Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of February 4, 2004, by and
between Dwango North America Corp., a Nevada corporation (the "Company"), and
the shareholders of the Company listed on the signature page hereof (the
"Rightsholders").
WHEREAS, this Agreement has been entered into in connection with the
Agreement and Plan of Merger (the "Merger Agreement"), dated the date hereof, by
and between the Company and the Rightsholders, among others; and
WHEREAS, to induce the Rightsholders to execute and deliver the Merger
Agreement and to consummate the transactions contemplated thereby, the Company
has agreed to provide to the Rightsholders certain registration rights under the
Securities Act of 1933, as amended, and the rules and regulations thereunder, or
any similar successor statute (collectively, the "Securities Act"), and
applicable state securities laws;
NOW, THEREFORE, it is agreed as follows:
1. REGISTERABLE SECURITIES. The term "Registerable Securities" shall
mean (i) any of the shares of common stock, par value $.001 per share ("Common
Stock"), of the Company issued to the Rightsholders pursuant to the Merger
Agreement, and (ii) any Common Stock issued as (or issuable upon the conversion
or exercise of any warrant, right or other security that is issued as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of, the shares referenced in (i) above. For the purposes of this
Agreement, securities will cease to be Registerable Securities when (A) such
Registerable Securities are distributed to the public pursuant to the Securities
Act, or pursuant to an exemption from the registration requirements of the
Securities Act, including, but not limited to, Rule 144 promulgated under the
Securities Act, (B) such Registerable Securities are eligible for immediate
resale (in full as to each Rightholder) pursuant to Rule 144 promulgated under
the Securities Act, (C) such Registerable Securities have been registered
pursuant to an effective registration statement, or (D) such Registerable
Securities have been otherwise transferred and the Company, in accordance with
applicable laws and regulations, has delivered new certificates or other
evidences of ownership for such securities which are not subject to any stop
transfer order or other restriction on transfer and such Registerable Securities
may be publicly resold (without volume or method of sale restrictions) without
registration under the Securities Act.
2. REGISTRATION RIGHTS.
(a) If, at any time commencing the date hereof and on or on or
prior to seven years from the date hereof, the Company proposes to file a
registration statement (a "Registration Statement") under the Securities Act
with respect to an offering by the
Company or any selling stockholders of any of its equity securities (other than
a registration statement on Form S-4 or Form S-8, or any successor form or a
registration statement filed solely in connection with an exchange offer, a
business combination transaction or an offering of securities solely to the
existing stockholders or employees of the Company), then the Company shall in
each case give written notice (the "Notice") of such proposed filing to the
Rightsholders at least twenty (20) days before the anticipated filing date of
such Registration Statement, which Notice shall offer the Rightsholders the
opportunity to include in such Registration Statement such amount of
Registerable Securities for resale as they may request. Each of the
Rightsholders electing to have his Registerable Securities registered pursuant
to this Section 2(a) shall advise the Company of such election in writing within
ten (10) days after the date of receipt of the Notice, specifying the amount of
Registerable Securities for which registration is requested (the "Election").
The Company shall include in any such Registration Statement all Registerable
Securities so requested to be included; provided that the Company has received
the Election and subject to limitations set forth in Section 2(b) below; and,
provided, further (i) the Company may determine, after good faith discussions
with legal counsel of the Rightsholders (if so requested by the Rightsholders),
not to include the Registerable Securities in the event it believes that such
inclusion may possibly violate applicable securities laws and (ii) nothing
herein shall prevent the Company from, at any time before the effectiveness of
such Registration Statement, abandoning or delaying any registration pursuant to
this Section 2(a). With respect to any amendment to the Registration Statement
on Form SB-2 filed by the Company on January 30, 2004 (File No. 333-112371), in
the event that the Company amends such Registration Statement, then the Company
shall include the Registerable Securities in such Registration Statement unless
the Company determines, after good faith discussions with legal counsel to the
Rightsholders (if so requested by the Rightsholders), not to include the
Registerable Securities because it believes that such inclusion may possibly
violate applicable securities laws.
(b) Notwithstanding the foregoing, if the underwriter(s) of
any such offering of the Company shall be of the good faith opinion that the
total amount or kind of securities held by the Rightsholders and any other
persons or entities entitled to be included in such offering would adversely
affect the success of such offering, then the amount of securities to be offered
for the accounts of Rightsholders and the other selling securityholders included
in the Registration Statement shall be reduced pro rata to the extent necessary
to reduce the total amount of securities to be included in such offering to the
amount recommended by the underwriter(s) thereof, whereupon the Company shall
only be obligated to register such limited portion (which may be none) of the
Registerable Securities with respect to which such Rightsholders have provided
an Election. In no event shall the Company be required pursuant to this Section
2(b) to reduce the amount of securities proposed to be registered by it for its
own account.
(c) In the event that the Company does not include the
Registerable Securities in a Registration Statement within six months of the
date hereof, the Company shall file a new Registration Statement to register the
resale of the Registerable Securities on or prior to the six month anniversary
of the date hereof, and will use its reasonable
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commercial efforts to cause such Registration Statement to become effective as
soon as practicable thereafter.
3. REGISTRATION EXPENSES.
(a) Except as provided in Section 3(b), the Company shall pay
all of the expenses incurred in connection with a registration (whether or not
abandoned or delayed) under this Registration Rights Agreement, including, but
not limited to, (i) all registration and filing fees, (ii) "Blue Sky" fees and
expenses, (iii) all printing, duplicating, and delivery expenses, (iv) fees and
disbursements of counsel for the Company and of independent certified public
accountants of the Company, (v) all fees and expenses incurred in connection
with the listing of the Registerable Securities on any securities exchange, (vi)
internal expenses of the Company (e.g. salaries and expenses of its officers and
employees), and (vii) the expenses of any audit.
(b) The Company shall not be required to pay underwriting
discounts, selling commissions or transfer taxes attributable to the sale of the
Registerable Securities.
4. REGISTRATION OBLIGATIONS
(a) OBLIGATIONS OF THE COMPANY. The Company will, in
connection with any registration pursuant to Section 2 hereof:
(i) Prepare and file with the Commission a Registration
Statement with respect to such Registerable Securities in accordance with the
method or methods of distribution thereof as reasonably specified by the
Rightsholder (except if otherwise directed by the Rightsholder).
(ii) Notify the Rightsholders and their legal counsel as
promptly as possible (A) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective; (B) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registerable Securities or the
initiation of any action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened (each, a "Proceeding") for that
purpose; (C) of the receipt by the Company of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registerable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose; and (D) of the occurrence of any
event that makes any statement made in the Registration Statement or prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, prospectus or other documents so that, in the case of
the Registration Statement or the prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
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(iii) Furnish to the Rightsholders and their legal counsel,
without charge, at least one conformed copy of each Registration Statement and
each amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference, and
all exhibits to the extent requested by such person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(iv) Promptly deliver to the Rightsholders and their legal
counsel, without charge, as many copies of the Registration Statement,
prospectus or prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such persons may reasonably request; and the
Company hereby consents to the use of such prospectus and each amendment or
supplement thereto by the Rightsholders in connection with the offering and sale
of the Registerable Securities covered by such prospectus and any amendment or
supplement thereto.
(v) Prior to any public offering of the Registerable
Securities, use reasonable efforts to register or qualify or cooperate with the
Rightsholders in connection with the registration or qualification (or exemption
from such registration or qualification) of such Registerable Securities for
offer and sale under the securities or blue sky laws of such jurisdictions
within the United States as the Rightsholders request in writing, to keep each
such registration or qualification (or exemption therefrom) effective during the
period when the Registration Statement is effective and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registerable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject; and
(vi) Use reasonable efforts to cause all Registerable
Securities relating to such Registration Statement to be listed on any
securities exchange, quotation system or market (including Nasdaq), if any, on
which similar securities issued by the Company are then included.
(b) OBLIGATIONS OF RIGHTSHOLDERS. In connection with any
registration of Registerable Securities of a Rightsholder pursuant to Section 2
hereof:
(i) The Company may require that each Rightsholder whose
Registerable Securities are included in such Registration Statement timely
furnish to the Company such information regarding the distribution of such
Registerable Securities and such Rightsholder as the Company may from time to
time reasonably request;
(ii) Each Rightsholder, upon receipt of notice from the
Company of the occurrence of any event that makes any statement made in the
Registration Statement or prospectus or any document incorporated or deemed to
be incorporated therein by reference untrue in any material respect or that
requires any revisions to the Registration
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Statement, prospectus or other documents so that, in the case of the
Registration Statement or the prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
shall forthwith discontinue disposition of Registerable Securities pursuant to
the Registration Statement covering such Registerable Securities until such
Rightsholder is advised in writing by the Company that the use of the applicable
prospectus may be resumed or until the Company delivers copies of supplemented
or amended prospectuses.
5. PARTICIPATION IN UNDERWRITTEN REGISTRATION. No Rightsholder may
participate in any underwritten registration hereunder unless such Rightsholder
(i) agrees to sell such Rightsholder's securities on the basis provided in any
underwriting arrangements and to comply with Regulation M under the Securities
Exchange Act of 1934, and the rules and regulations thereunder, or any similar
successor statute (collectively, the "Exchange Act") and (ii) completes and
executes all customary questionnaires, appropriate and limited powers of
attorney, escrow agreements, indemnities, underwriting agreements, lock-up
agreements with respect to securities not being sold and such other customary
documents reasonably required under the terms of such underwriting arrangement.
6. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each
Rightsholder and their respective officers, directors, advisors and agents and
employees and each Person who controls (within the meaning of the Securities Act
or the Exchange Act) such Persons from and against any and all losses, claims,
damages, liabilities (or actions or proceedings in respect thereof, whether or
not such indemnified party is a party thereto) and expenses (including
reasonable costs of investigation and legal expenses), joint or several (each, a
"Loss" and collectively "Losses"), arising out of or based upon (i) any untrue
or alleged untrue statement of a material fact contained in any Registration
Statement under which such Registerable Securities were registered under the
Securities Act (including any final, preliminary or summary prospectus contained
therein or any amendment thereof or supplement thereto or any documents
incorporated by reference therein) or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus or preliminary prospectus,
in light of the circumstances under which they were made) not misleading;
provided, however, that the Company shall not be liable to any indemnified party
in any such case to the extent that any such Loss arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in any such Registration Statement in reliance upon and in conformity with
written information furnished to the Company by such Rightsholder expressly for
use in the preparation thereof. This indemnity shall be in addition to any
liability the Company may otherwise have. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Rightsholder or any
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indemnified party and shall survive the transfer of such securities by such
Rightsholder.
(b) INDEMNIFICATION BY THE RIGHTSHOLDER. Each selling
Rightsholder agrees (severally and not jointly) to indemnify and hold harmless,
to the full extent permitted by law, the Company, its directors and officers and
each Person who controls the Company (within the meaning of the Securities Act
and the Exchange Act) from and against any Losses arising out of or based upon
any untrue statement of a material fact or any omission of a material fact
required to be stated in the Registration Statement under which such
Registerable Securities were registered under the Securities Act (including any
final, preliminary or summary prospectus contained therein or any amendment
thereof or supplement thereto or any documents incorporated by reference
therein), or necessary to make the statements therein (in the case of a
prospectus or preliminary prospectus, in light of the circumstances under which
they were made) not misleading, to the extent, but only to the extent, that such
untrue statement or omission has been contained in any information furnished in
writing by such selling Rightsholder to the Company specifically for inclusion
in such Registration Statement. This indemnity shall be in addition to any
liability such Rightsholder may otherwise have. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any indemnified party. In no event shall the liability of any
selling Rightsholder hereunder be greater in amount than the dollar amount of
the proceeds received by such Rightsholder under the sale of the Registerable
Securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
(provided, that any delay or failure to so notify the indemnifying party shall
relieve the indemnifying party of its obligations hereunder only to the extent,
if at all, that it is actually and materially prejudiced by reason of such delay
or failure) and (ii) permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any Person entitled to indemnification hereunder shall
have the right to select and employ separate counsel and to participate in the
defense of such claim, but the fees and expenses of such counsel shall be at the
expense of such Person unless (A) the indemnifying party has agreed in writing
to pay such fees or expenses, (B) the indemnifying party shall have failed to
assume the defense of such claim within a reasonable time after having received
notice of such claim from the Person entitled to indemnification hereunder and
to employ counsel reasonably satisfactory to such Person, (C) in the reasonable
judgment of any such Person, based upon advice of its counsel, a conflict of
interest exists between such Person and the indemnifying party with respect to
such claims or (D) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party (in which case, if the Person notifies the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such claim on behalf of such Person). If such defense is not assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent, but such consent may
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not be unreasonably withheld; provided, that an indemnifying party shall not be
required to consent to any settlement involving the imposition of any material
obligations on such indemnifying party other than financial obligations for
which such indemnified party will be indemnified hereunder. If the indemnifying
party assumes the defense, the indemnifying party shall have the right to settle
such action without the consent of the indemnified party; provided, that the
indemnifying party shall be required to obtain such consent (which consent shall
not be unreasonably withheld) if the settlement includes any admission of
wrongdoing on the part of the indemnified party or any restriction on the
indemnified party or its officers or directors. No indemnifying party shall
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to each indemnified party of an unconditional release from all liability in
respect to such claim or litigation. The indemnifying party or parties shall
not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm at any one time from all such indemnified party
or parties.
7. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8. ENTIRE AGREEMENT. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein, constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof.
9. SEVERABILITY. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10. GOVERNING LAW . This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any state or federal court within the State of Washington, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Washington for such persons and
waives and covenants not to assert or plead any objection which they
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might otherwise have to such jurisdiction and such process.
11. ASSIGNMENT. The right to include Registerable Securities in a
Registration Statement pursuant to Section 2 may not be assigned without the
consent of the Company, which consent may not be unreasonably withheld.
12. AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented
without the written consent of each of the Company and the Rightsholders (on
behalf of themselves). Any of the Rightsholders (on behalf of themselves) or the
Company may, by written notice to the others, (i) waive any of the conditions to
its obligations hereunder or extend the time for the performance of any of the
obligations or actions of the other, (ii) waive any inaccuracies in the
representations of the other contained in this Agreement or in any documents
delivered pursuant to this Agreement, (iii) waive compliance with any of the
covenants of the other contained in this Agreement or (iv) waive or modify
performance of any of the obligations of the other. No action taken pursuant to
this Agreement, including, without limitation, any investigation by or on behalf
of any party, shall be deemed to constitute a waiver by the party taking such
action or compliance with any representation, warranty, condition or agreement
contained herein. Waiver of the breach of any one or more provisions of this
Agreement shall not be deemed or construed to be a waiver of other breaches or
subsequent breaches of the same provisions.
13. NOTICES. All notices, requests, demands or other communications
provided for herein shall be in writing and shall be deemed to have been given
when personally delivered or sent by (i) registered or certified mail, return
receipt requested, (ii) nationally recognized overnight courier service or (iii)
facsimile transmission electronically confirmed addressed if to the Company, to
Dwango North America Corp., 5847 San Felipe Street, Houston, Texas 77057, Attn:
Robert E. Huntley, Chief Executive Officer, with a copy to Gary T. Moomjian,
Esq., Moomjian & Waite, LLP, 500 North Broadway, Suite 142, Jericho, New York
11753; and if to the Rightsholders, to their address set forth in the records of
the Company; or to such other person or address as either party shall designate
to the other from time to time in writing forwarded in like manner.
14. OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
15. FURTHER ASSURANCES. Each party hereto covenants and agrees with all
other parties hereto to promptly execute, deliver, file and/or record such
agreements, instruments, certificates and other documents and to do and perform
such other and further acts and things as any other party hereto may reasonably
request or as may otherwise be necessary or proper to consummate and perfect the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by themselves or their duly authorized respective officers, all as of the
date first written above.
DWANGO NORTH AMERICA CORP.
By: /s/ Robert E. Huntley
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Robert E. Huntley
Chairman
/s/ Rick Hennessey
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Rick Hennessey
/s/ David C. Adams
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David C. Adams
/s/ Mark Sanders
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Mark Sanders
/s/ Alexander U. Conrad
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Alexander U. Conrad
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]