COMMON STOCK PURCHASE WARRANT VERSO TECHNOLOGIES, INC.
Exhibit 4.1
(Placement Agent)
NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS
SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN CONNECTION
WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
COMMON STOCK PURCHASE WARRANT
VERSO TECHNOLOGIES, INC.
| Warrant Shares: [ ] | Initial Exercise Date: January 31, 2007 |
THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received,
(the “Holder”) is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the date hereof (the
“Initial Exercise Date”) and on or prior to the close of business on the five year
anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to
subscribe for and purchase from Verso Technologies, Inc., a Minnesota corporation (the
“Company”), up to shares (the “Warrant Shares”) of common stock, par value
$.01 per share, of the Company (the “Common Stock”). The purchase price of one share of
Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).
Section 1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain Securities Purchase Agreement (the
“Purchase Agreement”), dated January 30, 2006, among the Company and the purchasers
signatory thereto.
Section 2. Exercise.
(a) Exercise of Warrant. Exercise of the purchase rights represented by this Warrant
may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on
or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the
Notice of Exercise Form annexed hereto (or such other office or agency of the Company as it may
designate by notice in writing to the registered Holder at the address of such Holder appearing on
the books of the Company); and, within 3 Trading Days of the date said Notice of Exercise is
delivered to the Company, the Company shall have received payment
of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s
check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder
shall not be required to physically surrender this Warrant to the Company until the Holder has
purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full,
in which case, the Holder shall surrender this Warrant to the Company for cancellation within 3
Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial
exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares
available hereunder shall have the effect of lowering the outstanding number of Warrant Shares
purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The
Holder and the Company shall maintain records showing the number of Warrant Shares purchased and
the date of such purchases. The Company shall deliver any objection to any Notice of Exercise Form
within 1 Business Day of receipt of such notice. In the event of any dispute or discrepancy, the
records of the Holder shall be controlling and determinative in the absence of manifest error. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of
the provisions of this paragraph, following the purchase of a portion of the Warrant Shares
hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be
less than the amount stated on the face hereof.
(b) Exercise Price. The exercise price per share of the Common Stock under this
Warrant shall be $1.25, subject to adjustment hereunder (the “Exercise Price”).
(c) Cashless Exercise. If at any time after one year from the date of issuance of
this Warrant there is no effective Registration Statement registering, or no current prospectus
available for, the resale of the Warrant Shares by the Holder, then this Warrant may also be
exercised at such time by means of a “cashless exercise” in which the Holder shall be entitled to
receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing
[(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date
of such election;
(B) = the Exercise Price of this Warrant, as adjusted; and
(X) = the number of Warrant Shares issuable upon exercise of this
Warrant in accordance with the terms of this Warrant by means of a cash
exercise rather than a cashless exercise.
Notwithstanding anything herein to the contrary, unless the Company notifies the Holder in
writing at least 45 calendar days prior to the Termination Date, on the Termination Date, this
Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
(d) Exercise Limitations.
(i) Holder’s Restrictions. The Company shall not effect any exercise of this Warrant,
and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section
2(c) or otherwise, to the extent that after giving effect to such issuance after
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exercise as set forth on the applicable Notice of Exercise, such Holder (together with such
Xxxxxx’s Affiliates, and any other person or entity acting as a group together with such Holder or
any of such Holder’s Affiliates), as set forth on the applicable Notice of Exercise, would
beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of shares of Common Stock beneficially owned by such Holder
and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of
this Warrant with respect to which such determination is being made, but shall exclude the number
of shares of Common Stock which would be issuable upon (A) exercise of the remaining, nonexercised
portion of this Warrant beneficially owned by such Holder or any of its Affiliates and (B) exercise
or conversion of the unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Warrants) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially owned by such Holder or any of
its affiliates. Except as set forth in the preceding sentence, for purposes of this Section
2(d)(i), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder, it being acknowledged by a Holder that
the Company is not representing to such Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be
filed in accordance therewith. To the extent that the limitation contained in this Section 2(d)
applies, the determination of whether this Warrant is exercisable (in relation to other securities
owned by such Holder together with any Affiliates) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of a Holder, and the submission of a Notice of Exercise
shall be deemed to be each Holder’s determination of whether this Warrant is exercisable (in
relation to other securities owned by such Holder together with any Affiliates) and of which
portion of this Warrant is exercisable, in each case subject to such aggregate percentage
limitation, and the Company shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as contemplated above shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 2(d), in determining the number of
outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common
Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y)
a more recent public announcement by the Company or (z) any other notice by the Company or the
Company’s Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the
written or oral request of a Holder, the Company shall within two Trading Days confirm orally and
in writing to such 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 this Warrant, by such Holder or its
Affiliates since the date as of which such number of outstanding shares of Common Stock was
reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon exercise of this Warrant. The Beneficial Ownership Limitation provisions of
this Section 2(d)(i) may be waived by such Xxxxxx, at the election of such Holder, upon not less
than 61 days’ prior notice to the Company to change the Beneficial Ownership Limitation to 9.99% of
the number of shares of the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock upon exercise of this Warrant, and the provisions of this
Section 2(d) shall continue to apply. Upon such a change by a Holder of the Beneficial
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Ownership Limitation from such 4.99% limitation to such 9.99% limitation, the Beneficial
Ownership Limitation may not be further waived by such Holder. The provisions of this paragraph
shall be construed and implemented in a manner otherwise than in strict conformity with the terms
of this Section 2(d)(i) to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes
or supplements necessary or desirable to properly give effect to such limitation. The limitations
contained in this paragraph shall apply to a successor holder of this Warrant.
(e) Mechanics of Exercise.
(i) Authorization of Warrant Shares. The Company covenants that all Warrant Shares
which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes, liens and charges created by the Company in
respect of the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
(ii) Delivery of Certificates Upon Exercise. Certificates for shares purchased
hereunder shall be transmitted by the transfer agent of the Company to the Holder by crediting the
account of the Holder’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission (“DWAC”) system if the Company is a participant in such system,
and otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise
within 3 Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of
this Warrant (if required) and payment of the aggregate Exercise Price as set forth above
(“Warrant Share Delivery Date”). This Warrant shall be deemed to have been exercised on
the date the Exercise Price is received by the Company. The Warrant Shares shall be deemed to have
been issued, and Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price (or by cashless exercise, if permitted)
and all taxes required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior to the
issuance of such shares, have been paid. If the Company fails for any reason to deliver to the
Holder certificates evidencing the Warrant Shares subject to a Notice of Exercise by the Warrant
Share Delivery Date, the Company shall pay to such Holder, in cash, as liquidated damages and not
as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the
Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to
$20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for
each Trading Day after such Warrant Share Delivery Date until such certificates are delivered.
(iii) Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant
certificate, at the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be
identical with this Warrant.
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(iv) Rescission Rights. If the Company fails to cause its transfer agent to transmit
to the Holder a certificate or certificates representing the Warrant Shares pursuant to this
Section 2(e)(iv) by the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.
(v) Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.
In addition to any other rights available to the Holder, if the Company fails to cause its transfer
agent to transmit to the Holder a certificate or certificates representing the Warrant Shares
pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the
Holder is required by its broker to purchase (in an open market transaction or otherwise) or the
Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise
(a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount by which (x)
the Holder’s total purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant
Shares that the Company was required to deliver to the Holder in connection with the exercise at
issue times (B) the price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored or deliver to the
Holder the number of shares of Common Stock that would have been issued had the Company timely
complied with its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such
purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the
Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to
pursue any other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver certificates representing shares of Common Stock upon exercise of the
Warrant as required pursuant to the terms hereof.
(vi) No Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share
which Holder would otherwise be entitled to purchase upon such exercise, the Company shall at its
election, either pay a cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price or round up to the next whole share.
(vii) Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall
be made without charge to the Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the
Company, and such certificates shall be issued in the name of the Holder or in such name or names
as may be directed by the Holder; provided, however, that in the event certificates
for Warrant Shares are to be issued in a name other than the name of the Holder, this
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Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder; and the Company may require, as a condition thereto, the
payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.
(viii) Closing of Books. The Company will not close its stockholder books or records
in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
Section 3. Certain Adjustments.
(a) Stock Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (A) pays a stock dividend or otherwise make a distribution or distributions on shares
of its Common Stock or any other equity or equity equivalent securities payable in shares of Common
Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the
Company upon exercise of this Warrant), (B) subdivides outstanding shares of Common Stock into a
larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares
of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the
Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding immediately after such event
and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted.
Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(b) Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable,
at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell
or grant any right to reprice its securities, or otherwise dispose of or issue (or announce any
offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock
Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share
less than the then Exercise Price (such lower price, the “Base Share Price” and such
issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock or Common
Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to
warrants, options or rights per share which are issued in connection with such issuance, be
entitled to receive shares of Common Stock at an effective price per share which is less than the
Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on
such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to
equal the Base Share Price, but in no event will the number of shares issuable upon exercise of the
Warrant be increased in connection with such Dilutive Issuance. Such adjustment shall be made
whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing,
no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt
Issuance. The Company shall notify the
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Holder in writing, no later than the Trading Day following the issuance of any Common Stock or
Common Stock Equivalents subject to this Section 3(b), indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and other pricing terms (such
notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the
Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of
any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a
number of Warrant Shares based upon the Base Share Price regardless of whether the Holder
accurately refers to the Base Share Price in the Notice of Exercise.
(c) Subsequent Rights Offerings. If the Company, at any time while the Warrant is
outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to
Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share
less than the VWAP at the record date mentioned below, then the Exercise Price shall be multiplied
by a fraction, of which the denominator shall be the number of shares of the Common Stock
outstanding on the date of issuance of such rights or warrants plus the number of additional shares
of Common Stock offered for subscription or purchase, and of which the numerator shall be the
number of shares of the Common Stock outstanding on the date of issuance of such rights or warrants
plus the number of shares which the aggregate offering price of the total number of shares so
offered (assuming receipt by the Company in full of all consideration payable upon exercise of such
rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever
such rights or warrants are issued, and shall become effective immediately after the record date
for the determination of stockholders entitled to receive such rights, options or warrants.
(d) Pro Rata Distributions. If the Company, at any time prior to the Termination
Date, shall distribute to all holders of Common Stock (and not to Holders of the Warrants)
evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Stock (which shall be subject to
Section 3(b)), then in each such case the Exercise Price shall be adjusted by multiplying the
Exercise Price in effect immediately prior to the record date fixed for determination of
stockholders entitled to receive such distribution by a fraction of which the denominator shall be
the VWAP determined as of the record date mentioned above, and of which the numerator shall be such
VWAP on such record date less the then per share fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good faith. In either case
the adjustments shall be described in a statement provided to the Holder of the portion of assets
or evidences of indebtedness so distributed or such subscription rights applicable to one share of
Common Stock. Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
(e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (A)
the Company effects any merger or consolidation of the Company with or into another Person, (B) the
Company effects any sale of all or substantially all of its assets in one or a series of related
transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which holders of Common Stock are permitted to
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tender or exchange their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which
the Common Stock is effectively converted into or exchanged for other securities, cash or property
(each “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the
Holder shall have the right to receive, for each Warrant Share that would have been issuable upon
such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of
shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the
surviving corporation, and any additional consideration (the “Alternate Consideration”)
receivable as a result of such merger, consolidation or disposition of assets by a Holder of the
number of shares of Common Stock for which this Warrant is exercisable immediately prior to such
event. For purposes of any such exercise, the determination of the Exercise Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and
the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction, then the Holder shall be given the same choice as to the
Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the
Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant
consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant
into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or surviving entity to
comply with the provisions of this Section 3(e) and insuring that this Warrant (or any such
replacement security) will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental
Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule
13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction
involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select
Market, the Nasdaq Global Market, the Nasdaq Capital Market, the Company or any successor entity
shall pay at the Holder’s option, exercisable at any time concurrently with or within 30 days after
the consummation of the Fundamental Transaction, an amount of cash equal to the value of this
Warrant as determined in accordance with the Black-Scholes option pricing formula using an expected
volatility equal to the 100 day historical price volatility obtained from the HVT function on
Bloomberg L.P. as of the trading day immediately prior to the public announcement of the
Fundamental Transaction.
(f) Calculations. All calculations under this Section 3 shall be made to the nearest
cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the
number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be
the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.
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(g) 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.
(h) Notice to Holder.
(i) Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to
any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting
forth the Exercise Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment. If the Company issues a variable rate security, despite the prohibition
thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or
Common Stock Equivalents at the lowest possible conversion or exercise price at which such
securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in
the Purchase Agreement).
(ii) Notice to Allow Exercise by Xxxxxx. If (A) the Company shall declare a dividend
(or any other distribution in whatever form) on the Common Stock; (B) the Company shall declare a
special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall
authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any reclassification of the Common
Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or
substantially all of the assets of the Company, of any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property; (E) the Company shall authorize the
voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company;
then, in each case, the Company shall cause to be mailed to the Holder at its last address as it
shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock
of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or
share exchange is expected to become effective or close, and the date as of which it is expected
that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation,
merger, sale, transfer or share exchange; provided that the failure to mail such notice or any
defect therein or in the mailing thereof shall not affect the validity of the corporate action
required to be specified in such notice. The Holder is entitled to exercise this Warrant during
the 20-day period commencing on the date of such notice to the effective date of the event
triggering such notice.
Section 4. Transfer of Warrant.
(a) Transferability. Subject to compliance with any applicable securities laws and
the conditions set forth in Section 4(d) hereof and to the provisions of Section 4.1 of the
Purchase Agreement, this Warrant and all rights hereunder (including, without limitation, any
registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the
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principal office of the Company or its designated agent, together with a written assignment of
this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or
attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of
Warrant Shares without having a new Warrant issued.
(b) New Warrants. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued, signed by the Holder
or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such
notice.
(c) Warrant Register. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in the name of the
record Holder hereof from time to time. The Company may deem and treat the registered Holder of
this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any
distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
(d) Transfer Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered
pursuant to an effective registration statement under the Securities Act and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing such transfer,
that (i) the Holder or transferee of this Warrant, as the case may be, furnish to the Company a
written opinion of counsel (which opinion shall be in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that such transfer may be made
without registration under the Securities Act and under applicable state securities or blue sky
laws, and (ii) the Holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company, and (iii) the transferee be an “accredited investor”
as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated under the Securities
Act or a “qualified institutional buyer” as defined in Rule 144A(a) promulgated under the
Securities Act.
Section 5. Miscellaneous.
(a) No Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder
to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof
as set forth in Section 2(e)(ii).
(b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant or any stock certificate relating to the Warrant
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Shares, and in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond),
and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated as of such
cancellation, in lieu of such Warrant or stock certificate.
(c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of
any action or the expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next succeeding Business Day.
(d) Authorized Shares.
The Company covenants that during the period the Warrant is outstanding, it will reserve from
its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance
of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers
who are charged with the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant.
The Company will take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law or regulation, or
of any requirements of the Trading Market upon which the Common Stock may be listed.
Except and to the extent as waived or consented to by the Holder, the Company shall not by any
action, including, without limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or performance of any of the
terms of this Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without limiting the generality
of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the
amount payable therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and
(c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Before taking any action which would result in an adjustment in the number of Warrant Shares
for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
(e) Jurisdiction. All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the provisions of the
Purchase Agreement as though the Holder were a party thereto.
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(f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the
exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state
and federal securities laws.
(g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise
any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise
prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any
provision of this Warrant, which results in any material damages to the Holder, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and expenses, including, but
not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by
Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights,
powers or remedies hereunder.
(h) Notices. All notices or other communications required or permitted hereunder shall
be in writing and shall be mailed by express, registered or certified mail, postage prepaid, return
receipt requested, sent by telecopy (with confirmation of transmission received and followed by the
posting of a “hard copy” of the notice or communication by first-class U.S. mail), or by courier
service guaranteeing overnight delivery with charges prepaid, or otherwise delivered by hand or by
messenger, and shall be conclusively deemed to have been received by a party hereto and to be
effective on the day on which delivered or telecopied to such party at its address set forth below
(or at such other address as such party shall specify to the other parties hereto in writing), or,
if sent by registered or certified mail, on the third business day after the day on which mailed,
addressed to such party at such address. In the case of the Holder, such notices and
communications shall be addressed to its address as shown on the books maintained by the Company,
unless the Holder shall notify the Company in writing that notices and communications should be
sent to a different address, in which case such notices and communications shall be sent to the
address specified by the Holder. In the case of the Company, such notices and communications shall
be addressed as follows: Attention: Chief Financial Officer, Verso Technologies, Inc., 000
Xxxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx 00000.
(i) Limitation of Liability. No provision hereof, in the absence of any affirmative
action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of
the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase
price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company.
(j) Remedies. Holder, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of its rights under
this Warrant. The Company agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive and not to assert the defense in any action for specific performance that a remedy at law
would be adequate.
(k) Successors and Assigns. Subject to applicable securities laws, this Warrant and
the rights and obligations evidenced hereby shall inure to the benefit of and be
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binding upon the successors of the Company and the successors and permitted assigns of Holder.
The provisions of this Warrant are intended to be for the benefit of all Holders from time to time
of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares.
(l) Amendment. This Warrant may be modified or amended or the provisions hereof
waived with the written consent of the Company and the Holder; provided, however, that the Holder
shall have no right to object or consent to any modification, amendment or waiver of any of the
provisions in the Purchase Agreement notwithstanding the fact that such provisions may affect the
terms of this Warrant.
(m) Severability. Wherever possible, each provision of this Warrant shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Warrant.
(n) Headings. The headings used in this Warrant are for the convenience of reference
only and shall not, for any purpose, be deemed a part of this Warrant.
[Signature page follows]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized as of the date first above indicated.
| VERSO TECHNOLOGIES, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
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NOTICE OF EXERCISE
TO: VERSO TECHNOLOGIES, INC.
(1) The undersigned hereby elects to purchase Warrant Shares of the Company pursuant
to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of
the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
| [ ] in lawful money of the United States; or | |||
[ ] [if permitted] the cancellation of such number of Warrant Shares
as is necessary, in accordance with the formula set forth in subsection 2(c), to
exercise this Warrant with respect to the maximum number of Warrant Shares
purchasable pursuant to the cashless exercise procedure set forth in subsection
2(c). |
(3) Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery
of a certificate to:
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in
Regulation D promulgated under the Securities Act of 1933, as amended.
[SIGNATURE OF HOLDER]
| Name of Investing Entity: | ||||||
| Signature of Authorized Signatory of Investing Entity: | ||||||
| Name of Authorized Signatory: | ||||||
| Title of Authorized Signatory: | ||||||
Date: |
||||||
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [ ] all of or [
] shares of the foregoing Warrant and all rights
evidenced thereby are hereby assigned to
whose address is .
whose address is .
Dated:
,
| Holder’s Signature: | ||||||
| Holder’s Address: | ||||||
Signature Guaranteed:
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the
face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign the foregoing
Warrant.
