Void after 5:00 P.M. New York City time on the last day of the Exercise Period, as defined in this Warrant COMMON STOCK PURCHASE WARRANT OF DATA SYSTEMS & SOFTWARE INC.
THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND
THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO DATA SYSTEMS & SOFTWARE INC. THAT SUCH
REGISTRATION IS NOT REQUIRED.
Void
after 5:00 P.M. New York City time on the last day of the Exercise
Period,
as
defined in this Warrant
COMMON
STOCK PURCHASE WARRANT
OF
DATA
SYSTEMS & SOFTWARE INC.
This
is
to certify that, FOR VALUE RECEIVED, ______________________________ (the
“Holder”),
is
entitled to purchase, subject to the provisions of this Warrant, from DATA
SYSTEMS & SOFTWARE INC., a Delaware corporation (the “Company”),
at an
exercise price per share of Two Dollars and Seventy-eight Cents ($2.78), subject
to adjustment as provided in this Warrant (the “Warrant
Exercise Price”),
__________________ (___________) shares of common stock, par value $0.01 per
share, of the Company (the “Common
Stock”).
The
shares of Common Stock deliverable upon such exercise, and as adjusted from
time
to time, are hereinafter sometimes referred to as the “Warrant
Shares.”
1. ISSUANCE
OF WARRANT/DEFINITIONS.
This
Warrant is being issued pursuant to that certain Subscription Agreement between
the Company and the Holder (the “Subscription
Agreement”).
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed thereto in the Subscription Agreement or the Memorandum (hereinafter
defined). In addition, the following terms shall have the meanings set forth
below:
“Convertible
Securities”
shall
mean evidences of indebtedness, shares of stock or other securities, which
are
convertible into or exchangeable, with or without payment of additional
consideration in cash and/or property, for shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified
event.
“Exercise
Period”
shall
mean the period commencing on the date hereof and ending at 5:00 p.m., Eastern
Time on July 13, 2011.
“Fair
Market Value”
of
a
share of Common Stock as of a particular date (the "Determination Date") shall
mean:
(a) If
the
Company's Common Stock is traded on an exchange, then the closing or last sale
price, reported for the last business day immediately preceding the
Determination Date.
(b) If
the
Company's Common Stock is not traded on an exchange but is traded on the NASD
OTC Bulletin Board, the Pink Sheets, or other public trading market, then the
mean of the average of the closing bid and asked prices on such market reported
for the last business day immediately preceding the Determination
Date.
“Memorandum”
shall
mean the Company’s Confidential Private Placement Memorandum dated as of June
12, 2006 (as amended or supplemented, and together with all exhibits attached
thereto).
“Permitted
Issuances”
shall
mean (i) Common Stock issuable or issued to employees, consultants, officers,
directors, or advisors of the Company directly or pursuant to a stock purchase
plan or other compensation arrangement approved by the Board of Directors of
the
Company which are issued at fair market value at the date of issuance, (ii)
capital stock, debt instruments convertible into capital stock or warrants
or
options to purchase capital stock issued in connection with bona fide
acquisitions, mergers, or purchases, corporate partnering agreements, joint
ventures or
similar transactions, the terms of which are approved by the Board of Directors
of the Company, and (iii) Common Stock issued or issuable upon exercise or
conversion of any warrants, options or any other securities exercisable or
exchangeable for, or convertible into shares of Common Stock outstanding as
of
June 7, 2006.
“Placement”
means
the private placement by the Company of of Common Stock and Warrants, including
this Warrant, as described in the Memorandum.
“Securities
Act”
means
the Securities Act of 1933, as amended, and all rules and regulations
promulgated thereunder.
2. EXERCISE
OF WARRANT.
(a) This
Warrant may be exercised in whole or in part at any time or from time to time
from the date hereof until the end of the Exercise Period by presentation and
surrender of this Warrant to the Company at its principal office, or at the
office of its stock transfer agent, if any, with the Purchase Form annexed
hereto duly executed and accompanied by payment of the Warrant Exercise Price
(or in certain events, by “cashless” exercise as provided in Sections 2(b) and
2(c) below) for the number of shares of Common Stock specified in such form.
If
this Warrant should be exercised in part only, the Company shall, upon surrender
of this Warrant for cancellation, execute and deliver a new Warrant evidencing
the rights of the Holder to purchase the balance of the shares of Common Stock
purchasable hereunder. Upon receipt by the Company of this Warrant at its
office, or by the stock transfer agent of the Company at its office, in proper
form for exercise, the Holder shall be deemed to be the holder of record of
the
shares of Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such shares of Common Stock shall not then actually be delivered
to
the Holder. As soon as practicable after each exercise of this Warrant, in
whole
or in part, and in any event within five (5) days thereafter, the Company at
its
expense (including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the Holder hereof or, subject
to
Section 10 hereof, as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates (with appropriate
restrictive legends, as applicable) for the number of duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock to which the Holder
shall be entitled upon exercise. All issuances of Common Stock pursuant to
the
exercise of this Warrant shall be rounded down to the nearest whole share.
2
(b)
If a
Registration Statement (as defined in the Subscription Agreement) is effective
and the Holder may utilize it to sell the Warrant Shares, this Warrant may
be
exercisable in whole or in part for cash only as set forth in Section 2 above.
Commencing six months after the Closing Date, if no such Registration Statement
is then effective, then commencing six months after the Closing Date, payment
upon exercise may be made at the option of the Holder either in (i) cash, wire
transfer or by certified or official bank check payable to the order of the
Company equal to the applicable aggregate Warrant Exercise Price, (ii) by
surrender of all or a portion of this Warrant in accordance with Sections 2(b)
and 2(c) below ("cashless exercise") or (iii) by a combination of any of the
foregoing methods, for the number of Common Stock specified in such form and
the
Holder shall thereupon be entitled to receive the number of duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock (or Other
Securities) determined as provided herein.
(c)
If
the Fair Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below) and no Registration
Statement relating to the shares of Common Stock underlying this Warrant is
effective, in lieu of exercising this Warrant for cash, the holder may elect
to
receive shares equal to the value (as determined below) of this Warrant (or
the
portion thereof being cancelled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Subscription Form,
in
which event the Company shall issue to the holder a number of shares of Common
Stock computed using the following formula:
X
= Y
(A-B)
A
Where X= the
number of shares of Common Stock to be issued to the Holder
|
Y=
|
the
number of shares of Common Stock purchasable under the Warrant or,
if only
a portion of the Warrant is being exercised, the portion of the Warrant
being exercised (at the date of such
calculation)
|
|
A=
|
the
Fair Market Value of one share of the Company’s Common Stock (at the date
of such calculation)
|
B= Warrant
Exercise Price (as adjusted to the date of such calculation)
3
(d) Call
Provision.
If
at
anytime during the Exercise Period the volume weighted average price for each
of
20 consecutive Trading Days (the "Measurement Period") exceeds $5.00 (subject
to
adjustment for forward and reverse stock splits, recapitalizations, stock
dividends and the like) (the "Threshold Price"), then the Company may, within
five Trading Days of the end of such period, call for cancellation of all or
any
portion of this Warrant for which a Notice of Exercise has not yet been
delivered (such right, a "Call"). To exercise this right, the Company must
deliver to the Holder an irrevocable written notice (a "Call Notice"),
indicating therein the portion of unexercised portion of this Warrant to which
such notice applies. If the conditions set forth below for such Call are
satisfied from the period from the date of the Call Notice through and including
the Call Date (as defined below), then any portion of this Warrant subject
to
such Call Notice for which a Notice of Exercise shall not have been received
by
the Call Date will be cancelled
at 6:30 p.m. (New York City time) on the 20th Trading Day after the date the
Call Notice is received by the Holder (such date, the "Call Date"). Any
unexercised portion of this Warrant to which the Call Notice does not pertain
will be unaffected by such Call Notice. In furtherance thereof, the Company
covenants and agrees that it will honor all Notice of Exercise with respect
to
Warrant Shares subject to a Call Notice that are tendered through 6:30 p.m.
(New
York City time) on the Call Date. The parties agree that any Notice of Exercise
delivered following a Call Notice shall first reduce to zero the number of
Warrant Shares subject to such Call Notice prior to reducing the remaining
Warrant Shares available for purchase under this Warrant. Subject to the
provisions of this Section 2(f), the Company may deliver subsequent Call Notices
for any portion of this Warrant for which the Holder shall not have delivered
a
Notice of Exercise. Notwithstanding anything to the contrary set forth in this
Warrant, the Company may not deliver a Call Notice or require the cancellation
of this Warrant (and any Call Notice will be void), unless, from the beginning
of the 20th consecutive Trading Days used to determine whether the Common Stock
has achieved the Threshold Price through the Call Date, (i) the Company shall
have honored in accordance with the terms of this Warrant all Notices of
Exercise delivered by 6:30 p.m. (New York City time) on the Call Date and (ii)
the Registration Statement shall be effective as to all Warrant Shares and
the
prospectus thereunder available for use by the Holder for the resale of all
such
Warrant Shares. The Company's right to Call the Warrant shall be exercised
ratably among the Holders based on each Holder's initial purchase of Common
Stock pursuant to the Purchase Agreement.
(e) Common
Stock Legend.
The
Holder acknowledges and agrees that until such time as the Warrant Shares has
been registered and sold in accordance with an effective registration statement,
or pursuant to an exemption from registration, certificates and other
instruments representing any of the Warrant Shares shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of any such securities):
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO DATA SYSTEMS
&
SOFTWARE INC. THAT SUCH REGISTRATION IS NOT REQUIRED.”
3. RESERVATION
OF SHARES/FRACTIONAL SHARES.
The
Company hereby agrees that at all times there shall be reserved for issuance
and/or delivery upon exercise of this Warrant such number of shares of Common
Stock as shall be required for issuance and delivery upon exercise of this
Warrant. No fractional shares or script representing fractional shares shall
be
issued upon the exercise of this Warrant. Instead, the Company will round up
to
the nearest whole share.
4
4. EXCHANGE,
TRANSFER, ASSIGNMENT OR LOSS OF WARRANT.
This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Warrant to the Company for other Warrants
of
different denominations entitling the Holder thereof to purchase in the
aggregate the same number of shares of Common Stock purchasable hereunder.
Upon
surrender of this Warrant to the Company or at the office of its stock transfer
agent, if any, with the Assignment Form annexed hereto duly executed and funds
sufficient to pay any applicable transfer tax, the Company shall, without
charge, execute and deliver a new Warrant in the name of the assignee named
in
such instrument of assignment and this Warrant shall promptly be canceled.
This
Warrant may be divided or combined with other Warrants which carry the same
rights upon presentation of this Warrant at the office of the Company or at
the
office of its stock transfer agent, if any, together with a written notice
specifying the names and denominations in which new Warrants are to be issued
and signed by the Holder hereof. The term “Warrant” as used herein includes any
Warrants into which this Warrant may be divided or for which it may be
exchanged. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, (and, in the case of
loss, theft or destruction, of a reasonably satisfactory surety bond), and
upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant of like tenor. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall
be at
any time enforceable by anyone; provided, however, that if the original Warrant
shall be presented for transfer by a protected purchaser (as defined in Section
8-303 of the Uniform Commercial Code), then in addition to any rights on the
surety bond or indemnity, the Company may recover the new Warrant in accordance
with the provisions of Section 8-405 of the Uniform Commercial Code.
5. RIGHTS
AND OBLIGATIONS OF THE HOLDER.
The
Holder shall not, by virtue of this Warrant, be entitled to any rights of a
stockholder of the Company, either at law or equity, and the rights of the
Holder are limited to those expressed in this Warrant and are not enforceable
against the Company except to the extent set forth herein. In addition,
no
provision hereof, in the absence of affirmative action by the Holder to purchase
shares of Common Stock, and no enumeration herein of the rights or privileges
of
the Holder hereof shall give rise to any liability of such Holder for the
purchase price of any Common Stock or as a stockholder of the Company, whether
such liability is asserted by the Company or by creditors of the
Company.
6. ANTI-DILUTION
PROVISIONS.
The
Warrant Exercise Price in effect at any time and the number and kind of
securities purchasable upon exercise of each Warrant, shall be subject to
adjustment as follows. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 6 at
the
time of such event:
(a) Stock
Dividends, Subdivisions and Combinations.
If at
any time the Company shall:
(i) take
a
record of the holders of its Common Stock for the purpose of entitling them
to
receive a dividend payable in, or other distribution of, shares of Common
Stock,
(ii) subdivide
or reclassify its outstanding shares of Common Stock into a larger number of
shares of Common Stock, or
(iii) combine
or reclassify its outstanding shares of Common Stock into a smaller number
of
shares of Common Stock or otherwise effect a reverse stock split, then:
(A)
the
number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of
shares of Common Stock for which this Warrant is exercisable immediately prior
to the occurrence of such event, would own or be entitled to receive after
the
happening of such event, and (B) the Warrant Exercise Price shall be adjusted
to
equal: (x) the Warrant Exercise Price immediately prior to such event multiplied
by the number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (y) the number of shares for
which this Warrant is exercisable immediately after such
adjustment.
5
(b) Certain
Other Distributions and Adjustments.
(i) If
at any
time the Company shall take a record of the holders of its Common Stock for
the
purpose of entitling them to receive any dividend or other distribution of:
(A) cash,
(B) any
evidences of its indebtedness, any shares of its capital stock or any other
securities or property of any nature whatsoever (other than Convertible
Securities or shares of Common Stock), or
(C)
any
warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of its stock or any other securities or property of
any
nature whatsoever (other than Convertible Securities or shares of Common
Stock),
then,
in
the case of (A) the Warrant Exercise Price shall be reduced by the amount of
such cash dividend when paid, or in the case of (B) or (C) the Warrant Holder
shall be given notice as provided by Section 8 of this Warrant and the
opportunity to exercise the Warrant prior to any such distribution.
A
reclassification of the Common Stock (other than a change in par value, or
from
par value to no par value or from no par value to par value) into shares of
Common Stock and shares of any other class of stock shall be deemed a
distribution by the Company to the holders of its Common Stock of such shares
of
such other class of stock and in such event the Holder shall be entitled to
receive such distribution as if the Holder had exercised this Warrant and,
if
the outstanding shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of the
outstanding shares of Common Stock within the meaning of Section
6(a).
(c) Issuance
of Additional Shares of Common Stock.
(i) Except
in
connection with Permitted Issuances, if, at any time prior to the date which
is
six months from the original issue date of this Warrant (the “Issuance Date”),
the Company shall issue or sell any shares of Common Stock for no consideration
or for consideration in an amount per share of Common Stock less than the Share
Price (as defined in the Subscription Agreement) (a “Discounted
Price”),
the
Warrant Exercise Price then in effect shall immediately, and without any further
action by the Company or the Holder required, be adjusted, concurrently with
such issuance, to a price equal to 105% of the Discounted Price.
(ii)
The
provision of paragraph (i) of this Section 6(c) shall not apply to any issuance
of shares of Common Stock for which an adjustment is provided under Section
6(a)
or 6(b). No adjustment of the number of shares of Common Stock for which this
Warrant shall be exercisable shall be made under paragraph (i) of this Section
6(c) upon the issuance of any shares of Common Stock which are issued pursuant
to the exercise of any warrants or other subscription or purchase rights or
pursuant to the exercise of any conversion or exchange rights in any Convertible
Securities, if any such adjustment shall previously have been made upon the
issuance of such warrants or other rights or upon the issuance of such
Convertible Securities (or upon the issuance of any warrant or other rights
therefor) pursuant to Section 6(d).
6
(d)
Issuance
of Warrants or Other Rights.
(i) Except
in
connection with any Permitted Issuances, if at any time prior to the date that
which is six months from the Issuance Date, the Company shall distribute to
the
holders of its Common Stock for the purpose of entitling them to receive a
distribution of, or shall in any manner (whether directly or by assumption
in a
merger in which the Company is the surviving corporation) issue or sell, any
warrants or other rights to subscribe for or purchase any shares of Common
Stock
or any Convertible Securities, whether or not the rights to exchange or convert
thereunder are immediately exercisable, and the price per share for which Common
Stock is issuable upon the exercise of such warrants or other rights or upon
conversion or exchange of such Convertible Securities shall be less than the
Exercise Price, then the Warrant Exercise Price shall be adjusted to such price.
No further adjustment of the Warrant Exercise Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issuance of such
Common Stock upon such conversion or exchange of such Convertible
Securities.
(e) Superseding
Adjustment.
If at
any time after any adjustment of the Warrant Exercise Price shall have been
made
pursuant to Section 6(d) as the result of any issuance of warrants, rights
or
other Convertible Securities,
(i) such
warrants or rights, or the right of conversion or exchange in such other
Convertible Securities, shall expire, and all or a portion of such warrants
or
rights, or the right of conversion or exchange with respect to all or a portion
of such other Convertible Securities, as the case may be, shall not have been
exercised, or
(ii) the
consideration per share for which shares of Common Stock are issuable pursuant
to such warrants or rights, or the terms of such other Convertible Securities,
shall be increased solely by virtue of provisions therein contained for an
automatic increase in such consideration per share upon the occurrence of a
specified date or event,
then
for
each outstanding Warrant such previous adjustment shall be rescinded and
annulled and the shares of Common Stock which were deemed to have been issued
by
virtue of the computation made in connection with the adjustment so rescinded
and annulled shall no longer be deemed to have been issued by virtue of such
computation made in connection with the adjustment so rescinded and annulled
shall no longer be deemed to have been issued by virtue of such computation.
Thereupon, a re-computation shall be made of the effect of the issuance of
such
rights or options or other Convertible Securities on the basis of:
(A) treating
the number of shares of Common Stock or other property, if any, theretofore
actually issued or issuable pursuant to the previous exercise of any such
warrants or rights or any such right of conversion or exchange, as having been
issued on the date or dates of any such exercise and for the consideration
actually received and receivable therefor, and
(B) treating
any such warrants or rights or any such other Convertible Securities which
then
remain outstanding as having been granted or issued immediately after the time
of such increase of the consideration per share for which shares of Common
Stock
or other property are issuable under such warrants or rights or other
convertible Securities; whereupon a new adjustment of the number of shares
of
Common Stock for which this Warrant is exercisable and the Warrant Exercise
Price(s) shall be made, which new adjustment shall supersede the previous
adjustment so rescinded and annulled.
7
(f) No
adjustment in the Warrant Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least One Cent ($0.01)
in
such price; provided, however, that any adjustments which by reason of this
Section 6(f) are not required to be made shall be carried forward and taken
into
account in any subsequent adjustment. All calculations under this Section 6(f)
shall be made to the nearest cent or to the nearest one-hundredth of a share,
as
the case may be.
(g) The
Company may retain a firm of independent public accountants of recognized
standing selected by the Board (who may be the regular accountants employed
by
the Company) to make any computation required by this Section 6.
(h) In
the
event that at any time, as a result of an adjustment made pursuant to Section
6(a), (b) or (c) of this Warrant, the Holder of any Warrant thereafter shall
become entitled to receive any shares of the Company’s capital stock, other than
Common Stock, thereafter the number of such other shares so receivable upon
exercise of this 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 Sections 6(a) through (h), inclusive,
of this Warrant.
(i) Notwithstanding
the foregoing, no adjustment pursuant to this Section 6 shall be effected due
to, or as a result of, any Permitted Issuances.
7. OFFICER’S
CERTIFICATE.
Whenever the Warrant Exercise Price(s) shall be adjusted as required by the
provisions of Section 6 of this Warrant, the Company shall forthwith file in
the
custody of its Secretary or an Assistant Secretary at its principal office
and
with its stock transfer agent, if any, an officer’s certificate showing the
adjusted Warrant Exercise Price(s) and the adjusted number of shares of Common
Stock issuable upon exercise of this Warrant, determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and
the
manner of computing such adjustment. Each such officer’s certificate shall be
forwarded to the Holder in the manner provided in Section 12 hereof.
8. NOTICES
TO WARRANT HOLDERS.
So long
as this Warrant shall be outstanding, (a) if the Company shall pay any dividend
or make any distribution upon Common Stock, or (b) if the Company shall offer
to
the holders of Common Stock for subscription or purchase by them any share
of
any class or any other rights, or (c) if any capital reorganization of the
Company, reclassification of the capital stock of the Company, consolidation
or
merger of the Company with or into another entity, tender offer transaction
for
the Company’s Common Stock, sale, lease or transfer of all or substantially all
of the property and assets of the Company, or voluntary or involuntary
dissolution, liquidation or winding up of the Company shall be effected, or
(d)
if the Company shall file a registration statement under the Securities Act,
on
any form other than on Form S-4 or S-8 or any successor form, then in any such
case, the Company shall cause to be mailed by certified mail to the Holder,
at
least ten (10) days prior to the date specified in clauses (a), (b), (c) or
(d),
as the case may be, of this Section 9 a notice containing a brief description
of
the proposed action and stating the date on which (i) a record is to be taken
for the purpose of such dividend, distribution or rights, or (ii) such
reclassification, reorganization, consolidation, merger, tender offer
transaction, conveyance, lease, dissolution, liquidation or winding up is to
take place and the date, if any is to be fixed, as of which the holders of
Common Stock or other securities shall receive cash or other property
deliverable upon such reclassification, reorganization, consolidation, merger,
conveyance, dissolution, liquidation or winding up, or (iii) such registration
statement is to be filed with the SEC.
8
9. RECLASSIFICATION,
REORGANIZATION OR MERGER.
In case
of any reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the Company, or in case of any consolidation or merger
of the Company with or into another corporation (other than a merger with a
subsidiary in which merger the Company is the continuing or surviving
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
class issuable upon exercise of this Warrant) or in case of any sale, lease
or
conveyance of all or substantially all of the assets of the Company, the Company
shall, as a condition precedent to such transaction, cause effective provisions
to be made so that (i) the Holder shall have the right thereafter by exercising
this Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance
by a
holder of the number of shares of Common Stock which could have been purchased
upon exercise of this Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance, and (ii) the successor or
acquiring entity shall expressly assume the due and punctual observance and
performance of each covenant and condition of this Warrant to be performed
and
observed by the Company and all obligations and liabilities hereunder (including
but not limited to the provisions of Section 6 regarding the increase in the
number of Warrant Shares potentially issuable hereunder). Any such provision
shall include provision for adjustments which shall be as nearly equivalent
as
possible to the adjustments provided for in this Warrant. The foregoing
provisions of this Section 9 shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that in connection with any such capital reorganization or reclassification,
consolidation, merger, sale or conveyance, additional shares of Common Stock
shall be issued in exchange, conversion, substitution or payment, in whole
in
part, for a security of the Company other than Common Stock, any such issue
shall be treated as an issuance of Common Stock covered by the provisions of
Section 6 of this Warrant.
10. TRANSFER
TO COMPLY WITH THE SECURITIES ACT.
This
Warrant, the Warrant Shares or any other security issued or issuable upon the
exercise of this Warrant may not be sold or otherwise disposed of except as
follows:
(a) to
a
person who, in the opinion of counsel for the Company, is a person to whom
this
Warrant or Warrant Shares may legally be transferred without registration and
without the delivery of a current prospectus under the Securities Act with
respect thereto and then only against receipt by the Company of an agreement
of
such person to comply with the provisions of this Section 10 with respect to
any
resale or other disposition of such securities, which agreement shall be
satisfactory in form and substance to the Company and its counsel;
or
(b) to
any
person upon delivery of a prospectus then meeting the requirements of the
Securities Act relating to such securities and the offering thereof for such
sale or disposition.
9
11. GOVERNING
LAW; JURISDICTION.
The
corporate laws of the State
of New
York shall govern all issues concerning the relative rights of the Company
and
its stockholders. All issues concerning the construction, validity, enforcement
and interpretation of this Warrant shall be governed by and construed in
accordance with the internal laws of the State of New York without giving effect
to the principles of conflicts of law thereof. The
parties hereto agree that venue in any and all actions and proceedings related
to the subject matter of this Warrant shall be in the state and federal courts
in and for New York, New York, which courts shall have exclusive jurisdiction
for such purpose, and the parties hereto irrevocably submit to the exclusive
jurisdiction of such courts and irrevocably waive the defense of an inconvenient
forum to the maintenance of any such action or proceeding. Service of process
may be made in any manner recognized by such courts. This Warrant and any term
hereof may be changed, waived, discharged or terminated only by an instrument
in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. NOTICES.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via
facsimile at the facsimile telephone number specified in this Section prior
to
5:00 p.m. (New York City time) on a Business Day, (b) the Business Day after
the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Agreement later
than 5:00 p.m. (New York City time) on any date and earlier than 11:59 p.m.
(New
York City time) on such date, (c) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service, or (d)
upon
actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:
If
to the
Company: Data
Systems & Software Inc.
200
Route
17
Mahwah,
NJ 07430
Attn:
▇▇▇▇ ▇. ▇▇▇▇▇
President
and Chief Executive Officer
With
a
copy to: ▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇ LLP
▇▇
▇▇▇▇
▇▇ ▇▇ ▇▇▇▇▇▇
New
York,
NY 10017
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If
to the
Holder: To
the
address set forth in the records of the Company
13. PAYMENT
OF TAXES.
The
Company will pay the cost of all applicable documentary stamp taxes, if any,
attributable to the issuance of shares of Common Stock underlying this Warrant
upon exercise of this Warrant; provided,
however,
that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the registration of any certificate for shares
of
Common Stock underlying this Warrant in a name other that of the Holder. The
Holder is responsible for all other tax liability that may arise as a result
of
holding or transferring this Warrant or receiving shares of Common Stock
underlying this Warrant upon exercise hereof.
10
14. INCONSISTENCIES.
To the
extent there are any inconsistencies between the terms and provisions of this
Warrant and the terms and provisions of the Subscription Agreement or the
Memorandum, the terms and provisions of this Warrant shall govern and be
controlling.
15. WARRANT
SOLICITATION FEE.
The
Company has agreed that First Montauk Securities Corp. (“FMSC”), a registered
broker dealer, shall be entitled to a fee of five percent (5%) with respect
to
the exercise of any Warrant or portion thereof which is exercised by the Holder
pursuant to the efforts of FMSC.
[Signature
Page Follows]
11
IN
WITNESS WHEREOF,
this
Warrant has been duly executed as of this 31st day of July, 2006.
DATA
SYSTEMS & SOFTWARE INC.
By:
____________________________________
Name:
▇▇▇▇ ▇. ▇▇▇▇▇
Title:
President and Chief Executive Officer
12
Exhibit
A
FORM
OF
EXERCISE NOTICE
(To
be
signed only on exercise of Warrant)
TO:
Data
Systems & Software Inc.
The
undersigned, pursuant to the provisions set forth in the attached Warrant
(No.____), hereby irrevocably elects to purchase (check applicable
box):
___
shares of the Common Stock covered by such Warrant; or
___the
maximum number of shares of Common Stock covered by such Warrant pursuant to
the
cashless exercise procedure set forth in Sections 2(b) and (c) of this
Warrant.
The
undersigned herewith makes payment of the full purchase price for such shares
at
the price per share provided for in such Warrant, which is $___________. Such
payment takes the form of (check applicable box or boxes):
___ $__________
in lawful money of the United States; and/or
___ the
cancellation of such portion of the attached Warrant as is exercisable for
a
total of _______ shares of Common Stock (using a Fair Market Value of $_______
per share for purposes of this calculation); and/or
___ the
cancellation of such number of shares of Common Stock as is necessary, in
accordance with the formula set forth in Section 2, to exercise this Warrant
with respect to the maximum number of shares of Common Stock purchasable
pursuant to the cashless exercise procedure set forth in Sections 2(b) and
(c)
thereof.
The
undersigned requests that the certificates for such shares be issued in the
name
of, and delivered to ______________________________ whose address is
_______________________________________
_____________________________________________________________________________________
The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the "Securities Act") or pursuant to an exemption from registration
under the Securities Act.
Dated:___________________ _____________________________________________
(Signature
must conform to name of holder
as specified
on the face of the Warrant)
___________________________________________
(Print
or
Type Name)
_________________________________________
(Address)
___________________________________________
(Social
Security or Tax I.D. Number)
The
holder acknowledges that the exercise of the warrant has been solicited by
First
Montauk Securities Corp. and that First Montauk securities Corp. shall be
entitled to a warrant solicitation fee of 5% of the exercise
proceeds.
13
ASSIGNMENT
FORM
FOR
VALUE RECEIVED,
_______________________________________ hereby sells, assigns and transfer
unto:
Name: _______________________________________________
(Please
typewrite or print in block letters)
Address: _______________________________________________
_______________________________________________
Social
Security or Employer Identification No.:__________________________
The
right
to purchase Common Stock represented by this Warrant to the extent of shares
as
to which such right is exercisable and does hereby irrevocably constitute and
appoint __________________________________ as attorney to transfer the same
on
the books of the Company with full power of substitution.
Dated:
_________________, 200_.
Signature:___________________________
Signature
Guaranteed:
___________________________________