EXHIBIT 6
WARRANT AGREEMENT
Dated as of
May 10, 2000
between
Computer Outsourcing Services, Inc.
as Issuer,
and
the Warrantholders Party Hereto
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Series A Common Stock Warrants
of
Computer Outsourcing Services, Inc.
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WARRANT AGREEMENT
WARRANT AGREEMENT dated as of May 10, 2000, between, Computer
Outsourcing Services, Inc., a Delaware corporation (the "Company"), and each of
the warrantholders party hereto (collectively, with their successors and
assigns, the "Warrantholders").
W I T N E S S E T H:
WHEREAS, the Company proposes, among other things, to issue and sell
pursuant to a Securities Purchase Agreement, dated as of April 7, 2000, among
the Company and DB Capital Investors, L.P. (the "Securities Purchase
Agreement"), 157,377 shares (the "Shares") of the Company's Series A Cumulative
Convertible Participating Preferred Stock ("Series A Preferred Stock") and
2,531,926 Series A Common Stock Warrants (the "Warrants"), each representing the
right to purchase one share of Common Stock, to be issued upon exercise of the
Warrants; and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the consummation of the transactions contemplated by the Securities
Purchase Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein, the Company hereby agrees as follows for the equal and ratable benefit
of the Warrantholders:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any other Person who is a
director or executive officer (A) of such specified Person, (B) of any
Subsidiary of such specified Person or (C) of any Person described in clause (i)
above. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agreement" means this Warrant Agreement as amended or supplemented
from time to time.
"Board of Directors" or "Board" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day that is not a Saturday, Sunday or other
day on which banking institutions in New York, New York are authorized or
required by law to close.
"Cashless Exercise Ratio" means a fraction, the numerator of which is
the excess of the Current Market Value per share of Common Stock on the Exercise
Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Current Market Value" per share of Common Stock or any other security
at any date means (i) if the security is not registered under the Exchange Act,
the value of the security, determined in good faith by the Board of Directors
and certified in a board resolution, or (ii) if the security is registered under
the Exchange Act, the average of the daily closing bid prices (or the equivalent
in an over-the-counter market) for each Business Day during the period
commencing 15 Business Days before such date and ending on the date one day
prior to such date, or if the security has been registered under the Exchange
Act for less than 15 consecutive Business Days before such date, the average of
the daily closing bid prices (or such equivalent) for all of the Business Days
before such date for which daily closing bid prices are available; provided,
however, that if the closing bid price is not determinable for at least ten
Business Days in such period, the "Current Market Value" of the security shall
be determined as if the security were not registered under the Exchange Act.
"ETG Earnout Shares" shall mean any shares of Common Stock issued
subsequent to the date of the Securities Purchase Agreement pursuant to the
terms of the Asset Purchase Agreement dated as of December 16, 1998, by and
among the Company, COSI Acquisition Corp., Enterprise Technology Group,
Incorporated and certain stockholders of Enterprise Technology Group,
Incorporated as amended from time to time, (including, without limitation,
Sections 3.3 and 3.4 thereof).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Date" means, for a given Warrant, the day on which such
Warrant is exercised pursuant to Section 3.04.
"Holder" means the Person in whose name a Warrant is registered on the
Warrant Registrar's books.
"Issue Date" means the date on which the Warrants are initially
issued.
"Officer" means the Chairman of the Board of Directors, the Chief
Executive Officer, the Chief Financial Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such Person,
over shares of Capital Stock of any other class of such Person.
"Securities" means the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" has the meaning assigned to it in the
recitals hereto.
"Series A Preferred Stock" has the meaning assigned to it in the
recitals hereto.
"Shares" has the meaning assigned to it in the recitals hereto.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (a) such Person, (b) such Person
and one or more Subsidiaries of such Person or (c) one or more Subsidiaries of
such Person.
"Uniform Commercial Code" shall mean the New York Uniform Commercial
Code, as in effect from time to time.
"Warrant" has the meaning assigned to it in the recitals hereto.
"Warrant Certificates" mean the registered certificates issued by the
Company under this Agreement representing the Warrants.
"Warrant Shares" mean the shares of Common Stock (and any other
securities) for which the Warrants are exercisable or which have been issued
upon exercise of Warrants.
Section 1.02. Other Definitions.
Term Defined in Section
"Cashless Exercise" 3.04
"Company" Preamble
"Exercise Price" 3.01
"Exercise Rate" 4.01
"Expiration Date" 3.02(b)
"Stock Registrar" 3.07
"Stock Transfer Agent" 3.05
"Warrantholder" Preamble
"Warrant Registrar" 2.03
Section 1.03. Rules of Construction. Unless the context otherwise
requires:
(i) a defined term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE II
WARRANT CERTIFICATES
Section 2.01. Form and Dating. The Warrant Certificates shall each be
substantially in the form of Exhibit A hereto, which is hereby incorporated in
and expressly made a part of this Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Warrant Certificate shall be dated the date that it is executed by the
Company.
Section 2.02. Execution and Countersignature. Two Officers shall sign
the Warrant Certificates for the Company by manual or facsimile signature. If an
Officer whose signature is on a Warrant Certificate no longer holds that office
at the time the Company issues the Warrant Certificate, the Warrant Certificate
shall be valid nevertheless.
Section 2.03. Warrant Registrar. The Company shall maintain an office
or agency where Warrants may be presented for registration of transfer, exchange
or exercise (the "Warrant Registrar"). The Warrant Registrar shall keep a
register of the Warrants and of their transfer, exchange or exercise. The
Company may have one or more co-registrars. The Company may act as Warrant
Registrar. The term Warrant Registrar includes any co-registrars. The Company
shall initially serve as Warrant Registrar in connection with the Warrants.
The Company shall enter into an appropriate agency agreement with any
Warrant Registrar not a party to this Agreement. The agreement shall implement
the provisions of this Agreement that relate to such agent. The Company shall
notify the Warrantholders of the name and address of any such agent. If the
Company fails to maintain a Warrant Registrar, the Company shall act as such.
The Company may remove any Warrant Registrar upon written notice to
such Warrant Registrar and to the Warrantholders; provided, however, that no
such removal shall become effective until (1) acceptance of an appointment by a
successor as evidenced by an appropriate agreement entered into by the Company
and such successor Warrant Registrar and delivered to the Warrantholders or (2)
notification to the Warrantholders that the Company shall serve as Warrant
Registrar until the appointment of a successor in accordance with clause (1)
above. The Warrant Registrar may resign at any time upon written notice. The
Company and the Warrant Registrar may deem and treat the Person in whose name a
Warrant Certificate is registered as the absolute owner of such Warrant
Certificate for all purposes whatsoever and neither the Company and the Warrant
Registrar shall be affected by notice to the contrary.
Section 2.04. Warrantholder Lists. The Company shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Warrantholders.
Section 2.05. Transfer and Exchange. The Warrants shall be issued in
registered form and shall be transferable only upon the surrender of a Warrant
Certificate for registration of transfer and in compliance with the provisions
of this Agreement. When a Warrant is presented to the Warrant Registrar with a
request to register a transfer, the Warrant Registrar shall register the
transfer as requested if the requirements of Section 8-401(a) of the Uniform
Commercial Code are met. When Warrants are presented to the Warrant Registrar
with a request to exchange them for an equal number of Warrants of other
denominations, the Warrant Registrar shall make the exchange as requested if the
requirements of Section 8-401(a)(1) and (2) of the Uniform Commercial Code are
met. To permit registration of transfers and exchanges, the Company shall
execute Warrant Certificates at the Warrant Registrar's request. The Company may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer, exchange or exercise
pursuant to this Section 2.05.
Subject to the restrictions set forth in this Section 2.05, each
Warrantholder may at any time and from time to time freely transfer its Warrant
and the Warrant Shares in whole or in part. No Warrant has been, and the Warrant
Shares at the time of their issuance may not be, registered under the Securities
Act, and, except as provided in any separate agreement providing for
registration rights, nothing herein contained shall be deemed to require the
Company to so register any Warrant or Warrant Shares. The Warrants and the
Warrant Shares are issued or issuable subject to the provisions and conditions
contained herein, and every Holder of a Warrant or Warrant Shares by accepting
such Warrant or Warrant Shares agrees with the Company to such provisions and
conditions, and represents to the Company that such Warrant has been acquired
and the Warrant Shares will be acquired for the account of such Warrantholder
for investment and not with a view to or for sale in connection with any
distribution thereof.
Except as otherwise permitted by this Section 2.05, each Warrant
(including each Warrant issued upon the transfer of any Warrant) and all Warrant
Shares shall be stamped or otherwise imprinted with legends in substantially the
following form:
(a) "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS THE COMPANY MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS" and
(b) "THIS WARRANT IS ALSO SUBJECT TO TRANSFER RESTRICTIONS SET
FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF APRIL 7, 2000,
AMONG THE COMPANY AND THE OTHER PARTIES REFERRED TO THEREIN (THE
"SECURITIES PURCHASE AGREEMENT"). THIS WARRANT MAY BE TRANSFERRED ONLY
IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN SUCH SECURITIES PURCHASE
AGREEMENT AND THE WARRANT AGREEMENT" and
(c) "ALL WARRANTS AND ALL WARRANT SHARES RECEIVED BY THE
WARRANTHOLDERS UPON EXERCISE OF THE WARRANTS WILL BE SUBJECT TO THE
TERMS AND CONDITIONS INCLUDING CERTAIN TRANSFER RESTRICTIONS OF A
STOCKHOLDERS AGREEMENT DATED AS OF MAY 10, 2000, AS AMENDED, AMONG THE
COMPANY AND THE VARIOUS STOCKHOLDERS OF THE COMPANY, AND EACH
WARRANTHOLDER AGREES TO BE BOUND BY THE TERMS AND CONDITIONS OF SUCH
STOCKHOLDERS AGREEMENTS AS SUCH STOCKHOLDERS AGREEMENTS MAY BE AMENDED
FROM TIME TO TIME"
Transfers of Warrants and Warrant Shares are subject to restrictions
as provided in (i) Section 6.5 of the Securities Purchase Agreement and (ii)
that certain Stockholders Agreement dated as of May 10, 2000 as amended among
the various stockholders of the Company. Prior to any transfer or attempted
transfer of any Warrants, the Holder of such Warrants shall give 10 days' prior
written notice (a "Transfer Notice") to the Company of such Holder's intention
to effect such transfer, describing the manner and circumstances of the proposed
transfer, and, if requested by the Company, obtain from counsel to such Holder
who shall be reasonably satisfactory to the Company, an opinion that the
proposed transfer of such Warrants may be effected without registration under
the Securities Act. After receipt of the Transfer Notice and opinion, the
Company shall, within five days thereof, so notify the Holder of such Warrants
and such Holder shall thereupon be entitled to transfer such Warrants, in
accordance with the terms of the Transfer Notice. Each Warrant issued upon such
transfer shall bear the restrictive legends set forth above, unless, with
respect to the legend in paragraph (a) above, in the opinion of such counsel
such legend is not required in order to ensure compliance with the Securities
Act. The Holder of the Warrants giving the Transfer Notice shall not be entitled
to transfer such Warrants until receipt of notice from the Company under this
Section 2.
Section 2.06. Replacement Certificate. If a mutilated Warrant is
surrendered to the Company or if a Warrantholder claims that the Warrant
Certificate has been lost, destroyed or wrongfully taken, the Company shall
execute a replacement Warrant Certificate if the requirements of Section 8-405
of the Uniform Commercial Code are met, such that the Warrantholder (i) notifies
the Company within a reasonable time after he has notice of such loss,
destruction or wrongful taking and the Company does not register a transfer
prior to receiving such notification, (ii) makes such request to the Company
prior to the Warrant being acquired by a protected purchaser as defined in
Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (iii)
satisfies any other reasonable requirements of the Company. If required by the
Company, such Warrantholder shall furnish an indemnity bond sufficient in the
reasonable judgment of the Company to protect the Company from any loss that it
may suffer if a Warrant is replaced. The Company may charge the Warrantholder
for its expenses in replacing a Warrant Certificate. Every replacement Warrant
is an additional obligation of the Company.
The provisions of this Section 2.06 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement of mutilated, lost, destroyed or wrongfully taken Securities.
Section 2.07. Outstanding Warrants. Warrants outstanding at any time
are all Warrant Certificates executed by the Company except for those canceled
by it, those delivered to it for cancellation and those described in this
Section 2.07 as not outstanding. A Warrant does not cease to be outstanding
because an Affiliate of the Company holds the Warrant. A Warrant ceases to be
outstanding if the Company holds the Warrant.
If a Warrant Certificate is replaced pursuant to Section 2.06, it
ceases to be outstanding unless the Company receives proof satisfactory to it
that the replaced Warrant Certificate is held by a protected purchaser.
Section 2.08. Cancellation. The Company at any time may cancel Warrant
Certificates which have been surrendered for registration of transfer, exchange,
exercise or cancellation. The Company and no one else shall cancel all Warrant
Certificates surrendered for registration of transfer, exchange, exercise or
cancellation. The Company may not issue new Warrant Certificates to replace
Warrants Certificates that have been exercised or Warrants which the Company has
purchased or otherwise acquired.
ARTICLE III
EXERCISE TERMS
Section 3.01. Exercise. Each Warrant shall initially entitle the
Holder thereof, subject to adjustment pursuant to the terms of this Agreement,
to purchase one (1) share of Common Stock. The exercise price (the "Exercise
Price") of each Warrant is $0.01 per share.
Section 3.02. Time of Exercise; Separability. (a) Subject to the terms
and conditions set forth herein, the Warrants shall be exercisable at any time
and from time to time on any Business Day on or after the Issue Date.
(b) No Warrant shall be exercisable after May 10, 2007 (the
"Expiration Date").
(c) The Shares and the Warrants will be separably transferrable,
subject to compliance with applicable securities laws, on the Issue Date.
Section 3.03. Expiration. A Warrant shall terminate and become void as
of the earlier of (i) the close of business on the Expiration Date or (ii) the
date such Warrant is exercised. The Company shall give notice not less than 90,
and not more than 120, days prior to the Expiration Date to the Holders of all
then outstanding Warrants to the effect that the Warrants will terminate and
become void as of the close of business on the Expiration Date; provided,
however, that if the Company fails to give notice as provided in this Section
3.03, the Warrants will nevertheless expire and become void on the Expiration
Date.
Section 3.04. Manner of Exercise. Warrants may be exercised upon (i)
surrender to the Warrant Registrar at its office of the related Warrant
Certificate, together with the form of election attached thereto to purchase
Common Stock duly filled in and signed by the Holder thereof and (ii) payment to
the Company, of the Exercise Price for each Warrant Share or other security
issuable upon the exercise of such Warrants then exercised. Such payment shall
be made (i) in cash or by certified or official bank check payable to the order
of the Company or by wire transfer of funds to an account designated by the
Company for such purpose or (ii) without the payment of cash, by reducing the
number of shares of Common Stock obtainable upon the exercise of a Warrant and
payment of the Exercise Price in cash so as to yield a number of shares of
Common Stock upon the exercise of such Warrant equal to the product of (a) the
number of shares of Common Stock issuable as of the Exercise Date upon the
exercise of such Warrant (if payment of the Exercise Price were being made in
cash) and (b) the Cashless Exercise Ratio. An exercise of a Warrant in
accordance with the immediately preceding clause (ii) is herein called a
"Cashless Exercise". Upon surrender of a Warrant Certificate representing more
than one Warrant in connection with the Holder's option to elect a Cashless
Exercise, the number of shares of Common Stock deliverable upon a Cashless
Exercise shall be equal to the number of shares of Common Stock issuable upon
the exercise of Warrants that the Holder specifies are to be exercised pursuant
to a Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions
of this Agreement shall be applicable with respect to a surrender of a Warrant
Certificate pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby. Subject to Section 3.02, the rights represented by
the Warrants shall be exercisable at the election of the Warrantholders thereof
either in full at any time or from time to time in part and in the event that a
Warrant Certificate is surrendered for exercise of less than all the Warrants
represented by such Warrant Certificate at any time prior to the Expiration
Date, a new Warrant Certificate representing the remaining Warrants shall be
issued.
Section 3.05. Issuance of Warrant Shares. Subject to Section 2.06,
upon the surrender of Warrant Certificates and payment of the per share Exercise
Price or election of a Cashless Exercise, as set forth in Section 3.04, the
Company shall issue and cause the transfer agent for the Common Stock ("Stock
Transfer Agent") to countersign and deliver to or upon the written order of the
Warrantholder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrants or other securities or property to which it
is entitled, registered or otherwise, to the Person or Persons entitled to
receive the same (including any depositary institution so designated by a
Warrantholder), together with cash as provided in Section 3.06 in respect of any
fractional Warrant Shares otherwise issuable upon such exercise. Such
certificate or certificates shall be deemed to have been issued and any Person
so designated therein shall be deemed to have become a Holder of record of such
Warrant Shares as of the date of the surrender of such Warrant Certificates and
payment of the per share Exercise Price or election of a Cashless Exercise, as
aforesaid; provided, however, that if, at such date, the transfer books for the
Warrant Shares shall be closed, the certificates for the Warrant Shares in
respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened and until such date the Company
shall be under no duty to deliver any certificates for such Warrant Shares;
provided further, however, that such transfer books, unless otherwise required
by law, shall not be closed at any one time for a period longer than 90 calendar
days.
Section 3.06. Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same
Warrantholder, the number of full Warrant Shares which shall be issuable upon
such exercise shall be computed on the basis of the aggregate number of Warrant
Shares which may be purchasable pursuant thereto. If any fraction of a Warrant
Share would, except for the provisions of this Section 3.06, be issuable upon
the exercise of any Warrant (or specified portion thereof), the Company shall
pay an amount in cash equal to the Current Market Value per Warrant Share, as
determined on the day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction, computed to the nearest whole cent.
Section 3.07. Reservation of Warrant Shares. The Company shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock (the "Stock Registrar") shall at
all times until the Expiration Date reserve such number of authorized shares as
shall be required for such purpose. The Company will keep a copy of this
Agreement on file with the Stock Transfer Agent. The Company will supply such
Stock Transfer Agent with duly executed stock certificates for such purpose and
will itself provide or otherwise make available any cash which may be payable as
provided in Section 3.06. The Company will furnish to such Stock Transfer Agent
a copy of all notices of adjustments (and certificates related thereto)
transmitted to each Holder.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of
preemptive rights, free from all taxes and free from all liens, charges and
security interests with respect to the issue thereof.
Section 3.08. Compliance with Law. Notwithstanding anything in this
Agreement to the contrary, in no event shall a Warrantholder be entitled to
exercise a Warrant unless in the opinion of counsel, the exercise of such
Warrants is exempt from the registration requirements of the Securities Act and
such securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states or other jurisdictions in which such
Holders reside.
Section 3.09 Obtaining Stock Exchange Listings. The Company will from
time to time take all action which may be necessary so that the Warrant Shares,
immediately upon their issuance upon the exercise of Warrants, will be listed on
the NASDAQ National Market or such other of the principal securities exchanges,
markets and automated quotation systems within the United States of America, if
any, on which other shares of Common Stock are then listed. In the event that,
at any time during the period in which the Warrants are exercisable, the Common
Stock is not listed on any principal securities or exchanges or markets within
the United States of America, the Company will use its best efforts to permit
the Warrant Shares to be designated PORTAL securities in accordance with the
rules and regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the Private Offering, Resales and Trading through
Automated Linkages market.
Section 3.10 No Dilution or Impairment. The Company (a) will not
permit the par or nominal value of any Warrant Shares issuable upon the exercise
of Warrants to exceed the amount payable therefor upon such exercise, (b) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of the Warrants from time to time outstanding and (c)
will not take any action which results in any adjustment of the Exercise Rate if
the total number of shares of Common Stock (or other securities) issuable after
the action upon the exercise of all of the Warrants would exceed the total
number of shares of Common Stock (or other securities) then authorized by the
Company's Certificate of Incorporation and available for the issuance of shares
of Common Stock (or other securities) upon such exercise.
ARTICLE IV
ANTIDILUTION PROVISIONS
Section 4.01. General. The number of shares of Common Stock issuable
upon the exercise of each Warrant (the "Exercise Rate") is subject to adjustment
from time to time upon the occurrence of the events enumerated in this Article
IV. The Exercise Rate shall initially be 1.0000.
Section 4.02. Adjustment for Common Stock Dividends. If the Company
shall hereafter pay a dividend or make a distribution to holders of the
outstanding shares of Common Stock in shares of Common Stock, the Exercise Rate
in effect at the opening of business on the date following the date fixed for
the determination of shareholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Exercise Rate by a fraction
of which the numerator shall be the sum of the number of shares of Common Stock
outstanding at the close of business on the Common Stock Record Date (as defined
in Section 4.07) and the total number of shares constituting such dividend or
other distribution and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the Common Stock Record Date fixed
for such determination, such increase to become effective immediately after the
opening of business on the day following the Common Stock Record Date. If any
dividend or distribution of the type described in this Section 4.02 is declared
but not so paid or made, the Exercise Rate shall again be adjusted to the
Exercise Rate which would then be in effect if such dividend or distribution had
not been declared.
Section 4.03. Adjustment for Issuances of Common Stock, Options,
Warrants, Rights and Convertible or Exchangeable Securities. If the Company
shall issue, sell or distribute any shares of Common Stock (including, without
limitation, any ETG Earnout Shares, which such ETG Earnout Shares shall for
purposes of this Section 4.03 be deemed issued for no additional consideration)
or offer or issue, sell or distribute options, rights or warrants to any Person
entitling them to subscribe for or purchase shares of Common Stock or issue,
sell or distribute convertible or exchangeable securities which are convertible
or exchangeable for shares of Common Stock, in each case, at a price per share
less than $14.61, the Exercise Rate shall be adjusted so that the same shall
equal the rate determined by multiplying the Exercise Rate in effect at the
opening of business on the date immediately prior to such sale, issuance or
distribution of shares, options, rights, warrants or exchangeable or convertible
securities by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on such date plus the total
number of additional shares of Common Stock to be issued, sold or distributed or
subject to such options, rights, warrants or exchangeable or convertible
securities for subscription or purchase and of which the denominator shall be
the number of shares of Common Stock outstanding at the close of business on
such date plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock to be issued, sold or
distributed or subject to such options, rights, warrants or exchangeable or
convertible securities would purchase at a price of $14.61 per share. Such
adjustment shall become effective immediately after the opening of business on
the day following the issuance, sale or distribution of such shares, options,
rights, warrants or exchangeable or convertible securities. To the extent that
shares of Common Stock are not delivered pursuant to such options, rights,
warrants or exchangeable or convertible securities, upon the expiration or
termination of such options, rights, warrants or exchangeable or convertible
securities the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect had the adjustments made upon the issuance, sale
or distributions of such options, rights, warrants or exchangeable or
convertible securities been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. If such shares, options, rights,
warrants or exchangeable or convertible securities are not so issued, the
Exercise Rate shall again be adjusted to be the Exercise Rate which would then
be in effect if such date fixed for the determination of shareholders entitled
to receive such shares, options, rights, warrants or exchangeable or convertible
securities had not been fixed. In determining whether any shares, options,
rights, warrants or exchangeable or convertible securities entitle the Holders
to subscribe for or purchase shares of Common Stock at less than $14.61 per
share, and in determining the aggregate offering price of such shares of Common
Stock, there shall be taken into account any consideration received for such
options, rights, warrants or exchangeable or convertible securities, with the
value of such consideration, if other than cash, to be determined in good faith
by the Board of Directors and the amount of any exercise price or subscription
price required to be paid upon exercise of such options, rights, warrants or
exchangeable or convertible securities.
Section 4.04. Adjustment upon Subdivision, Reclassification or
Combination of Common Stock. If the outstanding shares of Common Stock shall be
subdivided or reclassified into a greater number of shares of Common Stock, the
Exercise Rate in effect at the opening of business on the day following the day
upon which such subdivision or reclassification becomes effective shall be
proportionately increased, and, conversely, if the outstanding shares of Common
Stock shall be combined into a smaller number of shares of Common Stock, the
Exercise Rate in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately reduced,
such increase or reduction, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
Section 4.05. Adjustments for Mergers, Consolidations, etc. In case of
any consolidation of the Company with, or merger of the Company into, any other
corporation, or in case of any merger of another corporation into the Company
(other than a merger that does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the Company),
or in case of any sale, conveyance or transfer of all or substantially all the
assets of the Company, the Holder of each Warrant shall have the right
thereafter, during the period such Warrant shall be exercisable in accordance
with its terms, to exercise such Warrant for the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, conveyance
or transfer by a holder of the number of shares of shares of Common Stock of the
Company into which such Warrant might have been exercised immediately prior to
such consolidation, merger, conveyance or transfer, assuming such Holder of
shares of Common Stock of the Company failed to exercise his rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer (provided
that, if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance or transfer is not the same for each
Common Share of the Company in respect of which such rights of election shall
not have been exercised ("nonelecting share"), then for the purpose of this
Section 4.05 the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer by each
nonelecting share shall be deemed to be the kind and amount so receivable per
share by a plurality of the nonelecting shares). Such securities shall provide
for adjustments which, for events subsequent to the effective date of the
triggering event, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article IV. The above provisions of this
Section 4.05 shall similarly apply to successive consolidations, mergers,
conveyances or transfers.
Section 4.06. Other Events. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors, fairly and adequately protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions, then
such Board of Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary, in the good faith opinion of such Board of Directors, to
protect such purchase rights as aforesaid, but in no event shall any such
adjustment have the effect of decreasing the Exercise Rate or decreasing the
number of Warrant Shares issuable upon exercise of the Warrants.
Section 4.07. Certain Definitions. For purposes of this Article IV,
the following term shall have the meaning indicated:
"Common Stock Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
Section 4.08. Deferral of Certain Adjustments. No adjustment in the
Exercise Rate shall be required unless such adjustment would require an increase
or decrease of at least 1% in such rate; provided, however, that any adjustments
which by reason of this Section 4.08 are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Article IV shall be made by the Company and shall be
rounded to fourth decimal place. No adjustment need be made for a change in the
par value or no par value of the Common Stock.
Section 4.09. Officers Certificate; Notice of Adjustment. Whenever the
Exercise Rate is adjusted as herein provided, the Company shall promptly file
with the Warrant Registrar an Officers' certificate setting forth the Exercise
Rate after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Exercise Rate setting
forth the adjusted Exercise Rate and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Exercise Rate to
each Warrantholder at such Warrantholder's last address appearing on the
register of Warrantholders maintained by the Warrant Registrar for that purpose
within 20 days of the effective date of such adjustment. Failure to deliver such
notice shall not affect the legality or validity of any such adjustment.
Section 4.10. Right to Delay Issuance of Incremental Common Stock. In
any case in which this Article IV provides that an adjustment shall become
effective immediately after a Common Stock Record Date for an event, the Company
may defer until the occurrence of such event issuing to any holder of Warrants
exercised after such Common Stock Record Date and before the occurrence of such
event the additional shares of Common Stock issuable upon such exercise by
reason of the adjustment required by such event over and above the shares of
Common Stock issuable upon such exercise before giving effect to such
adjustment.
Section 4.11. Treasury Shares Disregarded. For purposes of this
Article IV, the number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company. The Company shall not
pay any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.
Section 4.12. No Adjustment for Certain Issuances. Notwithstanding
anything to the contrary set forth herein, this Article IV shall not apply, and
no adjustment to the Exercise Rate shall be made with respect to (A)
compensatory or incentive stock options (or any shares of Common Stock issued
upon the exercise thereof) issued pursuant to employee stock option plans of the
Company which have been approved by the Board of Directors of the Company, (B)
issuances of Common Stock to employees, officers, directors and consultants of
the Company, pursuant to employee benefit plans approved by the Board of
Directors of the Company, or (C) shares of Common Stock issued upon the
conversion of the Series A Preferred Stock.
Section 4.13. Notice of Certain Adjustments. If the Company shall take
any action requiring an adjustment to the Exercise Rate pursuant to this Article
IV, then the Company shall cause to be filed with the Warrant Registrar, and
shall cause to be mailed to all Warrantholders at their last addresses as they
shall appear in the Warrant Register, at least 20 Business Days (or 10 Business
Days in any case specified in clause 4.02 or 4.03 above) prior to the applicable
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, rights or warrants,
or, if a record is not to be taken, the date as of which the holders of shares
of Common Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined or (y) the date on which a reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is
expected to become effective, and the date as of which it is expected that
holders of shares of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give the notice required by this Section
4.13 or any defect therein shall not affect the legality or validity of any
dividend, distribution, right, warrant, reclassification, consolidation, merger,
sale transfer, dissolution, liquidation or winding-up, or the vote upon any such
action.
Section 4.14. Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article IV, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of Common Stock issuable upon
exercise of the Warrants as are stated in the Warrant Certificates initially
issued pursuant to this Agreement. The Company, however, may at any time in its
sole discretion make any change in the form of Warrant Certificate that it may
deem appropriate to give effect to such adjustments and that does not affect the
substance of the Warrant Certificate, and any Warrant Certificate thereafter
issued or countersigned, whether in exchange or substitution for an outstanding
Warrant Certificate or otherwise, may be in the form as so changed.
Section 4.15. Certain Tax Matters. Notwithstanding anything to the
contrary set forth herein, for federal income tax purposes (but not for any
other purpose of this Warrant Agreement), any adjustments to the Exercise Rate
made in respect of any ETG Earnout Shares shall be treated as an adjustment to
the purchase price of the Warrants.
ARTICLE V
MISCELLANEOUS
Section 5.01. Persons Benefiting. Nothing in this Agreement is
intended or shall be construed to confer upon any Person other than the Company
and the Warrantholders any right, remedy or claim under or by reason of this
Agreement or any part hereof.
Section 5.02. Rights of Warrantholders. Holders of unexercised
Warrants are not entitled to (i) receive dividends or other distributions, (ii)
receive notice of or vote at any meeting of the stockholders, (iii) consent to
any action of the stockholders, (iv) receive notice of any other proceedings of
the Company, (v) exercise any preemptive right or (vi) exercise any other rights
whatsoever as stockholders of the Company.
Section 5.03. Amendment. Any amendment or supplement to this Agreement
shall require the written consent of the Warrantholders of a majority of the
then outstanding Warrants. The consent of each Warrantholder affected shall be
required for any amendment pursuant to which the Exercise Price would be
increased, the Exercise Rate would be decreased (other than pursuant to
adjustments provided herein) or the antidilution provisions in Article IV are
altered in a manner which adversely affects the Warrantholders. In determining
whether the Warrantholders of the required number of Warrants have concurred in
any direction, waiver or consent, Warrants owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not to be
outstanding. Also, subject to the foregoing, only Warrants outstanding at the
time shall be considered in any such determination.
Section 5.04. Notices. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail addressed as follows:
Computer Outsourcing Services, Inc.
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The Company by notice to the Warrantholders may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Warrantholder shall be mailed
to the Warrantholder at the Warrantholder's address as it appears on the
Company's records and shall be sufficiently given if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Warrantholder or any
defect in it shall not affect its sufficiency with respect to other
Warrantholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 5.05. Governing Law. THIS AGREEMENT AND THE WARRANTS SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
Section 5.06. Successors. All agreements of the Company in this
Agreement and the Warrant Certificates shall bind its successors.
Section 5.07. Multiple Originals. The parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Agreement.
Section 5.08. Table of Contents The table of contents and headings of
the Articles and Sections of this Agreement have been inserted for convenience
of reference only, are not intended to be considered a part hereof and shall not
modify or restrict any of the terms or provisions hereof.
Section 5.09. Severability. The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
COMPUTER OUTSOURCING SERVICES, INC.
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chief Executive Officer
WARRANTHOLDERS
DB CAPITAL INVESTORS, L.P.,
By: DB Capital Partners, L.P.,
its General Partner
By: DB Capital Partners, Inc.,
its General Partner
By: /s/▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Director
SANDLER CAPITAL PARTNERS V, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General Partner
By /s/ ▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
SANDLER INTERNET PARTNERS, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General Partner
By /s/▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
SANDLER CO-INVESTMENT PARTNERS, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General Partner
By /s/ ▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Director
PRICE FAMILY LIMITED PARTNERS
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: General Partner
▇▇▇▇▇▇, ▇.▇.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: General Partner
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS THE COMPANY MAY REASONABLY
REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS WARRANT IS ALSO SUBJECT TO TRANSFER RESTRICTIONS SET FORTH IN A
SECURITIES PURCHASE AGREEMENT, DATED AS OF APRIL 7, 2000, AMONG THE COMPANY AND
THE OTHER PARTIES REFERRED TO THEREIN (THE "SECURITIES PURCHASE AGREEMENT").
THIS WARRANT MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED
IN SUCH SECURITIES PURCHASE AGREEMENT AND THE WARRANT AGREEMENT.
ALL WARRANTS AND ALL WARRANT SHARES RECEIVED BY THE WARRANTHOLDERS
UPON EXERCISE OF THE WARRANTS WILL BE SUBJECT TO THE TERMS AND CONDITIONS
INCLUDING CERTAIN TRANSFER RESTRICTIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF
MAY 10, 2000, AS AMENDED, AMONG THE COMPANY AND THE VARIOUS STOCKHOLDERS OF THE
COMPANY (THE "STOCKHOLDERS AGREEMENT"), AND EACH WARRANTHOLDER AGREES TO BE
BOUND BY THE TERMS AND CONDITIONS OF SUCH STOCKHOLDERS AGREEMENT AS SUCH
STOCKHOLDERS AGREEMENT MAY BE AMENDED FROM TIME TO TIME.
No. [ ]
SERIES A COMMON STOCK WARRANT
OF
COMPUTER OUTSOURCING SERVICES, INC.
THIS CERTIFIES THAT [ ], or its registered assigns, is the registered
holder of Series A Common Stock Warrants (the "Warrants"). Each Warrant entitles
the holder thereof (the "Holder"), at its option and subject to the provisions
contained herein and in the Warrant Agreement referred to below, to purchase
from Computer Outsourcing Services, Inc., a Delaware corporation ("the
Company"), one (1) share of Common Stock, par value of $.01 per share, of the
Company (the "Common Stock") at the per share exercise price of $0.01 (the
"Exercise Price") or by Cashless Exercise referred to below. This Warrant
Certificate shall terminate and become void as of the close of business on May
10, 2007 (the "Expiration Date") or upon the exercise hereof as to all the
shares of Common Stock subject hereto. The number of shares issuable upon
exercise of the Warrants and the Exercise Price per share shall be subject to
adjustment from time to time as set forth in the Warrant Agreement (as defined).
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of May 10, 2000 (the "Warrant Agreement"), between
the Company and various Warrantholders party thereto (the "Warrantholders"), and
is subject to the terms and provisions contained in the Warrant Agreement, to
all of which terms and provisions the Holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part hereof. Reference is hereby made to the
Warrant Agreement for a full statement of the respective rights, limitations of
rights, duties and obligations of the Company and the Warrantholders.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in the Warrant Agreement. A copy of the Warrant Agreement may be
obtained for inspection by the Holder hereof upon written request to the Company
at ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Chief
Financial Officer.
Subject to the terms of the Warrant Agreement, the Warrants may be
exercised in whole or in part (i) by presentation of this Warrant Certificate
with the Election to Purchase attached hereto duly executed and with the
simultaneous payment of the Exercise Price in cash (subject to adjustment) to
the Company for the account of the Company or (ii) by Cashless Exercise. Payment
of the Exercise Price in cash shall be made by certified or official bank check
payable to the order of the Company or by wire transfer of funds to an account
designated by the Company for such purpose. Payment by Cashless Exercise shall
be made without the payment of cash by reducing the amount of Common Stock that
would be obtainable upon the exercise of a Warrant and payment of the Exercise
Price in cash so as to yield a number of shares of Common Stock upon the
exercise of such Warrant equal to the product of (1) the number of shares of
Common Stock for which such Warrant is exercisable as of the Exercise Date (if
the Exercise Price were being paid in cash) and (2) a fraction, the numerator of
which is the excess of the Current Market Value per share of Common Stock on the
Exercise Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Common Stock
on the Exercise Date.
As provided in the Warrant Agreement and subject to the terms and
conditions therein set forth, the Warrants shall be exercisable at any time and
from time to time on any Business Day after the Issue Date; provided, however,
that no Warrant shall be exercisable after May 10, 2007.
As provided in the Warrant Agreement, the Exercise Rate is subject to
adjustment upon the happening of certain events.
The Company may require payment of a sum sufficient to pay all taxes,
assessments or other governmental charges in connection with the transfer or
exchange of the Warrant Certificates pursuant to the terms of the Warrant
Agreement, but not for any exchange or original issuance (not involving a
transfer) with respect to temporary Warrant Certificates, the exercise of the
Warrants or the Warrant Shares.
Upon any partial exercise of the Warrants, there shall be
countersigned and issued to the Warrantholder hereof a new Warrant Certificate
representing those Warrants which were not exercised. This Warrant Certificate
may be exchanged at the office of the Company by presenting this Warrant
Certificate properly endorsed with a request to exchange this Warrant
Certificate for other Warrant Certificates evidencing an equal number of
Warrants. No fractional Warrant Shares will be issued upon the exercise of the
Warrants, but the Company shall pay an amount in cash equal to the Current
Market Value per Warrant Share on the day immediately preceding the date the
Warrant is exercised, multiplied by the fraction of a Warrant Share that would
be issuable on the exercise of any Warrant.
All shares of Common Stock issuable by the Company upon the exercise
of the Warrants shall, upon such issue, be duly and validly issued and fully
paid and non-assessable.
The Warrantholder in whose name the Warrant Certificate is registered
may be deemed and treated by the Company as the absolute owner of the Warrant
Certificate for all purposes whatsoever and the Company shall not be affected by
notice to the contrary.
The Warrants do not entitle any Warrantholder hereof to any of the
rights of a stockholder of the Company.
This Warrant Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Company.
COMPUTER OUTSOURCING SERVICES, INC.
By:
--------------------------------
Name:
Title:
Attest:
-------------------------------
Name:
Title:
DATED:
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
COMPUTER OUTSOURCING SERVICES, INC.
The undersigned hereby irrevocably elects to exercise
__________________ Warrants to acquire shares of Common Stock, par value $.001
per share, of Computer Outsourcing Services, Inc., (i) at an exercise price per
share of Common Stock of $0.01 (subject to adjustment as provided in the Warrant
Agreement) or (ii) through Cashless Exercise and otherwise on the terms and
conditions specified in the Warrant Certificate and the Warrant Agreement,
surrenders this Warrant Certificate and all right, title and interest therein to
Computer Outsourcing Services, Inc. and directs that the shares of Common Stock
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Check method of exercise:
Exercise at $0.01 per share of Common Stock (subject to adjustment as
provided in the Warrant Agreement): ___
Cashless Exercise: _____
Date: _______________________, ____
----------------------------------------------------(1)
(Signature of Owner)
(Street Address)
-------------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
-------------------------------------------------------
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A new Warrant Certificate evidencing any unexercised Warrants evidenced by the
within Warrant Certificate is to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
--------------------------
(1) The signature must correspond with the name as written upon the face of the
Warrant Certificate in every particular, without alteration or enlargement
or any change whatever, and must be guaranteed by a national bank or trust
company or by a member firm of any national securities exchange.
ASSIGNMENT FORM
To assign this Warrant, fill in the form below:
I or we assign and transfer this Warrant to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Warrant on the books of the
Company. The agent may substitute another to act for him.
-----------------------------------------------------------------
Date: Your Signature:
------------- -----------------------
-----------------------------------------------------------------
The signature must correspond with the name as written upon the face of the
Warrant Certificate in every particular, without alteration or enlargement or
any change whatever, and must be guaranteed by a national bank or trust company
or by a member firm of any national securities exchange.
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS........................................................1
Section 1.01. Definitions...........................................1
Section 1.02. Other Definitions.....................................3
Section 1.03. Rules of Construction.................................4
ARTICLE II WARRANT CERTIFICATES..............................................4
Section 2.01. Form and Dating.......................................4
Section 2.02. Execution and Countersignature........................4
Section 2.03. Warrant Registrar.....................................4
Section 2.04. Warrantholder Lists...................................5
Section 2.05. Transfer and Exchange.................................5
Section 2.06. Replacement Certificate...............................7
Section 2.07. Outstanding Warrants..................................7
Section 2.08. Cancellation..........................................7
ARTICLE III EXERCISE TERMS...................................................8
Section 3.01. Exercise..............................................8
Section 3.02. Time of Exercise; Separability........................8
Section 3.03. Expiration............................................8
Section 3.04. Manner of Exercise....................................8
Section 3.05. Issuance of Warrant Shares............................9
Section 3.06. Fractional Warrant Shares.............................9
Section 3.07. Reservation of Warrant Shares.........................9
Section 3.08. Compliance with Law..................................10
Section 3.09 Obtaining Stock Exchange Listings.....................10
Section 3.10 No Dilution or Impairment.............................10
ARTICLE IV ANTIDILUTION PROVISIONS..........................................11
Section 4.01. General..............................................11
Section 4.02. Adjustment for Common Stock Dividends................11
Section 4.03. Adjustment for Issuances of Common Stock, Options,
Warrants, Rights and Convertible or Exchangeable
Securities.........................................11
Section 4.04. Adjustment upon Subdivision, Reclassification
or Combination of Common Stock.......................12
Section 4.05. Adjustments for Mergers, Consolidations, etc.........12
Section 4.06. Other Events.........................................13
Section 4.07. Certain Definitions...................................13
Section 4.08. Deferral of Certain Adjustments......................13
Section 4.09. Officers Certificate; Notice of Adjustment...........13
Section 4.10. Right to Delay Issuance of Incremental Common Stock..14
Section 4.11. Treasury Shares Disregarded..........................14
Section 4.12. No Adjustment for Certain Issuances..................14
Section 4.13. Notice of Certain Adjustments........................14
Section 4.14. Adjustment to Warrant Certificate....................14
Section 4.15. Certain Tax Matters..................................15
ARTICLE V MISCELLANEOUS.....................................................15
Section 5.01. Persons Benefiting...................................15
Section 5.02. Rights of Warrantholders.............................15
Section 5.03. Amendment............................................15
Section 5.04. Notices..............................................15
Section 5.05. Governing Law........................................16
Section 5.06. Successors...........................................16
Section 5.07. Multiple Originals...................................16
Section 5.08. Table of Contents....................................16
Section 5.09. Severability.........................................16
