EXHIBIT 4.2
WARRANT AGREEMENT
between
Data conversion laboratory, INC.
and
CONTINENTAL STOCK TRANSFER TRUST COMPANY
Dated as of _____________, 2002
THIS AGREEMENT, DATED AS OF ______________, 2002, IS BETWEEN DATA
CONVERSION LABORATORY, INC., A NEW YORK CORPORATION (THE "COMPANY"), AND
CONTINENTAL STOCK TRANSFER TRUST COMPANY, A ___________ CORPORATION (THE
"WARRANT AGENT").
WHEREAS, the Company, at or about the time that it is entering into
this Agreement, proposes to issue and sell up to 1,250,000 units ("Units") to
public investors (the "Offering"), which amount includes Units issuable upon the
exercise of the option granted to the representative of the several underwriters
of the Offering (the "Representative") to purchase up to 187,500 Units (solely
to cover over-allotments in the sale of the Units). Each Unit consists of one
share of the Company's common stock, $0.01 par value per share ("Common Stock"),
and one warrant (a "Warrant" and collectively, the "Warrants"), with each
Warrant being exercisable to purchase one share of Common Stock for $____ (150%
public offering price of the Units), upon the terms and conditions and subject
to adjustment in certain circumstances, all as set forth in this Agreement;
WHEREAS, the Company proposes to issue to the Representative, in
connection with the Offering, warrants to purchase up to 125,000 additional
Units, with the terms of such warrants set forth in a separate agreement between
the Company and the Representative entered into on the date hereof;
WHEREAS, the Company wishes to retain the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing to so act, in connection
with the issuance, transfer, exchange and replacement of the certificates
evidencing the Warrants to be issued under this Agreement (the "Warrant
Certificates") and the exercise of the Warrants; and
WHEREAS, the Company and the Warrant Agent wish to enter into this
Agreement to set forth the terms and conditions of the Warrants and the rights
of the holders thereof ("Warrantholders") and to set forth the respective rights
and obligations of the Company and the Warrant Agent, and whereas, each
Warrantholder is an intended beneficiary of this Agreement with respect to the
rights of Warrantholders herein.
Page 1 - Warrant Agreement
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent
The Company appoints the Warrant Agent to act as agent for the Company
in accordance with the instructions in this Agreement, and the Warrant Agent
accepts such appointment.
Section 2. Date, Denomination and Execution of Warrant Certificates
The Warrant Certificates (and the Form of Election to Purchase and the
Form of Assignment to be printed on the reverse thereof) shall be in registered
form only and shall be substantially of the tenor and purport recited in Exhibit
A hereto, and may have such letters, numbers or other marks of identification or
designation and such legends, summaries or endorsements printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law, or with any rule or regulation made pursuant thereto, or with any rule or
regulation of any stock exchange on which the Common Stock or the Warrants may
be listed or any automated quotation system, or to conform to usage. After
[INSERT THE DATE WHICH IS 30 DAYS AFTER THE DATE OF THE FINAL PROSPECTUS], each
Warrant Certificate shall entitle the registered holder thereof, subject to the
provisions of this Agreement and of the Warrant Certificate, to purchase, on or
before the close of business on _______, 2007 (THE FIFTH ANNIVERSARY OF THE DATE
OF THE FINAL PROSPECTUS) (the "Expiration Date"), one fully paid and
nonassessable share of Common Stock for each Warrant evidenced by such Warrant
Certificate, subject to adjustments as provided in Section 6 hereof, for $____
(150% public offering price of the Units) (the "Exercise Price"). Each Warrant
Certificate issued as a part of a Unit offered to the public as described in the
recitals, above, shall be dated _________, 2002; each other Warrant Certificate
shall be dated the date on which the Warrant Agent receives valid issuance
instructions from the Company or a transferring holder of a Warrant Certificate
or, if such instructions specify another date, such other date.
For purposes of this Agreement, the term "close of business" on any
given date shall mean 5:00 p.m., Pacific time, on such date; provided, however,
that if such date is not a business day, it shall mean 5:00 p.m., Pacific time,
on the next succeeding business day. For purposes of this Agreement, the term
"business day" shall mean any day other than a Saturday, Sunday, or a day on
which banking institutions in New York are authorized or obligated by law to be
closed.
Each Warrant Certificate shall be executed on behalf of the Company by
the Chairman of the Board, or Chief Executive Officer, President or a Vice
President of the Company, either manually or by facsimile signature printed
thereon, and have affixed thereto the Company's seal or a facsimile thereof
which shall be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. Each Warrant Certificate
shall be manually countersigned by the Warrant Agent and shall not be valid for
any purpose unless so countersigned. In case any officer of the Company who
shall have signed any Warrant Certificate shall cease to be such officer of the
Company before countersignature by the Warrant Agent and issue and delivery
thereof by the Company, such Warrant Certificate, nevertheless, may be
countersigned by the Warrant Agent, issued and delivered with the same force and
effect as though the person who signed such Warrant Certificate had not ceased
to be such officer of the Company.
Page 2 - Warrant Agreement
Section 3. Subsequent Issue of Warrant Certificates
Subsequent to their original issuance, no Warrant Certificates shall be
reissued except (i) Warrant Certificates issued upon transfer thereof in
accordance with Section 4 hereof, (ii) Warrant Certificates issued upon any
combination, split-up or exchange of Warrant Certificates pursuant to Section 4
hereof, (iii) Warrant Certificates issued in replacement of mutilated,
destroyed, lost or stolen Warrant Certificates pursuant to Section 5 hereof,
(iv) Warrant Certificates issued to reflect any adjustment or change in the
Exercise Price or the number or kind of shares purchasable thereunder pursuant
to Section 6 hereof and (v) Warrant Certificates issued upon the partial
exercise of Warrant Certificates pursuant to Section 7 hereof. The Warrant Agent
is hereby irrevocably authorized to countersign and deliver, in accordance with
the provisions of said Sections 4, 5, 6 and 7, the new Warrant Certificates
required for purposes thereof, and the Company, whenever required by the Warrant
Agent, will supply the Warrant Agent with Warrant Certificates duly executed on
behalf of the Company for such purposes.
Section 4. Transfers and Exchanges of Warrant Certificates
The Warrant Agent will keep or cause to be kept books for registration
of ownership and transfer of the Warrant Certificates issued hereunder. Such
registers shall show the names and addresses of the respective holders of the
Warrant Certificates and the number of Warrants evidenced by each such Warrant
Certificate.
The Warrant Agent shall, from time to time, register the transfer of
any outstanding Warrants upon the books to be maintained by the Warrant Agent
for that purpose, upon surrender of the Warrant Certificate evidencing such
Warrants, with the Form of Assignment duly filled in and executed with such
signature guaranteed by a banking institution or NASD member and such supporting
documentation as the Warrant Agent or the Company may reasonably require, to the
Warrant Agent at its stock transfer office in Glendale, California at any time
on or before the Expiration Date, and upon payment to the Warrant Agent for the
account of the Company of an amount equal to any applicable transfer tax.
Payment of the amount of such tax may be made in cash, or by certified or
official bank check, payable in lawful money of the United States of America to
the order of the Company.
Upon receipt of a Warrant Certificate, with the Form of Assignment duly
filled in and executed, accompanied by payment of an amount equal to any
applicable transfer tax, the Warrant Agent shall promptly cancel the surrendered
Warrant Certificate and countersign and deliver to the transferee a new Warrant
Certificate for the number of full Warrants transferred to such transferee;
provided, however, that in case the registered holder of any Warrant Certificate
shall elect to transfer fewer than all of the Warrants evidenced by such Warrant
Certificate, the Warrant Agent in addition, shall promptly countersign and
deliver to such registered holder a new Warrant Certificate or Certificates for
the number of full Warrants not so transferred.
Page 3 - Warrant Agreement
Any Warrant Certificate or Certificates may be exchanged at the option
of the holder thereof for another Warrant Certificate or Certificates of
different denominations, of like tenor and representing in the aggregate the
same number of Warrants, upon surrender of such Warrant Certificate or
Certificates, with the Form of Assignment duly filled in and executed, to the
Warrant Agent, at any time or from time to time after the close of business on
the date hereof and prior to the close of business on the Expiration Date. The
Warrant Agent shall promptly cancel the surrendered Warrant Certificate and
deliver the new Warrant Certificate pursuant to the provisions of this Section
4.
Section 5. Mutilated, Destroyed, Lost or Stolen Warrant Certificates
Upon receipt by the Company and the Warrant Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
any Warrant Certificate, and in the case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them, and reimbursement to them
of all reasonable expenses incidental thereto, and, in the case of mutilation,
upon surrender and cancellation of the Warrant Certificate, the Warrant Agent
shall countersign and deliver a new Warrant Certificate of like tenor for the
same number of Warrants.
Section 6. Adjustments of Number and Kind of Shares Purchasable and
Exercise Price
Except as provided in Subsection I below, the number and kind of
securities or other property purchasable upon exercise of a Warrant shall be
subject to adjustment from time to time upon the occurrence, after the date
hereof, of any of the following events:
A. In case the Company shall (i) pay a dividend in, or make a
distribution of, shares of capital stock on its outstanding Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a greater number of such
shares or (iii) combine its outstanding shares of Common Stock into a smaller
number of such shares, the total number of shares of Common Stock purchasable
upon the exercise of each Warrant outstanding immediately prior thereto shall be
adjusted so that the holder of any Warrant Certificate thereafter surrendered
for exercise shall be entitled to receive at the same aggregate Exercise Price
the number of shares of capital stock (of one or more classes) which such holder
would have owned or have been entitled to receive immediately following the
happening of any of the events described above had such Warrant been exercised
in full immediately prior to the record date with respect to such event. Any
adjustment made pursuant to this Subsection shall, in the case of a stock
dividend or distribution, become effective as of the record date therefor and,
in the case of a subdivision or combination, be made as of the effective date
thereof. If, as a result of an adjustment made pursuant to this Subsection, the
holder of any Warrant Certificate thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive and shall be evidenced by a Board resolution filed with the Warrant
Agent) shall determine the allocation of the adjusted Exercise Price between or
among shares of such classes of capital stock.
Page 4 - Warrant Agreement
B. In the event of a capital reorganization or a reclassification of
the Common Stock (except as provided in Subsection A above or Subsection E
below), any Warrantholder, upon exercise of Warrants, shall be entitled to
receive, in substitution for the Common Stock to which such Warrantholder would
have become entitled upon exercise immediately prior to such reorganization or
reclassification, the shares (of any class or classes) or other securities or
property of the Company (or cash) that such Warrantholder would have been
entitled to receive at the same aggregate Exercise Price upon such
reorganization or reclassification if such Warrants had been exercised
immediately prior to the record date with respect to such event; and in any such
case, appropriate provision (as determined by the Board of Directors of the
Company, whose determination shall be conclusive and shall be evidenced by a
certified Board resolution filed with the Warrant Agent) shall be made for the
application of this Section 6 with respect to the rights and interests
thereafter of the Warrantholders (including but not limited to the allocation of
the Exercise Price between or among shares of classes of capital stock), to the
end that this Section 6 (including the adjustments of the number of shares of
Common Stock or other securities purchasable and the Exercise Price thereof)
shall thereafter be reflected, as nearly as reasonably practicable, in all
subsequent exercises of the Warrants for any shares or securities or other
property (or cash) thereafter deliverable upon the exercise of the Warrants.
C. Whenever the number of shares of Common Stock or other securities
purchasable upon exercise of a Warrant is adjusted as provided in this Section
6, the Company will promptly file with the Warrant Agent a certificate signed by
the Chairman of the Board, Chief Executive Officer, President or a Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company setting forth the number and
kind of securities or other property purchasable upon exercise of a Warrant, as
so adjusted, stating that such adjustments in the number or kind of shares or
other securities or property conform to the requirements of this Section 6, and
setting forth a brief statement of the facts accounting for such adjustments.
Promptly after receipt by the Warrant Agent of such certificate, the Company, or
the Warrant Agent at the Company's request, will deliver, by first-class,
postage prepaid mail, a brief summary of such certificate (to be supplied by the
Company if delivered by the Warrant Agent at the Company's request) to the
registered holders of the outstanding Warrant Certificates; provided, however,
that failure to file or to give any notice required under this Subsection, or
any defect therein, shall not affect the legality or validity of any such
adjustments under this Section 6; and provided, further, that, where
appropriate, such notice may be given in advance and included as part of the
notice required to be given pursuant to Section 12 hereof.
D. In case of any consolidation of the Company with, or merger of the
Company into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), or in case of any sale or conveyance to another corporation of the
capital stock or assets of the Company as an entirety or substantially as an
entirety, the surviving corporation formed by such consolidation or merger or
the corporation which shall have acquired such capital stock or assets, as the
case may be, shall execute and deliver to the Warrant Agent a supplemental
warrant agreement providing that the holder of each Warrant then outstanding
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of such Warrant, solely the kind and amount of shares of
stock and other securities and property (or cash) receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock for which such Warrant would have been exercised immediately prior
to such consolidation, merger, sale or transfer. Such supplemental warrant
agreement shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided in this Section. The above
provision of this Subsection shall similarly apply to successive consolidations,
mergers, sales or transfers.
Page 5 - Warrant Agreement
The Warrant Agent shall not be under any responsibility to determine
the correctness of any provision contained in any such supplemental warrant
agreement relating to either the kind or amount of shares of stock or securities
or property (or cash) purchasable by holders of Warrant Certificates upon the
exercise of their Warrants after any such consolidation, merger, sale or
transfer or of any adjustment to be made with respect thereto, but subject to
the provisions of Section 20 hereof, may accept as conclusive evidence of the
correctness of any such provisions, and shall be protected in relying upon, a
certificate of a firm of independent certified public accountants (who may be
the accountants regularly employed by the Company) with respect thereto.
E. Irrespective of any adjustments in the number or kind of shares
issuable upon exercise of Warrants, Warrant Certificates theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the similar Warrant Certificates initially issuable
pursuant to this Warrant Agreement.
F. The Company may retain a firm of independent public accountants of
recognized standing, which may be the firm regularly retained by the Company,
selected by the Board of Directors of the Company or the Executive Committee of
said Board, and not disapproved by the Warrant Agent, to make any computation
required under this Section, and a certificate signed by such firm shall, in the
absence of fraud or gross negligence, be conclusive evidence of the correctness
of any computation made under this Section.
G. For the purpose of this Section, the term "Common Stock" shall mean
(i) the class of stock designated as Common Stock in the Certificate of
Incorporation of the Company, or (ii) any other class of stock resulting from
successive changes or reclassification of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time as a result of an adjustment made
pursuant to this Section, the holder of any Warrant thereafter surrendered for
exercise shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, thereafter the number of such other
shares so receivable upon exercise of any Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock contained in this Section,
and all other provisions of this Agreement, with respect to the Common Stock,
shall apply on like terms to any such other shares.
H. The Company may, from time to time and to the extent permitted by
law, reduce the exercise price of the Warrants by any amount for a period of not
less than 20 days. If the Company so reduces the exercise price of the Warrants,
it will give not less than 15 days' notice of such decrease, which notice may be
in the form of a press release, and shall take such other steps as may be
required under applicable law in connection with any offers or sales of
securities at the reduced price.
I. The Underwriting Agreement between the Company and the
Representative relating to the sale of the Units provides that, if the Company's
audited pre-tax income for the year ending December 31, 2002 is less than $1.3
million, it will issue a 10% stock dividend to all holders of Common Stock of
record on the record date of the dividend (the "Stock Dividend"). None of the
adjustments considered by this Section 6 will be made as a result of the
issuance of the Stock Dividend.
Page 6 - Warrant Agreement
Section 7. Exercise and Redemption of Warrants
Unless the Warrants have been redeemed as provided in this Section 7,
the registered holder of any Warrant Certificate may exercise the Warrants
evidenced thereby, in whole at any time or in part from time to time after
[INSERT THE DATE WHICH IS 30 DAYS AFTER THE DATE OF THE FINAL PROSPECTUS] and at
or prior to the close of business on the Expiration Date, subject to the
provisions of Section 8, at which time the Warrant Certificates shall be and
become wholly void and of no value. Warrants may be exercised by their holders
or redeemed by the Company as follows:
A. Exercise of Warrants shall be accomplished upon surrender of the
Warrant Certificate evidencing such Warrants, with the Form of Election to
Purchase on the reverse side thereof duly filled in and executed, to the Warrant
Agent at its stock transfer office in Glendale, California, together with
payment to the Company of the Exercise Price (as of the date of such surrender)
of the Warrants then being exercised. Payment of the Exercise Price may be made
by wire transfer of good funds, or by certified or bank cashier's check, payable
in lawful money of the United States of America to the order of the Company. No
adjustment shall be made for any cash dividends, whether paid or declared, on
any securities issuable upon exercise of a Warrant. Subject to the terms and
conditions of Section 11, the Company shall pay any and all transfer tax
incurred as a result of any exercise of the Warrants.
B. Upon receipt of a Warrant Certificate, with the Form of Election to
Purchase duly filled in and executed, accompanied by payment of the Exercise
Price of the Warrants being exercised, the Warrant Agent shall promptly request
from the transfer agent with respect to the securities to be issued and deliver
to or upon the order of the registered holder of such Warrant Certificate, in
such name or names as such registered holder may designate, a certificate or
certificates for the number of full shares of the securities to be purchased,
together with cash made available by the Company pursuant to Section 8 hereof in
respect of any fraction of a share of such securities otherwise issuable upon
such exercise. If the Warrant is then exercisable to purchase property other
than securities, the Warrant Agent shall take appropriate steps to cause such
property to be delivered to or upon the order of the registered holder of such
Warrant Certificate. In addition, if it is required by law and upon instruction
by the Company, the Warrant Agent will deliver to each Warrantholder a
prospectus which complies with the provisions of Section 10 of the Securities
Act of 1933, as amended, and the Company agrees to supply the Warrant Agent with
sufficient number of prospectuses to effectuate that purpose.
C. In case the registered holder of any Warrant Certificate shall
exercise fewer than all of the Warrants evidenced by such Warrant Certificate,
the Warrant Agent shall promptly countersign and deliver to the registered
holder of such Warrant Certificate, or to his duly authorized assigns, a new
Warrant Certificate or Certificates evidencing the number of Warrants that were
not so exercised.
D. Each person in whose name any certificate for securities is issued
upon the exercise of Warrants shall for all purposes be deemed to have become
the holder of record of the securities represented thereby as of, and such
certificate shall be dated, the date upon which the Warrant Certificate was duly
surrendered in proper form and payment of the Exercise Price was made; provided,
however, that if the date of such surrender and payment is a date on which the
stock transfer books of the Company are closed, such person shall be deemed to
have become the record holder of such shares as of, and the certificate for such
shares shall be dated, the next succeeding business day on which the stock
transfer books of the Company are open (whether before, on or after the
Expiration Date) and the Warrant Agent shall be under no duty to deliver the
certificate for such shares until such date. The Company covenants and agrees
that it shall not cause its stock transfer books to be closed for a period of
more than 20 consecutive business days except upon consolidation, merger, sale
of all or substantially all of its assets, dissolution or liquidation or as
otherwise provided by law.
Page 7 - Warrant Agreement
E. The Warrants outstanding at the time of a redemption may be redeemed
at the option of the Company, in whole, at any time, or in part, from time to
time, and on a pro rata basis (except as provided in Subsection J below), if at
the time notice of such redemption is given by the Company as provided in
Paragraph F below, the Daily Price has exceeded 150% of the initial public
offering price of the Units for the 10 consecutive trading days immediately
preceding the date of such notice, at a price equal to $0.25 per Warrant (the
"Redemption Price"). For the purpose of the foregoing sentence, the term "Daily
Price" shall mean, for any relevant day, the closing bid price or closing price,
as the case may be, on that day as reported by the principal exchange, national
market or quotation system on which prices for the Common Stock are reported. On
the redemption date the holders of record of redeemed Warrants shall be entitled
to payment of the Redemption Price upon surrender of such redeemed Warrants to
the Company at the principal office of the Warrant Agent in New York, New York.
Notwithstanding anything herein to the contrary, the Company shall not redeem
any Warrants prior to [INSERT DATE WHICH IS THE DATE WHICH IS SIX MONTHS FROM
THE DATE OF THE FINAL PROSPECTUS]. Holders of record may exercise the Warrants
at any time prior to the close of business on the date of redemption.
F. Notice of redemption of Warrants shall be given at least 30 days
prior to the redemption date by mailing, by registered or certified mail, return
receipt requested, a copy of such notice to the Warrant Agent and to all of the
holders of record of Warrants at their respective addresses appearing on the
books or transfer records of the Company or such other address designated in
writing by the holder of record to the Warrant Agent not less than 40 days prior
to the redemption date.
G. With respect to Warrants called for redemption by the Company, from
and after such redemption date, all rights of the Warrantholders shall terminate
(except the right to receive the Redemption Price), but only if (a) no later
than one day prior to the redemption date the Company shall have irrevocably
deposited with the Warrant Agent as paying agent a sufficient amount to pay on
the redemption date the Redemption Price for all Warrants called for redemption
and (b) the notice of redemption shall have stated the name and address of the
Warrant Agent and the intention of the Company to deposit such amount with the
Warrant Agent no later than one day prior to the redemption date.
H. The Warrant Agent shall pay to the holders of record of redeemed
Warrants all monies received by the Warrant Agent for the redemption of Warrants
to which the holders of record of such redeemed Warrants who shall have
surrendered their Warrants are entitled.
Page 8 - Warrant Agreement
I. Any amounts deposited with the Warrant Agent that are not required
for redemption of Warrants may be withdrawn by the Company. Any amounts
deposited with the Warrant Agent that shall be unclaimed after six months after
the redemption date may be withdrawn by the Company, and thereafter the holders
of the Warrants called for redemption for which such funds were deposited shall
look solely to the Company for payment. The Company shall be entitled to the
interest, if any, on funds deposited with the Warrant Agent and the holders of
redeemed Warrants shall have no right to any such interest.
J. If the Company fails to make a sufficient deposit with the Warrant
Agent as provided above, the holder of any Warrants called for redemption may at
the option of the holder (a) by notice to the Company declare the notice of
redemption a nullity as to such holder, at which time the deposit made by the
Company with the Warrant Agent shall be distributed, on a pro rata basis, to all
other Warrantholders or (b) maintain an action against the Company for the
Redemption Price. If the holder brings such an action, the Company will pay
reasonable attorneys' fees of the holder. If the holder fails to bring an action
against the Company for the Redemption Price within 60 days after the redemption
date, the holder shall be deemed to have elected to declare the notice of
redemption to be a nullity as to such holder and such notice shall be without
any force or effect as to such holder. Except as otherwise specifically provided
in this Subsection J, a notice of redemption, once mailed by the Company as
provided in Subsection F, shall be irrevocable.
Section 8. Fractional Interests
The Company shall not be required to issue any Warrant Certificate
evidencing a fraction of a Warrant or to issue fractions of shares of securities
on the exercise of the Warrants. If any fraction (calculated to the nearest
one-hundredth) of a Warrant or a share of securities would, except for the
provisions of this Section 8, be issuable upon the exercise of any Warrant, the
Company shall, at its option, either purchase such fraction for an amount in
cash equal to the current value of such fraction computed on the basis of the
Daily Price on the trading day immediately preceding the day upon which such
Warrant Certificate was surrendered for exercise in accordance with Section 7
hereof or issue the required fractional Warrant or share. By accepting a Warrant
Certificate, the holder thereof expressly waives any right to receive a Warrant
Certificate evidencing any fraction of a Warrant or to receive any fractional
share of securities upon exercise of a Warrant, except as expressly provided in
this Section 8.
Section 9. Reservation of Equity Securities
The Company covenants that it will at all times reserve and keep
available, free from any preemptive rights, out of its authorized and unissued
equity securities, solely for the purpose of issue upon exercise of the
Warrants, such number of shares of equity securities of the Company as shall
then be issuable upon the exercise of all outstanding Warrants ("Equity
Securities"). The Company covenants that all Equity Securities which shall be so
issuable shall, upon such issue, be duly authorized, validly issued, fully paid
and nonassessable.
Page 9 - Warrant Agreement
The Company covenants that if any Equity Securities, required to be
reserved for the purpose of issue upon exercise of the Warrants hereunder,
require registration with or approval of any governmental authority under any
federal or state law before such shares may be issued upon exercise of Warrants,
the Company will use all commercially reasonable efforts to cause such
securities to be duly registered, or approved, as the case may be, and, to the
extent practicable, take all such action in anticipation of and prior to the
exercise of the Warrants, including, without limitation, filing any and all
post-effective amendments to the Company's Registration Statement on Form SB-2
(Registration No. ___-_____) necessary to permit a public offering of the
securities underlying the Warrants at any and all times during the term of this
Agreement; provided, further, that in no event shall such securities be issued,
and the Company is authorized to refuse to honor the exercise of any Warrant, if
such exercise would result, in the opinion of the Company's Board of Directors,
upon advice of counsel, in the violation of any law; and provided further that,
in the case of a Warrant exercisable solely for securities listed on a
securities exchange or for which there are at least two independent market
makers, in lieu of obtaining such registration or approval, the Company may
elect to redeem Warrants submitted to the Warrant Agent for exercise for a price
equal to the difference between the aggregate low asked price, or closing price,
as the case may be, of the securities for which such Warrant is exercisable on
the date of such submission and the Exercise Price of such Warrants; in the
event of such redemption, the Company will pay to the holder of such Warrants
the above-described redemption price in cash within 10 business days after
receipt of notice from the Warrant Agent that such Warrants have been submitted
for exercise.
Section 10. Reduction of Exercise Price Below Par Value
Before taking any action that would cause an adjustment pursuant to
Section 6 hereof reducing the portion of the Exercise Price required to purchase
one share of capital stock below the then par value (if any) of a share of such
capital stock, the Company will use its best efforts to take any corporate
action which, in the opinion of its counsel, may be necessary in order that the
Company may validly and legally issue fully paid and non-assessable shares of
such capital stock.
Section 11. Payment of Taxes
The Company covenants and agrees that it will pay when due and payable
any and all federal and state documentary stamp and other original issue taxes
which may be payable in respect of the original issuance of the Warrant
Certificates, or any shares of Common Stock or other securities upon the
exercise of Warrants. The Company shall not, however, be required (i) to pay any
tax which may be payable in respect of any transfer involved in the transfer and
delivery of Warrant Certificates or the issuance or delivery of certificates for
Common Stock or other securities in a name other than that of the registered
holder of the Warrant Certificate surrendered for purchase or (ii) to issue or
deliver any certificate for shares of Common Stock or other securities upon the
exercise of any Warrant Certificate until any such tax shall have been paid, all
such tax being payable by the holder of such Warrant Certificate at the time of
surrender.
Page 10 - Warrant Agreement
Section 12. Notice of Certain Corporate Action
In case the Company, after the date hereof, shall propose (i) to offer
to the holders of Common Stock, generally, rights to subscribe to or purchase
any additional shares of any class of its capital stock, any evidences of its
indebtedness or assets, or any other rights or options or (ii) to effect any
reclassification of Common Stock (other than a reclassification involving merely
the subdivision or combination of outstanding shares of Common Stock) or any
capital reorganization, or any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is required, or
any sale, transfer or other disposition of its property and assets substantially
as an entirety, or the liquidation, voluntary or involuntary dissolution or
winding-up of the Company, then, in each such case, the Company shall file with
the Warrant Agent and the Company, or the Warrant Agent on its behalf, shall
mail (by first-class, postage prepaid mail) to all registered holders of the
Warrant Certificates notice of such proposed action, which notice shall specify
the date on which the books of the Company shall close or a record be taken for
such offer of rights or options, or the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up shall take place
or commence, as the case may be, and which shall also specify any record date
for determination of holders of Common Stock entitled to vote thereon or
participate therein and shall set forth such facts with respect thereto as shall
be reasonably necessary to indicate any adjustments in the Exercise Price and
the number or kind of shares or other securities purchasable upon exercise of
Warrants which will be required as a result of such action. Such notice shall be
filed and mailed in the case of any action covered by clause (i) above, at least
ten days prior to the record date for determining holders of the Common Stock
for purposes of such action or, if a record is not to be taken, the date as of
which the holders of shares of Common Stock of record are to be entitled to such
offering; and, in the case of any action covered by clause (ii) above, at least
20 days prior to the earlier of the date on which such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up is expected to
become effective and the date on which it is expected that holders of shares of
Common Stock of record on such date shall be entitled to exchange their shares
for securities or other property deliverable upon such reclassification,
reorganization, consolidation, merger, sale, transfer, other disposition,
liquidation, voluntary or involuntary dissolution or winding-up. Notwithstanding
anything to the contrary in this Section, the Company shall not be required to
deliver such notice if, in the reasonable opinion of the Company's Board of
Directors, based on advice of counsel, such notification would violate any
federal or state securities laws.
Failure to give any such notice or any defect therein shall not affect
the legality or validity of any transaction listed in this Section 12.
Section 13. Disposition of Proceeds on Exercise of Warrant Certificates, etc.
The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently pay to the Company all moneys received by
the Warrant Agent for the purchase of securities or other property through the
exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement available for
inspection by Warrantholders during normal business hours at its stock transfer
office. Copies of this Agreement may be obtained upon written request addressed
to the Warrant Agent at its stock transfer office in New York, New York.
Page 11 - Warrant Agreement
Section 14. Warrantholder Not Deemed a Shareholder
No Warrantholder, as such, shall be entitled to vote, receive dividends
or be deemed the holder of Common Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Warrants represented
thereby for any purpose whatsoever, nor shall anything contained herein or in
any Warrant Certificate be construed to confer upon any Warrantholder, 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 shareholders 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 or change of stock to no par value, consolidation, merger,
conveyance or otherwise), or to receive notice of meetings or other actions
affecting shareholders (except as provided in Section 12 hereof), or to receive
dividend or subscription rights, or otherwise, until such Warrant Certificate
shall have been exercised in accordance with the provisions hereof and the
receipt of the Exercise Price and any other amounts payable upon such exercise
by the Warrant Agent.
Section 15. Right of Action
All rights of action with respect to this Agreement are vested in the
respective registered holders of the Warrant Certificates; and any registered
holder of any Warrant Certificate, without the consent of the Warrant Agent or
of any other holder of a Warrant Certificate, may, in his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company suitable to enforce, or otherwise in respect of,
his right to exercise the Warrants evidenced by such Warrant Certificate, for
the purchase of shares of the Common Stock in the manner provided in the Warrant
Certificate and in this Agreement.
Section 16. Agreement of Holders of Warrant Certificates
Every holder of a Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent and with every other holder of a
Warrant Certificate that:
A. the Warrant Certificates are transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in this
Agreement; and
B. the Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the absolute owner of the
Warrant (notwithstanding any notation of ownership or other writing thereon made
by anyone other than the Company or the Warrant Agent) for all purposes whatever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.
Section 17. Cancellation of Warrant Certificates
In the event that the Company shall purchase or otherwise acquire any
Warrant Certificate or Certificates after the issuance thereof, such Warrant
Certificate or Certificates shall thereupon be delivered to the Warrant Agent
and be canceled by it and retired. The Warrant Agent shall also cancel any
Warrant Certificate delivered to it for exercise, in whole or in part, or
delivered to it for transfer, split-up, combination or exchange. Warrant
Certificates so canceled shall be delivered by the Warrant Agent to the Company
from time to time, or disposed of in accordance with the instructions of the
Company.
Page 12 - Warrant Agreement
Section 18. Concerning the Warrant Agent
The Company agrees to pay to the Warrant Agent from time to time, on
written demand of the Warrant Agent, reasonable compensation for all services
rendered by it hereunder and also its reasonable expenses, including counsel
fees, and other disbursements incurred in the administration and execution of
this Agreement and the exercise and performance of its duties hereunder. The
Warrant Agent agrees to use its best efforts to submit in advance a written
estimate of any costs in excess of $_______ which it expects to incur in its
exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Warrant Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Warrant Agent, arising out of or in connection
with the acceptance and administration of this Agreement.
Section 19. Merger or Consolidation or Change of Name of Warrant Agent
Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided that
such corporation would be eligible for appointment as a successor warrant agent
under the provisions of Section 21 hereof. In case at the time such successor to
the Warrant Agent shall succeed to the agency created by this Agreement, any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrant Certificates so countersigned;
and in case at that time any of the Warrant Certificates shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrant
Certificates either in the name of the predecessor Warrant Agent or in the name
of the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and in this
Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignature under its prior
name and deliver Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name; and in all such cases such Warrant Certificates shall have the
full force provided in the Warrant Certificates and in this Agreement.
Section 20. Duties of Warrant Agent
The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the Company
and the holders of Warrant Certificates, by their acceptance thereof, shall be
bound:
Page 13 - Warrant Agreement
A. The Warrant Agent may consult with counsel satisfactory to it (who
may be counsel for the Company or the Warrant Agent's in-house counsel), and the
opinion of such counsel shall be full and complete authorization and protection
to the Warrant Agent as to any action taken, suffered or omitted by it in good
faith and in accordance with such opinion; provided, however, that the Warrant
Agent shall have exercised reasonable care in the selection of such counsel.
Fees and expenses of such counsel, to the extent reasonable, shall be paid by
the Company, subject to the provisions of Section 18 hereof.
B. Whenever in the performance of its duties under this Agreement, the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the Chairman of the Board, President,
Chief Executive Officer, a Vice President or Secretary of the Company and
delivered to the Warrant Agent; and such certificate shall be full authorization
to the Warrant Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
C. The Warrant Agent shall be liable hereunder only for its own gross
negligence, bad faith or willful misconduct.
D. The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Warrant
Certificates (except its countersignature on the Warrant Certificates and such
statements or recitals as describe the Warrant Agent or action taken or to be
taken by it) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
E. The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Warrant Certificate; nor shall
it be responsible for the making of any change in the number of shares of Common
Stock for which a Warrant is exercisable required under the provisions of
Section 6 or responsible for the manner, method or amount of any such change or
the ascertaining of the existence of facts that would require any such
adjustment or change (except with respect to the exercise of Warrant
Certificates after actual notice of any adjustment of the Exercise Price); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any shares of Common Stock to be
issued pursuant to this Agreement or any Warrant Certificate or as to whether
any shares of Common Stock will, when issued, be validly issued, fully paid and
nonassessable.
F. The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or take any other action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrant Certificates, as their respective rights
or interests may appear.
Page 14 - Warrant Agreement
G. The Warrant Agent and any stockholder, director, officer or employee
of the Warrant Agent may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
H. The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman, President, a Vice President, Secretary or Controller of the Company,
and to apply to such officers for advice or instructions in connection with the
Warrant Agent's duties, and it shall not be liable for any action taken or
suffered or omitted by it in good faith in accordance with instructions of any
such officer.
I. The Warrant Agent will not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
J. The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees or for any loss to the Company resulting
from such neglect or misconduct; provided, however, that reasonable care shall
have been exercised in the selection and continued employment of such attorneys,
agents and employees.
K. The Warrant Agent will not incur any liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action taken, or
any failure to take action, in reliance on any notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument reasonably
believed by the Warrant Agent to be genuine and to have been signed, sent or
presented by the proper party or parties.
L. The Warrant Agent will act hereunder solely as agent of the Company
in a ministerial capacity, and its duties will be determined solely by the
provisions hereof. The Warrant Agent will not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, bad faith or willful conduct.
Page 15 - Warrant Agreement
Section 21. Change of Warrant Agent
The Warrant Agent may resign and be discharged from its duties under
this Agreement upon 30 days' prior notice in writing mailed, by registered or
certified mail, to the Company. The Company may remove the Warrant Agent or any
successor warrant agent upon 30 days' prior notice in writing, mailed to the
Warrant Agent or successor warrant agent, as the case may be, by registered or
certified mail. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent and shall, within 15 days following such appointment, give
notice thereof in writing to each registered holder of the Warrant Certificates.
If the Company shall fail to make such appointment within a period of 15 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Warrant Agent,
then the Company agrees to perform the duties of the Warrant Agent hereunder
until a successor Warrant Agent is appointed. After appointment and execution of
a copy of this Agreement in effect at that time, the successor Warrant Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Warrant Agent without further act or deed; but
the former Warrant Agent shall deliver and transfer to the successor Warrant
Agent, within a reasonable time, any property at the time held by it hereunder,
and execute and deliver any further assurance, conveyance, act or deed necessary
for the purpose. Failure to give any notice provided for in this Section,
however, or any defect therein shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
warrant agent, as the case may be.
Section 22. Issuance of New Warrant Certificates
Notwithstanding any of the provisions of this Agreement or the several
Warrant Certificates to the contrary, the Company may, at its option, issue new
Warrant Certificates in such form as may be approved by its Board of Directors
to reflect any adjustment or change in the Exercise Price or the number or kind
of shares purchasable under the several Warrant Certificates made in accordance
with the provisions of this Agreement.
Section 23. Notices
Notice or demand pursuant to this Agreement to be given or made on the
Company by the Warrant Agent or by the registered holder of any Warrant
Certificate shall be sufficiently given or made if sent by first-class or
registered mail, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:
Data Conversion Laboratory, Inc.
184-13 Horace Harding Expressway
Fair Meadows, New York 11365
Attn: Mark Gross
Page 16 - Warrant Agreement
Subject to the provisions of Section 21, any notice pursuant to this
Agreement to be given or made by the Company or by the holder of any Warrant
Certificate to or on the Warrant Agent shall be sufficiently given or made if
sent by first-class or registered mail, postage prepaid, addressed (until
another address is filed in writing by the Warrant Agent with the Company) as
follows:
Continental Stock Transfer Trust Company
17 Battery Place
New York, New York 10004
Any notice or demand authorized to be given or made to the registered
holder of any Warrant Certificate under this Agreement shall be sufficiently
given or made if sent by first-class or registered mail, postage prepaid, to the
last address of such holder as it shall appear on the registers maintained by
the Warrant Agent.
Section 24. Modification of Agreement
The Warrant Agent may, without the consent or concurrence of the
Warrantholders, by supplemental agreement or otherwise, concur with the Company
in making any changes or corrections in this Agreement that the Warrant Agent
shall have been advised by counsel (who may be counsel for the Company) are
necessary or desirable to cure any ambiguity or to correct any defective or
inconsistent provision or clerical omission or mistake or manifest error herein
contained, or to make any other provisions in regard to matters or questions
arising hereunder and which shall not be inconsistent with the provisions of the
Warrant Certificates and which shall not adversely affect the interests of the
Warrantholders. As of the date hereof, this Agreement contains the entire and
only agreement, understanding, representation, condition, warranty or covenant
between the parties hereto with respect to the matters herein, supersedes any
and all other agreements between the parties hereto relating to such matters,
and may be modified or amended only by a written agreement signed by both
parties hereto pursuant to the authority granted by the first sentence of this
Section.
Section 25. Successors
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
Section 26. Governing Law
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the state of New York and for all
purposes shall be construed in accordance with the laws of said state.
Page 17 - Warrant Agreement
Section 27. Termination
This Agreement shall terminate as of the close of business on the
Expiration Date, or such earlier date upon which all Warrants shall have been
exercised or redeemed, except that the Warrant Agent shall account to the
Company as to all Warrants outstanding and all cash held by it as of the close
of business on the Expiration Date.
Section 28. Benefits of this Agreement
Nothing in this Agreement or in the Warrant Certificates shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent, and their respective successors and assigns hereunder and the
registered holders of the Warrant Certificates any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Warrant Agent, their respective
successors and assigns hereunder and the registered holders of the Warrant
Certificates.
Section 29: Descriptive Headings
The descriptive headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
Section 30. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
DATA CONVERSION LABORATORY, INC.
By:
-------------------------------------
Mark Gross
President
CONTINENTAL STOCK TRANSFER TRUST COMPANY
By:
-------------------------------------
Page 18 - Warrant Agreement
VOID AFTER 5:00 P.M. PACIFIC TIME ON __________, 2007
WARRANTS TO PURCHASE COMMON STOCK
W-_____ _________Warrants
Data Conversion Laboratory, Inc.
CUSIP ______________
THIS CERTIFIES THAT
or registered assigns, is the registered holder of the number of Warrants (the
"Warrants") set forth above. Each Warrant entitles the holder thereof to
purchase from Data Conversion Laboratory, Inc., a corporation incorporated under
the laws of the state of New York (the "Company"), subject to the terms and
conditions set forth hereinafter and in the Warrant Agreement hereinafter more
fully described (the "Warrant Agreement"), at any time on or before the close of
business on __________, 2007 or, if such Warrant is redeemed as provided in the
Warrant Agreement, at any time prior to the effective time of such redemption
(the "Expiration Date"), one fully paid and non-assessable share of Common Stock
of the Company (the "Common Stock") upon presentation and surrender of this
Warrant Certificate, with the instructions for the registration and delivery of
Common Stock filled in, at the stock transfer office in New York, New York, of
Continental Stock Transfer Trust Company, Warrant Agent of the Company (the
"Warrant Agent") or of its successor warrant agent or, if there be no successor
warrant agent, at the corporate offices of the Company, and upon payment of the
Exercise Price (as defined in the Warrant Agreement) and any applicable taxes
paid either in cash, or by certified or official bank check, payable in lawful
money of the United States of America to the order of the Company. Each Warrant
initially entitles the holder to purchase one share of Common Stock initially
for $ [150% of the initial public offering price of the Units]. The number and
kind of securities or other property for which the Warrants are exercisable are
subject to further adjustment in certain events, such as mergers, splits, stock
dividends, recapitalizations and the like, to prevent dilution. After six months
following the closing of the Company's initial public offering, the Company may
redeem any or all outstanding and unexercised Warrants at any time if the
average Daily Price equals or exceeds 200% of the initial public offering price
of the Units for ten consecutive trading days immediately preceding the date of
notice of such redemption, or the Company has audited earnings per share of
$____ for any four consecutive quarters, upon 30 days notice, at a price equal
to $0.25 per Warrant. For the purpose of the foregoing sentence, the term "Daily
Price" shall mean, for any relevant day, the closing bid price on that day as
reported by the principal exchange or quotation system on which prices for the
Common Stock are reported. All Warrants not theretofore exercised or redeemed
will expire on _________, 2007.
Page 19 - Warrant Agreement
This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, dated as of ____________, 2002 (the
"Warrant Agreement"), between the Company and the Warrant Agent, to all of which
terms, provisions and conditions the registered holder of this Warrant
Certificate consents by acceptance hereof. The Warrant Agreement is incorporated
herein by reference and made a part hereof and reference is made to the Warrant
Agreement for a full description of the rights, limitations of rights,
obligations, duties and immunities of the Warrant Agent, the Company and the
holders of the Warrant Certificates. Copies of the Warrant Agreement are
available for inspection at the stock transfer office of the Warrant Agent or
may be obtained upon written request addressed to the Company at 184-13 Horace
Harding Expressway, Fresh Meadows, New York 11365, Attention: Mark Gross.
The Company shall not be required upon the exercise of the Warrants
evidenced by this Warrant Certificate to issue fractions of Warrants, Common
Stock or other securities, but shall make adjustment therefor in cash on the
basis of the current market value of any fractional interest as provided in the
Warrant Agreement.
In certain cases, the sale of securities by the Company upon exercise
of Warrants would violate the securities laws of the United States, certain
states thereof or other jurisdictions. The Company has agreed to use all
commercially reasonable efforts to cause a registration statement to continue to
be effective during the term of the Warrants with respect to such sales under
the Securities Act of 1933, as amended, and to take such action under the laws
of various states as may be required to cause the sale of securities upon
exercise to be lawful. However, the Company will not be required to honor the
exercise of Warrants if, in the opinion of the Board of Directors, upon advice
of counsel, the sale of securities upon such exercise would be unlawful. In
certain cases, the Company may, but is not required to, purchase Warrants
submitted for exercise for a cash price equal to the difference between the
market price of the securities obtainable upon such exercise and the exercise
price of such Warrants.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender to the Warrant Agent, any successor warrant agent or, in the
absence of any successor warrant agent, at the corporate offices of the Company,
may be exchanged for another Warrant Certificate or Certificates evidencing in
the aggregate the same number of Warrants as the Warrant Certificate or
Certificates so surrendered. If the Warrants evidenced by this Warrant
Certificate shall be exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Certificates
evidencing the number of Warrants not so exercised.
No holder of this Warrant Certificate, as such, shall be entitled to
vote, receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise
hereof for any purpose whatever, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder of this Warrant
Certificate, 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 give or withhold consent to any corporate
action (whether upon any matter submitted to stockholders at any meeting
thereof, or give or withhold consent to any merger, recapitalization, issuance
of stock, reclassification of stock, change of par value or change of stock to
no par value, consolidation, conveyance or otherwise) or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Warrant Agreement) or to receive dividends or subscription rights or otherwise
until the Warrants evidenced by this Warrant Certificate shall have been
exercised and the Common Stock purchasable upon the exercise thereof shall have
become deliverable as provided in the Warrant Agreement.
Page 20 - Warrant Agreement
If this Warrant Certificate shall be surrendered for exercise within
any period during which the transfer books for the Company's Common Stock or
other class of stock purchasable upon the exercise of the Warrants evidenced by
this Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:
(a) This Warrant Certificate is transferable on the registry books of
the Warrant Agent only upon the terms and conditions set forth in the Warrant
Agreement; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name this Warrant Certificate is registered as the absolute owner hereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone other than the Company or the Warrant Agent) for all purposes whatever
and neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.
The Company shall not be required to issue or deliver any certificate
for shares of Common Stock or other securities upon the exercise of Warrants
evidenced by this Warrant Certificate until any tax which may be payable in
respect thereof by the holder of this Warrant Certificate pursuant to the
Warrant Agreement shall have been paid, such tax being payable by the holder of
this Warrant Certificate at the time of surrender.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the proper officers of the Company
and its corporate seal.
Dated: , 2002 Data Conversion Laboratory, Inc.
-------------------
By:
-------------------------------------
Mark Gross,
President
Attest:
---------------------------------
Secretary
Countersigned
Continental Stock Transfer & Trust Company
- ------------------------------------------
By:
---------------------------------------
Authorized Officer
Page 21 - Warrant Agreement
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE
THE WARRANTS IN WHOLE OR IN PART)
To: DATA CONVERSION LABORATORY, INC.
The undersigned Registered Holder ( )
- -------------------------------------
(Please insert Social Security or other
identification number of Registered Holder)
hereby irrevocably elects to exercise the right of purchase represented by the
within this Warrant Certificate for, and to purchase thereunder, _______________
shares of Common Stock provided for therein and tenders payment herewith to the
order of DATA CONVERSION LABORATORY, INC. in the amount of $________________.
The undersigned requests that certificates for such shares of Common Stock be
issued as follows:
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
Deliver to:
---------------------------------------------------------------------
Address:
------------------------------------------------------------------------
and if said number of Warrants being exercised shall not be all the Warrants
evidenced by this Warrant Certificate, that a new Certificate for the balance of
such Warrants as well as the shares of Common Stock represented by this Warrant
Certificate be registered in the name of, and delivered to, the Registered
Holder at the address stated below:
Address:
------------------------------------------------------------------------
Dated: ,
----------------- ------
Signature
- ------------------------------------------
(Signature must conform in all respects to the name of Registered Holder as
specified in the case of this Warrant Certificate in every particular, without
alteration or any change whatever.)
Signature Guaranteed:
- ------------------------------------------
The signature should be guaranteed by an eligible institution (Banks,
Stockbrokers, Savings and Loan Association and Credit Union with membership in
an approved signature Medallion Program), pursuant to S.E.C. Rule 17Ad-15.
Page 22 - Warrant Agreement
FORM OF ASSIGNMENT
(TO BE SIGNED ONLY UPON ASSIGNMENT)
FOR VALUE RECEIVED, the undersigned Registered Holder ( )
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(Please insert
Social Security or other
identification number of
Registered Holder)
hereby sells, assigns and transfers unto
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(Please Print Name and Address including Zip Code)
Warrants evidenced by the within Warrant Certificate, and irrevocably
constitutes and appoints
______________________________________________________________________ Attorney
to transfer this Warrant Certificate on the books of Data Conversion Laboratory,
Inc. with the full power of substitution in the premises.
Dated: ,
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Signature:
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(Signature must conform in all respects to the name of Registered Holder as
specified on the face of this Unit Certificate in every particular, without
alteration or any change whatsoever, and the signature must be guaranteed in the
usual manner.)
Signature Guaranteed:
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The signature should be guaranteed by an eligible institution (Banks,
Stockbrokers, Savings and Loan Association and Credit Union with membership in
an approved signature Medallion Program), pursuant to S.E.C. Rule 17Ad-15.
Page 23 - Warrant Agreement