Exhibit 4.1
EXHIBIT A
[FORM OF WARRANT]
CHINA SECURITY & SURVEILLANCE TECHNOLOGY, INC.
Warrant To Purchase Common Stock
Warrant No.: [
]
Number of Shares of Common Stock:[__________]
Date of Issuance: October 2, 2009 (“ Issuance
Date ”)
China Security & Surveillance
Technology, Inc., a Delaware corporation (the “
Company ”), hereby certifies that, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, [___________], the registered holder hereof or
its permitted assigns (the “ Holder ”), is
entitled, subject to the terms set forth below, to purchase from
the Company, at the Exercise Price (as defined below) then in
effect, upon surrender of this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, the “
Warrant ”), at any time or times on or after the date
hereof (the “ Initial Exercise Eligibility Date
”), but not after 11:59 p.m., New York time, on the
Expiration Date (as defined below), (______________)1 fully
paid, nonassessable shares of Common Stock (as defined below) (the
“ Warrant Shares ”). Except as otherwise
defined herein, capitalized terms in this Warrant shall have the
meanings set forth in Section 15. This Warrant is one of
the Warrants to purchase Common Stock (the “ SPA
Warrant ”) issued pursuant to that certain Securities
Purchase Agreement, dated as of October 2, 2009 (the “
Subscription Date ”), by and among the Company and the
investors (the “ Buyers ”) referred to therein
(the “ Securities Purchase Agreement
”).
ARTICLE I. EXERCISE OF
WARRANT
1.1
Mechanics of Exercise. Subject
to the terms and conditions hereof (including, without limitation,
the limitations set forth in Section 1(f)), this Warrant may
be exercised by the Holder on any day on or after the Initial
Exercise Eligibility Date, in whole or in part, by
(i) delivery of a written notice, in the form attached hereto
as Exhibit A (the “Exercise Notice”), of the
Holder’s election to exercise this Warrant and
(ii) (A) payment to the Company of an amount equal to the
applicable Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the
“Aggregate Exercise Price”) in cash or by wire transfer
of immediately available funds or (B) by notifying the Company
that this Warrant is being exercised pursuant to a Cashless
Exercise (as defined in Section 1(d)). The Holder shall
not be required to deliver the original Warrant in order to effect
an exercise hereunder. Execution and delivery of the Exercise
Notice with respect to less than all of the Warrant Shares shall
have the same effect as cancellation of the original Warrant and
issuance of a new Warrant evidencing the right to purchase the
remaining number of Warrant Shares. On or before the first (1
st ) Business Day following the date on which the
Company has received each of the Exercise Notice and the Aggregate
Exercise Price (or notice of a Cashless Exercise) (the
“Exercise Delivery Documents”), the Company shall
transmit by facsimile an acknowledgment of confirmation of receipt
of the Exercise Delivery Documents to the Holder and the
Company’s transfer agent (the “Transfer Agent”).
On or before the third (3 rd ) Trading Day
following the date on which the Company has received all of the
Exercise Delivery Documents (the “Share Delivery
Date”), the Company shall (X) provided that the Transfer
Agent is participating in The Depository Trust Company
(“DTC”) Fast Automated Securities Transfer Program,
upon the request of the Holder, credit such aggregate number of
Warrant Shares to which the Holder is entitled pursuant to such
exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit Withdrawal Agent Commission
system, or (Y) if the Transfer Agent is not participating in
the DTC Fast Automated Securities Transfer Program, issue and
dispatch by overnight courier to the address as specified in the
Exercise Notice, a certificate, registered in the Company’s
share register in the name of the Holder or its designee, for the
number of shares of Common Stock to which the Holder is entitled
pursuant to such exercise. Upon delivery of the Exercise
Delivery Documents, the Holder shall be deemed for all corporate
purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective
of the date such Warrant Shares are credited to the Holder’s
DTC account or the date of delivery of the certificates evidencing
such Warrant Shares, as the case may be. If this Warrant is
submitted in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by
this Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three
Business Days after any exercise and at its own expense, issue a
new Warrant (in accordance with Section 7(d)) representing the
right to purchase the number of Warrant Shares purchasable
immediately prior to such exercise under this Warrant, less the
number of Warrant Shares with respect to which this Warrant is
exercised. No fractional shares of Common Stock are to be
issued upon the exercise of this Warrant, but rather the number of
shares of Common Stock to be issued shall be rounded up to the
nearest whole number. The Company shall pay any and all taxes
which may be payable with respect to the issuance and delivery of
Warrant Shares upon exercise of this Warrant.
___________________________________________________
1 Insert number of
Warrant Shares equal to ¼ of the number of Common Stock
issued pursuant to the Securities Purchase Agreement.
1
1.2
Exercise Price. For purposes
of this Warrant, “Exercise Price” means $8.16, subject
to adjustment as provided herein.
1.3
Company’s Failure to Timely
Deliver Securities. If within three (3) Trading Days
after the Company’s receipt of the Exercise Delivery
Documents the Company shall fail to issue and deliver a certificate
to the Holder and register such shares of Common Stock on the
Company’s share register or credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon the Holder’s exercise hereunder,
and if on or after such Trading Day the Holder purchases (in an
open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of shares of Common
Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “Buy-In”), then the
Company shall, within three (3) Business Days after the
Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage
commissions, if any) for the shares of Common Stock so purchased
(the “Buy-In Price”), at which point the
Company’s obligation to deliver such certificate (and to
issue such Warrant Shares) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or
certificates representing such Warrant Shares and pay cash to the
Holder in an amount equal to the excess (if any) of the Buy-In
Price over the product of (A) such number of shares of Common
Stock, times (B) the Closing Bid Price on the date of
exercise.
2
1.4
Cashless Exercise.
Notwithstanding anything contained herein to the contrary, if
a Registration Statement (as defined in the Securities Purchase
Agreement) covering the Warrant Shares that are the subject of the
Exercise Notice (the “Unavailable Warrant Shares”) is
not available for the resale of such Unavailable Warrant Shares,
the Holder may, in its sole discretion, exercise this Warrant in
whole or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive
upon such exercise the “Net Number” of shares of Common
Stock determined according to the following formula (a
“Cashless Exercise”):
Net Number = (A x B)
- (A x C)
B
For purposes of the
foregoing formula:
A =
the total number of
shares with respect to which this Warrant is then being
exercised.
B =
the Weighted Average
Price of the shares of Common Stock (as reported by Bloomberg) for
the five (5) consecutive Trading Days ending on the date
immediately preceding the date of the Exercise Notice.
C =
the Exercise Price
then in effect for the applicable Warrant Shares at the time of
such exercise.
1.5
Disputes. In the case of a
dispute as to the determination of the Exercise Price or the
arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with
Section 12.
3
1.6
Beneficial Ownership Limitation.
The Company shall not effect the exercise of this Warrant,
and the Holder shall not have the right to exercise this Warrant,
to the extent that after giving effect to such exercise, such
Person (together with such Person’s affiliates) would
beneficially own in excess of 4.99% (the “Maximum
Percentage”) of the shares of Common Stock outstanding
immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by such Person and its
affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude
shares of Common Stock which would be issuable upon
(x) exercise of the remaining, unexercised portion of this
Warrant beneficially owned by such Person and its affiliates and
(y) exercise or conversion of the unexercised or unconverted
portion of any other securities of the Company beneficially owned
by such Person and its affiliates (including, without limitation,
any convertible notes or convertible preferred stock or warrants)
subject to a limitation on conversion or exercise analogous to the
limitation contained herein. Except as set forth in the
preceding sentence, for purposes of this paragraph, beneficial
ownership shall be calculated in accordance with Section 13(d)
of the Securities Exchange Act of 1934, as amended. For
purposes of this Warrant, in determining the number of outstanding
shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the
Company’s most recent Form 10-K, Form 10-Q, Current
Report on Form 8-K or other public filing with the Securities
and Exchange Commission, as the case may be, (2) a more recent
public announcement by the Company or (3) any other notice by
the Company or the Transfer Agent setting forth the number of
shares of Common Stock outstanding. For any reason at any
time, upon the written or oral request of the Holder, the Company
shall within one Business Day confirm orally and in writing to the
Holder the number of shares of Common Stock then outstanding.
In any case, the number of outstanding shares of Common Stock
shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the SPA Warrants,
by the Holder and its affiliates since the date as of which such
number of outstanding shares of Common Stock was reported. By
written notice to the Company, the Holder may from time to time
increase or decrease the Maximum Percentage to any other percentage
not in excess of 9.99% specified in such notice; provided that
(x) any such increase will not be effective until the
sixty-first (61 st ) day after such notice is delivered
to the Company, and (y) any such increase or decrease will
apply only to the Holder and not to any other holder of SPA
Warrants.
1.7
Insufficient Authorized Shares.
If at any time while any of the Warrants remain outstanding
the Company does not have a sufficient number of authorized and
unreserved shares of Common Stock to satisfy its obligation to
reserve for issuance upon exercise of the Warrants at least a
number of shares of Common Stock equal to (the “Required
Reserve Amount”) the number of shares of Common Stock as
shall from time to time be necessary to effect the exercise of all
of the Warrants then outstanding (an “Authorized Share
Failure”), then the Company shall immediately take all action
necessary to increase the Company’s authorized shares of
Common Stock to an amount sufficient to allow the Company to
reserve the Required Reserve Amount for the Warrants then
outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than seventy
five (75) days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its stockholders for
the approval of an increase in the number of authorized shares of
Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its
best efforts to solicit its stockholders’ approval of such
increase in authorized shares of Common Stock and to cause its
board of directors to recommend to the stockholders that they
approve such proposal.
ARTICLE II. ADJUSTMENT OF EXERCISE
PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and the
number of Warrant Shares shall be adjusted from time to time as
follows:
2.1
Adjustment upon Subdivision or
Combination of Common Stock. If the Company at any time on or
after the Subscription Date subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares,
the Exercise Price in effect immediately prior to such subdivision
will be proportionately reduced and the number of Warrant Shares
will be proportionately increased. If the Company at any time
on or after the Subscription Date combines (by combination, reverse
stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination will
be proportionately increased and the number of Warrant Shares will
be proportionately decreased. Any adjustment under this
Section 2(b) shall become effective at the close of business
on the date the subdivision or combination becomes
effective.
4
2.2
Voluntary Adjustment By Company.
The Company may at any time during the term of this Warrant
reduce the then current Exercise Price to any amount and for any
period of time deemed appropriate by the Board of Directors of the
Company.
2.3
Other Events. If any event
occurs of the type contemplated by the provisions of this
Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features
to the holders of the Company’s Common Stock), then the
Company’s Board of Directors will make an appropriate
adjustment in the Exercise Price and the number of Warrant Shares
so as to protect the rights of the Holder; provided that no such
adjustment pursuant to this Section 2(c) will increase the
Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.
ARTICLE III. RIGHTS UPON
DISTRIBUTION OF ASSETS. If the Company shall declare
or make any dividend or other distribution of its assets (or rights
to acquire its assets) to holders of shares of Common Stock, by way
of return of capital or otherwise (including, without limitation,
any distribution of cash, stock or other securities, property or
options by way of a dividend, spin off, reclassification, corporate
rearrangement, scheme of arrangement or other similar transaction)
(a “Distribution”), at any time after the issuance of
this Warrant, then, in each such case:
(i)
any Exercise Price in effect
immediately prior to the close of business on the record date fixed
for the determination of holders of shares of Common Stock entitled
to receive the Distribution shall be reduced, effective as of the
close of business on such record date, to a price determined by
multiplying such Exercise Price by a fraction of which (i) the
numerator shall be the Closing Bid Price of the shares of Common
Stock on the Trading Day immediately preceding such record date
minus the value of the Distribution (as determined in good faith by
the Company’s Board of Directors) applicable to one share of
Common Stock, and (ii) the denominator shall be the Closing
Bid Price of the shares of Common Stock on the Trading Day
immediately preceding such record date; and
(ii)
the number of Warrant Shares shall
be increased to a number of shares equal to the number of shares of
Common Stock obtainable immediately prior to the close of business
on the record date fixed for the determination of holders of shares
of Common Stock entitled to receive the Distribution multiplied by
the reciprocal of the fraction set forth in the immediately
preceding paragraph (a); provided that in the event that the
Distribution is of shares of Common Stock (or common stock)
(“Other Shares of Common Stock”) of a company whose
common shares are traded on a national securities exchange or a
national automated quotation system, then the Holder may elect to
receive a warrant to purchase Other Shares of Common Stock in lieu
of an increase in the number of Warrant Shares, the terms of which
shall be identical to those of this Warrant, except that such
warrant shall be exercisable into the number of shares of Other
Shares of Common Stock that would have been payable to the Holder
pursuant to the Distribution had the Holder exercised this Warrant
immediately prior to such record date and with an aggregate
exercise price equal to the product of the amount by which the
exercise price of this Warrant was decreased with respect to the
Distribution pursuant to the terms of the immediately preceding
paragraph (a) and the number of Warrant Shares calculated in
accordance with the first part of this
paragraph (b).
5
ARTICLE IV. PURCHASE RIGHTS;
FUNDAMENTAL TRANSACTIONS.
4.1
Purchase Rights. In addition
to any adjustments pursuant to Section 2 above, if at any time
the Company grants, issues or sells any Options, Convertible
Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of
shares of Common Stock (the “Purchase Rights”), then
the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the
Holder could have acquired if the Holder had held the number of
shares of Common Stock acquirable upon complete exercise of this
Warrant (without regard to any limitations on the exercise of this
Warrant) immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no
such
