Document:

Unassociated Document

    ESCROW
      AGREEMENT 

    

    This
      ESCROW AGREEMENT (the “Agreement”),
      dated
      as of December 1, 2006 (the “Effective
      Date”),
      is
      made by and among Aperio Technologies, Inc., a Florida corporation
      (“Aperio”),
      Handheld Entertainment, Inc., a Delaware corporation (“Handheld”)
      and
      Niesar Curls Bartling & Whyte, LLP, a California limited liability
      partnership, as escrow agent (the “Escrow
      Agent”).

     

    R
      E C
      I T A L S:

     

    WHEREAS,
      Aperio and Handheld are parties to that certain Asset Purchase Agreement, dated
      as of December 1, 2006 (the “Purchase
      Agreement”),
      pursuant to which Handheld will purchase, and Aperio will sell, one hundred
      percent (100%) of the assets and business interests in Funmansion.com, which
      is
      entirely owned by Aperio;

     

    WHEREAS,
      Article 7 of the Purchase Agreement provides for the indemnification of Handheld
      by Aperio from certain losses that may be incurred by it; and

     

    WHEREAS,
      consummation of the Purchase Agreement is conditioned upon the execution and
      delivery of this Agreement and this Agreement is an essential part of the
      consideration for which Handheld is willing to enter into the Purchase Agreement
      and to consummate the transactions contemplated thereby.

     

    NOW,
      THEREFORE, in consideration of the foregoing premises, and for other good and
      valuable consideration, the receipt and adequacy of which is hereby
      acknowledged, it is hereby agreed as follows:

     

    1. Appointment
      of Escrow Agent.
      

     

    (a) The
      parties hereto hereby designate and appoint the Escrow Agent as escrow agent
      to
      act in accordance with the terms of this Agreement, and the Escrow Agent agrees
      to act as such escrow agent on the terms, conditions and provisions provided
      in
      this Agreement. 

     

    (b) On
      or
      before the Effective Date, Handheld will deposit:

     

    (i) Twenty
      Five Thousand Dollars ($25,000.00) in cash (the “Escrow
      Amount”)
      with
      the Escrow Agent for the account of Aperio. The Escrow Amount, together with
      any
      interest accrued thereon, shall be hereinafter referred to as the “Escrow
      Account.”
The
      Escrow Agent shall hold, administer, distribute and dispose of the Escrow
      Account in accordance with the terms and conditions of this Agreement;

     

    2. Escrow
      Account.
      

     

    (a) The
      Escrow Agent shall establish the Escrow Account as an Attorney Trust Account
      with such bank with offices in San Francisco, California, as it shall deem
      appropriate. Gerald V. Niesar shall be the only signatory on the Escrow Account.
      The Escrow Agent shall provide each of Handheld and Aperio with complete
      information concerning the Escrow Account, including a telephone access code
      allowing each to determine the balance of the Escrow Account on any banking
      day.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3. Payments
      From Escrow.
      The
      Escrow Agent shall hold the Escrow Account in accordance with this Agreement
      and
      shall make payments from the Escrow Account only as provided by Sections 3
      and 4
      hereof or as further directed in writing by both Aperio and
      Handheld:

     

    (a) In
      the
      event the Escrow Agent is duly instructed to disburse funds from the Escrow
      Account to any party, (i) the Escrow Agent shall disburse such funds by mailing
      a check to such party at the address set forth in the instruction; or (ii)
      if
      the Escrow Agent is instructed to transfer funds from the Escrow Account to
      any
      bank for the account of any party, the Escrow Agent shall disburse such funds
      by
      electronic transfer; provided, however, that the Escrow Agent may require the
      party issuing the instruction to agree to appropriate security procedures to
      verify that the instruction is that of such issuing party;

     

    (b) Handheld
      shall be paid such amounts as are authorized to be paid to Handheld pursuant
      to
      Section 4 below.

     

    (c) Six
      (6)-months following the Effective Date, Aperio shall be paid an amount equal
      to
      the entire Unclaimed Deposit (as hereinafter defined). For purposes of this
      agreement, the “Unclaimed
      Deposit”
shall
      mean the entire balance of the Escrow Account then remaining, minus the
      aggregate of the then existing Claim Reserves for Open Claims and any interest
      accrued thereon. 

     

    (d) Within
      two banking days of the Escrow Agent’s having received a copy of a Final
      Determination (as hereinafter defined) for an Open Claim, the amount payable
      to
      Handheld under the Final Determination for such Open Claim shall be paid to
      Handheld from the Claim Reserve for such Open Claim and the balance of such
      Claim Reserve shall then be paid to Aperio, to the extent authorized in Section
      4 below.

     

    (e) Within
      two banking days of the Escrow Agent’s having received a joint written
      instruction by Handheld and Aperio that an Open Claim is no longer disputed,
      the
      Escrow Agent shall pay the Claim Reserve for such Open Claim plus any interest
      accrued thereon to Aperio; provided, however that if the date set forth in
      Section 3(c) has not yet passed, such portion of the Claim Reserve plus any
      interest accrued thereon shall simply cease to be a reserved portion of the
      Escrow Account. 

     

    4. Handheld
      Claims.
      The
      procedure for payments from the Escrow Account shall be as follows:

     

    (a) From
      time
      to time prior to the date identified in Section 3(c) above as Handheld
      determines that it is entitled to an indemnification payment under Article
      VII
      of the Purchase Agreement, it may request payment from the Escrow Account by
      giving written notice of its claim to the Escrow Agent and Aperio in accordance
      with the provisions of Section 13 below, certifying in such notice (i) the
      nature of the claim, (ii) the amount thereof if then ascertainable and, if
      not
      then ascertainable, the estimated maximum amount thereof (provided however,
      that
      Handheld shall provide the Escrow Agent with a specific amount), (iii)
      provisions in the Purchase Agreement on which the claim is based, (iv) that
      such
      request for payment is being made in good faith, and (v) that notice of
      Handheld’s request for indemnification has been provided to Aperio in accordance
      with Article VII of the Purchase Agreement (a “Claim
      Notice”).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) If
      the
      Escrow Agent has not received written objection to a Claim Notice given by
      Handheld in accordance with the preceding Section 4(a) from Aperio within twenty
      (20) days after receipt by the Escrow Agent of the Claim Notice of such claim
      from Handheld, the Escrow Agent shall promptly thereafter pay to Handheld,
      in
      the manner specified in the Claim Notice, from the Escrow Account the amount
      of
      such claim to the extent of the funds in the Escrow Account, plus any interest
      accrued on such amount through the date of payment. 

     

    (c) If
      within
      said twenty (20) days the Escrow Agent shall have received from Aperio an
      objection to the claim by Handheld, certifying the nature of and grounds for
      such objection and that such objection is being made in good faith (a copy
      of
      which shall in each case be sent to Handheld by Aperio in accordance with the
      provisions of Section 13 below), then such claim shall be deemed to be an
“Open
      Claim”
and
      the
      Escrow Agent shall reserve within the Escrow Account an amount equal to the
      amount of the Open Claim (which amount for each Open Claim is referred to herein
      as the “Claim
      Reserve”).

     

    (d) The
      amount constituting the Claim Reserve for each Open Claim shall be paid by
      the
      Escrow Agent from the Escrow Account to Handheld only either (i) in accordance
      with a joint written instruction by Handheld and Aperio or (ii) if and to the
      extent consistent with either (A) a certified copy of a final order, decree
      or
      judgment from a court of competent jurisdiction pertaining to the Open Claim
      or
      (B) a certified copy of a final result, determination, finding, judgment and/or
      award from an arbitrator pertaining to the Open Claim, sent to the Escrow Agent
      by Handheld (a “Final
      Determination”),
      and
      any portion of the Claim Reserve for such Open Claim not so required to be
      paid
      to Handheld shall be paid by the Escrow Agent to Aperio in accordance with
      Section 3(c) or Section 3(d) above and such Claim Reserve shall be reduced
      to
      zero; provided, however that if the date set forth in Section 3(c) has not
      yet
      passed, such portion of the Claim Reserve shall simply cease to be a reserved
      portion of the Escrow Account.

     

    5. Termination.
      

     

    (a) This
      Agreement shall terminate on the earliest to occur of:

     

    (i) the
      date
      on which the Escrow Agent shall have been notified in writing by Handheld and
      Aperio that this Agreement shall be terminated; or

     

    (ii) the
      date
      on which the Escrow Agent shall have delivered the entire Escrow Account to
      Handheld or Aperio in accordance with the provisions of Sections 3(c), 3(d)
      or
      4.

     

    (b) Upon
      termination of this Agreement as set forth in this Section 5, the Escrow Agent
      shall be discharged from all further obligations or responsibilities
      hereunder.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    6. Duties
      of Escrow Agent.
      

     

    (a) The
      instructions of the parties set forth herein are irrevocable, and the Escrow
      Agent shall act only in accordance with such instructions and in any amendment
      or amendments executed by all parties hereto and not in accordance with any
      contrary instructions from any third person. The duties and obligations of
      the
      Escrow Agent shall be determined solely by the express provisions of this
      Agreement, and the Escrow Agent shall not be liable except for the performance
      of its duties and obligations as are specifically set forth herein.

     

    (b) The
      Escrow Agent shall provide to Aperio and Handheld monthly statements reflecting
      the balance of the Escrow Account and the interest earned thereon. In addition,
      the Escrow Agent shall forward all account records or statements related to
      the
      Escrow Account to Handheld and Aperio promptly upon receipt of the same. The
      Escrow Agent shall deliver to Handheld and Aperio, upon final disbursement,
      a
      complete accounting of all transactions relating to this Agreement.

     

    7. Liability
      of Escrow Agent.
      In
      order to induce the Escrow Agent to act as escrow agent hereunder, the parties
      hereto agree that: 

     

    (a) The
      Escrow Agent shall not be responsible for or be required to enforce any of
      the
      terms or conditions of the Purchase Agreement or any other agreement between
       
      Handheld
      and Aperio.

     

    (b) The
      Escrow Agent shall not be responsible or liable in any manner whatsoever for
      the
      performance of or by Handheld and Aperio of their respective obligations under
      this Agreement nor shall the Escrow Agent be responsible or liable in any manner
      whatsoever for the failure of the other parties to this Escrow Agreement or
      of
      any third party to honor any of the provisions of this Escrow
      Agreement.

     

    (c) The
      parties hereto represent to the Escrow Agent that they are authorized to enter
      into the Escrow Agreement by their duly authorized representatives and that
      the
      Escrow Agent is entitled to rely on this representation without the need to
      confirm the authority of the representatives.

     

    (d) The
      duties and obligations of the Escrow Agent shall be limited to and determined
      solely by the express provisions of this Escrow Agreement and no implied duties
      or obligations shall be read into this Escrow Agreement against the Escrow
      Agent.

     

    (e) The
      Escrow Agent is not bound by and is under no duty to inquire into the terms
      or
      validity of any other agreements or documents, including any agreements or
      documents which may be related to, referred to in or deposited with the Escrow
      Agent in connection with this Escrow Agreement.

     

    (f) The
      Escrow Agent shall not be liable for any act which the Escrow Agent may do
      or
      omit to do hereunder while acting in good faith, unless caused by or arising
      from its own gross negligence, willful misconduct or failure to act in good
      faith. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (g) It
      is
      understood that all checks received by the Escrow Agent hereunder are subject
      to
      clearance time and the funds represented thereby cannot be drawn upon or
      disbursed until such time as the same constitute good and collected funds.
      If
      any checks are returned to the Escrow Agent as uncollectible, the Escrow Agent
      shall notify the party on whose account the check was drawn and redeposit such
      check for collection upon the verbal instructions of such party. Notwithstanding
      the foregoing, if for any reason any check or instrument entered for collection
      by the Escrow Agent hereunder is uncollectible after payment of the funds
      represented thereby has been made pursuant to the terms hereof, the party on
      whose account the check was drawn shall immediately reimburse of the Escrow
      Agent and the Escrow Agent shall deliver the returned check or instrument to
      such party.

     

    (h) Neither
      this Escrow Agreement, nor any other agreement between Handheld, Aperio, and
      the
      Escrow Agent shall be deemed to create a joint venture between the Escrow Agent
      and Handheld or Aperio. Nor shall the Escrow Agent be considered the alter
      ego
      of Handheld or Aperio by virtue of this Agreement, or any other
      agreement.

     

    (i) the
      Escrow Agent shall not in any way be bound or affected by any amendment or
      modification of this Agreement, unless the same shall have been agreed to in
      writing by the Escrow Agent;

     

    (j) the
      Escrow Agent shall not be under any duty to give the property held hereunder
      any
      greater degree of care than it gives its own similar property;

     

    (k) the
      Escrow Agent may act in reliance upon and shall incur no liability for or in
      respect of any action taken or omitted to be taken or anything suffered by
      it in
      reliance upon, any notice, direction, consent, certificate, affidavit, statement
      or other paper or document reasonably believed by the Escrow Agent to be genuine
      and to have been presented or signed by the proper party or
      parties;

     

    (l) the
      Escrow Agent shall not at any time be under any duty or responsibility to make
      a
      determination of any facts contained in any certificate delivered pursuant
      hereto or to make any independent verification of the statements or signatures
      in such certificate or amounts delivered thereby. The Escrow Agent shall not
      be
      responsible for any failure by Handheld or Aperio to comply with any of their
      respective covenants contained in this Agreement, the Purchase Agreement or
      any
      other agreement;

     

    (m) the
      Escrow Agent shall be under no duty or obligation to take any legal action
      in
      connection with this Agreement or to enforce, through the institution of legal
      proceedings or otherwise, any of its rights as Escrow Agent hereunder or any
      rights of any other party hereto pursuant to this Escrow Agreement or any other
      agreement, nor shall it be required to defend any action or legal proceeding
      which, in its opinion, would or might involve the Escrow Agent in any cost,
      expense, loss or liability;

     

    (n) the
      Escrow Agent may engage or be interested in any financial or other transaction
      with the parties hereunder as freely as if it were not the Escrow Agent
      hereunder;

     

    (o) the
      Escrow Agent shall be entitled to rely upon advice of counsel (the cost of
      which
      shall be borne by Handheld and Aperio) of its choosing in reference to any
      matter connected herewith, and shall have full and complete authorization and
      protection for any action taken or suffered by it hereunder in good faith and
      in
      accordance with the opinion of such counsel and shall not be liable for any
      mistake of fact or error of judgment, or for any acts or omissions of any kind
      unless caused by its willful misconduct, gross negligence or failure to act
      in
      good faith;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (p) notwithstanding
      anything to the contrary contained herein, if the Escrow Agent shall be
      uncertain as to its duties or rights hereunder, shall receive any notice,
      advice, direction, or other document from any other party with respect to this
      Agreement which, in its opinion, is in conflict with any of the provisions
      of
      this Agreement, or should be advised that a dispute has arisen with respect
      to
      the payment, ownership, or right of possession of or to the Escrow Account
      or
      any interest on the Escrow Account or any part thereof (or as to the delivery,
      non-delivery, or content of any notice, advice, direction or other document),
      the Escrow Agent shall be entitled (but not obligated), without liability to
      anyone, to refrain from taking any action other than to use its best efforts
      to
      keep safely the Escrow Account until the Escrow Agent shall be directed
      otherwise in writing by the other parties hereto or by an order, decree or
      judgment of a court of competent jurisdiction which has been finally affirmed
      on
      appeal or which by lapse of time or otherwise is no longer subject to appeal,
      but the Escrow Agent shall be under no duty to institute or to defend any
      proceeding, although it may institute or defend such proceedings;

     

    (q) Handheld
      and Aperio hereby authorize the Escrow Agent, if the Escrow Agent is threatened
      with litigation or is sued, to interplead all interested parties in any court
      of
      competent jurisdiction and to deposit the Escrow Account with the clerk of
      that
      court; and

     

    (r) this
      Agreement sets forth exclusively the duties of the Escrow Agent with respect
      to
      any and all matters pertinent hereto and no implied duties or obligations shall
      be read into this Agreement against the Escrow Agent.

     

    8. Indemnification.
      

     

    (a) Handheld
      and Aperio each covenant and agree to indemnify and hold harmless the Escrow
      Agent against any costs or expenses (including attorneys’ fees and expenses),
      judgments, fines, losses, claims, damages, liabilities and amounts paid in
      settlement in connection with any claim, action, suit, proceeding or
      investigation arising out of or pertaining to this Agreement, and in the event
      of any such claim, action, suit, proceeding or investigation: (i) Handheld
      and
      Aperio shall each pay the reasonable fees and expenses of counsel selected
      by
      the Escrow Agent, promptly as statements therefor are received; and (ii)
      Handheld and Aperio will cooperate in the defense of any such matter; except
      that Handheld and Aperio shall not have any obligation to indemnify the Escrow
      Agent against any cost, expense, judgment, fine, loss, claim, damage, liability
      or settlement amount arising out of or pertaining to this Agreement arising
      from
      the Escrow Agent’s own gross negligence, willful misconduct or failure to act in
      good faith. The obligations of Handheld and Aperio under this paragraph shall
      survive: (i) the delivery of the Escrow Account or any interest on the Escrow
      Account pursuant to this Agreement; (ii) the termination of this Agreement;
      and
      (iii) the resignation or removal of the Escrow Agent. In the event Handheld
      or
      Aperio makes any payment pursuant to this Section 8, the party making the
      payment shall have the right to seek contribution from the other party in the
      amount of 50% of the amount so paid.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) Handheld
      and Aperio jointly and severally agree to assume any and all obligations imposed
      now or hereafter by any applicable tax law with respect to the payment of the
      Escrow Account under this Agreement, and to indemnify and hold the Escrow Agent
      harmless from and against any taxes, additions for late payment, interest,
      penalties and other expenses that may be assessed against the Escrow Agent
      on
      any such payment or other activities under this Agreement. Handheld and Aperio
      undertake to instruct the Escrow Agent in writing with respect to the Escrow
      Agent’s responsibility for withholding and other taxes, assessments or other
      governmental charges, certifications and governmental reporting in connection
      with its acting as Escrow Agent under this Agreement. Handheld and Aperio,
      jointly and severally, agree to indemnify and hold the Escrow Agent harmless
      from any liability on account of taxes, assessments or other governmental
      charges, including without limitation the withholding or deduction or the
      failure to obtain proper certifications or to properly report to governmental
      authorities, to which the Escrow Agent may be or become subject in connection
      with or which arises out of this Agreement, including costs and expenses
      (including reasonable legal fees), interest and penalties. 

     

    9. Resignation.
      The
      Escrow Agent may at any time resign as Escrow Agent by mailing written notice
      to
      Handheld and Aperio of such intention on its part, specifying the date on which
      its desired resignation shall become effective, with such resignation being
      effective upon Escrow Agent’s delivery of the Escrow Account to any successor
      Escrow Agent designated by Handheld and Aperio in writing or by any court of
      competent jurisdiction as provided below. Upon receiving such notice of
      resignation, Handheld and Aperio shall promptly appoint a successor escrow
      agent
      by written instrument signed on behalf of Handheld and Aperio, one copy of
      which
      shall be delivered to each of the resigning Escrow Agent and the successor
      escrow agent. If Handheld and Aperio shall fail to make such appointment within
      a period of thirty (30) days after they have been notified in writing of such
      resignation by the resigning Escrow Agent, then the resigning Escrow Agent
      may
      apply to any court of competent jurisdiction in the State of California for
      the
      appointment of a successor escrow agent. Such resignation shall become effective
      upon the acceptance of the appointment by the successor escrow agent as provided
      in this Section 9. Upon resignation, the Escrow Agent shall be entitled to
      payment by Handheld and Aperio of any amounts then due it hereunder. Any
      successor escrow agent shall have all the rights, obligations and immunities
      of
      the Escrow Agent set forth herein.

     

    10. Assignment.
      This
      Agreement and all of the provisions hereof shall be binding upon and inure
      to
      the benefit of the parties hereto and their respective successors and permitted
      assigns, but except as set forth in Section 9, neither this Agreement nor any
      of
      the rights, interests or obligations hereunder shall be assigned by any of
      the
      parties hereto without the prior written consent of the other parties, nor
      is
      this Agreement intended to confer upon any other person except the parties
      hereto any rights or remedies hereunder.

     

    11. Banking
      Days.
      If any
      date on which the Escrow Agent is required to make a delivery pursuant to the
      provisions hereof is not a banking day, then the Escrow Agent shall make such
      delivery on the next succeeding banking day.

     

    12. Escrow
      Costs.
      The
      fees, costs and expenses payable to the Escrow Agent hereunder shall be borne
      by
      Handheld. The Escrow Agent shall not collect any fee from the Escrow Account.
      In
      consideration for services rendered in connection with this Agreement, the
      Escrow Agent shall be compensated in accordance with the hourly billing rate
      which is customarily paid for Escrow Agent’s legal services. Handheld hereby
      agrees that it is Handheld’s obligation to compensate Escrow Agent in accordance
      with this Section 12 for services rendered in connection with this
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    13. Miscellaneous.

     

    (a) Notices.
      All notices, demands or other communications to be given or delivered under
      or
      by reason of the provisions of this Agreement shall be in writing and shall
      be
      deemed to have been given (i) when delivered personally to the recipient, (ii)
      when sent to the recipient by telecopy (receipt electronically confirmed by
      sender’s telecopy machine) if during normal business hours of the recipient,
      otherwise on the next Business Day, (iii) one Business Day after the date when
      sent to the recipient by reputable express courier service (charges prepaid),
      or
      (iv) seven Business Days after the date when mailed to the recipient by
      certified or registered mail, return receipt requested and postage prepaid.
      Such
      notices, demands and other communications shall be sent to Handheld, Aperio,
      or
      the Escrow Agent at the addresses indicated below:

     

    
      	
              If
                to Handheld:

            	
              Handheld
                Entertainment, Inc.

              Attn:
                Jeff Oscodar, President

              539
                Bryant Street, Suite 403

              San
                Francisco, CA 94107

              Fax:
                (415) 358-4865

               

            
	
              With
                a copy to: 

              (which
                shall not constitute notice)

            	
              Niesar
                Curls Bartling & Whyte LLP

              90
                New Montgomery Street, 9th
                Floor

              San
                Francisco, CA 94105

              Attn:
                Gerald V. Niesar, Esq.

              Fax:
                (415) 882-5400

               

            
	
              If
                to Aperio:

            	
              Aperio
                Technologies, Inc.

              ATTN:Mary
                Dunne

              2433
                SW Independence Rd.

              Port
                St. Lucie, FL 34953

               

            
	
              With
                a copy to: 

              (which
                shall not constitute notice)

               

            	
              Greenberg
                Traurig

              ATTN:
                Stephen A. Mendelsohn, Esq.

              5100
                Town Center Circle, Suite 400, 

              Boca
                Raton, FL 33486

               

            
	
              If
                to the Escrow Agent:

            	
              Niesar
                Curls Bartling & Whyte LLP

              90
                New Montgomery Street, 9th
                Floor

              San
                Francisco, CA 94105

              Attn:
                Gerald V. Niesar, Esq.

               

              Fax:
                (415) 882-5400

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    or
      to
      such other address as either party hereto may, from time to time, designate
      in
      writing delivered pursuant to the terms of this Section.

    

     

    (b) Amendment
      and Modification. This Agreement may be amended, modified or supplemented only
      by written agreement of each of the parties hereto.

     

    (c) Conflict
      with Purchase Agreement. If any conflict should arise between this Agreement
      and
      the Purchase Agreement, the terms of the Purchase Agreement shall control.
      

     

    (d) Governing
      Law. This Agreement shall be governed by the laws of the State of California
      (regardless of the laws that might otherwise govern under applicable California
      principles of conflicts of law) as to all matters, including but not limited
      to
      matters of validity, construction, effect, performance and remedies, and such
      operating circulars of any Federal Reserve Bank, federal laws and regulations,
      funds transfer system rules and general commercial bank practices applicable
      to
      funds transfer and related activities.

     

    (e) Counterparts.
      This Agreement may be executed in two or more counterparts, each of which shall
      be deemed to be an original, but all of which together shall constitute one
      and
      the same instrument.

     

    (f) Interpretation.
      The section headings contained in this Agreement are solely for the purpose
      of
      reference, are not part of this Agreement and shall not in any way effect the
      meaning or interpretation of this Agreement. 

     

    (g) Entire
      Agreement. This Agreement, including the exhibit attached hereto, together
      with
      the Purchase Agreement embody the entire agreement and understanding of the
      parties hereto in respect of the subject matter hereof. There are no
      restrictions, promises, representations, warranties, covenants or undertakings,
      other than those expressly set forth or referred to herein or
      therein.

     

    [SIGNATURES
      ON FOLLOWING PAGE]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned have executed this Escrow Agreement as of
      the
      Effective Date.

     

    

     

    
      	
              HANDHELD
                ENTERTAINMENT, INC.

               

              /s/
                Jeff
                Oscodar                                        
                

              Signature

              Name:
                Jeff Oscodar

              Title:
                President & CEO

            	
              APERIO
                TECHNOLOGIES, INC.

               

              /s/s
                Mary
                Dunne                                       
                

              Signature

              Name:
                Mary Dunne

              Title:
                President

            
	
               

               

               

               

            	
               

              ESCROW
                AGENT - 

               

              /s/
                Niesar Curls Bartling & Whyte LLP

              by
                Gerald V.
                Niesar                                   
                

              Signature

              Name:
                Gerald V. Niesar

              Title:
                PartnerUnassociated Document

    EMPLOYMENT
      AGREEMENT

    

     

    The
      Employment Agreement (the “Agreement”)
      is
      made as of the 1st day of December, 2006 (the “Effective
      Date”),
      by
      and between HandHeld Entertainment, Inc., a Delaware corporation (the
“Company”)
      and
      Mary Dunne (“Employee”),
      an
      individual residing in the State of Florida.

     

    WHEREAS,
      the Company has acquired the Business relating to Funmansion.com, which business
      was previously managed by Employee; and

     

    WHEREAS,
      “Business”
shall
      have the meaning set forth in the Asset Purchase Agreement executed by and
      among
      the Company, Employee and Aperio Technologies, Inc., a Florida corporation,
      on
      even date herewith (the “Purchase
      Agreement”);
      and

     

    WHEREAS,
      the Company needs an experienced employee to run the Business and the Company
      wishes to engage Employee for such purpose;

     

    NOW
      THEREFORE, in consideration of the premises and the covenants contained herein,
      the parties hereby agree as follows:

     

    1. DUTIES
      AND POSITION.
      During
      the term of the Agreement, Employee agrees to be employed full time by and
      to
      serve the Company as an employee of Dorks, LLC, a division and wholly-owned
      subsidiary of the Company. The Company agrees to employ and retain Employee
      in
      such capacity and Employee accepts and agrees to such employment, subject to
      the
      general supervision, advice and direction of the manager of Dorks, LLC, who
      is
      currently John Kowal. Employee shall manage the Business, which shall include,
      without limitation, updating the Funmansion.com website with media content,
      maintaining link trades, answering user questions, and, in general, ensuring
      that the Business is properly functioning. 

     

    2. TERMS
      OF EMPLOYMENT.

     

    2.1. Term
      of Employment.
      The
      Agreement shall be effective as of the date first set forth above and shall
      continue until November 30, 2007, unless sooner terminated pursuant to the
      provisions set forth herein (the “Term”).

     

    Place
      of Performance.
      Employee shall be based at 2433 SW Independence Rd., Port St. Lucie, FL 34953
      (“Place
      of Employment”).
      Under
      no circumstances shall Employee be assigned to duties and responsibilities
      that
      would require Employee to move Employee’s principal place of residence to a
      location more than twenty five (25) miles from Employee’s Place of
      Employment.

    

    3. SALARY,
      BENEFITS AND BONUS COMPENSATION.

     

    3.1. Salary.
      As
      payment for the services to be rendered by Employee as provided in Section
      1 and
      subject to the terms and conditions of Section 4, the Company agrees to pay
      to
      Employee a salary equal to $24,000.00 per year, payable in twenty-four equal
      installments on the 15th
      and the
      last day of each month (as may be adjusted from time-to-time, the “Salary”).
      Employee’s salary shall be reviewed by the Company’s Board of Directors in
      accordance with Company policies, and Employee shall be eligible for increases
      in salary and benefits as determined by the Company’s Board
      of
      Directors in its sole discretion. In no event shall Employee’s salary be reduced
      below the Salary except with Employee’s consent which may be withheld in
      Employee’s sole discretion.

     

    
      
         

      

      
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    3.2. Bonuses.
      Employee shall be eligible for bonuses in accordance with Company
      policies

     

    3.3. Employee
      Benefits.
      Employee shall be eligible to participate in all benefit plans generally
      available to Employees of the Company including health, dental, life insurance,
      stock and bonus compensation programs.

     

    4. TERMINATION.

     

    4.1. Definitions.
      For
      purposes of the Agreement, the following terms shall have the following
      meanings:

     

    (a) “Termination
      For Cause”
shall
      mean termination by the Company of Employee’s employment by the Company for
      reasons of Employee’s conviction of, or plea of “guilty” or “no contest” to, a
      felony involving moral turpitude, persistent dishonesty or fraud, persistent
      willful breaches of the material terms of the Agreement, or habitual neglect
      of
      the duties which he is required to perform hereunder.

     

    (b) “Termination
      Other Than For Cause”
shall
      mean termination by the Company of Employee’s employment by the Company other
      than a Termination For Cause.

     

    (c) “Voluntary
      Termination”
shall
      mean termination of Employee’s employment with the Company by action of Employee
      (other than termination by reason of Employee’s disability or death as described
      in Sections 4.3 and 4.4).

     

    4.2. Termination
      For Cause.
      

     

    (a) Termination
      For Cause may be effected by the Company at any time during the Term and shall
      be effected by notice to Employee. 

     

    (b) Upon
      Termination For Cause, Employee immediately shall be paid any accrued salary,
      any bonus compensation to the extent earned, any vested deferred compensation
      (other than pension plan or profit sharing plan benefits which will be paid
      in
      accordance with the applicable plan), any benefits under any plan of the Company
      in which Employee is a participant to the full extent of Employee’s rights under
      such plans, any accrued vacation pay and any appropriate business expenses
      incurred by Employee in connection with Employee’s duties hereunder, all to the
      date of termination, but Employee shall not be paid any other compensation
      or
      reimbursement of any kind, including without limitation, severance
      compensation.

     

    
      
         

      

      
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    4.3. Termination
      by Reason of Disability.
      

     

    (a) If,
      during the Term, Employee is determined by an examining physician to have failed
      to perform Employee’s duties under the Agreement on account of illness or
      physical or mental incapacity, and such illness or incapacity continues for
      a
      consecutive period of more than four (4) months, or an aggregate of more than
      six (6) months in a twelve (12) month period, the Company shall have the right
      to terminate Employee’s employment hereunder by notice to Employee.

     

    (b) Upon
      a
      termination by reason of disability, the Company shall pay to the Employee
      any
      accrued salary, any bonus compensation to the extent earned, any vested deferred
      compensation (other than pension plan or profit sharing plan benefits which
      will
      be paid in accordance with the applicable plan), any benefits under any plans
      of
      the Company in which Employee is a participant to the full extent of Employee’s
      rights under such plans, any accrued vacation pay and any appropriate business
      expenses incurred by Employee in connection with Employee’s duties hereunder,
      all to the date of termination, but no other compensation or reimbursement
      of
      any kind.

     

    4.4. Death.
      

     

    (a) In
      the
      event of Employee’s death during the Term, Employee’s employment shall be deemed
      to terminate as of the last day of the month during which Employee’s death
      occurs.

     

    (b) Upon
      termination by death, the Company shall pay to Employee’s estate any accrued
      salary, any bonus compensation to the extent earned, any vested deferred
      compensation (other than pension plan or profit sharing plan benefits which
      will
      be paid in accordance with the applicable plan), any accrued vacation pay and
      any appropriate business expenses incurred by Employee in connection with
      Employee’s duties hereunder, all to the date of termination, but no other
      compensation or reimbursement of any kind.

     

    4.5. Voluntary
      Termination.
      Employee may effect a Voluntary Termination of Employee’s employment at any time
      upon written notice to the Company. The Company requests the courtesy of, and
      Employee agrees to provide to the Company, a thirty (30) day notice. In the
      event of a Voluntary Termination, the Company immediately shall pay any accrued
      salary, any bonus compensation to the extent earned, any vested deferred
      compensation (other than pension plan or profit sharing plan benefits which
      will
      be paid in accordance with the applicable plan), any benefits under any plans
      of
      the Company in which Employee is a participant to the full extent of Employee’s
      rights under such plans, any accrued vacation pay and any appropriate business
      expenses incurred by Employee in connection with their duties hereunder, all
      to
      the date of termination, but no other compensation or reimbursement of any
      kind.

     

    5. SEVERANCE
      COMPENSATION.

     

    Upon
      a
      Termination Other Than for Cause, Employee shall receive a severance fee equal
      to two (2) months at Employee’s then-current Salary. 

     

    
      
         

      

      
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    6. PAID
      TIME OFF. Employee
      shall be eligible to accrue vacation and sick leave according to the Company’s
      vacation and sick leave policies in effect from time-to-time applicable to
      employees, generally. Employee is ineligible to accrue vacation and sick leave
      benefits while Employee is absent without pay including, but not limited to,
      unpaid leaves of absence. The purpose of vacation leave is, among other things,
      to provide time for recreation and relaxation. The Company encourages all of
      its
      employees to take accrued vacation leave each year. Accordingly, the maximum
      vacation and sick leave Employee will be permitted to accrue is based on time
      of
      service and once the maximum amount has been reached, no additional vacation
      or
      sick leave, respectively, will accrue until Employee has reduced the balance
      of
      unused leave to less than the maximum. 

     

    7. HOLIDAYS. Employee
      shall be entitled to holidays with pay during each calendar year consistent
      with
      the holiday schedule applicable to management employees of the Company,
      generally.

     

    8. COMPLIANCE
      WITH EMPLOYER’S RULES. 

     

    8.1 General. The
      employment relationship between the parties shall be governed by the general
      employment policies, procedures and rules of the Company, including (but not
      limited to) those relating to the protection of confidential information and
      assignment of inventions; provided, however, that when the terms of the
      Agreement differ from or are in conflict with the Company’s general employment
      policies or procedures, the Agreement shall control. Employee agrees to abide
      by
      all of the Company’s policies, procedures and rules in effect from time-to-time.

     

    9. RETURN
      OF PROPERTY. Upon
      termination of Employee’s employment, Employee shall deliver all property
      (including keys, records, notes, lists, data, memoranda, models, and equipment)
      that is in the Employee’s possession or under the Employee’s control which is
      the Company’s property or related to the Company’s business. 

     

    10. INDEMNIFICATION
      OF EMPLOYEE.
      The
      Company shall indemnify Employee against any direct losses incurred by Employee
      in the course of Employee’s duties to the fullest extent permissible under
      applicable law. 

     

    11. MISCELLANEOUS.

     

    11.1. Notice.
      Every
      notice or other communication required or contemplated by this Agreement by
      either party shall be in writing and shall be delivered to the other party
      at
      the address set forth on the signature page below by: (i) personal delivery;
      (ii) postage prepaid, return receipt requested, registered or certified mail;
      (iii) internationally recognized express courier, such as Federal Express,
      UPS
      or DHL; or (iv) facsimile or email with a confirmation copy sent simultaneously
      by postal mail. Either party may change its or his or her address for notice
      from time-to-time by providing written notice in the manner set forth
      above.

     

    11.2. Attorney
      Fees.  In
      the
      event that any action, suit or other proceeding at law or in equity is brought
      to enforce the provisions of the Agreement, or to obtain money damages for
      the
      breach thereof, and such action results in the award of a judgment for money
      damages or in the granting of any injunction in favor of the Company, then
      all
      reasonable expenses, including, but not limited to, reasonable attorneys’ fees
      and disbursements (including those incurred on appeal) of the Company in such
      action, suit or other proceeding shall (on demand of the Company) forthwith
      be
      paid by Employee. If such action results in a judgment in favor of Employee,
      then all reasonable expenses, including but not limited to, reasonable
      attorney’s fees and disbursements (including those incurred on appeal) of
      Employee in such action, suit or other proceeding shall (on demand of Employee)
      forthwith be paid by the Company.

     

    
      
         

      

      
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    11.3. Entire
      Agreement. The Agreement,
      including the policies and procedure referred to in Section 8 above, supersedes
      all prior agreements, and the terms set forth herein represent the entire
      understanding and agreement between the Company and Employee regarding
      compensation, employment, status and position. It is further understood that
      the
      Company’s policies, procedures and rules may be amended or changed at any time
      by the Company.

     

    11.4. Amendment. The
      Agreement may be modified or amended only if the amendment is made in writing
      and is signed by both parties. The Agreement cannot be altered in any way by
      any
      oral statement(s) made by Employee or the Company.

     

    11.5. Severability. If
      any
      provision(s) of the Agreement shall be held to be invalid or unenforceable
      for
      any reason, the remaining provisions shall continue to be valid and enforceable.
      If a court finds that any provision(s) of the Agreement is invalid or
      unenforceable, but that by limiting such provision it would become valid or
      enforceable, then such provision shall be deemed to be written, construed,
      and
      enforced as so limited.

     

    11.6. Waiver
      Of Contractual Right. The
      failure of either party to enforce any provision of the Agreement shall not
      be
      construed as a waiver or limitation of that party’s right subsequently to
      enforce and compel strict compliance with every provision of the
      Agreement.

     

    11.7. Applicable
      Law. The
      Agreement shall be governed by the laws of the State of California.

     

    

     

    

    [Remainder
      of Page Intentionally Left Blank]

    
      
         

      

      
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    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the date first
      above written.

    

     

    
      	
              HANDHELD
                ENTERTAINMENT, INC.

               

              By:
                /s/ Jeff
                Oscodar                                   
                

                     Jeff
                Oscodar, President 

               

               

              539
                Bryant Street, Suite 403

              San
                Francisco, CA 94107

              Fax:
                (415) 495-7708

            	
              EMPLOYEE

               

              By:
                /s/ Mary
                Dunne                                           
                

                     Mary
                Dunne

               

               

              2433
                SW Independence Rd.

              Port
                St. Lucie, FL 34953

              Fax:
                ___________

            

    

     

    
      
         

      

      
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