ASSETPURCHASE AGREEMENT

 

ThisAsset Purchase Agreement ("Agreement") is entered into as of the 2ndday of July, 2004, by and between FoneFriend, Inc., a Delaware corporation("Seller") and YAP International, Inc., a Nevada corporation("Purchaser").

 

RECITALS:

 

WHEREAS,Seller has entered into a certain Technology License Agreement, dated April 30,2001, with FoneFriend Systems, Inc., a District of Columbia corporation ("FSI"),whereby FSI granted Seller a license to utilize FSI's patented technology (Voiceover Internet Telephony, patent attached), which Seller intended to use tocommercialize an Internet Telephony product known as the "FoneFriend";and

 

WHEREAS,Seller has recently entered into an agreement with a third party to acquire asubstantial volume of customers and supporting infrastructure that uses atechnology which is not compatible with the "FoneFriend"; and

 

WHEREAS,Seller desires to divest itself of certain assets related to its intendedbusiness of commercializing the "FoneFriend" product and services (the"Purchased Assets"); and

 

WHEREAS,Purchaser desires to purchase from Seller, and Seller desire to sell toPurchaser, all of Seller' right, title and interest in and to certain of thetangible and intangible assets of Seller relating to or used in connection withthe Purchased Assets, together with the goodwill associated with such assets,all as more fully described below, on the terms and conditions set forth herein;and

 

WHEREAS,the Boards of Directors of Seller and Purchaser believe that this asset purchaseis in the best interests of their respective companies and shareholders and infurtherance thereof have approved and recommended this Asset Purchase Agreement.

 

NOW,THEREFORE, in consideration of the foregoing Recitals and mutual promisescontained herein, and for other good and valuable consideration, the receipt andsufficiency of which is hereby acknowledged, the parties hereby agree asfollows:

 

ARTICLEI

PURCHASEAND SALE OF ASSETS

1.1 PurchasedAssets.

 

Subjectto, and upon the terms and conditions contained herein, at the Closing (ashereinafter defined) Seller shall sell, transfer, assign, convey and deliver toPurchaser, and Purchaser shall purchase, accept and acquire from Seller, all ofSeller' right, title and interest in and to all of the tangible and intangibleassets of Seller relating to or used in connection with the Purchased Assets,other than the Excluded Assets (as hereinafter defined), wherever such assetsare located, and whether or not in the possession of Seller, any of itssuppliers or sales agents, together with the goodwill of such businessassociated with the Purchased Assets, in each case free and clear of allencumbrances other than the Assumed Liabilities (as hereinafter defined). Thepurchase and sale of the Purchased Assets shall be evidenced by an Assignmentand Bill of Sale in the form of Exhibit "A", attached hereto andincorporated as a part of this Agreement, which shall be executed by the partiesat Closing. A detailed listing of the Purchased Assets is set forth n theSchedules affixed to Exhibit "A", and includes:

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(a) *AssignedContract*. All of Seller' right, title and interest in and to thatcertain Technology License Agreement with FSI ("Assigned Contract"), acopy of which is attached as Schedule 1 of Exhibit "A"; and

 

(b) *IntangibleAssets And Goodwill*. Other tangible and intangible property of Sellerused in connection with or relating to the Purchased Assets, as set forth andmore fully described in Schedule 2 of Exhibit "A", including, withoutlimitation, the goodwill of the Purchased Assets as a going concern, inventoryof FoneFriend "beta" devices, Internet servers and related equipmentand software.

 

1.2 ExcludedAssets.

 

Notwithstandinganything contained in this Agreement to the contrary, except as listed in theSchedules affixed to Exhibit "A", the Purchaser and the Selleracknowledge and agree that Purchaser is not buying, and Seller is not selling,any other assets of the Seller of any nature whatsoever, including, withoutlimitation, all other assets owned by Seller, regardless of whether or not theymay be deemed to be related to, or used in connection with the Purchased Assets(collectively, the "Excluded Assets"), and, without limitation, suchExcluded Assets shall include the following:

 

(a) Allrights under this Agreement and to the Purchase Price;

 

(b) Anyshares of capital stock of, or other equity interests in, Seller or anysubsidiary of Seller;

 

(c)Seller's corporate seal, minute books, record books, and such other books andrecords as pertaining to the organization, existence or ownership of Seller;

 

(d) Anyfinancial or personnel records related to the Purchased Assets which arerequired by law to be retained by Seller.

 

1.3 Assumptionof Certain Liabilities.

 

On theClosing Date, Purchaser shall assume and agree to undertake to pay, perform anddischarge as and when due, and shall indemnify Seller for and hold Sellerharmless from and against each of the following obligations, responsibilities,liabilities and debts (collectively, the "Assumed Liabilities"):

 

(a) Allobligations, responsibilities and liabilities incurred on and after the ClosingDate in connection with the performance by Purchaser of the Assigned Contracts;

 

(b) Allobligations, responsibilities and liabilities arising on and after the ClosingDate from Purchaser's use, ownership, possession, sale or operation of thePurchased Assets; and

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1.4 *ExcludedLiabilities*. Except for the Assumed Liabilities assumed by Purchaserunder Section 1.3, above, the purchase by Purchaser of the Purchased Assetsshall be free and clear of all liens, claims and encumbrances of any kind andnature, and without any assumption by Purchaser of any debts, obligations orliabilities whatsoever of Seller or any other persons who at any time may havebeen in possession of the Purchased Assets, whether such liabilities are actualor contingent, known or unknown, liquidated or unliquidated, whether existingtax liabilities, liabilities to creditors or otherwise (the "ExcludedAssets").

 

ARTICLEII

CONSIDERATION;CLOSING

 

2.1 PurchasePrice; Allocation.

 

(a) *PurchasePrice*. The consideration to be paid to Seller for the Purchased Assetsat the Closing shall be five million (5,000,000) shares of the Purchaser'scommon stock (the "Purchase Price"), subject to restrictions underRule 144 of the Securities Act of 1933, which Purchaser shall pay at theClosing. Further, upon the written instructions of Seller, Purchaser herebyagrees to deliver said Purchase Price in the form of certificates registered inthe names of the Seller's existing shareholders of record as of the ClosingDate.

 

(b) *Allocationof Purchase Price*. Seller and Purchaser agree to allocate the PurchasePrice in accordance with Section 1060 of the Internal Revenue Code of 1986, asamended (the "Code"). No later than 10 days following the ClosingDate, Purchaser shall prepare and provide to Seller a draft allocation of theaggregate purchase price among the Purchased Assets (the "AllocationStatement"), such Allocation Statement to be prepared in accordance withthe methodology set forth in the Code. Seller shall notify Purchaser within 20days of receipt of such draft Allocation Statement of any objections that Sellermay have thereto. Seller and Purchaser agree to resolve any disagreement withrespect to such Allocation Statement in good faith. In addition, Seller andPurchaser hereby undertake and agree to file timely any information that may berequired to be filed pursuant to any treasury regulations promulgated underSection 1060(b) of the Code, and shall use the allocation determined pursuant tothis Section 2.1(b) in connection with the preparation of IRS Form 8594 (and anysupplemental filings required in connection therewith) as such form relates tothe transactions contemplated by this Agreement. Neither Seller nor Purchasershall file any tax return or other document or otherwise take any position fortax purposes that is inconsistent with the allocation determined pursuant tothis Section 2.1(b) except as may be adjusted by subsequent agreement followingan audit by the Internal Revenue Service or by court decision.

 

2.2 TimeAnd Place.

 

Thetransactions provided for by this Agreement shall be consummated (the"Closing") by telephone, fax and email, on July 2, 2004, or such otherdate and/or method as may be agreed upon by the parties hereto. The date andtime of Closing is hereinafter sometimes called the "Closing Date."The Closing shall commence at 10:00 a.m., Pacidic Time, on the Closing Date andproceed promptly to conclusion.

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2.3 Deliveriesby Seller.

 

Sellershall deliver to Purchaser at the Closing the following:

 

(a) anAssignment and Bill of Sale for the Purchased Assets in the form attached heretoas Exhibit "A"; and

 

(b) anAcknowledgement and Consent relating to the Assigned Contract in the formattached hereto as Exhibit "B", which may be required or appropriateto vest and confirm in Purchaser good and marketable title to the AssignedContract; and

 

(c)copies, certified as of the Closing Date by the Secretary of the Seller, of themajority consent of shareholders, or appropriate resolution of the Board ofDirectors of Seller, authorizing the execution, delivery and performance of thisAgreement and the documents to be executed by Seller hereunder referred to inthis Section 2.3 by Seller; and

 

(d)possession of all items of tangible personal property included among thePurchased Assets, wherever located.

 

 

2.4 DeliveriesBy Purchaser.

 

Purchasershall deliver to Seller at the Closing the following:

 

(a) acopy, certified by the Secretary of Purchaser, of the majority consent ofshareholders, or appropriate resolution of the Board of Directors of Purchaser,authorizing the execution, delivery and performance of this Agreement and thedocuments to be executed by Purchaser hereunder;

 

(b) anoriginal stock certificate representing five million (5,000,000) shares of thecommon stock of YAP International, Inc., issued in the name of FoneFriend, Inc.

2.5 Taxes.

 

Purchasershall be solely responsible for any sales, use and/or transfer taxes arisingfrom or in connection with the sale of the Purchased Assets hereunder.

 

ARTICLEIII

REPRESENTATIONSAND WARRANTIES OF SELLER

 

As amaterial inducement to Purchaser to enter into this Agreement and purchase thePurchased Assets, Seller hereby represents and warrants to Purchaser that:

3.1 CorporateStatus.

 

Selleris a corporation duly organized and subsisting under Delaware law and has fullpower and authority to own its properties and to carry on the business aspresently conducted by it. Seller is duly qualified to do business and is ingood standing in all other jurisdictions where the conduct of its business sorequires, except where the failure to be so qualified and in good standing wouldnot be reasonably likely to have a material adverse effect on the PurchasedAssets. Seller has the power and authority to own and dispose of the PurchasedAssets and to carry on its business as now being conducted.

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3.2 CorporateAuthority; Effective Agreement.

 

Sellerhas full corporate power and authority to execute and deliver this Agreement, toperform its obligations under this Agreement and any and all other agreements,documents or instruments to be executed and/or delivered in connection herewith(collectively, the "Purchase Documents") and to consummate thetransactions contemplated herein and therein. This Agreement has been dulyexecuted and delivered by Seller and, assuming it constitutes a valid andbinding obligation of Purchaser, is a valid and binding obligation of Sellerenforceable against Seller in accordance with its terms. The Purchase Documents,when executed by Seller, will, assuming they constitute a valid and bindingobligation of the other parties thereto, constitute the valid and bindingobligation of Seller, enforceable against each of them in accordance with theirrespective terms.

 

3.3 Brokersor Finders.

 

Noagent, broker, person or firm acting on behalf of Seller or any of itsaffiliates is, or will be, entitled to any commission, broker's or finder's feesfrom any party, or from any affiliate of any party, in connection with any ofthe transactions contemplated by this Agreement.

 

3.4 NoClaims Or Litigation.

 

Exceptas disclosed, there are no suits, actions, claims, proceedings (including,without limitation, arbitral and administrative proceedings) or governmentalinvestigations pending or, to the knowledge of Seller, threatened against orcontemplated against the Seller (or any of its affiliates, including directors,officers, employees or agents) relating to or affecting, directly or indirectly,the Purchased Assets except as disclosed in the Seller's reports and otherfilings with the Securities and Exchange Commission ("SEC Filings").There are no such suits, actions, proceedings, claims or investigations pendingor, to the knowledge of Seller, threatened challenging the validity or proprietyof, or otherwise involving, this Agreement or the transactions contemplatedhereby. There is no judgment, order, injunction, decree or award issued by anycourt, arbitrator, governmental body or agency thereof to which any of theSeller is a party and which would materially affect the Purchased Assets or bywhich any of the Purchased Assets are bound, which is unsatisfied or whichrequires continuing compliance therewith by the Seller except as disclosed bySeller in its SEC Filings.

 

3.5 PurchasedAssets.

 

Sellerhas good and valid title to, and is the absolute owner of, all of the PurchasedAssets being sold to Purchaser hereunder, free and clear of all liens andencumbrances. To Seller's knowledge, all such Purchased Assets are in goodoperating condition and repair, normal wear and tear excepted, and the AssignedContract is in good standing and not in default.

 

3.6 Consents.

 

Exceptas set forth in Exhibit "B", no notices, consents, approvals,licenses, permits or waivers are required to execute and deliver this Agreementand to consummate the transactions provided for herein, including the transferof the Purchased Assets to Purchaser hereby.

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3.7 Disclosure.

 

Norepresentation and warranty of Seller contained in this Agreement (including,without limitation, the Schedules hereto), nor any other statement, schedule,certificate or other document delivered or to be delivered by Seller toPurchaser pursuant hereto or in connection with the transactions contemplated bythis Agreement, contains or will contain any untrue statement of a material factor omits or will omit to state a material fact necessary in order to make thestatements made herein or therein, in the light of the circumstances in whichthey were made, not misleading.

 

3.8 Reliance.

 

Theforegoing representations and warranties are made in conjunction with Seller'sSEC Filings with the knowledge and expectation that Purchaser, after conductingits thorough investigation of Seller as described in Section 4.6, is placingcomplete reliance thereon in entering into, and performing its obligations underthis Agreement, and the same shall not be affected in any respect whatsoever bythe consummation of the transactions contemplated hereby or otherwise.

 

3.9 Survivalof Representations and Warranties.

 

Therepresentations, warranties and agreements of Seller set forth in this Agreementor in any Exhibit attached hereto shall be true, correct, complete and accurateas of the Closing Date.

 

ARTICLEIV

REPRESENTATIONSAND WARRANTIES OF PURCHASER

 

Purchaserhereby represents and warrants to Seller that:

 

4.1 CorporateStatus.

 

Purchaseris a corporation duly organized and subsisting under Nevada law and has fullpower and authority to own its properties and to carry on the business presentlyconducted by it.

 

4.2 CorporateAuthority; Effective Agreement.

 

TheBoard of Directors of Purchaser has duly authorized and approved the executionand delivery of this Agreement and the performance of the transactions providedfor herein. No other corporate action is required in connection herewith. ThisAgreement constitutes a legal, valid and binding obligation of Purchaser and isenforceable against Purchaser in accordance with its terms.

 

4.3 Brokersor Finders.

 

Noagent, broker, person or firm action on behalf of Purchaser or any of itsaffiliates is, or will be, entitled to any commission, broker's or finder's feesfrom any party, or from any affiliate of any party, in connection with any ofthe transactions contemplated by this Agreement.

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4.4 NoClaims Or Litigation.

 

Exceptas disclosed, there are no suits, actions, claims, proceedings (including,without limitation, arbitral and administrative proceedings) or governmentalinvestigations pending or, to the best of Purchaser's knowledge, threatenedagainst or contemplated against the Purchaser (or any of its affiliates,including directors, officers, employees or agents) relating to or affecting,directly or indirectly, the Purchased Assets or the intended business ofPurchaser that will utilize the Purchased Assets. There are no such suits,actions, proceedings, claims or investigations pending or, to the knowledge ofPurchaser, threatened challenging the validity or propriety of, or otherwiseinvolving, this Agreement or the transactions contemplated hereby. There is nojudgment, order, injunction, decree or award issued by any court, arbitrator,governmental body or agency thereof to which the Purchaser is a party and whichwould materially affect the Purchased Assets acquired hereunder.

 

4.5 Disclosure.

 

Norepresentation and warranty of Purchaser contained in this Agreement (including,without limitation, the Schedules hereto), nor any other statement, schedule,certificate or other document delivered or to be delivered by Purchaser toSeller pursuant hereto or in connection with the transactions contemplated bythis Agreement, contains or will contain any untrue statement of a material factor omits or will omit to state a material fact necessary in order to make thestatements made herein or therein, in the light of the circumstances in whichthey were made, not misleading.

 

4.6 Purchaser'sInvestigation of Seller.

 

Purchaserrepresents and warrants to, and covenants with, the Seller that: (i) Purchaseris knowledgeable, sophisticated and experienced in making, and is qualified tomake decisions with respect to the purchase of the Purchased Assets hereunder.Purchaser has requested, received, reviewed and considered all information itdeems relevant in making an informed decision to acquire the Purchased Assets,including discussions with Seller's management and the review by Purchaser'scounsel and/or management of all disclosures, reports and other statements bythe Seller in its filings with the Securities and Exchange Commission. Purchaserhas, in connection with its decision to acquire the Purchased Assets herein,relied solely upon its own investigation of the Seller's books and recordsrelated to the Purchased Assets, including its review of the Seller's SECFilings, and is not relying solely on discussions with Seller's managementconducted prior to Closing, or the representations and warranties set forthherein.

 

4.7 Reliance.

 

Theforegoing representations and warranties are made by Purchaser with theknowledge and expectation that Seller is placing complete reliance thereon inentering into, and performing its obligations under, this Agreement, and thesame shall not be affected in any respect whatsoever by any investigationheretofore conducted by or on behalf of Seller whether in contemplation of thisAgreement or otherwise.

 

4.8 Survivalof Representations and Warranties.

 

Therepresentations, warranties and agreements of Purchaser as set forth in thisAgreement or in any Exhibit attached hereto are made as of the date of thisAgreement and shall be true, correct and accurate on and as of the Closing Date.

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ARTICLEV

CONDUCTOF BUSINESS PENDING CLOSING

 

5.1 Conductof Business Pending Closing.

 

Selleragrees that between the date hereof and the Closing Date, Seller shall:

 

(a)Conduct its business in a good and diligent manner in the ordinary and usualcourse of its business;

 

(b) Notenter into any contract, agreement, commitment or other arrangement with anyparty, other than contracts in the ordinary course of its business, and notamend or modify, in any material respect, or terminate any Assigned Contract,without the prior written consent of Purchaser;

 

(c) Usereasonable efforts to preserve its business organization intact, to keepavailable the service of its employees and to preserve its relationships withcustomers, suppliers and others with whom it deals;

 

(d)Comply in all material respects with all provisions of applicable laws, rulesand regulations; and

 

ARTICLEVI

FURTHERCOVENANTS AND AGREEMENTS

 

6.1 ConsummationOf Agreement.

 

Each ofthe parties agrees to perform its obligations hereunder and to use itsreasonable best efforts to cause the consummation of the transactionscontemplated by this Agreement in accordance with, and subject to, the terms andconditions of this Agreement.

 

6.2 Accessto Information; Confidentiality.

 

Subjectto existing confidentiality obligations of and between Purchaser and Seller,Seller shall give to Purchaser and its Agents reasonable access to itsfacilities, the Purchased Assets and all of Seller's documents, books andrecords relating to its current and past operations of its business, and shallpermit Purchaser and its Agents to make copies thereof, and Seller shall permitPurchaser to interview Seller's employees during reasonable business hours andupon reasonable prior written notice.

 

6.3 Cooperation.

 

(a)Purchaser and Seller agree to execute and deliver all other instruments and takeall such other actions as either party may reasonably request from time to time,before or after Closing and without payment of further consideration, toeffectuate the transactions provided herein and to confer to the parties heretothe benefits intended by such transactions. The parties shall cooperate fullywith each other and with their respective counsel and accountants in connectionwith any steps required to be taken as part of their respective obligationsunder this Agreement.

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(b)Purchaser agrees that following Closing, it shall provide to Seller informationrelating to the Purchased Assets and/or Seller's business which Sellerreasonably requires to prepare any tax returns, information returns or reportsrequired to be filed by Seller with governmental agencies.

 

6.4 AccessAfter Closing.

 

(a)Purchaser and Seller agree to retain all accounting (including, withoutlimitation, accountants' work papers), business, financial and Tax records intheir possession (i) relating to the Purchased Assets in existence on theClosing Date and either sold to Purchaser hereunder or retained by Sellerthereafter, as the case may be, or (ii) coming into existence after the ClosingDate which relate to the Purchased Assets for pre-Closing periods, in each casefor a period of three years from the Closing Date, provided that, after suchdate, each party shall make reasonable arrangements for the other party'scontinued access to such records. In addition, from and after the Closing Date,Purchaser and Seller agree that, subject to receiving appropriate assurances ofconfidentiality and restrictions on use, they will not unreasonably withholdaccess by the other party and its attorneys, accountants and otherrepresentatives (after reasonable notice and during normal business hours), tosuch personnel, books, records and documents relating to the Purchased Assets asthe other party may reasonably deem necessary to properly prepare for, file,prove, answer, prosecute and/or defend any financial statements, tax return,filing, audit, judicial or administrative proceeding, protest, claim, suit,inquiry or other proceeding.

 

(b) Theparty requesting assistance hereunder shall pay to the party whose assistance isrequested the reasonable costs of the party providing such assistance.

 

6.5 PostClosing Covenant of Seller. If the effectiveness or validity of the transferof the Assigned Contract, or any portion thereof, is challenged by any action atlaw or in equity, or otherwise deemed to be null and void, rescinded orineffective for any reason whatsoever at any time following the Closing, Sellerhereby covenants that it shall immediately grant Purchaser a sub-license toutilize the "FoneFriend" technology, in accordance with the terms ofits technology license from FSI, with full and unencumbered rights that areidentical in nature to those possessed by the Seller on the Date of Closing.Seller agrees that Purchaser shall be entitled to injunctive relief from anycourt of competent jurisdiction to enforce Seller's covenant contained in thisSection 6.5.

 

ARTICLEVII

CONDITIONSTO OBLIGATIONS OF PURCHASER

 

Theobligations of Purchaser to consummate the transactions contemplated by thisAgreement are subject to the satisfaction, on or prior to the Closing Date, ofeach of the following conditions, any or all of which Purchaser may waive inwriting:

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7.1 Representationsand Warranties.

 

Therepresentations and warranties of Seller set forth in this Agreement and anyExhibit hereto, as further qualified by reference to Seller's SEC Filings, shallbe true and correct in all material respects as of the Closing Date.

 

7.2 Performanceof Agreements.

 

Sellershall have performed and complied in all material respects with all of itscovenants and agreements contained in this Agreement which are required to beperformed or complied with on or prior to the Closing Date.

 

7.3 NoActions.

 

Noaction, suit, proceeding or investigation by or before any court, administrativeagency or other governmental authority shall have been instituted or threatened,the effect of which would restrain, prohibit or invalidate the transactionscontemplated by this Agreement or affect the right of Purchaser to own orcontrol, after the Closing, the Purchased Assets.

 

7.4 Consents.

 

TheSeller shall have received all required consents, if any, of any third partiesnecessary to consummate the transactions provided for in this Agreement

 

7.5 DueDiligence Audit.

 

Purchasershall have completed its due diligence investigation of the Purchased Assets andSeller's business, including Seller's SEC Filings, and the results of suchinvestigation shall be reasonably satisfactory to Purchaser.

 

7.6 Deliveries.

 

Alldocuments required to be delivered by Seller at or prior to Closing shall havebeen delivered to Purchaser at Closing.

 

ARTICLEVIII

CONDITIONSTO OBLIGATIONS OF SELLER

 

Theobligations of Seller to consummate the transactions contemplated by thisAgreement are subject to the satisfaction, on or prior to the Closing Date, ofeach of the following conditions, any or all of which Seller may waive inwriting:

 

8.1 Representationsand Warranties.

Each ofthe representations and warranties of Purchaser set forth in this Agreement andany Exhibit hereto shall be true and correct in all material respects on and asof the Closing Date.

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8.2 Performanceof Agreements.

 

Purchasershall have performed and complied in all material respects with all of itscovenants and agreements contained in this Agreement which are required to beperformed or complied with on or prior to the Closing Date.

 

8.3 NoActions.
 

Noaction, suit, proceeding or investigation by or before any court, administrativeagency or other governmental authority shall have been instituted or threatened,the effect of which would restrain, prohibit or invalidate the transactionscontemplated by this Agreement.

 

8.4 Deliveries.

 

Alldocuments required to be delivered by Purchaser at or prior to Closing shallhave been delivered to Seller at Closing.

 
**ARTICLEIX

INDEMNIFICATION**
 

9.1 Indemnificationby Seller.

 

Sellerhereby agrees to indemnify, defend and hold harmless Purchaser and itsdirectors, officers, agents and employees from and against any and all losses,damages, liabilities and expenses, including, without limitation, reasonablelegal fees and court costs, to which any of them may become subject as theresult of:

 

(a) Anymisrepresentation, breach of warranty, or any non-fulfillment of any warranty,representation, covenant or agreement on the part of Seller;

 

(b) Anyand all loss or damage resulting to Purchaser by reason of any claim, debt,liability or obligation not expressly assumed by Purchaser hereunder, arisingfrom Seller's business or the ownership, use or operation of the PurchasedAssets on or prior to the Closing Date and which did not constitute the breachof a representation or warranty of Seller; and

 

(c) Anyand all acts, suits, proceedings, demands, assessments, judgments, reasonablyattorneys' fees, costs and expenses incident to any of the foregoing.

 

9.2 Indemnificationby Purchaser.

Purchaserhereby agrees to indemnify, defend and hold harmless Seller and its officers,directors, agents, advisors and employees, from and against any and all losses,damages, liabilities and expenses, including, without limitation, legal fees andcourt costs, which any of them may become subject to as the result of:

 

(a) Anyand all loss or damage resulting from any misrepresentation, breach of warranty,or any non-fulfillment of any warranty, representation, covenant or agreement onthe part of Purchaser contained in this Agreement;

(b) Anyand all loss or damage resulting to Seller by reason of any claim, debt,liability or obligation expressly assumed by Purchaser hereunder; and

 

(c) Anyand all acts, suits, proceedings, demands, assessments, judgments, reasonablyattorneys' fees, costs and expenses incident to any of the foregoing.

 

9.3 Proceduresfor Establishment of Indemnification.

 

(a) Inthe event that any claim shall be asserted by any party which, if sustained,would result in a right of a party to indemnification hereunder (a"Loss"), the person entitled to indemnification hereunder (the "Indemnitee"),within a reasonable time after learning of such claim, shall notify the personobligated to provide indemnification hereunder with respect to such claim (the"Indemnitor"), and shall extend to the Indemnitor a reasonableopportunity to defend against such claim, at the Indemnitor's sole expense andthrough legal counsel reasonably acceptable to the Indemnitee, provided that theIndemnitor proceeds in good faith, expeditiously and diligently; and provided,further, that any failure to give such notice shall not relieve the Indemniteeof its indemnification obligations hereunder except to the extent it wasprejudiced by the failure to give notice. No determination shall be madepursuant to subparagraph (b) below while such defense is still being made untilthe earlier of (i) the resolution of said claim by the Indemnitor with theclaimant, or (ii) the termination of the defense by the Indemnitor against suchclaim or the failure of the Indemnitor to prosecute such defense in good faithand in an expeditious and diligent manner. The Indemnitee shall be entitled torely upon the opinion of its counsel as to the occurrence of either of saidevents. The Indemnitee shall, at its option and expense, have the right toparticipate in any defense undertaken by the Indemnitor with legal counsel ofits own selection. No settlement or compromise of any claim which may result ina Loss may be made by the Indemnitor without the prior written consent of theIndemnitee unless (i) prior to such settlement or compromise the Indemnitoracknowledges in writing its obligation to pay in full the amount of thesettlement or compromise and all associated expenses and (ii) the Indemnitee isfurnished with security reasonably satisfactory to the Indemnitee that theIndemnitor will in fact pay such amount and expenses.

 

(b) Inthe event that an Indemnitee asserts the existence of any Loss, the Indemniteeshall give written notice to the Indemnitor of the nature and amount of the Lossasserte(d) If the Indemnitor, within a period of 15 days after the giving of theIndemnitee's notice, does not give written notice to the Indemnitee announcingits intention to contest such assertion of the Indemnitee (such notice by theIndemnitor being hereinafter called the "Contest Notice"), suchassertion of the Indemnitee shall be deemed accepted and the amount of the Lossshall be deemed establishe(d) In the event, however, that a Contest Notice isgiven to the Indemnitee within said 15-day period, then the contested assertionof a Loss shall be settled by binding arbitration. Notwithstanding anythingherein contained to the contrary, each party shall pay its own attorney's fees,costs and expenses incident to any arbitration proceeding brought under thisSection 9.3(b).

 

(c) TheIndemnitee and the Indemnitor may agree in writing, at any time, as to theexistence and amount of a Loss, and, upon the execution of such agreement, suchLoss shall be deemed established.

(d)Payments of any Loss shall be paid to the person entitled thereto within tenbusiness days following the establishment of the Loss.

 

9.4 Limitationson Indemnity.

Anythingin this Agreement and the Purchase Documents to the contrary notwithstanding:

 

(a) Noclaim for indemnity on the basis of a breach of a representation or warranty maybe after the termination of such representation or warranty.

 

(b) Allclaims for Losses shall be limited to the Purchase Price, and there shall be noliability except to the extent that the aggregate Losses exceeds $100,000, andthen only to the extent of such excess.

 

(c) Forpurposes of determining the amount of any Losses, such amount shall be reducedby the amount of any insurance benefits and proceeds to be received by theIndemnitee in respect of the Losses (net of any deductible amounts).

 

(d) Ifan indemnification obligation arises in respect of any Losses that results inany tax benefit to the Indemnitee or any affiliate thereof (the "BenefitedParty") that would not, but for such Losses, be available, the BenefitedParty shall pay or cause to be paid to the Indemnifying Party an amount equal tothe actual tax savings produced by such tax benefit at the time such tax savingis realized by the Benefited Party and after the Indemnifying Party has paid theamount of the Losses to the Indemnified Party. The amount of any such tax savingfor any taxable period shall be the amount of the reduction of taxes payable tothe taxing authority by the Benefited Party with respect to such tax period ascompared to the taxes that would have been payable to taxing authority by theBenefited Party with respect to such tax period in the absence of tax benefit.

 

(e) Inno event shall any party hereunder have any liability for Losses consisting ofor in the nature of punitive, consequential, indirect or special damages.

 
**ARTICLEX

TERMINATIONOF AGREEMENT**
 

10.1 Termination.

 

ThisAgreement may be terminated, and the transaction contemplated hereby may beabandoned, by written notice promptly given to the other parties hereto, at anytime prior to the Closing Date:

 

(a) Bymutual written consent of Purchaser and Seller; or

 

(b) Byeither Purchaser or Seller if there shall have been a material breach of anyrepresentation, warranty, covenant or agreement on the part of the other setforth in this Agreement; or

(c) Byeither Purchaser or Seller if any permanent injunction or other order of a courtor competent authority or government agency which prevents the consummation ofthe transaction shall have become final and not appealable; or

 

(d) BySeller if any of the conditions specified in Article VIII has not been met orwaived by Seller at any such time as such conditions can no longer be satisfied;or

 

(e) ByPurchaser if any of the conditions specified in Article VII has not been met orwaived by Purchaser at any such time as such conditions can no longer besatisfied.

 

10.2 Statusof Agreement after Termination.

 

Uponany termination of this Agreement pursuant to Section 10.1, this Agreement shallbe void and have no effect, without any liability on the part of any partyhereto or any shareholders, directors or officers thereof; provided, however,such termination shall not affect the liability of any party for the breach ofany provision of this Agreement.

 
**ARTICLEXI

GENERAL**
 

11.1 Amendment.

 

ThisAgreement may be amended, modified or supplemented only by an instrument inwriting executed by the party against whom the enforcement of the amendment,modification or supplement is sought.

 

11.2 Assignment;Binding Effect.

 

Neitherthis Agreement nor any right created hereby shall be assignable by either partyhereto without the express written consent of the other party. This Agreementshall be binding upon the parties hereto and their successors and permittedassigns.

 

11.3 Notices.

 

Allnotices and other communications hereunder shall be in writing and shall be sentby certified mail, postage prepaid, return receipt requested; by an overnightexpress courier service that provides written confirmation of delivery; or byfacsimile with confirmation, addressed as follows:

 

If toSeller:   

 FoneFriend, Inc.

   

8447Wilshire Blvd., 5th Floor

   

BeverlyHills, California 90211

   

Fax:(323) 653-6240
 
If toPurchaser:   

 YAP International, Inc.

   

14545Friar Street, Suite 103

   

VanNuys, California 91411

   

Fax:(818) 376-0680

Anyparty may change its address for receiving notice by giving notice of a newaddress in the manner provided herein. Any notice so given shall be deemed to bedelivered on the second business day after the same is deposited in the UnitedStates Mail, on the next business day if sent by overnight courier, or on thesame business day if sent by facsimile before the close of business, or the nextbusiness day, if sent by facsimile after the close of business.

 

11.4 Broker'sCommission.

 

Eachparty agrees to indemnify and hold harmless the other party from and against anyand all liability, loss, damage, cost or expense (including court costs andattorney fees) arising out of or relating to any claim that such party enteredinto any brokerage agreement or similar arrangement, whether oral or written.

 

11.5 Headings.

 

Thedescriptive article, section and paragraph headings set forth herein areinserted for convenience of reference only, do not constitute a part of thisAgreement and shall not control or affect the meaning or construction of anyprovision of the within Agreement.

 

11.6 EntireAgreement.

 

ThisAgreement, the Purchase Documents and the Exhibits and Schedules attached tothis Agreement constitute the entire agreement between the parties pertaining tothis subject matter and supersede all prior or contemporaneous agreements andunderstandings of the parties relating to the same. This Agreement may beamended only in writing signed by the parties hereto.

 

11.7 Costs,Expenses And Legal Fees.

 

Whetheror not the transactions contemplated hereby are consummated, each party heretoshall bear its own costs and expenses (including attorneys' fees), except thateach party hereto agrees to pay the costs and expenses, including reasonableattorneys' fees, incurred by the other parties in successfully (a) enforcing anyof the terms of this Agreement, or (b) proving that the other parties breachedany of the terms of this Agreement in any material respect.

 

11.8 Severability.

 

If anyterm or provision of this Agreement or any application thereof shall be invalidor unenforceable, the remainder of this Agreement and any other application ofsuch term or provision shall not be affected thereby.

 

11.9 GoverningLaw.

 

TheParties hereby agree that this Agreement shall be governed and construed inaccordance with the laws of the State of California, without giving effect toprinciples of conflicts of law thereunder and irrespective that neither partyhereto is domiciled in California. Further, the language used in this Agreementshall be deemed to be language chosen by both parties hereto to express theirmutual intent, and no rule of strict construction against either party shallapply to any terms or conditions hereof.

11.10 Arbitration.

 

Theparties shall resolve any dispute relating to this Agreement by negotiation and,failing that, by binding arbitration in Los Angeles, California under the rulesof the American Arbitration Association. An arbitration proceeding must bebrought within one year of the onset of the dispute or it is barred. The partybringing the arbitration must advance the costs of arbitration and theprevailing party may seek reimbursement of its costs, fees and expenses in thearbitration. Arbitration awards may not include punitive and similar damages andmay be enforced in any court of competent jurisdiction.

 

11.11 Waiver.

 

Any ofthe terms or conditions of this Agreement may be waived at any time by the partyentitled to the benefit thereof, but only by written notice specifying the itemwaived and signed by the party waiving such terms or conditions.

 

11.12 FurtherAssurances.

 

Bothparties will take such reasonable steps as are necessary to consummate thetransactions contemplated herein.

 

11.13 CounterpartExecution.

 

ThisAgreement may be executed in any number of counterparts, each of which shall bedeemed an original, but all of which together shall constitute one and the sameinstrument. Any counterpart signature page delivered by facsimile transmissionshall be deemed to be and have the same force and effect as an originallyexecuted signature page. This Agreement shall become binding when one or morecounterparts hereof, individually or taken together, shall bear the signaturesof all of the parties reflected hereon as the signatories.

 

INWITNESS WHEREOF, the Purchaser and the Seller have caused this Agreement to beexecuted by their duly authorized representatives as of the day and year firstabove written.
*** *
***InPresence Of:   ***

*** Purchaser:***

   

 YAPINTERNATIONAL, INC.

 

**                                             **

By:                                             

   

JanOlivier, President
* *
***   ***

***Seller:***

   

FONEFRIEND,INC

 

**                                             **

By:                                                 

   

Gary A.Rasmussen, Chairman

EXHIBIT"A"

 

ASSIGNMENTAND BILL OF SALE**
 

FORVALUE RECEIVED, FoneFriend, Inc., a Delaware corporation, "Assignor"herein, hereby sells, assigns, transfers, conveys and sets over unto YAPInternational, Inc., a Nevada corporation, "Assignee" herein, all ofthe right, title and interest of Assignor in and to the Technology LicenseAgreement, a copy of which is attached hereto as "Schedule 1" (the"Agreement"), together with all of Assignor's right, title andinterest in and to the tangible and intangible personal property and equipment(collectively the "Property"), of which the location and a detaileddescription of such Property are set forth in and attached hereto as"Schedule 2."

 

Assignorwarrants to Assignee that Assignor has good and full legal title to theAgreement and Property and such Agreement and Property are free from anysecurity interests, liens or encumbrances. Assignor further warrants that (i)the Property is in good working order and fit for its intended purpose, (ii) theAgreement is in full force and effect, (iii) Assignor is not in default underthe Agreement and to the best of Assignor's knowledge, no other party to theAgreement is in default thereunder, and (iv) all of the rights of Assignor inand under the Agreement are transferable and that Assignor has received allconsents and approvals of other parties whether required under the Agreement, orotherwise, required and necessary to assign and transfer the Agreement toAssignee.

 

TheAssignor hereby constitutes and appoints the Assignee its true, lawful andirrevocable attorney to demand, receive and enforce payments and to givereceipts, releases, satisfaction for and to sue for all moneys payable to theAssignor pursuant to the Agreement, and this may be done either in the name ofthe Assignor or in the name of the Assignee with the same force and effect asthe Assignor could do if this Assignment had not been made.

 

Bythe execution of this Assignment and Bill of Sale, Assignor accepts and agreesto the foregoing and to become bound under the terms of the Agreement. By itsexecution hereof, Assignee agrees to keep and perform all obligations ofAssignor under the Agreement from the date hereof.

 

INWITNESS WHEREOF, Assignor has caused this Assignment and Bill of Sale to beexecuted this 2nd day of July, 2004.

 

WITNESSES:   

 Assignor:

   

FONEFRIEND,INC.

   

ADelaware corporation

 

**                                             **

By:                                                              

   

Gary A.Rasmussen, Chairman

   

Address:8447 Wilshire Blvd., 5th Floor

   

              BeverlyHills, CA 90211

ACCEPTEDAND AGREED TO this 2nd day of July, 2004.

 

   

Assignee:

   

YAPINTERNATIONAL, INC.

   

ANevada corporation

 

**                                             **

By:                                                            

   

JanOlivier, President

   

Address:14545 Friar Street, Suite 103

   

              VanNuys, CA 91411
**SCHEDULE1

 

ASSIGNEDCONTRACT

 

TECHNOLOGYLICENSE AGREEMENT

 **
ThisAgreement ("Agreement") is entered into as of the 30th day of April2001 (the "Effective Date") by and between FoneFriend, Inc., a Nevadacorporation whose address is 4616 West Sahara Avenue #357, Las Vegas, Nevada89102 ("Licensee") and FoneFriend Systems, Inc., a District ofColumbia corporation whose address is 3524 Rittenhouse Street, NW, Washington,D.C. 20015 ("Company").

 
**RECITALS:

 **
**WHEREAS**,the Company owns certain Patent Rights (as defined below) and Technology Rights(as defined below) related to the Licensed Technology (as defined below), whichwere developed by the Company; and
** 

WHEREAS,the Company is in the business of developing, using, and licensing others touse, and is the owner of certain proprietary technology covered by certainpatent filings set forth in Exhibit "A", attached hereto and made apart of this Agreement, which describes an Internet telephony device and relatedtechnology commonly referred to as the "FoneFriend"; and

 

**WHEREAS**,the Company desires to have the Licensed Technology commercially exploited andused by and for the benefit of Licensee; and

 

**WHEREAS**,the Licensee was organized for the purpose of commercially exploiting theLicensed Technology, and desires to obtain a license from the Company to utilizesaid Licensed Technology;

 

**NOW,THEREFORE**, in consideration of the mutual covenants and premises hereincontained, the parties agree as follows:
** 

1.DEFINITIONS**
 

As usedin this Agreement, the following terms have the meanings indicated:

 

1.1"***Affiliate***" means any business entity more than 20%owned by Licensee, any business entity which owns more than 20% of Licensee, orany business entity that is more than 50% owned by a business entity that ownsmore than 20% of Licensee.

 

1.2"***Licensed Product***" means the product or service commonlyreferred to as the "FoneFriend", or any other brand name for theproduct, which is covered by the Licensed Technology and utilizes the PatentRights and/or Technology Rights pursuant to this Agreement.

 

1.3"***Licensed Technology***" means inventions, discoveries andprocesses covered by the Patent Rights and/or Technology Rights under whichLicensee is granted a license to commercially exploit, manufacture, market, useand Sell the Licensed Product.

 

1.4"***Net Monthly Revenue***" means the gross, monthly recurringrevenues received by Licensee from the marketing of the Licensed Product lesssales and/or use taxes actually paid, import and/or export duties actually paid,outbound transportation prepaid or allowed, and amounts allowed or credited dueto returns or service problems. Net Monthly Revenue shall not include anyoutright Sale of the Licensed Products to any Affiliates, sub-licensees or otherthird parties.

1.5"***Patent Rights***" means Company's rights in information ordiscoveries covered in patents, and/or patent applications, whether domestic orforeign, and all divisionals, continuations, continuations-in-part, reissues,re-examinations or extensions thereof, and any letters patent that issuethereon, which are described under certain patent applications and/or filingsset forth in Exhibit "A", attached hereto.

 

1.6"***Sale, Sell or Sold***" means the transfer or dispositionof a Licensed Product, by Licensee or any sub-licensee, to a consumer for whichthe Licensee or any sub-licensees shall receive monthly, recurring revenue.

 

1.7"***Technology Rights***" means Company's rights in technicalinformation, know-how, processes, procedures, compositions, devices, methods,formulas, protocols, techniques, software, designs, drawings or data created ordeveloped by Company at anytime prior to the Effective Date and for the term ofthis Agreement, which relates to the Licensed Technology and which is notcovered by Patent Rights, but are considered necessary for commerciallyexploiting the Licensed Technology and the use or Sale of the Licensed Product.

 

1.8"***Territory***" means worldwide..
** 

2.WARRANTY: SUPERIOR-RIGHTS**
 

2.1 TheCompany represents and warrants that: (1) it is the owner of the entire right,title, and interest in and to both the Patent Rights and the LicensedTechnology, and (2) that it has the sole right to grant licenses thereunder, and(3) it believes that it has not knowingly granted licenses thereunder to anyother entity that would restrict any rights granted to Licensee except as statedherein.

 

2.2Licensee understands and acknowledges that the Company, by this Agreement, makesno representation as to the operability or fitness for any use, safety,efficacy, approvability by regulatory authorities, time and cost of development,patentability, and/or breadth of the Licensed Technology. The Company, by thisAgreement, also makes no representation as to whether there are any patents nowheld, or which will be held, by others or by the Company which may be dominantor subordinate to the Patent Rights, nor does the Company make anyrepresentation that the inventions contained in the Patent Rights do notinfringe any other patents now held or that will be held by others or by theCompany.

[SeeExhibit A]

 

2.3 TheCompany represents and warrants that it shall use its best efforts to cause anymanufacturer it selects, with respect to producing the Licensed Product, toprovide Licensee with a one-year warranty or guaranty per Licensed Product Unit(commencing at shipment from the manufacturer to Licensee) against defects inmaterials and workmanship, encountered in normal use of the Licensed Product.Such warranty shall not to apply in the following cases: loss or damage to theLicensed Product unit due to abuse, mishandling, improper packaging, alteration,accident, electric current fluctuations and failure to follow operating,maintenance or environmental instructions prescribed in the Company's UserManual. The Company shall not be liable to any third party for damages,including any loss of revenues or profits, inconvenience, telephone or commoncarrier expenses, lost data, or any indirect, consequential, or incidentaldamages resulting from the use of or inability to use the Licensed Product,regardless of the legal theory on which the claim is based.
** 

3.GRANT OF LICENSE COUPLED WITH EQUITY INVESTMENT IN COMPANY**
 

3.1Subject to rights retained by the Company hereunder, the Company hereby grantsto Licensee during the term of this Agreement, and Licensee hereby accepts, aroyalty-bearing, non-exclusive license under and for the Licensed Technology togenerally exploit, in a commercial fashion, all aspects of the LicensedTechnology including, but not limited to, the right to manufacture, havemanufactured, operate, use and/or Sell the Licensed Product within theTerritory.

3.2Included in the license granted herein, Licensee shall have the right to useCompany's "FoneFriend" and "FaxFriend" names, logos andtrademarks in connection with the marketing of the Licensed Product, withoutexpress written consent from Company. Further, Licensee shall have the right toprivate label or change the name of the Licensed Product for marketing purposes.

 

3.3Licensee may grant sub-licenses consistent with this Agreement if Licensee isresponsible for the operations of its sub-licensees relevant to this Agreementas if the operations were carried out by Licensee. Licensee must deliver toCompany a true and correct copy of each sub-license granted by Licensee, and anymodification or termination thereof, within thirty (30) days after execution,modification, or termination. When this Agreement is terminated, the Companyagrees to accept, as successors to Licensee, all existing sub-licensees in goodstanding at the date of termination, provided that the sub-licensees consent inwriting to be bound by all the terms and conditions of this Agreement.

 

3.4 Thelicense and related rights, granted to Licensee by the Company, shall surviveany sale or transfer, in whole or in part, by the Company of its LicensedTechnology and/or its Patent Rights to any third party, or the sale or transferof the equity, control or ownership of the Company.

 

3.5Coupled with an interest in the license granted to Licensee herein, the Companyshall issue Licensee two hundred twenty five thousand (225,000) shares of thecommon stock of FoneFriend Systems, Inc. ("FSI Stock"), representingapproximately four and one-half percent (4.5%) of the total authorized andoutstanding capital stock of the Company.

 

3.7Licensee may extend the license and/or the FSI Stock granted herein, in part orin whole, to any Affiliate if the Affiliate consents in writing to be bound bythis Agreement to the same extent as Licensee. Licensee must deliver to Companya true and accurate copy of such written agreement, and any modification ortermination thereof, within thirty (30) days after execution, modification ortermination.
** 

4.PAYMENTS AND REPORTS**
 

4.1 Inconsideration of the license and related rights granted to Licensee, plus theFSI Stock issued to Licensee by the Company under this Agreement, Licensee willpay the Company the aggregate sum of Four Hundred Fifty Thousand ($450,000)Dollars, due and payable as follows:

 

a.Fifty Thousand ($50,000) Dollars within 30 days of Licensee's receipt of thisAgreement, fully executed by the duly authorized legal representative of theCompany; and

 

b. Thebalance of Four Hundred Thousand ($400,000) Dollars to be paid in eight (8),equal, monthly installments of Fifty Thousand ($50,000.00) Dollars each, witheach installment being due and payable on the monthly anniversary date of thefirst payment due under sub-section 4.1 a., above.

 

4.2 Inaddition to the consideration for the license, related rights and the FSI Stock,upon the Licensee's receipt of its first revenue from the Sale of the LicensedProduct, Licensee shall pay the Company a running royalty fee("Royalty") equal to: (i) five percent (5%) of the Net Monthly Revenuereceived by Licensee from the Sale of the first one hundred thousand (100,000)units of the Licensed Product Sold by Licensee or any sub-licensee; or (ii) fourpercent (4%) of the Net Monthly Revenue received by Licensee at such time asmore than one hundred thousand (100,000) units, but less than five hundredthousand (500,000) units of the Licensed Product have been Sold by Licensee orany sub-licensee; or (iii) three percent (3%) of the Net Monthly Revenuereceived by Licensee at such time as more than five hundred thousand (500,000)units of the Licensed Product have been Sold by Licensee or any sub-licensee.

4.3 Inthe event of late payments to the Company due under this section 4, interestshall accrue at the rate of one percent (1%), per month, of the amount past due.

 

4.4During the term of this Agreement and for one (1) year thereafter, Licenseeagrees to keep complete and accurate records of its and its sub-licensees' Salesand Net Monthly Revenue under the license granted in this Agreement insufficient detail to enable the Royalty payable hereunder to be determined.Licensee agrees to permit the Company or its representatives, at the Company'sexpense and with thirty (30) days prior written notice, to periodically examineits books, ledgers, and records during regular business hours, not morefrequently than once every six (6) months, for the purpose of and to the extentnecessary to verify any report required under this Agreement. If the amounts dueto the Company are determined to have been underpaid by more than two percent(2%), Licensee will pay the cost of the examination and all overdue amounts withaccrued interest.

 

4.5Within sixty (60) days after June 30 and December 31 of each year of the validterm of this Agreement, beginning on December 31, 2001, Licensee shall deliverto the Company a true and accurate written report, even if no payments are duethe Company, giving the particulars of the business conducted by Licensee andits sub-licensee(s), if any exist, during the preceding six (6) calendar monthsunder this Agreement as are pertinent to calculating Royalty payments duehereunder. This report will include at least:

 

a. thetotal quantities of Licensed Products manufactured or produced; and

b. thetotal Sales; and

c. thecalculation of royalties thereon; and

d. thetotal of all amounts due Company hereunder.

 

Simultaneouslywith the delivery of each report, Licensee must pay to the Company the amount,if any, due for the period of each report.

 

4.6 Onor before each anniversary of the Effective Date, irrespective of having a firstSale, Licensee shall, upon written request from the Company, deliver to theCompany a brief written progress report as to Licensee's (and any sub-licensee's)efforts and accomplishments during the preceding year in commercializing ormarketing the Licensed Technology.

 

4.7 Allamounts payable hereunder by Licensee shall be paid in United States dollars.Any Royalty accruing on Sales in countries other than the United States shall bepaid in United States currency in amounts based on the rate of exchange asquoted in the Wall Street Journal (WSJ) as of the last business day of thereporting period. If the WSJ does not publish any such rate, a comparable ratepublication will be agreed upon from time to time by the parties, and withrespect to each country for which such rate is not published by the WSJ or in acomparable publication, the parties will use the prevailing rate for bank cabletransfers for such date, as quoted by leading United States banks in New YorkCity dealing in the foreign currency exchange market. Checks shall be drawn on aU.S. bank, payable to the Company and delivered to:

 

FoneFriendSystems, Inc.

3524Rittenhouse Street, NW

Washington,D.C. 20015
** 

5.OBLIGATIONS OF THE PARTIES**
 

5.1 **CompanyObligations**. During the Term of this Agreement, the Company agrees to:

a.Provide all manufacturing information, functional test, programming tools andsupport necessary for Licensee to manufacture the Licensed Product (either"FoneFriend units or Licensee's own brand) in support of Licensee's Sale ofsame.

 

b.Manage and maintain the global network and related computer equipment used bythe Licensed Product and/or "FoneFriend" units in completing calls toone another, in exchange for Licensee's Royalty payment provided for undersection 4 of this Agreement.

 

c.Provide functional copies of the Company's Help Desk software for Licensee's usein servicing its customers, as well as training, technical assistance andsupport in the use of same to Licensee's technical support personnel.

 

5.2 Fora period of three (3) years from the Effective Date of this Agreement, or longerat the option of Licensee, the Company agrees to provide certain other serviceson behalf of, and paid for by Licensee, as follows:

 

a. TheCompany will provide quality assurance and supervise the manufacturing andprocurement of units of the Licensed Product and all related network elementsfor a fee equal to five percent (5%) of the cost to procure such items;

 

b. TheCompany shall arrange for the necessary licensing to enable Licensee to offer"gateway calling, phone-house and NextGen" capabilities (as thoseterms are defined in any Company correspondence or literature), either directlyor via the Company's distributor who funded such developments. Other thanrelated one-time procurement, R&D or technical support requirements, thereshall be no additional royalty fee due the Company for these developed features.

 

c. Uponwritten request of the Licensee, and at Licensee's expense, the Company shallprovide engineering, including R&D, and technical support services toLicensee in accordance with a mutually agreed upon budget which shall bedetermined in advance. Such services of the Company shall include:

 

i.assistance of the Company's personnel with appropriate expertise and competenceto develop and implement Licensee's infrastructure which is necessary to supportLicensee's Sale of the Licensed Product;

 

ii.access to all aspects of the relevant Licensed Technology, includingparticipation in Company's development, testing and manufacturing of relevantLicensed Technology, whether or not such access or participation is madeavailable to other licensees of the Company;

 

iii.all other reasonable and necessary training, assistance and support for Licensee'scommercial exploitation and use of the Licensed Technology.

 

5.3 **LicenseeObligations**. During the term of this Agreement, Licensee agrees that itshall:

 

a.Disclose all sales of the Licensed Product which it has produced so as to assurea complete audit trail; and

 

b.Assume responsibility for the interface to its customers (i.e., billing,technical support and customer relationship management).

 

c.Licensee must comply with all applicable national, state and local laws andregulations in connection with its activities pursuant to this Agreement.

d.Conduct itself in a manner that will (i) safeguard and promote the reputationand trademarks of the Company, (ii) refrain from any conduct which might beharmful to the reputation or trademarks or to the marketing of the LicensedProduct, and (iii) avoid all illegal, unfair, deceptive, misleading, orunethical practices.
** 

6.LICENSEE'S OPTION TO ACQUIRE CERTAIN ASSETS OF THE COMPANY**
 

6.1Upon such date, during the term of this Agreement, that the Licensee shall be inreceipt of financing in the amount of Five Million ($5,000,000) Dollars, orgreater, the Company hereby agrees to grant Licensee an irrevocable option toacquire the following assets of the Company, subject to such assets being ownedor controlled by the Company on the date said option is granted, upon terms asfollows:

 

a. Forcash consideration in the amount of Two Hundred Fifty Thousand ($250,000)Dollars, the Company warrants that it shall assign, bargain, sell or otherwisetransfer all right, title and interest in and to all of the Company's agreementsand contractual rights, including those in the process of negotiation, coveringor relating to other distributors and/or licensees that may be engaged in theSale of the Licensed Product and/or Licensed Technology. Notwithstanding theforegoing, the Company shall be entitled to retain any outstanding installmentsremaining on any one-time license fee due and owing Company from its licensee.Upon completion of this transaction, the third parties covered by saidagreements and contractual rights shall be deemed to be sub-licensees of theLicensee for purposes of calculating the amount of any Royalty due the Companypursuant to section 4 of this Agreement.

 

b. Forcash consideration in the amount of Two Hundred Fifty Thousand ($250,000)Dollars, the Company warrants that it shall refrain from marketing and/orlicensing any other entities that may engage in the distribution, marketing orSale the Licensed Product or Licensed Technology, directly or indirectly(including activities through or in cooperation with any third party), for theduration of this Agreement; provided, however, that in the event theCompany is acquired, transferred or sold to a third party, the Licensee shallconsent to a waiver of the provisions of this section 6.1 b, in consideration ofthe return of the cash consideration paid to the Company under this sub-section.

 

c. Forcash consideration in the amount of Two Hundred Fifty Thousand ($250,000)Dollars, the Company warrants that it shall assign, bargain, sell or otherwisetransfer all right, title and interest in and to the Company's web site on theInternet, identified as: "www.fonefriend.com."

 

d. Inthe event that Licensee shall receive financing in the amount of Twenty Million($20,000,000), or greater, License hereby warrants that it shall remit anadvance payment to the Company in the amount of Two Million Five HundredThousand ($2,500,000) Dollars, which shall be credited towards Licensee's costof any future research and development projects, or other services requested bythe Licensee pursuant to section 5.2, above, and shall also be credited towardsany Royalty payments due from Licensee, as provided for under section 4 of thisAgreement.

 
**7. TERMAND TERMINATION

 **
7.1 Theterm of this Agreement is for a period of ten (10) years, commencing on theEffective Date.

 

7.2This Agreement will earlier terminate:

 

a.Automatically if Licensee becomes bankrupt or insolvent and/or if the businessof Licensee is placed in the hands of a receiver, assignee, or trustee, whetherby voluntary act of Licensee or otherwise; or

b. Withthe noted exception of the first payment due the Company, for which there shallbe no cure period, upon thirty (30) days written notice from Company if Licenseebreaches or defaults on its obligation to make payments (if any are due), inaccordance with the terms of section 4 hereof, unless, before the end of saidthirty (30) day period, Licensee has cured the breach or default.Notwithstanding the foregoing, ; or

 

c. Uponninety (90) days written notice if Licensee breaches or defaults on any otherobligation under this Agreement, unless, before the end of the ninety (90) dayperiod, Licensee has cured the breach or default and so notifies Company,stating the manner of the cure; or

 

d. Atany time by mutual written agreement between Licensee and Company, upon thirty(30) days written notice to all parties and subject to any terms herein whichsurvive termination.

 

7.3 Ifthis Agreement is terminated for any cause:

 

a.Nothing herein will be construed to release either party of any obligationmatured prior to the effective date of the termination;

 

b.After the effective date of the termination, Licensee shall not manufacture anyLicensed Product, but may continue to operate its business with respect to allLicensed Product in service and may Sell all Licensed Products, and partstherefor, it has on hand at the date of termination; provided, that it pays theRoyalty earned thereon, and any other amounts due pursuant to the terms ofsection 4 of this Agreement; and

 

c. Theparties hereto will be continue to be bound by the provisions of sections 4,(Payments and Reports), 9 (Indemnification) and 10 (Confidential Information),which shall survive any termination of this Agreement.

 
**8.INFRINGEMENT BY THIRD PARTIES

 **
8.1 TheCompany shall, at its expense, enforce any Patent Rights and/or TechnologyRights licensed hereunder against infringement by third parties and it shall beentitled to retain recovery from such enforcement. From any such recovery, theCompany agrees to reimburse Licensee for all out-of-pocket expenses including,but not limited to, legal fees, travel and time, etc., incurred by Licensee inassisting the Company with such enforcement. If the Company does not file suitagainst a substantial infringer of any Patent Rights and/or Technology Rightslicensed hereunder within six (6) months of knowledge thereof, and suchinfringement is damaging Licensee's business, then Licensee may enforce anyrights licensed hereunder on behalf of itself and the Company, with Licenseeretaining all recoveries from such enforcement. After deduction of all costs,damages and expenses related to any such infringement action or the enforcementor collection thereof, Licensee agrees to remit fifty percent (50%) of theremaining amount to the Company.

 

8.2 Inany infringement suit or dispute, the parties agree to cooperate fully with eachother. At the request and expense of the party bringing suit, the other partywill permit access to all relevant personnel, records, papers, information,samples, specimens, etc., during regular business hours.

 
**9.INDEMNIFICATION

 **
9.1Licensee hereby agrees to hold harmless and indemnify the Company, its officers,directors, affiliates and agents, collectively and individually, from andagainst all claims, damages, suits, loss, liabilities and expenses incurred bythe Company including, but not limited to fees and disbursements of counsel,which are related to or arise out of actions taken or omitted to be taken byLicensee, or any of its affiliates or agents, in connection with the Licensee'sactivities under this Agreement.

9.2The Company hereby agrees to hold harmless and indemnify Licensee, its officers,directors, affiliates and agents, collectively and individually, from andagainst all claims, damages, suits, loss, liabilities and expenses incurred byLicensee including, but not limited to fees and disbursements of counsel, whichare related to or arise out of actions taken or omitted to be taken by theCompany, or any of its affiliates or agents, in connection with the Company'sactivities under this Agreement.

 
**10.CONFIDENTIAL INFORMATION

 **
10.1Company and Licensee each agree that all information forwarded to one by theother for the purposes of this Agreement (1) are to be received in strictconfidence, (2) are to be used only for the purposes of this Agreement, and (3)are not to be disclosed by the recipient party, its agents or employees withoutthe prior written consent of the other party, except to the extent that therecipient party can establish competent written proof that such information:

 

a. wasin the public domain at the time of disclosure;

 

b.later became part of the public domain through no act or omission of therecipient party, its employees, agents, successors or assigns;

 

c. waslawfully disclosed to the recipient party by a third party having the right todisclose it;

 

d. wasalready known by the recipient party at the time of disclosure;

 

e. wasindependently developed by the recipient; or

 

f. isrequired by law or regulation to be disclosed, provided however, that thedisclosing party shall first give the other party written notice and adequateopportunity to object to such order for disclosure or to request confidentialtreatment.

 

10.2Information shall not be deemed to be available to the public or to be in therecipient's possession merely because it:

 

a.includes information that falls within an area of general knowledge available tothe public or to the recipient (i.e., it does not include the specificinformation provided by the other party); or

 

b. canbe reconstructed in hindsight from a combination of information from multiplesources that are available to the public or to the recipient, if not one ofthose sources actually taught or suggested the entire combination, together withits meaning and importance.

 

10.3Each party's obligation of confidence hereunder shall be fulfilled by using atleast the same degree of care with the other party's confidential information asit uses to protect its own confidential information. This obligation shall existwhile this Agreement is in force and for a period of 3 years thereafter.

 
**11.GENERAL

 **
11.1This Agreement constitutes the entire agreement between the parties with respectto the subject matter hereof. No promises, guarantees, inducements or agreement,whether oral or written, express or implied have been made or shall be of anyforce or effect other than as contained in this Agreement. This Agreement canonly be modified or changed in writing signed by both parties.

11.2 Itis agreed and acknowledged that Licensee is an independent contractor and shallonly hold itself out as such with respect to the Company. Nothing in thisAgreement shall be construed to constitute Licensee nor any of Licensee'srepresentatives as the partner, employee, joint venturer, franchisee, legalrepresentative, or agent of the Company and neither Licensee nor any of itsrepresentatives shall represent itself, himself, or herself as any of theforegoing. In furtherance of the foregoing, in no event shall Licensee or itsrepresentatives have any authority to assume or create any liability orobligation, express or implied, on behalf of the Company and any representationto the contrary will constitute a material breach of this Agreement. Licenseeacknowledges that it is solely responsible for any and all claims, liabilities,damages, and debts of any type whatsoever that may arise as a result of Licensee'sactivities, or those of its representatives, in the performance of thisAgreement or in the marketing, distribution, or Sale of the Licensed Product.

 

11.3Any notice required by this Agreement must be given by facsimile transmissionconfirmed by personal delivery (including delivery by reputable messengerservices such as Federal Express) or by prepaid, first class, certified mail,return receipt requested, addressed in the case of Company to:

 

FoneFriendSystems, Inc.

3524Rittenhouse Street, NW

Washington,D.C. 20015

Attn:President

Fax:(202) 363-2423

 

or inthe case of Licensee to:

 

FoneFriend,Inc.

4616West Sahara Avenue, #357

LasVegas, Nevada 89102

Attn:President

Fax:(707) 982-2558

 

orother addresses as may be given from time to time under the terms of this noticeprovision.

 

11.4Any disputes or disagreement arising out of or relating to this Agreement, whichcannot be settled by the parties in a mutually satisfactory basis, shall beresolved by binding arbitration in accordance with the Rules of the AmericanArbitration Association, by three arbitrators appointed in accord with suchRules. The Judgment of a majority of the arbitrators shall be final and bindingupon the parties, and an award upon the Judgment of the arbitrators may beentered in any court of competent jurisdiction. The party against, whomarbitration is sought shall select the situs for the arbitration, provided thatsuch situs shall be within the United States and shall be not more than 50 milesfrom the principal place of business of such party. Any counterclaims shall bemade in such situs. Any award in arbitration may be entered in any domestic orforeign court having jurisdiction over the enforcement of such awards.

 

11.5This Agreement shall be construed and enforced in accordance with the laws ofthe United States, or in such state or district where any arbitration is held,determined without regard to its provisions which would otherwise apply to aquestion of conflict of laws. The language used in this Agreement shall bedeemed to be language chosen by both parties hereto to express their mutualintent, and no rule of strict construction against either party shall apply toany terms or conditions hereof.

 

11.6If any of the terms or provisions of this Agreement are held to be unenforceableby a court of competent jurisdiction or arbitrator, the remaining portions ofthe Agreement will remain in full force and effect.

11.7This Agreement shall inure to the benefit and be binding upon the parties heretoand their respective legal representatives, administrators, executors,successors subsidiaries and affiliates.

 

11.8Failure of either party to enforce any right under this Agreement will not actas a waiver of that right or the ability to later assert that right relative tothe particular situation involved.

 

11.9Neither party shall be held liable or responsible to the other party nor bedeemed to have defaulted under or breached this Agreement for failure or delayin fulfilling or performing any term of this Agreement when such failure ordelay is caused by or results from causes beyond the reasonable control of theaffected party, including, without limitation, fire, floods, earthquakes,natural disasters, embargoes, war, acts of war (whether war be declared or not),insurrections, riots, civil commotions, strikes, lockouts or other labordisturbances, acts of God or acts, omissions or delays in acting by anygovernmental authority or the other party.

 

11.10Headings are included herein for convenience only and shall not be used toconstrue this Agreement.

 

11.11This Agreement may be executed in one or more counterparts, each of which shallbe deemed an original, but all of which together shall constitute one and thesame instrument. This Agreement may be effective upon the execution and deliveryby any party of facsimile copies of signature pages hereto duly executed by suchparty; provided, however, that any party delivering a facsimile signature page,covenants and agrees to deliver promptly thereafter at least two (2) originalcopies to the other party hereto.

 

**INWITNESS WHEREOF**, parties hereto have caused their duly authorizedrepresentatives to execute this Agreement.

 

**"Company"   **

** "Licensee"**

**FONEFRIENDSYSTEMS, INC.   **

** FONEFRIEND, INC.**

** **

 

**By: /s/ John D. Wimsatt   **

**By:  /s/ Gary A. Rasmussen**

**John D.Wimsatt   **

** Gary A. Rasmussen**

**President   **

** President**

**  **

**Attest: /s/ Marjorie B. Wimsatt   **

**Attest:  /s/ William B. Krusheski**

**MarjorieB. Wimsatt   **

** William B. Krusheski**

**Secretary   **

** Secretary**
** ****EXHIBIT"A"

** 
PatentRights
 

U.S.Patent Application Number:   

  09/029,839

 

Date:   

 February 25, 1997

 

Titleof Invention:   

  Internet Switch Box, System and Method for Internet Telephony.

 

Applicant:   

 FoneFriend Systems, Inc.

 

FurtherApplicants:   

 Vaziri,Faramarz, et al.

 

PCTApplication Number:   

  US/98/03630

 

Date:   

 February 25, 1998

 

FCCRegistration Certificate No.:   

  B11 USA-25483-MD-E.
**  

[ADDENDUM- CURRENT PATENT STATUS]**
 
-  USPatent No. 6377570, 47 claims in all, issued April 23, 2002.USPatent No. 6671272, with 11 claims in all, issued December 30, 2003.USPatent Application No. 10/621,383, with 42 claims in all, published February 5,2004.**SCHEDULE- 2

PURCHASEDASSETS

 **
 

ThePurchased Assets shall include the following:

 

1.Assignment of a certain Technology License Agreement, between FoneFriend, Inc.,as "Licensee", and FoneFriend Systems, Inc., as the "Company,dated April 30, 2001, to be delivered to Purchaser by Seller at Closing.

 

2. Acertain original stock certificate, number 7, representing 225,000 shares of thecommon stock of FoneFriend Systems, Inc., $.00025 par value, dated December 29,2001, and registered in the name of FoneFriend, Inc., to be delivered toPurchaser by Seller at Closing.

 

3. OnePC computer, referred to as the "FoneFriend Connection Server", withSun Solaris operating system and proprietary software developed by FoneFriendSystems, Inc., presently in the possession of Winsonic Holdings Ltd., and placedfor the benefit of FoneFriend at Winsonic's "co-location facilities"with Level 3, located at 818 W. Seventh St., Los Angeles, California. This assetto remain in Winsonic's possession until further notice by Purchaser.

 

4. OnePC computer, referred to as the "FoneFriend H - Server", a HewlettPackard Pavilion, 2.0 Ghz PC computer with 512 Mb. RAM, Windows XP Professionaloperating system and proprietary software developed by FoneFriend Systems, Inc.,presently in the possession of Winsonic Holdings Ltd., and placed for thebenefit of FoneFriend at Winsonic's "co-location facilities" withLevel 3, located at 818 W. Seventh St., Los Angeles, California. This asset toremain in Winsonic's possession until further notice by Purchaser.

 

5. One"Quintum, Tenor, 8-Port", analog gateway, along with software CD andinstruction manual, presently in the possession of Winsonic Holdings Ltd., andplaced for the benefit of FoneFriend at Winsonic's "co-locationfacilities" with Level 3, located at 818 W. Seventh St., Los Angeles,California. This asset to remain in Winsonic's possession until further noticeby Purchaser.

 

6.Approximately 50 FoneFriend "beta" devices, and approximately 20 powersupplies, presently located at 14545 Friar Street, Suite 103, Van Nuys,California 91411. This asset to remain at present location until further noticeby Purchaser.

 

7. Acopy of the FoneFriend "Help Desk" software, used for programming theFoneFriend "beta" devices, to be delivered to Purchaser by Seller atClosing.
**EXHIBIT"B"

 

ACKNOWLEDGEMENTAND CONSENT

 

TOASSIGNMENT OF TECHNOLOGY LICENSE AGREEMENT

BY

FONEFRIENDSYSTEMS, INC.

 

FONEFRIENDSYSTEMS, INC.

 **
John D.Wimsatt   

 524 Rittenhouse Street, NW   

 Also

*President*   

 Washington, D.C. 20015   

 Kingston, New York

   

202-363-2423(Tel/Fax)   

 NewPaltz, New York

   

jackwimsatt@starpower.net   

 www.fonefriend.com

 

ViaFacsimile and Federal Express

 

July1,2004

 

To:Gary Rasmussen

     FoneFriend,Inc.

 

From:John D. Wimsatt

 

Re:Consents and Understandings

 

Withrespect to the assignment of all of the rights and obligations under theTechnology License Agreement, dated April 30, 2001, between FoneFriend Systems,Inc. (FSI), a District of Columbia corporation, and FoneFriend, Inc., a Nevadacorporation, to FoneFriend, Inc., a Delaware corporation, and to YapInternational, Inc., a Nevada corporation, FSI hereby consents. In addition, FSIagrees to extend the term of the Agreement by three years. FSI also representsthat said Agreement is currently in full force and effect and not in default.

 

Inaccordance with the terms of the aforementioned Agreement, FoneFriend, Inc., orits Assignee(s) are responsible for certain onetime costs associated with thedevelopment of the "NexGen" capability, specifically the up frontlicense fee of $150,000 charged by GAO Research, Inc (GRI), a Canadiancorporation, for its GAO SOFTWARE, with $30,000 of this fee reimbursable to FSIfor payments already made to GRI and $120,000 payable directly to GRI. FSI hasagreed to credit FoneFriend, Inc., or its Assignee(s) the full Amount of the$150,000 to be paid herein as an advance against royalties due to FSI as per theTechnology Licensing Agreement. For information, FSI shall formally accept saidGAO SOFTWARE and make appropriate changes to the Software-Copyright LicenseAgreement with GRI as may be necessary in connection therewith.

 

Bothparties hereby acknowledge and agree to the foregoing.

 

ForFoneFriend, Inc.

  For FoneFriend Systems, Inc.

 

/s/Gary Rasmussen                     

 /s/ John D. Wimsatt                    

GaryRasmussen, Chairman

  John D.Wimsatt, President******