Contract
THIS
WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAWS. THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER
SAID
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO CONVERSION SERVICES INTERNATIONAL, INC.THAT SUCH REGISTRATION
IS
NOT REQUIRED.
Right
to Purchase up to 1,785,714 Shares of Common Stock of
CONVERSION
SERVICES INTERNATIONAL, INC.
(subject
to adjustment as provided herein)
COMMON
STOCK WARRANT
| No. _________________Issue |
Date:
March 1,
2007
|
CONVERSION
SERVICES INTERNATIONAL, INC., a corporation organized under the laws of the
State of Delaware (“Company”), hereby certifies that, for value received, LAURUS
MASTER FUND, LTD., or assigns (the “Holder”), is entitled, subject to the terms
set forth below, to purchase from the Company (as defined herein) from and
after
the Issue Date of this Warrant and at any time or from time to time, up to
1,785,714
fully
paid and nonassessable shares of Common Stock (as hereinafter defined), $0.001
par value per share, at the applicable Exercise Price per share (as defined
below). The number and character of such shares of Common Stock and the
applicable Exercise Price per share are subject to adjustment as provided
herein.
As
used
herein the following terms, unless the context otherwise requires, have the
following respective meanings:
(a) The
term
“Company” shall include CONVERSION SERVICES INTERNATIONAL, INC. and any
corporation that shall succeed, or assume the obligations of, CONVERSION
SERVICES INTERNATIONAL, INC. hereunder.
(b) The
term
“Common Stock” includes (i) the Company’s Common Stock, $0.001 per value per
share; and (ii) any other securities into which or for which any of the
securities described in (a) may be converted or exchanged pursuant to a plan
of
recapitalization, reorganization, merger, sale of assets or
otherwise.
(c) The
“Exercise Price” applicable under this Warrant shall be a price of $0.01 per
share.
(d) The
term
“Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which
the
Holder at any time shall be entitled to receive, or shall have received, on
the
exercise of the Warrant, in lieu of or in addition to Common Stock, or which
at
any time shall be issuable or shall have been issued in exchange for or in
replacement of Common Stock or Other Securities pursuant to Section 4 or
otherwise.
1. Exercise
of Warrant.
1.1 Number
of Shares Issuable upon Exercise.
From
and after the date hereof, the Holder shall be entitled to receive, upon
exercise of this Warrant in whole or in part, by delivery of an original or
fax
copy of an exercise notice in the form attached hereto as Exhibit A (the
“Exercise Notice”), shares of Common Stock of the Company, subject to adjustment
pursuant to Section 4. Notwithstanding anything herein to the contrary, in
no
event shall the Holder be entitled to exercise any portion of this Warrant
in
excess of that portion of this Warrant upon exercise of which the sum of (1)
the
number of shares of Common Stock beneficially owned by the Holder and its
Affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject
to a limitation on conversion analogous to the limitations contained herein)
and
(2) the number of shares of Common Stock issuable upon the exercise of the
portion of this Warrant with respect to which the determination of this proviso
is being made, would result in beneficial ownership by the Holder and its
Affiliates of any amount greater than 9.99% of the then outstanding shares
of
Common Stock (whether or not, at the time of such exercise, the Holder and
its
Affiliates beneficially own more than 9.99% of the then outstanding shares
of
Common Stock). As used herein, the term “Affiliate”
means
any person or entity that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with
a
person or entity, as such terms are used in and construed under Rule 144 under
the Securities Act. For purposes of the second preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of
the
Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder,
except as otherwise provided in clause (1) of such sentence. For any
reason at any time, upon written or oral request of the Holder, the Company
shall within one (1) business day confirm orally and in writing to the Holder
the number of shares of Common Stock outstanding as of any given date. The
limitations set forth herein (x) may be waived by the Holder upon provision
of
no less than sixty-one (61) days prior written notice to the Company and (y)
shall automatically become null and void following notice to the Company upon
the occurrence and during the continuance of an Event of Default (as defined
in
the Security Agreement), except that at no time shall the Company be obligated
to issue any shares of Common Stock pursuant to the terms of this Warrant,
the
Security Agreement or any other Ancillary Agreement (as defined in the Security
Agreement) if the issuance of such shares of Common Stock would exceed the
aggregate number of shares of Common Stock which the Company may issue pursuant
to the terms of this Warrant, the Security Agreement or any Ancillary Agreement
without violating the rules or regulations of the Principal Market (the
“Principal
Market”),
except that such limitation shall not apply in the event that the Company
obtains the approval of its stockholders as required by the applicable rules
or
regulations of the Principal Market for issuances of Common Stock in excess
of
such amount.
1.2 Fair
Market Value.
For
purposes hereof, the “Fair Market Value” of a share of Common Stock as of a
particular date (the “Determination Date”) shall mean:
(a) If
the
Company’s Common Stock is traded on the American Stock Exchange or another
national exchange or is quoted on the National or SmallCap Market of The Nasdaq
Stock Market, Inc. (“Nasdaq”), then the closing or last sale price,
respectively, reported for the last business day immediately preceding the
Determination Date.
(b) If
the
Company’s Common Stock is not traded on the American Stock Exchange or another
national exchange or on the Nasdaq but is quoted on the NASD Over The Counter
Bulletin Board, then the mean of the average of the closing bid and asked prices
reported for the last business day immediately preceding the Determination
Date.
(c) Except
as
provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement
by arbitration in accordance with the rules then in effect of the American
Arbitration Association, before a single arbitrator to be chosen from a panel
of
persons qualified by education and training to pass on the matter to be
decided.
(d) If
the
Determination Date is the date of a liquidation, dissolution or winding up,
or
any event deemed to be a liquidation, dissolution or winding up pursuant to
the
Company’s charter, then all amounts to be payable per share to holders of the
Common Stock pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be payable per share in
respect of the Common Stock in liquidation under the charter, assuming for
the
purposes of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Warrant are outstanding at the Determination
Date.
1.3 Company
Acknowledgment.
The
Company will, at the time of the exercise of the Warrant, upon the request
of
the Holder hereof acknowledge in writing its continuing obligation to afford
to
such Holder any rights to which such Holder shall continue to be entitled after
such exercise in accordance with the provisions of the Warrant. If the Holder
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such rights.
1.4 Trustee
for Warrant Holders.
In the
event that a bank or trust company shall have been appointed as trustee for
the
Holder of the Warrant pursuant to Subsection 3.2, such bank or trust company
shall have all the powers and duties of an warrant agent (as hereinafter
described) and shall accept, in its own name for the account of the Company
or
such successor person as may be entitled thereto, all amounts otherwise payable
to the Company or such successor, as the case may be, on exercise of this
Warrant pursuant to this Section 1.
2. Procedure
for Exercise.
2.1 Delivery
of Stock Certificates, Etc., on Exercise.
The
Company agrees that the shares of Common Stock purchased upon exercise of this
Warrant shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Warrant shall
have
been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Warrant in full or in part,
and
in any event within three (3) 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, or as such Holder
(upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares
of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 Exercise.
(a) Subject
to subsection (b) below, payment shall be made in cash or by certified or
official bank check payable to the order of the Company equal to the applicable
aggregate Exercise Price for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Warrant) and the Holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully-paid and
non-assessable shares of Common Stock (or Other Securities) determined as
provided herein.
(b) Notwithstanding
any provisions herein to the contrary, in the event there is no effective
registration statement with respect to the shares issuable upon exercise of
this
Warrant or a Default or an Event of Default (as such terms are defined in the
Security Agreement dated as of the date hereof among the Holder and the Company,
as amended, modified, restated and/or supplemented from time to time),) has
occurred and is continuing, if the Fair Market Value of one share of Common
Stock is greater than the Exercise Price (at the date of calculation as set
forth below), in lieu of exercising this Warrant for cash, the Holder may elect
to receive shares equal to the value (as determined below) of this Warrant
(or
the portion thereof being exercised) by surrender of this Warrant at the
principal office of the Company together with the properly endorsed Exercise
Notice in which event the Company shall issue to the Holder a number of shares
of Common Stock computed using the following formula:
| X=Y |
(A-B)
|
|
A
|
Where
X
= the
number of shares of Common Stock to be issued to the Holder
Y
= the
number of shares of Common Stock purchasable under the Warrant or, if only
a
portion of the Warrant is being exercised, the portion of the Warrant being
exercised (at the date of such calculation)
A
= the
Fair
Market Value of one share of the Company’s Common Stock (at the date of such
calculation)
B
= Exercise
Price (as adjusted to the date of such calculation)
3. Effect
of Reorganization, Etc.; Adjustment of Exercise Price.
3.1 Reorganization,
Consolidation, Merger, Etc.
In case
at any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any
plan
or arrangement contemplating the dissolution of the Company, then, in each
such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder, on the
exercise hereof as provided in Section 1 at any time after the consummation
of
such reorganization, consolidation or merger or the effective date of such
dissolution, as the case may be, shall receive, in lieu of the Common Stock
(or
Other Securities) issuable on such exercise prior to such consummation or such
effective date, the stock and other securities and property (including cash)
to
which such Holder would have been entitled upon such consummation or in
connection with such dissolution, as the case may be, if such Holder had so
exercised this Warrant, immediately prior thereto, all subject to further
adjustment thereafter as provided in Section 4.
3.2 Dissolution.
In the
event of any dissolution of the Company following the transfer of all or
substantially all of its properties or assets, the Company, concurrently with
any distributions made to holders of its Common Stock, shall at its expense
deliver or cause to be delivered to the Holder the stock and other securities
and property (including cash, where applicable) receivable by the Holder
pursuant to Section 3.1, or, if the Holder shall so instruct the Company, to
a
bank or trust company specified by the Holder and having its principal office
in
New York, NY as trustee for the Holder (the “Trustee”).
3.3 Continuation
of Terms.
Upon
any reorganization, consolidation, merger or transfer (and any dissolution
following any transfer) referred to in this Section 3, this Warrant shall
continue in full force and effect and the terms hereof shall be applicable
to
the shares of stock and other securities and property receivable on the exercise
of this Warrant after the consummation of such reorganization, consolidation
or
merger or the effective date of dissolution following any such transfer, as
the
case may be, and shall be binding upon the issuer of any such stock or other
securities, including, in the case of any such transfer, the person acquiring
all or substantially all of the properties or assets of the Company, whether
or
not such person shall have expressly assumed the terms of this Warrant as
provided in Section 4. In the event this Warrant does not continue in full
force
and effect after the consummation of the transactions described in this Section
3, then the Company’s securities and property (including cash, where applicable)
receivable by the Holders will be delivered to Holder or the Trustee as
contemplated by Section 3.2.
4. Extraordinary
Events Regarding Common Stock.
In the
event that the Company shall (a) issue additional shares of the Common Stock
as
a dividend or other distribution on all outstanding Common Stock or preferred
stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine
its
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock (each of the preceding clauses (a) through (c), inclusive, an
“Event”), then, in each such event, the number of shares of Common Stock that
the Holder shall thereafter, on the exercise hereof as provided in Section
1, be
entitled to receive shall be increased or decreased to a number determined
by
multiplying the number of shares of Common Stock that would, immediately prior
to such Event, be issuable upon the exercise of this Warrant by a fraction
of
which (a) the numerator is the number of issued and outstanding shares of Common
Stock immediately after such Event, and (b) the denominator is the number of
issued and outstanding shares of Common Stock immediately prior to such
Event.
5. Certificate
as to Adjustments.
In each
case of any adjustment or readjustment in the shares of Common Stock (or Other
Securities) issuable on the exercise of the Warrant, the Company at its expense
will promptly cause its Chief Financial Officer or other appropriate designee
to
compute such adjustment or readjustment in accordance with the terms of the
Warrant and prepare a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment
is
based, including a statement of (a) the consideration received or receivable
by
the Company for any additional shares of Common Stock (or Other Securities)
issued or sold or deemed to have been issued or sold, (b) the number of shares
of Common Stock (or Other Securities) outstanding or deemed to be outstanding,
and (c) the Exercise Price and the number of shares of Common Stock to be
received upon exercise of this Warrant, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in this
Warrant. The Company will forthwith mail a copy of each such certificate to
the
Holder and any Warrant agent of the Company (appointed pursuant to Section
10
hereof).
6. Reservation
of Stock, Etc., Issuable on Exercise of Warrant.
The
Company will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrant, shares of Common Stock (or Other
Securities) from time to time issuable on the exercise of the
Warrant.
7. Assignment;
Exchange of Warrant.
Subject
to compliance with applicable securities laws, this Warrant, and the rights
evidenced hereby, may be transferred by any registered holder hereof (a
“Transferor”) in whole or in part. On the surrender for exchange of this
Warrant, with the Transferor’s endorsement in the form of Exhibit B attached
hereto (the “Transferor Endorsement Form”) and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable securities
laws, which shall include, without limitation, the provision of a legal opinion
from the Transferor’s counsel (at the Company’s expense) that such transfer is
exempt from the registration requirements of applicable securities laws, and
with payment by the Transferor of any applicable transfer taxes) will issue
and
deliver to or on the order of the Transferor thereof a new Warrant of like
tenor, in the name of the Transferor and/or the transferee(s) specified in
such
Transferor Endorsement Form (each a “Transferee”), 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 so surrendered by the Transferor.
8. Replacement
of Warrant.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement
or
security reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of this Warrant,
the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor.
9. Registration
Rights.
The
Holder has been granted certain registration rights by the Company to file
a
registration statement on Form S-1 (or Form S-3 if then eligible) with the
Securities and Exchange Commission to register the shares of Common Stock
underlying this Warrant, the shares of Common Stock underlying that certain
Common Stock Purchase Warrant issued by the Company to Laurus as of August
16,
2004, and (iii) that certain Option issued by the Company to Laurus as of
February 1, 2006, within 120 days of the date hereof.
10. Warrant
Agent.
The
Company may, by written notice to each Holder of the Warrant, appoint an agent
for the purpose of issuing Common Stock (or Other Securities) on the exercise
of
this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section
7, and replacing this Warrant pursuant to Section 8, or any of the foregoing,
and thereafter any such issuance, exchange or replacement, as the case may
be,
shall be made at such office by such agent.
11. Transfer
on the Company’s Books.
Until
this Warrant is transferred on the books of the Company, the Company may treat
the registered holder hereof as the absolute owner hereof for all purposes,
notwithstanding any notice to the contrary.
12. Notices,
Etc.
All
notices and other communications from the Company to the Holder shall be mailed
by first class registered or certified mail, postage prepaid, at such address
as
may have been furnished to the Company in writing by such Holder or, until
any
such Holder furnishes to the Company an address, then to, and at the address
of,
the last Holder who has so furnished an address to the Company.
13. 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 SUCH CHANGE, WAIVER, DISCHARGE OR TERMINATION IS SOUGHT. THIS WARRANT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF STATE OF NEW YORK
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. Any action brought concerning
the transactions contemplated by this Warrant shall be brought only in the
state
courts of New York or in the federal courts located in the state of New York;
provided, however, that the Holder may choose to waive this provision and bring
an action outside the state of New York. The individuals executing this Warrant
on behalf of the Company agree to submit to the jurisdiction of such courts
and
waive trial by jury. The prevailing party shall be entitled to recover from
the
other party its reasonable attorney’s fees and costs. In the event that any
provision of this Warrant is invalid or unenforceable under any applicable
statute or rule of law, then such provision shall be deemed inoperative to
the
extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid
or
unenforceable under any law shall not affect the validity or enforceability
of
any other provision of this Warrant. The headings in this Warrant are for
purposes of reference only, and shall not limit or otherwise affect any of
the
terms hereof. The invalidity or unenforceability of any provision hereof shall
in no way affect the validity or enforceability of any other provision hereof.
The Company acknowledges that legal counsel participated in the preparation
of
this Warrant and, therefore, stipulates that the rule of construction that
ambiguities are to be resolved against the drafting party shall not be applied
in the interpretation of this Warrant to favor any party against the other
party.
[BALANCE
OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE
PAGE FOLLOWS.]
IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.
|
CONVERSION
SERVICES INTERNATIONAL, INC.
|
|||
|
WITNESS:
|
|||
|
By:
|
/s/
Xxxxx Xxxxxx
|
||
|
Name:
|
Xxxxx
Xxxxxx
|
||
|
Xxxxxxxx
X. Xxxx
|
Title:
|
President
and CEO
|
|
EXHIBIT
A
FORM
OF SUBSCRIPTION
(To
Be
Signed Only On Exercise Of Warrants)
|
TO:
|
CONVERSION
SERVICES INTERNATIONAL, INC.
|
|
Attention:
|
Chief
Financial Officer
|
The
undersigned, pursuant to the provisions set forth in the attached Warrant (No.
____), hereby irrevocably elects to purchase (check applicable
box):
| ________ |
________
shares of the Common Stock covered by such Warrant;
or
|
| ________ |
the
maximum number of shares of Common Stock covered by such Warrant
pursuant
to the cashless exercise procedure set forth in Section
2.
|
The
undersigned herewith makes payment of the full Exercise Price for such shares
at
the price per share provided for in such Warrant, which is
$___________. Such payment takes the form of (check applicable box or
boxes):
|
________
|
$__________
in lawful money
of
the United States; and/or
|
| ________ |
the
cancellation of such portion of the attached Warrant as is exercisable
for
a total of _______ shares of Common Stock (using a Fair Market Value
of
$_______ per share for purposes of this calculation);
and/or
|
| ________ |
the
cancellation of such number of shares of Common Stock as is necessary,
in
accordance with the formula set forth in Section 2.2, to exercise
this
Warrant with respect to the maximum number of shares of Common Stock
purchasable pursuant to the cashless exercise procedure set forth
in
Section 2.
|
The
undersigned requests that the certificates for such shares be issued in the
name
of, and delivered to ____________________________________________ whose address
is ___________________________________________________________.
The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the “Securities Act”) or pursuant to an exemption from registration
under the Securities Act.
|
Dated:
|
||||
|
(Signature
must conform to name of Holder as specified on the face of the
Warrant)
|
||||
|
Address:
|
||||
EXHIBIT
B
FORM
OF TRANSFEROR ENDORSEMENT
(To
Be
Signed Only On Transfer Of Warrant)
For
value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of CONVERSION SERVICES INTERNATIONAL, INC.into which the within Warrant
relates specified under the headings “Percentage Transferred” and “Number
Transferred,” respectively, opposite the name(s) of such person(s) and appoints
each such person Attorney to transfer its respective right on the books of
CONVERSION SERVICES INTERNATIONAL, INC.with full power of substitution in the
premises.
|
Transferees
|
Address
|
Percentage
Transferred
|
Number
Transferred
|
|||
|
Dated
|
||||
|
(Signature
must conform to name of Holder as specified on the face of the
Warrant)
|
||||
|
Address:
|
||||
|
SIGNED
IN THE PRESENCE OF:
|
|||
|
(Name)
|
|||
ACCEPTED
AND AGREED:
[TRANSFEREE]
_____________________________
(Name)
