Exhibit 4.2
THE REPRESENTATIVE'S WARRANTS EVIDENCED AND REPRESENTED BY THIS CERTIFICATE (THE
"REPRESENTATIVE'S WARRANTS") AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
(THE "WARRANT SHARES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, PURSUANT TO A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION AND WITH THE SECURITIES ADMINISTRATORS OF CERTAIN STATES
UNDER THE SECURITIES ("BLUE SKY") LAWS OF SUCH STATES. HOWEVER, NEITHER THE
REPRESENTATIVE'S WARRANTS NOR SUCH WARRANT SHARES MAY BE SOLD, TRANSFERRED,
PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO (I) A POST-EFFECTIVE AMENDMENT TO
SUCH REGISTRATION STATEMENT, (II) A SEPARATE REGISTRATION STATEMENT UNDER SUCH
ACT, OR (III) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND UNDER THE
APPLICABLE BLUE SKY LAWS.
THIS REPRESENTATIVE'S WARRANT MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED EXCEPT AS
OTHERWISE PROVIDED HEREIN AND THE HOLDER OF THIS REPRESENTATIVE'S WARRANT, BY
ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS
REPRESENTATIVE'S WARRANT EXCEPT AS OTHERWISE PROVIDED HEREIN.
COMMUNICATIONS SYSTEMS INTERNATIONAL, INC.
Representative's Warrant for the Purchase of Common Stock
---------------------------------------------------------
No. UW-001 100,000 Representative's Warrants
THIS CERTIFIES that, for receipt in hand of $50 and other value
received, COHIG & ASSOCIATES, INC. (the "Holder"), is entitled to subscribe for
and purchase from COMMUNICATIONS SYSTEMS INTERNATIONAL, INC., a Colorado
corporation (the "Company"), upon the terms and conditions set forth herein, at
any time, or from time to time, after _________, 1999, and before 5:00 p.m.
Mountain time on __________, 2003 (the "Exercise Period"), 100,000 shares of
Common Stock (the "Warrant Shares"), at a price of $_________ per Warrant Share
(the "Exercise Price"), or _____% of the offering price of Common Stock to be
sold by the Company in a public offering (the "Public Offering") at or prior to
the date hereof.
The term the "Holder" as used herein shall include any transferee to
whom this Representative's Warrant has been transferred in accordance with the
above. As used herein the term "this Representative's Warrant" shall mean and
include this Representative's Warrant and any Representative's Warrant or
Representative's Warrants hereafter issued as a consequence of the exercise or
transfer of this Representative's Warrant in whole or in part, and the term
"Common Stock" shall mean and include the Company's Common Stock with ordinary
voting power, which class at the date hereof is publicly traded.
1. This Representative's Warrant may not be sold, transferred,
assigned, pledged or hypothecated until ________, 1999 (12 months from the
Effective Date of the Registration Statement on which it is initially
registered) except that it may be transferred, in whole or in part, (i) to one
or more officers or partners of the Holder (or the officers or partners of any
such partner); (ii) to a member of the underwriting syndicate and/or its
officers or partners; (iii) by reason of reorganization
of the Company; or (iv) by operation of law. After _________, 1999, this
Representative's Warrant may be sold, transferred, assigned or hypothecated in
accordance with applicable law.
2. a. This Representative's Warrant may be exercised during the Exercise
Period as to the whole or any lesser number of Warrant Shares, by the
surrender of this Representative's Warrant (with the election attached
hereto duly executed) to the Company at its office at Suite 101, 8 South
Nevada Avenue, Colorado Springs, Colorado 80903, or such other place as is
designated in writing by the Company, together with a certified or bank
cashier's check payable to the order of the Company in an amount equal to
the Exercise Price multiplied by the number of Warrant Shares for which
this Representative's Warrant is being exercised.
b. Upon written request of the Holder, and in lieu of payment for the
Warrant Shares by check in accordance with paragraph 2(a) hereof, the
Holder may exercise the Representative's Warrant (or any portion thereof)
for and receive the number of Warrant Shares equal to a fraction, the
numerator of which equals (i) the amount by which the Current Market Price
of the Common Stock for the ten (10) trading days preceding the date of
exercise exceeds the Exercise Price per Share, multiplied by (ii) the
number of Warrant Shares to be purchased; the denominator of which equals
the Current Market Price.
c. For the purposes of any computation under this Representative's
Warrant, the "Current Market Price" at any date shall be the closing price
of the Common Stock on the business day next preceding the event requiring
an adjustment hereunder. If the principal trading market for such
securities is an exchange, the closing price shall be the reported last
sale price on such exchange on such day provided if trading of such Common
Stock is listed on any consolidated tape, the closing price shall be the
reported last sale price set forth on such consolidated tape. If the
principal trading market for such securities is the over-the-counter
market, the closing price shall be the last reported sale price on such
date as set forth by The Nasdaq Stock Market, Inc., or, if the security is
not quoted on such market, the average closing bid and asked prices as set
forth in the National Quotation Bureau pink sheet or the Electronic
Bulletin Board System for such day. Notwithstanding the foregoing, if
there is no reported last sale price or average closing bid and asked
prices, as the case may be, on a date prior to the event requiring an
adjustment hereunder, then the current market price shall be determined as
of the latest date prior to such day for which such last sale price or
average closing bid and asked price is available.
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3. Upon each exercise of this Representative's Warrant, the Holder shall
be deemed to be the holder of record of the Warrant Shares issuable upon such
exercise, notwithstanding that the transfer books of the Company shall then be
closed or certificates representing such Warrant Shares shall not then have been
actually delivered to the Holder. As soon as practicable after each such
exercise of this Representative's Warrant, the Company shall issue and deliver
to the Holder a certificate or certificates for the Warrant Shares issuable upon
such exercise, registered in the name of the Holder or its designee. If this
Representative's Warrant should be exercised in part only, the Company shall,
upon surrender of this Representative's Warrant for cancellation, execute and
deliver a new Representative's Warrant evidencing the right of the Holder to
purchase the balance of the Warrant Shares (or portions thereof) subject to
purchase hereunder.
4. The Representative's Warrants shall be registered in a
Representative's Warrant Register as they are issued. The Company shall be
entitled to treat the registered holder of any Representative's Warrant on the
Representative's Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Representative's Warrant on the part of any other person. The
Representative's Warrants shall be transferable only on the books of the Company
upon delivery thereof duly endorsed by the Holder or by his duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian or other legal representative, duly
authenticated evidence of his or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Representative's
Warrant or Representative's Warrants to the person entitled thereto. The
Representative's Warrants may be exchanged, at the option of the Holder thereof,
for another Representative's Warrant, or other Representative's Warrants of
different denominations, of like tenor and representing in the aggregate the
right to purchase a like number of Warrant Shares (or portions thereof) upon
surrender to the Company or its duly authorized agent. Notwithstanding the
foregoing, the Company shall have no obligation to cause Representative's
Warrants to be transferred on its books to any person if, in the opinion of
counsel to the Company, such transfer does not comply with the provisions of the
Securities Act of 1933, as amended (the "Act"), or applicable state blue sky
laws and the rules and regulations thereunder.
5. The Company shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of providing for
the exercise of this Representative's Warrant, such number of shares of Common
Stock as shall, from time to time, be sufficient therefor.
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The Company covenants that all Warrant Shares issuable upon exercise of this
Representative's Warrant shall be validly issued, fully paid, nonassessable, and
free of preemptive rights.
6. a. In case the Company shall sell or issue hereafter either its
Common Stock or any rights, options, warrants or obligations or securities
containing the right to subscribe for or purchase any Common Stock ("Options")
or exchangeable for or convertible into Common Stock ("Convertible Securities"),
at a price per share, as determined pursuant to paragraph (b) of this section,
less than the Exercise Price then in effect on the date of such sale or
issuance, then the number of Warrant Shares thereafter purchasable upon exercise
of this Representative's Warrant shall be determined by multiplying the number
of Warrant Shares theretofore purchasable upon exercise of this Representative's
Warrant by a fraction, (i) the numerator of which shall be the number of shares
of Common Stock outstanding on the date of issuance of such Common Stock,
Options or Convertible Securities and (ii) the denominator of which shall be the
number of shares of Common Stock outstanding on the date prior to the date of
issuance of such Common Stock or Convertible Securities plus the number of
shares of Common Stock which the aggregate consideration received by the Company
upon such issuance would purchase on such date at the Exercise Price then in
effect.
b. The following provisions, in addition to other provisions of this
section shall be applicable in determining any adjustment under (a) above:
i. In case of the issuance or sale of Common Stock part or all
of which shall be for cash, the cash consideration received by the
Company therefor shall be deemed to be the amount of cash proceeds of
such sale of shares less any compensation paid or discount allowed in
the sale, underwriting or purchase thereof by underwriters or dealers
or others performing similar services or any expenses incurred in
connection therewith, plus the amounts, if any, determined as provided
in (b)(ii) below.
ii. In case of the issuance or sale of Common Stock wholly or
partly for a consideration other than cash, the amount of the
consideration other than cash received by the Company for such Common
Stock shall be deemed to be the fair value of such consideration as
determined by a resolution adopted by the Board of Directors of the
Company acting in good faith, less any compensation paid or incurred
by the Company for any underwriting of, or otherwise in connection
with such issuance, provided, however, the amount of such
consideration other than cash
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shall in no event exceed the cost thereof as recorded on the books of
the Company. In case of the issuance or sale of Common Stock
(otherwise than upon conversion or exchange) together with other stock
or securities or other assets of the Company for a consideration which
is received for both such Common Stock and other securities or assets,
the Board of Directors of the Company acting in good faith shall
determine what part of the consideration so received is to be deemed
to be the consideration for the issuance of such Common Stock, less
any compensation paid or incurred by the Company for any underwriting
of, or otherwise in connection with such issuance, provided, however,
the amount of such consideration other than cash shall in no event
exceed the cost thereof as recorded on the books of the Company. In
case at any time the Company shall declare a dividend or make any
other distribution upon any stock of the Company payable in Common
Stock then such Common Stock issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
iii. The price per share of any Common Stock sold or issued by
the Company (other than pursuant to Options or Convertible Securities)
shall be equal to a price calculated by dividing (A) the amount of the
consideration received by the Company, as determined pursuant to
(b)(i) and (b)(ii) above, upon such sale or issuance by (B) the number
of shares of Common Stock sold or issued.
iv. In case the Company shall at any time after the date hereof
issue any Options or Convertible Securities, the following provisions
shall apply in making any adjustment:
(A) The price per share for which Common Stock is issuable
upon the exercise of the Options or upon conversion or exchange
of the Convertible Securities shall be determined by (1) dividing
the total amount, if any, received or receivable by the Company
as consideration for the issuance of such Options or Convertible
Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon exercise of
such Options or the conversion or exchange of such Convertible
Securities, by (2) the aggregate maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon
the conversion or exchange of such Convertible Securities.
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(B) In determining the price per share for which Common
Stock is issuable upon exercise of the Options or conversion or
exchange of the Convertible Securities as set forth above and in
computing any adjustment pursuant to (a) above: the aggregate
maximum number of shares of Common Stock issuable upon the
exercise of such Convertible Securities shall be considered to be
outstanding at the time such Options or Convertible Securities
were issued and to have been issued for such price per share as
determined pursuant to (b)(iv)(A), and the consideration for the
issuance of such Options or Convertible Securities and the amount
of additional consideration payable to the Company upon exercise
of such Options or upon the conversion or exchange of such
Convertible Securities shall be determined in the same manner as
the consideration received upon the issuance or sale of Common
Stock as provided in paragraphs (b)(i) and (b)(ii).
(C) On the expiration of such Options or the termination of
any right to convert or exchange any Convertible Securities, the
number of Warrant Shares subject to this Representative's Warrant
shall forthwith be readjusted to such number of Warrant Shares as
would have been obtained had the adjustments made upon the
issuance of such Options or Convertible Securities been made upon
the basis of the delivery of only the number of shares of Common
Stock actually delivered upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities.
(D) If the minimum purchase price per share of Common Stock
provided for in any Option, or the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock,
shall change or a different purchase price or rate shall become
effective at any time or from time to time (other than pursuant
to any anti-dilution provisions of such Options or Convertible
Securities) then upon such change becoming effective, the number
of Warrant Shares subject to this Representative's Warrant shall
forthwith be increased or decreased to such number of Warrant
Shares as would have been obtained had the adjustments made upon
the granting or issuance of such Options or Convertible
Securities been made upon the basis of (1) the issuance of the
number of shares of Common Stock theretofore
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actually delivered upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities, and the
total consideration received therefor, and (2) the granting or
issuance at the time of such change of any such Options or
Convertible Securities then still outstanding for the
consideration, if any, received by the Company therefor and to be
received on the basis of such changed price or rate of exchange
or conversion.
v. Except as otherwise specifically provided herein, the date of
issuance or sale of Common Stock shall be deemed to be the date the
Company is legally obligated to issue such Common Stock or the date
the Company is legally obligated to issue any Option or Convertible
Security. If the Company shall take a record date for the purpose of
determining holders of Common Stock entitled to (A) receive a dividend
or other distribution payable in Common Stock or in Options or
Convertible Securities or (B) subscribe for or purchase Common Stock,
Options or Convertible Securities, such record date shall be deemed to
be the date of issue or sale of the Common Stock, Options or
Convertible Securities.
vi. The number of shares of Common Stock outstanding at any
given time shall not include treasury shares but the disposition of
any such treasury shares shall be considered an issue or sale of
Common Stock for the purposes of this section.
vii. Anything hereinabove to the contrary notwithstanding, no
adjustment shall be made pursuant to (a) above to the Exercise Price
or to the number of Warrant Shares purchasable upon:
(A) The issuance or sale by the Company of any Common Stock
pursuant to these Representative's Warrants, any securities
offered in a public offering underwritten by Cohig & Associates,
Inc., any shares, Options or Convertible Securities issued and
outstanding at the effective date of such public offering, any
shares issuable pursuant to the Company's stock option plan
currently in effect or warrants outstanding prior to the
Company's initial public offering, provided the total number of
shares issuable pursuant to such plan and warrants does not
exceed 600,000.
(B) The issuance or sale by the Company of any Common Stock
pursuant to any Options or Convertible Securities issued and
outstanding prior to the date of Effective Date of the
Registration Statement or with
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respect to the issuance or sale by the Company of any shares of
Common Stock to the shareholders of International Telephone
Company in a transaction completed simultaneously with the
original issuance of this Representative's Warrant.
(C) The issuance or sale of Common Stock pursuant to the
exercise of Options or conversion or exchange of Convertible
Securities hereinafter issued for which an adjustment has been
made (or was not required to be made) pursuant to the provisions
hereof.
(D) The increase in the number of shares of Common Stock
subject to any Option or Convertible Security referred to in
subsections (A), (B) or (C) hereof pursuant to the provisions of
such Option or Convertible Securities designed to protect against
dilution.
c. If the Company shall at any time subdivide its outstanding Common
Stock by recapitalization, reclassification or split-up thereof, the number
of Warrant Shares subject to this Representative's Warrant immediately
prior to such subdivision shall be proportionately increased, and if the
Company shall at any time combine the outstanding Common Stock by
recapitalization, reclassification or combination thereof, the number of
Warrant Shares subject to this Representative's Warrant immediately prior
to such combination shall be proportionately decreased. Any corresponding
adjustment to the Exercise Price shall become effective at the close of
business on the record date for such subdivision or combination.
d. If the Company after the date hereof shall distribute to the
holders of its Common Stock any securities or other assets (other than a
distribution of Common Stock or a cash distribution made as a dividend
payable out of earnings or out of any earned surplus legally available for
dividends under the laws of the jurisdiction of incorporation of the
Company), the Board of Directors shall be required to make such equitable
adjustment in the Exercise Price in effect immediately prior to the record
date of such distribution as may be necessary to preserve the rights
substantially proportionate to those enjoyed hereunder by the Holder
immediately prior to such distribution. Any such adjustment made in good
faith by the Board of Directors shall be final and binding upon the Holder
and shall become effective as of the record date for such distribution.
e. No adjustment in the number of Warrant Shares subject to this
Representative's Warrant shall be required unless such adjustment would
require an increase
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or decrease in such number of Warrant Shares of at least 1% of the then
adjusted number of Warrant Shares issuable upon exercise of this
Representative's Warrant, provided, however, that any adjustments which by
reason of the foregoing are not required at the time to be made shall be
carried forward and taken into account and included in determining the
amount of any subsequent adjustment; and provided further, however, that in
case the Company shall at any time subdivide or combine the outstanding
Common Stock or issue any additional Common Stock as a dividend, said
percentage shall forthwith be proportionately increased in the case of a
combination or decreased in the case of a subdivision or dividend of Common
Stock so as to appropriately reflect the same. If the Company shall make a
record of the holders of its Common Stock for the purpose of entitling them
to receive any dividend or distribution and legally abandon its plan to pay
or deliver such dividend or distribution then no adjustment in the number
of Warrant Shares subject to this Representative's Warrant shall be
required by reason of the making of such record.
f. Whenever the number of Warrant Shares purchasable upon the
exercise of this Representative's Warrant is adjusted as provided herein,
the Exercise Price shall be adjusted (to the nearest one tenth of a cent)
by respectively multiplying such Exercise Price immediately prior to such
adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares purchasable upon the exercise of this Representative's
Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares purchasable immediately thereafter.
g. In case of any reclassification of the outstanding Common Stock
(other than a change covered by (c) hereof or which solely affects the par
value of such Common Stock) or in the case of any merger or consolidation
of the Company with or into another corporation (other than a consolidation
or merger in which the Company is the continuing corporation and which does
not result in any reclassification or capital reorganization of the
outstanding Common Stock), or in the case of any sale or conveyance to
another corporation of the property of the Company as an entirety or
substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Representative's Warrant shall have the right
thereafter (until the expiration of the right of exercise of this
Representative's Warrant) to receive upon the exercise hereof, for the same
aggregate Exercise Price payable hereunder immediately prior to such event,
the kind and amount of shares of stock or other securities or property
receivable upon such reclassification, capital reorganization, merger
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or consolidation, or upon the dissolution following any sale or other
transfer, by a holder of the number of Warrant Shares obtainable upon the
exercise of this Representative's Warrant immediately prior to such event;
and if any reclassification also results in a change in Common Stock
covered by (c) above, then such adjustment shall be made pursuant to both
this paragraph (g) and paragraph (c). The provisions of this paragraph (g)
shall similarly apply to successive re-classifications, or capital
reorganizations, mergers or consolidations, sales or other transfers.
If the Company after the date hereof shall issue or agree to issue
Common Stock, Options or Convertible Securities, other than as described
herein, and such issuance or agreement would in the opinion of the Board of
Directors of the Company materially affect the rights of the Holders of the
Representative's Warrants, the Exercise Price and the number of Warrant
Shares purchasable upon exercise of the Representative's Warrants shall be
adjusted in such matter, if any, and at such time as the Board of Directors
of the Company, in good faith, may determine to be equitable in the
circumstances. The minutes or unanimous consent approving such action
shall set forth the Board of Director's determination as to whether an
adjustment is warranted and the manner of such adjustment. In the absence
of such determination, any Holder may request in writing that the Board of
Directors make such determination. Any such determination made in good
faith by the Board of Directors shall be final and binding upon the
Holders. If the Board fails, however, to make such determination within
sixty (60) days after such request, such failure shall be deemed a
determination that an adjustment is required.
h. i. Upon occurrence of each event requiring an adjustment of the
Exercise Price and of the number of Warrant Shares purchasable upon
exercise of this Representative's Warrant in accordance with, and as
required by, the terms hereof, the Company shall forthwith employ a
firm of certified public accountants (who may be the regular
accountants for the Company) who shall compute the adjusted Exercise
Price and the adjusted number of Warrant Shares purchasable at such
adjusted Exercise Price by reason of such event in accordance
herewith. The Company shall give to each Holder of the
Representative's Warrants a copy of such computation which shall be
conclusive and shall be binding upon such Holders unless contested by
Holders by written notice to the Company within thirty (30) days after
receipt thereof.
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ii. In case the Company after the date hereof shall propose (A)
to pay any dividend payable in stock to the holders of its Common
Stock or to make any other distribution (other than cash dividends) to
the holders of its Common Stock or to grant rights to subscribe to or
purchase any additional shares of any class or any other rights or
options, (B) to effect any reclassification involving merely the
subdivision or combination of outstanding Common Stock, or (C) any
capital reorganization or any consolidation or merger, or any sale,
transfer or other disposition of its property, assets and business
substantially as an entirety, or the liquidation, dissolution or
winding up of the Company, then in each such case, the Company shall
obtain the computation described above and if an adjustment to the
Exercise Price is required, the Company shall notify the Holders of
the Representative's Warrants of such proposed action, which shall
specify the record date for any such action or if no record date is
established with respect thereto, the date on which such action shall
occur or commence, or the date of participation therein by the holders
of Common Stock if any such date is to be fixed, and shall also set
forth such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action on the Exercise Price and the
number, or kind, or class of shares or other securities or property
obtainable upon exercise of this Representative's Warrant after giving
effect to any adjustment which will be required as a result of such
action. Such notice shall be given at least twenty (20) days prior to
the record date for determining holders of the Common Stock for
purposes of any such action, and in the case of any action for which a
record date is not established then such notice shall be mailed at
least twenty (20) days prior to the taking of such proposed action.
iii. Failure to file any certificate or notice or to give any
notice, or any defect in any certificate or notice, shall not effect
the legality or validity of the adjustment in the Exercise Price or in
the number, or kind, or class of shares or other securities or
property obtainable upon exercise of the Representative's Warrants or
of any transaction giving rise thereto.
i. The Company shall not be required to issue fractional Warrant
Shares upon any exercise of the Representative's Warrants. As to any final
fraction of a Share which the Holder of a Representative's Warrant would
otherwise be entitled to purchase upon such
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exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the market price of a
share of such stock on the business day preceding the day of exercise. The
Holder of a Representative's Warrant, by his acceptance of a
Representative's Warrant, expressly waives any right to receive any
fractional Warrant Shares.
j. Regardless of any adjustments pursuant to this section in the
Exercise Price or in the number, or kind, or class of shares or other
securities or other property obtainable upon exercise of a Representative's
Warrant, a Representative's Warrant may continue to express the Exercise
Price and the number of Warrant Shares obtainable upon exercise at the same
price and number of Warrant Shares as are stated herein.
k. The number of Warrant Shares, the Exercise Price and all other
terms and provisions of the Company's agreement with the Holder of this
Representative's Warrant shall be determined exclusively pursuant to the
provisions hereof.
l. The above provisions of this section 6 shall similarly apply to
successive transactions which require adjustments.
m. Notwithstanding any other language to the contrary herein, the
anti-dilution terms of this Representative's Warrant will not be enforced
so as to provide the Holder the right to receive, or for the accrual of,
cash dividends prior to the exercise of this Representative's Warrant.
7. The issuance of any Warrant Shares or other securities upon the
exercise of this Representative's Warrant and the delivery of certificates or
other instruments representing such securities, or other securities, shall be
made without charge to the Holder for any tax or other charge in respect of such
issuance. The Company shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of any
certificate in a name other than that of the Holder and the Company shall not be
required to issue or deliver any such certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that
such tax has been paid.
8. a. If, at any time after _____________, 1998 (the Effective Date of
the Registration Statement), and ending ____________, 2005 (seven years
after the Effective Date of the Registration Statement), the Company shall
file a registration statement (other than on Form S-4, Form S-8, or any
successor form) with the Securities and Exchange Commission
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(the "Commission") while Warrant Shares are available for purchase upon
exercise of this Representative's Warrant or while any Warrant Shares
(collectively, the "Representative's Warrants and the underlying Warrant
Shares, the "Representative's Securities") are outstanding, the Company
shall, on two occasions only, give the Holder and all the then holders of
such Representative's Securities at least 30 days prior written notice of
the filing of such registration statement. If requested by the Holder or
by any such holder in writing within 20 days after receipt of any such
notice, the Company shall, at the Company's sole expense (other than the
fees and disbursements of counsel for the Holder or such holder and the
underwriting discounts, if any, payable in respect of the securities sold
by the Holder or any such holder), register or qualify the Representative's
Securities of the Holder or any such holders who shall have made such
request concurrently with the registration of such other securities, all to
the extent requisite to permit the public offering and sale of the
Representative's Securities requested to be registered, and will use its
best efforts through its officers, directors, auditors and counsel to cause
such registration statement to become effective as promptly as practicable.
Notwithstanding the foregoing, if the managing underwriter of any such
offering shall advise the Company in writing that, in its opinion, the
distribution of all or a portion of the Representative's Securities
requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely
affect the distribution of such securities by the Company for its own
account, then the Holder or any such holder who shall have requested
registration of his or its Representative's Securities shall delay the
offering and sale of such Representative's Securities (or the portions
thereof so designated by such managing underwriter) for such period, not to
exceed 90 days, as the managing underwriter shall request, provided that no
such delay shall be required as to any Representative's Securities if any
securities of the Company are included in such registration statement for
the account of any person other than the Company and the Holder unless the
securities included in such registration statement for such other person
shall have been reduced pro rata to the reduction of the Representative's
Securities which were requested to be included in such registration.
b. If at any time after __________, 1998 (the Effective Date of the
Registration Statement), and before ___________, 2003 (five years after the
Effective Date of the Registration Statement), the Company shall receive a
written request from holders of Representative's Securities who, in the
aggregate, own (or upon exercise of all Warrant
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Shares will own) a majority of the total number of Warrant Shares, the
Company shall, as promptly as practicable, prepare and file with the
Commission a registration statement sufficient to permit the public
offering and sale of the Representative's Securities, and will use its best
efforts through its officers, directors, auditors and counsel to cause such
registration statement to become effective as promptly as practicable;
provided, however, that the Company shall only be obligated to file and
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obtain effectiveness of one such registration statement for which all
expenses incurred in connection with such registration (other than the fees
and disbursements of counsel for the Holder or such holders and
underwriting discounts, if any, payable in respect of the Representative's
Securities sold by the Holder or any such holder) shall be borne by the
Company. In addition to the one demand registration provided for
hereinabove, the holders of the Representative's Securities who, in the
aggregate, own (or upon exercise of all Representative's Warrants will own)
a majority of the total number of Warrant Shares issued or issuable upon
exercise of the Representative's Warrants may request that the Company
prepare and file a registration statement to permit the public offering and
sale of the Representative's Securities on two additional occasions only,
but the costs of preparation and filing of such additional registration
statements shall be at the then holders' cost and expense unless the
Company elects to register additional shares of Common Stock, in which case
the cost and expense of such registration statements will be prorated
between the Company and the holders of the Representative's Securities
according to the aggregate sales price of the securities being issued.
c. In the event of a registration pursuant to the provisions of this
paragraph 8, the Company shall use its best efforts to cause the
Representative's Securities so registered to be registered or qualified for
sale under the securities or blue sky laws of such jurisdictions as the
Holder or such holders may reasonably request; provided, however, that the
-------- -------
Company shall not be required to qualify to do business in any state by
reason of this paragraph 8(c) in which it is not otherwise required to
qualify to do business and provided further, that the Company has no
obligation to qualify the Representative's Securities where such
qualification would cause any unreasonable delay or expenditure by the
Company.
d. The Company shall keep effective any registration or qualification
contemplated by this paragraph 8 and shall from time to time amend or
supplement each applicable registration statement, preliminary prospectus,
final prospectus, application, document and communication for such period
of time as shall be required to permit the
14
Holder or such holders to complete the offer and sale of the
Representative's Securities covered thereby. The Company shall in no event
be required to keep any such registration or qualification in effect for a
period in excess of nine months from the date on which the Holder and such
holders are first free to sell such Representative's Securities; provided,
--------
however, that if the Company is required to keep any such registration or
-------
qualification in effect with respect to securities other than the
Representative's Securities beyond such period, the Company shall keep such
registration or qualification in effect as it relates to the
Representative's Securities for so long as such registration or
qualification remains or is required to remain in effect in respect of such
other securities.
e. In the event of a registration pursuant to the provisions of this
paragraph 8, the Company shall furnish to the Holder and to each such
holder such reasonable number of copies of the registration statement and
of each amendment and supplement thereto (in each case, including all
exhibits), such reasonable number of copies of each prospectus contained in
such registration statement and each supplement or amendment thereto
(including each preliminary prospectus), all of which shall conform to the
requirements of the Act and the rules and regulations thereunder, and such
other documents as the Holder or such holders may reasonably request in
order to facilitate the disposition of the Representative's Securities
included in such registration.
f. In the event of a registration pursuant to the provisions of this
paragraph 8, the Company shall furnish the Holder and each holder of any
Representative's Securities so registered with an opinion of its counsel to
the effect that (i) the registration statement has become effective under
the Act and no order suspending the effectiveness of the registration
statement, preventing or suspending the use of the registration statement,
any preliminary prospectus, any final prospectus, or any amendment or
supplement thereto has been issued, nor to such counsel's actual knowledge
has the Securities and Exchange Commission or any securities or blue sky
authority of any jurisdiction instituted or threatened to institute any
proceedings with respect to such an order and (ii) the registration
statement and each prospectus forming a part thereof (including each
preliminary prospectus), and any amendment or supplement thereto, complies
as to form with the Act and the rules and regulations thereunder. Such
counsel shall also provide a Blue Sky Memorandum setting forth the
jurisdictions in which the Representative's Securities have been registered
or qualified for sale pursuant to the provisions of paragraph 8(c).
15
g. The Company agrees that until all the Representative's Securities
have been sold under a registration statement or pursuant to Rule 144 under
the Act, it shall keep current in filing all reports, statements and other
materials required to be filed with the Commission to permit holders of the
Representative's Securities to sell such securities under Rule 144.
h. The Holder and any holders who propose to register their
Representative's Securities under the Act shall execute and deliver to the
Company a selling shareholder questionnaire on a form to be provided by the
Company.
9. a. Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless the Holder, any holder of any of the
Representative's Securities, their officers, directors, partners,
employees, agents and counsel, and each person, if any, who controls any
such person within the meaning of Section 15 of the Act or Section 20(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from
and against any and all loss, liability, charge, claim, damage and expense
whatsoever (which shall include, for all purposes of this Section 9, but
not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts
paid in settlement of any claim or litigation), as and when incurred,
arising out of, based upon, or in connection with (i) any untrue statement
or alleged untrue statement of a material fact contained (A) in any
registration statement, preliminary prospectus or final prospectus (as from
time to time amended and supplemented), or any amendment or supplement
thereto, or (B) in any application or other document or communication (in
this Section 9 collectively called an "application") executed by or on
behalf of the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to register or
qualify any of the Representative's Securities under the securities or blue
sky laws thereof or filed with the Commission or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company with respect
to the Holder or any holder of any of the Representative's Securities by or
on behalf of such person expressly for inclusion in any registration
statement, preliminary prospectus, or final prospectus, or any amendment or
supplement thereto, or in any application, as the case may
16
be, or (ii) any breach of any representation, warranty, covenant or
agreement of the Company contained in this Representative's Warrant. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this
Representative's Warrant.
If any action is brought against the Holder or any holder of any of
the Representative's Securities or any of its officers, directors,
partners, employees, agents or counsel, or any controlling persons of such
person (an "indemnified party") in respect of which indemnity may be sought
against the Company pursuant to the foregoing paragraph, such indemnified
party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve
the Company from any liability it may otherwise have to Holder or any
holder of any of the Representative's Securities) and the Company shall
promptly assume the defense of such action, including the employment of
counsel (reasonably satisfactory to such indemnified party or parties) and
payment of expenses. Such indemnified party or parties shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
or parties unless the employment of such counsel shall have been authorized
in writing by the Company in connection with the defense of such action or
the Company shall not have promptly employed counsel reasonably
satisfactory to such indemnified party or parties to have charge of the
defense of such action or such indemnified party or parties shall have
reasonably concluded that there may be one or more legal defenses available
to it or them or to other indemnified parties which are different from or
additional to those available to the Company, in any of which events such
fees and expenses shall be borne by the Company and the Company shall not
have the right to direct the defense of such action on behalf of the
indemnified party or parties. Anything in this paragraph to the contrary
notwithstanding, the Company shall not be liable for any settlement of any
such claim or action effected without its written consent.
b. The Holder and each holder agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who
shall have signed any registration statement covering the Representative's
Securities held by the Holder and each holder and each other person, if
any, who controls the Company within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act, to the same extent as the foregoing
indemnity from the Company to the Holder and each holder in paragraph 9(a),
but
17
only with respect to statements or omissions, if any, made in any
registration statement, preliminary prospectus, or final prospectus (as
from time to time amended and supplemented), or any amendment or supplement
thereto, or in any application, in reliance upon and in conformity with
written information furnished to the Company with respect to the Holder and
each holder by or on behalf of the Holder and each holder expressly for
inclusion in any such registration statement, preliminary prospectus, or
final prospectus, or any amendment or supplement thereto, or in any
application, as the case may be. If any action shall be brought against
the Company or any other person so indemnified based on any such
registration statement, preliminary prospectus, or final prospectus, or any
amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against the Holder and each holder pursuant
to this paragraph 9(b), the Holder and each holder shall have the rights
and duties given to the Company, and the Company and each other person so
indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of paragraph 9(a).
c. To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to paragraph
9(a) or 9(b) (subject to the limitations thereof) but it is found in a
final judicial determination, not subject to further appeal, that such
indemnification may not be enforced in such case, even though this
Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Act, the
Exchange Act or otherwise because the indemnification provided for in this
Section 9 is for any reason held to be unenforceable by the Company and the
Holder and any holder, then the Company (including for this purpose any
contribution made by or on behalf of any director of the Company, any
officer of the Company who signed any such registration statement and any
controlling person of the Company), as one entity, and the Holder and any
holder of any of the Representative's Securities included in such
registration in the aggregate (including for this purpose any contribution
by or on behalf of the Holder or any holder), as a second entity, shall
contribute to the losses, liabilities, claims, damages and expenses
whatsoever to which any of them may be subject, on the basis of relevant
equitable considerations such as the relative fault of the Company and the
Holder or any such holder in connection with the facts which resulted in
such losses, liabilities, claims, damages and expenses. The relative
fault, in the case of an untrue statement, alleged untrue statement,
omission or alleged omission, shall be
18
determined by, among other things, whether such statement, alleged
statement, omission or alleged omission relates to information supplied by
the Company, by the Holder or by any holder of Representative's Securities
included in such registration, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
alleged statement, omission or alleged omission. The Company and the
Holder agree that it would be unjust and inequitable if the respective
obligations of the Company and the Holder for contribution were determined
by pro rata or per capita allocation of the aggregate losses, liabilities,
claims, damages and expenses (even if the Holder and the other indemnified
parties were treated as one entity for such purpose) or by any other method
of allocation that does not reflect the equitable considerations referred
to in this paragraph 9(c). No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. For purposes of this paragraph 9(c), each
person, if any, who controls the Holder or any holder of any of the
Representative's Securities within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and each officer, director, partner,
employee, agent and counsel of each such person, shall have the same rights
to contribution as such person and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, each officer of the Company who shall have signed any such
registration statement, and each director of the Company shall have the
same rights to contribution as the Company, subject in each case to the
provisions of this paragraph 9(c). Anything in this paragraph 9(c) to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its
written consent. This paragraph 9(c) is intended to supersede any right to
contribution under the Act, the Exchange Act or otherwise.
10. Unless the Representative's Securities have been registered or an
exemption from such registration is available, the Warrant Shares issued upon
exercise of the Representative's Warrants shall be subject to a stop transfer
order and the certificate or certificates evidencing any such Warrant Shares
shall bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
NOR HAVE THEY BEEN REGISTERED UNDER THE SECURITIES ("BLUE SKY") LAWS OF ANY
STATE. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR
HYPOTHECATED UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND UNDER THE APPLICABLE STATE SECURITIES ("BLUE SKY") LAWS OR
UNLESS THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT
AND LAWS IS ESTABLISHED TO THE SATISFACTION OF THE
19
COMPANY, WHICH MAY NECESSITATE A WRITTEN OPINION OF SELLER'S COUNSEL
SATISFACTORY TO COMPANY COUNSEL.
11. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Representative's Warrant (and upon
surrender of any Representative's Warrant if mutilated), and upon reimbursement
of the Company's reasonable incidental expenses, the Company shall execute and
deliver to the Holder thereof a new Representative's Warrant of like date, tenor
and denomination.
12. The Holder of any Representative's Warrant shall not have, solely on
account of such status, any rights of a stockholder of the Company, either at
law or in equity, or to any notice of meetings of stockholders or of any other
proceedings of the Company, except as provided in this Representative's Warrant.
13. This Representative's Warrant shall be construed in accordance with
the laws of the State of Colorado, without giving effect to conflict of laws.
Dated: _____________, 1998
COMMUNICATIONS SYSTEMS INTERNATIONAL, INC.
By:________________________________________
Robert A. Spade, Chief Executive Officer
[SEAL]
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
attached Representative's Warrant.)
FOR VALUE RECEIVED, ___________________________________ hereby sells,
assigns and transfers unto ________________________ Representative's Warrants to
purchase __________ shares of Common Stock of Communications Systems
International, Inc. (the "Company"), together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint
____________________________ attorney to transfer such Representative's Warrants
on the books of the Company, with full power of substitution.
Dated:_____________________
Signature:_______________________________________
Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Representative's Warrant in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must
be guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
21
ELECTION TO EXERCISE
(To be executed by the holder if such holder desires to
exercise the attached Representative's Warrant)
The undersigned hereby exercises his or its rights to subscribe for
__________ shares of Common Stock covered by the within Representative's Warrant
(each as defined in the within Representative's Warrant) and tenders payment
herewith in the amount of $__________ in accordance with the terms thereof, and
requests that certificates for such Warrants be issued in the name of, and
delivered to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print Name, Address and Social Security or
Tax Identification Number)
and, if such number of Warrants (or portions thereof) shall not be all the
Warrants covered by the within Representative's Warrant, that a new
Representative's Warrant for the balance of the Representative's Warrants (or
portions thereof) covered by the within Representative's Warrant be registered
in the name of, and delivered to, the undersigned at the address stated below.
Name:_________________________________________________________________________
(Print)
Address:______________________________________________________________________
________________________________________
(Signature)
Dated:__________________________________ Signature Guaranteed:
NOTICE
The signature on the foregoing Assignment must correspond to the name
as written upon the face of this Representative's Warrant in every particular,
without alteration or enlargement or any change whatsoever. Signature(s) must be
guaranteed by an eligible guarantor institution which is a participant in a
Securities Transfer Association recognized program.
22