THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
CONVERSION SERVICES INTERNATIONAL, INC.
COMMON STOCK PURCHASE WARRANT
August 11, 2006
THIS COMMON STOCK PURCHASE WARRANT (this "Warrant") of Conversion Services
International, Inc., a corporation duly organized and validly existing under the
laws of the State of Delaware (the "Company"), is issued to the Holder (as
defined below).
FOR VALUE RECEIVED, the Company hereby certifies that the registered
holder hereof and its successors and assigns, Hare & Co. (the "Holder") is
entitled to purchase from the Company 1,176,471 duly authorized, validly issued,
fully paid and nonassessable shares of common stock of the Company, par value
$0.001 per share (the "Common Stock"), at a purchase price per share equal to
$0.94, as may be adjusted to the anti-dilution provisions set forth herein (the
"Warrant Price"). The person or entity in whose name this Warrant (or one or
more predecessor Warrants) is registered on the records of the Company regarding
registration and transfers of the Warrant (the "Warrant Register") is the owner
and holder thereof for all purposes, except as described in Section 11 hereof.
1. Vesting of Warrant. This Warrant shall vest and become exercisable as
of the date hereof.
2. Expiration of Warrant. This Warrant shall expire on August 10, 2011
(the "Expiration Date").
3. Exercise of Warrant. This Warrant shall be exercisable pursuant to the
terms of Section 1 and this Section 3 hereof.
3.1 Manner of Exercise. This Warrant may only be exercised by the
Holder hereof, in accordance with the terms and conditions hereof, in whole or
in part with respect to any portion of the Warrant, into shares of Common Stock,
during normal business hours on any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in New York, New York are
authorized by law to be closed (a "Business Day") on or prior to the Expiration
Date with respect to such portion of the Warrant, by surrender of this Warrant
to the Company at its office maintained pursuant to Section 11.2(a) hereof,
accompanied by an exercise notice in substantially the form attached to this
Warrant as Exhibit A (or a reasonable facsimile thereof) duly executed by the
Holder, together with the payment of the Warrant Price. Anything to the contrary
not withstanding, at any time that the Company has not filed a Registration
Statement under the Securities Act of 1933 (the "Act") with the Securities and
Exchange Commission on or before 90 days after the date hereof covering the
shares issuable upon exercise of this Warrant is not effective, the Holder shall
have the right, at his election exercised in his sole discretion, to exercise
the Warrant, in whole or in part, and, in lieu of making the cash payment
otherwise contemplated to be made to the Company upon such exercise in payment
of the Exercise Price, elect instead to receive upon such exercise the "Net
Number" of shares of Common Stock determined according to the following formula
(a "Cashless Exercise"):
Net Number = (A x B) - (A x C)
---------------------
B
For purposes of the foregoing formula:
A = the total number of shares with respect to which this
Warrant is then being exercised.
B = the Closing Sale Price of the Common Stock on the trading
day immediately preceding the date of the Exercise Notice.
C = the Warrant Exercise Price then in effect for the
applicable Warrant Shares at the time of such exercise.
3.2 When Exercise Effective. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in Section 3.1 hereof, and, at such time, the corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or a governmental agency (a "Person" or the "Persons") in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon exercise as provided in Section 3.3 hereof shall be
deemed to have become the holder or holders of record thereof.
3.3 Delivery of Stock Certificates. As soon as practicable after
each exercise of this Warrant, in whole or in part, and in any event within
fifteen (15) Business Days thereafter, the Company at its expense (including the
payment by it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the Holder hereof or, subject to Section 10 hereof, as the
Holder (upon payment by the Holder of any applicable transfer taxes) may direct:
2
(a) a certificate or certificates (with appropriate
restrictive legends, as applicable) for the number of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock to which the Holder
shall be entitled upon exercise plus, in lieu of any fractional share to which
the Holder would otherwise be entitled, all issuances of Common Stock shall be
rounded up to the nearest whole share.
(b) in case exercise is in part only, a new Warrant of like
tenor, dated the date hereof and calling in the aggregate on the face thereof
for the number of shares of Common Stock equal to the number of shares called
for on the face of this Warrant minus the number of shares designated by the
Holder upon exercise as provided in Section 3.1 hereof (without giving effect to
any adjustment thereof).
3.4 Company to Reaffirm Obligations. The Company will, at the time
of each exercise of this Warrant, upon the written request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to the Holder all
rights (including without limitation any rights to registration of the shares of
Common Stock issued upon exercise) to which the Holder shall continue to be
entitled after exercise in accordance with the terms of this Warrant; provided,
however, that if the Holder shall fail to make a request, the failure shall not
affect the continuing obligation of the Company to afford the rights to such
Holder.
4. Adjustment of Common Stock Issuable Upon Exercise. The Warrant Price
shall be subject to be adjusted and re-adjusted from time to time as provided in
this Section 4 and, as so adjusted or re-adjusted, shall remain in effect until
a further adjustment or re-adjustment thereof is required by this Section 4:
4.1 Stock Dividends; Stock Splits. In case the Company at any time
or from time to time after the date hereof shall declare or pay any dividend or
otherwise make a distribution or distributions on shares of its Junior
Securities (as defined in the Certificate of Designations of Preferences, Rights
and Limitations of Series A Convertible Preferred Stock or the Company dated the
date hereof) or pari passu securities payable in shares of Common Stock on the
Common Stock payable in Common Stock, or shall effect a subdivision of the
outstanding shares of Common Stock into a greater number of shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in Common
Stock), then, and in each case, subject to Section 4.3 hereof, the Warrant Price
shall be reduced, concurrently with the dividend or subdivision, to a price
determined by multiplying the Warrant Price by a fraction:
(a) the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to the dividend or subdivision; and
(b) the denominator of which shall be the number of shares of
Common Stock outstanding immediately after the dividend or subdivision.
3
Additional shares of Common Stock shall be deemed to
have been issued and to be outstanding (a) in the case of any dividend,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive the dividend, or (b)
in the case of any subdivision, at the close of business on the day immediately
prior to the day upon which the corporate action becomes effective. Additional
shares of Common Stock deemed to have been issued pursuant to this Section 4.1
shall be deemed to have been issued for no consideration.
4.2 Adjustments for Combinations. In case the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to the combination or consolidation shall, concurrently
with the effectiveness of such combination or consolidation, be proportionately
increased. Adjustment under this Section 4.2 shall become effective at the close
of business on the day immediately prior to the day upon which the corporate
action becomes effective.
4.3 Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this Section 4 would be
less than one percent (1%) of the Warrant Price in effect at the time of the
adjustment is otherwise so required to be made, the amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with the amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of the Warrant Price.
5. Adjustments for Consolidation, Merger, Sale of Assets or
Reorganization. In case the Company after the date hereof (a) shall consolidate
with or merge into any other Person and shall not be the continuing or surviving
corporation following the consolidation or merger, or (b) shall permit any other
Person to consolidate with or merge into the Company and the Company shall be
the continuing or surviving Person but, in connection with the consolidation or
merger, the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (c) shall
transfer all or substantially all of its properties or assets to any other
Person, or (d) shall effect a capital reorganization or reclassification of the
Common Stock, then, and in the case of each such transaction, proper provision
shall be made so that, upon the basis and the terms and in the manner provided
in this Warrant, the Holder, upon the exercise hereof at any time after the
consummation of the transaction, shall be entitled to receive (at the aggregate
Warrant Price in effect at the time of such consummation for all Common Stock
issuable upon exercise immediately prior to the consummation), in lieu of the
Common Stock issuable upon exercise prior to the consummation, the greatest
amount of securities, cash or other property to which the Holder would actually
have been entitled as a stockholder upon such consummation if the Holder had
exercised the rights represented by this Warrant immediately prior thereto,
subject to adjustments (subsequent to the consummation) as nearly equivalent as
possible to the adjustments provided for in Sections 4 and 5 hereof.
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6. No Dilution or Impairment.
6.1 The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
of the terms and in the taking of all actions necessary or appropriate in order
to protect the rights of the Holder. Without limiting the generality of the
foregoing, the Company (a) will not permit the par value of any shares of Common
Stock receivable upon the exercise of this Warrant to exceed the amount payable
therefor upon exercise, (b) will take all actions necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock on the exercise of the Warrant and (c) will
not take any action which results in any adjustment of the Warrant Price if the
total number of shares of Common Stock issuable after the action upon the
exercise of the Warrant would exceed the total number of shares of Common Stock
then authorized by the Company's certificate of incorporation and available for
the purpose of issuance upon exercise.
6.2 The Company acknowledges that its obligation to issue shares of
Common Stock issuable upon exercise of this Warrant is binding upon it and
enforceable regardless of the dilution that such issuance may have on the
ownership interests of other stockholders.
7. Chief Financial Officer's Report as to Adjustments. In the case of any
adjustment or re-adjustment in the shares of Common Stock issuable upon the
exercise of this Warrant, the Company at its expense will promptly compute the
adjustment or re-adjustment in accordance with the terms of this Warrant and
cause its Chief Financial Officer to certify the computation (other than any
computation of the fair value of property as determined in good faith by the
Board of Directors of the Company) and prepare a report setting forth the
adjustment or re-adjustment and showing in reasonable detail the method of
calculation thereof and the facts upon which the adjustment or re-adjustment is
based, including a statement of (a) the number of shares of Common Stock
outstanding or deemed to be outstanding and (b) the Warrant Price in effect
immediately prior to the deemed issuance or sale and as adjusted and re-adjusted
(if required by Section 4 hereof) on account thereof. The Company will forthwith
mail a copy of each report to each holder of a Warrant and will, upon the
written request at any time of any holder of a Warrant, furnish to the holder a
like report setting forth the Warrant Price at the time in effect and showing in
reasonable detail how it was calculated. The Company will also keep copies of
all reports at its office maintained pursuant to Section 11.2(a) hereof and will
cause them to be available for inspection at the office during normal business
hours upon reasonable notice by any holder of a Warrant or any prospective
purchaser of a Warrant designated by the holder thereof.
5
8. Reservation of Shares. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, free from
all taxes, liens and charges with respect to the issue thereof and not be
subject to preemptive rights or other similar rights of stockholders of the
Company, solely for the purpose of effecting the exercise of this Warrant, such
number of its shares of Common Stock as shall from time to time be sufficient to
effect the exercise thereof, and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the exercise
of this Warrant, in addition to such other remedies as shall be available to
Holder, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase the number of authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purposes, including without limitation, using its best efforts to obtain the
requisite stockholder approval necessary to increase the number of authorized
shares of the Company's Common Stock. All shares of Common Stock issuable upon
exercise of the Warrant shall be duly authorized and, when issued upon exercise,
shall be validly issued and, in the case of shares, fully paid and
nonassessable.
9. Listing. The Company shall at all times comply in all respects with the
Company's reporting, filing and other obligations under the by-laws or rules of
the upon each national securities exchange or automated quotation system upon
which shares of Common Stock are then listed and shall list the shares issuable
upon the exercise of this Warrant on such national securities exchange.
10. Restrictions on Transfer.
10.1 Restrictive Legends. This Warrant and each Warrant issued upon
transfer or in substitution for this Warrant pursuant to Section 11, each
certificate for Common Stock issued upon the exercise of any Warrant and each
certificate issued upon the transfer of any such Common Stock shall be
transferable only upon satisfaction of the conditions specified in this Section
10. Each of the foregoing securities shall be stamped or otherwise imprinted
with a legend reflecting the restrictions on transfer set forth in Section 10
hereof and any restrictions required under the Act.
10.2 Notice of Proposed Transfer; Opinion of Counsel. Prior to any
transfer of any securities that are not registered under an effective
registration statement under the Act ("Restricted Securities"), the Holder will
give written notice to the Company of the Holder's intention to affect a
transfer and to comply in all other respects with this Section 10.2. Each notice
(a) shall describe the manner and circumstances of the proposed transfer, and
(b) shall designate counsel for the Holder giving the notice (who may be
in-house counsel for the Holder). The Holder giving notice will submit a copy
thereof to the counsel designated in the notice. The following provisions shall
then apply:
(i) If in the opinion of counsel for the Holder reasonably
satisfactory to the Company the proposed transfer (i.e. private sale of
Restricted Securities) may be effected without registration of Restricted
Securities under the Act (which opinion shall state the basis of the legal
conclusions reached therein), the Holder shall thereupon be entitled to transfer
the Restricted Securities in accordance with the terms of the notice delivered
by the Holder to the Company. Each certificate representing the Restricted
Securities issued upon or in connection with any transfer shall bear the
restrictive legends required by Section 10.1 hereof.
6
(ii) If the opinion called for in (i) above is not delivered,
the Holder shall not be entitled to transfer the Restricted Securities until
either (x) receipt by the Company of a further notice from such Holder pursuant
to the foregoing provisions of this Section 10.2 and fulfillment of the
provisions of clause (i) above, or (y) such Restricted Securities have been
effectively registered under the Act.
10.3 Termination of Restrictions. The restrictions imposed by
this Section 10 upon the transferability of Restricted Securities shall cease
and terminate as to any particular Restricted Securities: (a) which Restricted
Securities shall have been effectively registered under the Act, or (b) when, in
the opinions of both counsel for the holder thereof and counsel for the Company,
which opinion shall not be unreasonably withheld, such restrictions are no
longer required in order to insure compliance with the Act or Section 10 hereof.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the Holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new securities
of like tenor not bearing the applicable legends required by Section 10.1
hereof.
11. Ownership, Transfer and Substitution of Warrant.
11.1 Ownership of Warrant. The Company may treat the person in
whose name this Warrant is registered to in the Warrant Register maintained
pursuant to Section 11.2(a) hereof as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except that, if and when
any Warrant is properly assigned by a notice in substantially the form attached
to this Warrant as Exhibit B (or a reasonable facsimile thereof) duly executed
by the Holder in blank, the Company shall treat the bearer thereof as the owner
of such Warrant for all purposes, notwithstanding any notice to the contrary.
Subject to Section 10 hereof, this Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.
11.2 Office; Transfer and Exchange of Warrant.
(a) The Company will maintain an office (which may be an
agency maintained at a bank) at 000 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxx, Xxx Xxxxxx
00000 (until the Company notifies the Holder of any change of location of the
office) where notices, presentations and demands in respect of this Warrant may
be made upon it.
(b) The Company shall cause to be kept at its office
maintained pursuant to Section 11.2(a) hereof a Warrant Register for the
registration and transfer of the Warrant. The names and addresses of holders of
the Warrant, the transfers thereof and the names and addresses of transferees of
the Warrant shall be registered in such Warrant Register. The Person in whose
name any Warrant shall be so registered shall be deemed and treated as the owner
and holder thereof for all purposes of this Warrant, and the Company shall not
be affected by any notice or knowledge to the contrary.
(c) Upon the surrender of this Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company maintained
pursuant to Section 11.2(a) hereof, the Company at its expense will (subject to
compliance with Section 10 hereof, if applicable) execute and deliver to or upon
the order of the Holder thereof a new Warrant of like tenor, in the name of such
holder or as such holder (upon payment by such holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face thereof for the number
of shares of Common Stock called for on the face of the Warrant so surrendered.
7
11.3 Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of indemnity reasonably satisfactory to the Company in form and
amount or, in the case of any mutilation, upon surrender of the Warrant for
cancellation at the office of the Company maintained pursuant to Section 11.2(a)
hereof, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor and dated the date hereof.
12. No Rights or Liabilities as Stockholder. Except as may otherwise be
provided herein, no Holder shall be entitled to vote or receive dividends or be
deemed the holder of any shares of Common Stock or any other securities of the
Company which may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained herein be construed to confer upon the
Holder, as such, any of the rights of a stockholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value, consolidation, merger,
conveyance, or otherwise) or to receive notice of meetings, or to receive
dividends or subscription rights or otherwise until the Warrant shall have been
exercised and the shares of Common Stock purchasable upon the exercise hereof
shall have become deliverable, as provided herein. The Holder will not be
entitled to share in the assets of the Company in the event of liquidation,
dissolution or the winding up of the Company.
13. Notices. Any notice or other communication in connection with this
Warrant shall be deemed to be given if in writing (or in the form of a
facsimile) addressed as hereinafter provided and actually delivered at such
address: (a) if to any Holder, at the registered address of such holder as set
forth in the Warrant Register kept at the office of the Company maintained
pursuant to Section 11.2(a) hereof, or (b) if to the Company, to the attention
of its Chief Financial Officer at its office maintained pursuant to Section
11.2(a) hereof; provided, however, that the exercise of any Warrant shall be
effective in the manner provided in Section 3 hereof.
14. Payment of Taxes. The Company will pay all documentary stamp taxes
attributable to the issuance of shares of Common Stock underlying this Warrant
upon exercise of this Warrant; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the registration of any certificate for shares of Common Stock underlying
this Warrant in a name other that of the Holder. The Holder is responsible for
all other tax liability that may arise as a result of holding or transferring
this Warrant or receiving shares of Common Stock underlying this Warrant upon
exercise hereof.
8
15. Warrant Agent. The Company shall serve as warrant agent under this
Warrant. Upon thirty (30) days notice to the Holder, the Company may appoint a
new warrant agent. Any corporation into which the Company or any new warrant
agent may be merged or any corporation resulting from any consolidation to which
the Company or any new warrant agent shall be a party or any corporation to
which the Company or any new warrant agent transfers substantially all of its
corporate trust or stockholders services business shall be successor warrant
agent under this Warrant without any further act. Any such successor warrant
agent shall promptly cause notice of its succession as warrant agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.
16. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of the change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware. The section headings in this
Warrant are for purposes of convenience only and shall not constitute a part
hereof.
9
IN WITNESS WHEREOF, the Company has caused this Common Stock Purchase
Warrant to be duly executed as of the date first above written.
CONVERSION SERVICES INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Executive Officer
10
EXHIBIT A
FORM OF EXERCISE NOTICE
[To be executed only upon conversion of Warrant]
To CONVERSION SERVICES INTERNATIONAL, INC.:
The undersigned registered holder of the within Warrant hereby
irrevocably exercises the Warrant pursuant to Section 3.1 of the Warrant with
respect to __________(1) shares of the Common Stock, at an exercise price per
share of Common Stock of $____, which the holder would be entitled to receive
upon the cash exercise hereof, and requests that the certificates for the shares
be issued in the name of, and delivered to, whose address is:
Dated: _______________
----------------------------------------
Print or Type Name
----------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of Warrant)
----------------------------------------
(Street Address)
----------------------------------------
(City) (State) (Zip Code)
-----------------------
(1) Insert here the number of shares called for on the face of this Warrant (or,
in the case of a partial exercise, the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment of shares of
Common Stock or any other stock or other securities or property or cash which,
pursuant to the adjustment provisions of this Warrant, may be delivered upon
exercise. In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unconverted portion of the Warrant, to
the holder surrendering the Warrant.
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EXHIBIT B
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto _____________________ the right
represented by the Warrant to purchase __________(1) shares of Common Stock of
CONVERSION SERVICES INTERNATIONAL, INC. to which the Warrant relates, and
appoints _____________________ Attorney to make such transfer on the books of
CONVERSION SERVICES INTERNATIONAL, INC. maintained for the purpose, with full
power of substitution in the premises.
Dated:
--------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
Warrant)
--------------------------------------------
(Street Address)
--------------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
--------------------------------------------
(Signature of Transferee)
--------------------------------------------
(Street Address)
--------------------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
-----------------------
(1) Insert here the number of shares called for on the face of this Warrant (or,
in the case of a partial exercise, the portion thereof as to which this Warrant
is being exercised), in either case without making any adjustment of shares of
Common Stock or any other stock or other securities or property or cash which,
pursuant to the adjustment provisions of this Warrant, may be delivered upon
exercise. In the case of a partial exercise, a new Warrant or Warrants will be
issued and delivered, representing the unexercised portion of the Warrant, to
the holder surrendering the Warrant.
12
