may, at its own expense, have its own counsel in attendance at all
proceedings and substantive negotiations relating to such claim. If a claim of
infringement has occurred, or in the reasonable opinion of Licensee is likely to
occur, Licensor, at its option and expense and in addition to its obligations of
indemnity and defense set forth in this Section 10, to (a) procure for Licensee
the right to continue using the infringing information or material as licensed
hereunder; or (b) replace or modify the same so that it becomes non-infringing
with substantially equivalent performance, functionality and compatibility.
-5-
11. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the parties or their
respective permitted successors and assigns. Any amendment or waiver effected in
accordance with this Section 9(a) shall be binding upon the parties and their
respective successors and assigns.
(b) Successors and Assigns. Licensee shall not assign any of its
----------------------
rights, obligations or privileges (by operation of law or otherwise) hereunder
without the prior written consent of Licensor; except that Licensee may assign
------
such rights, obligations or privileges without such consent in connection with
any merger, consolidation, sale of all or substantially all of Licensee's assets
related to the Business or any other transaction in which more than fifty
percent (50%) of Licensee's voting securities are transferred; provided that the
-------- ----
acquiring party assumes in writing all obligations hereunder. All terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted transferees, successors and
assigns. Licensor shall have the right to assign its rights, obligations and
privileges hereunder to an assignee that agrees in writing to be bound by the
terms and conditions of this Agreement. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties.
(c) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(d) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(e) Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
(g) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Agreement, (ii) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (iii) the balance of the
Agreement shall be enforceable in accordance with its terms.
(h) Independent Contractor. Neither party shall, for any purpose,
----------------------
be deemed to be an agent of the other party and the relationship between the
parties shall only be that of independent contractors. Neither party shall have
any right or authority to assume or create any obligations or to make any
representations or warranties on behalf of any other party, whether express or
implied, or to bind the other party in any respect whatsoever.
-6-
(i) Force Majeure. In the event that either party is prevented from
-------------
performing or is unable to perform any of its obligations under this Agreement
due to any Act of God, fire, casualty, flood, earthquake, war, strike, lockout,
epidemic, destruction of production facilities, riot, insurrection, material
unavailability, or any other cause beyond the reasonable control of the party
invoking this section, and if such party shall have used its best efforts to
mitigate its effects, such party shall give prompt written notice to the other
party, its performance shall be excused, and the time for the performance shall
be extended for the period of delay or inability to perform due to such
occurrences.
(j) Entire Agreement. This Agreement is product of both of the
----------------
parties hereto, and, together with the Purchase Agreement, constitutes the
entire agreement between such parties pertaining to the subject matter hereof,
merges all prior negotiations and drafts of the parties with regard to the
transactions contemplated herein. Any and all other written or oral agreements
existing between the parties hereto regarding such transactions are expressly
canceled.
[SIGNATURE PAGE FOLLOWS]
-7-
The parties have executed this Agreement as of the date first set forth
above.
"LICENSOR" "LICENSEE"
HEARME GAMESPY, INC.
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxx Xxxxxx
--------------------------------------------- ----------------------------------------
Name: Xxxxxx X. Xxxxxxx Name: Xxxx Xxxxxx
------------------------------------------ -------------------------------------
Title: Chief Executive Officer Title: President and CEO
------------------------------------------ -------------------------------------
________________________________________________________________
-8-
EXHIBIT A
SOFTWARE
The Xxxxx Wilco software is a small (360k) stand-alone Voice-over-IP Windows
application optimized for use along site networked computer games. Xxxxx Wilco
uses the Microsoft DirectSound API, as well as proprietary sound card opening
techniques, to mix incoming voice sounds with background game sounds. Xxxxx
Wilco uses a speech compression algorithm that compresses sound packets to 2.4
kbits/sec with negligible processing power.
EXHIBIT E
---------
TECHNOLOGY AND SOURCE CODE LICENSE AGREEMENT
TECHNOLOGY AND SOURCE CODE LICENSE AGREEMENT
-------------------------------------------
This Agreement is made and entered into as of January 19, 2001 (the
"Effective Date") by and between HearMe, a Delaware corporation ("Licensor"),
-------------- --------
with its principal place of business at 000 Xxxxx Xxxxxx, Xxxxxxxx Xxxx, XX
00000, and GameSpy Industries, Inc., a California corporation ("Licensee"), with
--------
its principal place of business at 00000 Xxx Xxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx
00000.
RECITALS
--------
Pursuant to an Asset Purchase Agreement dated December 18, 2000 by and
between Licensor and Licensee (the "Purchase Agreement"), Licensor has agreed to
------------------
sell, and Licensee has agreed to purchase, certain assets related to the
Business (as defined below). In addition, it is a condition to the consummation
of the transactions contemplated by the Purchase Agreement that Licensor license
to Licensee certain propriety software and technology of the Business upon the
terms and subject to the conditions of this Agreement.
AGREEMENT
---------
The parties agree as follows:
1. Definitions. As used herein, the following terms shall be defined
-----------
as follows:
(a) "Business" shall mean the multiplayer or online game service
--------
and voice chat communities operated by or for Licensor, including the business
segment entitled "Live Communities," information regarding the users of such
technology and services, Seller's affiliate network, the collection of web sites
and web pages relating to gaming, and the global rankings services.
(b) "Confidential Information" shall mean any information
------------------------
disclosed by either party to the other party which is in written, graphic,
machine readable or other tangible form and is marked "Confidential,"
"Proprietary" or in some other manner to indicate its confidential nature.
Confidential Information may also include oral information disclosed by either
party to the other party pursuant to this Agreement, provided that such
information is designated as confidential at the time of disclosure and is
reduced to writing by the disclosing party within a reasonable time (not to
exceed thirty (30) days) after its oral disclosure, and such writing is marked
in a manner to indicate its confidential nature and delivered to the receiving
party.
(c) "Documentation" shall mean any documentation, manuals or
-------------
other supporting materials relating to the Software or the HearMe Technology, if
any, owned by, possessed by or licensed to Licensor or over which Licensor may
exhibit control.
(d) "End User" means an individual or entity that subscribes to,
--------
or otherwise becomes entitled to use or uses, the Services.
(e) "HearMe Technology" shall mean the software (and any
-----------------
rights necessary to use such software) related to the implementation, deployment
and operation of the Software and the Documentation.
(f) "Modified Software" shall mean the Source Code modified by
-----------------
Licensee under Section 2 and any resulting Object Code.
(g) "Object Code" shall mean the computer executable
-----------
embodiment of any computer code for any software (including the Software), which
is derived from the Source Code by a process generally known as "compilation" or
any other process that translates the Source Code or some intermediate code
derived from the Source Code into a form that can be executed by a computer.
(h) "Proprietary Rights" shall mean all rights held by a party
------------------
in its software (including without limitation Source Code and Object Code) and
its Confidential Information, including, but not limited to, patents,
copyrights, authors' rights, trademarks, tradenames, know-how and trade
-3-
secrets, irrespective of whether such rights arise under U.S. or international
intellectual property, unfair competition or trade secret laws.
(i) "Software" shall mean all Object Code and Source Code
--------
relevant to the HearMe Technology, as specified on Exhibit A.
---------
(j) "Software Source Code" shall mean the Source Code of the
--------------------
Software.
(k) "Source Code" shall mean the human readable embodiment of
-----------
software computer code, which must be translated by a process generally known as
"compilation" into Object Code before such software can be executed by a
computer.
2. License.
-------
(a) Grant of License. Subject to the terms and conditions of
----------------
this Agreement, Licensor hereby grants to Licensee a worldwide, transferable,
sublicensable, non-exclusive, fully-paid, royalty-free perpetual license to the
HearMe Technology, including without limitation the right to use, copy, modify,
publicly display, publicly perform, market, create modifications to, create
derivative works based on, and incorporate into other products the HearMe
Technology or any part or portion thereof. Without in any way limiting the
generality of the foregoing, the license granted hereunder specifically includes
the rights to:
(i) use, copy, modify, publicly display, publicly
perform, market, create modifications to, create derivative works based on, and
incorporate into other products the Software;
(ii) distribute and sublicense the Software and the
Documentation to End Users.
(iii) distribute and sublicense the Software to employees,
independent contractors or other agents, and grant them access to the HearMe
Technology and the Documentation.
(iv) use, copy, modify, publicly display, publicly
perform, market, create modifications to, create derivative works based on, and
incorporate into other products the Documentation; and
(v) use, copy, modify, display, create modifications to,
make derivative works from and incorporate into other products the Source Code
of the Software to create Modified Software.
(b) Import and Export Requirements. Licensee shall not export,
------------------------------
directly or indirectly, any HearMe Technology, Documentation or related
information without first obtaining all required licenses and approvals from the
appropriate government agencies.
(c) No Support. Licensee acknowledges that Licensor shall have
----------
no maintenance or support obligations with respect to this Agreement or the
Software or Source Code licensed hereunder.
(d) Restrictions on License. Licensee acknowledges the existence
-----------------------
of the Third Party Licenses (as defined in the Purchase Agreement) and that the
license grant set forth in this Section 2 is subject to and limited by such
Third Party Licenses, except that Licensor represents and warrants that none of
the Third Party Licenses restrict the use of the HearMe Technology in the United
States in connection with conducting the Business in the English language.
Licensee shall have no rights or obligations under the Third Party Licenses, and
the Technology Licensees (as defined in the Asset Purchase Agreement) shall not
be deemed or construed as third party beneficiaries in any fashion under this
Agreement.
(e) Patent License. The parties have entered into a nonexclusive
--------------
patent license agreement of even date herewith (the "Patent License"). Except as
-------------
set forth below in Section 4(f), nothing in this Agreement shall be construed to
grant any rights to, or impose any obligations on, any
-4-
party with respect to any of the Patent Rights (as defined in the Patent
License), and any provisions to the contrary in this agreement shall not apply
with respect to such Patent Rights.
3. Delivery. Within two (2) days of the Effective Date, Licensor will
--------
deliver to Licensee (i) two copies (2) of the Software stored electronically on
magnetic media, (ii) two (2) copies of the Software in hardcopy format and (iii)
two electronic copies of any Documentation (if available) and (iv) two (2)
copies of any Documentation in hardcopy format.
4. Representations and Warranties. Licensor hereby represents and
------------------------------
warrants that as of the Effective Date:
(a) Licensor is the owner or licensee of any and all
intellectual and other property and rights relating to the HearMe Technology,
and possesses sufficient rights in such property and authority to permit
Licensor to grant the licenses and carry out its obligations hereunder;
(b) To Licensor's knowledge, the HearMe Technology is not subject to
or involved in any litigation and are not the subject of a governmental
investigation;
(c) The HearMe Technology does not violate or infringe any U.S.
copyright or trade secret, or, to Licensor's knowledge, U.S. patent, of any
third party;
(d) To Licensor's knowledge, the HearMe Technology is free of any
computer virus, "time bomb", "trap door" or any other similar harmful, malicious
or hidden program or data, and
(e) Except as otherwise set forth in Section 2(d), Licensor has not
entered into and is not bound by any agreements of any kind inconsistent with or
contrary to this Agreement and has not granted any rights in the HearMe
Technology to any third party that are inconsistent with or would be violated by
the provisions or intent of this Agreement or that are inconsistent with the
rights in the HearMe Technology granted to Licensee under this Agreement,
including without limitation granting any exclusive licenses to the HearMe
Technology that would prohibit in any way Licensee's exploitation of the HearMe
Technology in the provision of gaming and advertising services.
(f) Licensor is the sole owner of the Patent Rights;
The representations and warranties of Licensor contained in this
Section 4 shall survive the Effective Date and terminate on the first
anniversary of the Effective Date.
5. Disclaimer of Warranties. OTHER THAN THE LIMITED WARRANTIES
------------------------
SPECIFICALLY SET FORTH IN SECTION 4 ABOVE, LICENSOR HEREBY DISCLAIMS ALL
WARRANTIES WITH RESPECT TO THE SOURCE CODE THE SOFTWARE AND DOCUMENTATION,
WHETHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES
OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT.
6. Ownership. As between Licensor and Licensee, the HearMe Technology
---------
is and shall remain the exclusive property of Licensor. Nothing herein shall be
construed to require Licensor to provide or license to Licensee any upgrades,
updates, or derivative works of or to the HearMe Technology. As between Licensor
and Licensee, the Modified Software shall be the exclusive property of Licensee,
subject to the license grants hereunder and Licensor's Proprietary Rights in the
Software, and Licensor hereby assigns to Licensee all of Licensor's right, title
and interest in the Modified Software, including all Proprietary Rights therein
or any other rights necessary for Licensee to exploit, sublicense or modify any
Modified Software. Licensor shall perform all acts and sign all documents
necessary or appropriate to secure in Licensee all ownership rights, including
all Proprietary Rights, in such Modified Software.
-5-
7. Confidentiality.
---------------
(a) Nondisclosure. Each party shall treat as confidential all
-------------
Confidential Information, shall not use such Confidential Information except as
set forth in this Agreement, and shall use reasonable efforts not to disclose
such Confidential Information to any third party except as such may be
specifically authorized herein. Without limiting the foregoing, each party hall
use at least the same degree of care which it uses to prevent the disclosure of
its own confidential information of like importance to prevent the disclosure of
Confidential Information. Each party shall promptly notify the other party of
any actual or suspected misuse or unauthorized disclosure of any of the
Confidential Information.
(b) Exceptions. Notwithstanding the above, each party shall
----------
not be liable to the other party with regard to any Confidential Information of
the other which the receiving party can prove: (i) was in the public domain at
the time it was disclosed or has entered the public domain through no fault of
Licensee; (ii) was known to the receiving party, without restriction, at the
time of disclosure, as demonstrated by files in existence at the time of
disclosure; (iii) is disclosed with the prior written approval of the disclosing
party; (iv) was independently developed by the receiving party without any use
of the Confidential Information and by employees of the receiving party who did
not have access to the Confidential Information, as demonstrated by files
created at the time of such independent development; (v) becomes known to the
receiving party , without restriction, from a source other than the disclosing
party without breach of this Agreement by the receiving party and otherwise not
in violation of the disclosing party's rights; (vi) is disclosed generally to
third parties by the disclosing party without restrictions similar to those
contained in this Agreement; or (vii) is disclosed pursuant to the order or
requirement of a court, administrative agency, or other governmental body;
provided, however, that the receiving party shall provide prompt notice thereof
to the disclosing party to enable the disclosing party to seek a protective
order or otherwise prevent or restrict such disclosure.
(c) Return of Confidential Information. Upon expiration or
----------------------------------
termination of this Agreement, each party shall return all Confidential
Information received from the other party.
(d) Remedies. Any breach of the restrictions contained in this
--------
Section 6 is a breach of this Agreement which may cause irreparable harm to the
non-breaching party. Any such breach shall entitle the non-breaching party to
injunctive relief in addition to all legal remedies.
(e) Confidentiality of Agreement. Each party shall be entitled
----------------------------
to disclose the existence of this Agreement, but agrees that the terms and
conditions of this Agreement shall be treated as Confidential Information and
shall not be disclosed to any third party; provided, however, that each party
may disclose the terms and conditions of this Agreement: (i) as required by any
court or other governmental body; (ii) as otherwise required by law; (iii) to
legal counsel of the parties; (iv) in confidence, to accountants, banks, and
financing sources and their advisors; (v) in connection with the enforcement of
this Agreement or rights under this Agreement; or (vi) in confidence, in
connection with an actual or proposed merger, acquisition, or similar
transaction.
8. Term and Termination. This Agreement shall continue in full
--------------------
force and effect from the Effective Date unless earlier terminated by Licensee
by written notice to Licensor. Licensor acknowledges and agrees that Licensor's
sole remedy for breach of this Agreement by Licensee shall be an action for
damages, and not termination of the license granted hereunder. In no event shall
Licensor have the right to terminate this Agreement or the perpetual license
granted hereunder. If this Agreement is terminated by Licensee, then Licensee's
rights under the license set forth in Section 2 shall immediately terminate. The
provisions of Sections 4, 5, 6, 7, 8, 9 and 10 of this Agreement shall survive
any termination of this Agreement.
-6-
9. Limitation of Liability. IN NO EVENT SHALL LICENSOR BE LIABLE
-----------------------
FOR COSTS OF PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES, LOST PROFITS, LOSS
OF DATA OR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING TORT OR STRICT LIABILITY),
ARISING OUT OF THIS AGREEMENT. Except to the extent that such liability is to be
paid by an assignee of Licensor's rights and obligations under this Agreement,
the liability of either party hereunder shall be subject to the limitations of,
and shall be payable in the manner set forth in, Section 9.3(d) of the Purchase
Agreement.
10. Mutual Indemnification. Each party shall indemnify, defend and
----------------------
hold harmless the other party and its respective officers, directors and
employees from any and all third party claims, suits and proceedings and all
resulting damages, penalties, liabilities, costs and expenses, including
reasonable legal fees and expenses, arising out of or relating the breach of any
warranty, representation or covenant in this Agreement. Each party shall give
the other party prompt written notice of any claim, action or demand for which
indemnity is claimed. Each party agrees to reasonably cooperate with the other
party with the defense and/or settlement of any such claim and to permit the
indemnifying party sole control over the investigation, defense and settlement
of such claim; provided that, if any settlement requires an affirmative
obligation of, results in any ongoing liability to or prejudices or
detrimentally impacts a party in any way and such obligation, liability,
prejudice or impact can reasonably be expected to be material, then such
settlement shall require the other party's written consent (not to be
unreasonably withheld or delayed) and the indemnified party may, at its own
expense, have its own counsel in attendance at all proceedings and substantive
negotiations relating to such claim.
11. Miscellaneous.
-------------
(a) Amendments and Waivers. Any term of this Agreement may be
----------------------
amended or waived only with the written consent of the parties or their
respective permitted successors and assigns. Any amendment or waiver effected in
accordance with this Section 11(a) shall be binding upon the parties and their
respective successors and assigns.
(b) Successors and Assigns. Neither party shall assign any of
----------------------
its rights, obligations or privileges (by operation of law or otherwise)
hereunder without the prior written consent of the other party; provided,
--------
however, that such rights, obligations or privileges may be assigned (i) without
-------
such consent in connection with any merger, consolidation, sale of all or
substantially all of such party's assets that are the subject of this Agreement
or any other transaction in which more than fifty percent (50%) of such party's
voting securities are transferred or (ii) by Licensor to the acquiror of all or
substantially all of the HearMe Technology, provided that in each such case the
assignee assumes in writing all obligations hereunder. All terms and provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted transferees, successors and assigns.
(c) Governing Law. This Agreement and all acts and
-------------
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law.
(d) Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(e) Titles and Subtitles. The titles and subtitles used in
--------------------
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(f) Notices. Any notice required or permitted by this
-------
Agreement shall be in writing and shall be deemed sufficient upon receipt, when
delivered personally or by courier, overnight delivery service or confirmed
facsimile, or forty-eight (48) hours after being deposited in the regular mail
as certified or registered mail (airmail if sent internationally) with postage
prepaid, if such notice is
-7-
addressed to the party to be notified at such party's address or facsimile
number as set forth below, or as subsequently modified by written notice.
(g) Severability. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith, in order to maintain the economic
position enjoyed by each party as close as possible to that under the provision
rendered unenforceable. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(h) Independent Contractor. Neither party shall, for any
----------------------
purpose, be deemed to be an agent of the other party and the relationship
between the parties shall only be that of independent contractors. Neither party
shall have any right or authority to assume or create any obligations or to make
any representations or warranties on behalf of any other party, whether express
or implied, or to bind the other party in any respect whatsoever.
(i) Force Majeure. In the event that either party is prevented
-------------
from performing or is unable to perform any of its obligations under this
Agreement due to any Act of God, fire, casualty, flood, earthquake, war, strike,
lockout, epidemic, destruction of production facilities, riot, insurrection,
material unavailability, or any other cause beyond the reasonable control of the
party invoking this section, and if such party shall have used its best efforts
to mitigate its effects, such party shall give prompt written notice to the
other party, its performance shall be excused, and the time for the performance
shall be extended for the period of delay or inability to perform due to such
occurrences.
(j) Entire Agreement. This Agreement is product of both of the
----------------
parties hereto, and, together with the Purchase Agreement, constitutes the
entire agreement between such parties pertaining to the subject matter hereof,
merges all prior negotiations and drafts of the parties with regard to the
transactions contemplated herein. Any and all other written or oral agreements
existing between the parties hereto regarding such transactions are expressly
canceled.
[SIGNATURE PAGE FOLLOWS]
-8-
The parties have executed this Agreement as of the date first set forth
above.
"LICENSOR" "LICENSEE"
HEARME GAMESPY INDUSTRIES, INC.
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxx Xxxxxx
---------------------- --------------------------
Name: Xxxxxx Xxxxxxx Name: Xxxx Xxxxxx
--------------------- ------------------------
Title: CEO Title: President and CEO
------------------- ----------------------
-9-
EXHIBIT A *
* Material has been omitted pursuant to request for confidential treatment
-2-
* Material has been omitted pursuant to request for confidential treatment
EXHIBIT F
---------
FORM OF PROMISSORY NOTE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED.
PROMISSORY NOTE
---------------
$______________ January 19, 2001
(subject to adjustment) Irvine, California
For value received, GameSpy Industries, Inc., a California corporation (the
"Company"), promises to pay to HearMe, a Delaware corporation (the "Holder"),
------- ------
the sum of $1,500,000 (the "Initial Amount") plus __________(the "Additional
-------------- ----------
Amount") (the Initial Amount and the Additional Amount, collectively, the
------
"Principal Amount"). Interest shall accrue from the date of this Note on the
----------------
unpaid Principal Amount at a rate equal to six and one-tenth percent (6.10%) per
annum. This Note is issued pursuant to the Asset Purchase Agreement by and
between the Company and the Holder dated December 18, 2000 (the "Purchase
--------
Agreement") and is subject to the following terms and conditions.
---------
1. Maturity. The Principal Amount and any accrued but unpaid interest
--------
under this Note shall be due and payable upon demand by the Holder at any time
after the date that is six months following the date of issuance of this Note
(the "Maturity Date"). Notwithstanding the foregoing, the Principal Amount,
-------------
together with accrued and unpaid interest thereon, shall become immediately due
and payable upon the insolvency of the Company, the commission of any act of
bankruptcy by the Company, the execution by the Company of a general assignment
for the benefit of creditors, the filing by or against the Company of a petition
in bankruptcy or any petition for relief under the federal bankruptcy act or the
continuation of such petition without dismissal for a period of ninety (90) days
or more, or the appointment of a receiver or trustee to take possession of the
property or assets of the Company.
2. Collection of Accounts Receivable. The parties acknowledge and agree
---------------------------------
that pursuant to the Purchase Agreement, the Company has assumed the accounts
receivable of the Business (as defined in the Purchase Agreement) (the
"Receivables"). The Company agrees to use commercially reasonable efforts to
-----------
collect the Receivables prior to the Maturity Date, and the Holder may, in its
sole discretion, assist in such collection effort in such manner as may be
reasonably acceptable to the Company. In the event that, as of the Maturity
Date, the Company shall have collected Receivables
amounting to less than the Additional Amount, then the Principal Amount shall be
reduced by the amount the Additional Amount exceeds the amount of Receivables
collected by the Company; provided, however, that in no event shall the
-------- -------
Additional Amount be less than 2,416,879.64. At the Holder's expense, the Holder
shall have the right to designate independent accountants to perform one audit
of the Company's records during regular business hours with respect to
compliance with this Section 2; provided, however, that the Company shall bear
-------- -------
such expense in the event that such audit reports an underpayment of at least
5%.
3. Payment. All payments shall be made in lawful money of the United
-------
States of America at such place as the Holder hereof may from time to time
designate in writing to the Company. Payment shall be credited first to the
accrued interest then due and payable and the remainder applied to the Principal
Amount. Prepayment of this Note may be made at any time without penalty.
4. Transfer; Successors and Assigns. The terms and conditions of this
--------------------------------
Note shall inure to the benefit of and be binding upon the respective successors
and assigns of the parties. This Note may be transferred only upon surrender of
the original Note for registration of transfer, duly endorsed, or accompanied by
a duly executed written instrument of transfer in form reasonably satisfactory
to the Company. Thereupon, a new note for the Principal Amount and interest will
be issued to, and registered in the name of, the transferee. Interest and the
Principal Amount are payable only to the registered holder of this Note.
5. Governing Law. This Note and all acts and transactions pursuant hereto
-------------
and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
6. Notices. Any notice required or permitted by this Note shall be in
-------
writing and shall be deemed sufficient upon delivery, when delivered personally
or by a nationally-recognized delivery service (such as Federal Express or UPS),
or forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, addressed to the party to be notified
at such party's address as set forth below or as subsequently modified by
written notice.
7. Amendments and Waivers. Any term of this Note may be amended only with
----------------------
the written consent of the Company and the Holder. Any amendment or waiver
effected in accordance with this Section 6 shall be binding upon the Company,
the Holder and each transferee of the Note.
8. Officers and Directors Not Liable. In no event shall any officer or
---------------------------------
director of the Company be liable for any amounts due or payable pursuant to
this Note.
9. Action to Collect on Note. If action is instituted to collect on this
-------------------------
Note, the Company promises to pay all costs and expenses, including reasonable
attorney's fees, incurred in connection with such action.
COMPANY:
GAMESPY INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxx
---------------------------
Name: Xxxx Xxxxxx
-------------------------
(print)
Title: President and CEO
Address: 00000 Xxx Xxxx Xxxxxx
Xxxxxx, XX 00000
AGREED TO AND ACCEPTED:
HEARME
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------
(print)
Title: Chief Executive Officer
-------------------------
Address: 000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
EXHIBIT G
---------
XXXX OF SALE
XXXX OF SALE
------------
This Xxxx of Sale ("Agreement") is made as of January 19, 2001 by and
---------
between HearMe, a corporation organized under the laws of Delaware ("Seller"),
------
and, GameSpy Industries, Inc., a corporation organized under the laws of
California (the "Buyer").
-----
1. Definitions. Unless specifically designated otherwise, capitalized
-----------
terms used in this Agreement shall have the meanings given them in the Asset
Purchase Agreement between Seller and Buyer dated as of December 18, 2000 (the
"Purchase Agreement").
------------------
2. Sale of Assets. Pursuant to the Purchase Agreement, Seller, for good
--------------
and valuable consideration, the receipt of which is hereby acknowledged, hereby
unconditionally and irrevocably sells, assigns, grants, conveys and delivers to
Buyer the Assets (as defined in the Purchase Agreement).
3. Miscellaneous.
-------------
(a) Seller and Buyer hereby agree that they will, from time to time,
execute and deliver such further instruments of conveyance and transfer as may
be reasonably required to implement and effectuate the sale of the Assets
pursuant to the Purchase Agreement.
(b) This Agreement has been executed to implement the Purchase
Agreement and nothing contained herein shall be deemed or construed to impair or
alter any of the provisions of the Purchase Agreement.
(c) This Agreement is executed and delivered in, and shall be
construed and enforced in accordance with the domestic laws of the State of
California, and shall be binding upon and shall inure to the benefit of the
respective successors and assigns of the parties to this Agreement.
(d) This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
(e) The terms of this Agreement may only be modified by a written
agreement duly signed by persons authorized to sign agreements on behalf of the
parties hereto.
(f) Seller hereby represents and warrants that (i) the Assets are free
and clear of any Encumbrance and (ii) it has good and marketable title to the
Assets, and no agreements or understandings exist which limit or restrict the
right of Seller to transfer the Assets to Buyer.
Signature pages follow.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
"BUYER"
GAMESPY INDUSTRIES, INC.
By: /s/ Xxxx Xxxxxx
---------------------------
Title: President and CEO
------------------------
"SELLER"
HEARME
By: /s/ Xxxxxx Xxxxxxx
---------------------------
Title: Chief Executive Officer
------------------------
EXHIBIT H
---------
FORM OF OPINION OF COUNSEL TO BUYER
January __, 2001
HearMe
000 Xxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Ladies and Gentlemen:
We have acted as special counsel to GameSpy Industries, Inc., a
California corporation (the "Company"), in connection with the transactions
contemplated by the Asset Purchase Agreement, dated as of December 18, 2000 (the
"Asset Purchase Agreement"), by and between the Company and HearMe, a Delaware
corporation. We are providing this opinion to you at the request of the Company
pursuant to Section 7.6 of the Asset Purchase Agreement. Except as otherwise
indicated, capitalized terms used in this opinion and defined in the Asset
Purchase Agreement will have the meanings given in the Asset Purchase Agreement.
In our capacity as such counsel, we have examined originals or
copies of those corporate and other records and documents we considered
appropriate. As to relevant factual matters, we have relied upon, among other
things, the Company's factual representations in the Asset Purchase Agreement
and factual representations in a certificate of the Company dated January __,
2001. In addition, we have obtained and relied upon those certificates of public
officials we considered appropriate.
We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with originals of all documents submitted to us as copies. To the extent the
Company's obligations depend on the enforceability of the Asset Purchase
Agreement against the other parties to the Asset Purchase Agreement, we have
assumed that the Asset Purchase Agreement is enforceable against such other
parties.
On the basis of such examination, our reliance upon the
assumptions in this opinion and our consideration of those questions of law we
considered relevant, and subject to the limitations and qualifications in this
opinion, we are of the opinion that:
1. The Company has been duly incorporated, organized and is
validly existing in good standing under the laws of the State of California,
with corporate power to carry on its on-line gaming business, to enter into the
Asset Purchase Agreement, and to perform its obligations under the Asset
Purchase Agreement.
2. The execution, delivery and performance of the Asset
Purchase Agreement have been duly authorized by all necessary corporate action
on the part of the Company, and the Asset Purchase Agreement has been duly
executed and delivered by the Company.
3. The execution and delivery by the Company of the Asset
Purchase Agreement do not, and the Company's performance of its obligations
under the Asset Purchase Agreement will not (i) violate the Company's Second
Amended and Restated Articles of Incorporation or Bylaws or (ii) to our
knowledge, breach or otherwise violate any existing obligation of or restriction
on the Company under any order, judgment or decree of any California or federal
court or governmental authority binding on the Company.
4. The execution and delivery by the Company of the Asset
Agreement do not, and the Company's performance of its obligations under the
Asset Purchase Agreement will not, violate any current California or federal
statute, rule or regulation that we have, in the exercise of customary
professional diligence, recognized as applicable to the Company or to
transactions of the type contemplated by the Asset Purchase Agreement.
5. To our knowledge, there is no action, suit or proceeding
pending or threatened against the Company before any court, arbitrator or
governmental agency which seeks to affect the enforceability of the Asset
Purchase Agreement or which seeks to challenge or materially delay the
transactions contemplated by the Asset Purchase Agreement. We call your
attention to the fact that our engagement is limited to matters as to which we
are consulted.
6. The authorized capital stock of the Company consists of
30,000,000 shares of common stock of the Company, par value $0.0001 ("Common
Stock"), 17,671,064 shares of which are issued and outstanding, immediately
prior to the Closing, and 1,500,000 shares of preferred stock of the Company,
par value $0.0001 ("Preferred Stock"), 907,992 shares of which have been
designated as Series A Preferred Stock, of which 907,992 are issued and
outstanding. The outstanding shares of the capital stock of the Company have
been duly authorized by all necessary corporate action on the part of the
Company and are validly issued, fully paid, and non-assessable. The Company has
reserved 907,992 shares of Common Stock for issuance upon conversion of
Preferred Stock, and 5,050,000 shares of Common Stock for issuance under the
Company's 1999 Stock Option Plan (the "Plan").
----
7. Except pursuant to the Plan and as provided for in Section
2.3 of the Investors' Rights Agreement, to our knowledge, the authorized but
unissued shares of capital stock of Company are not subject to any warrants,
options, rights or commitments granted by the Company, and the Company is not
obligated to issue, purchase or redeem any shares of the Company's capital
stock.
8. Assuming the accuracy of your representations in Article IV
of the Asset Purchase Agreement, it is not necessary in connection with the sale
of shares of Common Stock of the Company under the circumstances contemplated by
the Asset Purchase Agreement to register such Common Stock under the Securities
Act of 1933, as amended, or to qualify the offer or sale of such Common Stock
under the California Corporate Securities Law. We express no opinion as to the
securities laws of any other state.
For purposes of the opinions expressed in paragraphs 3 and 4, we have
assumed that the Company will not in the future take any discretionary action
(including a decision not to act) permitted by the Asset Purchase Agreement that
would cause the performance of the Asset Purchase Agreement to violate any
California or federal statute, rule or regulation or constitute a violation or
breach of or default under any orders, judgments or decrees referred to in
clause (ii) of paragraph 3 or require an order, consent, permit or approval to
be obtained from a California or federal governmental authority.
Our use of the terms "known to us," "to our knowledge," or similar
phrases to qualify a statement in this opinion means that those attorneys in
this firm who have given substantive attention to the representation described
in the introductory paragraph of this opinion do not have current actual
knowledge that the statement is inaccurate. Such terms do not include any
knowledge of other attorneys within our firm (regardless of whether they have
represented or are representing the Company in connection with any other matter)
or any constructive or imputed notice of any matters or items of information. We
have not undertaken any independent investigation to determine the accuracy of
the statement, and any limited inquiry undertaken by us during the preparation
of this opinion letter should not be regarded as such an investigation. No
inference as to our knowledge of any matters bearing on the accuracy of any such
statement should be drawn from the fact of our representation of the Company in
connection with this opinion letter or in other matters.
The law covered by this opinion is limited to the present federal
securities laws and the present laws of the State of California. We express no
opinion as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction.
This opinion is furnished by us as special counsel for the Company and
may be relied upon by you only in connection with the Asset Purchase Agreement.
It may not be used or relied upon by you for any other purpose or by any other
person, nor may copies be delivered to any other person, without in each
instance our prior written consent. This opinion is expressly limited to the
matters set forth above and we render no opinion, whether by implication or
otherwise, as to any other matters. We assume no obligation to update or
supplement this opinion to reflect any facts or circumstances which may
hereafter come to our attention, or any changes in laws which may hereafter
occur.
Respectfully submitted,
EXHIBIT I
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FORM OF OPINION OF COUNSEL TO SELLER
VLG LETTERHEAD
January 19, 2001
GameSpy Industries, Inc.
00000 Xxx Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Ladies and Gentlemen:
We have acted as counsel for HearMe, a Delaware corporation (the
"Seller"), in connection with the sale by the Seller to you of certain assets
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related to the Business pursuant to the Asset Purchase Agreement (the "Asset
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Purchase Agreement") dated as of December 18, 2000 by and between Seller and
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GameSpy Industries, Inc. (the "Buyer"). Unless defined herein, capitalized terms
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have the meaning given them in the Asset Purchase Agreement.
In rendering this opinion, we have examined such matters of law as we
considered necessary for the purpose of rendering this opinion. As to matters of
fact material to the opinions expressed herein, we have relied upon the
representations and warranties as to factual matters contained in and made by
the Seller pursuant to the Asset Purchase Agreement and the Opinion Certificate
(defined below) and upon certificates and statements of government officials and
officers of the Seller. In addition, we have examined originals or copies of
documents, corporate records and other writings, which we consider relevant for
the purposes of this opinion. In such examination, we have assumed that the
signatures on documents and instruments examined by us are authentic, that each
document is what it purports to be, and that all documents submitted to us as
copies or facsimiles conform with the originals, which facts we have not
independently verified.
In making our examination of documents executed by entities other than
the Seller, we have further assumed (i) that each such entity had the power to
enter into and perform all of its obligations thereunder, (ii) the due
authorization by each such entity of all requisite actions, (iii) the due
execution and delivery of such documents by each such entity, (iv) the
enforceability and binding nature of the obligations of such entities under such
documents, and (v) that there are no facts or circumstances relating to such
entities that might prevent the Buyer from enforcing any of the rights to which
this opinion relates. We have also assumed that there are no extrinsic
agreements or understandings among the parties to the Asset Purchase Agreement
that would modify or interpret the terms of the Asset Purchase Agreement or the
respective rights or obligations of the parties thereunder.
As used in this opinion, the expression "to our knowledge" or "known to
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us" with reference to matters of fact refers to the current actual knowledge of
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attorneys within the firm principally responsible for handling current matters
for the Seller. Except to the extent expressly set forth herein we have not
undertaken any independent investigation to determine the existence or absence
of any other facts, and no inference as to our knowledge of the existence or
absence of any such facts should be drawn from our representation of the Seller
or the rendering of the opinions set forth below.
Where statements in this opinion are qualified by the term "material"
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or "materially," those statements involve judgments and opinions as to the
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materiality or lack of materiality of any matter to the Seller or its business,
assets, prospects, results of operations or financial condition that are
entirely those of the Seller and its officers, after having been advised by us
as to the legal effect and consequences of such matters. Such opinions and
judgments are not known to us to be incorrect.
We express no opinion as to matters governed by any laws other than the
laws of the State of California, the Delaware General Corporation Law and the
federal law of the United States of America. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the Asset Purchase Agreement or the transactions contemplated thereby.
In rendering the opinion set forth in paragraph (1) below as to the
good standing of the Seller, we have relied exclusively on certificates of
public officials, although we have not obtained tax good standing certificates
and no opinion is provided with respect to tax good standing.
In rendering the opinion in paragraph (4) relating to violations of
federal, California or Delaware General Corporation laws, rules or regulations
applicable to the Seller, such opinion is limited to such laws, rules or
regulations that in our experience are typically applicable to a transaction of
the nature contemplated by the Asset Purchase Agreement.
In rendering the opinion expressed in paragraph (5) below, please note
that we have not conducted a docket search in any jurisdiction with respect to
litigation that may be pending against the Seller or any of its officers or
directors, nor have we undertaken any further inquiry whatsoever.
With respect to our opinions in paragraphs (2), (3) and (4) below,
please note that we express no opinion as to whether the Asset Purchase
Agreement or the transactions contemplated thereby require the approval of the
Seller's stockholders under applicable Delaware law. In this regard, we note
that the Seller has retained Xxxxxxxx, Xxxxxx & Finger as its counsel with
respect to the laws of the State of Delaware as they may relate to the need for
such stockholder approval. A copy of the legal opinion rendered by Xxxxxxxx,
Xxxxxx & Finger in this matter is attached hereto as Exhibit A. Because the
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selection of Xxxxxxxx, Xxxxxx & Finger was made solely by the Seller, we express
no opinion as to whether such selection is reasonable or justified, nor do we
assume responsibility for such selection.
In addition to the foregoing, the opinions expressed below are
specifically subject to the following limitations, exceptions, qualifications
and assumptions:
(i) We express no opinion as to the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
relief of debtors or the rights and remedies of creditors generally, including
without limitation the effect of statutory or other law regarding fraudulent
conveyances, preferential transfers and equitable subordination.
(ii) We express no opinion as to the effect of Section 1670.5 of the
California Civil Code or any other California law, federal law or equitable
principle which provides that a court may refuse to enforce, or may limit the
application of, a contract or any clause thereof which the court finds to have
been unconscionable at the time it was made or contrary to public policy.
(iii) We express no opinion as to compliance with any federal or state
antitrust statutes, rules or regulations, including without limitation the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
Based upon and subject to the foregoing and except as set forth in the
Asset Purchase Agreement or the Seller Disclosure Schedule delivered in
connection therewith, we are of the opinion that:
1. Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business as it is now being conducted.
2. Seller has the corporate power and authority to enter into the Asset
Purchase Agreement and to carry out its obligations thereunder. The execution
and delivery of the Asset Purchase Agreement and the consummation of the
transactions contemplated therein have been duly authorized by the board of
directors of Seller, and no other corporate proceedings are necessary to
authorize the Asset Purchase Agreement.
3. The Asset Purchase Agreement has been duly executed and delivered by
Seller.
4. The execution and delivery of the Asset Purchase Agreement by Seller
and the performance by Seller of its obligations as set forth therein do not:
(a) conflict with, violate or breach any provision of Seller's Certificate of
Incorporation or Bylaws, each as amended to date, or (b) to our knowledge
violate or contravene: (i) any order, writ, judgment, injunction, decree or
determination of award which has been entered against Seller or (ii) any
statute, rule or regulation of any governmental body applicable to Seller.
5. To our knowledge, there is no action, suit, proceeding, claim or
investigation pending or threatened against Seller which challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
in the Asset Purchase Agreement.
This opinion is rendered as of the date first written above solely for
your benefit in connection with the Asset Purchase Agreement and may not be
relied on by, nor may copies be delivered to, any other person without our prior
written consent. Our opinion is expressly limited to the matters set forth above
and we render no opinion, whether by implication or otherwise, as to any other
matters relating to the Seller. We assume no obligation to inform you of any
facts, circumstances, events or changes in the law that may hereafter be brought
to our attention that may alter, affect or modify the opinions expressed herein.
VENTURE LAW GROUP,
A Professional Corporation
JYS
