YOURDAILYMEDIA.COM
ASSET PURCHASE AGREEMENT
BY & BETWEEN
HANDHELD ENTERTAINMENT, INC.,
A DELAWARE CORPORATION
AND
SCOTT JOHN PAUL WORSNOP,
AN INDIVIDUAL
DATED AS OF DECEMBER 15, 2006
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT") is entered into as of
December 15, 2006 by and between HANDHELD ENTERTAINMENT, INC., a
Delaware
corporation ("HANDHELD") and Scott John Paul Worsnop, an individual
("MR.
WORSNOP").
RECITALS
WHEREAS, Mr. Worsnop owns one hundred percent (100%) of the assets
and
business interests (subject to Section 3.4(c)) ("INTEREST")
relating to
Yourdailymedia.com ("YOURDAILYMEDIA" or "BUSINESS"); and
WHEREAS, HandHeld desires to purchase the Interest from Mr.
Worsnop,
and Mr. Worsnop desires 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. [RESERVED]
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 Mr.
Worsnop, and Mr.
Worsnop shall sell, transfer, assign, convey and deliver to
HandHeld, the
Interest.
SECTION 2.2. PURCHASE PRICE.
(a) The purchase price (the "PURCHASE PRICE") for the Interest
shall
consist of the following:
(i) $200,000 United States Dollars ("USD") (the "CASH
CONSIDERATION"), less the Escrow Amount which will be deposited at
the
Closing into Escrow pursuant to the terms of the Escrow Agreement,
attached as EXHIBIT A, (the "ESCROW AGREEMENT"). The Cash
Consideration (less the Escrow
2
Amount) shall be due and payable to Mr. Worsnop on January 2, 2007
via
wire transfer or as otherwise directed by Mr. Worsnop;
(ii) $60,000 USD payable in 12 equal monthly installments of
$5,000 USD (each a "MONTHLY PAYMENT"). The first Monthly Payment
shall
be due and payable January 1, 2007 and each remaining Monthly
Payment
shall be due and payable on the first day of each calendar month
thereafter; and
(iii) A five (5)-year, convertible promissory note in favor of
Mr. Worsnop in the amount of $800,000 USD, in the form attached as
EXHIBIT B hereto, given by HandHeld (the "PROMISSORY NOTE") at the
Closing. The Promissory Note shall be convertible on the terms
provided in the Promissory Note.
SECTION 2.3. NONDISCLOSURE; NONCOMPETITION; NON-SOLICITATION.
(a) Except as required by the law of any jurisdiction or pursuant
to
any ongoing employment or consultancy or other agreement between
Mr.
Worsnop and HandHeld, from and for a period of five (5) years after
the
Closing Date, Mr. Worsnop 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 the Business
(including,
without limitation, customer lists, supplier lists and pricing and
marketing arrangements with customers or suppliers) and Mr. Worsnop
shall
cooperate reasonably with HandHeld in preserving such proprietary,
confidential or secret aspects of HandHeld and the Business.
(b) From and after the Closing Date and except as pursuant to any
ongoing employment or consultancy or other agreement between Mr.
Worsnop
and HandHeld, for a period of two (2) years from the Closing Date,
Mr.
Worsnop 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 humor.
(c) HandHeld hereby acknowledges and agrees that Mr. Worsnop shall
continue to own and operate one or more separate businesses and/or
related
websites (as applicable), as listed on Schedule 2.3(c) to this
Agreement
("SEPARATE BUSINESSES") and shall continue to own all inventions,
creations, revenues, profits, or other benefits generated by the
Separate
Businesses. In addition, and notwithstanding anything to the
contrary in
this Agreement, or the Services Agreement (as defined in Section
4.2 of
this Agreement), or as would otherwise be provided by applicable
State or
Federal law, HandHeld waives any right to claim any incidence of
franchise,
sharing or other right to revenues, profits, or other benefits,
whether
created or generated by Mr. Worsnop or by any Separate Business.
Moreover,
HandHeld waives any right to claim any incidence of ownership to
any
intellectual property created or generated by Mr. Worsnop by any
Separate
Business, except such as directly relates to the intellectual
property
acquired by HandHeld pursuant to this Agreement (e.g., intellectual
property of the Business, including any trademark with respect to
"Yourdailymedia.com" (for the avoidance of
3
doubt Mr. Worsnop does not own any such registered trademarks), the
domain
name "yourdailymedia.com" and any intellectual property residing on
the
server which Mr. Worsnop shall transfer to HandHeld at the
Closing).
(d) Mr. Worsnop 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 (other than general site sponsors and/or advertisers and
server
providers) of HandHeld or the Business or make known the names and
addresses of such customers or suppliers or any information
relating in any
manner to HandHeld or the Business or HandHeld's or the Business'
relationships with such customers or suppliers. Mr. Worsnop agrees
that a
violation of this Section may 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
Mr. Worsnop from doing or continuing to do any such violation and
any other
violations or threatened violations of this Section.
(e) Mr. Worsnop acknowledges and agrees 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 assets
and the
Business 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.
WARRANTIES OF MR. WORSNOP
Mr. Worsnop warrants to HandHeld as set forth in this Article III:
SECTION 3.1. AUTHORITY OF MR. WORSNOP
(a) Mr. Worsnop has full power and authority to execute and deliver
this Agreement and related documents.
4
SECTION 3.2. ASSETS AND LIABILITIES OF YOURDAILYMEDIA.
As of the date hereof, the only assets and liabilities of
Yourdailymedia are those listed on Schedule 3.2 hereof.
SECTION 3.3 EMPLOYEES/CONTRACTORS OF YOURDAILYMEDIA.
As of the date hereof and except as set forth in Schedule 3.3
hereto,
Yourdailymedia has no, and prior to the Closing will have no
employees,
contractual relationships or other obligations, other than this
Agreement.
SECTION 3.4 STATUS OF ASSETS.
(a) As of the date hereof and at the Closing, no person or entity
other than Mr. Worsnop has any interest in or claim to any of the
assets
listed in Schedule 3.2.
(b) As of the date hereof, neither the execution and delivery of
this
Agreement (and related documents) nor the consummation or
performance of
any of the transactions contemplated thereby will, directly or
indirectly
(with or without notice or lapse of time) contravene, conflict
with, or
result in a violation or breach of any provision of, or give any
person the
right to declare a default or exercise any remedy under, or to
accelerate
the maturity or performance of, or to cancel, terminate, or modify
any
material agreement to which Mr. Worsnop is a party.
(c) As of the date hereof, and subject to Section 3.4(d) below,
Mr.Worsnop is the true and lawful owner of the Interest, holds
good,
absolute and marketable title in and to all of the Interest, and
has full
power and authority to sell and convey the same, in each case free
and
clear of all encumbrances.
(d) HandHeld acknowledges and agrees that Mr. Worsnop does not
warrant
any right(s) to user-submitted content which has or may appear on
www.yourdailymedia.com. Mr. Worsnop warrants to HandHeld that, as
of the
date of the Closing, Mr. Worsnop has not received any unresolved
notice of
claim against him relating to a third party's alleged rights in
user-submitted content appearing on www.yourdailymedia.com. For the
avoidance of doubt, any user-submitted content which appears on
www.yourdailymedia.com is (and has historically been) deleted from
the site
as soon as reasonably practicable following receipt by Mr. Worsnop
of any
notice relating to a third party's alleged rights in any such
user-submitted content.
SECTION 3.5 TRAFFIC STATISTICS REPORTS.
The yourdailymedia.com website traffic statistic reports provided
to
HandHeld by Mr. Worsnop are, to the best knowledge of Mr.
Worsnop's, reasonably
true and correct representations of actual results realized for the
periods
covered by such reports, as reported by industry standard website
traffic
reporting services and Yourdailymedia's internal traffic statistics
program.
5
ARTICLE IV.
CONDITIONS TO MR. WORSNOP'S OBLIGATIONS
The obligation of Mr. Worsnop to consummate the transactions
contemplated by this Agreement is subject to the satisfaction
(unless waived in
writing by Mr. Worsnop) 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 Mr. Worsnop this
Agreement, the Escrow Agreement, the Promissory Note, and the
Registration
Rights Agreement in the form attached hereto as EXHIBIT C (the
"REGISTRATION
RIGHTS AGREEMENT").
SECTION 4.2. INDEPENDENT CONTRACTOR SERVICES
HandHeld shall have agreed to engage Mr. Worsnop on substantially
the
terms set forth in the Independent Contractor Services Agreement
attached hereto
as EXHIBIT D (the "SERVICES AGREEMENT").
SECTION 4.3. OPINION OF COUNSEL.
Mr. Worsnop shall have received an opinion of Niesar Curls Bartling
&
Whyte LLP, counsel to HandHeld, substantially in the form attached
hereto as
EXHIBIT E ("PURCHASER'S OPINION OF COUNSEL").
SECTION 4.4 CORPORATE DOCUMENTS.
Mr. Worsnop shall have received from HandHeld certified copies of
its
charter documents, a certificate of good standing from the
jurisdiction in which
it is incorporated and written consents from the Board of Directors
of HandHeld
and the shareholders of HandHeld (where required by law) approving
the execution
and delivery of this Agreement (and related documents) and the
consummation of
the transactions contemplated hereby and thereby, and such
resolu
