THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED.
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Warrant No. WE-___ Date of Issuance: September 29, 2003
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DWANGO NORTH AMERICA CORP.
COMMON STOCK PURCHASE WARRANT
Dwango North America Corp., a Nevada corporation (the "Company"), for
value received, hereby certifies that _______________, or his registered assigns
(the "Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 6 below) shares of common stock, par
value $.001 per share, of the Company ("Common Stock") at an exercise price of
$1.20 per share. The shares purchasable upon exercise of this Warrant, and the
purchase price per share, as adjusted from time to time pursuant to the
provisions of this Warrant, are hereinafter referred to as the "Warrant Stock"
and the "Purchase Price," respectively.
1. NUMBER OF SHARES. Subject to the terms and conditions hereinafter
set forth, the Holder is entitled, upon surrender of this Warrant, to purchase
from the Company _______ shares (subject to adjustment as provided herein) of
Warrant Stock.
2. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder at any time, in whole or in part, by surrendering this
Warrant, with the purchase/exercise form appended hereto as Exhibit A duly
executed by such Registered Holder at the principal office of the Company, or at
such other office or agency as the Company may designate, accompanied by payment
in full of the Purchase Price payable in respect of the number of shares of
Warrant Stock purchased upon such exercise. The Purchase Price may be paid by
cash, check, wire transfer, or by the surrender of promissory notes or other
instruments, in due date order, representing indebtedness of the Company to the
Registered Holder.
(b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the day on which this Warrant shall have been surrendered to the Company as
provided in Section 2(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 2(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.
(c) NET ISSUE EXERCISE.
(i) In lieu of exercising this Warrant in the manner
provided above in Section
2(a), the Registered Holder may elect to receive shares equal to the value of
this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with notice of such
election on the purchase/exercise form appended hereto as Exhibit A duly
executed by such Registered Holder or such Registered Holder's duly authorized
attorney, in which event the Company shall issue to such Holder a number of
shares of Warrant Stock computed using the following formula:
X = Y (A - B)
---------
A
Where X = The number of shares of Warrant Stock to be issued to the
Registered Holder.
Y = The number of shares of Warrant Stock purchasable
under this Warrant (at the date of such calculation).
A = The fair market value of one share of Warrant Stock (at the
date of such calculation).
B = The Purchase Price (as adjusted to the date of such calculation).
(ii) For purposes of this Section 2(c), the fair market value
of Warrant Stock on the date of calculation shall mean with respect to each
share of Warrant Stock:
(A) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by the
Securities and Exchange Commission, then the fair market value per share shall
be the initial "Price to Public" specified in the final prospectus with respect
to the offering of one share of Common Stock.
(B) if this Warrant is exercised after, and not in connection
with, the Company's initial public offering, and if the Company's Common Stock
is traded on a securities exchange or The Nasdaq Stock Market or actively traded
over-the-counter:
(1) if the Company's Common Stock is traded on a
securities exchange or The Nasdaq Stock Market, the fair market value shall be
deemed to be the average of the closing prices over a thirty (30) day period
ending three days before date of calculation; or
(2) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the average of the
closing bid or sales price (whichever is applicable) over the thirty (30) day
period ending three days before the date of calculation; or
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(C) if neither (A) nor (B) is applicable, the fair market
value of Warrant Stock shall be at the highest price per share which the Company
could obtain on the date of calculation from a willing buyer (not a current
employee or director) for shares of Warrant Stock sold by the Company, from
authorized but unissued shares, as determined in good faith by the Board of
Directors, unless the Company is at such time subject to an acquisition as
described in Section 6(b) below, in which case the fair market value of Warrant
Stock shall be deemed to be the value received by the holders of such stock
pursuant to such acquisition.
(d) DELIVERY TO HOLDER. As soon as practicable after the exercise of
this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of
Warrant Stock to which such Registered Holder shall be entitled, and
(ii) in case such exercise is in part only, a new warrant or
warrants (dated the date hereof) of like tenor, calling in the aggregate on the
face or faces thereof for the number of shares of Warrant Stock equal to the
number of such shares called for on the face of this Warrant (without giving
effect to any adjustment therein) minus the number of such shares purchased by
the Registered Holder upon such exercise (including any shares constituting the
exercise price for such purchase and without giving effect to any adjustments in
such numbers occurring prior to such purchase) as provided in Section 2(a) or
2(c) above.
3. ADJUSTMENTS.
(a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.
(b) RECLASSIFICATION, ETC. In case there occurs any
reclassification or change of the outstanding securities of the Company or of
any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) or any similar corporate reorganization on or after the date hereof,
then and in each such case the Registered Holder, upon the exercise hereof at
any time after the consummation of such reclassification, change, or
-3-
reorganization shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment
pursuant to the provisions of this Section 3.
(c) ADJUSTMENT CERTIFICATE. When any adjustment is required to
be made in the Warrant Stock or the Purchase Price pursuant to this Section 3,
the Company shall promptly mail to the Registered Holder a certificate setting
forth (i) a brief statement of the facts requiring such adjustment, (ii) the
Purchase Price after such adjustment and (iii) the kind and amount of stock or
other securities or property into which this Warrant shall be exercisable after
such adjustment.
4. TRANSFERS.
(a) UNREGISTERED SECURITY. Each holder of this Warrant
acknowledges that this Warrant and the Warrant Stock have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and agrees
not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose
of this Warrant or any Warrant Stock issued upon its exercise in the absence of
(i) an effective registration statement under the Act as to this Warrant or such
Warrant Stock and registration or qualification of this Warrant or such Warrant
Stock under any applicable U.S. federal or state securities law then in effect,
or (ii) an opinion of counsel, satisfactory to the Company, that such
registration and qualification are not required and an affidavit of transfer
executed by the transferee bearing appropriate representations by such
transferee under federal and state securities laws. Each certificate or other
instrument for Warrant Stock issued upon the exercise of this Warrant shall bear
a legend substantially to the foregoing effect.
(b) TRANSFERABILITY. Subject to the provisions of Section 4(a)
hereof, this Warrant and all rights hereunder are transferable, in whole or in
part, upon surrender of the Warrant with a properly executed assignment (in the
form of Exhibit B hereto) at the principal office of the Company; provided,
however, that this Warrant may not be transferred in part unless the transferee
acquires the right to purchase either (i) at least 10,000 shares of Warrant
Stock (as adjusted pursuant to Section 3) or (ii) all of the shares of Warrant
Stock exercisable hereunder.
(c) WARRANT REGISTER. The Company will maintain a register
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.
5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
-4-
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 14 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.
6. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) April 26, 2007, (b) the sale, conveyance or
disposal of all or substantially all of the Company's property or business or
the Company's merger into or consolidation with any other corporation (other
than a wholly-owned subsidiary of the Company) or any other transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, provided that this Section 6(b)
shall not apply to a merger effected exclusively for the purpose of changing the
domicile of the Company, or (c) the closing of the initial public offering of
the Company's Common Stock pursuant to a registration statement under the
Securities Act.
7. NOTICES OF CERTAIN TRANSACTIONS. In case:
(a) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right, to subscribe for or purchase any shares of stock of any
class or any other securities, or to receive any other right, or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or
(c) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company, or
(d) of any redemption of the Common Stock of the Company,
then, and in each such case, the Company will mail or fax or cause to be mailed
or faxed to the Registered Holder of this Warrant a notice specifying, as the
case may be, (i) the date on which a record is to be taken for the purpose of
such dividend, distribution or right, and stating the amount and character of
such dividend, distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation, winding-up or redemption is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such other
stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion) are to be determined. Such notice shall be
-5-
mailed or faxed at least ten (10) days prior to the record date or effective
date for the event specified in such notice.
8. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.
9. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 4
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.
10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required in an amount reasonably
satisfactory to the Company), or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.
11. MAILING OF NOTICES. Any notice required or permitted pursuant to
this Warrant shall be in writing and shall be deemed sufficient upon receipt,
when delivered personally or sent by courier, overnight delivery service or
confirmed facsimile, or forty-eight (48) hours after being deposited in the
regular mail, as certified or registered mail, with postage prepaid, addressed
(a) if to the Registered Holder, to the address of the Registered Holder most
recently furnished in writing to the Company and (b) if to the Company, to the
address set forth below or subsequently modified by written notice to the
Registered Holder.
12. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.
13. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.
14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.
-6-
15. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of any
provision of this Warrant.
16. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.
COMPANY:
DWANGO NORTH AMERICA CORP.
By:__________________________________________
Name:________________________________________
(print)
Title:_______________________________________
Address: 5847 San Felipe Street
Houston, Texas 77057
ACCEPTED AND AGREED:
[HOLDER]
By:
-----------------------------------
Name:
------------------------------
(print)
Title:
-----------------------------------
Address:
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EXHIBIT A
PURCHASE/EXERCISE FORM
To: Dwango North America Corp. Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant No. WE-__, hereby irrevocably elects to (a) purchase _______ shares of
the Common Stock covered by such Warrant and herewith makes payment of
$_________, representing the full purchase price for such shares at the price
per share provided for in such Warrant, or (b) exercise such Warrant for _______
shares of Common Stock purchasable under the Warrant pursuant to the Net Issue
Exercise provisions of Section 2(c) of such Warrant.
Signature:
----------------------------
Name (print):
-------------------------
Title (if applic.)
--------------------
Company (if applic.):
-----------------
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant with respect to the number of shares of Common Stock covered
thereby set forth below, unto:
NAME OF ASSIGNEE ADDRESS/FACSIMILE NUMBER NO. OF SHARES
---------------- ------------------------ -------------
REGISTERED HOLDER
Dated:_________________ Signature:
-------------------------------
Name (print):
----------------------------
Title (if applic.)
-----------------------
Company (if applic.):
--------------------
The undersigned acknowledges that it has reviewed the restrictions on
transfer set forth in Section 4 hereof and agrees to be bound by such
provisions.
ASSIGNEE:
Dated:_________________ Signature:
--------------------------
----------------------------
Witness:
----------------------------