ADDITIONAL SECURITIES PURCHASE AGREEMENT
THIS
ADDITIONAL SECURITIES PURCHASE AGREEMENT
(this
“Agreement”),
dated
as of October 31, 2007, by and among HANDHELD
ENTERTAINMENT, INC.,
a
Delaware corporation (the “Company”),
and
the Buyers listed on Schedule I attached hereto (individually, a
“Buyer”
or
collectively “Buyers”).
WITNESSETH
WHEREAS,
the
Company and the Buyer(s) are executing and delivering this Agreement in reliance
upon an exemption from securities registration pursuant to Section 4(2) and/or
Rule 506 of Regulation D (“Regulation
D”)
as
promulgated by the U.S. Securities and Exchange Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “Securities
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, at the closing (the “Closing”)
the
Company shall issue and sell to the Buyer(s), as provided herein, and the
Buyer(s) shall purchase (i) up to an aggregate of Seven Million Four Hundred
Twenty-Five Thousand Dollars ($7,425,000) (the “Purchase
Price”)
of
junior secured convertible debentures in the form attached hereto as
“Exhibit
A”
(the
“Junior
Debentures”),
which
shall be convertible into shares of the Company’s common stock, par value
$0.0001 (the “Common
Stock”)
(as
converted, the “Conversion
Shares”),
in
the respective amounts set forth opposite each Buyer(s) name on Schedule I
(the
“Subscription
Amount”);
and
(ii) warrants substantially in the form attached hereto as “Exhibit
B”
(the
“Warrants”),
to
acquire up to that number of additional shares of Common Stock set forth
opposite such Buyer’s name in column (3) of the Schedule I (as exercised, the
“Warrant
Shares”);
WHEREAS,
contemporaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering a Registration Rights Agreement (the
“Registration
Rights Agreement”)
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated there under,
and applicable state securities laws;
WHEREAS,
the
Junior Debentures are secured by a security interest in all of the assets of
the
Company and of each of the Company's subsidiaries as evidenced by the security
agreement together with the patent, trademark, and copyright security agreement
dated as of the Closing Date (the “Security
Documents”)
;
WHEREAS,
the
Junior Debentures, the Conversion Shares, the Warrants and the Warrants Shares
collectively are referred to herein as the “Securities”).
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Buyer(s) hereby agree as follows:
1. PURCHASE
AND SALE OF JUNIOR DEBENTURES.
(a) Purchase
of Junior Debentures.
Subject
to the satisfaction (or waiver) of the terms and conditions of this Agreement,
each Buyer agrees, severally and not jointly, to purchase at the Closing and
the
Company agrees to sell and issue to each Buyer, severally and not jointly,
at
the Closing, Junior Debentures in amounts corresponding with the Subscription
Amount set forth opposite each Buyer’s name on Schedule I hereto and the
Warrants to acquire up that number of Warrant Shares as set forth opposite
such
Buyer’s name in column (5) on Schedule I .
(b) Closing
Dates.
The
Closing of the purchase and sale of the Junior Debentures and Warrants shall
take place at 10:00 a.m. Eastern Standard Time on the fifth (5th)
business day following the date of satisfaction of the conditions to the Closing
set forth in Sections 6 and 7 below (or such other date as is reasonably
determined by the Company) (the “Closing
Date”).
The
Closings shall occur on the Closing Date at the offices of ▇▇▇▇▇▇ and ▇▇▇▇▇,
LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (or such other place as is reasonably
determined by the Company).
(c) Form
of Payment.
Subject
to the satisfaction of the terms and conditions of this Agreement, on each
Closing Date, (i) the Buyers shall deliver to the Company such aggregate
proceeds for the Junior Debentures and Warrants to be issued and sold to such
Buyer at such Closing, and (ii) the Company shall deliver to each Buyer,
Junior Debentures and Warrants which such Buyer is purchasing at such Closing
in
amounts indicated opposite such Buyer’s name on Schedule I, duly executed on
behalf of the Company.
(d) Stockholders
Approval.
Prior
to the consummation of the Closing, the Company shall use its reasonable best
efforts to call and hold a special meeting of the shareholders, for the purpose
of (i) approving the transactions contemplated herein, and (ii) increasing
the
authorized Common Stock of the Company to obtain any stockholder approval
required by the Primary Market (as defined herein) and which approval will
include at least 30 million shares of Common Stock (such
affirmative
approval being referred to herein as the “Stockholder
Approval”).
The
Buyer’s obligations to purchase the Junior Debentures to be issued in accordance
with this Agreement shall be contingent on the Company obtaining Stockholder
Approval.
2. BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer represents and warrants, severally and not jointly, that:
(a) Investment
Purpose.
Each
Buyer is acquiring the Securities for its own account for investment only and
not with a view towards, or for resale in connection with, the public sale
or
distribution thereof, except pursuant to sales registered or exempted under
the
Securities Act; provided, however, that by making the representations herein,
such Buyer reserves the right to dispose of the Securities at any time in
accordance with or pursuant to an effective registration statement covering
such
Securities or an available exemption under the Securities Act. Such Buyer does
not presently have any agreement or understanding, directly or indirectly,
with
any Person to distribute any of the Securities.
(b) Accredited
Investor Status.
Each
Buyer is an “Accredited
Investor”
as
that
term is defined in Rule 501(a)(3) of Regulation D.
(c) Reliance
on Exemptions.
Each
Buyer understands that the Securities are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying in
part
upon the truth and accuracy of, and such Buyer’s compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the
Securities.
(d) Information.
Each
Buyer and its advisors (and his or, its counsel), if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and information he deemed material to making an informed investment
decision regarding his purchase of the Securities, which have been requested
by
such Buyer. Each Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and its management. Neither such
inquiries nor any other due diligence investigations conducted by such Buyer
or
its advisors, if any, or its representatives shall modify, amend or affect
such
Buyer’s right to rely on the Company’s representations and warranties contained
in Section 3 below. Each Buyer understands that its investment in the Securities
involves a high degree of risk. Each Buyer is in a position regarding the
Company, which, based upon employment, family relationship or economic
bargaining power, enabled and enables such Buyer to obtain information from
the
Company in order to evaluate the merits and risks of this investment. Each
Buyer
has sought such accounting, legal and tax advice, as it has considered necessary
to make an informed investment decision with respect to its acquisition of
the
Securities.
(e) No
Governmental Review.
Each
Buyer understands that no United States federal or state agency or any other
government or governmental agency has passed on or made any recommendation
or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such authorities passed upon or endorsed the merits
of the offering of the Securities.
(f) Transfer
or Resale.
Each
Buyer understands that except as provided in the Registration Rights Agreement:
(i) the Securities have not been and are not being registered under the
Securities Act or any state securities laws, and may not be offered for sale,
sold, assigned or transferred unless (A) subsequently registered thereunder,
(B)
such Buyer shall have delivered to the Company an opinion of counsel, in a
generally acceptable form, to the effect that such Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration requirements, or (C) such Buyer provides the
Company with reasonable assurances (in the form of seller and broker
representation letters) that such Securities can be sold, assigned or
transferred pursuant to Rule 144, Rule 144(k), or Rule 144A promulgated under
the Securities Act, as amended (or a successor rule thereto) (collectively,
“Rule
144”),
in
each case following the applicable holding period set forth therein; (ii) any
sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules
and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register the Securities under the Securities
Act or any state securities laws or to comply with the terms and conditions
of
any exemption thereunder.
(g) Legends.
Each
Buyer agrees to the imprinting, so long as is required by this Section 2(g),
of
a restrictive legend in substantially the following form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW
TOWARD RESALE AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN
OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS.
Certificates
evidencing the Conversion Shares or Warrant Shares shall not contain any legend
(including the legend set forth above), (i) while a registration statement
(including the Registration Statement) covering the resale of such security
is
effective under the Securities Act, (ii) following any sale of such Conversion
Shares or Warrant Shares pursuant to Rule 144, (iii) if such Conversion Shares
or Warrant Shares are eligible for sale under Rule 144(k), or (iv) if such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff
of
the SEC). The Company shall cause its counsel to issue a legal opinion to the
Company’s transfer agent promptly after the effective date (the “Effective
Date”)
of a
Registration Statement if required by the Company’s transfer agent to effect the
removal of the legend hereunder upon satisfaction of the requirements for a
resale registration statement under applicable securities laws (prospectus
delivery and a sellers certification requirements).. If all or any portion
of
the Junior Debentures or Warrants are exercised by a Buyer that is not an
Affiliate of the Company (a “Non-Affiliated
Buyer”)
at a
time when there is an effective registration statement to cover the resale
of
the Conversion Shares or the Warrant Shares, such Conversion Shares or Warrant
Shares shall be issued free of all legends. The Company agrees that following
the Effective Date or at such time as such legend is no longer required under
this Section 2(g), it will, no later than three (3) Trading Days following
the
delivery by a Non-Affiliated Buyer to the Company or the Company’s transfer
agent of a certificate representing Conversion Shares or Warrant Shares, as
the
case may be, issued with a restrictive legend (such third Trading Day, the
“Legend
Removal Date”),
deliver or cause to be delivered to such Non-Affiliated Buyer a certificate
representing such shares that is free from all restrictive and other legends.
The Company may not make any notation on its records or give instructions to
any
transfer agent of the Company that enlarge the restrictions on transfer set
forth in this Section. Each Buyer acknowledges that the Company’s agreement
hereunder to remove all legends from Conversion Shares or Warrant Shares is
not
an affirmative statement or representation that such Conversion Shares or
Warrant Shares are freely tradable. Each Buyer, severally and not jointly with
the other Buyers, agrees that the removal of the restrictive legend from
certificates representing Securities as set forth in this Section 3(g) is
predicated upon the Company’s reliance that the buyer will sell any Securities
pursuant to either the registration requirements of the Securities Act,
including any applicable prospectus delivery requirements, or an exemption
therefrom, and that if Securities are sold pursuant to a Registration Statement,
they will be sold in compliance with the plan of distribution set forth
therein.
(h) Authorization,
Enforcement.
This
Agreement has been duly and validly authorized, executed and delivered on behalf
of such Buyer and is a valid and binding agreement of such Buyer enforceable
in
accordance with its terms, except as such enforceability may be limited by
general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating to,
or
affecting generally, the enforcement of applicable creditors’ rights and
remedies.
(i) Receipt
of Documents.
Each
Buyer and his or its counsel has received and read in their entirety: (i) this
Agreement and each representation, warranty and covenant set forth herein and
the Transaction Documents (as defined herein); (ii) all due diligence and other
information necessary to verify the accuracy and completeness of such
representations, warranties and covenants; (iii) the Company’s Form 10-KSB for
the fiscal year ended December 31, 2006; (iv) the Company’s Form 10-QSB for the
fiscal quarter ended June 30, 2007 and (v) answers to all questions each Buyer
submitted to the Company regarding an investment in the Company; and each Buyer
has relied on the information contained therein and has not been furnished
any
other documents, literature, memorandum or prospectus.
(j) Due
Formation of Corporate and Other Buyers.
If the
Buyer(s) is a corporation, trust, partnership or other entity that is not an
individual person, it has been formed and validly exists and has not been
organized for the specific purpose of purchasing the Securities and is not
prohibited from doing so.
(k) No
Legal Advice From the Company.
Each
Buyer acknowledges, that it had the opportunity to review this Agreement and
the
transactions contemplated by this Agreement with his or its own legal counsel
and investment and tax advisors. Each Buyer is relying solely on such counsel
and advisors and not on any statements or representations of the Company or
any
of its representatives or agents for legal, tax or investment advice with
respect to this investment, the transactions contemplated by this Agreement
or
the securities laws of any jurisdiction.
3. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
Except
as
set forth: (i) under the corresponding section of the Disclosure Schedules;
(ii)
in the executed Asset Purchase Agreement dated as of August 1, 2007 by and
between the Company, EBW Acquisition, Inc. and Ebaum’s World, Inc.(the “Asset
Purchase”)(including the representations and warranties of “Seller” therein set
forth in Article II and Article III and elsewhere therein and in any and all
schedules and exhibits thereto; and/or (iii) in the reports and other filings
of
the Company made with the Securities and Securities and Exchange Commission
(SEC) which are publicly available prior to the Closing Date (the “Filings”)
which shall be deemed a part hereof and qualify any representation or warranty
otherwise made herein (including any schedule or exhibit hereto) and which
Disclosure Schedules shall control over any inconsistent information provided
in
the Asset Purchase documents or the Filings (such Disclosure Schedules, Filings
and Asset Purchase disclosures shall be subject to additions, corrections,
and
deletions prior to the Closing date, provided such revisions shall be reasonably
acceptable to Buyer), to the extent of such disclosure, the Company hereby
makes
the representations and warranties set forth below to each Buyer:
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth on
Schedule
3(a).
The
Company owns, directly or indirectly, all of the capital stock or other equity
interests of each subsidiary free and clear of any liens, and all the issued
and
outstanding shares of capital stock of each subsidiary are validly issued and
are fully paid, non-assessable and free of preemptive and similar rights to
subscribe for or purchase securities.
(b) Organization
and Qualification.
The
Company and its subsidiaries are corporations duly organized and validly
existing in good standing under the laws of the jurisdiction in which they
are
incorporated, and have the requisite corporate power to own their properties
and
to carry on their business as now being conducted. Each of the Company and
its
subsidiaries is duly qualified as a foreign corporation to do business and
is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to be so qualified or be in good standing would not have or
reasonably be expected to result in (i) a material adverse effect on the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business or
condition (financial or otherwise) of the Company and the subsidiaries, taken
as
a whole, or (iii) a material adverse effect on the Company’s ability to perform
in any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”)
and no
proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification..
(c) Authorization,
Enforcement, Compliance with Other Instruments.
(i) The Company has the requisite corporate power and authority to enter
into and perform its obligations under this Agreement, the Junior Debentures,
the Warrants, the Security Documents, the Registration Rights Agreement and
each
of the other agreements entered into by the parties hereto in connection with
the transactions contemplated by this Agreement (collectively the “Transaction
Documents”)
and to
issue the Securities in accordance with the terms hereof and thereof, (ii)
the
execution and delivery of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Securities, the reservation
for issuance and the issuance of the Conversion Shares, and the reservation
for
issuance and the issuance of the Warrant Shares, have been duly authorized
by
the Company’s Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its stockholders, other
than
the Stockholder Approval and such approvals and authorizations which will be
sought by the Company and obtained prior to Closing, (iii) the Transaction
Documents have been duly executed and delivered by the Company, (iv) the
Transaction Documents constitute the valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or
similar laws relating to, or affecting generally, the enforcement of creditors’
rights and remedies. The authorized officer of the Company executing the
Transaction Documents knows of no reason why the Company cannot file the
Registration Statement as required under the Registration Rights Agreement
or
perform any of the Company’s other obligations under the Transaction Documents.
(d) Capitalization.
The
authorized capital stock of the Company consists of 50,000,000 shares of Common
Stock, par value $0.0001 per share, and 1,000,000 shares of Preferred Stock,
par
value $0.0001 per share (“Preferred
Stock”)
of
which 17,596,130 shares of Common Stock and zero shares of Preferred Stock
are
issued and outstanding. All of the outstanding shares of capital stock of the
Company are validly issued, fully paid and nonassessable, have been issued
in
compliance with all federal and state securities laws, and none of such
outstanding shares was issued in violation of any preemptive rights or similar
rights to subscribe for or purchase securities. Except as disclosed in Schedule
3(d): (i) none of the Company's capital stock is subject to preemptive rights
or
any other similar rights or any liens or encumbrances suffered or permitted
by
the Company; (ii) there are no outstanding options, warrants, scrip, rights
to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of
its
subsidiaries is or may become bound to issue additional capital stock of the
Company or any of its subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities or rights convertible into, or exercisable or exchangeable for,
any
capital stock of the Company or any of its subsidiaries (other than pursuant
to
existing option plans of the Company); (iii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other agreements,
documents or instruments evidencing indebtedness of the Company or any of its
subsidiaries or by which the Company or any of its subsidiaries is or may become
bound; (iv) there are no financing statements securing obligations in any
material amounts, either singly or in the aggregate, filed in connection with
the Company or any of its subsidiaries; (v) there are no outstanding securities
or instruments of the Company or any of its subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings or arrangements by which the Company or any of its subsidiaries
is or may become bound to redeem a security of the Company or any of its
subsidiaries; (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance
of
the Securities; (vii) the Company does not have any stock appreciation rights
or
"phantom stock" plans or agreements or any similar plan or agreement; and (viii)
the Company and its subsidiaries have no liabilities or obligations required
to
be disclosed in the SEC Documents but not so disclosed in the SEC Documents,
other than those incurred in the ordinary course of the Company's or its
subsidiaries' respective businesses and which, individually or in the aggregate,
do not or would not have a Material Adverse Effect. The Company has furnished
to
the Buyers true, correct and complete copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the “Certificate
of Incorporation”),
and
the Company's Bylaws, as amended and as in effect on the date hereof (the
“Bylaws”),
and
the terms of all securities convertible into, or exercisable or exchangeable
for, shares of Common Stock and the material rights of the holders thereof
in
respect thereto. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Securities (other than the Stockholder Approval). There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s capital stock to which the Company is a party or, to
the knowledge of the Company, between or among any of the Company’s
stockholders.
(e) Issuance
of Securities.
The
issuance of the Junior Debentures and the Warrants has been duly authorized
and
upon issuance, the Junior Debentures will be free from all taxes, liens and
charges relating to their issuance by the Company. Upon conversion in accordance
with the terms of the Junior Debentures or exercise in accordance with the
Warrants, as the case may be, the Conversion Shares and Warrant Shares,
respectively, when issued will be validly issued, fully paid and nonassessable,
free from all taxes, liens and charges with respect to the issue thereof. The
Company has reserved from its duly authorized capital stock the appropriate
number of shares of Common Stock as set forth in this Agreement.
(f) No
Conflicts.
The
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby
and
thereby (including, without limitation, the issuance of the Junior Debentures
and the Warrants, and reservation for issuance and issuance of the Conversion
Shares and the Warrant Shares) will not (i) result in a violation of any
certificate of incorporation, certificate of formation, any certificate of
designations or other constituent documents of the Company or any of its
subsidiaries, any capital stock of the Company or any of its subsidiaries or
bylaws of the Company or any of its subsidiaries or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) in any respect under, or give to others any rights
of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company or any of its subsidiaries is
a
party which would have a Material Adverse Effect, or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including foreign,
federal and state securities laws and regulations and the rules and regulations
of the Primary Market) applicable to the Company or any of its subsidiaries
or
by which any property or asset of the Company or any of its subsidiaries is
bound or affected; except in the case of each of clauses (ii) and (iii), such
as
could
not, individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.
To the
knowledge of the Company, the business of the Company and its subsidiaries
is
not being conducted, and shall not be conducted in violation of any material
law, ordinance, or regulation of any governmental entity. Assuming the accuracy
of the representations and warranties of Buyer herein, except as specifically
contemplated by this Agreement and as required under the Securities Act and
any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any
court or governmental agency in order for it to execute, deliver or perform
any
of its obligations under or contemplated by this Agreement or the Registration
Rights Agreement in accordance with the terms hereof or thereof. Except for
the
Stockholder Approval, all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof. The
Company and its subsidiaries are unaware of any facts or circumstance, which
might give rise to any of the foregoing.
(g) SEC
Documents; Financial Statements.
The
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC under the Securities Exchange Act of
1934, as amended (the “Exchange
Act”),
since
February 11, 2006 (or such shorter period as the Company was required by law
or
regulation to file such material) (all of the foregoing filed prior to the
date
hereof or amended after the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents incorporated by
reference therein, being hereinafter referred to as the “SEC
Documents”)
on
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Document prior to the expiration of any such extension.
The
Company has delivered to the Buyers or their representatives, or made available
through the SEC’s website at ▇▇▇▇://▇▇▇.▇▇▇.▇▇▇., true and complete copies of
the SEC Documents. As of their respective dates, the SEC Documents complied
in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with
the
SEC, contained any untrue statement of a material fact or omitted to state
a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the financial statements
of
the Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have
been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in
all
material respects the financial position of the Company as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). No other information provided by or on behalf of the Company
to
the Buyers which is not included in the SEC Documents, including, without
limitation, information referred to in Section 2(i) of this Agreement, contains
any untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made and not misleading.
(h) Intentionally
Omitted.
(i) Absence
of Litigation.
There
is no action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
against or affecting the Company, the Common Stock or any of the Company’s
subsidiaries, wherein an unfavorable decision, ruling or finding would (i)
have
a Material Adverse Effect.
(j) Acknowledgment
Regarding Buyer’s Purchase of the Junior Debentures.
The
Company acknowledges and agrees that each Buyer is acting solely in the capacity
of an arm’s length purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company further acknowledges that each Buyer is not
acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by each Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to such Buyer’s purchase of the
Securities. The Company further represents to each Buyer that the Company’s
decision to enter into this Agreement has been based solely on the independent
evaluation by the Company and its representatives.
(k) No
General Solicitation.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the Securities Act) in connection
with
the offer or sale of the Securities.
(l) No
Integrated Offering.
Neither
the Company, nor any of its affiliates, nor any person acting on its or their
behalf has, directly or indirectly, made any offers or sales of any security
or
solicited any offers to buy any security, under circumstances that would require
registration of the Securities under the Securities Act or cause this offering
of the Securities to be integrated with prior offerings by the Company for
purposes of the Securities Act.
(m) Employee
Relations.
Neither
the Company nor any of its subsidiaries is involved in any labor dispute or,
to
the knowledge of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company’s or its subsidiaries’ employees is a member of
a union and the Company and its subsidiaries believe that their relations with
their employees are good.
(n) Intellectual
Property Rights.
To the
knowledge of Company, the Company and its subsidiaries own or possess adequate
rights or licenses to use all trademarks, trade names, service marks, service
▇▇▇▇ registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets
and
rights necessary to conduct their respective businesses as now conducted. The
Company and its subsidiaries do not have any knowledge of any infringement
by
the Company or its subsidiaries of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
▇▇▇▇ registrations, trade secret or other similar rights of others, and, to
the
knowledge of the Company there is no claim, action or proceeding being made
or
brought against, or to the Company’s knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names, service marks, service
▇▇▇▇ registrations, trade secret or other infringement; and the Company and
its
subsidiaries are unaware of any facts or circumstances which might give rise
to
any of the foregoing.
(o) Environmental
Laws.
To the
knowledge of Company, the Company and its subsidiaries are (i) in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental
Laws”),
(ii)
have received all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and (iii)
are in compliance with all terms and conditions of any such permit, license
or
approval.
(p) Title.
All
real property and facilities held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use
made
and proposed to be made of such property and buildings by the Company and its
subsidiaries.
(q) Insurance.
The
Company and each of its subsidiaries is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as
management of the Company believes to be prudent and customary in the businesses
in which the Company and its subsidiaries are engaged. Neither the Company
nor
any such subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as
may
be necessary to continue its business at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its subsidiaries, taken as a
whole.
(r) Regulatory
Permits.
The
Company and its subsidiaries possess all material certificates, authorizations
and permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit.
(s) Internal
Accounting Controls.
The
Company and each of its subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and
to
maintain asset accountability, and (iii) the recorded amounts for assets are
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
(t) No
Material Adverse Breaches, etc.
Neither
the Company nor any of its subsidiaries is subject to any charter, corporate
or
other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company’s officers has or is expected in the future
to have a Material Adverse Effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company or its
subsidiaries. Neither the Company nor any of its subsidiaries is in breach
of
any contract or agreement which breach, in the judgment of the Company’s
officers, has or is expected to have a Material Adverse Effect on the business,
properties, operations, financial condition, results of operations or prospects
of the Company or its subsidiaries.
(u) Tax
Status.
The
Company and each of its subsidiaries has made and filed all federal and state
income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject and (unless and only to the extent that
the
Company and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) has
paid
all taxes and other governmental assessments and charges that are material
in
amount, shown or determined to be due on such returns, reports and declarations,
except those being contested in good faith and has set aside on its books
provision reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis
for any such claim.
(v) Certain
Transactions.
Except
for arm’s length transactions pursuant to which the Company makes payments in
the ordinary course of business upon terms no less favorable than the Company
could obtain from third parties and other than the grant of stock options
disclosed in the SEC Documents, none of the officers, directors, or employees
of
the Company is presently a party to any transaction with the Company (other
than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to
or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to
the
knowledge of the Company, any corporation, partnership, trust or other entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner.
(w) Fees
and Rights of First Refusal.
The
Company is not obligated to offer the securities offered hereunder on a right
of
first refusal basis or otherwise to any third parties including, but not limited
to, current or former shareholders of the Company, underwriters, brokers, agents
or other third parties.
(x) Investment
Company.
The
Company is not, and is not an affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(y) Registration
Rights.
Other
than each of the Buyers, no Person has any right to cause the Company to effect
the registration under the Securities Act of any securities of the Company.
There are no outstanding registration statements not yet declared effective
and
there are no outstanding comment letters requiring response by the Company
from
the SEC or any other regulatory agency.
(z) Private
Placement.
Assuming the accuracy of the Buyers’ representations and warranties set forth in
Section 2, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Buyers as contemplated hereby.
Upon the receipt of Stockholder Approval and any waiting period required for
the
effectiveness of such approval under Section 14 of the Exchange Act the issuance
and sale of the Securities hereunder does not contravene the rules and
regulations of the Primary Market.
(aa) Listing
and Maintenance Requirements.
The
Company’s Common Stock is registered pursuant to Section 12(b) or 12(g) of the
Exchange Act, and the Company has taken no action designed to terminate, or
which to its knowledge is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act nor has the Company
received any notification that the SEC is contemplating terminating such
registration. The Company has not, in the twelve (12) months preceding the
date
hereof, received notice from the Primary Market on which the Common Stock is
or
has been listed or quoted to the effect that the Company is not in compliance
with the listing or maintenance requirements of such Primary Market. The Company
is, and has no reason to believe that it will not in the foreseeable future
continue to be, in compliance with all such listing and maintenance
requirements. The Company intends to voluntarily delist its securities from
the
Boston Stock Exchange.
(bb) Manipulation
of Price.
The Company has not, and to its knowledge no one acting on its behalf has,
(i)
taken, directly or indirectly, any action designed to cause or to result in
the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Securities, (ii) sold, bid for,
purchased, or, paid any compensation for soliciting purchases of, any of the
Securities, or (iii) paid or agreed to pay to any Person any compensation for
soliciting another to purchase any other securities of the Company, other than,
in the case of clauses (ii) and (iii), compensation paid to the Company’s
placement agents in connection with the placement of the
Securities.
(cc) Dilutive
Effect.
The
Company understands and acknowledges that the number of Conversion Shares
issuable upon conversion of the Junior Debentures and the Warrant Shares
issuable upon exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Junior Debentures in accordance with this Agreement
and
the Junior Debentures and its obligation to issue the Warrant Shares upon
exercise of the Warrants in accordance with this Agreement and the Warrants,
in
each case, is absolute and unconditional regardless of the dilutive effect
that
such issuance may have on the ownership interests of other stockholders of
the
Company.
4. COVENANTS.
(a) Best
Efforts.
Each
party shall use its best efforts to timely satisfy each of the conditions to
be
satisfied by it as provided in Sections 6 and 7 of this Agreement.
(b) Form
D.
The
Company agrees to file a Form D with respect to the Securities as required
under
Regulation D and to provide a copy thereof to each Buyer promptly after such
filing. The Company shall, on or before the Closing Date, take such action
as
the Company shall reasonably determine is necessary to qualify the Securities,
or obtain an exemption for the Securities for sale to the Buyers at the Closing
pursuant to this Agreement under applicable securities or “Blue Sky” laws of the
states of the United States, and shall provide evidence of any such action
so
taken to the Buyers on or prior to the Closing Date.
(c) Reporting
Status.
Until
the earlier of (i) the date as of which the Buyer(s) may sell all of the
Securities without restriction pursuant to Rule 144(k) promulgated under the
Securities Act (or successor thereto), or (ii) the date on which (A) the Buyers
shall have sold all the Securities and (B) none of the Junior Debentures or
Warrants are outstanding (the “Registration
Period”),
the
Company shall file in a timely manner all reports required to be filed with
the
SEC pursuant to the Exchange Act and the regulations of the SEC thereunder,
and
the Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would otherwise permit such termination.
(d) Use
of
Proceeds.
The
Company will use the proceeds from the sale of the Junior Debentures for
acquisitions, fees, costs and expenses of the transactions contemplated and
general corporate and working capital purposes.
(e) Reservation
of Shares.
Prior
to Closing, the Company shall reserve for issuance to a maximum of 6,000,000
shares of Common Stock for issuance upon conversions of the Convertible Dentures
and exercise of the Warrants (the “Share
Reserve”).
The
Company represents that it will have as of the Closing Date sufficient
authorized and unissued shares of Common Stock available to create the Share
Reserve after considering all other commitments that may require the issuance
of
Common Stock. The Company shall take all action reasonably necessary to at
all
times have authorized, and reserved for the purpose of issuance the Share
Reserve (as adjusted for stock splits, recapitalizations, and similar events)
and in the event that the number of shares of Common Stock remaining in the
Share Reserve shall at any time be less than 1,000,000 (as may be
proportionately adjusted for stock splits, stock dividends, recapitalizations
and similar events affecting the rights of shareholders generally) the Company
shall immediately take all action reasonably necessary to at all times have
authorized, and reserve for the purpose of issuance, not less than the initial
amount required to be set aside as the Share Reserve as of the date of this
Agreement, including, without limitation, promptly (within 45 days) seeking
stockholder approval for such increase in the number of authorized shares so
that the appropriate number of shares may be set aside in the Share Reserve,
if
required.
(f) Listings
or Quotation.
The
Company’s Common Stock shall be listed or quoted for trading on any of (a) the
American Stock Exchange, (b) New York Stock Exchange, (c) the NASDAQ Global
Market, (d) the NASDAQ Capital Market, or (e) the NASDAQ OTC Bulletin Board
(“OTCBB”)
(each,
a “Primary
Market”).
The
Company shall promptly secure the listing of all of the Registrable Securities
(as defined in the Registration Rights Agreement) upon each national securities
exchange and automated quotation system, if any, upon which the Common Stock
is
then listed (subject to official notice of issuance) and shall maintain such
listing of all Registrable Securities from time to time issuable under the
terms
of the Transaction Documents.
(g) Fees
and Expenses.
Each of
the Company and the Buyer(s) shall pay all costs and expenses incurred by such
party in connection with the negotiation, investigation, preparation, execution
and delivery of the Transaction Documents.
(h) Corporate
Existence.
So long
as any of the Junior Debentures remain outstanding, the Company shall not
directly or indirectly consummate any merger, reorganization, restructuring,
reverse stock split consolidation, sale of all or substantially all of the
Company’s assets or any similar transaction or related transactions (each such
transaction, an “Organizational
Change”)
unless, prior to the consummation an Organizational Change, the Company obtains
the written consent of each Buyer. In any such case, the Company will make
appropriate provision with respect to such holders’ rights and interests to
insure that the provisions of this Section 4(h) will thereafter be applicable
to
the Junior Debentures.
(i) Transactions
With Affiliates.
So long
as any Junior Debentures are outstanding, the Company shall not, and shall
cause
each of its subsidiaries not to, enter into, amend, modify or supplement, or
permit any subsidiary to enter into, amend, modify or supplement any agreement,
transaction, commitment, or arrangement with any of its or any subsidiary’s
officers, directors, person who were officers or directors at any time during
the previous two (2) years, stockholders who beneficially own five percent
(5%)
or more of the Common Stock, or Affiliates (as defined below) or with any
individual related by blood, marriage, or adoption to any such individual or
with any entity in which any such entity or individual owns a five percent
(5%)
or more beneficial interest (each a “Related
Party”),
except for (a) customary employment arrangements and benefit programs on
reasonable terms, (b) any investment in the Company or an Affiliate of the
Company, (c) any agreement, transaction, commitment, or arrangement on an
arms-length basis on terms no less favorable than terms which would have been
obtainable from a person other than such Related Party, (d) any agreement,
transaction, commitment, or arrangement which is approved by a majority of
the
disinterested directors of the Company; for purposes hereof, any director who
is
also an officer of the Company or any subsidiary of the Company shall not be
a
disinterested director with respect to any such agreement, transaction,
commitment, or arrangement or approved by the shareholders of the Company or
otherwise satisfies the rules and regulations of the Primary Market.
“Affiliate”
for
purposes hereof means, with respect to any person or entity, another person
or
entity that, directly or indirectly, (i) has a ten percent (10%) or more equity
interest in that person or entity, (ii) has ten percent (10%) or more common
ownership with that person or entity, (iii) controls that person or entity,
or
(iv) shares common control with that person or entity. “Control”
or
“controls”
for
purposes hereof means that a person or entity has the power, direct or indirect,
to conduct or govern the policies of another person or entity.
(j) Transfer
Agent.
The
Company covenants and agrees that, in the event that the Company’s agency
relationship with the transfer agent should be terminated for any reason prior
to a date which is two (2) years after the Closing Date, the Company shall
immediately appoint a new transfer agent.
(k) Neither
any Buyer(s) nor its affiliates have an open short position in the Common Stock
of the Company, and each Buyer agrees that it shall not, and that it will cause
its affiliates not to, engage in any short sales of or hedging transactions
with
respect to the Common Stock as long as any Junior Debentures or Warrants shall
remain outstanding.
5. [RESERVED.]
6. CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL.
The
obligation of the Company hereunder to issue and sell the Junior Debentures
to
the Buyer(s) at the Closing is subject to the satisfaction, at or before the
Closing Dates, of each of the following conditions, provided that these
conditions are for the Company’s sole benefit and may be waived by the Company
at any time in its sole discretion:
(a) Each
Buyer shall have executed the Transaction Documents and delivered them to the
Company.
(b) The
Buyer(s) shall have delivered to the Company the Purchase Price for the Junior
Debentures in the respective amounts as set forth next to each Buyer as set
forth on Schedule I attached hereto, minus any fees to be paid directly from
the
proceeds the Closings as set forth herein, by wire transfer of immediately
available U.S. funds pursuant to the wire instructions provided by the
Company.
(c) The
representations and warranties of the Buyer(s) shall be true and correct in
all
material respects as of the date when made and as of the Closing Dates as though
made at that time (except for representations and warranties that speak as
of a
specific date), and the Buyer(s) shall have performed, satisfied and complied
in
all material respects with the covenants, agreements and conditions required
by
this Agreement to be performed, satisfied or complied with by the Buyer(s)
at or
prior to the Closing Dates.
(d) The
Company shall have obtained Stockholder Approval and all conditions for the
closing of the Asset Purchase shall have been met and the closing of the Asset
Purchase shall occur simultaneously with the Closing.
(e) The
Company, each Buyer, eBaum’s World, Inc. and YA Global Investments, L.P. shall
have entered into a Secondary Subordination Agreement in substantially the
form
attached hereto as Exhibit
C
(the
“Secondary
Subordination Agreement”).
7. CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE.
The
obligation of the Buyer(s) hereunder to purchase the Junior Debentures at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions:
(a) The
Company shall have executed the Transaction Documents and delivered the same
to
the Buyers.
(b) The
Common Stock shall be authorized for quotation or trading on the Primary Market,
trading in the Common Stock shall not have been suspended for any reason, and
all the Conversion Shares issuable upon the conversion of the Junior Debentures
shall be approved for listing or trading on the Primary Market.
(c) The
representations and warranties of the Company shall be true and correct in
all
material respects (except to the extent that any of such representations and
warranties is already qualified as to materiality in Section 3 above, in which
case, such representations and warranties shall be true and correct without
further qualification) as of the date when made and as of the Closing Date
as
though made at that time (except for representations and warranties that speak
as of a specific date) and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company at or prior to the Closing Date
(d) The
Company shall have executed and delivered to the Buyer the Junior Debentures
and
Warrants in the respective amounts set forth opposite each Buyer’s name on
Schedule I attached hereto.
(e) The
Company shall have provided to the Buyers a true copy of a certificate of good
standing evidencing the formation and good standing of the Company from the
secretary of state (or comparable office) from the jurisdiction in which the
Company is incorporated, as of a date within 10 days of the Closing
Date.
(f) The
Company shall have delivered to the Buyers a certificate, executed by the
Secretary of the Company and dated as of the Closing Date, as to (i) the
resolutions consistent with Section 3(c) as adopted by the Company's Board
of
Directors in a form reasonably acceptable to such Buyer, (ii) the Certificate
of
Incorporation and (iii) the Bylaws, each as in effect at the
Closing.
(g) The
Buyers, the Company, and all of the Company’s subsidiaries shall have executed
and delivered the Security Documents in a form reasonably satisfactory to the
Buyers providing the Buyers with a security interest in all the assets of the
Company and its subsidiaries (including all assets purchased pursuant to the
Asset Purchase), including, without limitation, all registered domain names,
intellectual property, patents, and trademarks, which security interest shall
be
expressly subordinate to security interests of YA Global Investments, L.P.
and
eBaum’s World, Inc., as provided in the Secondary Subordination Agreement.
(h) The
Company shall have obtained Stockholder Approval.
(i) The
Company shall have created the Share Reserve.
(j) There
shall not have been a Material Adverse Change to the Company, to any of its
subsidiaries, or to Ebaum’s World, Inc.
8. INDEMNIFICATION.
In
consideration of the Buyer’s execution and delivery of this Agreement and
acquiring the Junior Debentures and the Conversion Shares hereunder, and in
addition to all of the Company’s other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless the Buyer(s) and
each
other holder of the Junior Debentures and the Conversion Shares, and all of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by
this Agreement) (collectively, the “Buyer
Indemnitees”)
from
and against any and all actions, causes of action, suits, claims, losses, costs,
penalties, fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Buyer Indemnitee is a party to the action
for
which indemnification hereunder is sought), and including reasonable attorneys’
fees and disbursements (the “Indemnified
Liabilities”),
incurred by the Buyer Indemnitees or any of them solely as a result of (a)
any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement, the Junior Debentures or the other Transaction
Documents or any other certificate, instrument or document contemplated hereby
or thereby, or (b) any breach of any covenant, agreement or obligation of the
Company contained in this Agreement, or the other Transaction Documents or
any
other certificate, instrument or document contemplated hereby or thereby. To
the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment
and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
(a) In
consideration of the Company’s execution and delivery of this Agreement, and in
addition to all of the Buyer’s other obligations under this Agreement, the Buyer
shall defend, protect, indemnify and hold harmless the Company and all of its
officers, directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this Agreement)
(collectively, the “Company
Indemnitees”)
from
and against any and all Indemnified Liabilities incurred by the Indemnitees
or
any of them as a result of (a) any misrepresentation or breach of any
representation or warranty made by the Buyer(s) in this Agreement, instrument
or
document contemplated hereby or thereby executed by the Buyer or (b) any breach
of any covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby executed by the Buyer. To the extent
that the foregoing undertaking by each Buyer may be unenforceable for any
reason, each Buyer shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is permissible under
applicable law.
9. GOVERNING
LAW: MISCELLANEOUS.
(a) Governing
Law.
This
Agreement shall be governed by and interpreted in accordance with the internal
laws of the State of New York without regard to the principles of conflict
of
laws. The parties further agree that any action between them shall be heard
in
▇▇▇▇▇▇ County, New Jersey, and expressly consent to the jurisdiction and venue
of the Superior Court of New Jersey, sitting in ▇▇▇▇▇▇ County and the United
States District Court for the District of New Jersey sitting in Newark, New
Jersey for the adjudication of any civil action asserted pursuant to this
Paragraph.
(b) Counterparts.
This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other
party.
(c) Headings.
The
headings of this Agreement are for convenience of reference and shall not form
part of, or affect the interpretation of, this Agreement.
(d) Severability.
If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the
validity or enforceability of any provision of this Agreement in any other
jurisdiction.
(e) Entire
Agreement, Amendments.
This
Agreement supersedes all other prior oral or written agreements between the
Buyer(s), the Company, their affiliates and persons acting on their behalf
with
respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor any Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision
of
this Agreement or any of the other Transaction Documents may be waived or
amended other than by an instrument in writing signed by the Company and the
Required Percentage, which waiver or amendment shall upon approval by the
Required Percentage be binding upon all Debenture holders regardless of whether
they have consented. For the purposes hereof, the Required Percentage shall
mean
at the time of such amendment or waiver not less than fifty-one (51%) percent
of
the outstanding principal amount of Debentures including for any amendment
or
waiver under any of the Transaction Documents.
(f) Notices.
Any
notices, consents, waivers, or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered (i) upon receipt, when delivered personally; (ii) upon
confirmation of receipt, when sent by facsimile; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv) one (1)
day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same. The addresses and
facsimile numbers for such communications shall be:
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to the Company, to:
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Handheld
Entertainment, Inc.
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Attention:
▇▇▇▇▇▇▇ Oscodar
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Telephone: (▇▇▇)
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Facsimile: (▇▇▇)
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With
a copy to:
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and ▇▇▇▇▇, LLP
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▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
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Telephone: (▇▇▇)
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Facsimile: (▇▇▇)
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If
to any
Buyer, to its address or facsimile number set forth on Schedule I, with copies
to the Buyer’s counsel as set forth on Schedule I, if any. Each party shall
provide five (5) days’ prior written notice to the other party of any change in
address or facsimile number.
(g) Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and assigns. Neither the Company nor any Buyer
shall
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) No
Third Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other person.
(i) Survival.
Unless
this Agreement is terminated under Section 9(l), the representations and
warranties of the Company and the Buyer(s) contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9, and the
indemnification provisions set forth in Section 8, shall survive the Closing
for
a period of two (2) years following the date hereof. The Buyer(s) shall be
responsible only for its own representations, warranties, agreements and
covenants hereunder.
(j) Publicity.
The
Company shall have the right to approve, before issuance any press release
or
any other public statement with respect to the transactions contemplated hereby
made by any Buyer.
(k) Further
Assurances.
Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated hereby.
(l) Termination.
In the
event that the Closing shall not have occurred with respect to the Buyers on
or
before November 30, 2007, unless extended by the parties, due to the Company’s
or the Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7
above (and the non-breaching party’s failure to waive such unsatisfied
condition(s)), the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business on
such
date without liability of any party to any other party.
(m) Brokerage.
The
Company represents that no broker, agent, finder or other party has been
retained by it in connection with the transactions contemplated hereby and
that
no other fee or commission has been agreed by the Company to be paid by Buyer
for or on account of the transactions contemplated hereby.
(n) No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties to express their mutual intent, and no rules of strict construction
will
be applied against any party.
[REMAINDER
PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
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COMPANY:
HANDHELD
ENTERTAINMENT, INC.
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| By: | /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ | |
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Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇
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Title: Chief
Financial Officer
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BUYER’S
COUNTERPART SIGNATURE PAGE
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Securities Purchase Agreement to be duly executed as of the date first written
above.
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If
an entity:
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By:
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Name:
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Its:
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If
an individual:
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Name:
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