HANDHELD ENTERTAINMENT, INC. STOCK ISSUANCE AGREEMENT
Exhibit
4.8
This
Stock Issuance Agreement (this “Agreement”)
is
entered into as of the __day of _____, 200__ by and between HandHeld
Entertainment, Inc., a Delaware corporation (the “Company”)
and
________ (the “Purchaser”).
1. Issuance
and Sale of Common Stock.
Subject
to the terms hereof, the Company will issue and sell to the Purchaser and the
Purchaser will buy from the Company _________ shares of the Common Stock of
the
Company (the “Shares”)
at a
per share price of ____________, representing an aggregate purchase price for
the Shares of ____________________. The Purchaser will pay the purchase price
in
the form of Purchaser’s agreement to enter into an employment or consulting
relationship with the Company. For clarification, Purchaser is not purchasing
the Shares in the form of future services to be rendered to the Company, but
rather in the form of Purchaser’s agreement to enter into an employment or
consulting relationship whereby such services are to be provided.
2. Automatic
Forfeiture.
In the
event of a voluntary or involuntary termination of Purchaser’s employment or
consulting relationship with the Company for any reason (including death or
disability), with or without cause, Purchaser shall forfeit (“Automatic
Forfeiture”),
upon
the date of such termination (the “Termination
Date”),
all
or any portion of the Shares held by Purchaser as of the Termination Date which
have not yet been released from the Automatic Forfeiture.
2.1 Exercise
of Automatic Forfeiture.
The
Automatic Forfeiture shall be effectuated automatically without notice
immediately following the Termination Date. Immediately upon the Termination
Date, the Company shall become the legal and beneficial owner of the Shares
being forfeited and all rights and interest therein or related thereto, and
the
Company shall have the right to transfer to its own name the number of Shares
being forfeited by Purchaser, without further action by Purchaser.
2.2 Release
from Automatic Forfeiture.
One
hundred percent (100%) of the Shares shall initially be subject to the Automatic
Forfeiture. For the first ____ months following the Lapse Commencement Date
(as
set forth on the signature page of this Agreement), _____% of the Shares
initially subject to the Automatic Forfeiture shall be released from the
Automatic Forfeiture on each monthly anniversary of the Lapse Commencement
Date.
Thereafter, ____% of the Shares initially subject to the Automatic Forfeiture
shall be released from the Automatic Forfeiture on each monthly anniversary
of
the Lapse Commencement Date until all Shares are released from the Automatic
Forfeiture. Fractional shares shall be rounded to the nearest whole
share.
3.
Escrow
of Shares Subject to Automatic Forfeiture.
For
purposes of facilitating the enforcement of the provisions of Section 2
above, Purchaser agrees, immediately upon receipt of the certificate(s) for
the
Shares subject to the Automatic Forfeiture, to deliver such certificate(s),
together with an Assignment Separate from Certificate in the form attached
to
this Agreement as Exhibit A
executed
by Purchaser, in blank, to the Secretary of the Company, or the Secretary’s
designee, to hold such certificate(s) and Assignment Separate from Certificate
in escrow and to take all such actions and to effectuate all such transfers
and/or releases as are in accordance with the terms of this Agreement. Purchaser
hereby acknowledges that the Secretary of the Company, or the Secretary’s
designee, is so appointed as the escrow holder with the foregoing authorities
as
a material inducement to make this Agreement and that said appointment is
coupled with an interest and is accordingly irrevocable. Purchaser agrees that
said escrow holder shall not be liable to any party hereof (or to any other
party). The escrow holder may rely upon any letter, notice or other document
executed by any signature purported to be genuine and may resign at any time.
Purchaser agrees that if the Secretary of the Company, or the Secretary’s
designee, resigns as escrow holder for any or no reason, the Board of Directors
of the Company shall have the power to appoint a successor to serve as escrow
holder pursuant to the terms of this Agreement.
4.
Section
83(b) Election.
Purchaser understands that Section 83(a) of the Internal Revenue Code of
1986, as amended (the “Code”),
taxes
as ordinary income the difference between the amount paid for the Shares and
the
fair market value of the Shares as of the date any restrictions on the Shares
lapse. In this context, “restriction”
means
the forfeiture of the Shares pursuant to the Automatic Forfeiture set forth
in
Section 2 of this Agreement. Purchaser understands that Purchaser may elect
to be taxed at the time the Automatic Forfeiture is imposed, rather than when
and as the Automatic Forfeiture lapses, by filing an election under
Section 83(b) (an “83(b)
Election”)
of the
Code with the Internal Revenue Service within thirty (30) days from the date
of
receipt of the certificate(s) for the Shares. Purchaser understands that failure
to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser further understands that an additional
copy of such election form should be filed with his or her federal income tax
return for the calendar year in which Purchaser receives the certificate(s)
for
the Shares. Purchaser acknowledges that the foregoing is only a summary of
the
effect of United States federal income taxation with respect to purchase of
the
Shares hereunder, and does not purport to be complete. Purchaser further
acknowledges that the Company has directed Purchaser to seek independent advice
regarding the applicable provisions of the Code, the income tax laws of any
municipality, state or foreign country in which Purchaser may reside, and the
tax consequences of Purchaser’s death. Purchaser agrees that he or she will
execute and deliver to the Company with this executed Agreement a copy of the
Acknowledgment and Statement of Decision Regarding Section 83(b) Election (the
“Acknowledgment”),
attached hereto as Exhibit B.
5.
Representations
and Warranties.
Purchaser, by offering to purchase the Shares, (a) hereby represents and
warrants to the Company that all information provided by Purchaser herewith
is
true and correct and (b) hereby represents and warrants to the Company as
follows:
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5.1 Investment.
Purchaser is acquiring the Shares for investment for Purchaser’s own account,
not as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof in violation of applicable securities laws.
Purchaser understands that such Shares have not been, and will not be,
registered under the Securities Act of 1933, as amended (the “Securities
Act”),
by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature
of
the investment intent and the accuracy of such Purchaser’s representation as
expressed herein.
5.2 Rule
144.
Purchaser acknowledges that the Shares must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things, except as otherwise permitted under
Rule 144(k), if applicable, (a) the availability of certain current public
information about the Company; (b) the resale occurring not less than one year
after a party has purchased and fully paid for the shares to be sold; (c) the
sale being effected through a “broker’s transaction” or in transaction directly
with a “market maker” (as provided by Rule 144 (f)); and (d) the number of
shares being sold during any three-month period not exceeding specified
limitations.
5.3 No
Public Market.
Purchaser understands that no public market now exists for any of the Shares
issued by the Company and that there is no assurance that a public market will
ever exist for the Shares.
5.4 Access
to Data.
Purchaser has requested and received from the Company all the information
Purchaser considers necessary or appropriate for deciding whether to purchase
the Shares. Purchaser has had an opportunity to ask questions of and receive
answers from management of the Company concerning the Company, the Company’s
business and financial affairs and the Purchaser’s purchase of Shares hereunder.
Purchaser has had such questions answered to Purchaser’s satisfaction. Purchaser
understands that any information contained in any written documentation or
made
by management during discussions with the Company were intended to describe
the
aspects of the Company’s business and prospects but such information does not
necessarily provide a thorough or exhaustive description.
5.5 Brokers
or Finders.
There
are no arrangements or claims for brokerage or finders’ fees or agents’
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby based on any arrangement or Agreement known
to
Purchaser. Purchaser will pay, and hold the Company and each other Purchaser
harmless against, any liability, loss or expense (including reasonable attorneys
fees and out-of-pocket expenses) arising in connection with any such
claim.
5.6 No
Reliance on Third Parties.
In
purchasing the Shares, Purchaser is not relying upon any representation or
assurance from any person.
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5.7 Risk
of Investment.
Purchaser understands the risks inherent in new ventures and the risks
associated with unproven technologies such as those of the Company, and
Purchaser has experience in investing in such ventures. Purchaser can bear
the
entire loss of Purchaser’s investment in the Company.
5.8 Sophisticated
Investor.
Purchaser, either alone or with Purchaser’s representative(s), has such
knowledge and experience in financial and business matters that Purchaser is
capable of evaluating the merits and risks of this investment or has a
preexisting personal or business relationship with the Company or any of its
partners, officers, directors or controlling persons. Purchaser has such
business and financial experience as is required to give him or her the capacity
to protect Purchaser’s own interests in connection with the purchase of the
Shares.
6.
Miscellaneous.
6.1 Governing
Law.
This
Agreement will be governed and construed in all respects in accordance with
the
laws of the State of California without regard to conflict of laws
principles.
6.2 Successors
and Assigns.
Except
as otherwise provided herein, the provisions hereof will inure to the benefit
of
and be binding upon the successors, assigns, heirs, executors and administrators
of the parties hereto; provided,
however,
that
the rights of the Purchaser to purchase the Shares will not be assignable
without the prior written consent of the Company.
6.3 Entire
Agreement; Amendment.
This
Agreement between the Company and the Purchaser constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof, and supersedes all prior agreement and discussion
between the parties. No party will be liable or bound to any other party in
any
manner by any warranties, representations or covenants except as specifically
set forth herein. Except as expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated other
than
by a written instrument signed by the party against whom enforcement of any
such
amendment, waiver, discharge or termination is sought.
6.4 Notices,
etc.
All
notices and other communications required or permitted hereunder will be in
writing and will be mailed by registered or certified mail, postage prepaid,
or
otherwise delivered by hand or by messenger, addressed (a) if to the Purchaser,
at the Purchaser’s address set forth on the signature page hereof, or at such
other address as the Purchaser will have furnished to the Company in writing,
or
(b) if to the Company, one copy should be sent to its address set forth on
the
signature page hereof addressed to the attention of the Board of Directors,
or
at such other address as the Company will have furnished to the Purchaser in
writing. Each such notice or other communication will for all purposes of this
Agreement be treated as effective or having been given when delivered if
delivered personally, or, if sent by mail, at the earlier of its receipt or
five
days after the same as been deposited in a regularly-maintained receptacle
for
the deposit of the United States mail, addressed and mailed as
aforesaid.
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6.5 California
Corporate Securities Law.
THE
SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA
AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102, OR
25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
6.6 Legends.
The
Purchaser understands that the Company will cause the legend set forth below
or
a legend substantially equivalent thereto to be placed upon the certificate(s)
for the Shares, together with any other legends that may be required by the
Company or by state or federal securities laws:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND
NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF
1933, AS AMENDED. SUCH SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
THERETO UNDER SUCH ACT UNLESS SOLD PURSUANT TO RULE 144 OF SUCH ACT OR UNLESS
THE SALE IS OTHERWISE EXEMPT FROM REGISTRATION. THE COMPANY MAY REQUEST A
WRITTEN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE ACCEPTABLE TO THE
COMPANY, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH
ANY
SUCH SALE. THIS CERTIFICATE MUST BE SURRENDERED TO THE COMPANY OR ITS TRANSFER
AGENT AS A CONDITION PRECEDENT TO THE SALE, PLEDGE OR OTHER TRANSFER OF ANY
INTEREST IN ANY OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE.
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN ADDITIONAL
RESTRICTIONS CONTAINED IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER,
A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
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6.7 Expenses.
The
Company and the Purchaser will bear their own expenses incurred on their behalf
with respect to this Agreement and the transactions contemplated
hereby.
6.8 Severability.
In the
event that any provision of this Agreement becomes or is declared by a court
of
competent jurisdiction to be illegal, unenforceable, or void, this Agreement
will continue in full force and effect without such provision; provided,
however,
that no
such severability will be effective if it materially changes the economic
benefit of this Agreement to any party.
6.9 Transfers
in Violation of Agreement.
The
Company will not be required (a) to transfer on its books any Shares that the
Purchaser purports to sell or transfer in violation of any of the provisions
set
forth in this Agreement, or (b) to treat as owner of such Shares, to accord
the
right to vote as such owner, or to pay dividends to, any person to whom such
Shares were purportedly transferred.
6.10 Counterparts.
This
Agreement may be executed in counterparts, each of which will be enforceable
against the parties actually executing such counterparts, and which together
will constitute one instrument.
IN
WITNESS WHEREOF, the Company and the Purchaser have executed this Agreement
as
of the day and year first above written.
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Address:
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PURCHASER:
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By:
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EXHIBIT
A
ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR
VALUE
RECEIVED and pursuant to that certain Stock Issuance Agreement between the
undersigned (“Purchaser”)
and
HandHeld Entertainment, Inc., a California corporation (the “Company”)
dated
_______________ (the “Agreement”),
Purchaser hereby sells, assigns and transfers unto the Company
_____________________ (________) shares of the Common Stock of the Company
standing in Purchaser’s name on the Company’s books and represented by
Certificate No. _____, and does hereby irrevocably constitute and appoint
______________________ to transfer said stock on the books of the Company with
full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED
AS
AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated:
______________________
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Signature:
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Instruction:
Please do not fill in any blanks other than the signature
line.
The
purpose of this assignment is to enable the Company to effectuate the Automatic
Forfeiture provision set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
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EXHIBIT
B
ACKNOWLEDGMENT
AND STATEMENT OF DECISION
REGARDING
SECTION 83(b) ELECTION
The
undersigned has entered into that certain Stock Issuance Agreement with HandHeld
Entertainment, Inc., a California corporation (the “Company”)
dated
____________ (the “Agreement”),
pursuant to which an automatic forfeiture provision has been created with regard
to 4,500 shares of Common Stock of the Company owned by the undersigned (the
“Shares”).
In
connection with the Agreement, the undersigned hereby represents as
follows:
1. The
undersigned has carefully reviewed the Agreement.
2. The
undersigned either [check and complete as applicable]:
(a)
___
has consulted, and has been fully advised by, the undersigned’s own tax advisor,
__________________________, whose business address is
_____________________________, regarding the federal, state and local tax
consequences of purchasing the Shares and of the automatic forfeiture provision,
and particularly regarding the advisability of making elections pursuant to
Section 83(b) of the Internal Revenue Code of 1986, as amended (the
“Code”)
and
pursuant to the corresponding provisions, if any, of applicable state law;
or
(b)
___
has knowingly chosen not to consult such a tax advisor.
3. The
undersigned hereby states that the undersigned has decided [check as
applicable]:
(a)
___
to make an election pursuant to Section 83(b) of the Code; or
(b)
___
not to make an election pursuant to Section 83(b) of the Code.
4. Neither
the Company nor any subsidiary or representative of the Company has made any
warranty or representation to the undersigned with respect to the tax
consequences of the undersigned’s purchase of the Shares or of the tax
consequences of the automatic forfeiture provision, or of the making or failure
to make an election pursuant to Section 83(b) of the Code or the corresponding
provisions, if any, of applicable state law.
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Date:
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