Document:

Exhibit 10.10

    
      	
               

            	
              EXHIBIT 10.10

            	
               

            

    

    CONFIDENTIAL

    March 1, 2007

    Ace Ethanol, LLC

    c/o Greene Holcomb & Fisher LLC

    5450 Wells Fargo Center

    90 South Seventh Street

    Minneapolis, Minnesota 55402

    
      	
              LETTER OF INTENT

            

    

    Ladies and Gentlemen:

     This Letter summarizes certain terms under which ALL Energy Company
      ("Buyer") would acquire up to 100%, and not less than 70%, of the outstanding
      equity membership interests of Ace Ethanol, LLC (the "Company"). This proposed
      transaction is sometimes referred to as the "Transaction." 

    
      	
              NON-BINDING TERMS

            

    

    This paragraph and Sections 1 through 4 are not legally binding on either
      party. They would serve as the non-binding basis for an initial draft of a
      definitive agreement for the Transaction (the "Definitive Agreement"). We
      currently contemplate that the Definitive Agreement would include, among others,
      the following terms:

    1. The Transaction. At the closing of the Transaction ("Closing"), the
      Buyer would purchase up to 100% of the outstanding equity of the Company. Seller
      would make available to the Company's members the opportunity to retain or
      "roll" up to 30% of the Company's equity on a tax-efficient basis. However,
      this
      opportunity would be at the option of the Company's members, and the Buyer
      would
      be prepared to purchase 100% of the Company's equity for cash.

    2. Agreement Execution. We would attempt to negotiate and execute the
      Definitive Agreement by March 31, 2007.

    3. Purchase Price. The purchase price would be $106 million, subject to
      adjustment as provided below (the "Purchase Price"), on a debt-free, cash-free
      basis. For this purpose, the Company's potential tax obligations to the City
      of
      Stanley, Wisconsin would not be considered "debt." The Purchase Price would
      be
      paid as follows:

    (a) Cash at Closing. At Closing, Buyer would pay the Purchase Price, less
      the Escrow Amount, in cash to the Company's members.

    (b) Escrow. At Closing, Buyer would deposit approximately $3.18 million
      with a mutually acceptable escrow agent to secure the performance of the
      Company's and its members' indemnification obligations under the Definitive
      Agreement. Subject to pending claims, one-half of this escrowed amount would
      be
      released from escrow after 12 months (which we are assuming is the time required
      to complete the first audit cycle after the Closing) and the remaining escrowed
      amount would be released after 18 months.

    (c) Purchase Price Adjustment--Reduction for Retained Membership
      Interests.. At Closing, the amounts payable by Buyer as outlined above would
      be
      proportionately reduced for any membership interests that the Company's members
      elect to retain.

    (d) Purchase Price Adjustment--Working Capital. After Closing, the Purchase
      Price would be adjusted, based on the excess or shortfall of the Company's
      closing net working capital as compared to a target number reflecting a
      reasonable amount of working capital for the Company's business. The target
      working capital will be determined prior to signing the Definitive Agreement.
      An
      estimate of the working capital adjustment would be prepared and paid at
      closing. As described above, this working capital adjustment would be determined
      on a debt-free, cash-free basis.

    (e) Purchase Price Adjustment--New Corn Bins. The parties acknowledge that
      the Company intends to make purchase deposits for two new corn bins between
      now
      and Closing. If these deposits are made before Closing, the Purchase Price
      will
      be increased by the amount of that deposit, which is currently contemplated
      to
      be $300,000.

    (f) Purchase Price Adjustment--Put Contracts. The parties also acknowledge
      that the Company will likely be purchasing put contracts on or about March
      15,
      2007. The cost of these put contracts is currently contemplated to be
      approximately $680,000. If these put contracts are purchased before Closing,
      at
      Buyer's option, the Purchase Price would simply be increased by the cost of
      the
      put contracts, or the put contracts would be liquidated and the Purchase Price
      would be increased by the proceeds received by the Company.

    (g) Future Tax Refund Attributable to Sales Tax Audit. The parties also
      acknowledge that the Company is undergoing a sales tax audit for the years
      2002-2005. The Company currently contemplates that it will pay the amount of
      the
      disputed sales tax and file for a refund pending resolution of the audit. The
      Definitive Agreement would include provisions that would require Buyer to cause
      the Company to continue to pursue, in good faith, the subject sale tax refund,
      at the expense of the Company. The Definitive Agreement would also provide
      for
      70% of any such sales tax refund proceeds to be distributed by the Company
      to
      the members of record of the Company, pro rata, as of the date of closing under
      the Definitive Agreement. The Company would retain the balance of any such
      sales
      tax refund proceeds. At or before Closing, the Company will either pay the
      disputed sales tax amount to the appropriate tax authorities (subject to the
      refund claim contemplated hereby), or pay the disputed amount into an escrow
      until final resolution of the pending audit.

    4. Certain Additional Terms. The Definitive Agreement would contain other
      terms and conditions that would be customary for transactions of this type,
      including customary representations, warranties, covenants and indemnities
      (subject to the escrow limit described above). 

     

    
      	
              BINDING TERMS

            

    

    This paragraph and Sections 5 through 11, which are referred to
      collectively as the "Binding Terms," are the legally binding and enforceable
      agreements of Buyer and the Company. 

    5. Exclusivity. Throughout the period that begins on the date of this
      Letter and ends on the date that is 30 days from the date of mutual execution
      of
      this Letter (the "Exclusivity Period"), the Company will not, and will cause
      each of its representatives and agents not to, directly or indirectly, solicit,
      initiate, seek or encourage any inquiry, proposal or offer from, furnish any
      information to, or participate in any discussions or negotiations with, any
      person (other than Buyer or any person on Buyer's behalf) regarding any
      acquisition of the Company or any of its membership interests, assets or
      business, in whole or in part, whether directly or indirectly (by merger, tender
      offer, purchase, statutory share exchange, joint venture or otherwise), except
      sales of inventory in the ordinary course of the Company's business. Any
      Definitive Agreement would include an exclusivity agreement, with an appropriate
      "fiduciary out" that applies until the Company's members vote on the
      Transaction.

    Confidentiality. The terms and existence of this Letter, and the content
      and existence of discussions regarding the Transaction, are confidential
      information, and protected from disclosure by, the existing Confidentiality
      Agreement between the parties, which will remain in full force and effect
      pursuant to its terms. Notwithstanding the foregoing and the existing
      Confidentiality Agreement, the parties agree that (i) disclosure regarding
      the
      content and existence of this Letter made by Buyer or its affiliates under
      applicable securities laws shall not be a violation of this paragraph 6, and
      (ii) the Company may disclose the existence and terms of this Letter to its
      members at the members' meeting to be held on or about March 10, 2007.

    7. Expenses. Except to the extent expressly stated otherwise in the
      Definitive Agreement and the next paragraph, each of Buyer and the Company
      will
      be responsible for and bear all of its respective costs and expenses (including
      any broker's or finder's fees, legal fees and expenses and the fees and expenses
      of its other representatives) incurred at any time in connection with pursuing
      or consummating the Transaction.

     Notwithstanding the prior paragraph, if at any time prior to the
      termination of the Exclusivity Period Buyer presents to the Company a binding
      commitment letter from a reputable financing source with respect to the full
      amount of the Purchase Price, then the following provision shall
      apply:

      (i) if the parties do not enter into a definitive agreement
      relating to the Transaction (other than as a result of Buyer not being willing
      to enter into the Transaction on the terms proposed herein or breaching its
      obligations hereunder); and

      (ii) on or prior to May 31, 2007, the Company and a third party
      enter into a definitive agreement for the sale of the Company or any substantial
      part thereof to such third party; 

     then the Company shall reimburse Buyer's reasonable documented
      out-of-pocket costs and expenses (including reasonable attorney fees and costs,
      but excluding any compensation paid to employees of Buyer) incurred in
      connection with the Transaction, but not to exceed $200,000 in the
      aggregate.

    8. No Other Obligations or Claims. Nothing herein obligates either party
      to
      enter into or continue any discussions or negotiations with, solicit or accept
      any proposal from or enter into any definitive agreement with, the other party.
      Except for the Binding Terms, unless and until a final definitive agreement
      between the parties regarding a transaction has been executed and delivered
      (or
      except as expressly provided in any binding written agreement that either of
      the
      parties may enter into in the future), (a) neither party will be under any
      legal
      obligation of any kind regarding such a transaction by virtue of this Letter
      and
      (b) no past or future action, course of conduct or failure to act regarding
      a
      transaction, or relating to the negotiation of the terms of a transaction or
      the
      Definitive Agreement, will give rise to or serve as a basis for any obligation
      or other liability on the part of either party.

    9. Waiver and Amendment. No failure or delay by either party in exercising
      any right, power or privilege under this Letter will operate as a waiver
      thereof, nor will any single or partial exercise thereof preclude any other
      or
      further exercise of any right, power or privilege hereunder. No term in this
      Letter can be waived or amended except in a writing signed by each
      party.

    10. Entire Agreement. Other than existing confidentiality rights and
      obligations in any written agreement between the parties, this Letter contains
      the entire agreement between the parties regarding the subject matter hereof
      and
      supersedes all prior agreements or understandings between the parties with
      respect thereto.

    11. Counterparts. This Letter may be executed in counterparts, each of
      which will be deemed an original, and all of which will constitute the same
      agreement.

    * * * * *

     If the Company is in agreement, please sign below and return one or
      more fully executed copies of this Letter to Buyer. The Binding Terms will
      then
      become a binding agreement between us. Our proposal will expire at 5:00 p.m.
      CST
      on March 3, 2007 unless you deliver a signed copy of this Letter to us before
      that time.

    Very truly yours, 

    ALL ENERGY COMPANY

    By: /s/ DEAN E. SUKOWATEY

    Its: President

    Acknowledged and agreed to as of the date first written above:

    ACE ETHANOL, LLC

    By: /s/ 

    Its:Unassociated Document

    
      Exhibit
        4.5 

    

    

      THE
        SECURITIES REPRESENTED BY THIS WARRANT AND THE SHARES ISSUABLE ON EXERCISE
        OF
        THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE
        SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
        OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT AND
        ANY
        APPLICABLE STATE SECURITIES LAWS.

      

      WARRANT
        TO PURCHASE _________ SHARES

      OF
        THE COMMON STOCK OF 

      Handheld
        Entertainment, Inc.

      

      

      This
        certifies that _______________ or its assigns (each individually, the
“Holder”)
        for
        value received, shall be entitled to purchase from Handheld
        Entertainment,
        Inc.,
        a
        Delaware corporation (the “Company”),
        having its principal place of business at 539 Bryant Street, Suite 403, San
        Francisco, CA 94107, a maximum of ___________ (_________) fully paid and
        nonassessable shares of the Company’s Common Stock (“Common
        Stock”)
        for
        cash at a price equal to $_______ per share (the “Exercise
        Price”)
        at any
        time, or from time to time, up to and including 5:00 p.m. (local time) on
        _______________, 20___ (the “Expiration
        Date”),
        upon
        the surrender to the Company at its principal place of business (or at such
        other location as the Company may advise the Holder in writing) of this Warrant
        properly endorsed, a Form of Subscription in substantially the form attached
        hereto duly filled in and signed and, if applicable, upon payment in cash
        or by
        check of the aggregate Exercise Price for the number of shares for which
        this
        Warrant is being exercised determined in accordance with the provisions hereof.
        The Exercise Price and the number of shares of Common Stock purchasable
        hereunder are subject to adjustment as provided in Section 3
        herein.

      

      This
        Warrant is subject to the following terms and conditions:

       

      1. Exercise;
        Issuance of Certificates; Payment for Shares.

       

      1.1. General.
        The
        Company agrees that the shares of Common Stock purchased under this Warrant
        shall be and are deemed to be issued to the Holder hereof as the record owner
        of
        such shares as of the close of business on the date on which this Warrant
        shall
        have been surrendered, properly endorsed, the completed, executed Subscription
        Form delivered and payment made for such shares. Certificates for the shares
        of
        Common Stock so purchased, together with any other securities or property
        to
        which the Holder is entitled upon such exercise, shall be delivered to the
        Holder by the Company at the Company’s expense within a reasonable time after
        the rights represented by this Warrant have been so exercised, and in any
        event,
        within fifteen (15) days of such exercise. In case of a purchase of less
        than
        all the shares which may be purchased under this Warrant, the Company shall
        cancel this Warrant and execute and deliver a new Warrant or Warrants of
        like
        tenor for the balance of the shares purchasable under the Warrant surrendered
        upon such purchase to the Holder hereof within a reasonable time. Each stock
        certificate so delivered shall be in such denominations of Common Stock as
        may
        be requested by the Holder hereof and shall be registered in the name designated
        by such Holder. 

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

       

      1.2. Vesting.
        Notwithstanding any provisions herein to the contrary, the vesting for the
        underlying shares will be as follows

       

      (a). Upon
        Issuance:
        __________ (______) shares will be exercisable at the option of the holder
        of
        record hereof at any time or from time to time, up to the Expiration Date
        for
        all or any part of the shares of Common Stock (but not for a fraction of
        a
        share) which may be purchased hereunder.

       

      (b)
        Scheduled Vesting:
        The
        remaining underlying shares (________) will vest, as noted below,
        __________________________

      

        1.3. Net
          Issue Exercise.
          Notwithstanding any provisions herein to the contrary, if the fair market
          value
          of one share of the Company’s Common Stock is greater than the Exercise Price
          (at the date of calculation as set forth below), in lieu of exercising
          this
          Warrant for cash, the Holder may elect to receive shares equal to the value
          (as
          determined below) of this Warrant (or the portion thereof being canceled)
          by
          surrender of this Warrant at the principal office of the Company together
          with
          the properly endorsed Form of Subscription and notice of such election
          in which
          event the Company shall issue to the Holder a number of shares of Common
          Stock
          computed using the following formula:

      

       

      X
        = Y (A-B)

          A

      

      Where X = the number of shares of Common Stock to be issued to the Holder

      

      Y
        = the number of shares of Common Stock purchasable under the Warrant&
#160;or,
        if only a portion of the Warrant is being exercised, the portion of the Warrant
        being canceled (at the date of such calculation)

      

      A
        = the fair market value of one share of the Company’s Common
60;Stock (at
        the date of such calculation)

      

      B
        = Exercise Price (as adjusted to the date of such calculation).

      
         

        For
          purposes of the above calculation, the fair market value of one share of
          Common
          Stock shall be determined by the Company’s Board of Directors in good faith;
          provided, however, that where there is a public market for the Company’s Common
          Stock, the fair market value per share shall be the average of the closing
          prices of the Company’s Common Stock quoted on the Nasdaq National Market (or
          similar system) or on any exchange on which the Common Stock is listed,
          whichever is applicable, over the five (5) day period ending one (1) day
          before
          the day the current fair market value is being determined.

      

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      

      2. Shares
        to be Fully Paid; Reservation of Shares.

       

      The
        Company covenants and agrees that all shares of Common Stock which may be
        issued
        upon the exercise of the rights represented by this Warrant will, upon issuance,
        be duly authorized, validly issued, fully paid and nonassessable and free
        from
        all preemptive rights of any shareholder and free of all taxes, liens and
        charges with respect to the issue thereof. The Company further covenants
        and
        agrees that, during the period within which the rights represented by this
        Warrant may be exercised, the Company will at all times have authorized and
        reserved, for the purpose of issue or transfer upon exercise of the subscription
        rights evidenced by this Warrant, a sufficient number of shares of authorized
        but unissued Common Stock, or other securities and property, when and as
        required to provide for the exercise of the rights represented by this Warrant.
        The Company will take all such action as may be necessary to assure that
        such
        shares of Common Stock may be issued as provided herein without violation
        of any
        applicable law or regulation, or of any requirements of any domestic securities
        exchange upon which the Common Stock may be listed; provided, however, that
        the
        Company shall not be required to effect a registration under Federal or State
        securities laws with respect to such exercise. The Company will not take
        any
        action which would result in any adjustment of the Exercise Price (as set
        forth
        in Section 3 hereof) if the total number of shares of Common Stock issuable
        after such action upon exercise of all outstanding warrants, together with
        all
        shares of Common Stock then outstanding and all shares of Common Stock then
        issuable upon exercise of all options and upon the conversion of all convertible
        securities then outstanding, would exceed the total number of shares of Common
        Stock then authorized by the Company’s Articles/Certificate of Incorporation
        (the “Company
        Charter”).

       

      3. Adjustment
        of Exercise Price and Number of Shares. 

       

      3.1. The
        Exercise Price and the number of shares purchasable upon the exercise of
        this
        Warrant shall be subject to adjustment from time to time upon the occurrence
        of
        certain events described in this Section 3. Upon each adjustment of the Exercise
        Price, the Holder of this Warrant shall thereafter be entitled to purchase,
        at
        the Exercise Price resulting from such adjustment, the number of shares obtained
        by multiplying the Exercise Price in effect immediately prior to such adjustment
        by the number of shares purchasable pursuant hereto immediately prior to
        such
        adjustment, and dividing the product thereof by the Exercise Price resulting
        from such adjustment.

       

      3.2. Subdivision
        or Combination of Stock.
        In case
        the Company shall at any time subdivide its outstanding shares of Common
        Stock
        into a greater number of shares, the Exercise Price in effect immediately
        prior
        to such subdivision shall be proportionately reduced, and conversely, in
        case
        the outstanding shares of Common Stock of the Company shall be combined into
        a
        smaller number of shares, the Exercise Price in effect immediately prior
        to such
        combination shall be proportionately increased.

       

      3.3. Dividends
        in Common Stock, Other Stock, Property, Reclassification.
        If at
        any time or from time to time the Holders of Common Stock (or any shares
        of
        stock or other securities at the time receivable upon the exercise of this
        Warrant) shall have received or become entitled to receive, without payment
        therefor,

       

      (a) Common
        Stock or any shares of stock or other securities which are at any time directly
        or indirectly convertible into or exchangeable for Common Stock, or any rights
        or options to subscribe for, purchase or otherwise acquire any of the foregoing
        by way of dividend or other distribution,

       

      (b) any
        cash
        paid or payable otherwise than as a cash dividend, or

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

       

      (c) Common
        Stock or additional stock or other securities or property (including cash)
        by
        way of spinoff, split-up, reclassification, combination of shares or similar
        corporate rearrangement, (other than shares of Common Stock issued as a stock
        split or adjustments in respect of which shall be covered by the terms of
        Section 3.1 above), then and in each such case, the Holder hereof shall,
        upon
        the exercise of this Warrant, be entitled to receive, in addition to the
        number
        of shares of Common Stock receivable thereupon, and without payment of any
        additional consideration therefor, the amount of stock and other securities
        and
        property (including cash in the cases referred to in clause (b) above and
        this
        clause (c)) which such Holder would hold on the date of such exercise had
        he
        been the holder of record of such Common Stock as of the date on which holders
        of Common Stock received or became entitled to receive such shares or all
        other
        additional stock and other securities and property.

       

      3.4. Reorganization,
        Reclassification, Consolidation, Merger or Sale.
        If any
        recapitalization, reclassification or reorganization of the capital stock
        of the
        Company, or any consolidation or merger of the Company with another corporation,
        or the sale of all or substantially all of its assets or other transaction
        shall
        be effected in such a way that holders of Common Stock shall be entitled
        to
        receive stock, securities, or other assets or property (an “Organic
        Change”),
        then,
        as a condition of such Organic Change, lawful and adequate provisions shall
        be
        made by the Company whereby the Holder hereof shall thereafter have the right
        to
        purchase and receive (in lieu of the shares of the Common Stock of the
        Company immediately theretofore purchasable and receivable upon the exercise
        of
        the rights represented by this Warrant) such shares of stock, securities
        or
        other assets or property as may be issued or payable with respect to or in
        exchange for a number of outstanding shares of such Common Stock equal to
        the
        number of shares of such stock immediately theretofore purchasable and
        receivable upon the exercise of the rights represented by this Warrant. In
        the
        event of any Organic Change, appropriate provision shall be made by the Company
        with respect to the rights and interests of the Holder of this Warrant to
        the
        end that the provisions hereof (including, without limitation, provisions
        for
        adjustments of the Exercise Price and of the number of shares purchasable
        and
        receivable upon the exercise of this Warrant) shall thereafter be applicable,
        in
        relation to any shares of stock, securities or assets thereafter deliverable
        upon the exercise hereof. The Company will not effect any such consolidation,
        merger or sale unless, prior to the consummation thereof, the successor
        corporation (if other than the Company) resulting from such consolidation
        or the
        corporation purchasing such assets shall assume by written instrument
        reasonably satisfactory in form and substance to the Holders executed and
        mailed
        or delivered to the registered Holder hereof at the last address of such
        Holder
        appearing on the books of the Company, the obligation to deliver to such
        Holder
        such shares of stock, securities or assets as, in accordance with the foregoing
        provisions, such Holder may be entitled to purchase.

       

      3.5. Certain
        Events. 
        If any
        change in the outstanding Common Stock of the Company or any other event
        occurs
        as to which the other provisions of this Section 3 are not strictly applicable
        or if strictly applicable would not fairly protect the purchase rights of
        the
        Holder of the Warrant in accordance with such provisions, then the Board
        of
        Directors of the Company shall make an adjustment in the number and class
        of
        shares available under the Warrant, the Exercise Price or the application
        of
        such provisions, so as to protect such purchase rights as aforesaid. The
        adjustment shall be such as will give the Holder of the Warrant upon exercise
        for the same aggregate Exercise Price the total number, class and kind of
        shares
        as he would have owned had the Warrant been exercised prior to the event
        and had
        he continued to hold such shares until after the event requiring
        adjustment.

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

       

      3.6. Notices
        of Change.

       

      (a) Immediately
        upon any adjustment in the number or class of shares subject to this Warrant
        and
        of the Exercise Price, the Company shall give written notice thereof to the
        Holder, setting forth in reasonable detail and certifying the calculation
        of
        such adjustment.

       

      (b) The
        Company shall give written notice to the Holder at least 10 business days
        prior
        to the date on which the Company closes its books or takes a record for
        determining rights to receive any dividends or distributions.

       

      (c) The
        Company shall also give written notice to the Holder at least 30 business
        days
        prior to the date on which an Organic Change shall take place.

       

      4. Issue
        Tax.

       

      The
        issuance of certificates for shares of Common Stock upon the exercise of
        the
        Warrant shall be made without charge to the Holder of the Warrant for any
        issue
        tax (other than any applicable income taxes) in respect thereof; provided,
        however, that the Company shall not be required to pay any tax which may
        be
        payable in respect of any transfer involved in the issuance and delivery
        of any
        certificate in a name other than that of the then Holder of the Warrant being
        exercised.

      

      5. Closing
        of Books.

       

      The
        Company will at no time close its transfer books against the transfer of
        any
        warrant or of any shares of Common Stock issued or issuable upon the exercise
        of
        any warrant in any manner which interferes with the timely exercise of this
        Warrant.

      

      6. No
        Voting or Dividend Rights; Limitation of Liability. 

       

      Nothing
        contained in this Warrant shall be construed as conferring upon the Holder
        hereof the right to vote or to consent or to receive notice as a shareholder
        of
        the Company or any other matters or any rights whatsoever as a shareholder
        of
        the Company. No dividends or interest shall be payable or accrued in respect
        of
        this Warrant or the interest represented hereby or the shares purchasable
        hereunder until, and only to the extent that, this Warrant shall have been
        exercised. No provisions hereof, in the absence of affirmative action by
        the
        holder to purchase shares of Common Stock, and no mere enumeration herein
        of the
        rights or privileges of the holder hereof, shall give rise to any liability
        of
        such Holder for the Exercise Price or as a shareholder of the Company, whether
        such liability is asserted by the Company or by its creditors.

      

      7. Warrants
        Transferable.

       

      Subject
        to compliance with applicable federal and state securities laws, this Warrant
        and all rights hereunder are transferable, in whole or in part, without charge
        to the holder hereof (except for transfer taxes), upon surrender of this
        Warrant
        properly endorsed. Each taker and holder of this Warrant, by taking or holding
        the same, consents and agrees that this Warrant, when endorsed in blank,
        shall
        be deemed negotiable, and that the holder hereof, when this Warrant shall
        have been so endorsed, may be treated by the Company, at the Company’s option,
        and all other persons dealing with this Warrant as the absolute owner hereof
        for
        any purpose and as the person entitled to exercise the rights represented
        by
        this Warrant, or to the transfer hereof on the books of the Company any notice
        to the contrary notwithstanding; but until such transfer on such books, the
        Company may treat the registered owner hereof as the owner for all
        purposes.

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

      8. Rights
        and Obligations Survive Exercise of Warrant.

       

      The
        rights and obligations of the Company, of the holder of this Warrant and
        of the
        holder of shares of Common Stock issued upon exercise of this Warrant, shall
        survive the exercise of this Warrant.

      

      9. Further
        Representations, Warranties and Covenants of the
        Company.

       

      9.1. Articles
        and Bylaws.
        The
        Company has made available to Holder true, complete and correct copies of
        the
        Company Charter and Bylaws, as amended, through the date hereof.

       

      9.2. Due
        Authority.
        The
        execution and delivery by the Company of this Warrant and the performance
        of all
        obligations of the Company hereunder, including the issuance to Holder of
        the
        right to acquire the shares of Common Stock, have been duly authorized by
        all
        necessary corporate action on the part of the Company, and the Warrant is
        not
        inconsistent with the Company Charter or Bylaws and constitutes a legal,
        valid
        and binding agreement of the Company, enforceable in accordance with its
        terms.

       

      9.3. Consents
        and Approvals.
        No
        consent or approval of, giving of notice to, registration with, or taking
        of any
        other action in respect of any state, federal or other governmental authority
        or
        agency is required with respect to the execution, delivery and performance
        by
        the Company of its obligations under this Warrant, except for any filing
        required by applicable federal and state securities laws, which filing will
        be
        effective by the time required thereby.

       

      9.4. Issued
        Securities.
        All
        issued and outstanding shares of capital stock of the Company have been duly
        authorized and validly issued and are fully paid and nonassessable. All
        outstanding shares of capital stock were issued in full compliance with all
        federal and state securities laws. 

       

      9.5. Exempt
        Transaction.
        Subject
        to the accuracy of the Holder’s representations in Section 10 hereof, the
        issuance of the Common Stock upon exercise of this Warrant will constitute
        a
        transaction exempt from (i) the registration requirements of Section 5 of
        the
        Securities Act of 1933, as amended (the “Securities Act”), in reliance upon
        Section 4(2) thereof, and (ii) the qualification requirements of the applicable
        state securities laws.

       

      9.6. Compliance
        with Rule 144.
        At the
        written request of the Holder, who proposes to sell Common Stock issuable
        upon
        the exercise of the Warrant in compliance with Rule 144 promulgated by the
        Securities and Exchange Commission, the Company shall furnish to the Holder,
        within thirty (30) days after receipt of such request, a written statement
        confirming the Company’s compliance with the filing requirements of the
        Securities and Exchange Commission as set forth in such Rule, as such Rule
        may
        be amended from time to time.

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      

       

      10. Representations
        and Covenants of the Holder.

       

      This
        Warrant has been entered into by the Company in reliance upon the following
        representations and covenants of the Holder:

      

      10.1. Investment
        Purpose.
        The
        Warrant or the Common Stock issuable upon exercise of the Warrant will be
        acquired for investment and not with a view to the sale or distribution of
        any
        part thereof, and the Holder has no present intention of selling or engaging
        in
        any public distribution of the same except pursuant to a registration or
        exemption.

       

      10.2. Private
        Issue.
        The
        Holder understands (i) that the Warrant and the Common Stock issuable upon
        exercise of this Warrant are not registered under the Securities Act or
        qualified under applicable state securities laws on the ground that the issuance
        contemplated by this Warrant will be exempt from the registration and
        qualifications requirements thereof, and (ii) that the Company’s reliance on
        such exemption is predicated on the representations set forth in this Section
        10.

       

      10.3. Disposition
        of Holders Rights.
        In no
        event will the Holder make a disposition of the Warrant or the Common Stock
        issuable upon exercise of the Warrant unless and until (i) it shall have
        notified the Company of the proposed disposition, and (ii) if requested by
        the
        Company, it shall have furnished the Company with an opinion of counsel (which
        counsel may either be inside or outside counsel to the Holder) satisfactory
        to
        the Company and its counsel to the effect that (A) appropriate action necessary
        for compliance with the Securities Act has been taken, or (B) an exemption
        from
        the registration requirements of the Securities Act is available.
        Notwithstanding the foregoing, the restrictions imposed upon the transferability
        of any of its rights to acquire Common Stock or Common Stock issuable on
        the
        exercise of such rights do not apply to transfers from the beneficial owner
        of
        any of the aforementioned securities to its nominee or from such nominee
        to its
        beneficial owner, and shall terminate as to any particular share of Common
        Stock
        when (1) such security shall have been effectively registered under the
        Securities Act and sold by the holder thereof in accordance with such
        registration or (2) such security shall have been sold without registration
        in
        compliance with Rule 144 under the Securities Act, or (3) a letter shall
        have
        been issued to the Holder at its request by the staff of the Securities and
        Exchange Commission or a ruling shall have been issued to the Holder at its
        request by such Commission stating that no action shall be recommended by
        such
        staff or taken by such Commission, as the case may be, if such security is
        transferred without registration under the Securities Act in accordance with
        the
        conditions set forth in such letter or ruling and such letter or ruling
        specifies that no subsequent restrictions on transfer are required. Whenever
        the
        restrictions imposed hereunder shall terminate, as hereinabove provided,
        the
        Holder or holder of a share of Common Stock then outstanding as to which
        such
        restrictions have terminated shall be entitled to receive from the Company,
        without expense to such holder, one or more new certificates for the Warrant
        or
        for such shares of Common Stock not bearing any restrictive legend.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      

       

      10.4. Financial
        Risk.
        The
        Holder has such knowledge and experience in financial and business matters
        as to
        be capable of evaluating the merits and risks of its investment, and has
        the
        ability to bear the economic risks of its investment.

       

      10.5. Risk
        of No Registration.
        The
        Holder understands that if the Company does not register with the Securities
        and
        Exchange Commission pursuant to Section 12 of the Securities Act, or file
        reports pursuant to Section 15(d), of the Securities Exchange Act of 1934
        (the
“Exchange Act”), or if a registration statement covering the securities under
        the Securities Act is not in effect when it desires to sell (i) the Warrant,
        or
        (ii) the Common Stock issuable upon exercise of the Warrant, it may be required
        to hold such securities for an indefinite period. The Holder also understands
        that any sale of the Warrant or the Common Stock issuable upon exercise of
        the
        Warrant which might be made by it in reliance upon Rule 144 under the Securities
        Act may be made only in accordance with the terms and conditions of that
        Rule.

       

      10.6. Accredited
        Investor.
        Holder
        is an “accredited investor” within the meaning of Rule 501 of Regulation D under
        the Securities Act, as presently in effect.

       

      11. Modification
        and Waiver.

       

      This
        Warrant and any provision hereof may be changed, waived, discharged or
        terminated only by an instrument in writing signed by the party against which
        enforcement of the same is sought.

      

      12. Notices.

       

      Any
        notice, request or other document required or permitted to be given or delivered
        to the holder hereof or the Company shall be delivered or shall be sent by
        certified mail, postage prepaid, to each such holder at its address as shown
        on
        the books of the Company or to the Company at the address indicated therefor
        in
        the first paragraph of this Warrant or such other address as either may from
        time to time provide to the other.

      

      13. Binding
        Effect on Successors.

       

      This
        Warrant shall be binding upon any corporation succeeding the Company by merger,
        consolidation or acquisition of all or substantially all of the Company’s
        assets. All of the obligations of the Company relating to the Common Stock
        issuable upon the exercise of this Warrant shall survive the exercise and
        termination of this Warrant. All of the covenants and agreements of the Company
        shall inure to the benefit of the successors and assigns of the holder hereof.
        

      

      14. Descriptive
        Headings and Governing Law.

       

      The
        description headings of the several sections and paragraphs of this Warrant
        are
        inserted for convenience only and do not constitute a part of this Warrant.
        This
        Warrant shall be construed and enforced in accordance with, and the rights
        of
        the parties shall be governed by, the laws of the State of
        California.

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

      15. Lost
        Warrants.

       

      The
        Company represents and warrants to the Holder hereof that upon receipt of
        evidence reasonably satisfactory to the Company of the loss, theft, destruction,
        or mutilation of this Warrant and, in the case of any such loss, theft or
        destruction, upon receipt of an indemnity reasonably satisfactory to the
        Company, or in the case of any such mutilation upon surrender and cancellation
        of such Warrant, the Company, at its expense, will make and deliver a new
        Warrant, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
        Warrant. 

      

      16. Fractional
        Shares.

       

      No
        fractional shares shall be issued upon exercise of this Warrant. The Company
        shall, in lieu of issuing any fractional share, pay the holder entitled to
        such
        fraction a sum in cash equal to such fraction multiplied by the then effective
        Exercise Price.

      

      

      In
        Witness Whereof, the
        Company has caused this Warrant to be duly executed by its officers, thereunto
        duly authorized as of the _____ day of _________________20____. 

      

      

      

      HANDHELD
        ENTERTAINMENT, Inc.

      

       

      By:
        _____________________________

       

      Title:
        ____President
        & CEO__________

       

      

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      EXHIBIT
        A

       

      SUBSCRIPTION
        FORM

       

      Date:
        _________________, 200__

       

      [Company
        Name]

      [address]

       

      Attn:
        President

       

      Ladies
        and Gentlemen:

       

      
        	
                 ̈

              	
                The
                  undersigned hereby elects to exercise the warrant issued to it
                  by
                  International Microcomputer Software, Inc. (the “Company”)
                  and dated ___________ _____, ____ -___ (the “Warrant”)
                  and to purchase thereunder __________________________________ shares
                  of
                  the Common Stock of the Company (the “Shares”)
                  at a purchase price of ___________________________________________
                  Dollars
                  ($__________) per Share or an aggregate purchase price of
                  __________________________________ Dollars ($__________) (the
                  “Exercise
                  Price”).

              

      

       

      
        	
                 ̈

              	
                The
                  undersigned hereby elects to convert _______________________ percent
                  (____%) of the value of the Warrant pursuant to the provisions
                  of Section
                  1.2 of the Warrant.

              

      

       

      Pursuant
        to the terms of the Warrant the undersigned has delivered the Exercise Price
        herewith in full in cash or by certified check or wire transfer. 

      

      

      Very
        truly yours,

       

      
        	 	 	 	
              	
                 

              
	 	 	 	 	
                 

              
	
                Title:

              	 	 	
                By:
                  

              	
                 

              

      

      

      
        
           

        

        
          10

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