THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
EXERCISABLE UNTIL ON OR BEFORE
5:00 P.M., NEW YORK TIME, , 2008
Series A Warrants ________
DOCUMENT SECURITY SYSTEMS, INCORPORATED
This warrant certificate (the "Warrant Certificate") certifies that
_________ or registered assigns, is the registered holder (the "Holder") of
Series A Warrants to purchase, at any time until 5:00 P.M. New York time on
_________, 2008 (the "Expiration Date"), up to ___________ fully-paid and
non-assessable shares, subject to adjustment in accordance with Article 6 hereof
(the "Warrant Shares"), of the common stock, par value $.02 per share (the
"Common Stock"), of DOCUMENT SECURITY SYSTEMS, INCORPORATED, a New York
corporation (the "Company"), subject to the terms and conditions set forth
herein. The warrants represented by this Warrant Certificate and any warrants
resulting from a transfer or subdivision of the warrants represented by this
Warrant Certificate shall sometimes hereinafter be referred to, individually, as
a "Warrant" and, collectively, as the "Warrants." This Warrant Certificate is
being delivered in connection with the Confidential Offering Memorandum dated
October ___, 2003 and Subscription Agreement between the Company and the
original holder hereof.
1. EXERCISE OF WARRANTS. This Warrant is initially exercisable to
purchase one Warrant Share at an initial exercise price of $5.00 per share,
subject to adjustment as set forth in Article 6 hereof, payable in cash or by
check to the order of the Company, or any combination of cash or check. Upon
surrender of this Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Warrant Shares purchased, at the Company's
principal offices (presently located at 36 W. Main Street, Rochester, New York
14614), the registered holder of the Warrant Certificate (the "Holder" or
"Holders") shall be entitled to receive a certificate or certificates for the
Warrant Shares so purchased. The purchase rights represented by this Warrant
Certificate are exercisable at the option of the Holder hereof, in whole or in
part (but not as to fractional shares). In the case of the purchase of less than
all the Warrant Shares purchasable under this Warrant Certificate, the Company
shall cancel this Warrant Certificate upon its surrender and shall
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execute and deliver a new Warrant Certificate of like tenor for the balance of
the Warrant Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the
issuance of certificates for the Warrant Shares purchased pursuant to such
exercise shall be made forthwith without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall (subject to the provisions of Article 3
hereof) be issued in the name of, or in such names as may be directed by, the
Holder thereof; 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 issuance
and delivery of any such certificates in a name other than that of the Holder
and the Company shall not be required to issue or deliver such certificates
unless or until the person or persons requesting the issuance 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.
The Warrant Certificates and, upon exercise of the Warrants,
the certificates representing the Warrant Shares shall be executed on behalf of
the Company by the manual or facsimile signature of those officers required to
sign such certificates under applicable law.
This Warrant Certificate and, upon exercise of the Warrants,
in part or in whole, certificates representing the Warrant Shares shall bear a
legend substantially similar to the following:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended ("Act"), and may not be
offered or sold except (i) pursuant to an effective registration
statement under the Act, (ii) to the extent applicable, pursuant to
Rule 144 under the Act (or any similar rule under such Act relating to
the disposition of securities), or (iii) upon the delivery by the
holder to the Company of an opinion of counsel, reasonably satisfactory
to counsel to the issuer, stating that an exemption from registration
under such Act is available.
3. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of this Warrant
Certificate, by its acceptance thereof, represents and warrants to, and
covenants and agrees with the Company that the Warrants and the Warrant Shares
issuable upon exercise of the Warrants are being acquired for the Holder's own
account as an investment and not with a view to the resale or distribution
thereof and that the Warrants and the Warrant Shares are not registered under
the Act or any state securities or blue sky laws and, therefore, may not be
transferred unless such securities are either registered under the Act and any
applicable state securities law or an exemption from such registration is
available. The Holder of this Warrant Certificate acknowledges that the Holder
is an "accredited investor" within the meaning of Regulation D promulgated under
the Act who has been provided with an opportunity to ask questions of
representatives of the Company concerning the Company and that all such
questions were answered to the satisfaction of the Holder. In connection with
any purchase of Warrant Shares
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the Holder agrees to execute any documents which may be reasonably required by
counsel to the Company to comply with the provisions of the Act and applicable
state securities laws.
4. REGISTRATION RIGHTS. The Holder shall be entitled to all of the
rights and subject to all of the obligations set forth in the Registration
Rights Agreement of even date herewith between the Company and the original
holder hereof.
5. PRICE
5.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise
price of each Warrant shall be $5.00 per Warrant Share. The adjusted exercise
price shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Article 6 hereof.
5.2 EXERCISE PRICE. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
6. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
6.1 DIVIDENDS AND DISTRIBUTIONS. In case the Company shall at
any time after the date hereof pay a dividend in shares of Common Stock or make
a distribution in shares of Common Stock, then upon such dividend or
distribution, the Exercise Price in effect immediately prior to such dividend or
distribution shall be reduced to a price determined by dividing an amount equal
to the total number of shares of Common Stock outstanding immediately prior to
such dividend or distribution multiplied by the Exercise Price in effect
immediately prior to such dividend or distribution, by the total number of
shares of Common Stock outstanding immediately after such dividend or
distribution. For purposes of any computation to be made in accordance with the
provisions of this Section 6.1, the Common Stock issuable by way of dividend or
distribution shall be deemed to have been issued immediately after the opening
of business on the date following the date fixed for determination of
shareholders entitled to receive such dividend or distribution.
6.2 SUBDIVISION AND COMBINATION. In case the Company shall at
any time subdivide or combine the outstanding Common Stock, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
6.3 ADJUSTMENT IN NUMBER OF WARRANT SHARES. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Article 7,
the number of Warrant Shares issuable upon the exercise of each Warrant shall be
adjusted to the nearest full shares of Common Stock by multiplying a number
equal to the Exercise Price in effect immediately prior to such adjustment by
the number of Warrant Shares issuable upon exercise of the Warrants immediately
prior to such adjustment and dividing the product so obtained by the adjusted
Exercise Price.
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6.4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of
any reclassification or change of the outstanding shares of Common Stock (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in the
case of any consolidation of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger in which the Company
is the surviving corporation and which does not result in any reclassification
or change of the outstanding shares of Common Stock, except a change as a result
of a subdivision or combination of such shares or a change in nominal value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the Warrant Shares
issuable upon exercise of the Warrants immediately prior to any such events at a
price equal to the product of (x) the number of Warrant Shares issuable upon
exercise of the Warrants and (y) the Exercise Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Warrants.
6.5 DETERMINATION OF OUTSTANDING SHARES. The number of shares
of Common Stock at any one time outstanding shall include the aggregate number
of shares issued or issuable upon the exercise of outstanding options, rights,
warrants and upon the conversion or exchange of outstanding convertible or
exchangeable securities.
7. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. This Warrant
Certificate is exchangeable without expense, upon the surrender hereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant of like tenor, in
lieu thereof.
8. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
and shall not be required to issue scrip or pay cash in lieu of fractional
interests, it being the intent of the parties that all fractional interests
shall be eliminated by rounding any fraction up to the nearest whole number of
shares of Common Stock.
9. RESERVATION OF SHARES. The Company covenants and agrees that it will
at all times reserve and keep available out of its authorized share capital,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock as shall be equal to the number of Warrant
Shares issuable upon the exercise of the Warrants, for issuance
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upon such exercise, and that, upon exercise of the Warrants and payment of the
Exercise Price therefor, all Warrant Shares issuable upon such exercise shall be
duly and validly issued, fully paid, nonassessable and not subject to the
preemptive rights of any shareholder.
10. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holder or Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a shareholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend or distribution payable
otherwise than in cash, or a cash dividend or distribution payable otherwise
then out of current or retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of Common Stock or other shares of capital stock of the
Company or securities convertible into or exchangeable for shares of Common
Stock or other shares of capital stock of the Company, or any option, right or
warrant to subscribe therefor;
(c) a dissolution, liquidation or winding up of the Company (other than
in connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business as an entirety shall be proposed; or
(d) the Company or an affiliate of the Company shall propose to issue
any rights to subscribe for shares of Common Stock or any other securities of
the Company or of such affiliate to all the stockholders of the Company;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
Notwithstanding the foregoing, the Company agrees that it
shall promptly deliver to the Holder copies of all financial statements, reports
and proxy statements which the Company is required to send to its stockholders
generally.
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11. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the address of such
Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Article 1 of this
Agreement or to such other address as the Company may designate by notice to the
Holders.
12. SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
13. GOVERNING LAW.
13.1 CHOICE OF LAW. This Agreement shall be deemed to have
been made and delivered in the State of New York and shall be governed as to
validity, interpretation, construction, effect and in all other respects by the
internal laws of the State of New York.
13.2 JURISDICTION AND SERVICE OF PROCESS. The Company and the
Holder each (a) agrees that any legal suit, action or proceeding arising out of
or relating to this Warrant Certificate, or any other agreement entered into
between the Company and the Holder pursuant to the Unit Purchase Agreement shall
be instituted exclusively in the Supreme Court of New York, New York, New York,
or in the United States District Court for the Southern District of New York,
New York (b) waives any objection which the Company or such Holder may have now
or hereafter based upon FORUM NON CONVENIENS or to the venue of any such suit,
action or proceeding, and (c) irrevocably consents to the jurisdiction of the
Supreme Court of New York, New York, New York, or in the United States District
Court for the Southern District of New York, New York in any such suit, action
or proceeding. The Company and the Holder each further agrees (a) to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the Supreme Court of New York, New York, New York, or in
the United States District Court for the Southern District of New York, New York
and (b) agrees that service of process upon the Company or the Holder mailed by
certified mail to their respective addresses shall be deemed in every respect
effective service of process upon the Company or the Holder, as the case may be,
in any suit, action or proceeding. FURTHER, BOTH THE COMPANY AND HOLDER HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THE TERMS OF THIS WARRANT
CERTIFICATE AND IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR CROSS-CLAIM
ASSERTED IN ANY SUCH ACTION.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed, as of the day of , 2003.
DOCUMENTS SECURITY SYSTEMS, INCORPORATED
By: ______________________________
(Corporate Seal)
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[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ________ Warrant Shares and
herewith tenders in payment for such Warrant Shares cash or a certified check
payable to the order of Document Security Systems Incorporated in the amount of
$_________, all in accordance with the terms hereof. The undersigned requests
that a certificate for such Warrant Shares be registered in the name of
_____________________ ______________________, whose address is
________________________________________ _________________________, and that
such certificate be delivered to ___________________, whose address is
____________________ ---------------------------.
Dated: Signature:
-------------------------- --------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
---------------------------------
---------------------------------
(Insert Social Security or Other
Identifying Number of Holder)
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ASSIGNMENT FORM
---------------
The undersigned, being the true and lawful owner of Holder Warrants to purchase
shares of Common Stock of Document Security Systems, Incorporated hereby assigns
and transfers unto:
Name:
----------------------------------------------------------------
(Please typewrite or print in block letters)
Address:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
Social Security Number/ Federal ID:
----------------------------------------
the right to purchase Common Stock of _____________ represented by this Warrant
to the extent of ___________ shares of Common Stock as to which such right is
exercisable and does hereby irrevocably constitute and appoint _______________
Attorney, to transfer the same on the books of Document Security Systems
Incorporated with full power of substitution in the premises.
Date: ___________________
------------------------------
Name of Registered Holder
------------------------------
Signature
------------------------------
Signature, if held jointly
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