Exhibit 4.1
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE OFFERED FOR SALE, SOLD OR
TRANSFERRED UNLESS A REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS SHALL BE EFFECTIVE WITH RESPECT THERETO, OR AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
WARRANT
TO PURCHASE COMMON STOCK
OF
VERSO TECHNOLOGIES, INC.
Issue Date: Xxxxx 00, 0000 Xxxxxxx No. ___
THIS CERTIFIES that _______________________ or any subsequent holder hereof
(the "Holder"), has the right to purchase from VERSO TECHNOLOGIES, INC., a
Minnesota corporation (the "Company"), up to [________] fully paid and
nonassessable shares of the Company's common stock, par value $0.01 per share
(the "Common Stock"), subject to adjustment and the other terms as provided
herein, at a price per share equal to the Exercise Price (as defined below), at
any time and from time to time, subject to obtaining Stockholder Approval (as
defined in Section 4(b) hereof), beginning on February 4, 2006 (the
"Commencement Date") and ending at 6:00 p.m., eastern time, on February 4, 2010
(or, if such date is not a Business Day, on the Business Day immediately
following such date) (the "Expiration Date"). This Warrant is issued in
connection with the financing conducted by the Company pursuant to that certain
Securities Purchase Agreement, dated as of February 4, 2005 (the "Securities
Purchase Agreement"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings set forth in the Securities Purchase
Agreement.
1. Exercise.
(a) Right to Exercise; Exercise Price. Subject to obtaining Stockholder
Approval, the Holder shall have the right to exercise this Warrant at any time
and from time to time during the period beginning on the Commencement Date and
ending on the Expiration Date as to all or any part of the shares of Common
Stock covered hereby (the "Warrant Shares"). The "Exercise Price" for each
Warrant Share purchased by the Holder upon the exercise of this Warrant shall be
equal to seventy two cents ($.72), subject to adjustment for the events
specified in Section 6 below.
(b) Exercise Notice. In order to exercise this Warrant, the Holder shall
send to the Company by facsimile transmission, at any time prior to 6:00 p.m.,
eastern time, on the Business Day on which the Holder wishes to effect such
exercise (the "Exercise Date"), (i) a notice of exercise in substantially the
form attached hereto as Exhibit A (the "Exercise Notice"), and (ii) a copy of
the original Warrant, and, in the case of a Cash Exercise (as defined below),
the Holder shall pay the Exercise Price to the Company by wire transfer of
immediately available funds. The Exercise Notice shall state the name or names
in which the shares of Common Stock that are issuable on such exercise shall be
issued. In the case of a dispute between the Company and the Holder as to the
calculation of the Exercise Price or the number of Warrant Shares issuable
hereunder (including, without limitation, the calculation of any adjustment
pursuant to Section 6 below), the Company shall issue to the Holder the number
of Warrant Shares that are not disputed within the time periods specified in
Section 2 below and shall submit the disputed calculations to a certified public
accounting firm of national reputation (other than the Company's regularly
retained accountants) within two (2) Business Days following the date on which
the Holder's Exercise Notice is delivered to the Company. The Company shall
cause such accountant to calculate the Exercise Price and/or the number of
Warrant Shares issuable hereunder and to notify the Company and the Holder of
the results in writing no later than three (3) Business Days following the day
on which such accountant received the disputed calculations (the "Dispute
Procedure"). Such accountant's calculation shall be deemed conclusive absent
manifest error. The fees of any such accountant shall be borne by the party
whose calculations were most at variance with those of such accountant.
(c) Holder of Record. The Holder shall, for all purposes, be deemed to have
become the holder of record of the Warrant Shares specified in an Exercise
Notice on the Exercise Date specified therein, irrespective of the date of
delivery of such Warrant Shares. Except as specifically provided herein, nothing
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company prior to the Exercise Date.
(d) Cancellation of Warrant. This Warrant shall be canceled upon its
exercise in full and, if this Warrant is exercised in part, the Company shall,
at the time that it delivers Warrant Shares to the Holder pursuant to such
exercise as provided herein, issue a new warrant, and deliver to the Holder a
certificate representing such new warrant, with terms identical in all respects
to this Warrant (except that such new warrant shall be exercisable into the
number of shares of Common Stock with respect to which this Warrant shall remain
unexercised); provided, however, that the Holder shall be entitled to exercise
all or any portion of such new warrant at any time following the time at which
this Warrant is exercised, regardless of whether the Company has actually issued
such new warrant or delivered to the Holder a certificate therefor.
2. Delivery of Warrant Shares Upon Exercise. Upon receipt of a fax copy of
an Exercise Notice pursuant to Section 1 above, the Company shall, (A) in the
case of a Cash Exercise, no later than the close of business on the later to
occur of (i) the third (3rd) Business Day following the Exercise Date specified
in such Exercise Notice and (ii) such later date on which the Company shall have
received payment of the Exercise Price, (B) in the case of a Cashless Exercise
(as defined below), no later than the close of business on the third (3rd)
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Business Day following the Exercise Date specified in such Exercise Notice, and
(C) with respect to Warrant Shares that are the subject of a Dispute Procedure,
the close of business on the third (3rd) Business Day following the
determination made pursuant to Section 1(b) (each of the dates specified in (A),
(B) or (C) being referred to as a "Delivery Date"), issue and deliver or caused
to be delivered to the Holder the number of Warrant Shares as shall be
determined as provided herein. The Company shall effect delivery of Warrant
Shares to the Holder, as long as the Company's designated transfer agent (the
"Transfer Agent") participates in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program ("FAST") and no restrictive legend is
required pursuant to the terms of this Warrant or the Securities Purchase
Agreement, by crediting the account of the Holder or its nominee at DTC (as
specified in the applicable Exercise Notice) with the number of Warrant Shares
required to be delivered, no later than the close of business on such Delivery
Date. In the event that the Transfer Agent is not a participant in FAST or if
the Holder so specifies in a Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant Shares by
delivering to the Holder or its nominee physical certificates representing such
Warrant Shares, no later than the close of business on such Delivery Date.
Warrant Shares delivered to the Holder shall not contain any restrictive legend
unless such legend is required pursuant to the terms of the Securities Purchase
Agreement.
3. Failure to Deliver Warrant Shares.
(a) In the event that the Company fails for any reason to deliver to the
Holder the number of Warrant Shares specified in the applicable Exercise Notice
on or before the Delivery Date therefor (an "Exercise Default"), the Company
shall pay to the Holder payments ("Exercise Default Payments") in the amount of
(i) (N/365) multiplied by (ii) the aggregate Exercise Price of the Warrant
Shares which are the subject of such Exercise Default multiplied by (iii) the
lower of twelve percent (12%) per annum and the maximum rate permitted by
applicable law (the "Default Interest Rate"), where "N" equals the number of
days elapsed between the original Delivery Date of such Warrant Shares and the
date on which all of such Warrant Shares are issued and delivered to the Holder.
Cash amounts payable hereunder shall be paid on or before the fifth (5th)
Business Day of each calendar month following the calendar month in which such
amount has accrued.
(b) In the event of an Exercise Default, the Holder may, upon written
notice to the Company (an "Exercise Default Notice"), regain on the date of such
notice the rights of the Holder under the exercised portion of this Warrant that
is the subject of such Exercise Default. In the event of such Exercise Default
and delivery of an Exercise Default Notice, the Holder shall retain all of the
Holder's rights and remedies with respect to the Company's failure to deliver
such Warrant Shares (including without limitation the right to receive the cash
payments specified in Section 3(a) above).
(c) The Holder's rights and remedies hereunder are cumulative, and no right
or remedy is exclusive of any other. In addition to the amounts specified
herein, the Holder shall have the right to pursue all other remedies available
to it at law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Nothing herein shall limit the Holder's
right to pursue actual damages for the Company's failure to issue and deliver
Warrant Shares on the applicable Delivery Date (including, without limitation,
damages relating
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to any purchase of Common Stock by the Holder to make delivery on a sale
effected in anticipation of receiving Warrant Shares upon exercise, such damages
to be in an amount equal to (A) the aggregate amount paid by the Holder for the
Common Stock so purchased minus (B) the aggregate amount of net proceeds, if
any, received by the Holder from the sale of the Warrant Shares issued by the
Company pursuant to such exercise).
4. Exercise Limitations. In no event shall a Holder be permitted to
exercise this Warrant, or part hereof:
(a) if, upon such exercise the number of shares of Common Stock
beneficially owned by the Holder (other than shares which would otherwise be
deemed beneficially owned except for being subject to a limitation on conversion
or exercise analogous to the limitation contained in this Section 4(a)), would
exceed 4.99% of the number of shares of Common Stock then issued and
outstanding. As used herein, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. To the extent that the limitation contained
in this Section 4(a) applies, the submission of an Exercise Notice by the Holder
shall be deemed to be the Holder's representation that this Warrant is
exercisable pursuant to the terms hereof and the Company shall be entitled to
rely on such representation without making any further inquiry as to whether
this Section 4(a) applies. Nothing contained herein shall be deemed to restrict
the right of a Holder to exercise this Warrant, or part thereof, at such time as
such exercise will not violate the provisions of this Section 4(a). This Section
4(a) may not be amended unless such amendment is approved by the holders of a
majority of the Common Stock then outstanding; provided, however, that the
limitations contained in this Section 4(a) shall cease to apply (x) upon sixty
(60) days' prior written notice from the Holder to the Company, or (y)
immediately upon written notice from the Holder to the Company at any time after
the public announcement or other disclosure of a Major Transaction (as defined
below) or a Change of Control; or
(b) unless and until Stockholder Approval has been obtained.
"Stockholder Approval" means the (i) affirmative vote of the holders of such
number of votes cast at a meeting of stockholders approving the issuance of
Common Stock in excess of 19.99% of the number of shares of Common Stock
outstanding on February 4, 2005 (subject to adjustment upon a stock split, stock
dividend or similar event) as may be required under the applicable listing
requirements of the Principal Market; and (ii) the affirmative vote of the
holders of the number of shares of outstanding Common Stock required under the
Minnesota Business Corporation Code to approve an amendment to the Company's
Articles of Incorporation to increase the number of authorized shares of Common
Stock to a number sufficient to permit the conversion or the exercise in full
(without regard to any restriction on such conversion or exercise) of at least
(1) all the Debentures, the Series A Warrants and the Series B Warrants issued
pursuant to the Securities Purchase Agreement, and (2) all warrants issued or to
be issued as contemplated by Schedule 3.14 to the Securities Purchase Agreement.
5. Payment of the Exercise Price; Cashless Exercise. The Holder may pay the
Exercise Price in either of the following forms or, at the election of Holder, a
combination thereof:
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(a) through a cash exercise (a "Cash Exercise") by delivering immediately
available funds, or
(b) through a cashless exercise (a "Cashless Exercise"), as hereinafter
provided. The Holder may effect a Cashless Exercise by surrendering this Warrant
to the Company and noting on the Exercise Notice that the Holder wishes to
effect a Cashless Exercise, upon which the Company shall issue to the Holder the
number of Warrant Shares determined as follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to the Holder;
Y = the number of Warrant Shares with respect to which this Warrant is
being exercised;
A = the Market Price as of the Exercise Date; and
B = the Exercise Price.
For purposes of Rule 144, it is intended and acknowledged that the Warrant
Shares issued in a Cashless Exercise transaction shall be deemed to have been
acquired by the Holder, and the holding period for the Warrant Shares required
by Rule 144 shall be deemed to have been commenced, on the date this Warrant is
originally issued (the "Issue Date").
6. Anti-Dilution Adjustments; Distributions; Other Events. The Exercise
Price and the number of Warrant Shares issuable hereunder shall be subject to
adjustment from time to time as provided in this Section 6. In the event that
any adjustment of the Exercise Price required herein results in a fraction of a
cent, the Exercise Price shall be rounded up or down to the nearest one
hundredth of a cent.
(a) Subdivision or Combination of Common Stock. If the Company, at any time
after the Issue Date, subdivides (by any stock split, stock dividend,
recapitalization, reorganization, reclassification or otherwise) the outstanding
shares of Common Stock into a greater number of shares, then effective upon the
close of business on the record date for effecting such subdivision, the
Exercise Price in effect immediately prior to such subdivision will be
proportionately reduced. If the Company, at any time after the Issue Date,
combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the outstanding shares of Common Stock into a
smaller number of shares, then, effective upon the close of business on the
record date for effecting such combination, the Exercise Price in effect
immediately prior to such combination will be proportionally increased.
(b) Distributions. If, at any time after the Issue Date, the Company
declares or makes any distribution of cash or any other assets (or rights to
acquire such assets) to holders of Common Stock, as a partial liquidating
dividend or otherwise, including without limitation any dividend or distribution
to the Company's stockholders in shares (or rights to acquire shares) of capital
stock of a subsidiary) (a "Distribution"), the Company shall deliver written
notice of such Distribution (a "Distribution Notice") to the Holder at least
thirty (30) days prior to the earlier to
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occur of (i) the record date for determining stockholders entitled to such
Distribution (the "Record Date") and (ii) the date on which such Distribution is
made (the "Distribution Date") (the earlier of such dates being referred to as
the "Determination Date"). In the Distribution Notice to a Holder, the Company
shall indicate whether the Company has elected (A) to deliver to such Holder,
upon any exercise of this Warrant after the Determination Date, the same amount
and type of assets being distributed in such Distribution as though the Holder
were, on the Determination Date, a holder of a number of shares of Common Stock
into which this Warrant is exercisable as of such Determination Date (such
number of shares to be determined at the Exercise Price then in effect and
without giving effect to any limitations on such exercise) or (B) upon any
exercise of this Warrant on or after the Determination Date, to reduce the
Exercise Price applicable to such exercise by reducing the Exercise Price in
effect on the Business Day immediately preceding the Record Date by an amount
equal to the fair market value of the assets to be distributed divided by the
number of shares of Common Stock as to which such Distribution is to be made,
such fair market value to be reasonably determined in good faith by the
Company's Board of Directors. If the Company does not notify the Holders of its
election pursuant to the preceding sentence on or before the fifteenth (15th)
day immediately prior to the Determination Date, the Company shall be deemed to
have elected clause (A) of the preceding sentence.
(c) Dilutive Issuances. If, at any time after the Issue Date, the Company
issues or sells, or in accordance with subparagraph (iii) of this paragraph (c),
is deemed to have issued or sold, any shares of Common Stock for per share
consideration less than the Exercise Price on the date of such issuance or sale
(a "Dilutive Issuance"), then the Exercise Price shall be adjusted so as to
equal an amount determined by multiplying such Exercise Price by the following
fraction:
N(0) + N(1)
-----------
N(0) + N(2)
where: N(0) = the number of shares of Common Stock outstanding
immediately prior to the issuance, sale or deemed issuance
or sale of such additional shares of Common Stock in such
Dilutive Issuance (without taking into account any shares
of Common Stock issuable upon conversion, exchange or
exercise of any securities or other instruments which are
convertible into or exercisable or exchangeable for Common
Stock ("Convertible Securities") or options, warrants or
other rights to purchase or subscribe for Common Stock or
Convertible Securities ("Purchase Rights"));
N(1) = the number of shares of Common Stock which the aggregate
consideration, if any, received or receivable by the
Company for the total number of such additional shares of
Common Stock so issued, sold or deemed issued or sold in
such Dilutive Issuance (which, in the case of a deemed
issuance or sale, shall be calculated in accordance with
subparagraph (iii) below) would purchase at the Exercise
Price in effect immediately prior to such Dilutive
Issuance; and
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N(2) = the number of such additional shares of Common Stock so
issued, sold or deemed issued or sold in such Dilutive
Issuance.
Notwithstanding the foregoing, no adjustment shall be made pursuant hereto if
such adjustment would result in an increase in the Exercise Price.
(ii) Effect On Exercise Price Of Certain Events. For purposes of
determining the adjusted Exercise Price under subparagraph (i) of this paragraph
(c), the following will be applicable:
(A) Issuance Of Purchase Rights. If the Company issues or sells
any Purchase Rights, whether or not immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of such
Purchase Rights (and the price of any conversion of Convertible Securities,
if applicable) is less than the Market Price or the Exercise Price (or
both) in effect on the date of issuance or sale of such Purchase Rights,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Purchase Rights (assuming full conversion, exercise or
exchange of Convertible Securities, if applicable) shall, as of the date of
the issuance or sale of such Purchase Rights, be deemed to be outstanding
and to have been issued and sold by the Company for such price per share.
For purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Purchase Rights" shall
be determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of all
such Purchase Rights, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Purchase Rights, plus, in the case of Convertible Securities issuable upon
the exercise of such Purchase Rights, the minimum aggregate amount of
additional consideration payable upon the conversion, exercise or exchange
thereof (determined in accordance with the calculation method set forth in
subparagraph (iii)(B) below) at the time such Convertible Securities first
become convertible, exercisable or exchangeable, by (y) the maximum total
number of shares of Common Stock issuable upon the exercise of all such
Purchase Rights (assuming full conversion, exercise or exchange of
Convertible Securities, if applicable). No further adjustment to the
Exercise Price shall be made upon the actual issuance of such Common Stock
upon the exercise of such Purchase Rights or upon the conversion, exercise
or exchange of Convertible Securities issuable upon exercise of such
Purchase Rights.
(B) Issuance Of Convertible Securities. If the Company issues or
sells any Convertible Securities, whether or not immediately convertible,
exercisable or exchangeable, and the price per share for which Common Stock
is issuable upon such conversion, exercise or exchange is less than the
Exercise Price in effect on the date of issuance or sale of such
Convertible Securities, then the maximum total number of shares of Common
Stock issuable upon the conversion, exercise or exchange of all such
Convertible Securities shall, as of the date of the issuance or sale of
such Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. If the Convertible
Securities so issued or sold do not have a fluctuating conversion or
exercise price or exchange ratio, then for the purposes of the immediately
preceding sentence, the "price per share for which Common Stock is issuable
upon such conversion, exercise or exchange" shall be determined by dividing
(x)
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the total amount, if any, received or receivable by the Company as
consideration for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method set forth in this
subparagraph (iii)(B)), by (y) the maximum total number of shares of Common
Stock issuable upon the exercise, conversion or exchange of all such
Convertible Securities. If the Convertible Securities so issued or sold
have a fluctuating conversion or exercise price or exchange ratio (a
"Variable Rate Convertible Security"), then for purposes of the first
sentence of this subparagraph (B), the "price per share for which Common
Stock is issuable upon such conversion, exercise or exchange" shall be
deemed to be the lowest price per share which would be applicable (assuming
all holding period and other conditions to any discounts contained in such
Variable Rate Convertible Security have been satisfied) if the conversion
price of such Variable Rate Convertible Security on the date of issuance or
sale thereof were seventy-five percent (75%) of the actual conversion price
on such date (the "Assumed Variable Market Price"), and, further, if the
conversion price of such Variable Rate Convertible Security at any time or
times thereafter is less than or equal to the Assumed Variable Market Price
last used for making any adjustment under this paragraph (c) with respect
to any Variable Rate Convertible Security, the Exercise Price in effect at
such time shall be readjusted to equal the Exercise Price which would have
resulted if the Assumed Variable Market Price at the time of issuance of
the Variable Rate Convertible Security had been seventy-five percent (75%)
of the actual conversion price of such Variable Rate Convertible Security
existing at the time of the adjustment required by this sentence; provided,
however, that if the conversion or exercise price or exchange ratio of a
Convertible Security may fluctuate solely as a result of provisions
designed to protect against dilution, such Convertible Security shall not
be deemed to be a Variable Rate Convertible Security. No further adjustment
to the Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion, exercise or exchange of such Convertible Securities.
(C) Change In Option Price Or Conversion Rate. If, following an
adjustment to the Exercise Price upon the issuance of Purchase Rights or
Convertible Securities pursuant to a Dilutive Issuance, there is a change
at any time in (x) the amount of additional consideration payable to the
Company upon the exercise of any Purchase Rights; (y) the amount of
additional consideration, if any, payable to the Company upon the
conversion, exercise or exchange of any Convertible Securities; or (z) the
rate at which any Convertible Securities are convertible into or
exercisable or exchangeable for Common Stock (in each such case, other than
under or by reason of provisions designed to protect against dilution),
then in any such case, the Exercise Price in effect at the time of such
change shall be readjusted to the Exercise Price which would have been in
effect at such time had such Purchase Rights or Convertible Securities
still outstanding provided for such changed additional consideration or
changed conversion, exercise or exchange rate, as the case may be, at the
time initially issued or sold.
(D) Calculation Of Consideration Received. If any Common Stock,
Purchase Rights or Convertible Securities are issued or sold for cash, the
consideration received therefor will be the amount received by the Company
therefore. In case any Common Stock, Purchase Rights or Convertible
Securities are issued or sold for a
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consideration part or all of which shall be other than cash, including in
the case of a strategic or similar arrangement in which the other entity
will provide services to the Company, purchase services from the Company or
otherwise provide intangible consideration to the Company, the amount of
the consideration other than cash received by the Company (including the
net present value of the consideration expected by the Company for the
provided or purchased services) shall be the fair market value of such
consideration, except where such consideration consists of publicly traded
securities, in which case the amount of consideration received by the
Company will be the Market Price thereof on the date of receipt. In case
any Common Stock, Purchase Rights or Convertible Securities are issued in
connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor will be deemed
to be the fair market value of such portion of the net assets and business
of the non-surviving corporation as is attributable to such Common Stock,
Purchase Rights or Convertible Securities, as the case may be.
Notwithstanding anything else herein to the contrary, if Common Stock
Purchase Rights or Convertible Securities are issued or sold in conjunction
with each other as part of a single transaction or in a series of related
transactions, the Holder may elect to determine the amount of consideration
deemed to be received by the Company therefor by deducting the fair value
of any type of securities (the "Disregarded Securities") issued or sold in
such transaction or series of transactions. If the Holder makes an election
pursuant to the immediately preceding sentence, no adjustment to the
Exercise Price shall be made pursuant to this paragraph (c) for the
issuance of the Disregarded Securities or upon any conversion, exercise or
exchange thereof. The independent members of the Company's Board of
Directors shall calculate reasonably and in good faith, using standard
commercial valuation methods appropriate for valuing such assets, the fair
market value of any consideration other than cash or securities.
(E) Issuances Without Consideration Pursuant to Existing
Securities. If the Company issues (or becomes obligated to issue) shares of
Common Stock pursuant to any anti-dilution or similar adjustments (other
than as a result of stock splits, stock dividends and the like) contained
in any Convertible Securities or Purchase Rights outstanding as of the date
hereof, then all shares of Common Stock so issued shall be deemed to have
been issued for no consideration.
(iv) Exceptions To Adjustment Of Exercise Price. Notwithstanding the
foregoing, no adjustment to the Exercise Price shall be made pursuant to this
paragraph (c) upon the issuance of any Excluded Securities. For purposes hereof,
"Excluded Securities" means (I) securities purchased under the Securities
Purchase Agreement; (II) securities issued upon conversion or exercise of the
Debentures or the Warrants; (III) shares of Common Stock issuable or issued to
(x) employees, consultants or directors from time to time upon the exercise of
options, in such case granted or to be granted in the discretion of the Board of
Directors pursuant to one or more stock option plans or restricted stock plans
in effect as of the Issue Date or adopted after the Issue Date by the
independent members of the Board of Directors with substantially the same terms
as such plans in effect as of the Issue Date, or (y) vendors pursuant to
warrants to purchase Common Stock that are outstanding on the date hereof or
issued hereafter, provided such issuances are approved by the Board of
Directors; (IV) shares of Common Stock issued in connection with a commercial
lending transaction with a federally-
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insured financial institution that is approved by the independent members of the
Board of Directors, provided that the fair market value of such shares does not
exceed ten percent (10%) of the amount borrowed; (V) shares of Common Stock
issued in connection with any stock split, stock dividend or recapitalization of
the Company; (VI) shares of Common Stock issued in connection with the
acquisition by the Company of any corporation or other entity occurring after
the Effective Date, provided that, if in connection with such acquisition, the
Company will issue a number of shares equal to or greater than 20% of the number
of shares of Common Stock issued and outstanding immediately prior to the
consummation of such acquisition, the Company shall obtain a fairness opinion
with respect to such acquisition from an investment bank of national
recognition; (VII) shares of Common Stock issued in connection with any
Convertible Securities or Purchase Rights outstanding on the date hereof and
disclosed in a schedule to the Securities Purchase Agreement; and (VIII) shares
issued to Persons with whom the Company is entering into a joint venture,
strategic alliance or other commercial relationship in connection with the
operation of the Company's business and not in connection with a transaction the
purpose of which is to raise equity capital.
(v) Notice Of Adjustments. Upon the occurrence of one or more
adjustments or readjustments of the Exercise Price pursuant to this paragraph
(c) or any change in the number or type of stock, securities and/or other
property issuable upon exercise of this Warrant, the Company, at its expense,
shall promptly compute such adjustment or readjustment or change and prepare and
furnish to the Holder a notice (an "Adjustment Notice") setting forth such
adjustment or readjustment or change and showing in detail the facts upon which
such adjustment or readjustment or change is based, and, on or before the time
that it delivers an Adjustment Notice, publicly disclose the contents thereof.
The failure of the Company to deliver an Adjustment Notice shall not affect the
validity of any such adjustment.
(d) Major Transactions. In the event of a merger, consolidation, business
combination, tender offer, exchange of shares, recapitalization, reorganization,
redemption or other similar event, as a result of which shares of Common Stock
shall be changed into the same or a different number of shares of the same or
another class or classes of stock or securities or other assets of the Company
or another entity or the Company shall sell all or substantially all of its
assets (each of the foregoing being a "Major Transaction"), the Company will
give the Holder at least twenty (20) Trading Days written notice prior to the
earlier of (x) the closing or effectiveness of such Major Transaction and (y)
the record date for the receipt of such shares of stock or securities or other
assets. In the event of a Major Transaction, the Holder shall be permitted
either (i) where the surviving entity in a Major Transaction does not have a
class of equity security registered pursuant to Section 12 of the Exchange Act,
or such equity security does not trade on a national exchange or automated
quotation system, to require the Company to repurchase this Warrant for an
amount to the value of this Warrant calculated pursuant to the Black-Scholes
pricing model or (ii) to exercise this Warrant in whole or in part at any time
prior to the record date for the receipt of such consideration and shall be
entitled to receive, for each share of Common Stock issuable to Holder upon such
exercise, the same per share consideration payable to the other holders of
Common Stock in connection with such Major Transaction. If and to the extent
that the Holder retains any portion of this Warrant following such record date,
the Company will cause the surviving or, in the event of a sale of assets,
purchasing entity, as a condition precedent to such Major Transaction, to assume
the obligations of the Company under
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this Warrant, with such adjustments to the Exercise Price and the securities
covered hereby as may be necessary in order to preserve the economic benefits of
this Warrant to the Holder.
(e) Adjustments; Additional Shares, Securities or Assets. In the event that
at any time, as a result of an adjustment made pursuant to this Section 6, the
Holder of this Warrant shall, upon exercise of this Warrant, become entitled to
receive securities or assets (other than Common Stock) then, wherever
appropriate, all references herein to shares of Common Stock shall be deemed to
refer to and include such shares and/or other securities or assets; and
thereafter the number of such shares and/or other securities or assets shall be
subject to adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 6. Any adjustment
made herein that results in a decrease in the Exercise Price shall also effect a
proportional increase in the number of shares of Common Stock into which this
Warrant is exercisable.
7. Fractional Interests.
No fractional shares or scrip representing fractional shares shall be
issuable upon the exercise of this Warrant, but on exercise of this Warrant, the
Holder hereof may purchase only a whole number of shares of Common Stock. If, on
exercise of this Warrant, the Holder hereof would be entitled to a fractional
share of Common Stock or a right to acquire a fractional share of Common Stock,
the Company shall, in lieu of issuing any such fractional share, pay to the
Holder an amount in cash equal to the product resulting from multiplying such
fraction by the Market Price as of the Exercise Date.
8. Transfer of this Warrant.
The Holder may sell, transfer, assign, pledge or otherwise dispose of
this Warrant, in whole or in part, as long as such sale or other disposition is
made pursuant to an effective registration statement or an exemption from the
registration requirements of the Securities Act. Upon such transfer or other
disposition (other than a pledge), the Holder shall deliver this Warrant to the
Company together with a written notice to the Company, substantially in the form
of the Transfer Notice attached hereto as Exhibit B (the "Transfer Notice"),
indicating the person or persons to whom this Warrant shall be transferred and,
if less than all of this Warrant is transferred, the number of Warrant Shares to
be covered by the part of this Warrant to be transferred to each such person.
Within three (3) Business Days of receiving a Transfer Notice and the original
of this Warrant, the Company shall deliver to the each transferee designated by
the Holder a Warrant or Warrants of like tenor and terms for the appropriate
number of Warrant Shares and, if less than all this Warrant is transferred,
shall deliver to the Holder a Warrant for the remaining number of Warrant
Shares.
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9. Benefits of this Warrant.
This Warrant shall be for the sole and exclusive benefit of the Holder
of this Warrant and nothing in this Warrant shall be construed to confer upon
any person other than the Holder of this Warrant any legal or equitable right,
remedy or claim hereunder.
10. Loss, theft, destruction or mutilation of Warrant.
Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of indemnity reasonably satisfactory to the Company, and upon
surrender of this Warrant, if mutilated, the Company shall execute and deliver a
new Warrant of like tenor and date.
11. Notice or Demands.
Any notice, demand or request required or permitted to be given by the
Company or the Holder pursuant to the terms of this Warrant shall be in writing
and shall be deemed delivered (i) when delivered personally or by verifiable
facsimile transmission, unless such delivery is made on a day that is not a
Business Day, in which case such delivery will be deemed to be made on the next
succeeding Business Day, (ii) on the next Business Day after timely delivery to
an overnight courier and (iii) on the Business Day actually received if
deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:
If to the Company:
Verso Technologies, Inc.
000 Xxxxxxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxx LLP
2700 International Tower
000 Xxxxxxxxx Xxxxxx XX
Xxxxxxx, XX 00000
Attn: Xxxxxx X. Hussle, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
and if to the Holder, to such address as the Holder shall have furnished to the
Company in writing.
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12. Applicable Law.
This Warrant is issued under and shall for all purposes be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within the State of New York.
13. Amendments.
No amendment, modification or other change to, or waiver of any
provision of, this Warrant may be made unless such amendment, modification or
change is (A) set forth in writing and is signed by the Company and the Holder
and (B) agreed to in writing by the holders of at least a majority of the number
of shares into which the Warrants are exercisable (without regard to any
limitation contained herein on such exercise), it being understood that upon the
satisfaction of the conditions described in (A) and (B) above, each Warrant
(including any Warrant held by the Holder who did not execute the agreement
specified in (B) above) shall be deemed to incorporate any amendment,
modification, change or waiver effected thereby as of the effective date
thereof.
14. Entire Agreement.
This Warrant and the other Transaction Documents constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Warrant and the
other Transaction Documents supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
15. Headings.
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Company has duly executed and delivered this
Warrant as of the Issue Date.
VERSO TECHNOLOGIES, INC.
By:
------------------------------------
Name:
Title:
EXHIBIT A to WARRANT
EXERCISE NOTICE
The undersigned Holder hereby irrevocably exercises the right to purchase
_______ of the shares of Common Stock ("Warrant Shares") of VERSO TECHNOLOGIES,
INC. evidenced by the attached Warrant (the "Warrant"). Capitalized terms used
herein and not otherwise defined shall have the respective meanings set forth in
the Warrant.
1. Form of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:
______ a Cash Exercise with respect to _________________ Warrant
Shares; and/or
______ a Cashless Exercise with respect to _________________ Warrant
Shares, as permitted by Section 5(b) of the attached Warrant.
2. Payment of Exercise Price. In the event that the Holder has elected a
Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.
Date:
----------------------------------
----------------------------------------
Name of Registered Holder
By:
------------------------------------
Name:
Title:
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EXHIBIT B to WARRANT
TRANSFER NOTICE
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells,
assigns and transfers unto the person or persons named below the right to
purchase ____________ shares of the Common Stock of VERSO TECHNOLOGIES, INC.
evidenced by the attached Warrant.
Date:
----------------------------------
----------------------------------------
Name of Registered Holder
By:
------------------------------------
Name:
Title:
Transferee Name and Address:
----------------------------------------
----------------------------------------
----------------------------------------
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