STOCK PURCHASE AGREEMENT BY & AMONG HANDHELD ENTERTAINMENT, INC., A DELAWARE CORPORATION
EXHIBIT
2.1
PUTFILE
LIMITED
BY
& AMONG
A
DELAWARE CORPORATION
XXXXXX
PAGE,
AN
INDIVIDUAL
AND
XXXXXX
XXXX,
AN
INDIVIDUAL
Dated
as of February 5, 2007
This
Stock Purchase Agreement (“Agreement”) is
entered into as of February 5, 2007 by and among HANDHELD ENTERTAINMENT, INC.,
a
Delaware corporation (“HandHeld”),
Xxxxxx Page, an individual (“Xxxxxx
Page”)
and
Xxxxxx Xxxx, an individual (“Xxxxxx
Xxxx”
and,
together with Xxxxxx Page, the “Owners”).
RECITALS
WHEREAS,
Xxxxxx Page owns ninety percent (90%) of the outstanding equity interest in
Putfile Limited, a limited company registered in England (“Putfile”);
WHEREAS,
Xxxxxx Xxxx owns ten percent (10%) of the outstanding equity interest in
Putfile;
WHEREAS,
together, the Owners own one hundred percent (100%) of the outstanding equity
interest (“Interest”)
in
Putfile; and
WHEREAS,
HandHeld desires to purchase the Interest from Owners, and Owners desire to
sell
the Interest to HandHeld, in each case upon the terms and subject to the
conditions set forth in this Agreement;
NOW,
THEREFORE, in consideration of the premises, the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE
I.
DEFINITIONS
Section
1.1. Definitions
In
addition to the terms defined elsewhere herein, the terms defined in the
introductory paragraphs and the Recitals to this Agreement shall have the
respective meanings specified therein, and the following terms shall have the
meanings specified below when used herein with the initial capital
letters:
“Adjusted
Net Assets”
as
of
any date means, with respect to Putfile, current assets minus the sum of (i)
current liabilities (excluding deferred revenue and intercompany accounts
payable) plus (ii) long term liabilities plus (iii) one dollar ($1) in each
case
as would be reflected in a balance sheet prepared on a basis consistent with
that used in the preparation of the Financial Statements, provided, however,
that current assets, current liabilities and long term liabilities shall exclude
any amounts related to income or similar Taxes.
“Arbiter”
has
the
meaning set forth in Section 2.3(d).
“Balance
Sheet”
has
the
meaning set forth in Section 3.7.
“Balance
Sheet Date”
means
December 31, 2005.
2
“Business
Day”
means
a
day, other than a Saturday or a Sunday, on which commercial banks are not
required or authorized to close.
“Competitive
Business Activities”
shall
have the meaning set forth in Section 2.4(b).
“Closing”
shall
have the meaning set forth in Section 6.1.
“Closing
Date Balance Sheet”
shall
have the meaning set forth in Section 2.3(a) as finally adjusted pursuant to
Section 2.3(a).
“Draft
Adjustment Report”
shall
have the meaning set forth in Section 2.3(a).
“Escrow
Amount”
means
the sum of USD $100,000.
“Final
Net Asset Adjustment”
means:
(i) if Owners do not timely deliver an Objection Notice, the Net Asset
Adjustment as set forth in the Adjustment Report, or (ii) if the Owners timely
deliver an Objection Notice, the Net Asset Adjustment as determined pursuant
to
Section 2.3(d).
“Financial
Statements”
has
the
meaning set forth in Section 3.7.
“Net
Asset Adjustment”
means
the amount of Adjusted Net Assets as of the Closing Date, it being understood
that the Net Asset Adjustment may be more or less than zero.
“Objection
Notice”
has
the
meaning set forth in Section 2.3(c).
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Taxes”
means
all United Kingdom, federal, state, local, foreign and other taxes, assessments
and water and sewer charges and rents, including without limitation, income,
gross receipts, excise, employment, sales, use, transfer, license, payroll,
franchise, severance, stamp, withholding, Social Security, unemployment, real
property, personal property, property gains, registration, capital stock, value
added, single business, occupation, workers’ compensation, alternative or add-on
minimum, estimated, or other tax, including without limitation any interest,
penalties or additions thereto.
“Transfer”
with
regard to the Stock Consideration, means to sell, assign, hypothecate, pledge,
encumber, grant a security interest in or otherwise dispose of such Stock
Consideration.
ARTICLE
II.
SALE
AND PURCHASE
Section
2.1. Agreement
to Sell and to Purchase.
On
the
terms and subject to the conditions set forth in this Agreement, at the Closing,
HandHeld shall purchase from Owners, and Owners shall sell, transfer, assign,
convey and deliver to HandHeld,
the Interest free and clear of liens, claims and encumbrances. At the Closing,
Owners
shall
deliver to HandHeld or its designee a certificate or certificates representing
the Interest together with duly completed stock transfer forms in the name
of
Handheld or its nominee in respect of the Interest.
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HandHeld
represents and warrants that it is acquiring the Interest solely for its own
account, for investment and not with a view to resale or distribution. HandHeld
understands that the Interest has not been registered pursuant to the Securities
Act of 1933 or any state securities laws, and that the Interest may not be
sold,
pledged, or otherwise transferred without registration under such laws or is
exempt from registration under such laws.
Section
2.2. Purchase
Price.
(a) The
purchase price (the “Purchase
Price”)
for
the Interest shall consist of the following:
(i) $500,000
United States Dollars (“USD”)
(the “Cash
Consideration”),
via
wire transfer in immediately available funds as directed by Owners, less the
Escrow Amount which will be deposited into Escrow pursuant to the terms of
the
Escrow Agreement, attached as Exhibit
A, (the
“Escrow
Agreement”);
(ii) $500,000
USD payable in 12 equal monthly installments of $41,666.67 USD (each a
“Monthly
Payment”).
The
first Monthly Payment shall be due and payable March 1, 2007 and each remaining
Monthly Payment shall be due and payable on the first day of each calendar
month
thereafter; and
(iii) that
number of shares of the restricted common stock of HandHeld as shall be equal
to
(A) $6,000,000 divided by (B) the average of the closing price of HandHeld’s
common stock quoted on the Nasdaq National Market (or similar system) or on
any
exchange on which HandHeld’s common stock is listed, for the five (5) most
recent days upon which trades are reported preceding the Closing Date (the
“Stock
Consideration”).
The
Stock Consideration shall be registered by HandHeld pursuant to the terms of
the
Registration Rights Agreement in the form attached hereto as Exhibit
B
(the
“Registration
Rights Agreement”).
(b) The
total
Purchase Price (consisting of the Cash Consideration, the Monthly Payment and
the Stock Consideration) shall be apportioned as follows:
(i) ninety
percent (90%) to Xxxxxx Page
(ii) ten
percent (10%) to Xxxxxx Xxxx
(c) Notwithstanding
anything to the contrary in this Agreement or the Registration Rights Agreement,
at any time prior to the one (1)-year anniversary of the Closing Date, each
Owner may Transfer no greater than one twelfth (1/12) of the aggregate Stock
Consideration apportioned to such Owner (pursuant to Section 2.2(b) of this
Agreement) in any given thirty (30)-day period.
(d) HandHeld
will deliver binding instruction to its stock transfer agent within 1-2 business
days following the Closing to issue the Stock Consideration to the Owners,
credited as fully paid and nonassessable, as soon as practicable thereafter
after the Closing Date.
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Section
2.3 Purchase
Price Adjustment
(a) As
soon
as reasonably practical after the Closing, but in no event more than ninety
(90)
days after the Closing Date, HandHeld shall prepare a consolidated balance
sheet
of Putfile as of the close of business on the Closing Date (the “Closing
Date Balance Sheet”),
together with (ii) a draft schedule (the “Draft
Adjustment Report”)
showing HandHeld’s computation of the Net Asset Adjustment as of the Closing
Date and HandHeld’s proposed purchase price adjustment to be made in accordance
with this Section 2.3. The Closing Date Balance Sheet shall be prepared on
a
basis consistent with that used in the preparation of the Financial Statements
and in accordance with generally accepted accounting policies and practices
in
the United Kingdom. HandHeld shall deliver the Closing Date Balance Sheet and
the Draft Adjustment Report to Owners within such ninety (90) day period after
the Closing Date.
(b) During
the thirty (30) day period after Owners’ receipt of the Closing Date Balance
Sheet and the Draft Adjustment Report, Owners and HandHeld shall cooperate
with
each other to resolve any disagreements between them with respect to the Draft
Adjustment Report. In the event Owners and HandHeld agree on the Draft
Adjustment Report and the proposed Net Asset Adjustment set forth therein (such
agreement to be indicated in writing by Owners and HandHeld by signing such
Draft Adjustment Report), then the Draft Adjustment Report shall be deemed
to be
the final Adjustment Report (the “Adjustment
Report”),
and
the Net Asset Adjustment set forth therein shall be conclusive and binding
upon
HandHeld and Owners and shall have the effect of adjusting the Cash
Consideration as set forth therein.
(c) In
the
event Owners and HandHeld shall not reach agreement on all aspects of the Draft
Adjustment Report, including with respect to the Net Asset Adjustment set forth
therein, within such thirty (30) day period after the Owners’ receipt of the
Closing Date Balance Sheet and the Draft Adjustment Report, Owners shall
promptly (but in no event later than five (5) days following the expiration
of
such thirty (30) day period) prepare a written notice of objection(s) (the
“Objection
Notice”):
(i)
objecting in good faith to the Closing Date Balance Sheet or the Net Asset
Adjustment set forth in the Draft Adjustment Report, (ii) setting forth the
items being disputed and the reasons therefor, and (iii) specifying Owners’
calculation of the Net Asset Adjustment as of the Closing Date and the
adjustment to be made in accordance with this Section 2.3. In connection with
the preparation of the Objection Notice, HandHeld shall grant Owners’
accountants and other representatives reasonable access to all of the books
and
records of Putfile. If Owners fail to deliver timely notice of objection to
the
Closing Date Balance Sheet or the Net Asset Adjustment as set forth in the
Draft
Adjustment Report, then the Draft Adjustment Report shall be deemed to be the
final Adjustment Report, and the Net Asset Adjustment set forth therein shall
be
conclusive and binding upon HandHeld and Owners and shall have the effect of
adjusting the Cash Consideration as set forth therein.
(d) The
matters in dispute shall be determined by an independent accountant located
within the United Kingdom (recognized as entitled to practice by the Institute
of Chartered Accountants for England and Wales), mutually satisfactory to
HandHeld and Owners (the “Arbiter”).
In
the absence of agreement over the appointment, the Arbiter shall be appointed
by
the President (or such other person nominated by him from time to time for
such
purposes) of the Institute of Chartered Accountants for England and Wales.
HandHeld and Owners shall promptly deliver to the Arbiter the Closing Date
Balance Sheet, the Draft Adjustment Report and Owners’ Objection Notice.
Promptly, but not later than thirty (30) days after the acceptance of its
appointment, the Arbiter shall determine (based solely on presentations by
Owners and HandHeld to the Arbiter and not by independent review) only those
items in dispute and shall render a report as to its resolution of such items
and the resulting calculation of the Net Asset Adjustment. For purposes of
the
Arbiter’s determination, the amounts to be included shall be the appropriate
amounts from the Closing Date Balance Sheet or the Draft Adjustment Report,
as
the case may be, as to items that are not in dispute, and the amounts determined
by the Arbiter, as to items that are submitted for resolution by the Arbiter.
In
resolving any disputed item, the Arbiter may not assign a value to such item
greater than the greatest value for such item claimed by either party in the
Closing Date Balance Sheet, Draft Adjustment Report or Objection Notice or
less
than the lowest value for such item claimed by either party in the Closing
Date
Balance Sheet, Draft Adjustment Report or Objection Notice. HandHeld and Owners
shall cooperate with the Arbiter in making its determination and such
determination shall be conclusive and binding upon HandHeld and Owners. The
Arbiter shall act as expert and not as an arbitrator and the provisions of
United Kingdom arbitration acts shall not apply.
5
(e) HandHeld
and Owners shall each bear one-half of the fees and expenses of the
Arbiter.
(f) Within
five Business Days after the final determination of the Net Asset Adjustment
in
accordance with this Section 2.3, Owners shall direct the Escrow Holder to
pay
HandHeld from the Escrow Account by wire transfer of immediately available
funds
the amount, if any, by which the Final Net Asset Adjustment is less than
zero.
(g) Nothing
in this Section 2.3 or in the statements, reports or documents contemplated
hereby shall affect the parties’ rights and obligations in respect of a breach
or alleged breach of any representation or warranty herein.
Section
2.4. Nondisclosure;
Noncompetition; Non-solicitation.
(a)
Except as required by law, from and after the Closing Date, Owners shall not
use, divulge, furnish or make accessible to anyone any proprietary, non-public,
confidential or secret information to the extent relating to HandHeld or Putfile
(including, without limitation, customer lists, supplier lists and pricing
and
marketing arrangements with customers or suppliers) and Owners shall cooperate
reasonably with HandHeld in preserving such proprietary, confidential or secret
aspects of HandHeld and Putfile.
(b)
From
and after the Closing Date, for a period of two (2) years from the Closing
Date,
Owners shall not engage in Competitive Business Activities (as defined below).
For purposes of this Agreement,“Competitive
Business Activities”
means
the operation of a website, or other electronic system with similar
capabilities, that is, in whole or in part, devoted to hosting user-generated,
PG-13-like rated content.
(c)
Owners shall not, directly or indirectly, after the Closing and for a period
of
two (2) years from the Closing Date, (i) solicit for hire or enter into any
contractual arrangement with any employee or contractor of HandHeld without
the
prior written consent of HandHeld unless such employee or contractor has not
been employed by HandHeld for a period of two (2) years; or (ii) call on or
solicit any of the customers or suppliers of HandHeld or Putfile or make known
the names and addresses of such customers or suppliers or any information
relating in any manner to HandHeld or Putfile or HandHeld’s or Putfile’s
relationships with such customers or suppliers. Owners agree that a violation
of
this Section will
cause irreparable injury to HandHeld, and HandHeld shall be entitled, in
addition to any other rights and remedies it may have at law or in equity,
to an
injunction enjoining and restraining Owners from doing or continuing to do
any
such violation and any other violations or threatened violations of this
Section.
6
(d)
Owners acknowledge and agree that the covenants set forth in this Section are
reasonable and valid in scope and in all other respects and are designed to
protect the goodwill associated with the business and the assets being purchased
pursuant to this Agreement. If any of such covenants is found to be invalid
or
unenforceable by a final determination of a court of competent jurisdiction
(i)
the remaining terms and provisions hereof shall be unimpaired and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a term
or
provision that is valid and enforceable and that comes closest to expressing
the
intention of the invalid or unenforceable term or provision. In the event that
any of the provisions of this Section relating to scope of the covenants
contained therein or the nature of the business restricted thereby shall be
declared by a court of competent jurisdiction to exceed the maximum
restrictiveness such court deems enforceable, such provision shall be deemed
to
be replaced herein by the maximum restriction deemed enforceable by such
court.
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES OF THE OWNERS
The
Owners jointly and severally represent and warrant to HandHeld as set forth
in
this Article III:
Section
3.1. Organization
of Putfile.
Putfile
is a registered limited company organized as of June 5, 2005 under the laws
of
England and Wales and is validly existing in good standing under the laws of
England and Wales.
Section
3.2. Capitalization
of Putfile.
As
of the
date hereof, the authorized ownership of Putfile consists of one hundred (100)
shares of capital stock, of which ninety (90) shares are issued and outstanding
and owned by Xxxxxx Page and of which ten (10) shares are issued and outstanding
and owned by Xxxxxx Xxxx. There are or will be at Closing no outstanding
options, warrants, agreements, conversion rights, preemptive rights or other
rights to subscribe for, purchase or otherwise acquire shares of
Putfile.
Section
3.3 Assets
and Liabilities of Putfile.
As
of the
date hereof, the only assets and liabilities of Putfile are those listed on
Schedule 3.3 hereof.
Section
3.4 Employees/Contractors
of Putfile.
Except
as
set forth in Schedule 3.4 hereto, Putfile has no employees, contractual
relationships or other obligations, other than this Agreement.
7
Section
3.5 Status
of Assets.
(a) As
of the
date hereof and at the Closing, no person or entity other than Owners or Putfile
has any interest in or claim to any of the assets listed in Schedule
3.3.
(b) HandHeld
acknowledges and agrees that Putfile and Owners do not warrant any right(s)
to
user-submitted content which has or may appear on xxx.xxxxxxx.xxx. Owners
represent and warrant to HandHeld that, as of the date of Closing, they have
not
nor has Putfile received any unresolved notice of claim against them relating
to
a third party’s alleged rights in user submitted content appearing on
xxx.xxxxxxx.xxx.
Section
3.6 Traffic
Statistics Reports.
The
Xxxxxxx.xxx website traffic statistic reports provided to HandHeld by Putfile
and Owners are, to the best knowledge of Owners, true and correct
representations of actual results realized for the periods covered by such
reports, as reported by Google Analytics.
Section
3.7 Financial
Statements.
The
unaudited balance sheet of Putfile as of the Balance Sheet Date (the
“Balance
Sheet”),
and
related statements of income, retained earnings and cash flow for the period
ended on that date and the notes thereto (collectively, the “Financial
Statements”),
(i)
are included as Schedule 3.7: (ii) present fairly the financial condition and
the results of operations of Putfile as of the dates and for the periods
indicated thereon, (iii) are complete, correct and in accordance with the books
of account and records of Putfile, (iv) can be legitimately reconciled with
the
financial statements and the financial records maintained and the accounting
methods applied by Putfile for income tax purposes, and (v) reflect accurately
all costs and expenses which Putfile incurred, but not necessarily all of the
costs, or a pro-rata portion of the costs, incurred by Owners which may have
been expenses of Putfile if Putfile were independent and not affiliated with
any
other corporation or business (“Excluded
Costs”,
all of
which are set forth in Schedule 3.7).
Section
3.8 Investment
Intent; Status.
The
Stock
Consideration will be acquired hereunder solely for the account of Owners for
investment, and not with a view to the resale or distribution thereof in
violation of the Securities Act. Additionally, Owners acknowledge and agree:
(a)
that they are not U.S. persons and are not acquiring the securities for the
account or benefit of any U.S. person; (b) that the Stock Consideration has
not
been registered under the Securities Act and may not be offered or sold in
the
United States unless registered or an exemption from registration is available,
(c) that the Stock Consideration is being acquired by Owners hereunder pursuant
to Regulation S of the Securities Act, governing offers and sales made outside
the United States without registration under the Securities Act, (d) that Owners
shall resell such Stock Consideration only in accordance with the provisions
of
Regulation S and shall not engage in hedging transactions with regard to such
Stock Consideration unless in compliance with the Securities Act, and (e) the
certificate or certificates representing such Stock Consideration shall contain
a legend to the effect that transfer is prohibited except in accordance with
the
provisions of Regulation S of the Securities Act.
8
ARTICLE
IV.
CONDITIONS
TO OWNERS’ OBLIGATIONS
The
obligation of the Owners to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (unless waived in writing by Owners)
of
each of the following conditions on or prior to the Closing Date:
Section
4.1. Transaction
Documents.
HandHeld
shall have executed and delivered to Owners this Agreement, the Escrow
Agreement, and the Registration Rights Agreement.
Section
4.2. Services
Agreement.
HandHeld
shall have agreed to engage Xxxxxx Page on substantially the terms set forth
in
the Xxxxxx Page Independent Contractor Services Agreement, attached hereto
as
Exhibit
C
(the
“Xxxxxx
Page Services Agreement”).
ARTICLE
V.
CONDITIONS
TO HANDHELD’S OBLIGATIONS
The
obligation of HandHeld to consummate the transactions contemplated by this
Agreement is subject to the satisfaction (unless waived in writing by HandHeld)
of each of the following conditions on or prior to the Closing
Date:
Section
5.1. Corporate
Documents.
HandHeld
shall have received from Owners’ Solicitors certified copies of Putfile’s
formation documents, and any amendments thereto, and a certificate of good
standing from the United Kingdom official register of United Kingdom
companies.
Section
5.2. Services
Agreement.
Xxxxxx
Page shall have agreed to provide Services to Putfile, as hereafter owned by
HandHeld, on substantially the terms set forth in the Xxxxxx Page Services
Agreement.
Section
5.3 [Reserved]
Section
5.4 Transaction
Documents.
The
Owners (as applicable) shall have executed and delivered to HandHeld this
Agreement, the Escrow Agreement, the Registration Rights Agreement, and the
Xxxxxx Page Services Agreement and such other documents as shall be necessary
or
desirable to effect the transfer of the Interest.
Section
5.5 Resignations.
HandHeld
shall have received the resignations, effective as of the Closing Date, of
the
sole Director and each of the officers of Putfile.
9
Section
5.6 No
Payment Obligations.
As
of the
Closing Date, Putfile shall have no payment obligations or amounts owed to
either Xxxxxx Page or Xxxxxx Xxxx, either by promissory note or contract except
as described herein. For avoidance of doubt, as of the Closing Date, neither
Putfile nor HandHeld shall be required to pay either Xxxxxx Page or Xxxxxx
Xxxx
any amounts loaned by such Owner to Putfile prior to the Closing Date other
than
the sum of thirty six thousand pounds sterling (£36,000) which shall be payable
to Xxxxxx Page in twelve equal installments commencing on the Closing Date
and
monthly thereafter.
ARTICLE
VI.
THE
CLOSING
Section
6.1. The
Closing.
The
Closing of the transactions contemplated hereby (the “Closing”)
shall
be held on February 5, 2007 (the “Closing
Date”)
or at
such other time as the parties may mutually agree. The Closing shall be held
at
the offices of Xxxxxx Curls Xxxxxxxx & Xxxxx LLP, 00 Xxx Xxxxxxxxxx Xxxxxx,
0xx
Xxxxx,
Xxx Xxxxxxxxx, XX 00000 or at such other place as the parties may mutually
agree. Alternatively, the parties may mutually agree that the Closing may occur
by mail, electronic mail, fax, overnight courier or a combination thereof.
At
the Closing, all of the transactions provided for in Sections 2.1 and 2.2.
of
Article II
hereof
shall be consummated on a substantially concurrent basis.
Section
6.2 Interest
Held in Trust.
Each
Owner declares that for so long as he remains the registered holder of any
of
the Interest after the Closing Date he shall:
(a) hold
the
Interest and the dividends and other distributions of profits or surplus or
other assets declared, paid or made in respect of them after the Closing Date
and all rights arising out of or in connection with them in trust for Handheld
and any successors in title to Handheld; and
(b) deal
with
and dispose of the Interest and all such dividends, distributions and rights
as
are described in clause 6.2(a) as Handheld or any such successor may
direct.
Section
6.3 Power
of Attorney.
Owners
appoint Handheld as their lawful attorney for the purpose of receiving notices
of and attending and voting at all meetings of the members of Putfile from
the
Closing Date to the day on which Handheld or its nominee is entered in the
register of members of Putfile as the holder of the Interest and for that
purpose the Owners authorize:
(a) Putfile
to send any notices or other communications in respect of his holding of the
Interest to Handheld; and
10
(b) Handheld
to complete in such manner as it thinks fit and to return proxy forms, consents
to short notice and any other document required to be signed by it in its
capacity as a member; and
(c) This
power of attorney (which is given by way of security to secure the performance
of obligations owed by the Owners to Handheld under this Agreement) shall be
irrevocable.
Section
6.4 Delivery
of Records.
As
soon
as reasonably practicable following the Closing Date, the Owners shall (and
shall procure that any relevant third party shall) send to Handheld at its
registered office for the time being all documents, correspondence, memoranda,
files and other records to which HandHeld is entitled and which are not
delivered to HandHeld at Closing.
ARTICLE
VII.
INDEMNIFICATION
Section
7.1. Survival.
All
of
the representations and warranties of the Owners contained in Article III of
this Agreement or in any certificate delivered by the Owners pursuant to this
Agreement shall survive the Closing and continue in full force and effect until
the first (1st)
anniversary of the Closing Date.
Section
7.2. Indemnification
Provisions for Benefit of HandHeld.
(a) In
the
event that the Owners breach any of their representations, warranties or
covenants contained in this Agreement or in any certificate delivered by the
Owners pursuant hereto and provided that, as to any claim for breach of
representations or warranties, HandHeld makes a written claim for
indemnification against Owners within the survival period referred to in Section
7.1, if applicable, then Owners agree, jointly and severally, to indemnify
HandHeld and its Affiliates from and against all Damages HandHeld and its
Affiliates suffer resulting from or arising out of such event; provided,
however, that Owners shall not have any obligation to indemnify HandHeld from
and against any such Damages until HandHeld has suffered aggregate Damages
by
reason of all such breaches in excess of fifty thousand dollars ($50,000) USD
;
provided further that no claim may be made by HandHeld under this Section unless
the total of the Damages associated with any single event or occurrence
triggering an indemnification claim exceeds fifty thousand dollars ($50,000)
USD. In any event, the maximum amount that Owners shall be required to pay
as to
all claims made under this Section shall be equal to the lesser of seven million
dollars ($7,000,000) USD, or the actual consideration received by Owners
pursuant to this Agreement as of the date of Owners’ payment of such
indemnification claim, and the payment of which shall first be satisfied (A)
by
a setting off of such amounts against all or any portion of the remaining
amounts due under Section 2.2(a)(ii) of this Agreement, and then (B) from funds
held in Escrow.
11
Section
7.3. Matters
Involving Third Parties.
(a) If
any
third party notifies a party to this Agreement (the “Indemnified
Party”)
with
respect to any matter which may give rise to a claim for indemnification against
another party to this Agreement (the “Indemnifying
Party”)
under
this Article VII,
then the
Indemnified Party shall use reasonable efforts to notify the Indemnifying Party
thereof promptly and in any event within ten days after receiving any written
notice from a third party; provided, however, that no delay on the part of
the
Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless, and then solely to
the
extent that, the Indemnifying Party is actually prejudiced thereby.
(b) Once
the
Indemnified Party has given notice of the matter to the Indemnifying Party,
the
Indemnified Party may, subject to the Indemnifying Party’s rights to assume the
defense of such matter pursuant to paragraph (c) below, defend against the
matter in any manner it deems appropriate.
(c) The
Indemnifying Party may at any point in time choose to assume the defense of
all
of such matter, in which event:
(i) the
Indemnifying Party shall defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party,
(ii) the
Indemnified Party may retain separate counsel at its sole cost and expense
(except that the Indemnifying Party shall be responsible for the fees and
expenses of one separate co-counsel for all Indemnified Parties to the extent
the Indemnified Party is advised, in writing by its counsel, that either (x)
the
counsel the Indemnifying Party has selected has a conflict of interest, or
(y)
there are legal defenses available to the Indemnified Party that are different
from or additional to those available to the Indemnifying Party), and
(iii) the
Indemnifying Party shall reimburse the Indemnified Party for the reasonable
costs of defense or investigation for the period prior to the assumption of
the
defense.
(d) Assumption
of the defense of any matter by the Indemnifying Party shall without further
action constitute an irrevocable waiver by the Indemnifying Party of its right
to claim at a later date that such third party action for which the defense
was
assumed is not a proper matter for indemnification pursuant to this Article
VII.
(e) The
Indemnified Party shall not consent to the entry of a judgment or enter into
any
settlement with respect to any matter which may give rise to a claim for
indemnification without the written consent of the Indemnifying Party, which
consent may not be unreasonably withheld or delayed; provided, however, that
if
the Indemnifying Party has failed to provide indemnification required to be
provided pursuant to this Article
VII for
fifteen days after a request therefor, then the Indemnified Party may take
any
such action without the consent of the Indemnifying Party.
(f) The
Indemnifying Party shall not consent to the entry of a judgment with respect
to
any matter which may give rise to a claim for indemnification or enter into
any
settlement which does not include a provision whereby the plaintiff or claimant
in the matter releases the Indemnified Party from all liability with respect
thereto, without the written consent of the Indemnified Party (not to be
unreasonably withheld or delayed).
12
Section
7.4. Certain
Additional Provisions Relating to Indemnification.
(a) After
the
Closing Date, the indemnification provisions set forth in this Article
VII shall
constitute the sole and exclusive recourse and remedy available to HandHeld
with
respect to the breach of any representation or warranty contained in this
Agreement or in any certificate delivered pursuant to this Agreement, except
for
actual fraud.
(b) All
payments by an Indemnifying Party under this Article
VII shall
be
treated as an adjustment to the Purchase Price for all foreign, federal, state
and local income tax purposes.
ARTICLE
VIII.
MISCELLANEOUS
PROVISIONS
Section
8.1. Notices.
All
notices, demands or other communications to be given or delivered under or
by
reason of the provisions of this Agreement shall be in writing and shall be
deemed to have been given (a) when delivered personally to the recipient, (b)
when sent to the recipient by telecopy (receipt electronically confirmed by
sender’s telecopy machine) if during normal business hours of the recipient,
otherwise on the next Business Day, (c) one Business Day after the date when
sent to the recipient by reputable express courier service (charges prepaid),
or
(d) seven Business Days after the date when mailed to the recipient by certified
or registered mail, return receipt requested and postage prepaid. Such notices,
demands and other communications shall be sent to the Owners and to HandHeld
at
the addresses indicated below:
|
If
to Xxxxxx Page:
|
Xxxxxx
Page
00
Xxxxxxxxx Xxxxxx
Xxxxxxxxx
Xxxxxx
|
|
With
a copy to:
(which
shall not constitute notice)
|
Xxxxxx
Xxxxxxx LLP
ATTN:
Xxxxxx Xxxxxxxxxx
The
Oriel
Xxxxxxxx
xxxx
Xxxxxxxxx
Xxxxxx
XX0
0XX
Fax:
00000 000000
And
Xxxxxxxx
Venture Counsel
ATTN:
Xxx Xxxxxxxx
0000
Xxxxxxxx Xxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
|
13
|
If
to Xxxxxx Xxxx:
|
Xxxxxx
Xxxx
0
Xxxxxxxx Xxxx
Xxxxxxx
Xxxxxxxxx
Xxxxxx
XX0
0XX
|
|
With
a copy to:
(which
shall not constitute notice)
|
Xxxxxx
Xxxxxxx LLP
ATTN:
Xxxxxx Xxxxxxxxxx
The
Oriel
Xxxxxxxx
xxxx
Xxxxxxxxx
Xxxxxx
XX0
0XX
Fax:
00000 000000
And
Xxxxxxxx
Venture Counsel
ATTN:
Xxx Xxxxxxxx
0000
Xxxxxxxx Xxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
|
|
If
to HandHeld:
|
ATTN:
Xxxxxxx Oscodar
000
Xxxxxx Xxxxxx, Xxxxx 000
Xxx
Xxxxxxxxx, XX 00000
Fax:
|
|
With
a copy to:
(which
shall not constitute notice)
|
Xxxxxx
Curls Xxxxxxxx & Xxxxx, LLP
ATTN:
Xxxxxx X. Xxxxxx, Esq.
00
Xxx Xxxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
|
or
to
such other address as either party hereto may, from time to time, designate
in
writing delivered pursuant to the terms of this Section.
Section
8.2. Amendments.
The
terms, provisions and conditions of this Agreement may not be changed, modified
or amended in any manner except by an instrument in writing duly executed by
both of the parties hereto.
14
Section
8.3. Announcements.
All
press
releases, notices to customers and suppliers and similar public announcements
prior to or within five days after the Closing Date with respect to this
Agreement and the transactions contemplated by this Agreement shall be approved
by both HandHeld and Owners (not to be unreasonably withheld or delayed) prior
to the issuance thereof; provided that either party may make any public
disclosure it believes in good faith is required by law, regulation or rule
of
any stock exchange on which its securities are traded (in which case the
disclosing party shall use reasonable efforts to advise the other party prior
to
making such disclosure and to provide the other party a reasonable opportunity
to review the proposed disclosure).
Section
8.4. Expenses.
Except
as
expressly set forth in this Agreement, each party to this Agreement shall bear
all of its legal, accounting, investment banking, and other expenses incurred
by
it or on its behalf in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated.
Section
8.5. Entire
Agreement.
This
Agreement, together with the Exhibits and Schedules, constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof,
supersedes and is in full substitution for any and all prior agreements and
understandings among them relating to such subject matter and no party shall
be
liable or bound to the other party hereto in any manner with respect to such
subject matter by any warranties, representations, indemnities, covenants,
or
agreements except as specifically set forth herein. The Exhibits and Schedules
to this Agreement are hereby incorporated and made a part hereof and are an
integral part of this Agreement.
Section
8.6. Descriptive
Headings.
The
descriptive headings of the several sections of this Agreement are inserted
for
convenience only and shall not control or affect the meaning or construction
of
any of the provisions hereof.
Section
8.7. Counterparts.
For
the
convenience of the parties, any number of counterparts of this Agreement may
be
executed by any one or more parties hereto, and each such executed counterpart
shall be, and shall be deemed to be, an original, but all of which shall
constitute, and shall be deemed to constitute, in the aggregate but one and
the
same instrument.
Section
8.8. Governing
Law; Jurisdiction.
(a) This
Agreement and the legal relations between the parties hereto shall be governed
by and construed in accordance with the laws of the State of California
applicable to contracts made and performed therein without regard to principles
of conflicts of law.
15
(b) Any
legal
action or proceeding with respect to this Agreement shall be brought in the
courts of the State of California, and, by execution and delivery of this
Agreement, the parties hereto hereby accept for themselves and in respect of
their property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The parties hereto hereby irrevocably waive any objection, including
any
objection to the laying of venue or based on the grounds of forum non conveniens,
which
any of them may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
Section
8.9. Construction;
Interpretation.
The
parties have negotiated the provisions of this Agreement, and any presumption
that an ambiguity contained in this Agreement shall be construed against the
party that caused this Agreement to be drafted shall not apply to the
interpretation of this Agreement. The language used in this Agreement will
be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party. Any
references to any federal, state, local or foreign statute or law will also
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Unless the context otherwise requires: (a) a term has the
meaning assigned to it by this Agreement; (b) including means “including but not
limited to”; (c) “or” is disjunctive but not exclusive; (d) words in the
singular include the plural, and in the plural include the singular; and (e)
“$”
means the currency of the United States of America.
Section
8.10. Severability.
In
the
event that any one or more of the provisions contained in this Agreement or
in
any other instrument referred to herein, shall, for any reason, be held to
be
invalid, illegal or unenforceable in any respect, then to the maximum extent
permitted by law, such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
Furthermore, in lieu of any such invalid or unenforceable term or provision,
the
parties hereto intend that there shall be added as a part of this Agreement
a
provision as similar in terms to such invalid or unenforceable provision as
may
be possible and be valid and enforceable.
Section
8.11. Specific
Performance.
Without
limiting or waiving in any respect any rights or remedies of the parties under
this Agreement now or hereinafter existing at law or in equity or by statute,
each of the parties hereto shall be entitled to seek specific performance of
the
obligations to be performed by the other in accordance with the provisions
of
this Agreement.
[Remainder
of Page Intentionally Left Blank]
16
IN
WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement
as of the day and year first written above.
|
OWNER
|
|
|
/s/
Xxxxxx Page
|
|
|
XXXXXX
PAGE
|
|
|
OWNER
|
|
|
/s/
Xxxxxx Xxxx
|
|
|
XXXXXX
XXXX
|
|
|
HANDHELD
|
|
|
By:
/s/
Xxxx Oscodar
|
|
|
Name:
Xxxx Oscodar
|
|
|
Title:
President
|
|
17
Schedule
3.3
Assets
& Liabilities
10
razor servers
Dell
equipment - FX 1.6866
Dell
switch
Dell
hardware 3 x 2.8 GHz/2MB Cache, Xeon, 800 MHz
5
x 2.8 GHz servers
2
x MU116 16 cables
Cisco
3560 switch
LEASED
ASSETS
Dell
PC
Steel
storage cabinet
Two
desks
Security
equipment - time lapse video recorder
Security
equipment - wireless video camera
Air
conditioning unit
18
Schedule
3.4
Employees
Xxxxxx
Page - full time paid employee
Contractor
Helena
Page engaged at hourly rate of £6 per hour. Hours worked on an as and when
needed basis. Provides quality control services.
Contractual
Relationships/Obligations
Advertising
contracts with the following
Ad-brite
Banner
Ads
Google
adsense
Focalx
NetVisibility
Revenue
Science
Contractual
Obligations
Razor
Inc - contract for internet and collocation services dated 18 Oct
2006
Media
Mayhem contract
19
Dell
- maintenance contracts
Aurigma
- license for image uploader
OBDTech
Ltd - rental agreement (for those assets listed as leased assets in Schedule
3.3)
Infinity
Micro for Cisco 3560 switch
20
Schedule
3.7
Financial
Statements
21
EXHIBIT
A
Escrow
Agreement
22
EXHIBIT
B
Registration
Rights Agreement
23
EXHIBIT
C
Xxxxxx
Page Services Agreement
24
