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1 Victor T. Fu (State Bar No. 191744) ELECTRONICALLY
Albert T. Liou (State Bar No. 180258)
2 PROSPERA LAW, LLP
FILED
Superior Court of California,
1901 Avenue of the Stars, Suite 480 County of San Francisco
3 Los Angeles, California 90067 03/19/2024
Telephone: (424) 239-1890 Clerk of the Court
4 Facsimile: (424) 239-1882 BY: ALBERTO BARROSO
E-mail: vfu@prosperalaw.com Deputy Clerk
5 aliou@prosperalaw.com
6 Attorneys for Plaintiff
MULTI SOCIAL LLC
7
8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 FOR THE COUNTY OF SAN FRANCISCO
10 CGC-24-613253
11 MULTI SOCIAL LLC, a New Mexico limited Case No.:
liability company,
12
Plaintiff, COMPLAINT FOR:
13
vs. 1. BREACH OF CONTRACT
14 2. BREACH OF COVENANT OF GOOD
DANIEL SATHYANESAN, an individual, FAITH AND FAIR DEALING
15 SUNSET GROWTH PARTNERS LIMITED, 3. FRAUD
INC., a BVI corporation, and DOES 1 through 4. DECLARATORY RELIEF
16 20, inclusive,
17 Defendants.
18
19
20 Plaintiff Multi Social LLC (“Plaintiff”) complains and alleges as follows in this Complaint
21 against defendants Danial Sathyanesan (“Sathyanesan”), Sunset Growth Partners Limited, Inc.
22 (“Sunset”), and Does 1 through 20, as follows:
23 PARTIES
24 1. Plaintiff Multi Social LLC is a New Mexico limited liability company that is doing
25 business in the State of California, County of San Francisco.
26 2. Upon information and belief, defendant Sathyanesan is an individual, who is a
27 resident of the State of California and who, at the relevant times described below, was an officer,
28
1
COMPLAINT
1 manager, sole shareholder, sole beneficial owner, and duly authorized signatory of Sunset and is a
2 member of an affiliated entity Sequoia Collection LLC (“Sequoia”).
3 3. Upon information and belief, defendant Sunset is a corporation organized and
4 existing under the laws of the British Virgin Islands, with its principal place of business in West
5 Hollywood, California, and that is doing business in the State of California, County of San
6 Francisco. At the relevant times described below, Sunset was engaged in the business of providing
7 social medial promotion services, including operating certain websites that provided Instagram
8 growth services and products (the “Business”).
9 4. Plaintiff is ignorant of the true names and capacities of defendants, sued herein as
10 Does 1 through 20, inclusive, and therefore sues these defendants by such fictitious names.
11 Plaintiff will amend this complaint to allege their true names and capacities when ascertained.
12 Plaintiff is informed and believes and thereon alleges that each of these fictitiously named
13 defendants is responsible in some manner for the occurrences herein alleged and/or that Plaintiff’s
14 damages as herein alleged were proximately caused by their conduct. Defendants Sathyanesan,
15 Sunset, and Does 1-20 shall collectively be referred to hereafter as “Defendants.”
16 5. Plaintiff is informed and believes and thereupon alleges that, at all times material
17 hereto, Defendants, and each of them, was, were and are the agents, representatives, alter egos, or
18 employees of the other Defendants, and at all times pertinent hereto were acting within the course
19 and scope of said agency and/or employment, with the knowledge and consent of each other
20 Defendants and all of them jointly.
21 JURISDICTION AND VENUE
22 6. The court has personal jurisdiction over Defendants and venue is proper before this
23 court because Defendants do business in the State of California, County of San Francisco, and the
24 agreement between Plaintiff and Defendants mandates that any legal proceedings between them
25 arising therefrom are to be brought in the County of San Francisco, California.
26 GENERAL ALLEGATIONS
27 7. On or about June 6, 2023. Plaintiff and Defendants entered into an Asset Purchase
28 Agreement (the “Agreement”), pursuant to which Sunset and Sathyanesan, as Sunset’s sole
2
COMPLAINT
1 shareholder and beneficiary, agreed to sell and assign to Plaintiff substantially all the assets of the
2 Business, in exchange for Plaintiff’s payment of one million fifty thousand dollars ($1,050,000.00)
3 and other consideration. A copy of the agreement is attached as Exhibit A.
4 8. As specified in section 1.01 of the Agreement, the purchased assets included all
5 industrial and intellectual property rights, such as: (a) “trademarks, trade names, fictitious business
6 names (d/b/as), service marks, slogans, trade dress, logos, designs, and the goodwill associated
7 with the foregoing”; (b) “software, computer programs and applications (including source code
8 and object code), models, methodologies, program interfaces, operating systems, technical
9 information and documentation, internet and intranet websites (including data and collections of
10 data, whether machine readable or otherwise), specifically including, but not limited to, the
11 Websites, and development and design tools”; and (c) “domain names, URLs, social media
12 identifiers and online accounts, social media accounts, including, but not limited to, Meta,
13 Facebook, TikTok, Twitter, Instagram, Pinterest, YouTube, comparison shopping accounts, review
14 site accounts, Google Ads accounts, Microsoft Ads accounts, and any other ad accounts, Google
15 Search Console accounts, Webmaster Tools accounts, Wordpress accounts, NitroPack accounts,
16 Bing Ad accounts, Meta Business manager accounts, Meta Ad accounts, and any other similar
17 accounts or services, specifically including, but not limited to, the domain names and the
18 associated URLs and websites set forth on Section 1.01(e)(vi) of the Disclosure Schedules… and
19 all images, email addressed, and content contained therein or associated therewith”; among other
20 things (collectively, the “Purchased Assets”).
21 9. Defendants disclosed only three websites, including plixi.com, that provided
22 Instagram growth services and that were to be included in the Purchased Assets.
23 10. Defendants Sathyanesan and Sunset each “acknowledge[d] the competitive nature
24 of the Business and accordingly agree[d], in connection with the sale of the Purchased Assets,
25 including the goodwill of the Business, which [Plaintiff] considers to be a valuable asset, and in
26 exchange for good and valuable consideration, that for a period of five (5) years commencing on
27 the Closing Date (the “Restricted Period”), neither [Sunset] nor [Sathyanesan] shall, and neither
28 shall permit any of their respective Affiliates or Representatives to, directly or indirectly, (i)
3
COMPLAINT
1 engage in, or assist others in engaging in, the development, maintenance or sale of business advice
2 websites and services, including, but not limited to, the development, maintenance, or sale of
3 websites, businesses or ventures which are similar to or competitive with the Websites, or which
4 offer goods or services which are similar to or competitive with the goods or services offered by
5 the Websites as of the Closing (the “Restricted Business”) anywhere in the world (the “Territory”);
6 (ii) have an interest in any Person that engages directly or indirectly in the Restricted Business in
7 the Territory in any capacity, including as a partner, shareholder, director, member, manager,
8 employee, principal, agent, trustee, or consultant; or (iii) cause, induce, or encourage any material
9 actual or prospective client, customer, supplier, or licensor of the Business (including any existing
10 or former client or customer of Seller and any Person that becomes a client or customer of the
11 Business after the Closing), or any other Person who has a material business relationship with the
12 Business, to terminate or modify any such actual or prospective relationship,” as specified in
13 section 5.02(a) of the Agreement, titled Non-Competition; Non-Solicitation” (the “Non-Compete
14 Clause”).
15 11. Defendants Sathyanesan and Sunset each “acknowledge[d] that the restrictions
16 contained in this Section 5.02 are reasonable and necessary to protect the legitimate interests of
17 [Plaintiff] and constitute a material inducement to [Plaintiff] to enter into this Agreement and
18 consummate the transactions contemplated by this Agreement,” as specified in specified in section
19 5.02(d) of the Agreement.
20 12. Plaintiff has fully complied with all terms of the Agreement that Plaintiff was
21 required to perform.
22 13. Shortly after the closing date of the Agreement, however, Defendants launched a
23 competing website with the www.upgrow.com domain name (“Upgrow”) that provides Instagram
24 growth services and products in direct competition with the Purchased Assets in the Agreement
25 and in violation of the Non-Compete Clause. Notably, the Upgrow website is substantially
26 identical to plixi.com, one of the websites that Plaintiff purchased from Defendants. Copies of
27 screenshots from plixi.com and from upgrow.com are attached as Exhibits B and C, respectively.
28
4
COMPLAINT
1 14. Upon information and belief, Upgrow is managed and operated by Sathyanesan and
2 is affiliated with Defendants. For example, without limitation: (i) a merchant account associated
3 with Upgrow identifies the account holder as defendant Sathyanesan and an affiliated company
4 Sequoia, that is doing business as “Upgrowcrm”; (ii) Sequoia is identified as the advertiser on the
5 Upgrow website; and (iii) a business checking account associated with Upgrow lists defendant
6 Sunset as the account owner and defendant Sathyanesan as the account signatory.
7 15. On or about February 26, 2024, Plaintiff sent a cease and desist letter to
8 Defendants, advising Defendants that they were in breach of the Non-Compete Clause and
9 demanding that they immediately cease and desist from all uses of the domain name associated
10 with Upgrow, that they transfer the registration to Plaintiff, that they certify that Defendants
11 control no other registrations similar to Upgrow, and that they disgorge the revenues received from
12 Upgrow.
13 16. Despite the demand that Defendants cease and desist from its violations of the Non-
14 Compete Clause, Defendants have failed and refused to comply, and Defendants continue to
15 operate the Upgrow Website in competition with the websites that Plaintiff purchased from
16 Defendants in the Agreement. Plaintiff is still in the process of discovering the full extent of
17 Defendants’ malfeasance.
18 FIRST CAUSE OF ACTION
19 FOR BREACH OF CONTRACT
20 (Against All Defendants)
21 17. Plaintiff realleges and incorporates as though fully set forth at length the allegations
22 of Paragraphs 1 through 16 in support of this First Cause of Action for Breach of Contract.
23 18. As described above, Defendants were obligated to sell all assets relating to the
24 Business to Plaintiff and to comply with the Non-Compete Clause.
25 19. Plaintiff has performed all conditions, covenants, and promises required on its part
26 to be performed in accordance with the terms and conditions of the Agreement or were excused
27 therefrom.
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5
COMPLAINT
1 20. Defendants materially breached the Agreement by launching and operating Upgrow
2 in breach of the Non-Compete Clause and/or by failing to transfer Upgrow to Plaintiff.
3 21. As a direct and proximate cause of said breach, Plaintiff has suffered damages in an
4 amount to be proven at trial.
5 SECOND CAUSE OF ACTION
6 FOR BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
7 (Against All Defendants)
8 22. Plaintiffs reallege and incorporate as though fully set forth at length the allegations
9 of Paragraphs 1 through 21 in support of this Second Cause of Action for Breach of the Covenant
10 of Good Faith and Fair Dealing.
11 23. As described above, Plaintiff and Defendants entered into the Agreement.
12 24. Plaintiff has performed all conditions, covenants, and promises required on its part
13 to be performed in accordance with the terms and conditions of the Agreement or were excused
14 therefrom. All conditions required for Defendants’ performance under the Agreement had
15 occurred.
16 25. By launching and operating Upgrow in breach of the Non-Compete Clause and by
17 failing to transfer Upgrow to Plaintiff, Defendants did not act fairly and in good faith.
18 26. As a direct and proximate result, Plaintiff has been damaged in an amount to be
19 proven at trial.
20 THIRD CAUSE OF ACTION
21 FOR FRAUD
22 (Against All Defendants)
23 27. Plaintiffs reallege and incorporate as though fully set forth at length the allegations
24 of Paragraphs 1 through 16 in support of this Third Cause of Action for Fraud.
25 28. As described above, defendants Sathyanesan and Sunset represented to Plaintiff that
26 they were selling, conveying, assigning, transferring, and delivering to Plaintiff all assets,
27 properties, and rights of every kind and nature relating to the Business. In addition, defendants
28 Sathyanesan and Sunset represented to Plaintiff that they would not engage in, or assist others in
6
COMPLAINT
1 engaging in, the development, maintenance or sale of business advice websites and services
2 similar to or competitive with the websites purchased by Plaintiff in the Agreement.
3 29. Defendants Sathyanesan and Sunset knew that these representations were false
4 when they made them, or they made the representations recklessly and without regard for their
5 truth.
6 30. Defendants intended that Plaintiff rely on these representations in executing the
7 Agreement and making payments to Defendants pursuant to the Agreement.
8 31. Plaintiff reasonably relied upon Defendants’ representations, and such reliance on
9 Defendants’ representations was a substantial factor in causing harm to Plaintiff.
10 32. As a direct and proximate cause of Defendants’ misrepresentations, Plaintiff has
11 suffered damages in an amount to be proven at trial.
12 FOURTH CAUSE OF ACTION
13 FOR DECLARATORY RELIEF
14 (Against All Defendants)
15 33. Plaintiffs reallege and incorporate as though fully set forth at length the allegations
16 of Paragraphs 1 through 32 in support of this Fourth Cause of Action for Declaratory Relief.
17 34. An actual controversy has arisen and now exists between Plaintiff and Defendants
18 concerning their respective rights and duties in conjunction with the Agreement and Upgrow, as
19 described above. Plaintiff contends that Upgrow should have been included as one of the
20 Purchased Assets in the Agreement, that Sequoia is affiliated with Defendants and each of them,
21 that Defendants’ direct or indirect launching and continued operation of Upgrow or any entity that
22 provides services and products similar to the Business or the Purchased Assets violate the Non-
23 Compete Clause of the Agreement.
24 35. Plaintiff desires a judicial declaration setting forth the rights and duties of the
25 parties with respect to their contentions, including but not limited to those set forth above. A
26 judicial declaration is necessary and appropriate at this time in order that Plaintiff may ascertain
27 their rights and duties and alleviate the financial burden arising from Defendants’ conduct, to
28 avoid a multiplicity of suits, and to guide the parties’ future conduct with respect to the
7
COMPLAINT
1 Agreement, the Non-Compete Clause, Sequoia, and Upgrow. Plaintiff seeks a judicial declaration
2 that: (1) the Upgrow should have been included as one of the Purchased Assets in the Agreement;
3 (2) Sequoia is affiliated with one or more of the Defendants; and (3) Defendants’ direct or indirect
4 launching and continued operation of Upgrow or any entity that provides services and products
5 similar to the Business or the Purchased Assets violate the Non-Compete Clause.
6 PRAYER FOR RELIEF
7 WHEREFORE, Plaintiff prays for judgment against Defendants, and each of them, as
8 follows:
9 1. Actual, compensatory, economic, and consequential damages in amounts to be
10 determined at the time of trial for all causes of action;
11 2. Disgorgement of all revenues and other compensation paid in connection with
12 Upgrow and any other competing businesses or websites owned or operated, directly or indirectly,
13 by Defendants;
14 3. Exemplary and punitive damages for the third cause of action for fraud;
15 4. A judicial determination of the respective rights and duties of the parties with
16 respect to their contentions, as set forth in this Complaint;
17 5. Preliminary and permanent injunctive relief;
18 6. Reasonable attorneys’ fees and costs;
19 7. Pre-judgment and post-judgment interest at the highest rate allowed by law; and
20 8. Such other damages as the court may allow in furtherance of justice.
21
22 DATED: March 19, 2024 PROSPERA LAW, LLP
23
24 By:
VICTOR T. FU
25 ALBERT T. LIOU
Attorneys for Plaintiff
26 MULTI SOCIAL LLC
27
28
8
COMPLAINT
EXHIBIT A
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this “Agreement”), dated as of June 6, 2023, is entered
into by and among Sunset Growth Partners Limited, Inc., a corporation organized under the laws
of the British Virgin Islands (“Seller”), Daniel Sathyanesan, an individual residing in California
(“Shareholder”), and Multi Social LLC, a New Mexico limited liability company (“Buyer”).
RECITALS
WHEREAS, Seller is engaged in the business of providing social media promotion
services, which includes operating the Websites (as defined herein) and providing the products
and services offered thereby (the “Business”);
WHEREAS, Shareholder is the sole equity holder of Seller; and
WHEREAS, Seller wishes to sell and assign to Buyer, and Buyer wishes to purchase and
assume from Seller, substantially all the assets, and certain specified liabilities, of the Business
as a going concern, subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE
Section 1.01 Purchase and Sale of Assets. Subject to the terms and conditions set
forth herein, at the Closing, Seller shall sell, convey, assign, transfer, and deliver to Buyer, and
Buyer shall purchase as a going concern from Seller, all of Seller’s right, title, and interest in, to,
and under all of the tangible and intangible assets, properties, and rights of every kind and nature
and wherever located (other than the Excluded Assets), which relate to, or are used or held for
use in connection with, the Business (collectively, the “Purchased Assets”), including the
following:
(a) all Contracts set forth on Section 1.01(a) of the disclosure schedules
attached hereto (the “Disclosure Schedules”) (the “Assigned Contracts”). The term
“Contracts” means all contracts, leases, licenses, instruments, notes, commitments,
undertakings, indentures, joint ventures, and all other agreements, commitments, and
legally binding arrangements, whether written or oral;
(b) all prepaid expenses, credits, advance payments, claims, security, refunds,
rights of recovery, rights of set-off, rights of recoupment, deposits, charges, sums, and
fees (including any such item relating to the payment of Taxes);
(c) all of Seller’s rights under warranties, indemnities, and all similar rights
against third parties to the extent related to any Purchased Assets;
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(d) all insurance benefits, including rights and proceeds, arising from or
relating to the Business, the Purchased Assets, or the Assumed Liabilities;
(e) all industrial and intellectual property rights, including (i) trademarks,
trade names, fictitious business names (d/b/as), service marks, slogans, trade dress, logos,
designs, and the goodwill associated with the foregoing; (ii) patents; (iii) copyrights
(whether or not registered) and copyrightable works (in published or unpublished form);
(iv) software, computer programs and applications (including source code and object
code), models, methodologies, program interfaces, operating systems, technical
information and documentation, internet and intranet websites (including data and
collections of data, whether machine readable or otherwise), specifically including, but
not limited to, the Websites, and development and design tools; (v) servers, hardware,
networks, communications systems, interfaces, platforms, peripherals, computer systems,
including any outsourced systems and processes, electronic data processing, record
keeping and all other information technology equipment and assets, together with all
software embedded therein, and specifically including Chargebee accounts, merchant
processor accounts, server and database accounts, and information relating to existing
users, including but not limited to, the Websites’ fulfillment panels, Web Hosting
Instances, Trello accounts, project management accounts, and other subscription
accounts; (vi) domain names, URLs, social media identifiers and online accounts, social
media accounts, including, but not limited to, Meta, Facebook, TikTok, Twitter,
Instagram, Pinterest, YouTube, comparison shopping accounts, review site accounts,
Google Ads accounts, Microsoft Ads accounts, and any other ad accounts, Google Search
Console accounts, Webmaster Tools accounts, Wordpress accounts, NitroPack accounts,
Bing Ad accounts, Meta Business manager accounts, Meta Ad accounts, and any other
similar accounts or services, specifically including, but not limited to, the domain names
and the associated URLs and websites set forth on Section 1.01(e)(vi) of the Disclosure
Schedules (the “Websites”) and all images, email addressed, and content contained
therein or associated therewith; (vii) website traffic, analytics software, Chartmogul
accounts, Google Analytics account, spreadsheets, logs, and accounts, codebase,
structure, graphics, page templates, maintenance scripts, content, databases, forms,
internal search engines, advertising on or relating to websites, data, programming code,
use and customer lists, existing users data, consumer data and all other information and
property pertaining to the Websites or the operation thereof, blogs, email accounts
(including, but not limited to, the support email accounts listed on Section 1.01(e)(vii) of
the Disclosure Schedules (collectively, the “Support Email Accounts”)), servers, host
accounts, applications, software and platforms used by the Websites, any other accounts,
tools, extensions, application programming interfaces, integrated development
environments, or third party relationships or software used by Seller to operate or that has
been collected or used during the operation of, the Websites, and any informational or
instructional documentation relating to any of the foregoing, specifically including, but
not limited to, documentation on code programming and operation, and lists of all
backlink relationships for all Websites; (viii) know-how, trade secrets, proprietary
processes and formulae, proprietary development tools, confidential information,
including contact information for all content providers and partners; (ix) franchises,
licenses, customer lists, vendor lists, inventions, instructions, marketing materials,
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policies and procedures; and (x) all registrations, applications, renewals, documentation
and media constituting, describing or relating to the foregoing (“Intellectual Property”);
(f) originals or, where not available, copies, of all books and records,
including books of account, ledgers, and general, financial, and accounting records,
machinery and equipment maintenance files, customer lists, customer purchasing
histories, price lists, distribution lists, supplier lists, production data, quality control
records and procedures, customer complaints and inquiry files including, but not limited
to, emails relating to the Websites for no less than the one (1) year period immediately
preceding the Closing Date, research and development files, records, and data (including
all correspondence with any government or political subdivision thereof, or any agency
or instrumentality of such government or political subdivision, or any arbitrator, court, or
tribunal of competent jurisdiction (collectively, “Governmental Authority”)), sales
material and records, strategic plans and marketing, and promotional surveys, material,
and research (“Books and Records”); and
(g) all goodwill and the going concern value of the Purchased Assets and the
Business.
Section 1.02 Excluded Assets. Notwithstanding the foregoing, the Purchased Assets
shall not include the assets, properties, and rights specifically set forth on Section 1.02 of the
Disclosure Schedules (collectively, the “Excluded Assets”).
Section 1.03 Assumed Liabilities.
(a) Subject to the terms and conditions set forth herein, Buyer shall assume
and agree to pay, perform, and discharge only the Liabilities of Seller in respect of the
Assigned Contracts and only to the extent that such Liabilities thereunder are required to
be performed after the Closing Date, were incurred in the ordinary course of business,
and do not relate to any failure to perform, improper performance, warranty, or other
breach, default, or violation by Seller on or prior to the Closing (the “Assumed
Liabilities”). For purposes of this Agreement, “Liabilities” means liabilities, obligations,
or commitments of any nature whatsoever, whether asserted or unasserted, known or
unknown, absolute or contingent, accrued or unaccrued, matured or unmatured, or
otherwise.
(b) Notwithstanding any provision in this Agreement to the contrary, Buyer
shall not assume and shall not be responsible to pay, perform, or discharge any Liabilities
of Seller, Shareholder or any of their respective Affiliates of any kind or nature
whatsoever other than the Assumed Liabilities (the “Excluded Liabilities”). For
purposes of this Agreement: (i) “Affiliate” of a Person means any other Person that
directly or indirectly, through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person; and (ii) the term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract, or otherwise.
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Section 1.04 Purchase Price. The purchase price for the Purchased Assets (the
“Purchase Price”) shall be One Million Fifty Thousand Dollars ($1,050,000) plus the Earn-Out
Payments (if any), payable as follows:
(a) One Million Fifty Thousand Dollars ($1,050,000) shall be payable by
Buyer to Seller within two (2) Business Days of the Closing Date by wire transfer of
immediately available funds in accordance with the Seller wire instructions set forth on
Section 1.04(a) of the Disclosure Schedules (the “Closing Payment”); and
(b) The Earn-out Payments, if any, shall be payable in accordance with the
terms and conditions of Section 1.05 hereof.
Section 1.05 Earn-out Payments.
(a) Subject to the terms and conditions set forth in this Section 1.05, Seller
shall be eligible for up to sixteen (16) additional payments, each in the amount of
Twenty-Eight Thousand One Hundred Twenty-Five Dollars ($28,125) (each, an “Earn-
out Payment,” and collectively, the “Earn-out Payments”). An Earn-out Payment may
be earned in one (1) of sixteen (16) consecutive calendar quarters (each, a “Quarter”)
beginning with the [third Quarter (July-September) of 2023 and continuing through the
second Quarter (April-June) of 2027] (the “Earn-out Period”). If an Earn-out Payment is
earned, it shall be payable by Buyer to Seller within thirty (30) days following the end of
the Quarter to which such Earn-out Payment relates by wire transfer of immediately
available funds in accordance with the Seller wire instructions set forth on Section
1.04(a) of the Disclosure Schedules. For purposes of clarity, the sum of all Earn-out
Payments, if all are earned pursuant to this Section 1.05, is Four Hundred Fifty Thousand
Dollars ($450,000). Each Quarter’s Earn-out Payment shall be payable only if the
Revenue for that Quarter equals or exceeds Four Hundred Forty-Five Thousand Dollars
($445,000).
(b) For the avoidance of doubt, if the conditions for payment of a given Earn-
Out Payment as set forth in Section 1.05(a) are not satisfied, (i) Buyer shall have no
obligation to make such Earn-out Payment, and (ii) Seller shall remain eligible only for
subsequent Earn-Out Payments as they become due and payable (in addition to any Earn-
out Payments previously earned in accordance with this Section 1.05).
(c) As used herein, “Revenue” shall mean the gross revenue relating to or
arising from the Business. For purposes of calculating Revenue, any revenue arising from
annual (or terms in excess of one Quarter) subscriptions shall be prorated.
(d) Seller shall have the right to request underlying records relied on by Buyer
in calculating the Revenue for a given Quarter for purposes of reviewing/substantiating
any non-payment of an applicable Earn-out Payment.
Section 1.06 Allocation of Purchase Price. The Purchase Price and the Assumed
Liabilities shall be allocated among the Purchased Assets for all purposes (including Tax and
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financial accounting) as shown on the allocation schedule set forth on Section 1.06 of the
Disclosure Schedules (the “Allocation Schedule”). The Allocation Schedule shall be prepared
in accordance with Section 1060 of the United States Internal Revenue Code of 1986, as
amended. Buyer and Seller shall file all returns, declarations, reports, information returns and
statements, and other documents relating to Taxes (including amended returns and claims for
refund) (“Tax Returns”) in a manner consistent with the Allocation Schedule.
Section 1.07 Withholding Tax. Buyer shall be entitled to deduct and withhold from
the Purchase Price all Taxes that Buyer may be required to deduct and withhold under any
provision of Tax Law. All such withheld amounts shall be treated as delivered to Seller
hereunder.
Section 1.08 Third Party Consents. To the extent that Seller’s rights under any
Purchased Asset may not be assigned to Buyer without the consent of another Person which has
not been obtained, this Agreement shall not constitute an agreement to assign the same if an
attempted assignment would constitute a breach thereof or be unlawful, and Seller, at its
expense, shall use its reasonable best efforts to obtain any such required consent(s) as promptly
as possible. If any such consent shall not be obtained or if any attempted assignment would be
ineffective or would impair Buyer’s rights under the Purchased Asset in question so that Buyer
would not in effect acquire the benefit of all such rights, Seller, to the maximum extent permitted
by Law and the Purchased Asset, shall act after the Closing as Buyer’s agent in order to obtain
for it the benefits thereunder and shall cooperate, to the maximum extent permitted by Law and
the Purchased Asset, with Buyer in any other reasonable arrangement designed to provide such
benefits to Buyer.
Section 1.09 Currency; Form of Payment. All references to “Dollars” or “$” in this
Agreement shall mean U.S. Dollars (USD).
ARTICLE II
CLOSING
Section 2.01 Closing. Subject to the terms and conditions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the “Closing”) shall take
place remotely by exchange of documents and signatures (or their electronic counterparts), on
the date hereof (the “Closing Date”).
Section 2.02 Closing Deliverables.
(a) At the Closing, Seller shall deliver to Buyer the following:
(i) a domain names transfer agreement in the form of Exhibit A
attached hereto (the “Domain Names Transfer Agreement”) and duly
executed by Seller and Shareholder, transferring the Websites to the Buyer;
(ii) an assignment and assumption agreement in the form of Exhibit
B attached hereto (the “Assignment and Assumption Agreement,” and,
together with this Agreement, the Domain Names Transfer Agreement, and the
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other agreements, instruments, and documents required to be delivered in
connection with this Agreement or at the Closing, the “Transaction
Documents”) and duly executed by Seller and Shareholder, effecting the
assignment to and assumption by Buyer of the Purchased Assets and the
Assumed Liabilities; and
(iii) such other customary instruments of transfer or assumption,
filings, or documents, in form and substance reasonably satisfactory to Buyer,
as may be required to give effect to the transactions contemplated by this
Agreement.
(b) At the Closing, Buyer shall deliver to Seller (except where otherwise
indicated) the following:
(i) the Closing Payment (less any amounts which may be withheld
for outstanding Tax Liabilities); and
(ii) the Domain Names Transfer Agreement duly executed by Buyer;
and
(iii) the Assignment and Assumption Agreement duly executed by
Buyer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Shareholder jointly and severally represent and warrant to Buyer that the
statements contained in this ARTICLE III are true and correct as of the date hereof.
Section 3.01 Organization and Authority; Capitalization.
(a) Seller is a corporation duly organized, validly existing, and in good
standing under the Laws of the British Virgin Islands. Seller has full corporate power and
authority and has taken all necessary corporate action to enable it effectively to enter into
this Agreement and the other Transaction Documents to which Seller is a party, to carry
out its obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Seller of this
Agreement and any other Transaction Document to which Seller is a party, the
performance by Seller of its obligations hereunder and thereunder, and the consummation
by Seller of the transactions contemplated hereby and thereby have been duly authorized
by all requisite corporate, board, and shareholder action on the part of Seller. This
Agreement and the Transaction Documents constitute legal, valid, and binding
obligations of Seller enforceable against Seller in accordance with their respective terms.
(b) Shareholder has full power and authority to enter into this Agreement and
the other Transaction Documents to which Shareholder is a party, to carry out his
obligations hereunder and thereunder, and to consummate the transactions contemplated
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hereby and thereby. This Agreement and the Transaction Documents constitute legal,
valid, and binding obligations of Shareholder enforceable against Shareholder in
accordance with their respective terms.
(c) Shareholder is the sole registered, legal, and beneficial owner of one
hundred percent (100%) of the issued and outstanding shares or ownership interests,
however designated, of Seller (the “Shares”) and has good and valid title to such Shares,
free and clear of any Encumbrances. There are no outstanding or authorized options,
warrants, convertible securities, stock appreciation, phantom stock, profit participation or
other rights, agreements or commitments relating to any shares or ownership interests of
Seller or obligating Shareholder or Seller to sell or issue any shares or ownership interests
of, or any other interest in, Seller. Neither Seller nor Shareholder is subject to any
insolvency, liquidation, receivership, examinership, administration, bankruptcy,
reorganization or similar proceeding. Shareholder is not a party to or bound by any
voting trusts, stockholder agreements, proxies, or other agreements affecting or relating
to Shareholder’s right to own or vote the Shares.
Section 3.02 No Conflicts or Consents. The execution, delivery, and performance by
each of Seller and Shareholder of this Agreement and the other Transaction Documents to which
it or she is a party, and the consummation of the transactions contemplated hereby and thereby,
do not and will not: (a) violate or conflict with any provision of the certificate of incorporation,
by-laws, or other governing documents of Seller; (b) violate or conflict with any provision of any
Contract or statute, law, ordinance, regulation, rule, code, constitution, treaty, common law,
other requirement, or rule of law of any Governmental Authority (collectively, “Law”) or any
order, writ, judgment, injunction, decree, stipulation, determination, penalty, or award entered by
or with any Governmental Authority (“Governmental Order”) applicable to Seller,
Shareholder, the Business, or the Purchased Assets; (c) require the consent, notice, declaration,
or filing with or other action by any individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust, association, or
other entity (“Person”) or require any permit, license, or Governmental Order; (d) violate or
conflict with, result in the acceleration of, or create in any party the right to accelerate, terminate,
modify, or cancel any Contract to which Seller or Shareholder is a party or by which Seller,
Shareholder or the Business is bound or to which any of the Purchased Assets are subject
(including any Assigned Contract); (e) result in the creation or imposition of any charge, claim,
pledge, equitable interest, lien, security interest, restriction of any kind, or other encumbrance
(“Encumbrance”) on the Purchased Assets; (f) relieve any Person of any contractual or other
obligation under any Contract or entitle any Person to terminate any such obligation;
(g) terminate or make subject to termination or adversely affect from the point of view of the
Business its enjoyment of any present or future benefit or privilege; or (h) result in any customer
of or supplier to the Business being entitled to or ceasing to deal or substantially reducing the
existing level of its dealings with the Business or changing the terms upon which it deals with
the Business and Seller is not aware of any intention on the part of any such customer or supplier
to cease so to deal or so to reduce the existing level of such dealings or changing the terms upon
which it deals with the Business.
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Section 3.03 Financial Statements.
(a) Complete copies of the unaudited financial statements consisting of the
monthly profit and loss statements of the Business in each of the years 2022, 2021, and
2020 (the “Financial Statements”) have been delivered to Buyer.
(b) Complete copies of the unaudited financial statements consisting of the
profit and loss statement and the balance sheet of the Business as of May 1, 2023 for the
four months then ended (the “Interim Statements”) have been delivered to Buyer.
(c) The Financial Statements and the Interim Statements fairly present in all
material respects the financial condition of the Business as of the respective dates they
were prepared and the results of the operations of the Business for the periods indicated.
The profit and loss statement of the Business as of December 31, 2022, is referred to
herein as the “P&L Statement” and the date thereof as the “P&L Statement Date”.
(d) The Financial Statements and each of the other accounts of the Business
supplied by Seller to Buyer:
(i) give a true and fair view of and properly reflect the financial
position of the Business as at the P&L Statement Date and are not affected by
any unusual or non-recurring items or by any transaction, contract or
arrangement not on entirely arm’s length terms, or by any other matter making
the profits or losses for a period covered by any of those accounts unusually
high or low; and
(ii) give a true and fair view of the assets and liabilities and state of
affairs of the Business at the P&L Statement Date and of its profit or loss and
cash flow for the period then ended.
Section 3.04 Undisclosed Liabilities. Seller has no Liabilities with respect to the
Business, except (a) those which are adequately reflected or reserved against in the P&L
Statement as of the P&L Statement Date, and (b) those which have been incurred in the ordinary
course of business consistent with past practice since the P&L Statement Date and which are not,
individually or in the aggregate, material in amount.
Section 3.05 Absence of Certain Changes, Events, and Conditions.
(a) Since the P&L Statement Date, and other than in the ordinary course of
business consistent with past practice and except as disclosed on Section 3.05 of the
Disclosure Schedules, there has not been any change, event, condition, or development
that is, or could reasonably be expected to be, individually or in the aggregate, materially
adverse to: (a) the business, results of operations, condition (financial or otherwise), or
assets of the Business; or (b) the value of the Purchased Assets.
(b) Since the P&L Statement Date:
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(i) the Business has been carried on in the ordinary and usual course
without interruption both as regards the nature, scope and manner of conducting
the same and so as to maintain the same as a going concern;
(ii) the Business has paid its creditors within the times agreed with
such creditors and there are no debts outstanding which have been due for more
than 4 weeks;
(iii) there has been no unusual change in the stock levels, current
assets or liabilities of the Business;
(iv) none of the fixed assets of the Business shown in the Financial
Statements and none of the fixed assets of the Business acquired by Seller since
the P&L Statement Date have been lost, damaged or destroyed;
(v) Seller has not acquired or disposed of or agreed to acquire or
dispose of any asset other than trading stock in the ordinary and usual course of
business, or assumed or incurred or agreed to assume or incur any capital
commitments or material liabilities; and
(vi) no debtor in relation to the Business has been released by Seller
on terms that it pays less than the book value of any debt and no debt has been
written off or has proved to be irrecoverable to any extent and there has been no
change in the manner or time of the issue of invoices or the collection of debts.
(c) During the 12 months preceding the date of this Agreement, no substantial
customer (meaning a customer accounting for more than 10% of the Revenue over such
12-month period) or substantial supplier (meaning a supplier accounting for more than
10% of the purchases of the Business, measured in U.S. Dollars, over such 12-month
period) has:
(i) ceased or substantially reduced its business with or to the
Business;
(ii) materially changed the basis or terms on which it trades, enters
into contracts, or does business with the Business; or
(iii) notified the Seller regarding, and Seller is not aware of any facts
which might result in, any suc