REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”), dated as of April 20, 2007, is
entered into by and among Handheld Entertainment, Inc., a Delaware corporation
(the “Corporation”), and Xxxxxx X’Xxxxx (the “Stockholder”).
RECITALS
A. In
connection with the acquisition (the “Acquisition”) of Xxxxxxxxx.xxx and all of
the assets related thereto (collectively, the “Assets”) and as more fully
described in that Certain Asset Purchase Agreement, of even date herewith,
by
and between the Stockholder and Dorks LLC, a Washington limited liability
company and a wholly owned subsidiary of the Corporation, by Dorks LLC the
Stockholder has agreed to receive shares of the Corporation’s Common Stock as
partial consideration for the Assets; provided that, among other things, certain
securities registration rights are granted to the Stockholder.
B. The
Corporation deems it desirable to grant the securities registration rights
set
forth below to the Stockholder in order to induce the Stockholder to consummate
the Acquisition.
AGREEMENTS
In
consideration of the promises and the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions.
In
addition to the capitalized terms defined elsewhere in this Agreement, the
following capitalized terms shall have the following meanings when used in
this
Agreement:
“Acquisition”
has
the
meaning ascribed to it in the Recitals hereto.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the Common Stock, par value $0.0001 per share, of the Corporation.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor federal
statute, and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect from time to time.
“Holders”
means
the Stockholder or the Stockholder’s successors or assigns or subsequent holders
of the Registrable Shares contemplated by Section
11.
“Person”
means
a
natural person, a partnership, a corporation, a limited liability company,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or other entity, or a governmental entity or any department, agency
or political subdivision thereof.
“Piggyback
Registration”
has
the
meaning ascribed to it in Section
2(a).
“Registrable
Shares”
means
any shares of Common Stock issued as consideration for the Assets; provided,
however,
that
Registrable Shares shall not include any shares of Common Stock (i) the sale
of
which has been registered pursuant to the Securities Act, (ii) that have been
sold to the public pursuant to Rule 144 promulgated by the Commission under
the
Securities Act or (iii) which may then be sold pursuant to subsection (k) of
said Rule 144.
“Registration”
means
a
Piggyback Registration.
“Registration
Expenses”
has
the
meaning ascribed to it in Section
5.
“Securities
Act”
means
the Securities Act of 1933, as amended.
2. Piggyback
Registrations.
(a) Right
to Piggyback.
If the
Corporation proposes to register shares of Common Stock under the Securities
Act
(other than pursuant to a registration statement on Form S-4 or Form S-8 or
any
successor or similar forms) and the registration form to be used may be used
for
the registration of Registrable Shares (a “Piggyback Registration”), the
Corporation will give prompt written notice to all Holders of Registrable Shares
of its intention to effect such a registration and will include in such
registration, subject to the provisions of Section
2(b),
all
Registrable Shares with respect to which the Corporation has received written
requests for inclusion therein within 21 days after the Corporation’s notice has
been given.
(b) Priority
on Piggyback Registrations.
If a
Piggyback Registration is an underwritten registration on behalf of the
Corporation, and the managing underwriters advise the Corporation in writing
that in their opinion the aggregate number of securities requested to be
included in such registration pursuant to Section
2(a)
(the
“Requested Piggyback Shares”), together with the other shares being registered
by the Corporation, would exceed the maximum number of shares of Common Stock
that can be marketed without adversely affecting the offering, including a
substantial risk that the price per share of Common Stock will be reduced,
the
Corporation will include in such registration (i) first,
any
securities the Corporation proposes to sell, (ii) second,
the
Requested Piggyback Shares, with any reductions in the number of Registrable
Shares actually included in such registration to be allocated on a pro rata
basis
among all Holders of Requested Piggyback Shares in accordance with the number
of
Registrable Shares such Holders have requested to be included therein, and
(iii)
third,
to the
extent available, among any other selling security holders.
(c) Control
by the Corporation.
The
Corporation may withdraw any registration statement and abandon any proposed
offering initiated by the Corporation without the consent of any Holder of
Registrable Shares, notwithstanding the request of any such Holder to
participate therein in accordance with Section 2(a), if the Board of Directors
of the Corporation determines in its sole discretion that such action is in
the
best interest of the Corporation.
3. Information.The
Corporation may require the Holders to furnish to the Corporation such
information in writing regarding themselves and the distribution of Registrable
Shares as the Corporation may from time to time reasonably request in writing
in
order to comply with the Securities Act. The Holders agree to supply the
Corporation as promptly as practicable with such information and to notify
the
Corporation as promptly as practicable of any inaccuracy or change in
information they have previously furnished to the Corporation.
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4. Registration
Procedures.
Whenever
the Holders of Registrable Shares have requested that any Registrable Shares
be
registered pursuant to the terms of this Agreement, the Corporation will use
its
reasonable best efforts to effect the registration and the sale of such
Registrable Shares in accordance with the intended method of disposition
thereof, and pursuant thereto the Corporation will:
(a) prepare
and file with the Commission a registration statement on the appropriate form
with respect to such Registrable Shares and use its best efforts to cause such
registration statement to become effective as soon as practicable after such
filing and to remain effective until the earlier of (i) the time that all of
the
Registrable Shares covered by such registration statement have been sold in
accordance with the intended methods of disposition of the seller or sellers
set
forth in such registration statement or (ii) one year after such registration
statement has been declared effective;
(b) prepare
and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may
be
necessary to keep such registration statement effective for the period specified
in clause (a) and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement;
(c) furnish
to each seller of such Registrable Shares and the underwriters of the securities
being registered such number of copies of such registration statement, each
amendment and supplement thereto, the prospectus included in such registration
statement (including each preliminary prospectus) and such other documents
as
such seller or underwriters may reasonably request in order to facilitate the
disposition of the Registrable Shares owned by such seller or the sale of such
securities by such underwriters;
(d) notify
each seller of such Registrable Shares, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective
or a
supplement to any prospectus forming a part of such registration statement
has
been filed;
(e) notify
each seller of such Registrable Shares of any request by the Commission for
the
amending or supplementing of such registration statement or prospectus or for
additional information;
(f) prepare
and file with the Commission, promptly upon the request of any seller of such
Registrable Shares, any amendments or supplements to such registration statement
or prospectus which, in the opinion of counsel selected by the Holders of a
majority of the Registrable Shares being registered, is required under the
Securities Act or the rules and regulations thereunder in connection with the
distribution of Registrable Shares by such seller;
(g) prepare
and promptly file with the Commission and promptly notify each seller of such
Registrable Shares of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall
have occurred as the result of which any such prospectus or any other prospectus
as then in effect would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light
of
the circumstances in which they were made, not misleading;
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(h) advise
each seller of such Registrable Shares, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation
or
threatening of any proceeding for such purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued; and
(i) refrain
from filing any such registration statement, prospectus, amendment or supplement
to which counsel selected by the Holders of at least a majority of the
Registrable Shares being registered shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, after having been furnished with a copy thereof at
least
3 business days prior to the filing thereof, unless, in the case of an amendment
or supplement, in the opinion of counsel for the Corporation the filing of
such
amendment or supplement is reasonably necessary to protect the Corporation
from
any liabilities under any applicable federal or state law and such filing will
not violate applicable laws.
5. Registration
Expenses.
All
expenses incident to the Corporation’s performance of or compliance with this
Agreement, including, but not limited to, all registration and filing fees,
fees
and expenses of compliance with federal, state and foreign securities laws,
printing expenses, messenger and delivery expenses, and fees and disbursements
of counsel for the Corporation and its independent certified public accountants,
underwriters (excluding discounts and commissions attributable to the
Registrable Shares included in such registration) and other Persons retained
by
the Corporation (all such expenses being herein called “Registration Expenses”),
will be borne by the Corporation. In addition, the Corporation will pay its
internal expenses (including, but not limited to, all salaries and expenses
of
its officers and employees performing legal or accounting duties), and the
expense of any annual audit or quarterly review.
6. Indemnification.
(a) In
connection with a registration of Registrable Shares pursuant to this Agreement,
the Corporation agrees to indemnify, to the fullest extent permitted by law,
each seller of Registrable Shares, its officers, directors and employees and
each Person who controls any such person (within the meaning of the Securities
Act or the Exchange Act) against all losses, claims, damages, liabilities and
expenses (including, but not limited to, reasonable attorneys’ fees except as
limited by Section 6(c)) to which such indemnified party may become subject
insofar as they are caused by, arise out of, or are based upon any untrue or
alleged untrue statement of a material fact contained in any registration
statement, any prospectus or preliminary prospectus or any amendment thereof
or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
except insofar as the same are (i) caused by or contained in any written
information furnished to the Corporation by such seller expressly for use
therein, (ii) caused by such seller’s failure to deliver a copy of the
registration statement or prospectus or any amendment or supplement thereto
as
required by the Securities Act or (iii) caused by the use of a prospectus or
preliminary prospectus or any amendment or supplement thereto after receipt
of
notice from the Corporation that it should no longer be used. In connection
with
an underwritten offering, the Corporation will indemnify such underwriters,
their officers and directors and each Person who controls such underwriters
(within the meaning of the Securities Act or the Exchange Act) to the same
extent as provided above with respect to the indemnification of the sellers
of
Registrable Shares.
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(b) In
connection with any registration statement in which a seller of Registrable
Shares is participating, each such seller will furnish to the Corporation in
writing such information and affidavits as the Corporation reasonably requests
for use in connection with any such registration statement or prospectus and,
to
the fullest extent permitted by law, will indemnify the Corporation, its
directors, officers and employees, each underwriter (if any) and each Person
who
controls the Corporation or such underwriter (within the meaning of the
Securities Act or the Exchange Act) against any losses, claims, damages,
liabilities and expenses (including, but not limited to, attorneys’ fees except
as limited by Section 6(c)) to which such indemnified party may become subject
insofar as they are caused by, arise out of, or are based upon any untrue or
alleged untrue statement of a material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
but only to the extent that such untrue statement or omission is contained
in
any written information or affidavit so furnished in writing by such seller
expressly for use therein or the failure by such seller to deliver a copy of
the
registration statement or prospectus or amendment or supplement thereto as
required by the Securities Act; provided,
however,
that
the liability of each such seller of Registrable Shares will be limited to
the
net amount received by such seller from the sale of Registrable Shares pursuant
to such registration statement.
(c) Any
Person entitled to indemnification hereunder will (i) use reasonable efforts
to
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) unless in such indemnified party’s
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided,
however,
that
the failure of any Person entitled to indemnification hereunder to give such
notice to the indemnifying party shall not constitute a waiver of, or a defense
of the indemnifying party to, such Person's right to indemnification hereunder
unless such failure has a material adverse effect upon the indemnifying party's
ability to defend said action. If such defense is assumed, the indemnifying
party will not be subject to any liability for any settlement made by the
indemnified party without its consent (which consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and expenses
of more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any indemnified
party a conflict of interest may exist between such indemnified party and any
other of such indemnified parties with respect to such claim.
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(d) If
for
any reason the foregoing indemnity is unavailable, or is insufficient to hold
harmless an indemnified party, then the indemnifying party shall contribute
to
the amount paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the indemnifying party
on the one hand and the indemnified party on the other hand from the
registration or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate
to
reflect not only the relative benefits received by the indemnifying party on
the
one hand and the indemnified party on the other hand but also the relative
fault
of the indemnifying party and the indemnified party as well as any other
relevant equitable considerations. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(e) The
indemnification provided for under this Agreement will remain in full force
and
effect regardless of any investigation made by or on behalf of the indemnified
party or any officer, director or controlling Person of such indemnified party
and will survive the transfer of securities.
8. Underwritten
Registrations.
No
Person may participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell such Person’s securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and
other documents required under the terms of such underwriting
arrangements.
9. “Market
Stand Off” Agreement.
Each
Holder hereby agrees that it will not, without the prior written consent of
the
Corporation and the managing underwriter (if a managing or lead underwriter
is
appointed), during the period commencing on the date of the final prospectus
relating to a underwritten public offering of the Corporation’s securities and
ending on the date specified by the Corporation and the managing underwriter
(such period not to exceed one hundred eighty (180) calendar days) (i) lend,
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant
to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
securities of the Corporation, including (without limitation) shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether now owned or hereafter acquired) or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any
of
the economic consequences of ownership of any securities of the Corporation,
including (without limitation) shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (whether now
owned or hereafter acquired), whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of securities, in cash or
otherwise. The foregoing covenants shall not apply to the sale of any shares
by
a Holder to an underwriter pursuant to an underwriting agreement. Each Holder
agrees to execute an agreement(s) reflecting (i) and (ii) above as may be
requested by the managing or lead underwriters at the time of the underwritten
public offering, and further agrees that the Corporation may impose stop
transfer instructions with its transfer agent in order to enforce the covenants
in (i) and (ii) above. The underwriters in connection with the Corporation’s
underwritten public offering are intended third party beneficiaries of the
covenants in this Section 9 and shall have the right, power and authority to
enforce such covenants as though they were a party hereto.
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10. Remedies.
Any
Person having rights under any provision of this Agreement will be entitled
to
enforce such rights specifically, to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all other rights
granted by law.
11. Amendments
and Waivers.
Except
as otherwise expressly provided herein, the provisions of this Agreement may
be
amended or waived at any time only by the written agreement of the Corporation
and the Holders of at least a majority of the issued and outstanding Registrable
Shares. Any waiver, permit, consent or approval of any kind or character on
the
part of any such Holders of any provision or condition of this Agreement must
be
made in writing and shall be effective only to the extent specifically set
forth
in writing. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder of Registrable Shares and the Corporation.
Each Holder acknowledges that by operation of this paragraph the Holders of
at
least a majority of the Registrable Shares acting in conjunction with the
Corporation will have the right and power to diminish or eliminate all rights
pursuant to this Agreement.
12. Successors
and Assigns.
Except
as otherwise expressly provided herein, all covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto, whether so expressed or not. In addition and whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Shares are also for the benefit
of, and enforceable by, any subsequent holder of Registrable Shares who consents
in writing to be bound by this Agreement.
13. Final
Agreement.
This
Agreement constitutes the final agreement of the parties concerning the matters
referred to herein, and supersedes all prior agreements and understandings
relating to such matters.
14. Severability.
Whenever possible, each provision of this Agreement will be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be prohibited by or invalid under applicable law,
such provision will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Agreement.
15. Descriptive
Headings.
The
descriptive headings of this Agreement are inserted for convenience of reference
only and do not constitute a part of and shall not be utilized in interpreting
this Agreement.
16. Notices.
Any
notices required or permitted to be sent hereunder shall be delivered
personally, sent by United States mail, certified mail, return receipt
requested, with postage prepaid, or delivered by reputable overnight courier
service, with all charges prepaid, to the following addresses, or such other
addresses as shall be given by notice delivered hereunder, and shall be deemed
to have been given upon delivery, if delivered personally, three business days
after mailing, if mailed as provided above, or one business day after delivery
to the courier, if delivered by overnight courier service as provided
above:
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if
to the
Corporation, to:
000
Xxxxxx Xxxxxx
Xxx
Xxxxxxxxx, XX 00000
Attention:
Xxxx Oscodar, Chief Executive Officer
with
a
copy to:
Xxxxxx
and Xxxxx, LLP
000
X.
00xx
Xx.,
Xxxxx 0000
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxx X. Xxxxxx, Esq.
if
to the
Stockholder, as set forth in the records of the Corporation,
with
a
copy to:
Xxxxx
X.
Xxxxxxxx, Esq.
0000
Xxxxxxxx Xxxx.
Xxx
Xxxxxxxxx, XX 00000
Fax:
(000) 000-0000
17. Governing
Law.
The
validity, meaning and effect of this Agreement shall be determined in accordance
with the laws of the State of California applicable to contracts made and to
be
performed in that state, without regard to the principles of conflicts of
law.
18. Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed and delivered shall be deemed an original, and such counterparts
together shall constitute one instrument. Transmission by facsimile of an
executed counterpart of this Agreement shall constitute due and sufficient
delivery of this Agreement.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, this Registration Rights Agreement has been executed by the
undersigned as of the date first set forth above.
By:
By:
/s/
Xxxxxxx X.
Xxxx
Name:
Xxxxxxx X. Xxxx
Title:
Chief Financial Officer
STOCKHOLDER:
XXXXXX
X’XXXXX
/s/
Xxxxxx
X’Xxxxx
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