THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE SECURITIES AND THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR THE SHARES ISSUABLE
UPON EXERCISE HEREOF, AS APPLICABLE, UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN OPINION OF COUNSEL TO THE CORPORATION THAT SUCH REGISTRATION IS
NOT REQUIRED.
DWANGO NORTH AMERICA CORP.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK,
PAR VALUE $.001 PER SHARE
Warrant No. WE-___
THIS CERTIFIES that, for value received, ___________ (the
"Holder") is entitled to subscribe for and purchase from DWANGO NORTH AMERICA
CORP., a Nevada corporation (the "Company"), upon the terms and subject to the
conditions set forth herein, at any time or from time to time after the date
hereof and up to and including 5:00 P.M. on September 15, 2006, New York time
(the "Exercise Period"), ____________ shares (as adjusted pursuant to the terms
hereof, the "Warrant Shares") of the Company's common stock, par value $.001 per
share (the "Common Stock"). The exercise price (the "Exercise Price") per
Warrant Share purchasable hereunder shall equal $1.20 per share (or such price
as adjusted pursuant to Section 5). This Warrant may be redeemed by the Company
for $.01 per underlying Warrant Share, upon 30 days prior written notice to the
Holder, in the event that the Common Stock is publicly traded and the closing
sales price (or closing bid price) of the Common Stock on its principal trading
market is at least twice the then current Exercise Price for a period of ten
consecutive trading days ending within 20 days prior to the date of the notice
of redemption. As used herein the term "this Warrant" shall mean and include
this Warrant and any Warrant or Warrants hereafter issued as a consequence of
the exercise or transfer of this Warrant in whole or in part.
The number of shares of Common Stock issuable upon exercise of
this Warrant and the Exercise Price may be adjusted from time to time as
hereinafter set forth.
1. This Warrant may be exercised during the Exercise Period,
as to the whole or any lesser number of whole Warrant Shares, by the surrender
of this Warrant (with the form of election attached hereto duly executed) to the
Company at its office at 5847 San Felipe Street, Houston, Texas 77057, or at
such other place as is designated in writing by the Company, together with (i) a
certified or bank cashier's check payable to the order of the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant Shares
for which this Warrant is being exercised (the "Aggregate Exercise Price") and
(ii) the acceptance by the Holder of a number of Warrant Shares equal to the
number of Warrant Shares being purchased upon such exercise.
2. Upon each exercise of the Holder's rights to purchase
Warrant Shares, the Holder shall be deemed to be the holder of record of the
Warrant Shares issuable upon such exercise, notwithstanding that the transfer
books of the Company shall then be closed or certificates representing such
Warrant Shares shall not then have been actually delivered to the Holder. As
soon as practicable after each such exercise of this Warrant, the Company shall
issue and deliver to the Holder a certificate or certificates for the Warrant
Shares issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon surrender of this Warrant for cancellation, execute and deliver a new
Warrant evidencing the right of the Holder to purchase the balance of the
Warrant Shares (or portions thereof) subject to purchase hereunder.
3. Any Warrants issued upon the transfer or exercise in part
of this Warrant shall be numbered and shall be registered in a warrant register
(the "Warrant Register") as they are issued. The Company shall be entitled to
treat the registered holder of any Warrant on the Warrant Register as the owner
in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Warrant on the part of any other
person, and shall not be liable for any registration or transfer of Warrants
which are registered or to be registered in the name of a fiduciary or the
nominee of a fiduciary unless made with the actual knowledge that a fiduciary or
nominee is committing a breach of trust in requesting such registration or
transfer, or with the knowledge of such facts that its participation therein
amounts to bad faith. This Warrant shall be transferable only on the books of
the Company upon delivery thereof duly endorsed by the Holder or by his or its
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment, or authority to transfer. In all cases of transfer by an
attorney, executor, administrator, guardian, or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Warrant or Warrants to
the person entitled thereto. This Warrant may be exchanged, at the option of the
Holder thereof, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Warrant Shares (or portions thereof), upon surrender
to the Company or its duly authorized agent.
4. The Company shall at all times reserve and keep available
out of its authorized and unissued Common Stock, solely for the purpose of
providing for the exercise of the rights to purchase all Warrant Shares granted
pursuant to the Warrants, such number of shares of Common Stock as shall, from
time to time, be sufficient therefor. The Company covenants that all shares of
Common Stock issuable upon exercise of this Warrant, upon receipt by the Company
of the full Exercise Price therefor, shall be validly issued, fully paid,
nonassessable, and free of preemptive rights of third parties.
5. (a) In case the Company shall at any time after the date
this Warrant was first issued (i) declare a dividend on the outstanding shares
of Common Stock payable in shares of its Common Stock, (ii) subdivide the
outstanding shares of Common Stock, (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of the shares of Common Stock (including any
such reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then, in each case, the Exercise Price
and the number of Warrant Shares issuable upon exercise of this Warrant, in
effect at the time of the record date for such dividend or of the effective date
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of such subdivision, combination, or reclassification, shall be proportionately
adjusted so that the Holder after such time shall be entitled to receive the
aggregate number and kind of shares which, if such Warrant had been exercised
immediately prior to such time, it would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination, or
reclassification. Such adjustment shall be made successively whenever any event
listed above shall occur.
(b) In the event that the Company issues Common Stock
or securities convertible into or exercisable for shares of Common Stock at a
per share price (the "Per Share Price") of less than the then current Exercise
Price, the Exercise Price shall be immediately reset to equal the Per Share
Price; provided, however, that the following issuances shall not cause the
Exercise Price to be reset: (i) the issuance of Common Stock upon the exercise
of options outstanding as of the date hereof, and (ii) up to an additional
100,000 shares per annum (as proportionately adjusted for the events described
in Section 5(a) of this Warrant).
(c) Whenever there shall be an adjustment as provided
in this Section 5, the Company shall promptly cause written notice thereof to be
sent by registered mail, postage prepaid, to the Holder, at its address as it
shall appear in the Warrant Register, which notice shall be accompanied by an
officer's certificate setting forth the number of Warrant Shares purchasable
upon the exercise of this Warrant and the Exercise Price after such adjustment
and setting forth a brief statement of the facts requiring such adjustment and
the computation thereof, which officer's certificate shall be conclusive
evidence of the correctness of any such adjustment absent manifest error.
(d) The Company shall not be required to issue
fractions of shares of Common Stock or other capital stock of the Company upon
the exercise of this Warrant.
6. (a) In case of any consolidation with or merger of the
Company with or into another corporation (other than a merger or consolidation
in which the Company is the surviving or continuing corporation), or in case of
any sale, lease, or conveyance to another corporation of the property and assets
of any nature of the Company as an entirety or substantially as an entirety,
such successor, leasing, or purchasing corporation, as the case may be, shall,
as a condition to the consummation of any of the foregoing transactions, (i)
execute with the Holder an agreement providing that the Holder shall have the
right thereafter to receive upon exercise of this Warrant solely the kind and
amount of shares of stock and other securities, property, cash, or any
combination thereof receivable upon such consolidation, merger, sale, lease, or
conveyance by a holder of the number of shares of Common Stock for which this
Warrant might have been exercised immediately prior to such consolidation,
merger, sale, lease, or conveyance and (ii) make effective a provision in its
certificate of incorporation or otherwise, if necessary, to effect such
agreement. Such agreement shall provide for adjustments which shall be as nearly
equivalent as practicable to the adjustments in Section 5.
(b) In case of any reclassification or change of the
shares of Common Stock issuable upon exercise of this Warrant (other than a
change in par value or from no par value to a specified par value, or as a
result of a subdivision or combination, but including any change in the shares
into two or more classes or series of shares), or in case of any consolidation
or merger of another corporation into the Company in which the Company is the
continuing corporation and in which there is a reclassification or change
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(including a change to the right to receive cash or other property) of the
shares of Common Stock (other than a change in par value, or from no par value
to a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), the Holder shall have the right thereafter to receive upon exercise of
this Warrant solely the kind and amount of shares of stock and other securities,
property, cash, or any combination thereof receivable upon such
reclassification, change, consolidation, or merger by a holder of the number of
shares of Common Stock for which this Warrant might have been exercised
immediately prior to such reclassification, change, consolidation, or merger.
Thereafter, an appropriate provision shall be made for adjustments which shall
be as nearly equivalent as practicable to the adjustments in Section 5.
(c) The above provisions of this Section 6 shall
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales, leases, or conveyances.
7. In case at any time the Company shall propose:
(a) to pay any dividend or make any distribution on
shares of Common Stock in shares of Common Stock or make any other
distribution to all holders of Common Stock; or
(b) to effect any reclassification or change of
outstanding shares of Common Stock, or any consolidation, merger, sale,
lease, or conveyance of property, described in Section 6; or
(c) to effect any liquidation, dissolution, or
winding-up of the Company; or
(d) to take any other action which would cause
an adjustment to the Exercise Price;
then, and in any one or more of such cases, the Company shall give written
notice thereof, by registered mail, postage prepaid, to the Holder at the
Holder's address as it shall appear in the Warrant Register, mailed at least
five business days prior to (i) the date as of which the holders of record of
shares of Common Stock to be entitled to receive any such dividend or
distribution is to be determined, (ii) the date on which any such
reclassification, change of outstanding shares of Common Stock, consolidation,
merger, sale, lease, conveyance of property, liquidation, dissolution, or
winding-up is expected to become effective, and the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange their shares for securities or other property, if any, deliverable upon
such reclassification, change of outstanding shares, consolidation, merger,
sale, lease, conveyance of property, liquidation, dissolution, or winding up or,
(iii) the date of such action which would require an adjustment to the Exercise
Price.
8. The issuance of any shares of Common Stock or other
securities upon the exercise of this Warrant, and the delivery of certificates
or other instruments representing such shares or other securities, shall be made
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without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
9. The registration rights of the Holder (including the
Holder's successors) with respect to this Warrant and the Warrant Shares will be
as set in a Registration Rights Agreement assumed in connection with the
issuance of this Warrant.
10. The certificate or certificates evidencing such Warrant
Shares shall bear a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS."
11. Upon receipt of evidence satisfactory to the Company of
the loss, theft, destruction, or mutilation of any Warrant (and upon surrender
of any Warrant if mutilated), and upon reimbursement of the Company's reasonable
incidental expenses, the Company shall execute and deliver to the Holder thereof
a new Warrant of like date, tenor, and denomination.
12. The Holder of any Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Warrant.
13. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) five business days after having been sent by
registered or certified mail, return receipt requested, postage prepaid; or
(iii) one business day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt.
Notices may also be given by facsimile and will be effective on the date
transmitted if confirmed within 24 hours thereafter by a signed original sent in
the manner provided in the preceding sentence. All communications shall be sent
to the Company at 5847 San Felipe Street, Houston Texas 77057, Attention: Robert
E. Huntley, Chief Executive Officer; Fax: 713-914-9688, with a copy to Moomjian
& Waite, LLP, 500 North Broadway, Jericho, New York 11753, Attention: Gary T.
Moomjian; Fax: 516- 937-5050 and to the Holder at the address or facsimile
number set forth in the records of the Company, or at such other address as the
Company or the Holder may designate by 10 days' advance written notice to the
other parties hereto.
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14. The rights and obligations of the Company, of the holder
of this Warrant and holder of shares of Common Stock issued upon exercise of
this Warrant, referred to in Section 9, shall survive the exercise of this
Warrant.
15. This Warrant shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of the Holder and its
successors and assigns. The Holder may assign the Holder's rights under this
Warrant, in whole or in part, and such rights may be similarly assigned by such
assignee. 16. This Warrant shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed within such State,
without regard to principles of conflicts of law.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed on the day and year first written below.
Dated:
DWANGO NORTH AMERICA CORP.
By: ________________________________
Name:
Title:
[Signature Page for Warrant]
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, _____________________________ hereby
sells, assigns, and transfers unto __________________ a Warrant to purchase
__________ shares of Common Stock, par value $.001 per share, of Dwango North
America Corp. (the "Company"), together with all right, title, and interest
therein, and does hereby irrevocably constitute and appoint __________ attorney
to transfer such Warrant on the books of the Company, with full power of
substitution.
Dated: ______________
Signature_____________________________
NOTICE
The signature on the foregoing Assignment must correspond to
the name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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To: Dwango North America Corp.
5847 San Felipe Street
Houston, Texas 77057
ELECTION TO EXERCISE
The undersigned hereby elects to purchase /1/ shares of Common Stock of Dwango
North America Corp. pursuant to the terms of the attached Warrant and tenders
herewith payment in full for the purchase price of the shares being purchased,
together with all applicable transfer taxes, if any.
The undersigned requests that certificates for such securities be issued in the
name of, and delivered to:
------------------------------------------------------------
(Print Name, Address and Social Security or Tax Identification Number)
and, if such number of Warrant Shares shall not be all the Warrant Shares
covered by the within Warrant, that a new Warrant for the balance of the Warrant
Shares covered by the within Warrant be registered in the name of, and delivered
to, the undersigned at the address stated below.
Dated: _______________ Name________________________
(Print)
Address:_____________________________
------------------------
(Signature)
- --------
1 Insert here the maximum number of shares or, in the case of a partial
exercise, the portion thereof as to which the Warrant is being
exercised.
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