VIRTUAL COMMUNITIES INC/DE/
8-K, 2000-02-18
COMPUTER PROGRAMMING SERVICES
Previous: COMPOSITE AUTOMOBILE RESEARCH LTD, 8-K, 2000-02-18
Next: FIRST SECURITY AUTO GRANTOR TRUST 1997-A, 8-K, 2000-02-18


<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC 20549

                                   FORM 8-K
                                CURRENT REPORT

    Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934

                  Date of Report (Date of earliest reported)

                               February 10, 2000
                      ___________________________________

                           Virtual Communities, Inc.
     ____________________________________________________________________
            (Exact name of registrant as specified in its chapter)

                                   Delaware
                           _________________________
                (State or other jurisdiction of incorporation)

                                   01-12637
                           _________________________
                           (Commission File Number)

                                  95-4491750
                              ___________________
                       (IRS Employer Identification No.)

                               589 Eighth Avenue
                           New York, New York 10018
                         _____________________________
                   (Address of principal executive offices)

                                     10018
                        ______________________________
                                  (Zip Code)

                                (212) 931 8600
                               _________________

             (Registrant's telephone number, including area code)

          __________________________________________________________
         (Former name or former address, if changed since last report)

<PAGE>

Item 2. Acquisition or Disposition of Assets

On February 10, 2000, Virtual Communities, Inc. ("VCI") entered into a Share
Purchase Agreement ("SPA") with Cortext Ltd. ("Cortext"), a corporation
registered under the laws of the State of Israel, and the principal shareholders
of Cortext, to acquire a majority interest in the equity of Cortext. Cortext was
established in 1996 and is engaged in the development and licensing of content
management software for web publishers. VCI currently utilizes Cortext's
Magazine Software pursuant to a License Agreement with Cortext dated July 18,
1999 to manage content on several of the ethnic communities published by VCI and
as a central component of its Community Management Solution (CMS) turnkey
solution which it markets and licenses to third party web publishers.

Pursuant to the terms of the SPA, VCI was issued shares of Cortext so that it
holds approximately 54% of the outstanding shares of Cortext following the
payment of certain funds to and on behalf of Cortext.  Depending upon Cortext's
completion of certain software development milestones set forth in the SPA and
additional payments by VCI, up to 60% of the equity of Cortext could be acquired
by VCI by August 2000.  Pursuant to the SPA, the total amount of payments to be
made by VCI to and on behalf of Cortext (see below) for the full purchase of up
to 60% of equity in Cortext, including repayment of certain Cortext loans, is
expected in the aggregate to be $760,000 for the entire transaction.

Simultaneously with execution of the SPA, VCI and Cortext entered into an
Assignment Agreement with Planet Communications Ltd. ("Planet"), an Israel-based
unaffiliated third party holder of 50% of the rights in Cortext's Magazine
Software whereby Planet agreed to irrevocably assign all of its rights, title
and interest in the Magazine Software to Cortext in consideration of VCI's
payment of a portion of the transaction consideration on behalf of Cortext and
subject to such third party's retaining the right to sell up to ten Magazine
Software End User licenses. Cortext agreed to provide Planet with certain
upgrades and technical support services in connection with such End User
licenses if and when the same are granted. The majority of the payments to
Planet have been made and its assignment of its rights to the Magazine Software
has been effectuated. A portion of the payments to such third party are to be
paid in installments over a period of six months period from the date of the
Assignment Agreement and the SPA. Following the assignment of the rights by
Planet, Cortext holds 100% of the rights in and to the Magazine Software.

Concurrently with the execution of the SPA, Cortext also entered into long-term
employment agreements with its C.E.O. and C.T.O. and amended its By Laws.
Pursuant to the SPA, VCI has the right to name two members to Cortext's Board
and to name a majority of the Board upon the completion of its payments and
acquisition of shares in August 2000.

                                       2
<PAGE>

Item 7. Financial Statements and Exhibits.

Pursuant to paragraph (4) of Item 7(a), the Registrant hereby omits the
financial statements required under Item 7 required to be filed herewith and
hereby undertakes to file an amendment hereto containing such financial
statements not later than 60 days from the required filing date of this Form
8-K.

                                       3
<PAGE>

Exhibits.

 Exhibit No.   Description of document
 -----------   -----------------------

     10(9)     Software License Agreement between Cortext Ltd. and Planet
               Communications Ltd., on the one hand, and Virtual
               Communities, Inc., on the other hand, dated July 16, 1999, as
               filed with the Commission as Exhibit 10(7) to Heuristic
               Development Group's Registration Statement on Form S-4 on
               September 17, 1999 (File No. 333-87373), incorporated herein
               by reference thereto.

    10(40)     Share Purchase Agreement between Virtual Communities, Inc.
               and Cortext, Ltd. dated February 10, 2000

    10(41)     Assignment Agreement between Cortext Ltd., Planet Communications
               Ltd. and Virtual Communities, Inc. dated February 7, 2000

                                       4
<PAGE>

                                  SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.



                                    VIRTUAL COMMUNITIES, INC.


Date: February 18, 2000            By: /s/ Avi Moskowitz
     ---------------------------      ------------------------------------
                                       Avi Moskowitz,
                                       President and Chief
                                       Executive Officer

                                       5

<PAGE>

                                                                  Exhibit 10(40)
                                                                  --------------
                           SHARE PURCHASE AGREEMENT

     THIS SHARE PURCHASE AGREEMENT (this "Agreement") is entered into as of this
                                          ---------
10th day of February, 2000, by and between VIRTUAL COMMUNITIES, INC., a Delaware
corporation ("VCI"), CORTEXT LTD., an Israeli private company ("Cortext"), and
              ---                                               -------
RAN EILAM and NOAM ILAN (the "Cortext Principals").
                              ------------------

                                   RECITALS
                                   --------

          A.   Cortext and Planet Communications Ltd., an Israeli private
company ("Planet") each own 50% of a certain magazine web publishing tool kit
          ------
software (the "Magazine Software");
               -----------------

          B.   Cortext and Planet have licensed the Magazine Software to VCI
pursuant to a license agreement dated July 18, 1999 and annexed hereto as
Exhibit A (the "Software License Agreement");
                --------------------------

          C.   As a condition to this Agreement, Planet is assigning its entire
interest in the Magazine Software to Cortext pursuant to an agreement in the
form annexed hereto as Exhibit B (the "Assignment Agreement"); and
                                       --------------------

          D.   Upon the terms and subject to the conditions hereinafter set
forth, Cortext wishes to sell, and VCI wishes to purchase, up to 450 Ordinary
Shares of Cortext, nominal value NIS 1.00 each (the "Shares"), that would result
in VCI owning 60% of the outstanding share capital of Cortext after such
issuance, sale and purchase, on a fully-diluted basis calculated on the date
thereof.

                                   AGREEMENT
                                   ---------

     NOW, THEREFORE, in consideration of the mutual promises set forth in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:

     1.   Issuance and Purchase of the Shares. Cortext shall issue and sell to
          ------------------------------------
VCI and VCI shall purchase from Cortext, the Shares in four installments (each
an "Installment Closing"), subject to the terms and conditions set forth in
    -------------------
Exhibit 1 annexed hereto.

          2.   Agreements of the Cortext Parties.
               ---------------------------------

          From and after the execution hereof, the parties hereto agree to do
and cause to be done such acts or things (including, without limitation, voting
their shares in Cortext and/or amending the Articles of Association of Cortext)
as may be required from time to time to ensure the application of the provisions
of Sections 2 and 3 below.

          2.1  Appointment of Directors. The provisions of Article 61 of the New
               ------------------------
Articles (without regard to subsequent amendment) are hereby incorporated by
reference and each of the parties agrees to be bound by such provisions as if
the same were provided herein.

          2.2  Operation of, and Non-Deviation from, Cortext's Business.
               --------------------------------------------------------

                                                        STOCK PURCHASE AGREEMENT
<PAGE>

          From the date hereof up to and including the date of the fourth and
final Installment Closing set forth in Schedule 1 (the "Final Closing"):

          (i)   Cortext shall conduct its business in the ordinary course of
     business and shall immediately inform VCI of the occurrence of any event
     not in the ordinary course of business; and

          (ii)  Cortext will use its best efforts to preserve (A) Cortext's
     business organization intact and (B) Cortext's goodwill.  Without limiting
     the generality of the foregoing or any other covenant contained herein,
     Cortext will  perform in all material respects all obligations required of
     Cortext under any material contracts to which it is a party.

          2.3   Milestones..  Until the completion of the Milestones, and
                ----------
subject to VCI fulfilling its obligations hereunder, Cortext shall devote
substantially all of its resources and use its best efforts, to meeting the
Milestones in accordance with the Milestone Schedule.

          2.4   Litigation.  Cortext  will promptly notify VCI in writing of any
                ----------
lawsuits, claims, proceedings or investigations (each, a "Claim") which are
threatened or commenced against or by Cortext or, if known to Cortext, against
any employee, consultant or director of Cortext or against the Cortext
Principals in connection with their ownership interest in Cortext, the Magazine
Software or the transactions contemplated hereby.

          2.5   Keeping of Books and Records; Accounts and Reports.
                --------------------------------------------------

          (a)   Cortext shall keep and maintain adequate records and books of
account, as directed by the CFO of VCI, and in which adequate  entries will be
made in accordance with Israeli  GAAP, reflecting, in all material respects, all
financial transactions and in which all proper reserves for depreciation,
depletion, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.

          (b)   Cortext shall furnish to VCI (or to the VCI Director, when so
specified) copies of the following certificates, filings, reports and
information:

          (i)  As soon as practicable after the end of each fiscal year, and in
     any event within 90 days thereafter, consolidated balance sheets of
     Cortext, if any, as of the end of such fiscal year, and consolidated
     statements of income and consolidated statements of changes in cash flow of
     Cortext, if any, for such fiscal year, prepared in accordance with Israeli
     GAAP and setting forth in each case in comparative form the figures for the
     previous fiscal year and the budgeted figures for the current fiscal year,
     all in reasonable detail and audited (other than budgeted figures) by Kost,
     Forrer & Gabbai, or another Israeli affiliate of a "Big Five" accounting
     firm.

          (ii) As soon as practical after the end of the first, second and
     third quarterly accounting periods in each fiscal year of Cortext and in
     any event within 45 days thereafter, (A) a consolidated balance sheet of
     Cortext, if any, as of the end of each such quarterly period, and
     consolidated statements of income and consolidated statements of change in
     cash flow of Cortext for such period and for the current fiscal year to
     date, subject to changes resulting from normal year-end audit adjustments,
     and setting forth in each case in comparative form the figures for the same
     periods of the previous fiscal year and the budgeted figures for the
     current periods, all in reasonable detail and signed by the principal
     financial or accounting officer of Cortext and  to the VCI Director: (B) a
     quarterly letter from the executive
<PAGE>

     management of Cortext discussing in reasonable detail (1) the operations of
     Cortext for the previous quarter and (2) any deviations in the actual
     performance for the previous of Cortext from the projected performance of
     Cortext set forth in the Quarterly Budget (defined below).

          (iii) As soon as practical prior to  the end of each fiscal year, and
     in any event at least   30 days prior thereto, provide to all Board members
     for their review, a budget (the "Quarterly Budget") for Cortext that
                                                ------
     contains, at least with respect to such fiscal year,  quarterly and (where
     practicable) monthly detail, including, but not limited to, limitations on
     capital expenditures, operating expenditures and the incurrence of
     unsecured, secured and aggregate indebtedness.

          (iv)  As soon as practical prior to the end of each fiscal year, and
     in any event at least  30 days prior thereto, provide to all Directors a
     strategic plan (the "Plan") for Cortext that contains, at least with
                          ----
     respect to such upcoming fiscal year, a strategic plan on a product line
     and on an overall basis for Cortext, which shall be subject to the approval
     of the Board.

          (c)     Cortext shall promptly make full disclosure to VCI of all
material facts, affecting the financial condition, business operations,
properties and prospects of Cortext that could reasonably be expected to have a
material adverse effect on Cortext.

          (d)     Without derogating from any of the foregoing, commencing as of
the first Installment Closing Date, the financial controller of VCI shall direct
the financial control of Cortext and Cortext shall promptly institute all
financial controls and provide such financial reports as may be requested by the
VCI financial controller.

          2.6     Actions Prior to Final Closing. The provisions of Article 76A
                  ------------------------------
of the New Articles (without regard to subsequent amendment) are hereby
incorporated by reference and each of the parties agrees to be bound by such
provisions as if the same were provided herein.

     2.7  Cortext Name. Cortext acknowledges that following the first
          ------------
Installment Closing, VCI shall have the right to the  use of the name "Cortext"
in any materials relating to  the Magazine Software, in a manner that shall not
be contrary to the interests of CORTEXT.

     2.8  End User  Licenses. Provided that VCI shall not have failed  to make
          ------------------
any of the payments as required at an Installment Closing, Cortext shall not
grant any  license or right in the Magazine Software other than to single site
end users pursuant to a standard  end user license, except upon  the prior
written consent of VCI.

     2.9  Cortext Principals' Guarantees.  Following the first Installment
          ------------------------------
Closing, Cortext shall act to remove the personal guarantees of the Cortext
Principals with respect to  the debts and obligations  of Cortext set forth in
Schedule 2.9 annexed hereto, if any.

     3.   Transfer Restrictions; Right of First Refusal; Right of Co-Sale.
          ---------------------------------------------------------------

          3.1. Right of First Refusal. The provisions of Article 13   of the New
               -----------------------
Articles (without regard to subsequent amendment) are hereby incorporated by
reference and each of the parties agrees to be bound by such provisions as if
the same were provided herein.

          3.2. Restrictions on Transfer by Cortext Principals. Neither of the
               ----------------------------------------------
Cortext Principals shall sell, transfer or otherwise dispose of any shares of
any class which he may
<PAGE>

hold in Cortext without the prior written consent of VCI, which consent shall
not be unreasonably withheld, prior to the earlier of (a) July 31, 2001, (b) the
initial public offering of Cortext's shares or the closing of an M&A Transaction
involving the majority of CORTEXT's shares or its assets (c) the date that VCI
shall fail to make a payment as required at an Installment Closing or (d) the
date that VCI (or its Permitted Transferee) shall no longer hold shares in
Cortext. Such consent by VCI, or its successor, shall not be deemed a waiver of
any of VCI's rights pursuant to Article 13 of the New Articles or Section 3.3
hereof unless such rights are expressly waived in writing.


          3.3. Right of Co-Sale. (a)  Should any of the Cortext Principals or
               ----------------
VCI (in each case, the "Offeree") receive one or more bona fide offers
(collectively, the "Offer"), from any person or entity (the "Offeror") to
purchase from the Offeree any of its shares in Cortext, which Offer the Offeree
intends to accept, such Offeree shall promptly notify the others among them (the
"Eligible Shareholders") in writing of the name and address of the Offeror and
the terms and conditions of such Offer and each of the others shall be entitled
to exercise its right of first refusal under Article 13 of the Articles of the
Company or to participate in the sale by selling the same percentage of its
holding in Cortext (and on the same terms) as the Offeree. In the event an
Eligible Shareholder wishes to join in the sale, then the Eligible Shareholder
shall give written notice thereof to the Offeree ("Participation Notice"), which
shall be received by the Offeree within thirty (30) days of the date of notice
by Offeree , with a copy to Cortext, specifying the number of shares the
Eligible Shareholder wishes to sell.  If the Offeree receives Participation
Notices from one or more Eligible Shareholders, then the Offeree shall not sell
any shares to the Offeror unless the Offeror offers and agrees to purchase
concurrently from the Eligible Shareholder the number of shares specified in the
Eligible Shareholders' Participation Notices provided that the Offeror shall not
be required to purchase from the Eligible Shareholder a larger percentage of
such Eligible Shareholder's shares than that percentage of the Offeree's shares
being purchased concurrently therewith by the Offeror.

               (b) Should no Eligible Shareholders provide Participation Notice
s with respect to the Offer as set forth in (a) above, the Offeree shall be
entitled, for an additional period of sixty (60) days to sell or transfer such
shares to the Offeror, provided that the terms of such sale or transfer shall be
no more favorable to the Offeree than the Offer. Should the Offeree not dispose
of the shares which are the subject of the Offer during the aforementioned sixty
(60) day period, the shares which are the subject of the Offer shall not be sold
or transferred to the Offeror or to any other party unless and until the
Eligible Shareholders shall again be offered the right to participate in such
sale or transfer as set forth in Subarticle (a) above.

     3.4  The provisions of Sections 3.2 and 3.3 hereof shall not apply to any
transfer of shares to an entity controlled by, controlling, or under common
control with the transferring  shareholder, and,  in  the case of  a
transferring shareholder which is an individual, to any member of his immediate
family or to a wholly owned company of such individual ("Permitted Transferee").
For purposes hereof, "control" of an entity shall mean the ownership of: (1)
more than 50% of the equity securities (or similar interests) of the entity;
and (2) more than 50% of the right to participate in the entity's profits and
assets upon liquidation or winding up; and (3) the right to appoint more than
50% of the members of the board of directors (or similar governing body) of such
entity. No transfer under this Sections 3.4 shall be made to any transferee,
unless such transferee agrees in writing to be  bound by all agreements relating
to rights and/or obligations binding upon the transferring shareholder as a
shareholder and/or as a founder, as the case may be, immediately prior to such
transfer.

     4.   Representations and Warranties by CORTEXT.  Cortext and each of the
          ------------------------------------------
Cortext Principals hereby represents and warrants, as of the date hereof and
each Installment Closing Date, subject to such actions taken pursuant to this
Agreement and/or
<PAGE>

with the prior written consent of a director appointed by VCI, to VCI, as set
forth below. Notwithstanding anything to the contrary contained herein, the
representations of each of the Cortext Principals are made only to the best of
his knowledge, information and belief.

          4.1  Corporate Organization. Cortext is a private Israeli company,
               ----------------------
duly organized, validly existing under the Laws of Israel, has full power and
authority (corporate and otherwise) to carry on its business as it is now being
conducted and to own, lease or operate its properties and assets and is duly
qualified or licensed to do business as a foreign corporation in good standing
in every jurisdiction in which the character or location of the properties and
assets owned, leased or operated by it or the conduct of its business requires
such licensing or qualification. Cortext has filed all reports required to be
filed with the Israeli Companies Registrar, paid all annual registration fees
and fulfilled all of its other obligations under the Companies Ordinance,
including the regulations promulgated thereunder.

          4.2  Subsidiaries.  Cortext does not own, and has never owned, any
               ------------
interest in any corporation or other business entity and Cortext is not a
participant, and has never been a participant, in any partnership or any joint
venture with any third party.

          4.3. Capitalization.
               --------------

          (a)  The authorized share capital of Cortext consists of NIS 29,400
(twenty nine thousand and four hundred New Israeli Shekels) divided into 29,400
Ordinary Shares of NIS 1.00 each. As of the date hereof, 300 Ordinary Shares are
issued and outstanding. All issued and outstanding shares of Cortext are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights except as set forth in the Company's Articles of Association.

          (b)  All issued and outstanding shares of Cortext are owned by the
Cortext Principals, in equal amounts, free and clear of all mortgages, pledges,
liens, security interests, encumbrances, restrictions or charges of any kind.

          (c)  Except as set forth above in paragraph (a), there are no shares
or other securities of Cortext outstanding; there are no outstanding options,
warrants, conversion or exchange privileges or other rights to purchase or
obtain any shares of Cortext and there are no contracts, commitments,
understandings, arrangements or restrictions relating to the issuance, sale, or
transfer by Cortext of any of its shares.

          4.4  Authorization Capitalization. Cortext has full corporate power
               ----------------------------
and authority to enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by Cortext and constitutes a valid and binding agreement of Cortext
and each Cortext Principal and is enforceable against Cortext and each Cortext
Principal in accordance with its terms except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting the rights of creditors generally and except as limited
by the application of equitable principles when equitable remedies are sought,
and by the fact that rights to indemnity, contribution and waiver, and the
ability to sever unenforceable terms, may be limited by applicable law.

          4.5  Compliance with Laws and Other Instruments.  The execution,
               ------------------------------------------
delivery and performance by Cortext of this Agreement (a) will not require from
the board of directors or shareholders of Cortext any consent or approval that
has not been validly and lawfully obtained, (b) will not require any
authorization, consent, license, exemption or
<PAGE>

registration with any court or governmental department, commission, agency or
instrumentality of government, (c) will not cause Cortext or any Cortext
Principal to violate or contravene (i) any provision of law, (ii) any rule or
regulation of any agency or government, domestic or foreign, (iii) any order,
writ, judgment, injunction, decree, determination or award, or (iv) any
provision of the Memorandum of Association or Articles of Association of
Cortext, or (d) subject to the Assignment Agreement, will not result in the
creation or imposition of any lien, charge or encumbrance upon any of the assets
of Cortext pursuant to the terms or provisions of, or conflict with or result in
a breach or violation of any of the terms or provisions of, or constitute a
default under (with or without notice or lapse of time or both), or give any
other party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under any indenture, credit agreement, note
agreement, deed of trust, mortgage, security agreement or other agreement, lease
or instrument to which Cortext or any Cortext Principal is a party or by which
any Cortext Principal or Cortext or any of its properties or assets are bound.

          4.6. Issuance of Shares.  The Shares to be issued and sold by Cortext
               ------------------
at each Installment Closing Date, upon such issuance, will be duly authorized,
validly issued, fully paid and non-assessable, free and clear of all liens  and
will not be subject to any pre-emptive or similar right except as set forth in
the New Articles and in this Agreement.

          4.7. Financial Statements. At or prior to the First Installment
               --------------------
Closing Date, Cortext shall deliver to VCI, unaudited consolidated balance
sheets and statements of income, changes in stockholders' equity, and cash flow
as of and for the fiscal year ended December 31, 1999 (the "Fiscal Year End
                                                            ---------------
1999"). Attached hereto as Schedule 2 are the following financial statements (a)
audited consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal year ended December
31, 1998 (the "Most Recent Fiscal Year End") for Cortext; and (b) unaudited
               ---------------------------
consolidated balance sheets and statements of income, changes in stockholders'
equity, and cash flow (the "Most Recent Financial Statements") as of and for the
                            --------------------------------
6 months ended June 30, 1999 for Cortext. (The Fiscal Year End 1999, Most Recent
Fiscal Year End and the Most Recent Financial Statements are collectively
referred to as the "Financial Statements".) The Financial Statements (including
                    --------------------
the notes thereto) have been prepared in accordance with Israeli GAAP applied on
a consistent basis throughout the periods covered thereby and present fairly the
financial condition of Cortext as of such dates and the results of operations of
Cortext for such periods.

          4.8  Title to Assets; Leases.
               -----------------------

          (a) Cortext has good and marketable title to, or a valid leasehold
interest in, the real and tangible properties and assets used by it, located on
its premises, or shown on the balance sheet contained in the Most Recent
Financial Statements or acquired after the date thereof, free and clear of all
security interests, except for properties and assets disposed of in the ordinary
course of business since the date of the balance sheet contained in the Most
Recent Financial Statements.

          (b) All leases pursuant to which Cortext leases property are valid,
binding and enforceable in accordance with their terms, and are in full force
and effect; and there are no existing defaults by Cortext or the other party
thereunder; and no event of default has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a default thereunder; and all lessors under such leases have
consented (where such consent is necessary) to the consummation of the
transactions contemplated by this Agreement.
<PAGE>

          4.9  No Undisclosed Liabilities; Etc.  Cortext has no liabilities or
               -------------------------------
obligations of any nature (absolute, accrued, contingent or otherwise, and
whether due or to become due) ("Liabilities") except (a) Liabilities that are
                                -----------
fully reflected or reserved against in the Most Recent Financial Statements,
which reserves are appropriate and reasonable and (b) Liabilities incurred in
the ordinary course of business since the date of the Most Recent Financial
Statements.

          4.10 Events Subsequent to Most Recent Fiscal Year End.  Since the Most
               ------------------------------------------------
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of Cortext. Without limiting the generality of the foregoing, (but not
including those transactions reflected in the Most Recent Financial Statements,
this Agreement, the Assignment Agreement, the Software License Agreement and the
Employment Agreements), since that date:

              (a)  Cortext has not sold, leased, transferred, or assigned any
material assets, tangible or intangible;

              (b)  Cortext has not entered into any material agreement,
contract, lease, or license;

              (c)  no party (including Cortext) has accelerated, terminated,
made material modifications to, or canceled any material agreement, contract,
lease, or license to which Cortext is a party or by which Cortext is bound;

              (d)  Cortext has not imposed any security interest upon any of its
assets, tangible or intangible;

              (e)  Cortext has not made any material capital expenditures;

              (f)  Cortext has not made any material capital investment in, or
any material loan to, any Person;

              (g)  Cortext not created, incurred, assumed, or guaranteed any
indebtedness;

              (h)  Cortext has not granted any license or sublicense of any
material rights under or with respect to any Intellectual Property;

              (i)  there has been no change made or authorized in the Memorandum
of Association or Articles of Association of Cortext;

              (j)  Cortext has not issued, sold, or otherwise disposed of any of
its share capital, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange, or exercise) any of its share
capital;

              (k)  Cortext has not declared, set aside, or paid any dividend or
made any distribution with respect to its share capital (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its share capital;

              (l)  Cortext has not experienced any material damage, destruction,
or loss (whether or not covered by insurance) to its property;
<PAGE>

              (m)  Cortext has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees;

              (n)  Cortext has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement other than the Cortext Principals'
Employment Agreements;

              (o)  Cortext has not granted any increase in the base compensation
of any of its directors, officers, and employees;

              (p)  Cortext has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees; and

              (q)  Cortext has not committed to any of the foregoing.

        4.11   Intellectual Property.
               ---------------------

               (a) Cortext has not interfered with, infringed upon,
misappropriated or otherwise come into conflict in any material respect with any
rights of third parties with respect to Cortext Intellectual Property, and
Cortext has not received any charge, complaint, claim, demand or notice alleging
any such interference, infringement, misappropriation or conflict, and no such
claim is impliedly threatened by an offer to license from a third party under a
claim of use;

               (b) Subject to the Assignment Agreement, Cortext owns all  right,
title and interest in and to all of the Cortext Intellectual Property (other
than the Licensed Intellectual Property);

               (c) Subject to the Assignment Agreement, Cortext has the right to
use all Intellectual Property necessary or required for the conduct of its
business as currently conducted or contemplated by this Agreement or the
Exhibits hereto or for use by VCI pursuant to the Software License Agreement;

               (d) There are no royalties, honoraria, fees or other payments
payable by Cortext to any Person by reason of the ownership, use, license, sale
or disposition of any Intellectual Property;

               (e) No activity, service or procedure currently conducted or
contemplated by this Agreement or the Exhibits hereto   violates any agreement
governing the use of Licensed Intellectual Property;

               (f) Neither Planet nor any other third party participated in the
development of any of the Cortext Intellectual Property;

               (g) Cortext has taken reasonable and practicable steps
(including, without limitation, entering into confidentiality and nondisclosure
agreements and proprietary rights agreements with all officers, directors and
employees of, and consultants to, Cortext with access to or knowledge of the
Cortext Intellectual Property) designed to safeguard and maintain the secrecy
and confidentiality of, and its proprietary rights in, all Cortext Intellectual
Property; and
<PAGE>

               (h)  Cortext has not sent to any third party or otherwise
communicated to another Person any charge, complaint, claim, demand or notice
asserting infringement or misappropriation of, or other conflict with, Cortext
Intellectual Property by such other Person or any acts of unfair competition by
such other Person, nor, to the best knowledge of Cortext, is any such
infringement, misappropriation, conflict or act of unfair competition occurring
or threatened.

        4.12   Legal Compliance. To the best of its knowledge Cortext has
               ----------------
materially complied with, and is not in violation of, or in default with respect
to, all applicable Laws. No action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced alleging
any failure so to comply.

        4.13   Legal Action. There are no actions, suits, proceedings or
               ------------
investigations pending against Cortext, or, to the knowledge of Cortext or the
Cortext Principals, threatened against or affecting, Cortext's shareholders or
its officers in their capacity as such, or any of Cortext's properties (or any
basis therefor known by Cortext or the Cortext Principals) before or by any
Israeli or foreign court, commission, regulatory body, administrative agency or
other governmental body, wherein an unfavorable ruling, decision or finding
could reasonably be expected to materially and adversely affect Cortext, its
business, properties, business prospects, condition (financial or otherwise) or
results of operations.

        4.14.  Taxes. To the best knowledge of the Cortext Parties, all
               -----
applicable Israeli and foreign tax reports and returns required to be filed by
Cortext have been duly filed and all taxes including, without limitation,
income, value added, Israeli National Insurance Institute and Health taxes, and
other charges due or claimed to be due from it by Israeli or foreign taxing
authorities have been duly paid; the reserves for taxes reflected in the
Financial Statements are adequate; and there are no tax liens upon any property
or assets of Cortext.  Further, no state of facts exists or has existed which
would constitute grounds for the assessment of any further tax liability with
respect to the periods which have not been audited by the applicable state,
local, or foreign tax authorities.  All deficiencies and assessments resulting
from examination of such tax returns and reports of Cortext have been paid.
There are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any Israeli or foreign tax return or report for any
period. Notwithstanding the foregoing, VCI is aware that Cortext does not have a
Final Tax Assessment from the Israeli Tax Authorities and that these authorities
are authorized to re-examine any Tax Assessments for a period of seven years
thereafter.

        4.15   Insurance. All policies of fire, liability, worker's compensation
               ---------
and other forms of insurance owned or held by Cortext have been provided to VCI
and are in full force and effect; are valid, outstanding and enforceable
policies; provide full insurance coverage for the assets and operations of
Cortext; will remain in full force and effect through the Final Closing; and
will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement.

        4.16   Contracts and Commitments. There has been made available to VCI
               -------------------------
(a) a true and complete copy of each of the material contracts of Cortext
together with all amendments, waivers or other changes thereto, and (b) a
complete description of all oral contracts to which Cortext is a party or by
which any of its assets may be bound which individually or in the aggregate are
material to the business of Cortext. A list of all such contracts is attached
hereto as Schedule 4.16. Cortext has performed in all material respects all
obligations required to be performed by it under all such contracts and is not
in default under or in breach of nor in receipt of any claim of default or
breach under any such

<PAGE>

contract to which it is a party or by which any of its assets may be bound; and,
to Cortext's knowledge, no event has occurred which with the passage of time or
the giving of notice or both would result in such a default or breach under any
such contract, except where such actual or potential default or breach has not
had, and in the future is not reasonably likely to have, a material adverse
effect on Cortext. To Cortext's knowledge, no other party to any contract to
which Cortext is a party or by which its assets may be bound is in default under
or in breach of such contract and no event has occurred which would result in a
default or breach under any such contract.

        4.17   Registration Rights.  No Person has any right to cause Cortext to
               -------------------
effect the registration under the Securities Act or under the laws of any other
jurisdiction of any Cortext Securities.

        4.18   Year 2000. The Magazine Software and all other software code and
               ---------
product developed by Cortext (or any Affiliate or predecessor thereof) alone or
together with others and, to the best knowledge of Cortext, any other software
code or product owned by Cortext, are year 2000 compliant.

        4.19   Collective Bargaining Agreements.  There are no collective
               --------------------------------
bargaining agreements or extension orders which apply to the business of Cortext
and/or to one or more of its employees.

        4.20   Government Funding. Neither Cortext nor either of the Cortext
               ------------------
Principals have ever received or applied for, any form of Israeli government
funding, including without limitation funding from the Office of the Chief
Scientist, MESER, the BIRD Foundation and funding related to Approved Enterprise
status. Cortext has not received or applied for, any special status under any
Israeli law or regulation for purposes of obtaining any financial benefit, tax
benefit or government guarantee.

        4.21   Disclosure.  The representations and warranties of the Cortext
               ----------
Parties in this Agreement and the statements contained in the documents listed
as exhibits hereto do not, and will not as of the first Installment Closing
Date, contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements contained herein or therein not
misleading.

    5.  Representations and Warranties by VCI. VCI hereby represents and
        -------------------------------------
warrants as of each Installment Closing Date, to the Cortext Parties as follows:

        5.1    Execution, Delivery and Enforceability. All consents, approvals,
               --------------------------------------
authorizations and orders necessary for the execution, delivery and performance
by VCI of this Agreement have been duly and lawfully obtained, and VCI has full
right, power, authority and capacity to execute, deliver and perform this
Agreement. This Agreement has been duly executed and delivered by VCI and
constitutes a legal, valid and binding agreement of VCI enforceable against VCI
in accordance with its terms except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting the rights of creditors generally and except as limited by the
application of equitable principles when equitable remedies are sought, and by
the fact that rights to indemnity, contribution and waiver, and the ability to
sever unenforceable terms, may be limited by applicable law.

        5.2    Compliance with Laws and Other Instruments. The execution,
               ------------------------------------------
delivery and performance by VCI of this Agreement (a) will not require from the
board of directors or stockholders of VCI any consent or

<PAGE>

approval that has not been validly and lawfully obtained, (b) will not require
any authorization, consent, license, exemption of or filing or registration with
any court or governmental department, commission, agency or instrumentality of
government, except such as shall have been lawfully and validly obtained prior
to the date hereof, (c) will not cause VCI to violate or contravene (i) any
provision of law, (ii) any rule or regulation of any agency or government,
domestic or foreign, (iii) any order, writ, judgment, injunction, decree,
determination or award, or (iv) any provision of the certificate of
incorporation or bylaws of VCI, or (d) will not result in a violation or
conflict with, result in a breach of or constitute (with or without notice or
lapse of time or both) a default under, any indenture, credit agreement, note
agreement, deed of trust, mortgage, security agreement or other agreement, lease
or instrument to which VCI is a party or by which VCI or any of its properties
or assets are bound which would have a material adverse effect on VCI.

          5.3  VCI is experienced in evaluating and investing in technologies
such as the Magazine Software, is aware that CORTEXT is a start up company, is
aware of CORTEXT financial condition, and can bear the risk of its investment in
Cortext. VCI hereby represents that it has had sufficient opportunity to discuss
management and financial affairs of Cortext with the Cortext Principals, has
received answers to all questions that it has asked and has received materials
in response to its requests. Cortext has not refused any information which VCI
deemed necessary and appropriate to enable VCI to evaluate the financial risk
inherent in making an investment in the shares of Cortext.  Nothing contained in
this Section shall derogate from the liability of the Cortext Parties with
respect to the representations and warranties made by the Cortext Parties.

          6.   Survival of Representations and Warranties. All representations
               ------------------------------------------
and warranties of the parties hereto contained in this Agreement shall survive
the Final Closing Date and the consummation of the transactions contemplated
hereby (and any examination or investigation by or on behalf of any party
hereto) until the earlier of: (a) the lapse of two (2) years as of the first
Installment Closing Date or (2) the closing of an M&A Transaction involving the
majority of CORTEXT's shares or assets.

     7.   Definitions.  Unless the context otherwise requires, the terms defined
          -----------
in this Section 7 shall have the meanings herein specified for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms herein defined.

          "Affiliate" shall mean, with respect to any specified Person, any
           ---------
other Person who, directly or indirectly, through one or more intermediaries
controls, is controlled by, or is under common control with, the specified
Person.

          "Board" shall mean the board of directors of Cortext, together with
           -----
any executive committee thereof (if any), as same shall be constituted from time
to time.

          "Companies Ordinance" shall mean the Israel Companies Ordinance (New
           -------------------
Version), 5743 - 1983, as amended from time to time, and any successor thereto.

          "Confidential Information" shall mean any information, data,
           ------------------------
technology, designs, plans, processes, systems  or knowhow, whether or not
protected by laws affording protection for intellectual property rights,
regarding Cortext's or VCI's and their respective Affiliates' technologies, or
concerning the businesses and affairs of Cortext or VCI and their respective
Affiliates, that is not already generally available to the public.
<PAGE>

          "Cortext Intellectual Property" shall mean the Magazine Software and
           -----------------------------
all other Intellectual Property used by Cortext or necessary for use in
connection with the business of Cortext.

          "Cortext Securities" shall mean shares of Cortext (or any right or
           ------------------
interest therein) or rights or securities convertible into shares of Cortext (or
any right or interest therein).

          "Cortext Parties" shall mean Cortext and the Cortext Principals.
           ---------------

          "Employment Agreements" shall mean the employment agreements entered
           ---------------------
into by Cortext and each of Ran Eilam and Noam Ilan, as of the date hereof and
provided to VCI.

          "Holder" shall mean any of VCI, Ran Eilam or Noam Ilan.
           ------

          "Installment Closing" shall refer to each of the four issuance and
           -------------------
sales of the Shares to VCI in exchange for the consideration contemplated by
this Agreement.

          "Installment Closing Date" shall mean the date on which an Installment
           ------------------------
Closing occurs or is contemplated to occur in this Agreement.

          "Intellectual Property" shall mean (a) all inventions (whether
           ---------------------
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-in-
part, revisions, extensions, and reexaminations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including data and related documentation), (g) all
other proprietary rights, (h) all copies and tangible embodiments thereof (in
whatever form or medium) and (i) moral rights.

          "Law" shall mean any constitution, law, statute, treaty, rule,
           ---
directive, requirement or regulation or order of any governmental entity.

          "Licensed Intellectual Property" shall mean each item of Intellectual
           ------------------------------
Property that any Person owns and that Cortext uses in connection with its
business pursuant to license, sublicense, agreement or permission.

          "Milestones" shall mean the Milestones set forth in Schedule 1 as
           ----------
amended by mutual consent.

          "New Articles" shall mean the articles of association in the  form
appended hereto as Exhibit C.
<PAGE>

          "Person" shall include any natural person, corporation, limited
           ------
liability company, trust, association, company, partnership, joint venture and
other entity and any government, governmental agency, instrumentality or
political subdivision.

          "Securities Act" shall mean the Securities Act of 1933, as amended,
           --------------
and the rules and regulations promulgated thereunder.

     8.   Miscellaneous.
          -------------

          8.1  Waivers and Amendments. Neither this Agreement nor any provision
               ----------------------
hereof may be amended, waived, discharged or terminated orally or by course of
dealing, but only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. No waiver
by any party of the breach of any term or provision contained in this Agreement,
in any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such breach, or a waiver of the breach of any other
term or covenant contained in this Agreement.

          8.2  Developments and Notices.2  Notices.
               --------------------------  -------

          (a)  Each party will give prompt written notice to the others of any
material adverse development causing a breach or non-fulfillment of any of his
or its own representations and warranties in Sections 4 or 5 hereof, the
Software License Agreement or the Assignment Agreement. No disclosure by any
party pursuant to this Section 8, however, shall be deemed to prevent or cure
any misrepresentation, breach of warranty, or breach of covenant.

          (b)  All notices and other communications required or permitted under
this Agreement shall be given in writing and shall be delivered to the relevant
party or sent by registered air mail or facsimile to the address of that party
or that party's facsimile number specified in Section 8(c).  Unless otherwise
specified herein, each notice or other communication shall be deemed effective
nor having been given (i) on the date received, if personally delivered, (ii)
the earlier of actual receipt or eight (8) business days after being sent, if
sent by registered air mail, or (iii) one (1) business day after being sent, if
sent by telecopier with written confirmation of receipt.

          (c)  All notices and other communications shall be addressed as
follows:

          if to Cortext:

                    Attention: Noam Ilan
                    Telecopier No.:

          With a copy to:

                    Attention: Advocate Nehama Sneh

                    Telecopier No. +972-3-547 9241
<PAGE>

          if to VCI:

                    Virtual Communities, Inc.
                    589 8/th/ Avenue
                    New York, New York Attention:
                    Telecopier No.:

          With a copy to:

or such other address or telecopier number of a party, as that party shall have
notified in writing to all other parties pursuant to this Section.

          8.3  Severability. Should any one or more of the provisions of this
               ------------
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement and of each other agreement entered into pursuant to this Agreement,
shall be given effect separately from the provision or provisions determined to
be illegal or unenforceable and shall not be affected thereby.

          8.4  Parties in Interest. All the terms and provisions of this
               -------------------
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and permitted assigns of the parties hereto,
whether so expressed or not.  Subject to the immediately preceding sentence,
this Agreement shall not run to the benefit of or be enforceable by any Person
other than a party to this Agreement and its successors and permitted assigns.

          8.5  Expenses.  All costs and expenses (including, without limitation,
               --------
all legal fees and expenses and fees and expenses of any brokers, finders or
similar agents) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring the same.

          8.6  Headings. The headings of the Sections and paragraphs of this
               --------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.

          8.7  Choice of Law. It is the intention of the parties that the
               -------------
internal substantive laws, and not the laws of conflicts, of Israel should
govern the enforceability and validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the parties.

          8.8  Cumulative Remedies. None of the rights, powers or remedies
               -------------------
conferred upon any party shall be mutually exclusive, and each such right, power
or remedy shall be cumulative and in addition to every other right, power or
remedy, whether conferred hereby or now or hereafter available at law, in
equity, by statute or otherwise.

          8.9  Rights of Parties. Subject to the terms and conditions of this
               -----------------
Agreement, each party shall have the absolute right to exercise or refrain from
exercising any right or rights that such party may have by reason of this
Agreement, including without limitation the right to consent to the waiver of
any obligation of the other party under this Agreement and to enter into an
agreement with the other party for the purpose of modifying
<PAGE>

this Agreement or any agreement effecting any such modification, and such party
shall not incur any liability to any other party with respect to exercising or
refraining from exercising any such right or rights.

          8.10 Counterparts. This Agreement may be executed in any number of
               ------------
counterparts and by different parties hereto in separate counterparts (including
by facsimile), with the same effect as if all parties had signed the same
document.  All such counterparts shall be deemed an original, shall be construed
together and shall constitute one and the same instrument.

          8.11 No Publicity. No party, nor any of their respective affiliates,
               ------------
shall make any public announcement or press release or otherwise make a public
disclosure to any third party any terms or conditions of this Agreement or the
transactions contemplated hereby, except to the extent necessary to comply with,
or as required by, applicable law or pursuant to legal process, proceeding or
order.

          8.12 Entire Agreement. This Agreement, including the other documents
               ----------------
referred to herein and the Exhibits hereto, contains the entire understanding of
the parties hereto in respect of the subject matter hereof.  This Agreement,
including the other documents referred to herein and the Exhibits hereto,
supersedes all prior agreements and understandings between the parties hereto
with respect to such subject matter.

          8.13 Further Assurances. Subject to the terms and conditions of this
               ------------------
Agreement, each of the parties hereto agrees to use its reasonable best efforts
to take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Law or otherwise, to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the date hereof any further action is necessary or
desirable to carry out the purposes of this Agreement, the relevant party shall
take or cause to be taken all such necessary or convenient action and execute,
and deliver and file, or cause to be executed, delivered and filed, all
necessary or convenient documentation.

          8.14 Confidentiality. Each of the parties hereto will treat and hold
               ---------------
as such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the other party or destroy, at the request and option of such party
all tangible embodiments (and all copies) of the Confidential Information which
are in his or its possession. In the event that any of the parties is required
by any legal proceeding to disclose any Confidential Information, such party
will notify the other party promptly of the requirement so that the other party
may seek an appropriate protective order or waive compliance with the provisions
of this Section 8.14. If, in the absence of a protective order or the receipt of
a waiver hereunder, any of parties  on the advice of counsel, compelled to
disclose any Confidential Information to any tribunal or else stand liable for
contempt, such party  may disclose the Confidential Information to the tribunal;
provided, however, that the disclosing party shall use his or its reasonable
best efforts to obtain, at the reasonable request of the other party , an order
or other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as the other party
shall designate.

          8.15 Assignment.  This Agreement and the rights hereunder shall not be
               ----------
assignable or transferable by Cortext or the Cortext Principals or VCI except to
permitted transferees in accordance with Section 3 and the New Articles and
provided that such transferees undertake and assume all of transferor
obligations under this Agreement. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the

<PAGE>

benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.

          8.16 Specific Performance.  Each of the parties hereto acknowledges
               --------------------
and agrees that in the event of any breach of this Agreement, the nonbreaching
parties would be irreparably harmed and could not be made whole by monetary
damages.  Each of the parties hereto accordingly agrees to waive the defense in
any action for injunction or specific performance that a remedy at law would be
adequate and that the parties hereto, in addition to any other remedy to which
they may be entitled at law or in equity, shall be entitled to an injunction or
to compel specific performance of this Agreement.

          9. Conditions to Obligation to Close.
             ---------------------------------

          9.1  Conditions to Obligations of VCI. The obligations of VCI to
               --------------------------------
consummate the transactions to be performed by it in connection with each
Installment Closing as of each Installment Closing Date is subject to
satisfaction of the following conditions:

          (a)  the representations and warranties set forth in Section 4 above,
applicable to such Closing Date, shall be true and correct in all material
respects;

          (b)  the Cortext Parties shall have materially performed and complied
with all of their covenants hereunder;

          (c)  no action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (1) prevent consummation of any
of the transactions contemplated by this Agreement, (2) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (3) affect adversely the right of VCI to own the Shares  or (4)
affect materially and adversely the right of Cortext to own its assets and to
operate its business (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);

          (d)  on or prior to the date hereof, the relevant parties shall have
entered into the Assignment Agreement and the Employment Agreements (the "Side
Agreements") which agreements shall be in full force and effect; and any
necessary payments shall have been made under such agreements; and no breach or
violation of any of the terms or provisions of, or default under (with or
without notice or lapse of time or both), or any other right to terminate any of
the obligations under, or right to accelerate any obligations under, any of such
agreements shall exist;

          (e)  Cortext shall have delivered to VCI: (i) on or prior to the date
hereof, (A) resolutions of the Board and the shareholders, as the case may be,
authorizing the execution, delivery and performance of this Agreement, the Side
Agreements and the transactions contemplated hereby and thereby, including the
adoption of the New Articles, establishing the signature authorities of Cortext,
in the forms annexed hereto as Exhibit _9.1_(the "Resolutions") and (B) the
Fiscal Year End 1999 financial statement consistent with the representations and
warranties set forth in Section 4.10 above; and (ii) a certificate, dated as of
the date of the Installment Closing in question, executed by the appropriate
officers of Cortext, to the effect that each of the conditions specified above
in Section 1 and this Section 9.1 are satisfied in all respects;

<PAGE>

          (f)  VCI shall have received on the date hereof from counsel to
Cortext an opinion in form and substance as set forth in Exhibit D attached
hereto, addressed to VCI and dated as of the date hereof;

          (g)  VCI shall have received from Cortext on or prior to the date
hereof, the Agreement annexed hereto as Exhibit E, executed by Cortext and
Internet Dapei Zahav;

          (h)  VCI shall have received from Cortext on or prior to the date
hereof, executed banking instructions with respect to the payments to be made
hereunder to Planet reasonably satisfactory in form and substance to VCI; and

          (i)  all actions to be taken by the Cortext Parties in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby, or reasonably requested by VCI, shall be reasonably
satisfactory in form and substance to VCI.

     VCI may waive any condition specified in this Section 9 if it executes a
writing so stating at or prior to the relevant Installment Closing.

          9.2  Conditions to Obligation of the Cortext Parties. The obligation
               -----------------------------------------------
of the Cortext Parties to consummate the transactions to be performed by them in
connection with the each Installment Closing is subject to satisfaction of the
following conditions:

          (a)  the representations and warranties set forth in Section 5 above
shall be true and correct in all material respects at and as of each Installment
Closing Date;

          (b)  VCI shall have performed and complied with all of its covenants
hereunder in all material respects through the applicable Installment Closing
Date;

          (c)  no action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement or (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);

          (d)  all actions to be taken by VCI in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby, or reasonably requested by the Cortext Parties, shall be
reasonably satisfactory in form and substance to the Cortext Parties.

          (e)  Cortext received from VCI satisfactory written evidence of
transfer of the funds to the Cortext Account and to the Planet Account.

<PAGE>

          IN WITNESS WHEREOF, each of the parties hereto have caused this Stock
Purchase Agreement to be executed by its duly authorized representative as of
the date and year first set forth above.


                         VIRTUAL COMMUNITIES, INC.


                         By:  /s/ Avi Moskowitz
                              -----------------------

                         Title:  President



                         CORTEXT LTD.


                         By:  /s/ Noam Ilan
                              -----------------------

                         Title:  C.E.O.



                              /s/ Noam Ilan
                              -----------------------
                              Noam Ilan

                              /s/ Ran Eilam
                              -----------------------
                              Ran Eilam

<PAGE>

                                                                  Exhibit 10(41)
                                                                  --------------

                             ASSIGNMENT AGREEMENT

    THIS AGREEMENT (the "Agreement") is made as of the 7th day of February,
2000, by and between Planet Communications Ltd., a company incorporated under
the laws of the State of Israel with registered offices at 6 Balfour Street, Tel
Aviv, Israel ("Assignor") and Cortext Ltd., a company incorporated under the
laws of the State of Israel, with registered offices at Hamiktzoa 9, Tel Aviv,
Israel ("Assignee") and Virtual Communities, Inc., a company incorporated under
the laws of Delaware, USA with offices at 589 8/th/ Avenue, New York, NY
("VCI").

    WHEREAS, Assignee and Assignor entered into a Partnership Agreement (the
"Partnership Agreement"), dated November 2, 1997, with respect to the "Magazine
Software" (as defined below); and

    WHEREAS, Assignee has been the active party in the development, marketing,
sale, licensing and support of the Magazine Software; and

    WHEREAS, Assignee has "Rights" (as defined below) in and to the Magazine
Software pursuant to the Partnership Agreement; and

    WHEREAS, Assignee desires to acquire all Rights of Assignor in and to the
Magazine Software, and Assignor is willing to assign all such Rights, as
provided herein; and

    WHEREAS, VCI intends to purchase shares of Assignee, according to the terms
and conditions set forth in the Share Purchase Agreement by and between
Assignee and VCI (the "SPA") entered into simultaneously herewith ("VCI's
Investment"); and

    WHEREAS, according to the SPA, VCI's Investment is conditioned on Assignor
assigning all "Rights" in the Magazine Software to Assignee; and

    WHEREAS, in connection with the SPA, Assignee is entitled to certain
payments from VCI, in accordance with the SPA;

    THEREFORE, it is hereby agreed by the parties as follows:

1.   Effective as of the date when VCI, on behalf of Assignee, shall pay to
     Planet the payments set forth in sections 9.1 and 9.2 herein (the "Relevant
     Date") and subject to such payments, Assignor hereby irrevocably assigns
     to Assignee, and Assignee accepts, free from any encumbrances or other
     third party rights, all of Assignor's rights, title and interest in and to
     a certain magazine web publishing tool kit software (the "Magazine
     Software"), and any related technology or work of any kind related to the
     Magazine Software (including without limitation, interfaces and manuals)
     owned or developed by Assignor, alone or together with the Assignee,
     including, inter alia, all rights pursuant to, or in connection with, the
     Partnership Agreement and the Software License Agreement among the parties
     hereto, dated July 18, 1999 (the "VCI License"), and the Work Order among
     Internet Dapei Zahav; Assignee and Assignor dated

                                       1
<PAGE>

     August 13, 1998, including all rights to any work developed pursuant to, or
     in connection with such agreements and which relate to the Magazine
     Software, all subject to Assignor's right to sell up to 10 licences of the
     Magazine Software in form and substance as set forth in Exhibit A attached
     hereto only to Domain End Users (all of the above, collectively, the
     "Rights").

2.   The "Rights" shall include without limitation, any and all industrial and
     intellectual property rights relating to the Magazine Software and to any
     other related technology or work of any kind owned or developed by
     Assignor, and which relate to the Magazine Software, including without
     limitation, if any, patents, patent applications, patent rights,
     trademarks, trademark applications, trade names, service marks, service
     mark applications, copyrights, moral rights, computer programs, content and
     other computer software, source code, object code, technology, know-how,
     trade secrets, proprietary processes and formulae information, data,
     technology, know-how, inventions, discoveries, designs, models, technical
     reports, diagrams, software and hardware, ideas, and trade and business
     plans.

3.   The assignment of Rights to Assignee includes, but is not limited to all of
     the Rights of Assignor (in partnership with Assignee) as follows:

3.1. The right to become the sole registered owner of any Rights, whether or not
     currently registered.

3.2. The right to become the sole registered owner of any not yet registered or
     non-crystallized (as the case may be) Rights.

3.3. All rights and powers arising or accrued from the Rights, including the
     right to sue for damages and other remedies in respect of any infringement
     of the Rights, or in respect of other acts within the scope of the claims
     of any published specification of any patent or accompanying any
     application therefor or accompanying any applications prior to the date
     hereof.

3.4. The right to apply for, prosecute and obtain patents, trade names,
     intellectual property or similar protection throughout the world in respect
     to any right accrued, derived or based on the Rights, including the right
     to claim patent priority or other legal priority.

4.   If any right assigned to Assignee hereunder is not capable of assignment,
     then to the extent required to vest such right in Assignee, Assignor hereby
     waives and relinquishes such right in favor of Assignee and/or grants to
     Assignee a perpetual, exclusive, royalty free, worldwide license to exploit
     and use such right, including a license to assign, transfer and sub-license
     such right, in any manner that Assignee deems fit, and further hereby
     consents to any exercise whatsoever of such right by Assignee. Assignor
     shall promptly cooperate with Assignee, sign all documents and otherwise
     take all steps, at the request and expense of the Assignee, necessary to
     vest in the Assignee the rights assigned to the Assignee under this
     Agreement.

5.   Assignor declares and warrants that to the best of its knowledge it does
     not possess any software designs, lines of code or and any other tangible
     property or physical objects which relate to the Rights (and shall promptly
     deliver any of the foregoing if discovered). Assignor shall maintain the
     confidentiality of all information relating to the Rights and shall ensure
     that all persons which it has afforded access to such information shall not
     use or disclose such information.

                                       2
<PAGE>

6.   The Partnership Agreement is hereby terminated as of the Relevant Date.
     Each of Cortext and Planet irrevocably releases the other as of the
     Relevant Date from all claims and obligations arising out of the
     Partnership Agreement.

7.   The Assignor represents and warrants that, (a) it has not granted rights in
     the Rights to any third parties in any manner whatsoever; (b) Assignee,
     entirely through the efforts of its employees, has been the active party in
     the development, marketing, sale, licensing and support of the Magazine
     Software and Assignor was only a passive investor (supplying funds,
     equipment and premises) with respect to the development, licensing and
     support of the Magazine Software; and (c) to the best of its knowledge, (1)
     the Rights being assigned are free and clear of all liens, claims,
     encumbrances, rights, or equities whatsoever of any third party other than
     the Assignee and VCI; (2) the Rights being assigned have not been forfeited
     to the public domain and have been maintained in confidence; (3) no person
     has the right to assert any claim regarding the use of, or challenging or
     questioning the Assignor's right or title in, any of the Rights; and (4)
     there are no claims by or against the Assignor relating to the Rights and
     no ground exists that may give rise to such a claim. To eliminate any
     doubt, Assignor shall have no liability, in any way whatsoever, if any of
     its representations and warranties shall be found to be incorrect if they
     were effected by the acts of the Assignee or by any act in which Assignee
     was an active party with respect to the Magazine Software.

8.   Assignor represents and warrants to the best of its knowledge, information
     and belief, that (a) the Magazine Software does not infringe any patent,
     copyright, or trade secret of, or the intellectual property or other rights
     of, any third party; and (b) upon the effective date of this Agreement,
     Assignee will own all of the intellectual property or other rights relating
     to the Magazine Software subject to Assignor's right as set forth in
     section 1.

9.   In consideration of Assignor's obligations and representations herein,
     Assignee hereby authorizes and instructs VCI, on behalf of Assignee, and
     VCI hereby irrevocably accepts, agrees and obliges toward Assignor, to
     effect the following:

9.1. Within three (3) business days after the execution of this Agreement, pay
     to Assignor an amount of $35,000 plus V.A.T (against Planet's duly issued
     invoice to Assignee) and the V.A.T due on the advanced sum of $30,000
     already paid (against Assignor's duly issued invoice to Assignee in the
     amount of $30,000 plus V.A.T.) by wire transfer to Assignor account number
     322100/46 in Bank Leumi Branch Ahad Haam, Tel Aviv (No. 811) (the "$35,000
     Payment").

9.2. Within ten (10) days after the execution of this Agreement, pay to Assignor
     an amount of $285,000 plus V.A.T (against Assignor's duly issued invoice to
     Assignee) by wire transfer to the account specified in section 9.1 above
     (the "Second Installment").

9.3. Pay to Assignor an additional aggregate amount of $75,000 plus V.A.T
     (against Assignor's duly issued invoice to Assignee) by wire transfer to
     the account specified in section 9.1 above in three (3) installments
     ($25,000 plus V.A.T [against Assignor's duly issued invoice to Assignee]
     each), on April 15, 2000, June 15, 2000 and August 15, 2000.

9.4. In any manner whatsoever, unless this Agreement shall be cancelled, all
     sums as mentioned in sections 9.1 - 9.3 shall be paid to Assignor as
     detailed above. In particular, Assignee or VCI shall have no right to delay
     or postpone any of such payments and none of such payments shall

                                       3
<PAGE>

     be paid any other method (including, but not limited to a claim or plea of
     set-off) than the method detailed above. To eliminate any doubt, the
     foregoing shall not derogate from Assignor's liability for its
     representations and warranties contained herein.

9.5. In the event that any of the sums mentioned in sections 9.1 - 9.3 above or
     any portion thereof, shall not have been paid on the dates set forth in
     such section 9.1 - 9.3, then without derogating from any of Assignor's
     rights in such event, such sum(s) shall bear interest at the rate of one
     percent (1%) per month (on a daily basis) plus V.A.T, which shall be added
     to such sum and paid by VCI to Assignor.

9.6. In the event that VCI fails to meet any of its obligations under sections
     9.1 through 9.5 herein, or any portion thereof, such breach shall be deemed
     to be a fundamental breach of this Agreement. In such event, and without
     derogating from any of Assignor's rights in the event of such breach,
     including, but not limited to, the enforcement of this Agreement, VCI shall
     pay Assignor as agreed compensation, and without the need of proof of
     damages, the sum of $35,000. Without derogating from Assignor's rights, if
     in the event of a fundamental breach Assignor elects to cancel this
     Agreement after the sum of $35,000 pursuant to section 9.1 above has been
     paid by VCI (on behalf of Assignee) then, in such event, Assignor shall be
     entitled to retain this sum. Assignor acknowledges the prior receipt of
     $30,000 as an advance payment hereunder. In the event of a cancellation of
     this Agreement, Assignor shall not have to return this advance payment of
     $30,000 and such sum shall be applied toward VCI's purchase of additional
     licenses for Magazine Software pursuant to the VCI License.

9.7. To eliminate any doubt, regardless of the fact that VCI's payments and/or
     obligations, set forth in sections 9.1 - 9.6 are made on behalf of
     Assignee, Assignor's rights to these payments and/or to such rights shall
     be directly toward VCI (as well as, jointly and severally toward Assignee)
     and nothing in connection with the relationship between VCI and Assignee
     and/or the SPA, in any manner whatsoever, shall have any effect nor shall
     derogate from VCI obligations toward Assignor. Nevertheless, but without
     derogating from Assignor's rights, as mentioned above, all such payments,
     when paid by VCI, on behalf of Assignee, shall be considered as paid by
     Assignee and consequently, Assignor shall issue the invoices for such
     payments to Assignee.

10.  Each Party represents that the execution, delivery, and performance by such
     Party of this Agreement and all transactions contemplated hereby have been
     duly and validly authorized by all necessary actions on the part of such
     Party and that neither the execution of this Agreement nor the performance
     hereunder by such Party is in violation of such Party's obligations,
     contractual or otherwise, to any government, agency or any other party or
     parties.

11.  This Agreement merges and supersedes all prior and contemporaneous
     agreements, assurances, representations, and communications between the
     parties hereto regarding the subject matter hereof.

12.  This Agreement shall be governed by and construed under the laws of the
     State of Israel. Sole jurisdiction is given to the court in Tel Aviv,
     Israel.

13.  Any notice required or permitted under this Agreement shall be given in
     writing and shall be deemed effectively given upon personal delivery to the
     party to be notified or upon deposit with the Israeli Post Office, by
     registered or certified mail, postage prepaid and addressed to the

                                       4
<PAGE>

     party to be notified at the address indicated for such party below, or at
     such other address as such party may designate by ten (10) day's advance
     written notice to the other parties.

          If to Assignor:               Planet Communications Ltd.
                                        57 Igal Allon Street, Tel Aviv Israel
                                        Attn: Shimon Ohaion
                                        Fax: 972 3 636 6463

          With a copy (which shall not
          constitute notice) to:        Ami Sadan & Co. - Law Offices
                                        315 Haryarkon St. Tel Aviv, Israel
                                        Attn:Ami Sadan, Adv.
                                        Fax 972 3 602 2503

          If to Assignee:               Cortext Ltd.
                                        Hamikztoa 9
                                        Tel Aviv, Israel
                                        Attn: Noam Ilan
                                        Fax: 972 3

          If to VCI:                    Virtual Communities Israel Ltd.
                                        Jerusalem Technology Park, Malcha
                                        Jerusalem, Israel
                                        Attn: David Kahn
                                        Fax: 972 2 568 9171

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed.


Cortext Ltd.                                        Planet Communications Ltd.

By: _____________________                           By: _____________________

Virtual Communities, Inc.

By: _____________________

                                       5



© 2019 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission