Exhibit 10.2
AGREEMENT AND TERMS OF WARRANTS
1. Definitions. As used herein:
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(a) "Common Stock" shall mean the Common Stock, no par value per
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share, of the Company, whether now or hereafter authorized, holders of which
have the right to participate in the distribution of earnings and assets of the
Company without limit as to the amount or percentage.
(b) "Company" shall mean Communications Systems International, Inc., a
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Colorado corporation.
(c) "Convertible Promissory Notes" shall mean the 10% Convertible
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Promissory Notes given by the Company as Maker dated as of ______________, 1996.
(d) "Corporate Office" shall mean the principal office of the Company,
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which is presently located at 8 South Nevada Avenue, Suite 101, Colorado
Springs, Colorado 80903.
(e) "Exercise Date" shall mean the date of surrender for exercise of
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any Warrant Certificate, provided the exercise form on the back of the Warrant
Certificate, or a form substantially similar thereto has been completed in full
by the Warrant Holder or a duly appointed attorney and the Warrant Certificate
is accompanied by payment in full of the Exercise Price.
(f) "Exercise Period" shall mean the period commencing on the date the
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Warrants are issued and extending to and through the Expiration Date.
(g) "Exercise Price" shall mean a purchase price of $_______ per share
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of Common Stock; provided, however, that in the event the Company reduces the
Exercise Price in accordance with Section 8(h) hereof, the Exercise Price shall
be as established by the Company in accordance with such Section.
(h) "Expiration Date" shall mean 5:00 p.m. Colorado Springs, Colorado
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time on the earlier of (i)_____________, 1998, or (ii) the date on which the
Company prepays the Convertible Promissory Notes pursuant to the terms of
Section 5 thereof, or (iii) the date on which the Company repays the Warrant
Holder's Convertible Promissory Note pursuant to the terms of Section 8 thereof;
provided, however, if such date shall be a holiday or a day on which banks are
authorized to close in the State of Colorado, the Expiration Date shall mean
5:00 p.m. Colorado Springs, Colorado time on the next following day which in the
State of Colorado is not
a holiday or a day on which banks are authorized to close.
(i) "Subsidiary" shall mean any corporation of which shares having
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ordinary voting power to elect a majority of the Board of Directors of such
corporation (regardless of whether the shares of any other class or classes of
such corporation shall have or may have voting power by reason of the happening
of any contingency) is at the time directly or indirectly owned by the Company
or one or more Subsidiaries of the Company.
(j) "Warrant" or the "Warrants" shall mean up to 15,000 warrants which
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shall be issued pursuant to the terms of the Convertible Promissory Notes and
which may be exercised for Warrant Shares.
(k) "Warrant Certificate" shall mean the Warrant Certificate
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substantially in the form of Attachment 1 hereto with such changes as may be
provided for in this Agreement.
(l) "Warrant Holder" shall mean the person in whose name any Warrant
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Certificate shall be registered on the books maintained by the Company pursuant
to Section 6 of this Agreement.
(m) "Warrant Shares" shall mean and include up to 15,000 authorized
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and unissued shares of Common Stock reserved for issuance on exercise of the
Warrants, and unless otherwise noted, shall include any additional shares of
Common Stock or other property which may hereafter be issuable or deliverable on
exercise of the Warrants pursuant to Section 8 of this Agreement.
2. Warrants and Issuance of Warrant Certificates.
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(a) One Warrant shall initially entitle the Warrant Holder to purchase
one share of Common Stock on exercise thereof, subject to modification and
adjustment as hereinafter provided in Section 8. Warrant Certificates
representing 15,000 Warrants and evidencing the right to purchase an aggregate
of 15,000 shares of Common Stock of the Company shall be executed by the proper
officers of the Company. The Company shall deliver Warrant Certificates in
required whole number denominations to the person entitled thereto in connection
with any transfer or exchange permitted under this Agreement.
(b) Except as provided in Section 7 hereof, share certificates
representing the Warrant Shares shall be issued only on or after the Exercise
Date upon exercise of the Warrants or upon transfer or exchange of the Warrant
Shares following exercise of the Warrants.
3. Form and Execution of Warrant Certificates.
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(a) The Warrant Certificates shall be substantially in the form
attached hereto as Exhibit A and may have such letters, numbers or other marks
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of identification and such legends, summaries or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Agreement. The Warrant Certificates
shall be dated as of the date of issuance, whether on initial issuance,
transfer, exchange or in lieu of mutilated, lost, stolen or destroyed Warrant
Certificates.
(b) The Warrant Certificates shall be executed on behalf of the
Company by its President and Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal.
4. Exercise.
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(a) The Warrants will become exercisable on their issuance. The
exercise of the Warrants in accordance with this Agreement shall only be
permitted during the Exercise Period. Warrants shall be deemed to have been
exercised immediately prior to the close of business on the Exercise Date. The
exercise form shall be executed by the Warrant Holder thereof or his attorney
duly authorized in writing and shall be delivered together with payment to the
Company, in cash or by official bank or certified check, of an amount in lawful
money of the United States of America to the order of the Company in an amount
equal to the aggregate Exercise Price.
(b) The Company shall not be obligated to issue any fractional share
interests in Warrant Shares. If Warrants represented by more than one Warrant
Certificate shall be exercised at one time by the same Warrant Holder, the
number of full Warrant Shares which shall be issuable on exercise thereof shall
be computed on the basis of the aggregate number of full Warrant Shares issuable
on such exercise.
(c) The person entitled to receive the number of Warrant Shares
deliverable on such exercise shall be treated for all purposes as the Warrant
Holder as of the close of business on the Exercise Date. As soon as practicable
on or after the Exercise Date and in any event within 30 days after such date,
the Company shall issue and deliver to the person or persons entitled to receive
the same, a certificate or certificates for the number of Warrant Shares
deliverable on such exercise. No adjustment shall be made in respect of cash
dividends, if any, on Warrant Shares deliverable on exercise of any Warrant.
Following the determination by the Company that collected funds have been
received, the Company shall issue share certificates representing the number of
Warrant Shares purchased by the Warrant Holder.
No issuance of Warrant Shares shall be made unless there is an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), and registration or qualification of the Warrant Shares, or an
exemption therefrom has been obtained
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from state or other regulatory authorities in the jurisdiction in which such
Warrant Shares are sold. The Company is authorized to refuse to honor the
exercise of any Warrant if such exercise would result, in the opinion of the
Company upon advice of counsel, in the violation of any law.
5. Reservation of Shares and Payment of Taxes.
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(a) The Company covenants that it will at all times reserve and have
available from its authorized shares of Common Stock such number of shares of
Common Stock as shall then be issuable on exercise of all outstanding Warrants.
The Company covenants that all Warrant Shares issuable shall be validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issuance thereof.
(b) The Warrant Holder shall pay all documentary, stamp or similar
taxes and other government charges that may be imposed with respect to the
issuance of the Warrants, or the issuance, transfer or delivery of any Warrant
Shares on exercise of the Warrants. In the event the Warrant Shares are to be
delivered in a name other than the name of the Warrant Holder, no such delivery
shall be made unless the person requesting the same has paid to the Company the
amount of any such taxes or charges incident thereto.
6. Registration of Transfer.
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(a) The Warrant Certificates may be transferred in whole or in part
but only with the prior consent of the Company and only in compliance with
applicable law, including applicable federal and state securities laws. Warrant
Certificates to be exchanged shall be surrendered to the Company at its
Corporate Office. The Company shall execute, issue and deliver in exchange
therefor, the Warrant Certificate or Certificates which the holder making the
transfer shall be entitled to receive and the Company shall promptly cancel the
surrendered Warrant Certificate.
(b) The Company shall keep at its Corporate Office books for
registration of ownership and transfer of Warrant Certificates on which Warrant
Certificates and the transfer thereof shall be registered. Such books shall
show the names and addresses of the respective holders of the Warrant
Certificates and the number of Warrants evidenced by each such Warrant
Certificate. All Warrant Certificates presented for registration of transfer or
exercise shall be duly endorsed or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company. The Company may
require payment of a sum by the Warrant Holder sufficient to cover any tax or
other governmental charge that may be imposed in connection with the transfer of
Warrant Certificates. On due presentment for registration of transfer of any
Warrant Certificate at such office, the Company shall execute, issue and deliver
to the transferee or transferees a new Warrant Certificate or Certificates
representing an equal aggregate number of Warrants.
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(c) Prior to due presentment for registration of transfer thereof,
the Company may treat the Warrant Holder as the absolute owner thereof
(notwithstanding any notations of ownership or writing thereon made by anyone
other than the Company) and the parties hereto shall not be affected by any
notice to the contrary.
7. Loss or Mutilation. On receipt by the Company of evidence
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satisfactory as to the ownership of and the loss, theft, destruction or
mutilation of any Warrant Certificate, the Company shall execute and deliver in
lieu thereof, a new Warrant Certificate representing an equal aggregate number
of Warrants. In the case of loss, theft or destruction of any Warrant
Certificate, the Warrant Holder requesting issuance of a new Warrant Certificate
shall be required to secure an indemnity bond in favor of the Company in an
amount satisfactory to each of them. In the event a Warrant Certificate is
mutilated, such Warrant Certificate shall be surrendered and canceled by the
Company prior to delivery of a new Warrant Certificate. Applicants for a
substitute Warrant Certificate shall also comply with such other regulations and
pay such other reasonable charges as the Company may prescribe.
8. Adjustment of Exercise Price and Shares.
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(a) If any time prior to the expiration of the Warrants by their terms
or by exercise of the Warrants, the Company increases or decreases the number of
its issued and outstanding shares of Common Stock, or changes in any way the
rights and privileges of such shares of Common Stock, by means of (i) the
payment of a share dividend or the making of any other distribution on such
shares of Common Stock payable in its shares of Common Stock, (ii) a split or
subdivision of shares of Common Stock, or (iii) a consolidation or combination
of shares of Common Stock, then the Exercise Price in effect at the time of such
action and the number of Warrants required to purchase each Warrant Share at
that time shall be proportionately adjusted so that the numbers of rights and
privileges relating to the Warrant Shares then purchasable upon the exercise of
the Warrants shall be increased, decreased or changed in like manner, for the
same aggregate purchase price set forth in the Warrants, as if the Warrant
Shares purchasable upon the exercise of the Warrants immediately prior to the
event had been issued, outstanding, fully paid and nonassessable at the time of
such event. Any dividend paid or distributed on the shares of Common Stock in
shares of any other class of the Company or securities convertible into shares
of Common Stock shall be treated as a dividend paid in shares of Common Stock to
the extent shares of Common Stock are issuable on the payment or conversion
thereof. Any adjustment made pursuant to this Section 8(a) shall, in the case
of a stock dividend or distribution, become effective as of the record date
therefor and, in the case of a split, subdivision, consolidation or combination,
be made as of the effective date thereof.
(b) If, prior to the expiration of the Warrants by exercise or by
their terms, the Company shall be recapitalized by reclassifying its outstanding
shares of Common Stock into
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shares with a par value or in the event of any other material change of the
capital structure of the Company or of any successor corporation by reason of
any reclassification, equitable, lawful and adequate provision shall be made
whereby any Warrant Holder shall thereafter have the right to purchase, on the
basis and the terms and conditions specified in this Agreement, in lieu of the
Warrant Shares theretofore purchasable on the exercise of any Warrant, such
securities or assets as may be issued or payable with respect to or in exchange
for the number of Warrant Shares theretofore purchasable on exercise of the
Warrants had such reclassification, recapitalization or conveyance not taken
place; and in any such event, the rights of any Warrant Holder to any adjustment
in the number of Warrant Shares purchasable on exercise of such Warrant, as set
forth above, shall continue to be preserved in respect of any stock, securities
or assets which the Warrant Holder becomes entitled to purchase.
(c) In the event the Company, at any time while the Warrants shall
remain unexpired and unexercised, shall sell all or substantially all of its
property, or dissolves, liquidates or winds up its affairs, prompt,
proportionate, equitable, lawful and adequate provision shall be made as part of
the terms of such sale, dissolution, liquidation or winding up such that the
Warrant Holder may thereafter receive, on exercise thereof, in lieu of each
Warrant Shares which he would have been entitled to receive, the same kind and
amount of any stock, securities or assets as may be issuable, distributable or
payable on any such sale, dissolution, liquidation or winding up with respect to
each share of Common Stock; provided, however, that in the event of any such
sale, dissolution, liquidation or winding up, the right to exercise the Warrants
shall terminate on a date fixed by the Company, such date to be not earlier than
5:00 p.m. Colorado Springs, Colorado time on the 45th day next succeeding the
date on which notice of such termination of the right to exercise the Warrants
has been given by mail to the Warrant Holders thereof at such addresses as may
appear on the books of the Company.
(d) On exercise of the Warrants by the Warrant Holders, the Company
shall not be required to deliver fractions of shares of Common Stock; provided,
however, that the Company shall purchase such fraction for an amount in cash
equal to the current value of such fraction computed on the basis of the average
bid price on the trading day immediately preceding the day upon which such
Warrant Certificate was surrendered for exercise in accordance with Section 4
hereof. By accepting a Warrant Certificate, the holder thereof expressly waives
the right to receive a Warrant Certificate evidencing any fraction of a Warrant
or to receive any fractional share of securities upon exercise of a Warrant,
except as expressly provided in this Section 8(d).
(e) If, prior to expiration of the Warrants by exercise or by their
terms, the Company shall determine to take a record of the holders of its shares
of Common Stock for the purpose of determining shareholders entitled to receive
any stock dividend, distribution or other right which will cause any change or
adjustment in the number, amount, price or nature of the shares of Common Stock
or other stock, securities or assets deliverable on exercise of the
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Warrants pursuant to the foregoing provisions, the Company shall give to the
Warrant Holders at the addresses as may appear on the books of the Company at
least 20 days' prior written notice to the effect that it intends to take such a
record. Such notice shall specify the date as of which such record is to be
taken; the purpose for which such record is to be taken; and the number, amount,
price and nature of the shares of Common Stock or other stock, securities or
assets which will be deliverable on Warrant Shares following exercise of the
Warrants, if such exercise occurs prior to the record date for such action.
Without limiting the obligation of the Company to provide notice to the Warrant
Holders of any corporate action hereunder, failure of the Company to give notice
shall not invalidate such corporate action of the Company.
(f) The Warrants shall not entitle the Warrant Holder to any of the
rights of shareholders or to any dividend declared on the shares of Common Stock
unless the Warrant is exercised and the Warrant Shares purchased prior to the
record date fixed by the Board of Directors of the Company for the determination
of holders of shares of Common Stock entitled to such dividend or other right.
(g) Except as provided in Section 8(a) above, no adjustment of the
Exercise Price shall be made as a result of or in connection with the issuance
of shares of Common Stock.
(h) The Company shall be empowered, in the sole and unconditional
discretion of the Board of Directors, at any time during the Exercise Period, to
reduce the applicable Exercise Price of the Warrants. Any such reduction in the
applicable Exercise Price shall only be effective on 10 days' written notice to
the Warrant Holders, which notice shall be given pursuant to a duly and validly
authorized resolution of the Board of Directors of the Company. Any such
reduction in the Exercise Price shall not entitle the Warrant Holders to
issuance of any additional shares of Common Stock pursuant to the adjustment
provisions set forth elsewhere herein, regardless of whether the reduction in
the Exercise Price was effected either prior to or following exercise of
Warrants by the Warrant Holders. A nonexercising Warrant Holder shall have no
remedy or rights to receive any additional Warrant Shares as a result of any
reduction in any applicable Exercise Price pursuant to this subsection.
(i) Before taking any action that would cause an adjustment pursuant
to this Section 8 reducing the Exercise Price required to purchase one share of
Common Stock below the then par value (if any) of a share of such Common Stock,
the Company will use its best efforts to take any corporate action which, in the
opinion of its counsel, may be necessary in order that the Company may validly
and legally issue fully paid and non-assessable shares of such Common Stock.
9. Modification of Agreement. The Company may by supplemental agreement
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make any changes or corrections in this Agreement it shall deem appropriate to
cure any ambiguity or to correct any defective or inconsistent provision or
mistake or error herein
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contained. Additionally, the Company may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the Warrant Holders;
provided, however, this Agreement shall not otherwise be modified, supplemented
or altered in any respect except with the consent in writing of the Warrant
Holders who hold not less than a majority of the Warrants outstanding and
provided further that no such amendment shall accelerate the Warrant Expiration
Date or increase the Exercise Price without the approval of all the holders of
all outstanding Warrants.
10. Notices. All notices, demands, claims, elections, opinions, requests
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or other communications hereunder (however characterized or described) shall be
in writing and shall be deemed duly given or made if (and then two business days
after) sent by registered or certified mail, return receipt requested, postage
prepaid and addressed to, in the case of the Company:
Communications Systems International, Inc.
8 South Nevada Avenue, Suite 101
Colorado Springs, Colorado 80903
Attention: ________________________
and if the Warrant Holder, at the address of the Company as set forth on the
books maintained by the Company.
The Company may send any notice, demand, claim, election, opinion,
request or communication hereunder to the intended recipient at the address set
forth above using any other means (including personal delivery, expedited
courier, messenger service, telecopy, telex, ordinary mail or electronic mail),
but no such notice, demand, claim, election, opinion, request or other
communication shall be deemed to have been duly given or made unless and until
it actually is received by the intended recipient. The Company may change the
address to which notices, demands, claims, elections, opinions, requests and
other communications hereunder are to be delivered by giving the Warrant Holders
notice in the manner herein set forth.
11. Persons Benefiting. This Agreement shall be binding upon and inure to
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the benefit of the Company and its respective successors and assigns and the
Warrants Holders. Nothing in this Agreement is intended or shall be construed
to confer on any other person any right, remedy or claim or to impose on any
other person any duty, liability or obligation.
12. Severability. If any term contained herein shall be held, declared or
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pronounced void, voidable, invalid, unenforceable or inoperative for any reason
by any court of competent jurisdiction, government authority or otherwise, such
holding, declaration or pronouncement shall not affect adversely any other term,
which shall otherwise remain in full force and effect, and the effect of such
holding, declaration or pronouncement shall be limited to the territory or
jurisdiction in which made.
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13. Termination. This Agreement shall terminate as of the close of
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business on the Expiration Date, or such earlier date upon which all Warrants
shall have been exercised.
14. Governing Law. These terms and each Warrant Certificate issued
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hereunder shall be deemed to be a contract under the laws of the State of
Colorado and for all purposes shall be construed in accordance with the laws of
said state without giving effect to conflicts of laws provisions of such state.
15. Agreement Available to Warrant Holders. A copy of these terms shall
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be available at all reasonable times at the office of the Company for inspection
by any Warrant Holder. As a condition of such inspection, the Company may
require any Warrant Holder to submit a Warrant Certificate held of record for
inspection.
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ATTACHMENT 1
[FORM OF WARRANT CERTIFICATE]
The Warrants evidenced by this certificate were issued in connection with a
Convertible Promissory Note dated as of ____________, 1996 given by the Company
as Maker to the Warrant Holder ("Warrant"). One Warrant entitles the Warrant
Holder to purchase one share of Common Stock. The Warrants may only be
exercised when either (a) a current registration statement under the Securities
Act of 1993, as amended, is effective or (b) an exemption from such registration
is available to the Company, in either case, without undue expense or hardship.
Additionally, Warrants are only exercisable when such exercise, and the issuance
of the underlying Common Stock, can be effected in compliance with applicable
state Blue Sky laws. The Company will be under no obligation whatsoever to take
any steps in states other than California to allow Warrants to be exercised.
W-____________________ _____________ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that _________ or registered assigns
(the "Warrant Holder"), is the registered owner of the above-indicated number of
Warrants ("Warrants") expiring at 5:00 p.m., Colorado Springs, Colorado local
time, on _____________, 1998 (as extended or accelerated pursuant to the
Agreement and Terms of Warrants (the "Warrant Terms"), the "Expiration Date").
One Warrant entitles the Warrant Holder to purchase from Communications Systems
International, Inc., a Colorado corporation (the "Company"), at any time before
the Expiration Date, one fully paid and non-assessable share of Common Stock of
the Company at a purchase price of $_______ per share (the "Exercise Price") in
lawful money of the United States of America for one Warrant represented hereby
upon surrender of this Warrant Certificate, with the exercise form hereon duly
completed and executed, with payment of the Exercise Price at the principal
office of the Company, but only subject to the conditions set forth herein and
in the Agreement and Terms of Warrants. The Exercise Price, the number of
shares purchasable upon exercise of each Warrant, the number of Warrants
outstanding and the Expiration Date are subject to adjustments upon the
occurrence of certain events set forth in the Warrant Terms. Reference is
hereby made to the other provisions of this Warrant Certificate and the
provisions of the Warrant Terms, all of which are hereby incorporated by
reference herein and made a part of this Warrant Certificate and which shall for
all purposes have the same effect as though fully set forth at this place.
Upon due presentment for registration of transfer of this Warrant
Certificate at the office of the Company a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants, subject to any adjustments made in accordance with the
Attachment 1-1
Warrant Terms, shall be issued to the transferee in exchange of this Warrant
Certificate, subject to the limitations provided in the Warrant Terms entered
into between the Company and the original holder of the Warrant regarding
restrictions on transfer and, upon payment of the transfer fee and any tax or
other governmental charge imposed in connection with such transfer.
The Warrant Holder of the Warrants evidenced by this Warrant Certificate
may exercise all or any whole number of such Warrants in the manner stated
hereon and in the Warrant Terms. The Exercise Price shall be payable in lawful
money of the United Sates of America in cash or by certified or cashier's check
or bank draft payable to the order of the Company. Upon any exercise of any
Warrants evidenced by this Warrant Certificate in an amount less than the number
of Warrants so evidenced, there shall be issued to the Warrant Holder a new
Warrant Certificate evidencing the number of Warrants not so exercised. No
adjustment shall be made for any dividends on any shares issued upon exercise of
this Warrant.
No Warrant may be exercised after 5:00 p.m. Colorado Springs, Colorado,
local time, on the Warrant Expiration Date (as defined in the Warrant Terms),
and any Warrant not exercised by such time shall become void.
COPIES OF THE WARRANT TERMS, WHICH DEFINE THE RIGHTS, RESPONSIBILITIES
AND OBLIGATIONS OF THE COMPANY AND THE WARRANT HOLDERS ARE ON FILE
WITH THE COMPANY. ANY WARRANT HOLDER MAY OBTAIN A COPY OF THE WARRANT
TERMS, FREE OF CHARGE, BY A REQUEST TO THE PRINCIPAL OFFICES OF THE
COMPANY, ATTENTION: SECRETARY.
This Warrant Certificate, when surrendered to the Company at its principal
office by the Warrant Holder, in person or by attorney duly authorized in
writing, may be exchanged, in the manner and subject to the limitations provided
in the Warrant Terms, without payment of a charge, except for any tax or other
governmental charge impose in connection with such exchange, for another Warrant
Certificate or Warrant Certificates of like tenor and evidencing a like number
of Warrants, subject to any adjustments made in accordance with the Warrant
Terms.
The Company may deem and treat the registered holder hereof as the absolute
owner of this Warrant Certificate (notwithstanding any notation of ownership or
other writing hereon made by anyone) for all purposes and the Company shall not
be affected by any notice to the contrary. No Warrant Holder, as such, shall
have any rights of a shareholder of the Company, either at law or in equity, and
the rights of the Warrant Holder, as such, are limited to those rights expressly
provided in the Warrant Terms and in the Warrant Certificates.
Attachment 1-2
The Company shall not be required to issue fractions of warrants upon any
such adjustment or to issue fractions of shares upon the exercise of any
Warrants after any such adjustment, but the Company, in lieu of issuing any such
fractional interest, shall pay an amount in cash equal to such fraction times
the current market value of one share, determined in accordance with the Warrant
Terms.
Unless the amendment is able to be effected by the Company in accordance
with the Warrant Terms, the Warrant Terms are subject to amendment upon the
approval of holders of not less than a majority of the outstanding Warrants,
except that no such amendment shall accelerate the Warrant Expiration Date or
increase the Exercise Price without the approval of all the holders of all
outstanding Warrants. A copy of the Warrant Terms shall be available at all
reasonable times at the principal office of the Company for inspection by any
Warrant Holder. As a condition of such inspection, the Company may require any
Warrant Holder to submit his Warrant Certificate for inspection.
IMPORTANT: The Warrants represented by this Certificate may not be
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exercised by a Warrant Holder unless at the time of exercise the underlying
shares of Common Stock are qualified for sale, by registration or otherwise, in
the state where the Warrant Holder resides or unless the issuance of the shares
of Common Stock would be exempt under the applicable state securities laws.
Further, a registration statement under the Securities Act of 1933, as amended,
covering the exercise of the Warrants must be in effect and current at the time
of exercise unless the issuance of shares of Common Stock upon any exercise is
exempt from the registration requirements of the Securities Act of 1933, as
amended. Notwithstanding the provisions hereof, unless such registration
statement and qualification are in effect and current at the time of exercise,
or unless exemptions are available, the Company may decline to permit the
exercise of the Warrants and the holder hereof would then only have the choice
of either attempting to sell the Warrants, if a market existed therefor, or
letting the Warrants expire.
The certificates representing the shares of Common Stock to be received by
the Warrant Holder upon any exercise of the Warrants shall bear a restrictive
legend substantially as follows:
The shares represented by this Certificate may only be transferred by
operation of law or with the prior written consent of the Company.
The shares represented by this Certificate are also subject to
restrictions on transfer under the Securities Act of 1933, as amended,
and state securities laws, and may not be offered for sale, sold,
assigned, transferred, pledged or otherwise disposed of unless
registered and qualified under all applicable securities laws or
unless an exemption exists and can be satisfied by the transferor, the
availability of which is to be established by an opinion of
Attachment 1-3
counsel (which opinion and counsel shall both be reasonably
satisfactory to the Company). The Company is under no obligation to
register or qualify the shares which this Certificate represents under
any applicable securities laws.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
signed by its President and by its Secretary, each by a facsimile of said
officers' signatures, and has caused a facsimile of its corporate sale to be
imprinted hereon.
Dated: _____________________ COMMUNICATIONS SYSTEMS
INTERNATIONAL, INC.
By: ________________________ By: __________________________
____________, Secretary Robert A. Spade, President
Attachment 1-4