EMPLOYMENT
AGREEMENT





EMPLOYMENT
AGREEMENT (“Agreement”), dated as of March 1, 2005, by and between DWANGO NORTH
AMERICA CORP., a Nevada corporation (hereinafter referred to as the “Company”),
and Rick J. Hennessey, residing at 6713 11th Ave NW, Seattle, WA 98117
(hereinafter referred to as “Employee”).




W
I T N E S S E T H:




WHEREAS,
the
Employee is currently employed as the Chief Executive Officer of the
Company;




WHEREAS, the
parties desire to set forth in this Agreement the terms and conditions of
Employee’s continued employment as the Chief Executive Officer of the
Company.




NOW,
THEREFORE, in
consideration of the terms and conditions hereinafter set forth, the parties
hereto agree as follows:




1.    Employment




The
Company hereby employs Employee, and Employee hereby accepts continued
employment with the Company, as Chief Executive Officer, on the terms and
conditions herein set forth.




2.    Term
of Agreement




Unless
terminated sooner pursuant to the express provisions hereof, the term of
employment hereunder shall commence on the date hereof (the “Commencement Date”)
and shall continue for a period of three years thereafter. The period commencing
with the Commencement Date through the last day of Employee’s employment
hereunder is hereinafter referred to as the “Employment Period.”




3.    Duties




During
the Employment Period, Employee shall perform such functions as are normally
carried out by the Chief Executive Officer of a business of the type in which
the Company is engaged, and such other functions as the Board of Directors (the
“Board”) of the Company shall from time to time reasonably determine. Employee
shall devote his full-time energies and abilities to the Company’s business
pursuant to, and in accordance with, reasonable business policies and
procedures, as fixed from time to time by the Board. Employee covenants and
agrees that he will faithfully adhere to and fulfill such policies as are
established from time to time by the Board. Employee shall not be assigned
responsibilities in any material manner inconsistent with his position as Chief
Executive Officer.











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4.    Compensation




4.1    During
the Employment Period, Employee’s base salary shall be in the amount of $190,000
per annum, payable in accordance with the Company’s normal payroll procedures.
The Board shall evaluate the base salary annually and may increase such salary
in its sole discretion.




4.2    During
the Employment Period, in addition to Employee’s base salary, Employee shall be
entitled to a bonus equal to 100% of Employee’s base salary for the year ended
December 31, 2005 upon achieving the targets set forth in the Operating Plan of
the Company attached hereto as Exhibit A. Employee shall also be entitled to a
bonus for each of the years ending December 31, 2006 and 2007 upon achieving the
targets set forth in the Operating Plan of the Company for each of such years as
may be adopted by the Board no later than April 30 of each such year. Each such
Operating Plan as so adopted by the Board shall be appended hereto as an
addition to Exhibit A and shall for all purposes be deemed a part of this
Agreement. Any bonus payable pursuant to this Section shall be payable no later
than April 30 of the year following the year for which the bonus is payable. If
the target is not achieved for one or more of such years, the Board may
nonetheless award a bonus to Employee.




4.3    During
the Employment Period, Employee shall be eligible, to the extent he qualifies,
to participate in such fringe benefit plans (including health, retirement,
pension, life or other similar employee benefit plans), if any, which the
Company may from time to time make available to its employees, provided that the
Company shall have the right from time to time to modify, terminate or replace
any and all of such plans.




4.4    The
Company shall reimburse Employee on a timely basis for all reasonable business
expenses incurred by Employee in connection with the performance of his duties
hereunder, provided Employee submits supporting vouchers for such
expenses.




4.5    Employee
shall be entitled to four weeks paid vacation each year during the Employment
Period, to be taken at such time as is consistent with the needs of the Company
and the convenience of Employee.




4.6    Employee
shall be entitled to such other compensation as may be determined from time to
time by the Board in the sole discretion of the Board, including the payment of
a bonus in an amount to be determined by the Board in addition to the bonus, if
any, payable under Section 4.2 hereof.




5.    Stock
Options




5.1    On the
Commencement Date, Employee shall be granted a stock option (the “Option”)
pursuant to and subject to the terms and conditions of the Company’s 2003 Equity
Incentive Plan (the “Plan”) to purchase 100,000 shares of common stock, par
value $.001 per share (“Common Stock”), at a price per share equal to the fair
market value thereof on the date of grant, determined in accordance with the
provisions of the Plan. The Option shall be exercisable over a ten year period,
shall be an incentive stock option to the maximum extent permitted by the
Internal Revenue Code and to the extent incentive stock options are available
for issuance under the Plan, shall vest 1/3 on each of the first, second and
third anniversary dates of grant, and shall contain a provision providing for
immediate vesting upon termination of Employee by the Company without Cause (as
defined in Section 6.4) or termination of employment by Employee for Good Reason
(as defined in Section 6.2). 










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5.2    Employee
shall be entitled to such additional stock options as may from time to time be
granted by the Board of Directors of the Company in their sole and absolute
discretion.




6.    Termination




The
Employment Period shall terminate upon the happening of any of the following
events:




6.1    Automatically
and without notice upon the death of Employee.




6.2    Employee
leaves the employ of the Company for Good Reason or without Good Reason. For
purposes of this Agreement, “Good Reason” shall mean any of the following that
occur as a result of any action of the Company, unless such action occurs with
the prior written approval of Employee: a material reduction in Employee’s level
of responsibility or authority from that which Employee had on the Commencement
Date, any situation that materially impairs the ability of Employee, over an
extended period of time, to exercise the authority and perform the functions
assigned to him, any change in the location of Employee’s office and primary
work location away from the Seattle, Washington area, any change in the
principal place of the Company’s business away from the Seattle, Washington
area, or any change in control of the Company, whether by merger, acquisition,
asset sale or otherwise.




6.3    Upon
written notice of termination from the Board to Employee in the event that
Employee becomes physically or mentally disabled (a “Disability”) during the
Employment Period such that (a) in the Board’s good faith judgment, Employee is
permanently incapable of properly performing the duties customarily performed by
him hereunder, or (b) such Disability lasts for a period
of 60 consecutive days or 90 days in any 360 day period and the Board elects to
treat such Disability as being permanent in nature.




6.4    Upon
discharge of Employee, on written notice, by the Board for Cause or without
Cause. For purposes of this Agreement, “Cause” shall mean the following: the
conviction of, or plea of guilty or nolo contendre to, a felony, crime involving
moral turpitude or other act causing material harm to the Company’s standing and
reputation, failure to carry out, after reasonable written notice of such
failure and a reasonable opportunity to cure, the reasonable policies of the
Board as they may relate to Employee’s duties hereunder (other than for reasons
beyond his control), persistent absenteeism, a material default or breach of any
of the covenants made by Employee in this Agreement, a breach of Employee’s duty
of loyalty to the Company or any act of dishonesty or fraud with respect to the
Company, or the willful engaging by Employee in misconduct materially injurious
to the Company.










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6.5    In the
event of termination of the Employment Period pursuant to Section 6.1, Section
6.2 by Employee without Good Reason, Section 6.3 or Section 6.4 by the Board for
Cause, the Company shall be obligated to pay to Employee the compensation due
him under Section 4.1 hereof up to the date of termination only and Employee
shall not be entitled to receive any additional compensation of any nature
whatsoever. 




6.6    In the
event that Employee’s employment with the Company is terminated pursuant to
Section 6.2 by Employee for Good Reason, or Section 6.4 by the Board without
Cause, the Company shall be required to continue to pay Employee, in accordance
with its normal payroll procedures, the salary provided for in Section 4.1
hereof for a period of twelve months, and Employee shall be entitled to a pro
rata percentage of the bonus, if any, payable pursuant to Section 4.2 for the
year in which the termination occurred in the event that the requisite targets
are achieved for such year. Employee shall not be entitled to receive any
additional compensation of any nature whatsoever.




7.    Non
Competition




7.1    In view
of the unique and valuable services that Employee has rendered and is expected
to render to the Company, the Employee’s knowledge of the business of the
Company and proprietary information relating to the business of the Company and
similar knowledge regarding the Company that Employee has obtained and is
expected to obtain during the course of his employment with the Company and in
consideration of the compensation to be received by Employee hereunder, Employee
agrees that, during the Employment Period and for a period of one year
immediately following the termination or expiration thereof (the Employment
Period and the subsequent one year period being hereinafter collectively
referred to as the “Covenant Period”), he will not, in the United States or
Canada or any other geographical area in which the Company is currently
conducting business in any material respect, directly or indirectly, own,
manage, operate, control, loan money to, or participate in the ownership,
operation or control of, or be connected with as a director, partner,
consultant, agent, independent contractor or otherwise, or acquiesce in the use
of his name in, any other business or organization which develops or sells
software or other applications that enable mobile telephones to download,
organize and/or play games, ringtones or media; provided, however, that Employee
shall be permitted after the cessation of his employment but during the Covenant
Period to own less than a 1% interest as a shareholder in any company which is
listed on any national securities exchange even though it may be in competition
with the Company.




7.2    Employee
will not, during the Covenant Period, solicit or interfere with, or endeavor to
entice away from the Company, any of its employees or others with whom it has a
business relationship, including wireless providers and companies for which the
Company develops and/or publishes wireless content, without the written consent
of the Company.




7.3    Employee
agrees that the provisions of this Section 7 are reasonable and necessary to
protect the Company and its business. It is the desire and intent of the parties
that the provisions of this Section 7 shall be enforced to the fullest extent
permitted under the public policies and laws applied in each jurisdiction in
which enforcement is sought. If any restriction contained in this Section 7
shall be deemed to be invalid, illegal or unenforceable by reason of the extent,
duration or geographical scope thereof, or otherwise, then the court making such
determination shall have the right to reduce such extent, duration, geographical
scope or other provision hereof and in its reduced form such restriction shall
then be enforceable in the manner contemplated hereby.










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7.4    No
provision of this Agreement shall be deemed to preclude Employee from serving as
a director on the board of companies not in competition with the Company or of
charitable organizations, provided, that any such directorship or consulting
activities do not reduce Employee’s ability to attend to his duties on behalf of
the Company.




8.    Intellectual
Property




8.1    Employee
hereby agrees to promptly disclose to the Company any and all Intellectual
Property made or developed by Employee in connection with Employee’s employment
with the Company. For purposes of this Agreement, “Intellectual Property” shall
mean any and all of the following made or otherwise arising out of the efforts
of Employee in connection with Employee’s employment with the Company: all
copyrights (including, without limitation, the exclusive right to reproduce,
distribute copies of, display and thereupon perform the copyrighted work and to
prepare derivative works); all copyright registrations and applications; all
moral rights; all author’s rights; all trademark rights (including, without
limitation, registrations and applications); all right, title and interest in
and to any patent, letters patent, industrial model, design patent, petty
patent, patent of importation, utility model, certificate of invention, and/or
other indicia of inventorship and/or invention ownership, and any application
for any of the foregoing, and including any such rights granted upon any
reissue, division, continuation or continuation-in-part applications now or
hereafter filed, related to any such application; all trade names; all mask work
rights; all right, title and interest in and to all trade secret rights arising
under the common law, state law, federal law or the laws of any foreign country;
all algorithms; all rights in packaging, goodwill and other intellectual
property rights; and all divisions, continuations, reissues, renewals and
extensions thereof, regardless of whether any such rights arise under the laws
of the United States or any other state, country or jurisdiction, and all
derivative works thereof. 




8.2    All
elements of all Intellectual Property shall be exclusively owned by the Company
and shall be considered “Work Made for Hire” by Employee for the Company. The
Company shall exclusively own all United States and international copyrights and
all other intellectual property rights in the Intellectual Property. Employee
agrees to assign, and upon creation of each element of the Intellectual Property
automatically assigns to the Company, its successors and assigns, ownership of
all United States and international copyrights and all other intellectual
property rights in each element of the Intellectual Property. 




Employee
agrees that any and all such Intellectual Property shall be the absolute
property of the Company or the Company’s designees and, at the request of the
Company, Employee shall provide any reasonably necessary assistance to the
Company in making application in due form for United States letters patent and
foreign letters patent on such Intellectual Property. In the event that the
Company requests that Employee provide such application assistance after
termination of Employee’s employment with the Company, the Company agrees to
compensate Employee for time spent providing the requested assistance at a rate
equal to Employee’s most recent hourly rate. In calculating such hourly rate, it
shall be assumed that Employee works forty (40) hours per week to earn the
salary identified in Section 4.1 of the Agreement. Employee shall execute any
and all instruments and do any acts necessary or desirable in connection with
any such application for letters patent in order to establish and perfect in the
Company the entire right, title, and interest in such Intellectual Property, and
also to execute any instruments desirable in connection with any continuations,
renewals, or reissues thereof or in the conduct of any related proceedings or
litigation. The Company shall bear all reasonably necessary out of pocket
expenses incurred by Employee as a result of the performance of the obligations
provided for in this section 8.2. Except as authorized by the Company (in
writing if after termination of the Employment Period), Employee shall not
disclose, directly or indirectly, any information relating to any such invention
or patent application.










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If
Employee has any intellectual property rights to any Intellectual Property that
cannot be assigned to the Company, Employee unconditionally and irrevocably
waives the enforcement of such rights, and all claims and causes of action of
any kind against the Company with respect to such Intellectual Property, and
agrees, at the Company’s request and expense, to consent to and join in any
action to enforce the rights such Intellectual Property. If Employee has any
intellectual property rights in any Intellectual Property that cannot be
assigned to the Company or waived by Employee, the Employee, to the extent
Employee has the legal right to do so, unconditionally and irrevocably grants to
the Company during the term of such rights, an exclusive, irrevocable,
perpetual, worldwide, fully paid and royalty-free license, with rights to
sublicense through multiple levels of sublicensees, to reproduce, create
derivative works of, distribute, publicly perform and publicly display by all
means now known or later developed, such Intellectual Property.




8.3    The
parties understand that the provisions of this Agreement requiring assignment of
Intellectual Property to the Company and the waiver of the enforcement of such
rights against the Company do not apply to any invention for which no equipment,
supplies, facility or trade secret information of the Company was used and which
was developed entirely on Employee’s own time, unless (a) the invention relates
(i) directly to the business of the Company or (ii) to the Company’s actual or
demonstrably anticipated research or development or (b) the invention results
from any work performed by Employee for the Company. In addition, the parties
understand that the provisions of this Agreement do not apply to any of the
inventions, original works of authorship, developments, improvements, and trade
secrets which were made by Employee prior to the date of commencement of
employment with the Company, all of which are set forth on the list attached
hereto as Exhibit C (collectively referred to as “Prior Inventions”), which
belong solely to Employee or belong to Employee jointly with another and which
are not assigned to the Company hereunder; or, if no such list is attached,
Employee represents that there are no such Prior Inventions. If, in the course
of Employee’s employment with the Company, Employee incorporates into a Company
product, process or machine a Prior Invention owned by Employee or in which
Employee has an interest, the Company is hereby granted and shall have a
non-exclusive, royalty-free, irrevocable, perpetual, worldwide license (with the
right to sublicense) to make, have made, copy, modify, make derivative works of,
use, sell and otherwise distribute such Prior Invention as part of or in
connection with such product, process or machine. 










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9.    Confidentiality




9.1    Except as
authorized by the Company (in writing if after termination of the Employment
Period), Employee shall not disclose or use, directly or indirectly, either
during or subsequent to Employee’s employment with the Company, any Confidential
Information or Confidential Materials obtained during the course of Employee’s
employment with the Company. This provision shall apply regardless of whether or
not such Confidential Information or Confidential Materials were acquired,
originated or developed in whole or in part by Employee. Additionally, excluding
disclosures made in the proper course and scope of his employment by the
Company, Employee shall not distribute or otherwise disclose to any third party
any Confidential Materials, except as authorized in writing by the
Company.




9.2    Employee
agrees to deliver to the Company promptly upon request or on the date of the
termination of the Employment Period, all documents, copies thereof, and any
other materials in Employee’s possession or control concerning or relating to
any Confidential Information or Confidential Materials obtained during the
course of Employee’s employment with the Company.




9.3    “Confidential
Information” shall mean all nonpublic information that the party disclosing such
information (“Disclosing Party”) designates as being confidential, or
information that, under the circumstances surrounding disclosure ought to be
treated as confidential. Confidential Information includes, without limitation,
information related to released or unreleased Disclosing Party software
products, the marketing or promotion of any Disclosing Party product, Disclosing
Party’s business policies or practices, and information received from others
that Disclosing Party is obligated to treat as confidential. Confidential
Information disclosed to another party (“Receiving Party”) by any Disclosing
Party agent is also deemed to be covered by this Agreement. Confidential
Information does not include any of the foregoing items which (i) have become
publicly and widely known and made generally available through no wrongful act
of the Receiving Party or of others who were under confidentiality obligations
as to the item or items involved, (ii) was known to the Receiving Party, without
restriction, at the time of disclosure, as demonstrated by files in existence at
the time of disclosure; or (iii) becomes known to the Receiving Party, without
restriction, from a source other than the Disclosing Party without breach of
this Agreement by the Receiving Party and otherwise not in violation of the
Disclosing Party’s rights. 




9.4    “Confidential
Materials” shall mean all tangible materials containing Confidential
Information, including without limitation written or printed documents and
computer disks or tapes, whether machine or user readable.




10.   Remedies. Since a
breach of the provisions of Section 7, 8 or 9 could not adequately be
compensated by money damages and will cause irreparable injury to the Company,
the Company shall be entitled, in addition to any other right or remedy
available to it, to an injunction or restraining order restraining such breach
or a threatened breach, and no bond or other security shall be required in
connection therewith, and Employee hereby consents to the issuance of any such
injunction or restraining order. 










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11.   Entire
Agreement




Except
for the provisions in Article IV of the Agreement and Plan of Merger, dated as
of February 4, 2004, between the Company, Employee, OTA Acquisition Corp.,
Over-the-Air Wireless, Inc., David C. Adams, Mark Sanders and Alexander U.
Conrad, that survived the closing of the merger of Over-the-Air Wireless, Inc.
into OTA Acquisition Corp., the provisions hereof and the agreements referred to
herein constitute the entire agreement between the parties with respect to the
subject matter hereof and supersede any prior oral understanding, and no
modification, supplement or discharge hereof shall be effective unless in
writing and executed on behalf of the Company and Employee.




12.   Assignability




This
Agreement, and its rights and obligations may not be assigned by Employee. The
Company may assign any of its rights and obligations hereunder to a successor or
surviving corporation resulting from a merger or consolidation of the Company,
the sale by the Company of all or substantially all of its assets or other
similar corporate reorganization, upon condition that the assignee shall assume,
either expressly or by operation of law, all of the Company’s obligations
hereunder.




13.   Waiver




No waiver
by either party of any condition, term or provision of this Agreement shall be
deemed to be a waiver of any prior or succeeding breach of the same or of any
other condition, term or provision hereof.




14.   Notices




All
notices required or permitted to be given by either party hereunder shall be in
writing and mailed by registered mail, return receipt requested, faxed, or
delivered personally to the other party at the address set forth above or such
different address as may be given by notice as provided for herein. Any notice
mailed as provided above shall be deemed given seven (7) days after the date of
mailing or on the date of receipt, whichever is sooner. Any notice faxed or
delivered personally shall be deemed given on the date the notice is faxed or
delivered. 




15.   Counterparts




This
Agreement may be executed in several counterparts, each of which shall be deemed
an original but all of which together shall constitute one and the same
instrument.




16.   Governing
Law; Venue




This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Washington without regard to conflicts or choice of law provisions
thereof. Except as provided in Section 18 below, any legal action arising out of
or relating to this Agreement, or to the interpretation, breach or enforcement
thereof, shall be brought in a federal or state court located in Seattle,
Washington.










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17.   Expenses




Each
party shall bear their own expenses in connection with the negotiation,
execution and delivery of this Agreement, except that the Company shall pay the
reasonable legal fees and expenses of counsel for Employee in connection with
this Agreement in an amount not to exceed $2,000. In the
event that there is any controversy or claim arising out of or relating to this
Agreement, or to the interpretation, breach or enforcement thereof, and any
action or proceeding is commenced to enforce the provisions of this Agreement,
the prevailing party shall be entitled to be reimbursed by the other party its
reasonable attorney's fee, costs and expenses.




18.   Arbitration. Any
dispute or controversy arising under or in connection with this Agreement, other
than under Section 7, 8 or 9, shall be settled exclusively by arbitration,
conducted before a single arbitrator in Seattle, Washington, in accordance with
the rules of the American Arbitration Association then in effect, and judgment
may be entered on the arbitrator’s award in any court having jurisdiction. The
decision of the arbitrator shall be final and binding on the parties.





19.   Indemnification. The
Company shall, to the fullest extent permitted by law, indemnify and hold
Employee harmless from and against all claims, damages, losses, costs and
expenses, including reasonable attorneys’ fees and disbursements, arising out of
the performance by Employee of his duties pursuant to this Agreement, in
furtherance of the Company’s business, or within the scope of his
employment.








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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year first above written.

 



	 	 	 
	 	
		By:  	/s/ Rick J.
    Hennessey
	 	
      

      Name: Rick J. Hennessey
	 	





	 	 	 
	 	DWANGO NORTH AMERICA CORP.
	 
 	 
 	 
 
		By:  	/s/ J. Paul Quinn
	 	
      

      Name:
      J. Paul Quinn
	 	Title:
      Chief Financial Officer











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